Hermle: Good Figures Not Yet Rewarded

Last Updated: 20. November 2023By

Most German machine and equipment manufacturers are currently struggling due to high energy prices and weak economic conditions. In contrast, the Swabian tool machine and automation specialist Hermle recently performed even better than expected.

First, a brief profile, since you rarely find the company in the business press: The Berthold Hermle Machine Factory AG is a manufacturer of technically advanced milling machines. The company was founded in 1938 by Berthold Hermle and is based in Swabian Gosheim. In 1957, the production of milling machines began. In 1990 the company changed its name to Berthold Hermle Machine Factory and on 10 April 1990 it went public.

If you are a dividend fan, particularly interesting for you: Hermle is one of the most profitable German machine manufacturers. The company has been paying high dividends for years and regularly provides its shareholders with above-average dividend yields of 4 to 7%.

Encouragingly stable business development Hermle also developed encouragingly stably in the 3rd quarter of 2023. Based on the good business performance in the first half of the year, sales in the first nine months increased compared to the corresponding previous year period by 20.3% to 380.9 million euros.

This development, which was above expectations, was mainly due to the continuing high demand for automation solutions. In terms of order intake, Hermle reported a decline in the 3rd quarter as expected. The order backlog at the end of the 3rd quarter was 161.1 million euros compared to 168.0 million euros at the end of 2022.

The result development normalized in the 3rd quarter, but remained disproportionate to the sales trend at the end of September. It was a positive factor that the price quality at Hermle is still stable despite the expected economic downturn. In addition, the company still had high liquid funds and a very generous equity ratio of around 70% at the end of September 2023.

Cautiously optimistic for the full year 2023 For the business year 2023, Hermle is cautiously optimistic overall due to the solid order backlog. From today’s point of view, Hermle’s Management expects sales to remain at least at the good level of the previous year; without external interference, an increase of around 10% is also conceivable. The operating result should be roughly stable, with an increase possible in a favorable case.

You should take into account when making this forecast: Hermle’s Management traditionally publishes rather cautious forecasts, which are often significantly exceeded in the end. I appreciate the company’s caution, as it rarely leads to negative profit warnings. This saves the nerves of shareholders.

In the long term, Hermle continues to anticipate a growing global demand for machine tools and automation solutions, not least due to the increasing shortage of skilled labor in many developed economies.

In my opinion, the risks are currently too strong in the price of the Hermle share, so that the opportunities currently outweigh the risks in my analysis – at least in the medium term. The readers of my stock exchange service „Der Depot-Optimierer“ have been invested in Hermle for many years and are already up over 1,700% (share price gains + dividends).