HMS Networks (Sell, TP: SEK235.00) - Quality name but lofty valuation
HMS Networks has a strong vision, medium-term growth prospects and looks well placed to benefit from accelerated industrial automation and re-shoring capex. However, we are concerned as it is trading at a 2021e EV/EBIT of ~40x, which already discounts a ~25% EPS CAGR to 2023e (we forecast 16%), making it vulnerable to a slightly bumpier 2021e recovery or chip-shortage challenges. We reiterate our SELL but have raised our target price to SEK235 (230).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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