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机构：国泰君安国际
研究员：Muyang Zhao
We forecast earnings per share in 2024-2026 to be US$0.591, US$0.643, and US$0.685, respectively. Our TP represents 22.0x/ 20.2x/ 19.0x 2024-2026 PE ratio and 3.8x 2024 PB ratio.
The Company’s 2023 results slightly beat our expectations. The Company's revenue in 2023 was US$13.7 billion, an increase of 3.6% YoY, in line with our expectations. The Company’s net profit was US$976 million, a decrease of 9.4% YoY, but higher than our forecast of US$953 million. The earnings decrease was partially driven by significant increases in interest rates over the period. The Company has taken steps to reduce interest expenses by reducing debt, with net gearing ratio decreasing from 46.6% to 32.8% over the period. Also, due to promotional funding investments, Techtronic was able to drive sell through at its partners and reduce inventories from US$5.08 billion to US$4.10 billion. The Company believes they can streamline operations and continue to reduce inventory days on hand in 2024 and the years ahead.
Milwaukee business growth accelerates. In 2023, the Company’s flagship Milwaukee revenue increased by 12.7% YoY in local currency, up from 8.7% YoY in 2022. The Company’s strategy of transitioning to cordless devices has allowed it to increase its products’ average selling price, increasing gross margin by 14 ppts to 39.5%. The Company’s further investment in new technologies such as advanced electronics, brushless motors, the Company’s new cordless products offer users productivity and safety benefits that command a price premium.
Investments in manufacturing in Vietnam, Mexico and USA. Capex expenditure in 2023 was US$502 million, with much of the investment used to expand manufacturing facilities in Vietnam, Mexico and the United States.
Diversification of manufacturing facilities allows the Company to mitigate supply chain risk amidst the global trend of decoupling.
Company veteran Steven Richman to replace CEO Joseph Galli Jr. On 20 May 2024, Steven Galli ended his 16 year tenure as Techtronic’s CEO to be replaced by Steven Richman, formerly president of the Company’s flagship Milwaukee Tool business for 17 years. Richman also has experience working at Techtronic’s competitors, holding key management positions at Black & Decker, Skil and Bosch Power Tools for over five years respectively.
Risks: Company management may not perform as well as expected, lower demand in US and European housing markets.