HMS Networks (Hold, TP: SEK205.00) - Focus on pace of organic recovery
HMS Networks has taken swift and decisive action to protect margins and cash flows given challenging end-markets. The stock has risen ~75% in the past three years, ~65% of which we estimate can be attributed to multiples expansion. While we like the long-term investment case unfolding from a leading position in a secular growth niche, long-term software/service IIoT potential from a 7m installed base, and scope for M&A, in our view its recent organic growth track record leaves limited upside potential (trading at 40x P/E 2021e, a 20% premium to its three-year average). We reiterate our HOLD but have raised our target price to SEK205 (190).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.
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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