Intrinsic Value Hexatronic Group AB (publ) (0RDH.L)

• Previous Close: £23.68
• Intrinsic Value: £12.04
• Upside potential: -49%

Stock Valuation Context

Business Model And Market Position

Hexatronic Group AB operates in the fiber communication solutions sector, providing passive infrastructure, components, and system solutions to telecom operators, network owners, and wholesalers. The company’s product portfolio includes fiber optic cables, ducts, and high-density polyethylene pipes, catering to diverse applications such as fiber-to-the-home, geothermal, and industrial pressure pipe systems. Its offerings extend to training services and certification programs, reinforcing its role as an integrated solutions provider in the telecom and infrastructure markets. Hexatronic has established a strong presence in Sweden and internationally, leveraging its expertise in high-tech fiber optic communications. The company’s focus on innovation and quality positions it competitively in a rapidly evolving industry driven by increasing demand for high-speed connectivity and sustainable infrastructure solutions. Its diversified customer base and end-to-end service capabilities enhance resilience against market fluctuations, while its training division supports long-term industry relationships.

Revenue Profitability And Efficiency

Hexatronic reported revenue of SEK 7.58 billion for the period, with net income of SEK 346 million, reflecting a net margin of approximately 4.6%. Operating cash flow stood at SEK 921 million, indicating robust cash generation, while capital expenditures of SEK 325 million suggest ongoing investments in capacity and technology. The company’s ability to convert revenue into cash underscores operational efficiency.

Earnings Power And Capital Efficiency

Diluted EPS of SEK 1.69 highlights Hexatronic’s earnings capability relative to its share count. The company’s operating cash flow coverage of capital expenditures demonstrates disciplined capital allocation, with free cash flow supporting financial flexibility. Its capital-light training and certification segments likely contribute to higher-margin recurring revenue streams.

Balance Sheet And Financial Health

Hexatronic maintains SEK 633 million in cash and equivalents against total debt of SEK 3.07 billion, indicating a leveraged but manageable position. The debt level reflects strategic investments in growth, while liquidity appears sufficient for near-term obligations. The absence of dividends suggests a focus on reinvestment or debt reduction.

Growth Trends And Dividend Policy

Hexatronic’s growth is tied to global fiber optic infrastructure expansion, with revenue scalability evident in its international operations. The company does not currently pay dividends, prioritizing reinvestment in R&D and market expansion. Its beta of 1.494 suggests higher volatility, likely reflecting sector cyclicality and growth-dependent valuation.

Valuation And Market Expectations

With a market cap of SEK 5.01 billion, Hexatronic trades at a P/E multiple derived from its SEK 346 million net income. Investors appear to price in growth expectations, given the sector’s long-term tailwinds from digitalization and 5G deployment. The elevated beta implies market sensitivity to macroeconomic and industry-specific risks.

Strategic Advantages And Outlook

Hexatronic’s integrated solutions and training services provide a competitive edge in a fragmented market. Its focus on sustainable infrastructure aligns with global trends, while international diversification mitigates regional risks. Execution on operational efficiency and debt management will be critical to sustaining growth amid rising interest rates and supply chain uncertainties.

Sources

Company filings, London Stock Exchange data