Novaria Mgmt Mtg Takes: A True Aftermarket Story Where Process IP is the New IP

研报英文原文证据摘录

Novaria Mgmt Mtg Takes: A True Aftermarket Story Where Process IP is the New IP

ta, Jefferies estimates

Majority of SKUs with <$200K of Annual Revenues. Novaria's brands are Tier 3 suppliers that

operate downstream in the supply chain where there is limited competition and favorable unit

economics. There are 90K SKUs across the brands including fasteners & locking mechanisms, fluid

fittings, hydraulic tubes, seals, plating, coatings, and flat washers. Over 90% of SKUs produce <

$200K of annual sales. The cost of new competition is prohibitive given moats tied to process IP,

vertical integration, and a high degree of manufacturing complexity. More than 90% of sales start

from a raw material input, although raw mats are <30% of total COGS.

Process IP Leads to Price Capture and DD+ Organic Growth. Novaria realized 6pts of price capture

in '25 and expects a similar magnitude in '26, enabled by the high process IP model and reputation

as a high performing supplier. Price is a key lever for acquired businesses w/ a willingness to price

for the value of the offering at the expense of shedding less profitable work. The business could

sustain DD-plus organic growth w/ growth to be driven by Aero rates reaching full force, defense &

space spend, new product launches (such as 777X), and new wins.

M&A Compounder w/ 90% Non-Auction Deals at HSD EBITDA Multiples. The M&A strategy

has been 90% proprietary sourced, driven by long-tenured relationships, generally for family-

owned Tier 3 & below suppliers that value how the business will be run post-transaction. Novaria

typically acquires at 7-10X EBITDA, w/ targets having strong gross margins, limited capex, vertical

integration, high-IP, and limited competition. This compares to ARXS (a sister Arcline platform) avg