Core Viewpoint - The company has experienced a decline in valuation since being short-sold, with its performance lagging behind the market despite a slight increase over the past three years, indicating a need for a valuation anchor [1][2]. Financial Performance - For the first half of 2025, the company reported revenue of $7.833 billion, a year-on-year increase of 7.13%, and a net profit of $628 million, up 14.17% [1]. - The gross margin improved by 34 basis points to 40.3%, leading to a net profit margin increase to 8.17% [1]. - Earnings per share were $0.3437, with an interim dividend proposed at HKD 1.25 (approximately $0.1609), resulting in a payout ratio of 46.81% [1]. Business Segments - The electric tools segment showed robust performance, with revenue of $7.425 billion, a year-on-year growth of 7.85%, accounting for 94.8% of total revenue [3][4]. - The Milwaukee and Ryobi brands were the main drivers of growth, with Milwaukee's sales increasing by 11.9% and Ryobi's by 8.7%, contributing nearly 100% of the revenue growth [5][6]. Market Dynamics - The global electric tools market has shown stable but modest growth, with a compound annual growth rate (CAGR) of only 1.03% from 2018 to 2023 [7]. - The company is well-positioned in the North American and European markets, which have shown consistent growth, with revenues of $5.872 billion and $1.4 billion respectively, reflecting year-on-year increases of 7.52% and 11.9% [7]. Financial Health - The company maintains a healthy financial position, with a debt-to-asset ratio of 52.1% and a cash equivalent of $1.608 billion, covering its interest-bearing debt [8]. - Operating cash flow has remained positive, averaging $1.87 billion over the past three years, supporting ongoing investments in R&D and market expansion [8]. Market Sentiment - Despite a general market rally, the company's market value has slightly declined by 1.4%, indicating a need for improved earnings expectations to restore valuation [2][9]. - The company has engaged in share buybacks and dividends to boost market confidence, with a total of 54 dividend payments since 2000 and a buyback amount exceeding HKD 170 million this year [9].

Investment Rating - The report downgrades the investment rating to "Accumulate" and raises the target price to HK$109.00, indicating that the stock price remains below its historical average P/E ratio of 20 times [1]. Core Views - The mid-term performance of Techtronic Industries aligns with expectations, with a revenue forecast for 2025-2027 of USD 15.637 billion (+0.3%), USD 16.992 billion (+0.4%), and USD 18.422 billion (+0.5%) respectively [1]. - The company reported a revenue of USD 7.833 billion, a year-on-year increase of 7.1%, surpassing expectations by 0.4%. The growth is primarily driven by its leading brands, Milwaukee and Ryobi, which grew by 11.9% and 8.7% respectively in local currency [1][3]. - The company aims to attract new users through high-quality products and increase existing users' consumption through charging products [1]. Financial Performance Summary - The company’s gross profit margin is reported at 40.3%, a year-on-year increase of 0.3 percentage points, while the operating profit margin is at 9.1%, also reflecting a year-on-year increase of 0.5 percentage points [3][4]. - The net profit for the first half of 2025 is USD 628 million, a 14.2% increase year-on-year, with basic EPS at USD 0.344, reflecting a 14.1% growth [3][4]. - The report notes a slight decrease in the earnings per share forecast for 2025, 2026, and 2027 to USD 0.700 (-3.0%), USD 0.803 (-1.8%), and USD 0.929 (-1.1%) respectively [4][10]. Segment Performance - The electric tools segment generated USD 7.425 billion in revenue, a 7.9% increase year-on-year, while the floor care and cleaning segment saw a decline of 4.6% [3]. - The operating profit margin for electric tools is reported at 9.4%, an increase of 0.5 percentage points year-on-year [3]. Market Comparison - The company’s market capitalization is approximately HK$174.368 billion, with a P/E ratio of 19.9 for 2024 and projected to decrease to 17.3 for 2025 [8]. - Compared to peers, Techtronic Industries has a P/B ratio of 3.1 for 2025, indicating a competitive valuation within the machinery sector [8].