Spirax: Path to Restore Profitability Looks Achievable; Shares Are 25% Undervalued

We walked away from wide-moat Spirax’s capital markets day, confident in its fundamentals and path to restore EBIT margins between 22% and 23% in the medium term. Its long-term outlook remains robust and the group has proven in the past that it can comfortably outperform global industrial production growth, underpinned by fast-growing end markets and the small, but critical role its products have in customers’ production processes and decarbonization journeys. We view the slowdown in its recent performance, confined to a few sectors and China, as cyclical rather than structural. We keep our GBX 9,650 fair value estimate unchanged, presenting 25% upside for investors at current levels.