Why Techtronic Industries’ share price is up 167% in 12 months

Hong Kong-listed Techtronic Industries (HKG:0669) designs, manufactures and markets some of the world’s best-known brands in power tools, hand tools, accessories, outdoor power equipment and floor care appliances. Its stable of brands include household names in western markets such as Ryobi, AEG, Milwaukee, Hoover and VAX, to name a few. 

Techtronic has just delivered its results for the financial year ending December 31, 2020 and the numbers have been well received by investors. 

Highlights include:

  • Revenue of US$9.8 billion, up 28% on 2019.
  • Gross profit margin of 38.3%, up 52 bps on 2019
  • Net profit of US$801 million, up 30.2% on 2019
  • Basic earnings per share of 43.8 US cents, up 30.1% on 2019

Impressively, the multinational manufacturer’s gross margin improved for the 12th consecutive year. A trajectory management says can be attributed to “the launching of high margin new products, disciplined mix management, exceptional productivity gains and volume leverage.”

Company earnings before interest and tax (EBIT) increased 29.0% to US$868 million, with the EBIT margin improving by 10 basis points to 8.9%. Net profit rose 30.2% to US$801 million, with earnings per share increasing 30.1% over 2019 to US43.80 cents. 

Investors have been rewarded with a final dividend of approximately 10.55 US cents per share (HK82.00 cents). Together, with the interim dividend of approximately US6.82 cents per share (HK53.00 cents). This results in a full-year dividend of approximately US17.37 cents per share (HK135.00 cents) an increase of 31.1% on 2019. 

The power equipment division remains the jewel in Techtronic’s crown. It grew 28.5% to US$8.7 billion representing 89.0% of total sales. The flagship MILWAUKEE Professional business grew 25.8%, while the RYOBI cordless business generated double-digit sales growth. The floorcare segment accounted for 11.0% of total sales, increasing 23.6% to US$1.1 billion over 2019.

“TTI is well positioned to continue outperforming the market, with a strong balance sheet and a disciplined fixed and working capital management process. We are positioned to capitalize on the many growth opportunities we have identified in the months and years ahead,” said Techtronic Industries Chariman, Horst Pudwill, in a statement.

At time of publication Techtronic Industries traded at HK$131.00, up 167% in 12 months.

The Tesla of the industry 

In a CNBC interview following the results release, Techtronic Industries CEO, Jospeh Galli, likened Techtronic’s efforts in developing clean energy powered tools to Tesla. 

“Our mission, we believe, is to move people from, for example, from gas burning lawn mowers to clean battery power mowers, we are the Tesla of our industry. We’re doing this in every business unit in every geographic region and although our results last year were exceptional, we are just getting starting man,” said Galli.

“When you see what we have coming from 2021 and beyond you will accuse me of exaggerating. We have a lot of exciting products on the way. 

Techtronic is among a myriad of listed companies world-wide to have benefited from the DIY trend resulting from COVID-19 lockdowns, however, Galli says he doesn’t expect sales to slow once economies return to normal. 

“Before the virus became an issue, we were still growing like hell, we were still talking market share in every geographic unit and every business unit,” said Galli.  

“I can’t wait until the virus is over and I can assure you, the day the virus abates completely and its eradicated from the planet, we will still outgrow our competitors, we will take a lot of market share… We believe we can control our destiny regardless of what the virus environment is or any other macroeconomic environment.”

Techtronic listed on the Stock Exchange of Hong Kong Limited in 1990 and is one of the constituent stocks of the Hang Seng Index.