Hunting PLC: Navigating Volatility with Resilient Earnings and Strategic Growth

In an era of market volatility and shifting energy paradigms, industrial stocks with robust cash generation and alignment to long-term industry tailwinds often emerge as compelling opportunities. Hunting PLC (HTG.L) fits this profile, offering a compelling case for investors seeking undervalued exposure to the energy transition. With a first-half 2025 performance marked by strong EBITDA growth, strategic acquisitions, and a disciplined capital allocation policy, Hunting is positioning itself as a resilient player in the subsea technologies and enhanced oil recovery (EOR) sectors.

Resilient Earnings and Cash Flow Generation

Hunting's H1 2025 results underscore its ability to navigate macroeconomic headwinds. Revenue rose to $528.6 million, with EBITDA climbing 16% year-over-year to $70.2 million. Free cash flow surged to $66.2 million, a stark contrast to the $2.8 million generated in the same period in 2024. This cash flow strength is critical in a capital-intensive industry, enabling the company to fund its aggressive share buyback program (up to $40 million) and increase dividends by 13%.

The company's EBITDA margin of 13% reflects operational efficiency, outpacing the 12% average of its peers in the subsea sector. Hunting's ability to convert revenue into cash is further bolstered by its focus on high-margin projects, such as the $46 million titanium stress joint orders in the Gulf of Mexico and bespoke Enpro systems in the North Sea.

Strategic Acquisitions and Energy Transition Alignment

Hunting's recent acquisitions are a testament to its forward-looking strategy. The $64.8 million purchase of Flexible Engineered Solutions (FES) has expanded its subsea product portfolio, particularly in FPSO vessel operations, a growing segment as the industry shifts toward floating production systems. Similarly, the $18.2 million acquisition of Organic Oil Recovery technology positions Hunting to capitalize on the EOR boom, with global EOR markets projected to grow at a 7.43% CAGR through 2032.

These moves align with the energy transition, as subsea technologies and EOR solutions play a dual role: extending the life of existing hydrocarbon assets while enabling cleaner extraction methods. For instance, Hunting's EOR technology is being deployed in projects that reduce flaring and improve reservoir efficiency, addressing environmental concerns while enhancing profitability.

Undervaluation Amid Industry Peers

Despite its strong fundamentals, Hunting trades at a significant discount to its peers. As of August 2025, its P/E ratio stands at 4.81, while its P/EBITDA is approximately 5.35. In contrast, Subsea 7 (SUBCY) trades at a P/E of 23.46 and an EV/EBITDA of 5.72, and Reach Subsea has a P/E of 12.8x and EV/EBITDA of 3.0x. Hunting's valuation appears particularly attractive when considering its stronger EBITDA growth (16% vs. Subsea 7's flat EBITDA) and higher free cash flow margins.

Long-Term Tailwinds and Capital Allocation

The subsea systems market, valued at $20.89 billion in 2024, is expected to grow at a 5.6% CAGR through 2032, driven by deepwater exploration and subsea processing innovations. Hunting's recent $69 million in new subsea orders, including projects for ExxonMobil Guyana and Kuwait Oil Company, positions it to benefit from this growth. Additionally, the company's $11 million annual cost savings from European restructuring and its new Dubai facility enhance operational flexibility.

Hunting's capital allocation strategy further strengthens its case. The $40 million share buyback program, coupled with a 13% annual dividend increase, signals confidence in its cash flow sustainability. With a net cash position of $79.3 million as of H1 2025, the company is well-positioned to fund growth without overleveraging.

Investment Thesis

Hunting PLC offers a rare combination of undervaluation, strong cash generation, and strategic alignment to energy transition trends. Its disciplined approach to acquisitions, cost optimization, and shareholder returns creates a compelling risk-reward profile. While the stock's low P/E and P/EBITDA ratios may reflect skepticism about its ability to sustain growth, the company's H1 performance and industry tailwinds suggest otherwise.

For investors seeking exposure to the energy transition without overpaying for hype, Hunting represents a high-conviction opportunity. The stock's current valuation appears to discount its potential to outperform in a sector poised for long-term growth.

Conclusion
Hunting PLC's resilient earnings, strategic acquisitions, and undervaluation make it a standout in the industrial sector. As the energy transition accelerates, companies that can deliver both profitability and sustainability will thrive. Hunting's ability to navigate volatility while capitalizing on subsea and EOR growth positions it as a compelling buy for investors with a medium-term horizon.