HMS Networks (Buy, TP: SEK200.00) - Margin expansion back in 2020e
We expect declining organic order growth until Q2 2020, driven by soft industrial end-markets and cautious customers, providing limited short-term catalysts. We believe that HMS Networks could offset this organic trend via a more active M&A agenda and estimate that it has a financial muscle of SEK700m to deploy in 2020e. We reiterate our BUY and have increased our target price to SEK200 (160) after moving our valuation base to 2021e.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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