Hammond Power Solutions Inc. (HMDPF) research, news, and more from GeoInvesting

Company description

Mon, 18 Apr 2022 00:52:13 GMT

Hammond Power Solutions Inc. (“HPS” or the “Company”) is a leader in the design and manufacture of custom electrical engineered magnetics, standard electrical drytype, cast resin and liquid filled transformers. Advanced engineering capabilities, high quality products and fast responsive service to customers’ needs have established the Company as a technical and innovative manufacturer serving the electrical and electronic industries. The Company has manufacturing plants in Canada, the United States, Mexico and India.

Research

Tue, 30 Apr 2024 14:49:56 GMT

Hammond Power Solutions Inc. (HMDPF) (HPS-A:TO) ($98.5; $1.17B market cap) (Toronto symbol HPS-A.TO) announced Q1 results:

Sales of $190.6 million vs $171.1 in the prior year, ahead of analyst estimates of $188.3 million
GAAP EPS of $0.67 vs $1.32 in the prior year, significantly impacted by share-based compensation.
Adding back the share based comp, EPS would of been $2.07 vs $1.72 in the prior year with analyst estimates at $1.37

“We begin 2024 at a strong pace as we continued to grow our quarterly sales volumes. Higher bookings versus 2023 maintained the backlog even with higher shipments, and we are now seeing bookings and shipments somewhat evenly matched. The distribution network stood out again as a source of strength as more projects continued to flow through this channel. Canada was also a standout as we shipped several key projects in commercial construction, electric vehicle (“EV”) charging, data centers, public infrastructure, oil & gas, mining, and utilities,” said Adrian Thomas, CEO of Hammond Power Solutions. “With the strong project demand, we have made further commitments to equipment spending as we forecast demand from emerging market segments to continue. We also implemented a price increase that will take effect in the second quarter of 2024, after having not done so since 2022. The increase was in consideration of persistent inflation and resilient demand. Regarding the Mesta and Power Quality business, a large customer project delay impacted our shipments for the quarter, but we still expect full year shipments to remain close to expectations. We are gaining recognition within the technical community and among our customers, as demonstrated by receiving the Rockwell Automation Technology Partner Innovation award for our Active Harmonic Filter.”

HMDPF designs, manufactures, and sells custom electrical engineered magnetics, standard electrical dry-types, cast resins, liquid filled transformers, and wound magnetic products for electrical and electronic industries.

Research

Thu, 28 Mar 2024 14:49:57 GMT

Hammond Power Solutions Inc. (HMDPF) (HPS-A:TO) ($44.29; $529.0M market cap) (Toronto symbol HPS-A.TO) announced Q4 and full year 2023 results:

Sales of $186.9 million vs $144.2 million in the prior year
EPS of $1.68 vs $1.53 in the prior year
Full year sales of $710.1 million vs $558.5 million in the prior year
Full year EPS of $5.33 vs $3.77 in the prior year

“Through 2023, our efforts to build capacity to support demand growth have paid off, as inventory levels recovered and lead times for many facilities came back in line with customer expectations. In 2024, the bulk of our announced capital expenditures will be spent and will provide us with more than $900 million in yearly manufacturing capacity by 2025.”

Research

Wed, 02 Aug 2023 19:36:42 GMT

Hammond Power Solutions Inc. (HMDPF) (HPS-A:TO) ($44.29; $529.0M market cap) (Toronto symbol HPS-A.TO) designs, manufactures, and sells custom electrical engineered magnetics, standard electrical dry-types, cast resins, liquid filled transformers, and wound magnetic products for electrical and electronic industries. The company announced Q2 2023 results: (Financials are in CAD)

Sales of $172.4 million vs $137.4 million in the prior year
EPS of $1.12 vs $0.55 in the prior year
The Company’s Quarter 2, 2023 backlog increased by 44.4% as compared to Quarter 2, 2022 and has increased 5.0% from Quarter 1, 2023

“The second quarter was noteworthy as we continued to deliver record financial results and experience strong demand from a wide range of end markets, which led to the largest week of bookings in the history of HPS,” said Bill Hammond, Chief Executive Officer of Hammond Power Solutions. “Our $40 million capital investment program is proceeding as planned and we are already benefiting from new capacity that improves our ability to serve the growing demand from our distributors and customers. During the quarter we hired my successor, Adrian Thomas, as CEO. Adrian has an extensive background in the electrical industry and has successfully led teams launching technologies globally. I look forward to working with him as I continue as Executive Chair, building on the strong foundation that Hammond has built as we drive to reach a billion dollars in sales by the end of the decade.”

