Initiating Coverage on Halma With a Narrow Moat and Exemplary Capital Allocation Rating

We are initiating coverage on Halma with a fair value estimate of GBX 2,200, narrow moat and Exemplary capital allocation rating. We believe Halma has carved out a narrow economic moat based on intangible assets and switching costs, which have supported industry-leading margins. Our fair value estimate implies an earnings multiple of 35 times, which is justified by Halma’s competitive advantages across defensive product categories and management's exceptional capital allocation track record. We view shares as overvalued, currently trading at record levels on an absolute and relative level.