About Hanza
Hanza is an contract manufacturer. Hanza is unique due to its cluster manufacturing model. Hanza clusters manufacturing technologies like electronics, machining and assembly in European regional hubs.
Hanza acquires customers by offering business consulting services [Manufacturing solutions for Increased Growth and earnings – short MIG]. A 4–8-week business analysis of companies’ production process designed to streamline their manufacturing chain https://hanza.com/mig-advisory-services/ . Further, Hanza acquires customers by cross selling supply chain technologies and through acquisitions.
Hanza creates value for its customers largely by reducing complexity. The relentless focus on efficiency [just in time principles] and globalisation, has introduced highly fragile and fragmented supply chains. By clustering manufacturing in regions, Hanza reduces supply chain risk and increases efficiency.
For context, In todays business environment, manufactures have lost leverage over intermediaries [since the industrialisation, 1800’s]. In supply and value chains, the dynamics are always changing. The bull thesis, stands largely on a changing geopolitical environment -> that improves the value proposition of regional cluster manufacturing contrarian to fragmented arms-length supplier relationships.
Applying an ARA-model
This section aims to explore how geopolitical trends are affecting the OEM and manufacturer relationship.
In recent years; the Suez and Hormuz canal, corona lock downs and tarifs have severely affected supply chains. These geopolitical risks geopolitical risks has increased the value proposition for near shoring. This changes the linked layers in the ARA model significantly.
Activity Layer
When the operational processes of different actors are coordinated, they form activity links. This includes synchronized production schedules, joint R&D efforts, or integrated logistics.
HANZA pools machinery and talent, by grouping multiple manufacturing technologies into regional clusters. This generates capabilities and economies of scale, individual companies would struggle to achieve on their own. HANZAs contract manufacturing and value chain consultancy, integrates customers and creates a sticky business model.
Resource layer
The model assumes resources are heterogeneous; their value is not fixed, but depends entirely on how they are combined. When the assets of one actor are specifically adapted to fit the assets of another, they form resource ties (e.g., a company customising its software to directly read a supplier’s database).
OEMs are increasingly dependent on manufactures to manage increasingly fragile, complex, fragmented and global supply chains. Broadly speaking firms no longer save resources by applying just in time and fragmented supply chains, as the risk of these fragile supply chains breaking, significantly affect the expected value of such actions. Furthermore, highly specialised technology like microchips, serve as impenetrable barriers.
Actor layer
Actors form bonds with one another through trust, legal contracts, and historical interactions. These bonds determine the level of friction, knowledge sharing, and strategic alignment in the network.
Changes in the actor layer are illustrated by the changes in the manufacturer-OEM relationship. Firms like Hanza are increasingly capturing more of the supply-chain, by offering services traditionally governed by intermediaries. Across business units, Hanza is capable of managing the full supply chain – and take on the risk involved. OEMs are thus increasingly innovation and marketing houses closely integrating with manufacturers.
note
The ARA model has inherent strengths and weaknesses. The model can reveal hidden moats by examing switching costs, it highlights co creation by recognizing that competetive advantages often stems from external partnerships and it highlights this interdepencence and how changes can cascade. But, the model is descriptive, it assumes bounded rationality where actors optimize for efficiency and it is blind to actors outside the network.
Transaction Cost Theory
Transaction Frequency
Uncertainty
Asset Specificity
Applying Porters Five Forces
– Threat of new entrants. Manufacturing is highly competitive. The clustering approach is replicable. But it does require capital, capabilities and customers. Regional hubs must be placed in areas with plenty of access to transportation, labor, electricity etc., putting natural barriers to entry. Low.
– Bargaining power of suppliers. The cluster model relies on technological advanced parts like semiconductors and robotics. These suppliers have leverage over Hanza. High.
– Bargaining power of buyers. Initially it’s high. The customer has an existing value chain that they might wish to improve. As the customer becomes integrated with Hanza, the bargaining power shifts and becomes low for the customer. Hanza’s aim of a single customer not contributing to more than 10% of total sales, enhances Hanza’s leverage.
– Threat of substitutes. The re-industrialization of Europe has been a near term driver. While this is expected to continue into the midterm, there is no guarantee that the trend towards globalisation continues again – if so for example transport costs come down and geopolitics calm down. The argument here is that cluster manufacturing might be less appealing in an environment without geopolitical tension compared to other ways of managing supply chains.
– Industry rivalry. As mentioned, manufacturing as a sector Is very competitive.
Valuation and forecasts
The acquisition of BMK and Fortico; provide little customer overlap and arms lenght manufactuering models. For Hanza this means that Hanza has potential to upsell its cluster manufacturing approach to new customers. When Hanzas customers grow, their need for manufactuering increases. Hanza thus grows with its customers, being deeply embedded into their supply chains. Further, with the LYNX program Hanza targets 300 M SEK annual. Defence manufacturing includes drones. . The Reindustrialization of Europe and the European Defence Industry Programme (EDIP) will function as significant tailwinds in the short to midterm. https://commission.europa.eu/topics/defence/future-european-defence_en
Hanza is trading at a PE 23.6. with 6 billion in sales and a EBITDA margin at 6.3%. Using management guidance: their 2028 plan. Sales at 14 billion and an EBITA margin at atleast 9%. A start 2029 PE stands at around 10.
Note. Fortico acquisition is all cash and is expected to happen in Q4 2026; with a positive contribution to EPS. BMK is already integrated, and the merger was done issuing new shares. One time costs was materialised in Q2, hinting at a higher 2026 adjusted net income.
Market share and Competition
Illustrated above, Hanza is one of the least profitable firms in the peer group. The development though, is best or second best in class. Cicor and Kitron are both attractive alternatives. The lower profitability, can be attributed to recent acquisitions and the implementation. The profitability is expected to improve.
To Summarize
Hanza is the fastest growing European manufacturing company, with their aggressive M&A strategy and cluster model. Recent acquisitions fit the overall business model well, expanding in operational capabilities / securities & defence [BMK], customers and scale [Fortico]. Hanza is thus growing both in new product categories and in new customers. The risk is the acquisitions and implementation of these acquisitions and macro economic factors affecting European industry. Current industry trends, favour more resilient supply chains -> which favours Hanza. Hanza is experiencing significant insider buying. The advantage/moat is largely, that the cluster offering is unique and difficult to replicate, which in theory with time should improve margins. The growth comes from industry tailwinds, m&a and the superior positioning.
– The segment defence & security is going to have a positive contribution to sales and margins.
– The Fortico acquisition is going to provide potential for up selling to the new customer base.
– If managements guidance hold, the company is currently undervalued.
– Broad exposure to European industry. Any draw down in the economy, might affect profitability.
– Higher interest rates and increased leverage are going to affect m&a strategy in the short term.
– Inorganic growth is less valuable than organic growth.
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