Hexagon AB (Buy, TP: SEK135.00) - First results under new CEO in line
The Q4 results included positives: 1) still-strong 8% organic growth YOY, mitigating investors’ concerns on Hexagon’s growth prospects amid a weaker macro climate; and 2) an all-time high gross margin of 66.2%, suggesting medium-term potential. However, there were negatives: 1) a weaker incremental EBIT margin at ~25% versus 30%+ in recent quarters; and 2) soft LTM cash conversion at 72%, mainly due to WC build-up. We still see outperformance characteristics given low estimate risks and a reasonable valuation at a 2024e EV/EBIT of 18x. We reiterate our BUY and SEK135 target price.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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