[ET Net News Agency, 23 July 2018] Citi Research said Techtronic Industries'
(TTI)(00669) direct competitor, SBD, posted better-than-expected 2Q results versus
consensus for both top and bottom lines.
The organic revenue growth of tools & storage (T&S) came in at 10% yoy with volume up 9%
and ASP increase of 1%, noted the research house. But the OPM on T&S segment (excluding
M&A related costs) contracted to 16.2% from 17.6% a year ago as a result of the benefits
from volume leverage, pricing, productivity and cost control were more than offset by the
impacts from commodity inflation and currency.
According to SBD, the tariff on US$200bn batch may bring in US$70-80m annual profit
impact or implying 5-6% of 2018 profit per company guidance. SBD expects the industry will
inflate the price to partly offset the tariff if enacted.
Citi thinks this is because most top leaders have comparable cost structures with major
production in China. Despite headwinds of commodity cost tariff, SBD reiterated 2018 FY
core EPS guidance of US$8.3-8.5 per share (or 13% yoy rise). The solid 2Q18 top line
implies TTI's operation is on track with strong topline growth but margin may be impacted
by commodity cost.
Citi maintained its "buy" rating on TTI, with a target price of HK$56. (KL)