Stock Pick of the Week
THIS WEEK’S STOCK PICK: Hudaco Industries
Hudaco Industries is a South African group specialising in the importation and distribution of highquality branded automotive, industrial and electrical consumable products, mainly in the southern African region.
Noko Mantome, Junior Equity Analyst at Momentum Securities, Johannesburg region, shares her insights.
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Transcription:
Welcome to the stock pick of the week. This week’s stock is Hudaco Industries a medium cap stock listed on the JSE and currently trading at R150.
Hudaco Industries is a South African Group, specializing in the importation and distribution of high quality branded automotive, industrial and electronic consumable products mainly in the Southern African region.
Hudaco managed to increase operating margin and turn over above its pre-covid levels during challenging trading conditions that still prevail.
This highlights how defensive this business is and how strategic Hudaco management is. We believe the stock is fundamentally strong and can bring value to shareholders in the near term. Consumable related product segment benefits the business with a double digit increase in sales for the six months’ period ending on 31st May 2022.
This segment’s contribution to group sales accounting for fifty two percent (52%) of group sales and sixty one percent (61%) of operating profit. Trading conditions continued the positive trend of 2021 in the engineering consumables segment.
This segment has shown good growth with increased turn over from the mining and manufacturing sectors. In terms of valuation, we forecast hapted of 1 764cents for financial year 2022 and 1 910cents for financial year 2023. Hudaco industries is trading at 12 months forward PE of 8.06 times which falls below the peer average of 9.9 times. This indicates it is trading at a discount to its peers and appears to be under value.
Our target price one year forward is R183.30 and it has an upside of twenty two percent (22%). We have a buy recommendation on this stock, and we believe that it is stock to be added to your portfolio.
