Section 1: Company Overview and Fundamental Insights

1.1 Company Overview:

Heroux-Devtek Inc (TSX: HRX) designs, develops, manufactures and repairs landing gear and actuation systems and components for the aerospace market. It also produces electronic enclosures, heat exchanges, and cabinets for airborne radars, electro optic systems, and aircraft controls through megatron operations and fluid filters products through its Bolton operations. The company's products are helicopters, jets, military fighter and transport aircraft, electronic enclosures, heat exchangers, and cabinets. Kalkine’s Investor Report covers the Investment Highlights, Key Financial Metrics, Risks, Technical Analysis along with the Valuation, Target Price, and Recommendation on the stock.

1.2 The Key Positives, Negatives, Investment Highlights and Risks

1.3 Top 10 Shareholders:

The top 10 shareholders together form ~60.23% of the total shareholding. Caisse de Depot et Placement du Quebec and Fonds de Solidarité FTQ hold a maximum stake in the company at ~­­­14.28% and ~10.93%, respectively.

1.4 Key Metrics:

The company reported growth in its financial numbers in Q2 2024, furthermore revenue from both segments also improved, which is a key positive. Moreover, in the same reported period, the group reported sequential improvement in its margin profile, demonstrating its strength and adaptability.

Section 2: Business Updates and Financial Highlights

2.1 Recent Updates: The below picture gives an overview of the company’s recent activities, such as an announcement regarding the new development contract.

2.2 Insights on Q2 FY 2024 Financial Performance:

Section 3: Key Risks:

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

The stock has witnessed an upside of ~4.60% in 1 week and ~6.78% over the last 1 month. Moreover, the stock is trading above the average of 52-week high price of CAD 16.61 and 52-week low price of CAD 12.52 providing an opportunity to ride the trend. 

4.2 Fundamental Valuation

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is January 5, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Dividend Yield may vary as per the stock price movement.  

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.