Dassault Systèmes: HSBC goes Buy – 01/11/2023 at 10:51

(AOF) – HSBC raised its recommendation on Dassault Systèmes from Hold to Buy and its price target from €40 to €42 as part of a study on European technology stocks. The design office estimates its higher revenue and operating margin growth potential. The analyst believes his now less stretched rating provides a good entry point for this quality file; Dassault Systèmes is resilient and able to self-finance accretive M&A operations.

He points out that PER has gone from 46 at the beginning of 2022 to 30 currently.

HSBC believes the group will hit its 2024 targets as early as 2023 thanks to strong operating leverage and no margin dilution as it moves to the cloud.

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Main points

– Computer software publishing company established in 1981;

– Turnover of 4.9 billion euros, generated 37% in Europe, 38% in America and 25% in Asia and divided between software for 90% then licenses;

– The business model based on the 3DEXPERIENCE virtual platform of several software useful to customers in their search for sustainable innovations that harmonize product, nature and life, with 3 key sectors – manufacturing industries, life sciences and health and infrastructures and cities;

– Capital controlled at 40.2% (53.69% of voting rights) by the Dassault family, 5.96% (7.96%) by Charles Edelstenne, chairman of the board of directors of 12 members and 1.72 % (2.15%) by Bernard Charlès, Chief Executive Officer and future Chairman of the Board of Directors in 2023;

– Healthy balance sheet: debt classified A and reduced to 485 million euros and cash of 3.2 billion euros at the end of June.

challenges

– Strategy 2025:

– opening platforms for all players, from suppliers to consumers,

– acceleration of recurring revenues, through the cloud (25% of revenues in 2021, ie 860 million euros and ambition of 2 billion euros),

– capitalization in the group’s 15 main brands -ENOVIA, 3DEXCITE, CENTRIC PLM for collaboration applications, SOLIDWORKS, CATIA, GEOVIA, BIOVIA for 3D modeling, 3DVIA, DELMIA, SIMULIA for simulations and NETVLEDADATA for information, then NETVIBES, DIEXAA, Works for SMEs and IFWE loop for twins,

– The financial objective of the annual increase of 10% of turnover;

– Innovation strategy supported by R&D of 935 M€ with 73 centers employing 41% of employees:

– 3DEXPERIENCE Lab, open innovation that supports breakthrough innovation offers at the prototype stage carried out by start-ups, innovators or laboratories,

– supported topics: city, fashion and lifestyle and life sciences, using additive manufacturing, big data or virtual reality,

– The “sustainability commitment” environmental strategy aiming at carbon neutrality by 2040:

– 2/3 of new licenses with a positive impact on the environment in 2025,

– federation of interested parties;

– Virtual twins offer:

– operation of the specialized platform for synchronization between real products, including human ones, and data processed in virtual products,

– positioning in the circular economy by anticipating the recycling of products from their design;

– Launch of Software République, with Renault, STMicro and Thalès: joint offer and marketing of mobility systems and software;

– Activity visibility, recurring traffic that generates more than 8/10 of revenue.

challenges

– Positive positioning in the cloud, reinforced by the acquisition of StyleStage, complementary to CENTRIC PLM, and in healthcare;

– The punitive impact of anti-Covid restrictions in China, especially for SOLIWORKS

– After a 17% increase in turnover at the end of September, raising the 2022 target for a 9 to 10% increase in revenue and 14 to 16% in earnings per share, between €1.12 and €1.14 and total depreciation.

Learn more about the software publisher sector

European cloud players file complaint against Microsoft

These groups have enjoyed a 167% increase in their activity over the past five years. However, their share of the European cloud fell from 27% to 13% over the period. That of Amazon, Microsoft and Google has grown from 46% to 72%, according to Synergy Research. The European leader, SAP, is only in seventh place with only 2% of the market.

European players accuse Microsoft, the world’s number one cloud provider, of taking advantage of its position as a software publisher and cloud service provider to force its software customers to switch to its services if they want to migrate to the cloud . Despite recent announcements from Microsoft to calm things down, European players are offering to test its compliance with the ten principles of fair software licensing set by Cigref, the French association of leading digital customers.

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