Digital Transformation And Distributed Energy Will Expand Markets

Key Takeaways

• Accelerated customer migrations, large new deals, and SaaS transition position Hansen for long-term margin expansion and recurring revenue growth beyond current expectations.
  
• Investments in AI and automation enhance operational efficiency and open substantial new market opportunities, further supporting sustained profit improvement and business diversification.
  
• Increasing industry disruption, reliance on legacy products, and customer consolidation put Hansen at risk of revenue and margin declines without faster innovation and market adaptation.

Catalysts

Engages in the development, integration, and support of billing systems software for the energy, utilities, communications, and media sectors.

• Analyst consensus expects strong growth from major license renewals and upgrades in the second half of fiscal 2025, but this could be significantly understated given accelerated customer migrations, a record pipeline of multiyear deals (including multiple new large logos) and evidence of even larger deals being lined up for the next 12–24 months, implying revenue growth in excess of current guidance.
  
• While analysts broadly agree that the Powercloud turnaround is a success story, this outcome could drive even more substantial margin expansion than expected as cost synergies from tighter integration, lower operational overhead and increased focus in the high-growth German market deliver sustained EBITDA leverage and a structurally higher group profit margin by FY26 and beyond.
  
• Hansen's platform is positioned for rapid, secular demand growth from utilities and telcos globally as adoption of distributed energy resources, smart grids, and modernization of legacy IT accelerate-these trends point to a long-term step change in addressable market size and a multi-year tailwind for high-margin recurring revenue.
  
• The strategic shift to a SaaS-heavy, cloud-based model is likely to compound margin expansion and cash flow stability, as the company's annual recurring revenue base-characterized by exceptionally low churn and increasing cross-sell/upsell to long-standing blue-chip customers-drives a more predictable, higher quality earnings stream over time.
  
• Hansen's ongoing investment in AI and automation (such as its stake in Dial AI and integration into its CIS platform) not only positions it for runaway efficiency gains but also opens a pathway to entirely new solution lines and markets, with the potential to unlock high incremental margins and additional long-term revenue sources.

Hansen Technologies Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Hansen Technologies compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Hansen Technologies's revenue will grow by 7.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 1.0% today to 16.4% in 3 years time.
• The bullish analysts expect earnings to reach A$73.3 million (and earnings per share of A$0.36) by about July 2028, up from A$3.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 25.6x on those 2028 earnings, down from 348.3x today. This future PE is lower than the current PE for the AU Software industry at 73.4x.
• Analysts expect the number of shares outstanding to grow by 0.1% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.07%, as per the Simply Wall St company report.

Hansen Technologies Future Earnings Per Share Growth

Risks

• The increasing adoption of open-source and cloud-native solutions in the utility and telecom sectors may put pressure on Hansen's proprietary software, causing both pricing pressure and potential margin compression that could negatively affect the company's long-term earnings.
  
• Industry consolidation among Hansen's large customers, such as utility and telecom companies, could give these customers greater bargaining power, risking reduced average contract values and less predictable revenue streams for Hansen in future years.
  
• Hansen's ongoing reliance on legacy product lines is evident, and while the company discusses upgrades and large license deals, slower adaptation to new market needs or disruptive technology from competitors may result in revenue stagnation and long-term loss of market share.
  
• The shift toward decentralized energy models and increased demand for software tailored to renewables and microgrids means that some of Hansen's traditional billing systems could become obsolete, requiring substantial and ongoing R&D investment that may reduce net margins if new solutions are not successfully commercialized.
  
• A high concentration of revenue in large, long-term contracts-with unpredictable timing and structure of license renewals-creates the risk of sudden revenue drops, especially if contract renewals are delayed, lost, or renegotiated at lower values, which could destabilize both annual revenues and profitability.

Valuation

• The assumed bullish price target for Hansen Technologies is A$7.3, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Hansen Technologies's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$7.3, and the most bearish reporting a price target of just A$4.6.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be A$446.3 million, earnings will come to A$73.3 million, and it would be trading on a PE ratio of 25.6x, assuming you use a discount rate of 8.1%.
• Given the current share price of A$6.01, the bullish analyst price target of A$7.3 is 17.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.