PT to $210, Move to Equal-Weight

Research evidence excerpt

PT to $210, Move to Equal-Weight

IdeaM• Background: This business dates to 2014, when Penske acquired MTU

Detroit Diesel Australia, a distributor of diesel and gas engines and power

systems across on- and off-highway markets in Australia, New Zealand and

the Pacific, including mining, power generation, construction, defense and oil

& gas.

• #1 market share. Penske holds roughly 75% market share in data center

backup power for the 1,250 kilowatt and higher range, which covers the

majority of that market, and management referred to an extremely strong

pipeline on the 1Q earnings call.

• Recurring revenue dynamic: one major mining customer's 125 MW power

station, installed with 20 Bergen engines four years ago, is now generating a

major maintenance cycle — remanufacturing 300 cylinder heads worth

about 15,000 hours of work. Backup-power gensets carry a long service/

parts/remanufacturing tail.

• Significant growth. A trade-press interview with Penske Australia & New

Zealand Managing Director, Hamish Christie-Johnston, published a few weeks

ago noted that the energy division delivered 850 megawatts of standby

power to data centers last year and generated about $600mn in revenue,

making it the fastest-growing segment of its Australian business. He also

highlighted the next leg of growth: Penske is exploring integrated behind-

the-meter energy solutions combining gas, wind, solar and battery storage,

which could also support EV fleet charging.

• Diversification: the Australian business is expanding into other off-highway

sectors including mining and defense. Penske's ANZ MD Christie-Johnston

says increased government spending and large-scale projects such as

nuclear-powered submarines are creating significant opportunities. “Defence