Company Reports

No-moat Hexagon reported second-quarter numbers that were broadly in line with FactSet consensus. However, management said that they expect the trading environment to remain challenging in the third quarter, particularly in the construction and automotive sectors. Consequently, the shares were down around 4% intraday. We’re maintaining our SEK 108 fair value estimate. At current levels, the shares look fairly valued.

We’re initiating coverage of Sweden-based Hexagon with a no moat rating and fair value estimate of SEK 108. Our fair value estimate implies a fiscal 2024 enterprise value/EBITDA multiple of 12.5 times and a P/E multiple of 20 times. At current levels, the shares look fairly valued.

Hexagon, based in Sweden, is a global provider of hardware, software, and services across industries such as construction, manufacturing, oil and gas, agriculture, and mining. Hardware includes sensors, measuring devices, and other equipment typically used in conjunction with its software products. Sensors collect data and positioning information for equipment, which is fed into software that helps manage and optimize operations. Services are typically maintenance contracts on the hardware. Currently, the company’s revenue is around 40% hardware, 40% software, and 20% services. Hexagon generates around 80% of revenue through its direct salesforce, which we think is an advantage versus competitors who typically rely more on partners and distributors.