Forgent Power Solutions: Robust Demand & Taking Full Advantage

Research evidence excerpt

Forgent Power Solutions: Robust Demand & Taking Full Advantage

UpdateM

Risk Reward – Forgent Power Solutions (FPS.N)

KEY EARNINGS INPUTS

Drivers 2025 2026e 2027e 2028e

Organic Growth (%) 56.0 84.5 50.0 32.5

Operating Margin (%) 22.5 22.7 24.2 25.0

INVESTMENT DRIVERS RISKS TO PT/RATING MS ESTIMATES VS. CONSENSUS

A sizable and visible backlog underpinning near- RISKS TO UPSIDE FY Jun 2026e

term revenue growth Faster backlog conversion from smoother

Operating leverage from scale efficiencies and capacity ramp EBITDA

favorable mix shift driving margin expansion Stronger orders and pricing from differentiated ($, mm) 211 315

Differentiated custom capabilities supporting custom solutions 297

pricing power and competitive positioning Delayed industry capacity ramp sustaining

competitive advantage Sales /

GLOBAL REVENUE EXPOSURE RISKS TO DOWNSIDE Revenue 1,270 1,390

APAC, ex Japan, Mainland Inability to sustain order trends as industry ($, mm) 1,300 0-10% China and India capacity ramps

0-10% Europe ex UK Margin pressure if price/cost weakens amid

0-10% Japan inflation/tariff related cost pressures Net income 167

0-10% Latin America Capacity ramp delays/integration missteps ($, mm) 164 202

0-10% Mainland China 188

0-10% UK

OWNERSHIP POSITIONING 80-90% North America 0.55

EPSSource: Morgan Stanley Research Estimate HF Sector Long/Short Ratio 1.4% 0.54 0.68

($)

View explanation of regional hierarchies here HF Sector Net Exposure 8.6x 0.62

Source: Morgan Stanley Prime Brokerage. Includes

Mean Morgan Stanley Estimates

certain hedge fund exposures held with MSPB.

Information may be inconsistent with or may not reflect Source: Refinitiv, Morgan Stanley Research

broader market trends. Long/Short Ratio = Long

Exposure / Short exposure. Sector % of Total Net