HMS Networks (Hold, TP: SEK485.00) - Riding the automation wave
We believe HMS Networks offers several attractions: market leadership in a structurally growing niche, an ROCE of 25%+, founder-led with high insider ownership, a strong long-term main shareholder, and a ‘war chest’ for potential M&A. Despite 66% organic order growth YOY in 2021 – creating bright prospects for 2022 – in our view the rich valuation reflects these drivers, trading like a software company although 90%+ of sales are hardware. We also believe organic order intake deceleration in 2022e could become a drag on the stock. We reiterate our HOLD and SEK485 target price.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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