Shares of Techtronic Industries experienced a significant drop on Thursday following the announcement of a decline in first-half profits and lower revenue growth expectations for a key segment. The stock plummeted 17% to HK$80.55 (US$10.30), hitting its lowest point at HK$75.60, marking the largest single-day percentage loss since January 2009.
In their market filing after the market closed, Techtronic revealed a net profit of US$478.5 million for the first six months of the year, an 18% decrease compared to the same period last year. Additionally, revenue saw a 2.2% decline, amounting to US$6.88 billion.
While Citi noted that the revenue decline was in line with their expectations, they expressed disappointment that the profit fell short of their forecast, expecting only a marginal decline. Analysts Eric Lau and Alice Cai from Citi also highlighted surprise at the company's decision to lower its guidance for its prominent professional power-tool brand, Milwaukee.
Techtronic adjusted its revenue projection for the Milwaukee business to a mid-to-high single-digit growth rate over the next three years, down from the previous forecast of mid-to-high teens. The shift was prompted by a slowdown in certain industry verticals and potential challenges originating from the sluggish macroeconomic environment.
Given the first-half results, Citi initiated a 30-day negative catalyst watch on Techtronic, anticipating a potential price correction and anticipated downgrades. As a result, they lowered their H-share target price from HK$130.00 to HK$108.00.
Techtronic heavily relies on revenue from the North American market, with Home Depot serving as their largest customer, accounting for 48% of their 2021 sales.