I’m opening a new company thread for this company because it came under Inderes’ coverage.
Hexagon globally delivers technology solutions focused on developing information technology and applying it to geospatial and industrial applications. The company’s solutions primarily integrate sensors, software, industrial expertise, and customer workflows, thus forming extensive information ecosystems. Hexagon’s customer base extends globally across various industries. The company was founded in 1975, and its headquarters are located in Stockholm, Sweden.
And here below is a brand new Hexagon coverage initiation report from Pauli!
Extensive reports and coverage initiation reports are always available for everyone to read, so there are no paywalls for these.
Built on series of acquisitions, Hexagon is a global diversified technology company that provides productivity-improving solutions to multiple industries. Despite partial dependence on cyclical industries, we find a good chance that the company may continue earnings growth even during tougher market conditions.
Tässä olisi kolmannen kvartaalin osavuosikatsaus, joka on julkaistu 27.10.
Linkin takaa löytyy vielä katsauksen 21-sivuinen liite.
Third quarter 2023
8 per cent organic revenue growth (using fixed exchange rates and a comparable group structure)
Reported operating net sales increased by 2 per cent to 1,352.1 MEUR (1,320.2). Net sales including the reduction of acquired deferred revenue amounted to 1,349.8 MEUR (1,316.6)
Adjusted gross margin of 65.5 per cent (65.2)
Adjusted operating earnings (EBIT1) increased by 2 per cent to 393.0 MEUR (386.2)
Adjusted operating margin amounted to at 29.1 per cent (29.3)
Earnings before taxes, excluding adjustments, amounted to 350.0 MEUR (377.3)
Net earnings, excluding adjustments, amounted to 287.1 MEUR (309.4)
Earnings per share, excluding adjustments, amounted to 10.6 Euro cent (11.4)
Operating cash flow before non-recurring items decreased to 146.5 MEUR (243.5)
Hexagon is a global diversified technology company that provides productivity-improving solutions to multiple industries. The company consists of two business areas, Geospatial Enterprise Solutions and Industrial Enterprise Solutions. On the video, analyst Pauli Lohi explains the company’s business, the outlook for the next few years and the company valuation.
Content:
00:00 Intro 00:15 Hexagon as a company 01:21 Main markets & customer industries 03:02 Acquisition strategy 05:05 Corporate governance issues 07:14 Strategic cornerstones 09:11 Future expectations 11:14 Valuation
Tässä on Paulin kommentit tulevasta pääomamarkkinapäivistä.
Hexagon will host its Capital Markets Day on Thursday, December 7. We anticipate the company to showcase and demonstrate its growth opportunities in both business areas. In addition, Hexagon could give more color to its rationalization program that was kicked off earlier this year. When it comes to updating the financial targets, we see a slight profitability target upgrade possible given that the company is already rather close to its current target of adjusted EBIT of over 30%.
Alla on Paulin kommentit siitä, kun Hexagon kertoi tiistaina myyvänsä teollisen mittauslaitteiden bisneksen kiinalaisille. Ei pitäisi olla hirveesti vaikutusta firman EBITiin tai kassatilanteeseen.
Paulin etkokommentit, kun Hexagon julkaisee torstaina Q4-tuloksensa.
Hexagon will publish its Q4 financial report on Thursday, February 1. We expect sales growth to slow somewhat and relative profitability to remain flat year-on-year, partly weighed down by negative FX effects. Forward-looking comments on the growth outlook could drive the share price, even though the company does not typically provide any numerical group-level guidance.
Yle julkaisi muutama päivä sitten havainnollistavan artikkelin digitaalisista kaksosista teollisuudessa. Tässä artikkelissa käsitellään miten Valmet Automotive hyödyntää digitaalista kaksosta. Teknologiatoimittajaksi on tosin tässä tapauksessa valikoitunut Hexagonin Leican sijaan kilpaileva yhtiö, Trimble.
Hexagon has made a small “SaaS acquisition,” and below are Pauli’s comments regarding it.
The acquired business complements Hexagon’s enterprise asset management software offering. With revenue of only 1 MEUR, the acquired business has no material impact on Hexagon’s short-term earnings.
This video can also be found on the Inderes Nordic channel, which features a lot of great content. It’s worth subscribing to the channel: https://www.youtube.com/@inderesnordic
@Pauli_Lohi has written an excellent piece covering Hexagon and Vaisala.
How to find good entry points in growing quality companies, such as Vaisala and Hexagon, which almost always look expensive relative to near-term earnings? We believe that these companies should be bought when the market fears the short-term effects of a weak demand cycle – in other words, on the dip. Stock prices tend to rise too much as upswings are prolonged and fall too much when near-term outlooks weaken. We compared the historical stock returns of Vaisala and Hexagon relative to historical valuation levels, based on which we believe Hexagon in particular appears to be an interesting stock pick at the moment.
Hexagon’s Q3 results were weakened by “cyclical” challenges, and no significant recovery is expected in Q4. Growth is expected for 2025-26, supported by comparison figures and falling interest rates.
Recurring SaaS revenue grew steadily throughout the year, and as a result, the company is considering a partial carve-out of the SaaS businesses into its own entity. Although Q3 sales and operating profit fell short of expectations, cyclical recovery and new products could support Hexagon’s growth in the coming years. The potential separation of the aforementioned division could also enhance strategic development in the long term.
Hexagon acquires Geomagic software business from 3D Systems. The transaction supports the company’s Manufacturing Intelligence division, which offers production and design efficiency services to industrial customers.
Geomagic’s revenue was EUR 28 million, and its profitability improves the division’s margins. The acquisition price was EUR 117 million, and the estimated EV/EBIT multiple was approximately 14x, which is below Hexagon’s current valuation. The transaction complements Hexagon’s metrology offering and strengthens the emphasis on software sales.
Tässä on Paulin ennakkokommentit raportteineen, kun Hexagon julkaisee Q4-rapsansa perjantaina.
Hexagon will report its Q4 results on Friday, January 31. We expect growth to remain low, weighed down by weak industrial investment. However, we have raised our earnings estimates for 2025-26E due to recent acquisitions and positive FX changes. The recent rise in the company’s share price has weakened the risk/reward ratio, which is why we change our recommendation to Reduce (was Accumulate) with a target price of SEK 120 (was SEK 115). We believe that the next key drivers for the share are related to global economic activity and the impact of changes in US trade policy.
Hexagon will separate its ALI and SIG divisions into an independent company, which will be listed in the United States. The new company will also include Bricsys’ CAD business and ETQ. The spin-off could take place in early 2026.
Hexagon has reconfirmed its prior plan to separate its Asset Lifecycle Intelligence (ALI) division and related businesses through a spin-off. The company also indicated it currently expects that the new separated unit will be listed on a US-based stock exchange. The scope of the spin-off has been expanded to include the entire Safety, Infrastructure & Geospatial (SIG) division, resulting in some 27% of total revenue being separated into the new company.
Here’s a pre-company report from Pauli as the company releases its Q1 results on April 30th
The recent ~30% decline in the share price offers an attractive entry point for a long-term investor. A high proportion of recurring revenue, such as software and services, should partially mitigate future weakening in hardware sales due to tariff uncertainties. We note, however, that while we have lowered our 2025 adjusted EBIT forecast by 8%, there is still significant uncertainty associated with the forecasts. Nevertheless, we consider the current valuation attractive for a long-term value creator like Hexagon, which is why we raise our recommendation to Add (previously Reduce) and lower our target price to SEK 100 (previously SEK 125).
