Core Viewpoint - CICC maintains its EPS forecast for Techtronic Industries (00669) at $0.70/$0.80 for 2025/2026, with a target price of HKD 115.49, indicating a 22.6% upside potential and a rating of outperforming the industry [1] Financial Performance - In 1H25, the company reported revenue of $7.833 billion, a year-on-year increase of 7.1%, and a net profit of $628 million, up 14.2%, aligning with CICC's expectations [1] - The overall gross margin for 1H25 was 40.3%, an increase of 0.3 percentage points year-on-year, driven by growth in high-value products like Milwaukee [3] - The net profit margin for 1H25 was 8.0%, up 0.5 percentage points year-on-year [3] Product and Regional Performance - In 1H25, the electric tools segment generated $7.425 billion in revenue, a 7.9% year-on-year growth, with Milwaukee growing by 11.9% and Ryobi by 8.7% [2] - The floor care business saw a revenue decline of 4.6% to $408 million, primarily due to decreased demand for the VAX brand in the UK and Australia [2] - North America contributed $5.872 billion in revenue, a 7.5% increase year-on-year, while Europe saw an 11.9% growth to $1.401 billion; other regions experienced a 6.5% decline to $560 million [2] Inventory and Cost Management - The company increased its inventory by 6.61% to prepare for potential tariff changes in the second half of 2025 [3] - R&D expenses as a percentage of revenue rose by 0.5 percentage points to 4.6%, while sales expenses increased by 0.2 percentage points to 17.2% [3] Market Trends - Since 2025, U.S. home sales have been declining, with new home sales down 6.6% year-on-year in June 2025 [4] - The actual annualized consumption of tools and hardware in the U.S. was $41.94 billion in March 2025, reflecting a 3.8% year-on-year growth, but dropped to $39.95 billion in June, a 3.4% decline [4] - The company suggests monitoring improvements in end-user demand following interest rate cuts [4]

Investment Rating - The report maintains a "Buy" rating for the company, anticipating a price increase of over 15% in the next 6-12 months [11]. Core Insights - The company achieved a revenue of $14.622 billion in 2024, representing a year-on-year growth of 6.5%, and a net profit of $1.122 billion, which is a 14.9% increase compared to the previous year [1]. - The demand for professional-grade tools remains strong, with the Milwaukee brand showing a revenue increase of 11.6% year-on-year, while the Ryobi brand grew by 6.4% [2]. - The company expects revenue growth in 2025 to be in the mid to high single digits, focusing on improving performance in weaker regions [2]. - The overall gross margin for 2024 was 40.3%, an increase of 0.85 percentage points, driven by higher sales of Milwaukee and aftermarket battery products [3]. - Free cash flow generated during the year was $1.591 billion, an increase of $310 million from the previous year [3]. Financial Projections - Revenue projections for 2025, 2026, and 2027 are $15.915 billion, $17.719 billion, and $19.755 billion, respectively, with year-on-year growth rates of 8.8%, 11.3%, and 11.5% [3][6]. - Net profit forecasts for the same years are $1.328 billion, $1.582 billion, and $1.869 billion, reflecting growth rates of 18.3%, 19.1%, and 18.2% [3][6]. - The company is expected to maintain a competitive edge in the electric tool industry, with anticipated improvements in market share and profitability [3].

Financial Data and Key Metrics Changes - Revenue increased by 6.5% to $14.6 billion, with organic growth of 6.5% or 6.8% in local currencies [7][10] - Net profit rose by 14.9% to $1.12 billion, with a net profit margin improvement of 60 basis points to 7.7% [9][10] - Free cash flow reached $1.6 billion, a 23% increase from $1.3 billion in 2023, representing a 142% conversion of net profits [17] - Earnings per share increased by 15.1% to $61.43 [9] Business Line Data and Key Metrics Changes - Power Equipment division, accounting for 94% of total revenue, grew by 7.3% or 7.6% in local currencies to $13.7 billion [10][11] - Milwaukee brand achieved sales growth of 11.6% in local currencies, while Ryobi Power Tools grew by 6.7% [8][10] - Floorcare and Cleaning divisions saw a revenue decline of 4.5% in local currency, but operating profits increased by 4.73% [10][11] Market Data and Key Metrics Changes - North America, contributing 76% of revenue, grew by 5.5% in local currencies [11] - Europe, making up approximately 16% of the business, experienced over 10% growth in local currencies [11] - The rest of the world, led by Australia, delivered impressive local currency growth of 12.5% [11] Company Strategy and Development Direction - The company emphasizes innovation and a strong culture as key drivers of success, aiming to maintain market leadership through continuous investment in R&D [4][12] - Focus on expanding into new markets and user segments, leveraging the strengths of the Milwaukee and Ryobi brands [30][32] - The strategy includes a relentless focus on safety and productivity solutions for core trades, with a unique approach to embedded partnerships [68][69] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue delivering strong financial results, highlighting a culture of innovation and collaboration [19][46] - The company is aware of potential disruptions in the market and is committed to continuous innovation across all business aspects [39][40] - Future growth is expected to be driven by expanding product offerings and enhancing customer engagement [30][32] Other Important Information - The Board recommended a final dividend of HKD 118 per share, a 20.4% increase compared to the previous year [10] - The company aims to achieve a net cash position by 2025, with a focus on reducing high-cost debts [17][18] Q&A Session Summary Question: What are the growth opportunities for Ryobi and Milwaukee? - Ryobi is focusing on expanding its cordless ecosystem, which has seen a 15% compounded annual growth since 2016, and aims to convert users from legacy power sources [49][50] - Milwaukee is committed to enhancing safety and productivity for core trades, with a unique strategy that has resulted in 12% sales growth in 2024 [70][71] Question: How does the company plan to maintain its competitive advantage? - The company emphasizes its culture and people as key competitive advantages, fostering collaboration and innovation across all levels [19][22] - Continuous investment in breakthrough technology and understanding user needs are critical to maintaining market leadership [85][86]