Goldman Sachs has issued a research report setting a target price of HK$112.3 for TECHTRONIC IND (00669), derived from a forecasted 2026 price-to-earnings ratio of 19 times. The firm maintains a "Buy" rating on the stock.
TECHTRONIC IND announced its 2025 annual results yesterday (3rd), reporting revenue, operating profit, and net profit of $15.26 billion, $1.325 billion, and $1.198 billion, respectively. These figures represent year-on-year growth of 4%, 6%, and 7%, but came in approximately 1%, 3%, and 3% below Goldman Sachs' expectations, largely aligning with forecasts.
The gross margin for the full year expanded by 0.9 percentage points to 41.2%, with the second-half gross margin outperforming expectations. However, second-half revenue, operating profit, and net profit declined by 5%, 12%, and 9% year-on-year, respectively, falling 2%, 5%, and 6% short of Goldman Sachs' projections.
By business segment, Milwaukee brand sales slowed in the second half, consistent with the company's proactive management and self-imposed shipment restrictions on certain SKUs that did not meet internal profitability thresholds.
Notably, the board announced a discretionary share repurchase plan, authorizing the buyback of up to $500 million in shares over the next 18 months.
Following the earnings release, Goldman Sachs communicated with management and identified a key highlight: the production relocation for the Milwaukee brand has now fully normalized. Regarding manufacturing economics, management emphasized that the new production base in Vietnam offers a higher gross margin than mainland China due to advantages in local labor costs and production efficiency.
Management also anticipates that only remaining price increases will be implemented in early 2026. Looking forward, the company has provided guidance targeting mid-to-high single-digit revenue growth for 2026.
Goldman Sachs believes that, despite increased production costs due to US tariffs, the company possesses strong pricing power enabling it to pass on a significant portion of these additional costs. Over the medium term, the firm expects TECHTRONIC IND's market leadership and product innovation to support further penetration of wireless tools.
It is also believed that DIY consumer demand has largely bottomed out post-pandemic and holds potential for recovery. Other positive factors include new construction projects in the US, such as data center development.
Considering the forecasted compound annual growth rates of 8% for revenue and 13% for net profit between 2025 and 2030, Goldman Sachs views the stock's current valuation as attractive.
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