SRG +16.56%: upgraded FY26 guidance and introduced FY27 expectations that comfortably exceeded market forecasts, reinforcing why the stock has been one of the ASX’s standout performers over the past 18 months.
SRG now expects FY26 EBITDA to land at the top end of its $164m–$168m guidance range and has initiated FY27 EBITDA guidance of $190m–$200m after securing $1.85bn of new contracts across water, defence, energy, industrial, resources, ports, data centres, health and education.
The update highlights the strength of SRG’s diversified recurring revenue model, with long-duration contracts from clients including Fortescue, Alcoa and Origin providing earnings visibility well beyond FY27.
When we last covered SRG in April, we highlighted that the key challenge would be whether management could continue delivering growth sufficient to justify its premium valuation. This update goes a long way towards answering that question. The successful integration of Diona, expanding exposure to water infrastructure, ongoing maintenance contract wins and growing participation in data centre investment continue to provide multiple avenues for growth.
Valuation remains the key debate with the stock trading on a materially higher multiple than traditional engineering and maintenance peers, meaning expectations remain elevated. However, unlike many cyclical contractors, SRG continues to demonstrate strong earnings momentum, increasing recurring revenues and a growing backlog.
While the stock is no longer the undiscovered small-cap it once was, today’s upgrade is a reminder that the current market is more than willing to pay a premium for consistent execution. We continue to see scope for SRG to push higher through FY27 if management can keep converting its record pipeline into earnings growth.
- The operational momentum in SRG as hard to ignore.
MM is now bullish toward SRG
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