SXE +5.36: Reported results yesterday and delivered a good FY26, with underlying EBITDA and margins ahead of expectations, a stronger recurring revenue mix and a healthy order book. The main debate now is whether SXE can deliver the substantial revenue growth required to meet its unchanged FY27 EBITDA guidance.
Key FY26 results:
- Revenue of A$718.7 million, around 9% below the A$790.6 million expected.
- EBITDA of A$77.0 million, modestly ahead of the A$74.9 million expected.
- EBIT of A$64.4 million, broadly in line with consensus.
- Underlying NPAT of A$39.4 million, around in line with the A$39.1 million expected.
- Free cash flow of A$59.7 million, well ahead of consensus.
- Final dividend of 7.5c per share, taking the full-year dividend to 10c.
The headline revenue miss reflects the wind-down of several large projects, particularly Collie BESS and the Western Sydney International Airport Terminal. Despite that, underlying EBITDA increased 40% year-on-year to A$77 million, while gross margin expanded to a very strong 19%, up from 13.2% last year and above management’s longer-term 16% target.
The recurring revenue mix is also improving. Recurring revenue accounted for 31% of total revenue, up from 26% in FY25, which should help make earnings less dependent on individual project timing over time.
The order book remains healthy at A$810 million, up 18% year-on-year. Infrastructure still accounts for around 70% of the book, while more than 30% now comes from adjacent areas such as fire, manufacturing, security and communications. The East Coast now represents more than 85% of the order book.
There are also some clear structural growth drivers. Data centre activity is becoming increasingly important, with SXE working across projects including NEXTDC and DigiCo, while electrification and decarbonisation continue to create opportunities across infrastructure and resources.
The key issue is FY27. Management has reaffirmed guidance for EBITDA of at least A$100 million, but Shaw estimates that achieving this on a more normalised 16% gross margin would require revenue to grow by more than 60% organically to around A$1.15 billion. That is a big ask, even with a solid order book and strong industry tailwinds.
As a consequence, Shaw’s forecasts reflect that challenge, with FY27 revenue of around A$1.15 billion, EBITDA of A$102 million and underlying EPS growth of almost 30%. Importantly, their EBITDA estimates are largely unchanged following the result, suggesting the FY26 outcome itself has not materially altered the earnings outlook.
MM’s view: This was a good result from SXE, though the shares have been running hot, and are still a bit rich for us. Revenue was softer than expected, but the areas that matter more for value creation — margins, EBITDA, recurring revenue and cash generation — were all solid. Shaw retains a hold rating with a A$4.70 price target.
MM is cautiously bullish SXE ~$4.70, but reticent to chase
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