Sentiment On HollySys Still Exceptionally Weak

I’ve used words like “frustrating” and “confounding” in reference to HollySys (HOLI) before, and little has really changed in that respect. Despite a relatively healthy ongoing outlook for key end-markets like power generation, chemicals, and rail in China, not to mention relatively good financial performance back in the company’s fiscal fourth quarter (calendar second quarter), HollySys shares are down another 25% or so from mid-June.

There are valid reasons to be wary of HollySys, including poor management communication and a noted lack of progress in multiyear diversification/growth initiatives. Some investors won’t touch Chinese equities, and that’s fine (at a minimum, you should educate yourself on withholding rules and the like). Likewise, some investors may not want exposure to automation at this point or want to tolerate the exceptional volatility in the rail equipment business. Still, if HollySys can maintain operating margins in the 20%’s and generate mid-single-digit revenue growth, these shares are notably undervalued.

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Sentiment On HollySys Still Exceptionally Weak