Edison Investment Research Initiates Coverage on Altron: A Promising Prospect

Edison Investment Research Limited has commenced coverage on Altron (AEL), a South African IT services provider, spotlighting the company as a "Rising Star." Altron focuses on providing platforms and IT services that assist businesses in their digital transformation and operational IT needs. As part of its growth and profitability strategy, Altron's management has announced ambitious profit targets for the medium term. The company has shown noteworthy progress, with Edison forecasting a headline EPS compound annual growth rate (CAGR) of 21% from FY23 to FY26e.

The research agency believes Altron's market performance is undervalued, anticipating the FY24 results in May to shed light on individual business performance. This, according to Edison, is expected to narrow the valuation gap compared to its peers as the company's margin improvements become more apparent. Furthermore, Edison's sum-of-the-parts valuation, factoring a 30% discount for holding company/South Africa risks, pegs the company's shares at an 84% premium to the current market price.

Edison suggests that Altron's present share price anticipates only moderate revenue and minimal margin growth post-FY27. However, positive developments in margin performance and the resolution of its two discontinued business segments could act as catalysts for stock appreciation. This report by Edison underscores the unrecognized potential in Altron's share value and market positioning.