Understanding the Market | CHERVON shares rise over 7%, the tool industry is expected to enter a new cycle with interest rate cuts, and the company's short-term operational pressure may ease with the cyclical trend
CHERVON's stock price rose by more than 7%, with an increase of 7.61% as of the time of writing, reported at HKD 22.9, with a transaction volume of HKD 41.1542 million. The market expects the Federal Reserve to cut interest rates, which may open a new cycle for the tools industry. China Merchants Securities pointed out that the tools industry is highly correlated with the real estate industry, and a rate cut will boost tool demand. A report from CICC shows that the company's OPE business revenue grew by 22.8%, while revenue from power tools saw a slight decline. KGI Securities believes that the company's revenue may come under pressure in 2025, but the rate cut cycle will help alleviate operational pressure
According to Zhitong Finance APP, CHERVON (02285) rose over 7%, with a current increase of 7.61%, priced at HKD 22.9, and a trading volume of HKD 41.1542 million.
In terms of news, the Chicago Mercantile Exchange's FedWatch tool shows that the probability of the Federal Reserve cutting interest rates by 25 basis points in September is as high as 98%. The market expects the Federal Reserve to cut rates by a total of 142 basis points over the next 12 months. China Merchants Securities believes that the tool industry exhibits characteristics of "many SKUs, large market space, high correlation with the real estate industry, and a relatively dispersed pattern," with Europe and the United States as the main consumer markets. Currently, the U.S. real estate cycle is at the bottom, and the implementation of interest rate cuts is expected to initiate a new upward cycle, bringing elasticity to tool demand.
CICC pointed out that in 1H25, the company's OPE business achieved revenue of USD 602 million, a year-on-year increase of 22.8%, mainly due to revenue growth from EGO; revenue from electric tool products was USD 306 million, a year-on-year decline of 2.5%, mainly due to a decrease in OEM business and a weak Chinese market. The company's overall gross profit margin in 1H25 increased by 0.4 percentage points year-on-year to 33.3%, mainly due to an increase in the proportion of high-margin EGO products, a decrease in raw material costs, and an increase in sales prices. KGI Securities stated that the company's revenue in Q3 2025 may be under pressure but is still expected to ease in a timely manner with the interest rate cut cycle. Performance benefits from stable gross margins and resilient expense control, while in 2026, EGO's strong product power and channel expansion are expected to support relatively better performance, and capacity relocation may enhance certainty
