Have you heard whispers of a company called Techtronic Industries Co. Ltd. (HKG: 0669) and wondered what people are talking about? Many ASX investors might not have heard of Techtronic Industries shares prior to today. But a mention in the annual Sohn Hearts & Minds Investment Conference has brought the company into focus.
For starters, we have to explore beyond the realm of the ASX for this one. Rather than being on our local exchange, Techtronic trades on the Stock Exchange of Hong Kong. This might explain why some investors aren't too familiar with the business. However, if you have done some DIY projects there's a good chance Techtronic's products have been in your hands.
So, what is Techtronic, and what is all the fuss about Techtronic Industries shares today?
Putting the power in your hands
While the name Techtronic Industries may not resonate, the company's brands will likely ring a bell. The US$39 billion power tool and outdoor equipment company encompasses recognisable brands including Milwaukee, AEG, and Ryobi.
In addition, the company operates through brands such as Homelite, Kango, Hoover, and Vax. The common denominator across all of their brands is that their products are cordless. This improves safety and ease of use for everyone from the casual DIYer to the everyday professional.
At today's Sohn conference, Cooper Investors portfolio manager Qiao Ma has called out Techtronic Industries shares as her pick for 2022. She described it as more of a Silicon Valley company than an industrials company.
Ma said:
Every component that goes into a Techtronic power tools product, every step of the production process has been carefully thought through to make sure they stay at the forefront of technology. Let's use batteries as an example. As early as 2004, Techtronic migrated its entire toolset into lithium-ion batteries.
The company has experienced an incredible surge in revenue and earnings in the past financial year. In FY21, revenue increased 47% to US$12 billion. Similarly, the company's net profit ballooned by 50% to US$992.791 million.
The case for Techtronic Industries shares
Ma makes the case for her highest conviction stock pick for 2022. The portfolio manager believes the company's obsession and focus on a niche industry gives it an edge when it comes to understanding its customers.
Furthermore, in the past year, Techtronic has launched 500 new products. In Ma's view, this category expansion is limitless and offers a lot of upside in increasing sales.
Speaking of which, the portfolio manager highlighted the company's ability to grow sales at 13% per year over the past 13 years, stating:
That tells us one thing, that Techtronic is not growing sales by cutting prices and competing on volume, it's really creating a premium end product and commanding a very healthy product margin.
At the time of writing, Techtronic Industries shares are sitting at $170.30. However, Ma believes it could reach $250 per share within 12 to 18 months.
