Chuangke Industrial announced its 2023 annual results on the evening of March 6.
The performance exceeded market expectations. The company's revenue in 2023 increased 4% year over year to $13.7 billion, with a 2% decline in the first half of the year and a 10% increase in the second half of the year. The company achieved net profit of US$976 million, a year-on-year decrease of 9.4%, corresponding to a net profit margin of 7.1%. The company decided to pay HK$0.98 (approximately US$0.13) per share, combined with a dividend of HK$0.95 (approximately US$0.12) per share in the interim semi-annual report, for a total annual dividend of HK$1.93 (approximately US$0.25) per share.
By category, the company's power tools business revenue increased 3.8% year on year to US$12.8 billion, with a 4.1% increase in local currency. Among them, the Milwaukee specialty brand grew 10.7%, and the increase returned to double digits of 12.7% in the second half of '23, which is significantly faster than 8.7% in the first half of the year; the floor care business represented by the company's vacuum cleaners increased 1.5% year over year to US$937 million.
Based on overseas inventory recovery and the rising real estate cycle of the Federal Reserve's interest rate cuts, we continue to be optimistic about the tool industry beta.
Driven by Christmas on Black Friday 2023, we expect Home Depot's year-end sales to be positive year-on-year, hand/power tools will return to positive year-on-year growth, garden tools will grow at or higher, and Chuangke Industrial's revenue in the second half of the year will change from negative to positive year-on-year, indicating that channel inventory has basically been digested, and the tool industry as a whole will enter the storage preparation cycle.
Furthermore, the US 30-year mortgage interest rate fell from a high of 7.8% in early November to 6.6% in February. The Federal Reserve is expected to cut interest rates in 2024 to drive the recovery in existing home sales. Currently, existing home sales in the US have annualized 4 million households in January, exceeding expectations of 3.97 million households, an increase of 3.1% month-on-month, the biggest month-on-month increase in nearly a year.
Profit forecasting and investment ratings. We expect Chuangtech's 2024/2025/2026 revenue to be US$151/169/18.8 billion, up 10%/12%/11% year on year, and net profit to mother of US$11.3/13.3/1.55 billion, with a change of 15%/19%/16% year over year.
Risk warning: trade tariff disturbances between China and the US, rising raw material prices and shipping costs, sharp depreciation of the USD/GBP/EUR exchange rate, falling short of expectations in market demand, and intensifying market competition.