15/04/26

Today Duratec announced a major Defence contract award to the Duratec Ertech Joint Venture (DEJV):

• DEJV (50:50 with Ertech) awarded a $281m main works contract for infrastructure upgrades at HMAS Stirling, WA

• Main works follow early on-site works of $9.2m commenced in January 2026 and about $5m of long lead item procurement
• Main works contract duration is approximately 24 months

• Total contract value for the works is just under $300m

• Project supports future submarine capability under the AUKUS partnership

This is significant contract win with Duratec’s 50% share equal to approx 26% of FY25 revenue. I believe this increases the order book from approx $400 million in Februrary 2026 to approx $550 million now. This means more than half of Duratec’s order book is now contracted in the defence sector.

Source: Investor Briefing Presentation (31/03/2026). Order Book, Tenders and Pipeline update as at 23 February 2026, prior to today’s joint venture $300 million contract win.

Valuation

Following this announcement I am lifting my valuation to $2.50. This is based on the order book increasing to approx $550 million, FY2027 EPS likely to be aprox 13 cps, future EPS growth of 12%, and ROE increasing to 40%. My valuation is based on McNiven’s Valuation formula assuming 53% of earnings are reinvested into growth, fully franked dividends, and a minimum 12% required ROI.

On a PE valuation, this represents approx 19 times FY2027 earnings. Over the last 5 years Duratec has traded on multiples between 8 and 30 times historic EPS. If Duratec continues to win contracts and deliver on these, a 19 times FY27 multiple seems reasonable.

At the current share price ($2.85) I am continuing to lighten off slowly, taking advantage of the strength in the chart and the strong market support for defence stocks.

Held IRL (1.8%)

25/02/26

@Karmast I’m slightly more optimistic. I think the business is on track to deliver FY26 NPAT in line with expectations of $24.8 million, or approx 11 cps. With the order book starting to increase again (currently $400 million, up from $386 million in Nov 2025) I expect a stronger 2H 2026 with further growth in the order book, and double digit earnings growth over the next few years. Revenues were down 4.9% in 1H26, however margins were up slightly on 1H2025.

Results Summary;

• Revenue of $273.3m and Normalised EBITDA of $27.5m delivered (a 2% increase from $26.9m in PCP)

• Increase in average gross margin across entire business to 20.3%

• Record normalised EBITDA margin of 10.0%

• Record gross profit increasing to $55.4m (up 3.9% on the prior period)

• EPS increased to 5.25 cents (up 1.2% on PCP), NPAT increased by 3.5%

• Further $9m of on-site early works awarded to Duratec Ertech Joint Venture (DEJV) at HMAS Stirling to assist programme and project timing

• Successful acquisition and integration of EIG Australia during first half, and subsequent acquisition of RGK Resources which completed in January 2026

Outlook

Management said they are expecting: “Robust growth through the second half of FY26 and beyond. The order book has strengthened, supporting revenue and positioning the Company for further wins in the near term. MSA annuity work is set to expand alongside overall revenue growth, delivering a stable and predictable income stream. Key projects, including WPF’s Varanus Island B Tank Modification and upcoming work at HMAS Stirling Garden Island, will play significant roles in driving operational growth. Building & Facade’s projects continue to perform strongly, and all subsidiary companies are projected to experience ongoing growth, contributing to the broader success of the business.

The strength of Duratec’s tender pipeline, together with the expected award of several major projects—including ECI opportunities—provides the Company confidence of achieving robust growth. Significant infrastructure investment is planned, with an $8 billion upgrade at HMAS Stirling Garden Island and more than $20 billion earmarked for Henderson, positioning Duratec exceptionally well to capitalise on these opportunities. The Company is also focusing on Oil and Gas decommissioning activities, and despite short-term softness in Energy and Mining, anticipates positive momentum in these sectors. Building Maintenance has performed very well and remains supported by favourable market conditions.

Duratec is exceptionally well positioned for continued growth, underpinned by a diverse project portfolio, strong order book, and strategic expansion initiatives. The Company’s healthy balance sheet and ongoing commitment to key sectors such as Defence, Energy, Mining, and Building & Facade provides confidence for the second half of FY26 and beyond. Duratec remains focused on delivering value to its clients and shareholders as it pursues new opportunities and executes its long-term growth strategy.”

Valuation

Looking forward to FY27 I am working on NPAT of over $30million and EPS over 12 cps. Working on a PE of 17, I get a valuation of $2.04. With a PE of 15 this drops back to $1.80.

Using McNiven's Formula assuming current equity of 33 cps, future ROE of 36.5% (based on 12 cps NPAT), 53% of earnings reinvested and a required ROI of 13%, I get a valuation of $2.04. Lowering required ROI to 12%, the valuation increases to $2.28.

I’m happy to keep my valuation at $2.00 where I think it’s a HOLD. I would consider lightening off over $2.30, and adding under $1.70.

Like you @Karmast, I have been reducing IRL over $2.25 this year.

