Capital Goods Weekly: UK Capital Goods Weekly

Research evidence excerpt

Capital Goods Weekly: UK Capital Goods Weekly

19 June 2026

Engineering

Capital Goods Weekly

Across the sector, we can see the positive correlation. Only two stocks have

delivered margin progress over the past decade and not been rewarded by re-

rating: Rotork and Vesuvius.

n Rotork. Rotork delivers the strongest returns metrics in the sector - 24.6%

EBIT margin in FY25, up 100bps YoY. A decade ago, consensus was

assuming a one-year forward margin of <20%. We forecast 24.6% in

FY26E. With its electric actuators commanding strong margins (c.30%) and

growing in share, Rotork's management have been clear a mid-20%

operating margin is not a ceiling for the business, despite the extent of

progress already in the books. Over the medium-term, we believe there is

the potential for margins to work their way up to c.28%. We continue to

view the extent of change under Growth+ as underappreciated at current

valuation levels, particularly the sensitivity of profits to the O&G cycle given

the relative resilience of the electric actuators. A rebuild in energy

infrastructure offers a recovery path to O&G, alongside structural growth in

Water & Power and CPI. The shares are currently trading below their relative

valuation to the sector during the peak of the 2014 oil market downturn. We

continue to expect catalysts from the strong balance sheet position.

n Vesuvius. Next week, we are hosting a fireside chat with Vesuvius

management, shortly before the new European trade defence instrument

goes live on 1st July. This reshaping of the European steel industry has the

potential to be a multi-year catalyst for the shares, with importer costs set

to be no longer economically viable. The business has faced tough

European markets recently, costing about c.£40m of EBIT over the last two

years.