UBS: Upgrades earnings estimates and target price for TECHTRONIC IND (00669), optimistic about AIDC construction demand supporting long-term growth.

UBS published a research report stating that TECHTRONIC IND (00669) exceeded expectations in its performance for the first half of the year. Consequently, it has raised its average earnings per share forecasts for 2026 to 2028 by approximately 3%. The target price has been adjusted from HKD 148 to HKD 168, corresponding to an estimated price-to-earnings ratio of around 23 times for 2027, which is above the historical price-to-earnings range of about 15 to 20 times for the stock. UBS believes that the valuation premium is reasonable, anticipating stronger earnings growth from 2026 to 2028 compared to the past, and maintains a "Buy" rating. Management pointed out that the increasing demand for Artificial Intelligence Data Centers (AIDC) involves more complex systems in their construction, with tool usage density being twice that of regular infrastructure projects. Additionally, the ongoing labor shortage in the United States is beneficial for the development of related innovative tools and solutions businesses. Currently, data center-related businesses account for about 15% to 20% of Milwaukee's revenue, while Milwaukee contributes approximately 71% of the group's total revenue. UBS expects sales revenue related to AIDC to grow by over 20% in the coming years, reaching about 20% and 26% of the group's overall sales and profits, respectively, by 2028. The current forecast indicates that Techtronic's compound annual growth rate for earnings per share from 2026 to 2028 will be approximately 18%.