Held IRL (3.9%)

8/01/26

Today the market reacted positively to Duratec’s latest announcement. The Duratec-Ertech Joint Venture (DEJV) has been instructed to proceed with early procurement at HMAS Stirling:

• Early procurement involves approximately $5 million of long lead items

• Project award and commencement anticipated in Q3 FY26

• Second contract award expected in Q4 FY26

• Infrastructure upgrades are in preparation for the arrival of the rotational force from the US and UK in late 2027 under the AUKUS partnership

This announcement follows a solid FY25:

• FY25 revenue: $573.0m, up 3.1% from FY24

• Normalised EBITDA: $53.0m, up 11.3% from FY24

• Net profit after tax: $22.8m
• Earnings per share: 9.10 cents

• Final dividend: 2.5 cents per share, total dividend for the year: 4.25 cents per share

• Order book: $386m, tenders: $1.84b, pipeline: $4.65b

I believe Duratec is very well positioned to benefit from increased spending in the defence and mining sectors over the next few years.

Due to the strengthening pipeline of work, I think Duratec is fairly valued at $2.00 per share which is approx 18 times FY26 consensus earnings of $0.11 per share. This is around the median PE over the last 5 years. I am anticipating low double digit earnings growth over the next few years. I don’t think earnings growth will match past performance which was around 19% over the last 5 years.

Using McNiven’s valuation formula and assuming equity of $0.29 per share, forward ROE of 37% (11cps NPAT divided by 29cps equity) 50% of earnings reinvested, and a required shareholder return of 13%, I get a valuation of $1.90. The valuation increases to $2.15 with a 12% required return. I think Duratec represents fair value st $2.00. I won’t be adding any more shares to our portfolios at this level given our current holding.

The balance sheet is strong with the business holding more cash ($60 million) than it has debt ($5.4 million). I expect the FY26 dividend to be approx 2.8% fully franked.

Held IRL (4.4%)

13/02/2025

Good work Strawteam for the hard work you have done in picking this one! Shares have done quite well and the share price has just reached a 3 year high! Not a bad bounce up from $1.00 when we were talking about it.

Similar to @mikebrisy I work on a buy, hold sell valuation to inform investment decisions. For me Duratec is a hold at $1.70, where I believe it represents fair value.

Using McNiven’s formula, assuming future ROE of 32.8%, book value $0.24, 54% earnings reinvested and a 2.7% fully franked dividend, I get a valuation of $1.70 at a 10.7% required annual return. I like to buy businesses like Duratec when the valuation indicates >12% return, which is why it’s a hold for me at this price. However, you could still buy this if the analysts forecasts turned out to be ‘on the money’ and you were happy with a 10.7% annual return (total of dividends, franking credits and share value appreciation).

Held IRL 4.3%

28/08/2024

Thanks @mikebrisy for sharing the Duratec FY24 results summary.

Results are inline with analyst expectations. NPAT came in at $21.4 million (8.8 cps) a smidgeon above analyst consensus of $21.27 million (Simply Wall Street). Revenue was a record $555.8 million inline with consensus of $588.1 million.

Net profit margin was 3.9%, lower than last year (4.25%). Net profit for 2H was $9.2 million, 25% down on 1H. The market didn’t know what to make of the announcement and open down 2%, however, at the time of writing it is up 8%. I think this could be due to the market realising that orders have lifted to $405 million up 4.4% this half. I was hoping the order book would be over $400 million. It just made it!

Management is very optimistic about the outlook (see management comments below) and anticipates significant project awards across all market sectors in FY25. The Company’s pipeline of work supports Duratec’s growth objectives, with solid revenue growth anticipated in FY25. Management expects this to drive further growth in FY26 and beyond.

OUTLOOK

“Duratec is well positioned to achieve solid growth in 1H FY25. The Company’s medium-sized project win rate doubled in the second half of FY24, with all projects underway and contributing to first-half FY25 revenue and the majority extending into the second half. The Company is also expanding its delivery of MSA works to both existing and new clients.

Duratec’s strategic approach, including the use of ECI, has consistently delivered optimal outcomes for clients and stakeholders through collaboration and comprehensive solutions. Due to the high levels of tendering and ECI assignments, the Company anticipate significant project awards across all market sectors in FY25.

The Australian Department of Defence (DoD) has released indications of expected works into the future through the latest Defence Strategic Review. Key opportunities include an $8 billion spend at Garden Island Stirling base, where Duratec and DEJV are positioned well to secure opportunities identified in the Company’s tender pipeline.

Further prospects in the Pacific through Australian Government strategic relationships and US Department of Defence spend which aligns with the Company’s capabilities and in-house experience.

Demand from existing clients for Duratec’s services in the Pacific provides the Company’s Energy sector the opportunity to grow and expand its geographical presence. Australian-based opportunities are still plentiful as the Company continues to work with Santos on decommissioning works and the recent award of vendor status with Woodside will provide long-term maintenance opportunities for the Company.

