Update 22/02/2024

Updating my charts with 1H FY24 results added:

Revising some assumptions with NPAT growth of 25% for FY24 before returning to 15% growth for the next 4 years.

Discounting back 10% pa with a terminal PE of 30x gives a valuation of $8.14.

Disc: Held IRL and on Strawman.

Update 19/08/2023

Basing my valuation on a return to growth of 15% pa for the next 5 years and a terminal PE of 30x. This gives me a valuation of $6.80 in order to achieve a return of 10% pa.

Disc: Held IRL and on Strawman.

Update 18/03/2023

H1 FY23 results were quite disappointing for a company that was trading on a high PE although I do think the underlying business will benefit from the near term increase in investment to scale out their business.

I still regard this as one of the highest quality companies on the ASX and am willing to maintain my valuation of $6.51. I think if the share price decreased below $7 this starts to look interesting again. Capital allocation from management has always been first class and there are plenty of projects in the pipeline to continue on their growth trajectory.

The skew to 2H has always been strong so I wouldn't be surprised if they had a killer 2H FY23.

Definitely one to watch if there is further share price weakness.

Disc: Held IRL and on Strawman. Did sell some shares above $11 but will likely look to top up again if the SP fell below $7.

Update 18/08/2022

FY22 NPAT came in at around $20.4m representing a 24% increase YOY.

I am usually hesitant to assume that NPAT will continue to grow by such a large amount every year and so if I maintain my assumption of 15% CAGR for the next 5 years, and a terminal PE of 30x. This gives an updated valuation of $6.51.

Disc: Held IRL and on Strawman.

Update 08/06/2022

Just adjusting my valuation slightly as I think there will be further compression of PE ratios.

Same assumptions as above but assuming a terminal 30x PE would give a valuation of $5.77.

A terminal 25x PE would give a valuation of $4.81.

Disc: Held IRL and on Strawman

Original Valuation

PWR is an interesting company focusing on building cooling systems mostly in automobiles but are pivoting into other opportunities such as aerospace and defence.

• FY21 NPAT = $16.797m
• EPS = $0.1677

If they can grow NPAT at 15% per annum for the next 5 years (ambitious but some analysts have forecasts of greater than this) this gives:

• FY26 NPAT = $33.78m
• FY26 EPS (assuming around 120m shares on issue) = $0.28
• FY26 target price (assuming 35x PE) = $9.85

Discounting this back 10% per annum gives us an FY22 price of $6.73.

A PE of 40x would have FY22 price of $7.65.

Currently do hold some shares purchased around current prices but wouldn't likely add unless the price started with a $7.xx.