Q: In regard to the question about Hammond Power this might help..... from TD this morning,
National Bank Financial analyst Baltej Sidhu thinks the simplified rules emerging from “significant” changes” by the U.S. government to Section 232 tariffs on steel, aluminum and copper will provide a notable “structural tailwind” for Hammond Power Solutions Inc. (HPS.A-T).
Shares of the Guelph, Ont.-based company jumped 15.3 per cent on Monday after the Trump administration announced updated guidance on those tariffs, clarifying how rates apply to imports.
“The updated framework introduces a tiered structure, with 50-per-cent tariffs on primary metals, 25 per cent on derivative products, and a reduced 15-per-cent rate on select metal-intensive industrial and grid equipment,” he explained. “Overall, the tariff calculations are simpler and transparent, and could be viewed as the administration working with the industry, in acknowledging supply constraints and the need to support ongoing U.S. industrial and grid buildout.
“While the 15-per-cent grid equipment category appears to capture HPS’ suite, we believe its transformer products are likely to fall under the 25-per-cent derivative category, based on product codes listed in the annex. That said, we view the revised framework as more transparent and consistent, replacing metal-content-based calculations with a clearer rules-based approach, which should improve confidence and create a more level playing field.”
While acknowledging the overall financial impact “remains under evaluation given the complexity of HPS’s input mix and broad SKU base,” Mr. Sidhu thinks the revised framework could “prove incrementally less punitive” for Hammond.
“Under the revised tariff regime, the effective burden may be more manageable relative to the prior structure,” he said. “There are puts and takes as the savings may flow through to the customer in maintaining relationships. Stepping back, the policy shift reinforces an already tightening supply backdrop for transformer equipment while supporting continued investment in grid infrastructure, leaving us optimistic that HPS can recover costs and sustain pricing.”
Maintaining his “outperform” rating for the company’s shares, the analyst raised his Street-high target to $235 from $220. The average is currently $161.
“While we have more clarity, we are comfortable with our current estimates, and believe the reaction in the shares reflect margin expansion of 100-150bps vs. our modelling of 120bps. Owing to the continued structural drivers, and increased confidence, we increase our target,” he explained.
National Bank Financial analyst Baltej Sidhu thinks the simplified rules emerging from “significant” changes” by the U.S. government to Section 232 tariffs on steel, aluminum and copper will provide a notable “structural tailwind” for Hammond Power Solutions Inc. (HPS.A-T).
Shares of the Guelph, Ont.-based company jumped 15.3 per cent on Monday after the Trump administration announced updated guidance on those tariffs, clarifying how rates apply to imports.
“The updated framework introduces a tiered structure, with 50-per-cent tariffs on primary metals, 25 per cent on derivative products, and a reduced 15-per-cent rate on select metal-intensive industrial and grid equipment,” he explained. “Overall, the tariff calculations are simpler and transparent, and could be viewed as the administration working with the industry, in acknowledging supply constraints and the need to support ongoing U.S. industrial and grid buildout.
“While the 15-per-cent grid equipment category appears to capture HPS’ suite, we believe its transformer products are likely to fall under the 25-per-cent derivative category, based on product codes listed in the annex. That said, we view the revised framework as more transparent and consistent, replacing metal-content-based calculations with a clearer rules-based approach, which should improve confidence and create a more level playing field.”
While acknowledging the overall financial impact “remains under evaluation given the complexity of HPS’s input mix and broad SKU base,” Mr. Sidhu thinks the revised framework could “prove incrementally less punitive” for Hammond.
“Under the revised tariff regime, the effective burden may be more manageable relative to the prior structure,” he said. “There are puts and takes as the savings may flow through to the customer in maintaining relationships. Stepping back, the policy shift reinforces an already tightening supply backdrop for transformer equipment while supporting continued investment in grid infrastructure, leaving us optimistic that HPS can recover costs and sustain pricing.”
Maintaining his “outperform” rating for the company’s shares, the analyst raised his Street-high target to $235 from $220. The average is currently $161.
“While we have more clarity, we are comfortable with our current estimates, and believe the reaction in the shares reflect margin expansion of 100-150bps vs. our modelling of 120bps. Owing to the continued structural drivers, and increased confidence, we increase our target,” he explained.
