Expansion Into India And EV Charging Technologies Will Strengthen Future Market Position

Key Takeaways

• Huber+Suhner's innovation in optical switches and fiber technology could drive significant growth in the data center segment, boosting future revenues and margins.
  
• Strong market position in electric vehicle charging and aerospace defense, along with global expansion strategies, signifies potential for long-term revenue and market share growth.
  
• Economic uncertainties, project dependencies, and fluctuating markets pose risks to Huber+Suhner's revenue growth and profitability across various segments.

Catalysts

Offers products and services for electrical and optical connectivity.

• Huber+Suhner's focus on high-impact innovation projects such as all optical switches and hollow-core fiber technology in the data center segment could drive significant growth, potentially increasing future revenues and margins.
  
• The company's strategic position in the high-power charging market for electric vehicles, particularly in the U.S. and Europe, with its leading technology in high-power charging cables, may enhance its revenue streams and market share as demand for electric vehicles grows.
  
• The expansion into India and Asia-Pacific, including a successful large 4G project in India, presents opportunities for continued revenue growth in these emerging markets.
  
• The company's strong position in the Aerospace and Defense segments, supported by rising defense budgets, offers potential for long-term growth and could steadily contribute to high-margin revenue streams.
  
• Huber+Suhner's commitment to sustainability initiatives and achieving CO2 emission reductions could enhance its reputation and appeal, potentially improving sales and profitability by attracting environmentally conscious customers.

Huber+Suhner Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Huber+Suhner's revenue will grow by 9.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.0% today to 9.5% in 3 years time.
• Analysts expect earnings to reach CHF 112.4 million (and earnings per share of CHF 6.06) by about September 2028, up from CHF 73.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting CHF131.6 million in earnings, and the most bearish expecting CHF98.6 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.0x on those 2028 earnings, down from 31.2x today. This future PE is lower than the current PE for the GB Electrical industry at 29.1x.
• Analysts expect the number of shares outstanding to decline by 0.09% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.46%, as per the Simply Wall St company report.

Huber+Suhner Future Earnings Per Share Growth

Risks

• Economic and geopolitical tensions, including trade wars, could impact Huber+Suhner’s revenue and profits by increasing tariffs and disrupting global supply chains.
  
• The need to replace a large Indian 4G project means that without new equivalent contracts, the Communication segment may see a decline in revenue, potentially affecting overall sales for 2025.
  
• The fluctuating performance in the Transportation segment, particularly in the Automotive market, which remains soft, poses a risk to revenue growth in that division.
  
• The reliance on key projects, such as those in the Communication and Industry segments, creates a dependency risk; failure to win follow-up contracts or new projects could negatively affect future earnings.
  
• Currency effects and changes in withholding taxes have previously impacted financial results, and continued exposure to such factors could affect profitability and net margins.

Valuation

• The analysts have a consensus price target of CHF122.36 for Huber+Suhner based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CHF140.0, and the most bearish reporting a price target of just CHF80.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CHF1.2 billion, earnings will come to CHF112.4 million, and it would be trading on a PE ratio of 23.0x, assuming you use a discount rate of 5.5%.
• Given the current share price of CHF123.8, the analyst price target of CHF122.36 is 1.2% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.