Main menu button

Equity research, HANZA: Preview Q4, 2023

6 Feb 2024

Carlsquare Equity Research expects a substantial earnings improvement also in Q4, despite a slightly more cautious view on organic growth in the short-term following reports of growth headwinds in the sector. HANZA has said it will revise its financial targets upwards as the 2025 strategy has been achieved ahead of time.

The end of 2023 was eventful, with a significant acquisition (of Electronics Manufacturing Services (EMS) company Orbit One) followed by a SEK 300m capital raise in December. Including Orbit One, HANZA now has sales of some SEK 5.2bn. As HANZA has thus reached its growth target for 2025 (sales of at least SEK 5bn) ahead of time, the board will revise the financial targets upwards. HANZA has announced that it will present new financial targets in conjunction with the release of the Q4 report on 13 February.

The natural step would be to raise ambitions further. For example, 15 per cent annual growth, including acquisitions, would imply around SEK 10bn of sales by 2028-2029. What about profitability? On the back of the strong margin development in 2023, a long-term margin (EBITA) target of nine to ten per cent would likely be viewed as a bullish but achievable goal. We believe HANZA’s track record of achieving synergies in manufacturing clusters supports setting a relatively high bar, but the trajectory also depends on finding suitable acquisition targets. As a reference, Kitron and NOTE recently presented EBIT targets of nine and at least ten per cent for 2027, respectively.

For Q4, we expect continued albeit slower growth. In Q3, Main markets grew faster than we had expected, while sales in the ‘Other markets’ segment were somewhat disappointing. Nordic EMS peer NOTE somewhat unexpectedly lowered its sales and earnings guidance for Q4 in mid-December and eventually reported flattish sales for the quarter. Adjusted for extraordinary price adjustments in the year-ago period, organic sales increased by four per cent. NOTE says it is growing more slowly than its customers, which points to inventory adjustments. We believe that HANZA has fared relatively better in this environment but we lower our expectations for Q4 and 2023 slightly ahead of the earnings release on 13 February. We assume some three per cent organic growth driven by the ‘Main markets’ segment, down from five per cent previously.

In 2024, the acquisition of Orbit One will have a significant impact on the top line of some 27 per cent. However, there will be an initial dilution of margins (HANZA alluded to some -40 bp in the conference call on 1 December 2023). We will return with an update following the Q4 report to fully incorporate the Orbit One acquisition, the new financial targets and the recent directed share issue. As we explained in the comment on the acquisition on 1 December, we expect to raise the valuation in the base case.

The valuation of HANZA has come down in the last two months. Arguably, the dampened outlook from sector peers, as mentioned above, is a factor. If our estimates are correct, and HANZA can confirm a relative operating outperformance vs the sector, there should be a positive share reaction in the cards.


Carlsquare AB,, hereinafter referred to as Carlsquare, conducts business with regard to Corporate Finance and Equity Research in which areas it, among other things, publishes information about companies, including analyzes. The information has been compiled from sources that Carlsquare considers to be reliable. However, Carlsquare cannot guarantee the accuracy of the information. Nothing written in the analysis should be regarded as a recommendation or invitation to invest in any financial instrument, option, or the like. Opinions and conclusions expressed in the analysis are intended only for the recipient.

The content may not be copied, reproduced, or distributed to another person without the written approval of Carlsquare. Carlsquare shall not be held responsible for any direct or indirect damage caused by decisions made on the basis of information contained in this analysis. Investments in financial instruments provide opportunities for value increases and profits. All such investments are also subject to risks. Risks vary between different types of financial instruments and combinations of these. Historical returns should not be considered as an indication of future returns.

The analysis is not directed to U.S. persons (as defined in Regulation S of the United States Securities Act and interpreted in the United States Investment Company Act 1940), nor may it be disseminated to such persons. The analysis is also not directed to such natural and legal persons where the distribution of the analysis to such persons would result in or entail a risk of a violation of Swedish or foreign law or constitution.

The analysis is a so-called Commissioned Research Report where the analyzed Company has signed an agreement with Carlsquare for analysis coverage. The analyses are published ongoing during the contract period and for a usually fixed remuneration.

Carlsquare may or may not have a financial interest in the subject of this analysis. Carlsquare values the assurance of objectivity and independence and has established procedures for managing conflicts of interest for this purpose.

The analyst Niklas Elmhammer does not own and is not allowed to own shares in the Company analyzed.


Equity research, HANZA: Preview Q4, 2023