HollySys Growing, But Consistency Remains An Issue

HollySys (HOLI) has built a respectable business in process automation and train signaling in China, but inconsistent execution and order growth remain key challenges for management. Expanding its factory automation business has likewise proven challenging, though there has been more progress on this front and Chinese government policy could be a tailwind.

HollySys shares have done well as revenue has rebounded, but the soft order growth in industrial automation could become more of a headwind. I continue to believe HollySys can generate high single-digit revenue and high single-digit to low double-digit FCF growth, and those growth rates can support a double-digit total return, but future growth is tied to management's ability to grow the business beyond its historical strengths.

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HollySys Growing, But Consistency Remains An Issue