Today’s trading update ahead of the AGM is most encouraging. The decision to focus the strategy of the Group on power reliability, with accelerating growth within the datacentre and renewable energy markets, and recovery in marine and energy sectors, has clearly been vindicated. Only the Middle Eastern portion of the Tasman drilling tools business remains, with expectations of its disposal over the summer confirmed.
The number of large projects increased y-o-y, driven by the datacentre and marine markets and at improved margins relative to H1 ’21. Price increases on selected products offset ongoing inflation and supply chain issues, resulting in broadly unchanged margins. Strong ongoing demand can sustain further price increases should supply chain issues continue.
A combination of accelerating momentum within its markets, a strong pipeline of orders into H2, price increases, a rising number of projects, and growth investment in a new manufacturing facility and depot openings mean a more confident outlook for the Group. We increase estimates for the second time in as many months: adj. EPS are raised by 15.9% in FY22 and 17% in FY23, giving a CAGR from FY21 to FY23e of 30.6%.
The confidence in the outlook and subsequent increase in estimates result in our fair value / share increasing to 249p, representing a 29% premium to the current price.
