VRT: Investor Day Preview - May the Force Be With You

研报英文原文证据摘录

VRT: Investor Day Preview - May the Force Be With You

pside, underwriting positive estimate revision.

Fair Value $408 Margin Momentum: Margins have flattened out in FY25 due primarily to tariffs

that have negatively impacted backlog margin conversion. It is possible that

Base Case VRT reports outsized margin expansion in FY26.

Organic Growth (CAGR: '25-'28) 29% Surplus Capital Optionality: VRT has a significant well of surplus capital to

OM Expansion ('25-'28) 752bps deploy and it is possible that deal flow can be executed at multiples well below

VRT's valuation.

EPS 2028e $12.60

P/E 28x Potential Risks

Fair Value $315 AI Capex: AI capex has been surging, but there are concerns of bubble-like

behavior. It is possible that future growth expectations could be crimped by

Bear Case funding constraints and/or power supply limitations

Organic Growth (CAGR: '25-'28) 16% Rising Competition: There has been a large number of M&A transactions as

OM Expansion ('25-'28) 506bps large electrical consolidators have entered the market for liquid cooling and

thermal management. We are also seeing potential competitive threats from

EPS 2028e $8.48 HVAC and low-cost IT/server manufacturers.

P/E 23x Weaker Pricing Power: Industry capacity has been increasing which could

Fair Value $174 dampen pricing power and scope for margin expansion. Hyper scaler customers

could seek to lower prices over time.

Scenario's Commentary

Bull Case: Our 30x multiple assumes VRT trades well above the LT average of ~17x and at a ~2x premium to our Base Case. We discount back 2027 EPS

with a 12% rate.

Base Case: Our 28x multiple assumes VRT trades at a premium to the sector. We discount back 2027 EPS with a 12% rate.