Hexagon AB (Buy, TP: SEK460.00) - Three factors supporting growth
We have upgraded Hexagon to BUY (HOLD) and raised our target price to SEK460 (450) on our expectation of continued growth in Industrial Production, a wave of new car models, and the ‘industry 4.0’ transformation driving >5% annual organic growth over 2017–2020. We see this resulting in a 10% EPS CAGR, with added upside from potential M&A. Despite the near-term risk overhang from the pending verdict in the CEO’s insider trading case (due in the coming weeks), at a 2018e EV/EBIT of 17x, we find Hexagon’s overall risk/reward attractive.Hexagon is engaged in the provision of integrated design, measurement and visualization technologies. Co. has two segments: measurement technologies, which consist of Geosystems that captures, processes and stores position-related information, Metrology, which provides manufacturing evaluation, process qualification and final parts inspection, and Technology, which provides engineering software as well as geospatially powered solutions; and Other Operations, which focuses on the transportation industry in the car and heavy vehicle segments. The Other Operations conducts its business in the Nordic region.
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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