On the back of major capital expenditure in previous years, the maintenance requirements continue to grow across Duratec’s clients’ assets in the Mining and Industrial sector. With the assistance of MEnD, the Company is working collaboratively with its clients to complete asset condition assessments and are a trusted partner in delivering the remediation scopes which it has vision of in the pipeline.

Increasing numbers of building owners across Australia are de-risking their portfolios or repurposing their assets by remediating the facades of their buildings. The Company’s strategic approach to leveraging its in-house building and facade design capabilities, coupled with its nationwide presence, has positioned Duratec well to work with clients and assist them in delivering their strategy in a safe and efficient manner.

The Company will leverage its strong position by taking a strategic and targeted approach to tendering and securing new work. Engaging with clients early will continue to be Duratec’s focus, to ensure it can convert its pipeline and deliver safe and quality projects with good financial outcomes.

The Company’s pipeline of work supports Duratec’s growth objectives, with solid revenue growth anticipated in FY25. The expected award of a number of significant contracts in the coming year is expected to drive further growth in FY26 and beyond.”

Valuation

I’ve updated my “pipeline to profit” model below making a number of assumptions for future profitability.

ROE for FY24 was 36.2%, down from 41.7% in FY23. Shareholder equity has grown 28% to $59.1 million, or 23 cps (21 cps at the end of FY23 due to increased share count from 247.4 million to 258.5 million). Projecting forward using my updated “pipeline to profit” model I am expecting NPAT of $29.2 million in FY26 and ROE to be c. 34%. This year Duratec will pay 4 cps out of its 8.8 cps earnings in dividends, a payout ratio of 45%, which means they will be reinvesting 55% of earnings back into the business at a return on shareholder equity of c.34%. The gross dividend yield is 4.4% at the current share price of $1.30.

Using McNiven's Formula and assuming current shareholder equity of 23 cps, future ROE of 34%, 55% of earnings reinvested into growth at 34%, the remaining 45% of earnings paid out as fully franked dividends (3% fully franked or 4.4% gross yield) and requiring a 12% annual return I get a valuation of $1.43 per share. At the current share price of $1.30 I think you could expect an annual compound return of c. 12.6%. The PE at the current share price is 14.8. I expect earnings to be c 11.2 cps in FY26. Working on a PE of 14.5 the share price could be approx $1.60 by FY26. I don’t think that’s unreasonable.

I have decreased my valuation from 4 weeks ago due to lower ROE expectations over the next 2 to 3 years (previously 39%).

Held IRL (3%)

July 2024

The Duratec share price has been creeping up lately. I thought I should revisit my valuation. Looking back on my previous valuation ($2.00), I was working on a forward ROE of 41%. To be slightly more conservative, and in line with analyst consensus, I’m bringing this back to 39% going forward.

Using McNiven’s Formula assuming current equity of $0.21 per share, with 70% of earnings reinvested back into the business at a ROE of 39%, future dividends paid at 30% of earnings (expected to be c. 3.5% fully franked), and requiring an annual return of 12% (same as last valuation), I get a valuation of $1.80.

I could be jumping the gun updating my valuation ahead of the FY24 report. I will be watching the order book closely, anticipating some contact wins in defence and the order book increasing to over $400 million.

April 2024

Durutec had a record 1H24 result and the second half looks even better (c. $300 million in revenue based on FY24 guidance).

EBITDA and NPAT Margins have both improved:

The FY24 EPS forecast is backed by company guidance (mid-range):

Commsec analysts are forecasting 17% EPS growth on FY23 earnings over the next 3 years.

FY23 ROE was 41.7%. Based on guidance ROE will be c. 48% for FY24. Based on analyst forecasts ROE should be approx 41% over the next 3 years.

The balance sheet and cash flows are expected to be strong. Duratec are cashed up and well positioned to make further acquisitions, buy back shares, or increase dividends (expected to be c.4% fully franked this year).

Source: Simply Wall Street.

The biggest concern is the order book is slightly down (5.7%) on this time last year. This is the only thing I can find to explain the 30% fall in the share price since January ($1.70 down to $1.20). The current weakness could also be driven by some profit taking from early investors. The offer price on listing in November 2020 was $0.50 per share. These investors have done extremely well.

The business is diversified across several sectors with 42% of 1H24 revenue coming from Defence. The Australian defence budget has been growing.

Duratec is well positioned to continue expanding revenue in future years, with a strong order book ($387.8 million), open tenders of $1.02 billion, and an identified pipeline of work of $3.74 billion. The addressable market is large compared to Duratec’s current share.

Valuation

Using McNiven’s Formula and assuming forward ROE of 41%, current equity of $0.21 per share, reinvested earnings at 70%, dividends fully franked, and requiring an annual return of 12%, I get a valuation of $2.00.

At the current share price ($1.20) I am expecting an annual return of 15.8%.

Disc: Accumulating on weakness IRL (1.6%)