Hammond Power Solutions An Expanding Portfolio at the Heart of Electrification: Initiating at Overweight with YE26 PT of C$430

研报英文原文证据摘录

Hammond Power Solutions An Expanding Portfolio at the Heart of Electrification: Initiating at Overweight with YE26 PT of C$430

Tomohiko Sano AC North America Equity Research

(1-212) 622-1099 28 May 2026 J P M O R G A N

tomohiko.sano@jpmorgan.com

Risks to Rating and Price Target

Margin and tariff pass-through delays: Hammond Power Solutions operates an

international business that is at risk of tariffs adversely impacting margin levels. Further,

HPS depends on key inputs, including copper, electrical steel and aluminum, whose

prices can be volatile. The company is able to pass through input cost inflation via

pricing, but there is a lag, leaving it susceptible to short-term margin disruption.

End market concentration driving demand cyclicality: Hammond’s backlog growth

has largely benefited from increasing demand from data center-related customer

projects, thereby resulting in increased correlation to a single, capital-intensive and

historically cyclical end market. Any hyperscaler capex pause, changes in data center

electrical architecture that favors alternative equipment, or project deferrals could have

an adverse impact on future expected profitability.

AEG integration risk: The AEG acquisition is expected to close in 2Q26, moving HPS

from a net cash balance sheet to nearly 3x net leverage expected at closing. The addition

of a European and Asian power electronics business is likely to have different cost

structures, along with differing regulatory environments and product cycles than the

core franchise. Should Hammond falter in its ability to integrate the AEG business or

revenue/margins fall short of expectations, it could damage the accretion case of the

acquisition while simultaneously distracting management during a period of record core

demand.