Lagging Performance, Intact Fundamentals:Three Names to Own; Upgrade XYL to Buy

研报英文原文证据摘录

Lagging Performance, Intact Fundamentals:Three Names to Own; Upgrade XYL to Buy

ced $65-75m cost program should support ~100bps of additional expansion per

year in 2027 and 2028. FLS has already delivered 500bps+ of margin expansion since 2023, hit its Exhibit 2 - Adj. EBITDA margin for XYL and FLS

prior 14-16% operating margin target ahead of schedule, and is now targeting 20% by 2030 with an has expanded 500bps and 800bps+ between

2022-2025 while XLI companies average

activist pushing for faster improvement. margins expanded ~150bps

30%

Restructuring noise is masking the underlying demand picture. XYL and FLS are both executing 25%

80/20 portfolio simplification, creating NT revenue headwinds. As walk-away abates through Margins 20%

2H26 and into 2027, growth should better reflect actual demand. At VLTO WQ instruments and EBITDA 15%

consumables grow steadily with the installed base, municipal demand is a consistent MSD grower, Adj. 10%

and industrial water treatment is accelerating across data centers, power, and metals. FLS's 5%

demand setup is also improving with power and nuclear funnels are building, chemicals at or near 2022 2023XYL 2024FLS 2025VLTO 2026EXLI 2027E 2028E

a trough, and pent-up ME O&G project activity once hostilities end. For XYL, the metering business .Source: Jefferies, Company Data, FactSet Note: 2026-2028E

is Jef Estimate

is turning. M&CS orders grew 15% y/y in 1Q26 and mgmt. is guiding DD+ water meter order growth

to persist through 2026 (~20-25% of sales). Exhibit 3 - Valuation Summary

EV / EBITDA Price Target

Municipal funding concerns are not showing up in the order data. Noise around water infra. High Low Current Target Multiple

XYL 20.0x 11.0x 12.8x $140 15.0x

funding appears to be overdone.