This report is an updated version of the report published on 11 November 2022 at 11:40 AM (GMT +1)

Halma PLC

HLMA Details

Halma PLC (LON: HLMA) is a life-saving technology company operating through three segments. The Safety segment, the Environmental & Analysis Segment, and the medical segment.

Financial Results for FY22

• HLMA has reported healthy organic constant currency revenue and profit growth across sectors and all major regions
• The company has generated record revenue in FY22, up by 16% and 17% on an organic constant currency basis.
• Adjusted profit before taxation grew by 14% and rose 15% on an organic constant currency basis. The increase in adjusted profit before taxation reflected the growth in revenue and the return of discretionary variable overhead costs in 2HFY22.
• Cash conversion remained healthy at 84%, and the net debt/EBITDA stood at 0.74x (2021: 0.76x), providing scope for investment in organic growth and acquisitions.

Key Updates

• On 11 November 2022, the company declared the appointment of Steve Gunning as Chief Financial Officer, who will join the company on 16 January 2023 and be inducted to the company’s Board.
• On 6 October 2022, the company mentioned the acquisition of WEETECH Holding GmbH for a consideration of €57.5 million (~£50 million) on a cash- and debt-free basis.

Outlook

The company's healthy underlying cash generation and financial position drive accelerated strategic investment in future organic growth and provide financial flexibility to fund acquisitions and dividend policy. HLMA holds a promising acquisition pipeline across all three sectors. Besides, it remains focused on actively managing its portfolio of global businesses to deliver healthy growth and returns over the long term. Its companies are seeing healthy demand for their products and services, with order intake significantly higher than revenue in the year to date and order intake in the corresponding prior period. HLMA expects to attain sustained growth and maintain high returns in FY23, with decent single-digit percentage organic constant currency revenue growth and a return on sales in-line with the 2HFY22. Meanwhile, HLMA will release its results for 1HFY23 on 17 November 2022.

Key Risks

HLMA is prone to the risk of lacking the right talent and diversity at all levels of the organisation to deliver its strategy and manage a low-carbon transition. Failure to innovate to better products to cater to customer requirements, or protect intellectual property, would lead to a loss of market share.

Valuation Methodology: Price/Earnings Per Share Based Relative Valuation (Illustrative)

Stock Recommendation

Over the last one month, the stock has given a return of ~13.32%.

The stock has been valued using P/E multiple-based illustrative relative valuation, and the target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to P/E Multiple (NTM) (Peer Average), considering the challenging operating environment and the current trading levels.

Considering the resistance and target level achievement, current trading levels and risks associated, it is prudent to book profits at the current levels. Hence, a ‘Sell’ rating has been provided on the stock at the current price of GBX2,356.91 per share as of 11 November 2022 (Time: 09.01 AM (GMT +1), London, United Kingdom).

Technical Overview:

Daily Price Chart

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is November 11, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Disclaimer 

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