Daiwa released a research report stating that it reiterated the “buy” rating of the Innovation and Technology Industry (00669). With the Fed's policy shift, it is believed that the company will be one of the biggest beneficiaries, and the target price will remain at HK$110.
The bank said that a few days ago, a conference call was held with the management of Innovation and Technology Industries. The management maintained guidelines on the increase in the number of units in next year's revenue. Its brand, Milwaukee, aims to increase by 10%-13%, and the DIY business is expected to remain the same year on year; however, with the easing of inventory removal pressure, the main customer Home Depot's promotional activities have declined, and it is confident that gross margin will expand by 40-60 basis points next year. Due to strong demand from vertical industries such as mining, renewable energy, and electricity, the Pro business under the Milwaukee brand is expected to remain stable.
The report also quoted management as saying that business trends in the fourth quarter are expected to remain unchanged, demand for Pro business is strong during the period, and consumer DIY business is still weak. However, the bank believes that with the possible early shift in the Fed's policy and the bottoming out of US housing demand, there is limited room for decline in the DIY business; it also believes that Home Depot's channel inventory is close to a healthy level, paving the way for reducing promotional activities and launching new products next year, which will facilitate the expansion of the group's gross margin. Although the Group's revenue guide for next year is an increase in the number of units in China, it is expected that the profit growth rate of the I&T industry will accelerate to 20% year on year.