HMS Networks (Hold, TP: SEK460.00) - 30%+ EBIT beat but shares down
We admire HMS Networks’ consistent execution and view it as a high-quality business. We see low risk to our H2e, but have limited visibility for 2023e. We believe there could be a cyclical correction in orders from close to peak levels which could lead to a combination of negative consensus revisions and multiples contraction. The negative share price reaction to the 30%+ EBIT beat in Q2 indicates the market expectations embedded in HMS Networks’ valuation. We reiterate our HOLD and SEK460 target price, but we have raised our 2022–2023e EPS by 3–7%.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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