Antoine Lebourgeois ...
  • Gregory Ramirez
  • Paul Charpentier
  • Thibault Morel

Technology | Industry 4.0 | Industry in the digital age

Industry 4.0

Industry in the digital age

The industry of tomorrow is being reshaped through the convergence of IT (Information Technologies) and OT (Operational Technologies) as well as hardware and software embedding to meet the structural challenges of the 21st century such as the ageing population and the value chain disruption. In this context, we are extending our industrial coverage to include six new hardware and software stocks at the heart of structuring themes in industrial automation.
Structural trends set to drive an unprecedented automation adoption rate in the industry.

• In this report, we highlight four long-term megatrends that are set to drive an unprecedented automation adoption rate in the industry of the future. Among them, we find (i) the combination of ageing demographics and rising labour costs, (ii) mass customisation, (iii) supply chain disruption, and (iv) increasing public and state pressure for a sustainable industry.

IT/OT convergence - Intricated hardware and software; Network, processes and infrastructure integration.

• Once distinctly separate worlds, IT (information technologies) and OT (operational technologies) must now operate a greater convergence to address the above-mentioned challenges. This will come through customed software and hardware embedding as well as better integration of IT/OT networks and the further development of a structured IoT infrastructure.

Players addressing these trends with highly differentiated software to bolster their valuation.

• Valuation spreads between software and hardware companies have been widening over the years as software benefits from higher estimated LT structural growth boosted by lastingly low interest rates. We believe this premium should remain intact despite recent rate hikes and therefore expect players who master both (i) industrial hardware in sticky markets with (ii) highly differentiated software, to be the winners of tomorrow’s industry, thus harbouring the highest rerating potential.

Hardware winners boasting best-in-class software to solve key automation challenges in hot end-markets.

• HMS and Basler have winning profiles for tomorrow’s industry. Automation subsystems manufacturers, they respectively solve IT/OT convergence and the key challenges of Machine Vision in hot end-markets such as electronics and semiconductors, logistics, new agriculture and security. Leaders in their field, they have a very solid reputation, standing out from the competition with best in-class embedded software, harbouring undervalued double-digit growth and margin increase potential. Among the OEMs we cover, Schneider appears to have the best fundamentals and rerating potential compared with TKH, which is struggling to move away from low added-value and cyclical legacy businesses.

Industrial software winners are the leaders addressing the right industries with the right solutions

• Aveva, ESI and Lectra are our favourite names in industrial software. Aveva is ideally positioned to benefit from the return of industrial capital projects in process, batch and hybrid industries, while benefiting from the transition towards an SaaS model. ESI is a recognised player in the fastest-growing PLM segment, and has significant profitability improvement potential thanks to a credible self-help plan. Finally, Lectra, as the leader in cutting equipment and PLM software for fabrics and leather, should benefit from synergies from acquisitions and a multi-year installed base replacement cycle thanks to Industry 4.0.
AVEVA Group plc

Aveva Group is a holding company. Through its subsidiaries, Co. is engaged in the licensing of the rights to use its software products directly to end users and to a lesser extent indirectly through resellers. Co.'s services consist primarily of consultancy, implementation services and training, and are performed under separate service arrangements. Co.'s products are most applicable in industries that include Oil and Gas, Marine, Power, Petrochemical and Chemical, and other markets such as AEC Fabrication, Paper and Pulp, Mining and Pharmaceuticals.

Basler AG

Basler develops, manufactures and sells machine vision technology. Co. provides line scan cameras and area scan cameras, as well as network cameras. Co.'s cameras are used in a diverse range of industries. They are used in industrial production applications like electronics and semiconductor inspection, in robotics, food control, postal sorting and in print image control. In the medical sector, Co.'s cameras are used in many different tasks, such as microscopy, ophthalmology, and blood or specimen analysis. Co.'s cameras are also fit optimally for the traffic and transportation sector, as well as for the surveillance sector.

Dassault Systemes SA

Dassault Systemes provides software products & consulting services. Co.'s software applications allow businesses to digitally define, simulate products, the processes & resources required to manufacture, maintain & recycle them. Co. also provides services, principally to large customers. These services comprise mainly consulting services in methodology for design, deployment & support, training services & engineering services. Co.'s activities can be divided into two segments: the PLM market supports product development, production, maintenance & lifecycle management; & the Mainstream 3D market, which is primarily focused on product design.

ESI Group SA

ESI Group is engaged in researching, developing, designing, creating and distributing computer software; and acquiring, receiving, holding, managing and trading in a portfolio of securities, especially in fields related to the publishing of scientific software, including digital simulation software for prototyping and manufacturing processes and related decision-making support tools.

HMS Networks AB

HMS Networks AB (HMS) is a Sweden-based company engaged in the provision of communication technology for industrial automation. The Company provides solutions to connect industrial devices to networks and products enabling interconnection between different industrial networks. The Company's products are classified into two brands, namely Anybus and Netbiter. HMS, under the brand name Anybus, manufactures and markets intelligent communication technology for machines and electrically controlled equipment. Under the brand name Netbiter it develops and sells communication equipment that facilitates remote management through the Internet, either via the fixed telephony network or the mobile telephony network. The Company operates through numerous subsidiaries, including HMS Industrial Networks AB, IXXAT GmbH, a supplier of communication technology for industrial automation, machine manufacturing and the automotive industry, as well as eWON SA.

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TKH Group N.V. Cert

TKH Group creates and supplies Telecom, Building and Industrial Solutions. Telecom Solutions develops, produces and supplies systems ranging from outdoor infrastructure for telecom and CATV networks through to indoor home networking applications. Building Solutions develops, produces and supplies solutions in the field of electro-technology ranging from applications within buildings through to technical systems that - combined with software - provide solutions for the care and security sectors. Industrial Solutions develops, produces and supplies solutions ranging from specialty cable, "plug and play" cable systems through to integrated systems for the production of car and truck tires.

Bryan Garnier
Bryan Garnier

Since 1996, Bryan, Garnier & Co has been growing with an absolute conviction that the investment banking landscape would experience a major revolution: most of the large local generalist banking groups will disappear to the benefit of a handful of global powerhouses, and an emerging group of independent, highly specialised boutique investment banks.

Antoine Lebourgeois

Gregory Ramirez

Paul Charpentier

Thibault Morel

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