We maintain our “collect” rating and raised our target price to HK$101.40. We forecast net shareholders' net profit for 2024-2026 of USD 1,085 billion, USD 1,181 million, and USD 1.26 billion, respectively. We forecast earnings per share for 2024-2026 of $0.591, $0.643, and $0.685, respectively. Our target price corresponds to 22.0x/20.2x/19.0 times the 2024-2026 price-earnings ratio, and 3.8 times the 2024 net price-earnings ratio.
The company's 2023 results slightly exceeded our expectations. The company's revenue for 2023 was $13.7 billion, up 3.6% year over year, in line with our expectations. The company's net profit was $976 million, down 9.4% year over year, but higher than our forecast of $953 million. The decline in earnings was partly due to a sharp rise in interest rates during the period. The company has taken steps to reduce interest expenses by reducing debt, and the net debt ratio for the period fell from 46.6% to 32.8%.
Additionally, benefiting from promotional funding, I&T was able to drive partner sales and reduce inventory from $50.8 billion to $4.1 billion. The company believes it can streamline operations and continue to reduce inventory turnover days in 2024 and the next few years.
Business growth in Milwaukee is accelerating. In 2023, the company's flagship brand, Milwaukee, saw revenue growth of 12.7% year over year in local currency, up from 8.7% in 2022. The company's strategy to shift to cordless devices enabled it to raise the average sales price of its products, increasing gross margin by 14 percentage points to 39.5%.
The company further invests in new technologies such as advanced electronics and brushless motors. Its new cordless products provide users with productivity and safety advantages, so they can obtain higher premiums.
Invest in manufacturing sites in Vietnam, Mexico, and the US. Capital expenditure for 2023 was $502 million, with most of the investment going to expand manufacturing facilities in Vietnam, Mexico, and the US. Diversification of manufacturing facilities enables companies to mitigate supply chain risks in a global trend of decoupling.
Company veteran Steven Richman succeeds Joseph Galli Jr. as CEO. On May 20, 2024, Joseph Galli Jr. ended his 16-year term as CEO of I&T and was replaced by Steven Richman. Steven Richman was president of the company's flagship Milwaukee tool business for 17 years. Steven Richman also worked for rivals in the Chuangtech industry, holding key management positions at Black & Decker, Skil, and Bosch Power Tools for more than five years, respectively.
Risk: Company management may not perform as expected, and demand in the US and European housing markets will decline.