Shares are up 180% since our reasons for tracking note back in November 2022.

Research

Wed, 03 May 2023 15:34:20 GMT

Hammond Power Solutions Inc. (HMDPF) (HPS-A:TO) ($29.78; $351.7M market cap) (Toronto symbol HPS-A.TO) designs, manufactures, and sells custom electrical engineered magnetics, standard electrical dry-types, cast resins, liquid filled transformers, and wound magnetic products for electrical and electronic industries. The company announced Q1 2023 results: (Financials are in CAD)

Sales of $171.1 million vs $127.8 million in the prior year and ahead of analyst estimates of $148.8 million
EPS of $1.32 vs $0.72 in the prior year and well ahead of analyst estimates of $0.92
Backlog up 74.1%

“Following a robust 2022, we are starting 2023 off on the right foot with continued growth. Quotation activity is up significantly over both Q4 and the same quarter a year ago, and booking rates remain at or near our highest historical levels in diverse markets like renewable power generation, EV recharging, energy storage, data center construction, silicon carbide processing, industrial expansions, power quality, and large institutional projects like hospitals and industrial buildings,” said Bill Hammond, Chief Executive Officer of Hammond Power Solutions. “Our production capacity expansion plans announced in December 2022 are proceeding as planned. The $40 million dollars of capital investment are expected to accommodate sales growth of $250 million over the next five years.”

Shares are up 90% since our reasons for tracking note back in November 2022.

Research

Wed, 08 Mar 2023 05:00:00 GMT

Hammond Power Solutions Inc. (HMDPF) ($22.35; $266.8M market cap) (Toronto symbol HPS-A.TO) designs, manufactures, and sells custom electrical engineered magnetics, standard electrical dry-types, cast resins, liquid filled transformers, and wound magnetic products for electrical and electronic industries.

The company announced Q4 2022 results (Canadian Dollars):

Sales of $144.2 million vs $116.2 million in the prior year
EPS of $1.53 vs $0.36 in the prior year and analyst estimates of $0.77
Full year sales of $558.4 million vs $380.2 million in the prior year
EPS of $3.77 vs $1.28 in the prior year
The Company’s December 31, 2022 backlog has increased by 117.1% as compared to December 31, 2021 and has increased 13.3% from Quarter 3, 2022. The combination of price increases and strong demand in the third and fourth quarters contributed to the record-high backlog.

“We are extremely proud of what we have been able to accomplish during 2022. It was a year fraught with challenges in terms of supply chains, rising costs, and a tight labor market. Through this, Hammond Power Solutions performed admirably, in fact we delivered the strongest financial performance of our 22 years of being a separate public company,” said Bill Hammond, CEO and Chairman of Hammond Power Solutions. “Our service and quality have always been a point of pride for HPS, and we are working hard to maintain the high standards our customers have come to expect. In December, we announced our plans to add capacity in all three North American countries in which we operate in order to meet increasing demand in our low and medium voltage transformers, power quality, and induction heating products. Demand for our products remains strong and we are determined to grow our competitive position in the coming years.”

On November 17, 2022 we issued our brief Reasons For Tracking piece on the company which can be seen here. At a trailing P/E range of 10 to 15, the stock would sell between CAD $37.70 and CAD $56.50 ($27.40 USD to $41.00 USD) . We have been trying to get a hold of management to see if the company can continue to grow in 2023. However, it is worth noting the company recently completed capital investment expansion plans to increase overall capacity.

