CICC has issued a research report adjusting its earnings forecast for CHERVON (02285). Due to the impact of tariffs on profitability, the firm has lowered its 2026 EPS estimate by 26% to US$0.22 and introduced a 2027 EPS forecast of US$0.25. At the current share price, the stock trades at 10.1x and 8.8x P/E for 2026 and 2027, respectively. Considering the downward revision in earnings, CICC has reduced the target price by 24% to HK$20.4, implying 12.0x and 10.5x P/E for 2026 and 2027, and representing a potential upside of 19%. The Outperform rating is maintained.
Key points from CICC are as follows:
2025 results fell short of expectations. The company reported revenue of US$1.628 billion, down 8.2% year-on-year. Net profit attributable to shareholders declined by 13.2% to US$98 million, while adjusted net profit dropped 42.2% to US$78 million. The weaker-than-expected performance was attributed to cautious purchasing strategies adopted by customers, leading to a temporary decline in revenue.
OPE segment outperformed the industry. In 2025, revenue from the OPE business reached US$1.009 billion, up 0.1% year-on-year, mainly driven by growth in EGO brand revenue, which achieved double-digit growth in the North American market. Revenue from power tools decreased by 18.3% to US$611 million. Gross margin fell by 1.8 percentage points to 32.9%, primarily due to reduced economies of scale as revenue declined, but remained at a relatively high historical level. By region, revenue from North America and China decreased by 11.5% and 3.8%, respectively.
Operating expense ratio increased, while net profit margin edged down. In 2025, the ratios of selling, administrative, and R&D expenses rose by 1.1, 0.6, and 0.6 percentage points to 15.9%, 6.5%, and 5.3%, respectively, mainly due to the revenue decline. The financial expense ratio decreased by 0.1 percentage points to 0.2%. Other income amounted to US$32.336 million. The net profit margin attributable to shareholders declined by 0.3 percentage points to 6.0%.
EGO brand continues to gain market share; interest rate cuts remain a focus. According to the company’s earnings announcement, EGO's market share continues to grow, and CICC remains optimistic about the competitiveness of CHERVON’s EGO products. Categories such as walk-behind mowers, snow blowers, and riding mowers have become the highest-share lithium-powered OPE products in North America. Data from the U.S. Bureau of Economic Analysis indicates weak end-market demand for hardware tools in 2025, which CICC believes is partly due to the impact of high tariffs. As overseas production capacity is established and tariff differentials narrow, the impact of tariffs on revenue and profitability is expected to diminish. CICC is positive on CHERVON’s ability to increase its end-market share through product advantages.
Risks include slower-than-expected ramp-up of new products, delayed interest rate cuts in the U.S., and fluctuations in U.S. tariff policies.
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