David Farrell, an analyst from Jefferies, maintained the Buy rating on Hill & Smith Holdings (HILS – Research Report). The associated price target remains the same with p2,540.00.
David Farrell has given his Buy rating due to a combination of factors that highlight the positive outlook for Hill & Smith Holdings. The company’s EBITA for FY24 has surpassed consensus expectations by 3%, which is anticipated to lead to upgrades in the consensus EBITA for FY25. This improvement in earnings quality is further supported by better-than-expected net debt figures and upgraded EBITA and ROIC targets.
Additionally, the new CEO, Rutger Helbing, has swiftly identified opportunities within the group, leading to a strategic refresh that aligns capital allocation and portfolio management with high-growth and low-cyclicality markets. The introduction of a new EBITA margin target of over 18% and an increased ROIC target of 22%+ reflects the company’s focus on enhancing earnings quality. With FY24’s ROIC at 24.8%, there is room for acquisitions, and the management’s commitment to returning surplus capital to shareholders if certain debt ratios are maintained further strengthens the investment case.