By Clarence Leong
Shares of Techtronic Industries Co. jumped sharply Thursday morning in Hong Kong after the company posted a 10% rise in first-half net profit.
The stock rose 9.8% to 95.50 Hong Kong dollars (US$12.17), heading toward its biggest one-day percentage gain since mid-March. The gain also helped pare year-to-date losses to 38%.
The Hong Kong-based company, which manufactures electrical and electronic products, said in a late Wednesday filing that net profit for the first six months increased to US$578.0 million from US$523.7 million a year earlier.
Its gross profit margin expanded for the 14th straight first-half period, rising to 39.1% from 38.6%, while revenue grew 10% to US$7.03 billion, it said.
Analysts at Citi said in a note that Techtronic Industries' operating profit growth significantly outperformed that of peers Stanley Black & Decker Inc. and Makita Corp., even though they all faced the same cost pressure.
Broad declines in commodity prices since June should bode well for Techtronic Industries' margin expansion in the second half, they added.
Nevertheless, the company has trimmed its 2022 revenue guidance to mid-single-digit growth from high-single-digit growth, on account of excessive retail inventory, Citi noted. But it also expects that the inventory issue "may only last for a while," so the company projects that revenue growth will return to the high-single-digit area next year, according to Citi.
The U.S. bank cut its target price on the stock to HK$135 from HK$145 but retained a buy rating, keeping Techtronic Industries as its top pick in the Chinese industrial sector.
The city's benchmark index Hang Seng Index was recently 1.0% higher.
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(END) Dow Jones Newswires