Key Takeaways:
UBS raised its Techtronic price target to HKD168 from HKD148 on AI data center construction demand.
UBS said in a research report that data center-related work accounts for 15 percent to 20 percent of Milwaukee revenue, with Milwaukee contributing about 71 percent of group sales. The bank kept its Buy rating and lifted EPS forecasts for 2026 to 2028 by an average of about 3 percent.
The new target implies a forecast price-to-earnings ratio of about 23 times for 2027, above the stock's historical range of roughly 15 to 20 times. UBS said the premium is justified because earnings growth from 2026 to 2028 should be stronger than in the past, forecasting an EPS compound annual growth rate of about 18 percent.
UBS expects AI data center-related sales to grow more than 20 percent a year, reaching about 20 percent of group sales and 26 percent of earnings by 2028. Management said tool usage density on AI data center construction is roughly double that of general infrastructure projects, a tailwind compounded by a continued US labor shortage.
The upgrade follows record first-half results. Techtronic reported sales of $8.3 billion for the six months ended June 30, up 5.9 percent from a year earlier, with EPS of $0.405 and gross margin of 42.9 percent. Milwaukee, the professional brand, grew 10.5 percent on an underlying basis in local currency, while Ryobi rose 1.7 percent.
The AI buildout is reshaping demand across the toolmaker's end markets. Milwaukee's technology, energy and manufacturing segment, which spans data centers, high-tech manufacturing and utilities, grew at a 20 percent rate and now represents 32 percent of the brand's demand, management said. Work required by mechanical, electrical and plumbing trades inside a single data center is roughly double that of a traditional non-residential site, with hyperscalers including Microsoft, Oracle and OpenAI driving construction.
Shares trade near a 52-week high after the results. The stock slipped 0.6 percent to $133 in the session after the earnings call, about 2.4 percent below its high of $136.2.
The target raise shows UBS sees AI infrastructure as a durable growth driver rather than a cyclical spike, with data center work already a fifth of Milwaukee's revenue. Investors will watch whether Techtronic's second-half margin holds near the 9.9 percent EBIT level it posted in the first half, and whether tariff refunds arrive as one-off items.
This article is for informational purposes only and does not constitute investment advice.
