SRG flat: the engineering company was out with FY23 results today which came in ahead of expectations however the stock failed to react as we would have expected. Revenue was a ~6% miss, mostly on the timing of payments, while EBITDA was a small beat and came in ahead of guidance at $80.1m thanks to margins improving significantly to 9.9%. Cash conversion was weak at 68%, usually tracking at ~80%, however, this is largely a result of working capital investment as the company prepares to grow earnings further on more contract wins. Work in hand was up 46% to $1.9b and they still have $6.5b opportunity pipeline of work to contend for.
- Overall, we see this is a great result with SRG trading ~9.5x PE vs peers ~10.5x despite having a superior growth outlook in our view.
MM is long and bullish SRG
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