Cooper Investors’ Qiao Ma says that despite cordless power tools provider Techtronic Industries being an industrials company, it’s really a technology company at heart.
Naming the Hong-Kong listed stock as her top pick at the 2021 Sohn Hearts & Minds Conference, Ms Ma explained that Techtronic is more of a Silicon Valley company than an industrials company.
“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,” she says.
“Let’s use batteries as an example. As early as 2004, Techtronic migrated its entire toolset into lithium ion batteries.”
The other factor that stands out to Ms Ma is that Techtronic specialises in a niche area.
“This type of obsession and focus into one thing give them an incredibly deep and nuanced understanding of its customers,” Ma says.
Over the past 12 months, Techtronic has released an onslaught of 500 new products, and going forward, Ma says the company’s category expansion is limitless.
This type of product innovation also translates into financial year performance.
Over the past 13 years, Techtronic has been growing sales at 13 per cent per year, and even more impressively, it’s been growing profit at 26 per cent per year.
“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,” she says.
It means Ms Ma is excited about the future of Techtronic for three reasons.
The first is that Techtronic is going out of its core market in North America and expanding into Europe and Asia. Ms Ma is also bullish on the company’s category expansion, and its operating margin expansion.
While Techtronic is currently a $170 stock, Ms Ma believes within 12 to 18 months, it will climb to $215.
This article was originally posted by The AFR here.
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