“HPS continues to experience a very favorable environment where the electrification of our economy continues to drive strong demand in our industry”, said Bill Hammond, CEO of HPS. “These planned capital investments are expected to be made over the course of 2023 and 2024, and when complete, are expected to increase HPS’ overall sales capacity by approximately $180 million.”

So far, our attempts to speak with management have been unsuccessful.

Research

Tue, 27 Dec 2022 13:11:37 GMT

Hammond Power Solutions Inc. (HMDPF) (Toronto symbol HPS-A.TO) designs, manufactures, and sells custom electrical engineered magnetics, standard electrical dry-types, cast resins, liquid filled transformers, and wound magnetic products for electrical and electronic industries. On November 17, 2022 we issued our brief Reasons For Tracking piece on the company which can be seen here.

On December 20, 2022 the company announced its plans to expand capacity to meet the growing demand it is seeing.

“HPS continues to experience a very favorable environment where the electrification of our economy continues to drive strong demand in our industry”, said Bill Hammond, CEO of HPS. “These planned capital investments are expected to be made over the course of 2023 and 2024, and when complete, are expected to increase HPS’ overall sales capacity by approximately $180 million.

These planned capital investments are focused on areas targeted to increase capacity and reduce lead times for low voltage, power quality and induction heating products.”

Reasons For Tracking

Mon, 07 Nov 2022 14:33:57 GMT

We are adding Hammond Power Solutions Inc. (HMDPF) ($15.60; $187.2M market cap) (Toronto symbol HPS-A.TO) to our watchlist. HMDPF designs, manufactures, and sells custom electrical engineered magnetics, standard electrical dry-types, cast resins, liquid filled transformers, and wound magnetic products for electrical and electronic industries.

Below, we quickly lay out some items supporting why we are now tracking the company:

Reasons For Tracking

Year to date sales up over 50% (9 months sales of $414.2 million vs $263.9 million)
Year to date EPS up 150% (9 month EPS $2.25 vs $0.93)
6 Straight quarters of strong top and bottom line growth
Backlog up over 100%
P/E of 8
E/V to sales 0.3
Little long term debt, although the company relies heavily on its short term line of credit to operate
Price increases+higher demand
- “price increases were implemented in 2022, some of which affected Quarter 3, 2022 sales and will continue to be reflected in future quarter sales.”
- “Industry demand has continued to show strength, as shown by the backlog growth, but the pace of growth is slowing, with the backlog increase from the second quarter at 14.6%, down from the 26.6% increase experienced between the first and the second quarter.”
COGS may be stabilizing
- “In the third quarter, some material input costs have stabilized, while others continue to increase due to underlying inflation. While there remains higher than normal volatility in costs, we have seen a positive impact on margins in the quarter.”
Operating leverage

We are still early in our due diligence process, but are working on securing an interview with management. It should be noted that:

The stock is extremely illiquid
After Q4 2022, the quarterly financial comps become more challenging
As noted above, the pace of backlog growth is slowing. (something we need to be aware of due to recession fears)
The company operates in a low multiple industry

We just want to note that recession fears seem to be becoming more palpable. This observation is based on the earnings conference call transcripts we are reading for various companies: While this dictates that we exhibit some caution:

Tracking HMDPF and speaking with management is still in order because the valuation seems so compelling.
Q3 management commentary regarding 2023 and general growth about its markets was very positive.
If this is the case, we think there is a good chance the valuation multiples could materially expand.

Research

Mon, 02 May 2022 04:00:00 GMT

First Quarter 2022 Results:

Sales of $128 million vs $80.1 million in the prior year
EPS $0.72 vs $0.19 in the prior year

“We are now seeing the full impact of the price increases implemented in 2021. The increase in sales and backlog is driven by significantly higher prices versus a year ago and higher demand, particularly in our OEM markets. Margins were strong in the quarter as pricing caught up to costs, and as we benefitted from strong OEM project margins,” said Richard Vollering CFO of Hammond. “Looking forward in 2022, raw material costs continue to rise and as a result we will continue to monitor our pricing and make adjustments to maintain our margins. In parallel, we continue to see supply chain volatility that will continue to challenge us through the balance of 2022.”