Techtronic Industries (the "Company") 1H2024 results were strong, in-line with our expectations. The Company's revenue in 1H2024 was USD7.31 billion, an increase of 6.3% YoY, in-line with our expectations. Gross profit margin was stable at 39.9% (compared to 39.3% in 1H2023), exceeding our expectations. Net profit was US$550 million, an increase of 15.7% YoY, slightly exceeding our expectations. The Company has increased its working capital efficiency, with working capital as a percentage of sales increasing 4.1 ppt YoY to 18.7%. Despite strong 1H2024 performance, the Company's 2H2024 results are likely to be weaker due to poor macroeconomic headwinds. Therefore, we will lower our profit forecasts and adjust our target price in the next company report to reflect changes in operating conditions and the macroeconomic environment.

Milwaukee business is well positioned for growth with focus on total solutions and Artificial Intelligence. In 1H2024, the Company's flagship Milwaukee business's revenue increased by 11.2% YoY in local currency. The Company plans on integrating state-of-the-art technology into its products such as motion tracking, posture analysis, data encryption, and interconnectivity between devices, thereby making its products safer to use and better fitting the needs of its corporate customers. The Company is also collaborating with its customers to produce specialized tools that better fit the needs of data centres, power grids and renewable energy producers, which are projects that are driven by the downstream demand for AI. The Company expects its gross margin to continue to increase as it leverages trends in AI, but will continue to reinvest its proceeds into R&D to improve its products.

The Company's global performance was well balanced across geographies. The Company's sales in North America increased 5.6% YoY in local currency. Sales in Europe grew 7.9 % YoY in local currency. Sales in rest of world, featuring Australia and Asia, delivered 13.0% growth YoY in local currency.

The Company actively minimizes market risk, currency exchange risk, interest rate risk and price risks. The Company has a policy of using derivative financial instruments and natural hedges to reduce financial risk. For example, during the Federal Reserve interest rate hike cycle in 2022, the Company was able to properly hedge interest rate risk using foreign currency forward contracts and cross-currency interest rate swaps. This remains one of the Company's strengths, with it being important due to recent turmoil in financial markets.

We believe that the Company's performance will slightly decline in 2H2024. The Company believes that its high-quality corporate customers will be relatively unaffected by economic conditions.