Hunting PLC (HTG) 

Hunting delivered EBITDA of US$103m, ahead of revised guidance and the inferred year-end expectation, representing a 98% y-o-y uplift (and 11.1% margin, +380bp). Significant contract awards boosted Subsea and OCTG activities in particular, but top line progress was also accompanied by good cost control to deliver the full year outturn. A record year-end order book position leaves the company well-placed to deliver further progress in FY24, where guidance is unchanged. We note that our unchanged 407p/share fair value estimate is c.30% above the current share price.

Revenues, profitability and order books all show strong progress in FY23

At the headline level, Hunting delivered group revenue growth of 28% and margin progress (ie gross +90bp to 24.5% and EBITDA +390bp to 11.1%), feeding into a fivefold increase in pre-tax profit with EPS up over four times in FY23. The full year dividend rose by 11% to 10c per share, covered twice by earnings. Thematically, offshore and international markets were the strongest oil & gas demand segments, while non-oil & gas revenues grew by c.60% (to 8.2% of group revenue). We think it noteworthy that reported results contained no adjusting items; costs relating to facility consolidation activity and other minor impairment charges were all taken above the line. That said, a favourable tax credit (reflecting improved North American profitability) did increase deferred tax assets on the end FY23 balance sheet. In cash flow terms, Hunting was modestly geared at the yearend, with a c.US$25m net cash outflow for the year substantially driven by inventory investment to support higher activity levels and a record year-end order book position. 

Valuation: fair value still seen well above current share price level

Following the FY23 results release Hunting’s share price has moved above the 250p-300p trading range largely seen over the last six months and is now up 21% over this period compared to a modestly positive FTSE All-Share Index. Against our selected peer group average, Hunting’s P/E and EV/EBITDA multiples sit on discounts of 25-30% and 20-25% respectively. Taking a simple average of our P/E and DCF based analyses (ie sector average P/E in FY26, and US$180m long term EBITDA assumption respectively) generates an unchanged fair value per share of 407p.