MAIR: Breath of Fresh Air; Initiating at Outperform

Research evidence excerpt

MAIR: Breath of Fresh Air; Initiating at Outperform

ect any notion that it is at peak margins. The company EBITDA, Adj 890.7 1,013.4 1,093.9

follows the disciplined 80/20 operating principles with a commitment EPS, Adj Diluted 0.82 0.95 1.15

to “continuous improvement”. We estimate this should drive 50-75 bps P/AEPS 51.2x 44.2x 36.5x

of annual margin expansion. The attractive 70% replacement/30% new Revenue Q1 Q2 Q3 Q4

construction split also helps drive healthy margins. Services/aftermarket 2025 690.4A 819.6A 898.4A 931.7A

mix at 10% of revenues is the lowest of its big four HVAC peers (~26% 2026 850.1E 906.4E 966.6E 973.0E

2027 892.1E 951.0E 1,014.0E 1,021.3E average) but represents a growth opportunity. Initial debt leverage of 3.2x EBITDA, Adj

should be methodically managed down to the targeted 2.0x-2.5x range 2025 168.3A 225.5A 251.6A 245.3A

given its strong +100% FCF conversion. MAIR’s two-class structure gives 2026 202.1E 252.9E 279.0E 279.4E

billionaire-founder and Madison Air chairman Larry Gies ~96% voting share 2027 219.1E 272.2E 300.4E 302.1E

but he has committed to hold his shares for the next 5-10 years. All values in USD unless otherwise noted.

Priced as of prior trading day's market close, EST (unless otherwise noted).

Datacenter represents the fastest growth platform. Madison Air’s

datacenter air and liquid cooling solutions span custom (~85% of revenue)

and modular (~15% of revenue). Its margins currently sit below the

Commercial fleet average, but increased volumes should create operating

leverage. Datacenter grew ~+17% organically in 2025.

We project MSD% organic sales growth and HSD-LDD% earnings growth.

Commercial (~2/3 of revenues) should grow M-HSD% and resi (~1/3) LSD%

by our estimates. Mgmt is targeting 25-75 bps of EBITDA margin expansion