PWR Holdings (PWH)
PWH looks like a high quality business going through a rough patch. The share price has fallen significantly and the value proposition appears compelling. What do you think?
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Answer
Hi Cameron,
For subscribers not familiar with PWH, it’s a $640mn QLD company that specialises in the design, engineering, and manufacture of advanced cooling solutions used in Motorsport (formula 1 for example), auto, aero & defence. The companies shares have halved from their 2024 highs for two primary reasons:
- In late 2024, PWR announced the cancellation of certain EV-related projects, which had been anticipated to drive growth. The stock plunged ~20% on the news.
- Higher production costs have compressed margins. In 1H of FY25, NPAT fell by 58.3% to $4.1 million, despite an only 2.1% decline in revenue to $62.9 million.
PWH faces further short-term profitability challenges due to strategic investments but its pick up in aerospace & defence areas positions it for potential growth in FY26 and beyond – revenue is forecast to increase by over 22%v in next year. Having moved on from elevated EV expectations, like many companies, PWH is trading on an ok valuation ,with some upside already built into the share price.
- The risk/reward looks ok into fresh forays below $6.
