UBS released a research report stating that the target price was raised from HK$117 to HK$121 for the “buy” rating for Chuangke Industries (00669). I&T management's revenue guidance for FY2024 will achieve medium unit growth. In view of the obvious double-digit growth of Chuangke's brand, Milwaukee (Milwaukee), the bank believes that the relevant revenue guidelines are based on management's conservative estimates that the consumer segment is not growing.
The bank quoted the I&T management as saying that the company's gross margin growth of 14 basis points in fiscal year 2023 is abnormal, and it is expected that gross margin will return to historical levels in the future, that is, 40 to 60 basis points per year. Furthermore, due to the company's continued investment in products, supply chains, and geographical expansion, it is expected that I&T's sales and administrative expenditure ratio will be basically the same as the same period last year, and drive an improvement in its profit margin before interest and tax. Management's target profit margin before interest and tax for 2026 is 10%. In addition, I&T management indicated that inventory values will not be further lowered, but the number of inventory days can be further optimized, indicating that the pressure on the company's profit margin has been reduced by removing inventory. I&T reiterated that it has at least $1 billion in free cash flow for the 2024 fiscal year, and also stated that it will actively consider further increases in dividends.