Behind the Meter, Valuation Ahead of the Curve; Initiating Coverage at Hold

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Behind the Meter, Valuation Ahead of the Curve; Initiating Coverage at Hold

d connections are eventually obtained. Even if onsite engines

remain embedded in backup, hybrid, peaking, or grid-support roles, lower prime-

power runtime could affect the timing and magnitude of Services monetization.

Emissions constraints, grid expansion, alternative technologies, and potential

stranded-asset risk remain important longer-term considerations.

INIO deserves its valuation premium, but upside vs. the current stock price

appears limited based on our current estimates

INNIO sits within the highest-growth cohort across MI/EE and data center peers,

which should warrant a premium valuation; we view the company's closest peers

as data center infrastructure providers rather than traditional industrials. In our

view, the key debate is less about whether INNIO deserves a premium, and more

about the magnitude of the premium. To this point, on our estimates, INIO already

looks to be embedding the data center growth premium; the stock trades at 31x our

2027 adj. EBITDA forecast and 23x our 2028 adj. EBITDA forecast, compared with

GEV at ~31x/~23x, the Data Center Infrastructure median at ~23x/~20x, and the

Power Infrastructure median at ~34x/~24x. While it is difficult to call for further

multiple expansion based on where INIO already trades, we believe this multiple is

supported by the company's best-in-class growth profile. We apply a 24x 2028 EV/

EBITDA multiple to our INIO estimates, yielding a $41 price target. This implies 7%

upside vs. the current share price; within the MI/EE group, we tend to recommend

stocks with at least 15% total return opportunity. As of today, INIO does not meet

this threshold, and so we initiate coverage with a Hold rating. That said, if the