CICC: Maintains CHERVON (02285) outperform rating and lowers target price to 20.4 Hong Kong dollars.

CICC released a research report stating that due to the disturbance of tariffs on profits, it lowered CHERVON's (02285) 2026 EPS forecast by 26% to $0.22, and introduced a 2027 EPS of $0.25. The company's current stock price corresponds to a P/E ratio of 10.1/8.8x for 2026/2027. Considering the decline in profits, the bank lowered the company's target price by 24% to HK$20.4, corresponding to a P/E ratio of 12.0/10.5x for 2026/2027, with a 19% upside potential, maintaining an outperform industry rating. CICC's main points are as follows: Performance in 2025 was lower than the bank's expectations. The company announced its performance for 2025: revenue of $1.628 billion, a year-on-year decrease of 8.2%; net profit attributable to shareholders of $98 million, a year-on-year decrease of 13.2%, and non-GAAP net profit attributable to shareholders of $78 million, a year-on-year decrease of 42.2%. Due to customers adopting a more conservative procurement strategy, there was a temporary decline in revenue, and performance fell below the bank's expectations. OPE growth surpasses the industry. In 2025, the company's OPE business achieved revenue of $1.009 billion, a year-on-year increase of 0.1%, mainly due to revenue growth from EGO, which achieved double-digit growth in North America; revenue from power tool products was $611 million, a year-on-year decrease of 18.3%. The company's gross margin in 2025 decreased by 1.8 percentage points to 32.9% year-on-year, mainly due to a decrease in revenue leading to a reduction in scale efficiency, but overall remained at a historically high level. By region, revenue from North America and China decreased by 11.5% and 3.8%, respectively. The company's expense ratio increased slightly, and the net profit margin declined slightly. In 2025, the company's sales, management, and R&D expense ratios increased by 1.1/0.6/0.6 percentage points to 15.9%/6.5%/5.3%, mainly due to a decrease in revenue, while the financial expense ratio decreased by 0.1 percentage points to 0.2%. Other income in 2025 was $32.336 million, and the net profit margin of the company in 2025 decreased by 0.3 percentage points year-on-year to 6.0%. EGO brand market share continues to increase, paying attention to interest rate cuts. According to the company's performance announcement, EGO's market share continues to grow, and the bank continues to be optimistic about the competitiveness of the company's EGO products. The company's hand-push lawn mower, snow blower, and ride-on lawn mower categories have become the highest lithium OPE market share products in North America. According to data from the U.S. Bureau of Economic Analysis, the demand for power tools terminals was weak in 2025, as the bank believes that this was mainly due to the impact of high tariffs on industry demand, along with overseas capacity construction and the narrowing of tariff discrepancies between domestic and international markets. The bank is optimistic about Quanfeng's continuous improvement of product market share through product advantages. Risk warning: New product volume falls below expectations; U.S. interest rate cuts fall below expectations; U.S. tariff fluctuations.