HMS Networks (Hold, TP: SEK405.00) - Results justify recent rally
The Q4 results were strong across the board, which has led us to raise our 2023–2024e EPS by 10%. We still believe HMS Networks can 1) overcome investor concerns on order deterioration for 2023e; 2) raise its medium-term financial targets; and 3) add ~27% to our base-case EPS forecast through M&A. Also, in our view, its strong execution at a 36% ROCE and pure automation growth exposure warrant high valuation multiples. As the company will see tougher YOY comparables for H1, while its share price has rallied 30%+ in the past month, we see limited upside for now. Thus, we have downgraded to HOLD (BUY) but raised our target price to SEK405 (375).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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