The listed ‘Technology & hardware’ sector is resisting against the economic backdrop which remains sluggish. The values that compose it have still not consumed their growth potential, according to an analyst on the spot. To analyse.
The listed sector index called “Hardware, software and IT services” shows a slight drop of around 5%. This variation hides disparities between the different values that make up this index.
This index is composed of 8 companies– not all carrying out the same activity -, namely Disway, M2M Group, Microdata, S2M, Ib Maroc, Involys, HPS and Disty Technologies. The largest price increase in YTD is recorded by M2M (+24%), but this value is not traded much. Three stocks are down slightly: HPS (-1.1%), S2M (-1.7%) and Disway (-0.1%).
The largest price drop is posted by Disty (-30%). It is followed by Microdata (-24%), IB Maroc (-18%) and Involys (-18%).
Growth potential is still present
It is important to focus on the most traded values in the sector and the most followed by local research companies, in particular HPS, Disway and Microdata, according to a local analyst, contacted by LeBoursier.
How do they evolve? Do they have growth potential?
According to our analyst, “the growth potential of these stocks is far from being consumed. These are growth stocks. Their development this year is impacted by the international economic context which is marked by several tensions. The dollar took a lot especially against the dirham. Technology companies, especially those importing from abroad, are negatively impacted by the depreciation of the national currency against the dollar. Moreover, faced with this context, companies prefer to postpone their IT investment for next year. This somewhat limits the development of their activity”.
“The sector as a whole remains resilient. It preserves enormous growth potential. It is a sector that is in perpetual development; a promising sector which is going through a somewhat difficult period like most sectors of activity,” he believes.
The index corrects slightly lower after a strong rise in 2020. “This sector has benefited a lot from the outbreak of the pandemic in 2020. The values that make it up have risen a lot. It is normal that they are now correcting a little downwards, ”adds our interlocutor.
Recommendations from research companies
BMCE Capital Global Research (BKGR) recommends, in its latest Inventory guideof keep Diswayoflighten HPS and D’accumulate Microdata.
” Disway remains bolstered by continued strong demand for IT equipment and by its positioning in several strategic areas, which should enable it to achieve sustainable growth”, emphasizes BKGR, which values the share at 833 dirhams, i.e. an upside potential of 18% compared to the closing price of this Wednesday, October 12 (704 dirhams).
CFG Bank recommends keeping the Disway share with a target price of 655 dirhams, or a potential drop of 7%.
HPS is recommended for purchase by CFG and relief by BKGR
“Operating in a sector strongly impacted by the shortage of semiconductors and inflation, HPS should experience a contained evolution, based on its capacity to generate organic growth, however, mitigated by the appreciation of its operating expenses. in a dual context of inflation and high mobility of computer engineers,” says BKGR.
That said, HPS should continue to benefit from:
> Consumer enthusiasm for dematerialized means of payment (Contact-less, Mobile Payment, etc.);
> The signing of several international contracts and the development of several strategic partnerships allowing it to limit its risks through significant geographic diversification;
> The diversity of its business models (transactional, licensing, SaaS, etc.);
> And, a backlog well supplied for the next few years (an order book estimated at 579 MDH at the end of H1 2021).
“However, we believe that the current course already incorporates these perspectivesespecially since the expected increase in OPEX should weigh on margins in the short and medium term, hence our recommendation to lighten the stock”, underlines the research company which has set a target price of 5,826 dirhams for this title which should thus fall by 13% against a course of 6,700 dirhams (observed this Wednesday).
On his side, CFG Bank recommends buying HPS with a target price of 8,752 dirhams, representing a potential appreciation of 30% against a price of 6,700 dirhams.
“The health crisis has accelerated the digital transformation of companies and their investments in IT infrastructure, which should benefit Microdata and allow it to consolidate its leading position in IT Infrastructure”, according to BKGR.
The research company is counting on:
> The completion of a certain number of projects initiated in 2021-2022 and which would have been delayed, in particular due to health restrictions limiting the movement of teams;
> The reorientation of public budgets in favor of upgrading the IT infrastructure;
> The controlled increase in financial debt;
> The strengthening of Cloud professions today valued by the entire economic fabric;
> And, the positioning on new solutions and services with high added value should enable it to improve its margins.
Valued at 590 dirhams by BKGR, the title has a growth potential of 15% compared to a price of 510 dirhams.