Weir: Growth is back, but the margin trajectory is less certain. Reiterate Buy, but reduce PT

研报英文原文证据摘录

Weir: Growth is back, but the margin trajectory is less certain. Reiterate Buy, but reduce PT

costs are now expected to be around half of the original 70-80bps guidance, with a

greater impact in H2; we model a c.35bps headwind for the full year. Third,

management stopped short of reaffirming the 50bps margin expansion target for FY26,

and we now assume c.40bps. Weir also reiterated guidance for mid-single-digit organic

revenue growth. We estimate that c.4% organic growth equates to the 45/55 revenue

split. We have updated our forecasts accordingly.

Why we're now more optimistic on growth

Net/net, we view this as a positive print. Orders accelerated sharply in Q2, while

management provided strong evidence that market share concerns are misplaced,

highlighting a 70% win rate on large pump bids, a 90% aftermarket retention rate, and

success in 13 of 14 competitive large mill circuit pump trials. Encouragingly,

management also noted that software solutions growth remains on track, the project

pipeline exceeds 2,000 opportunities, and demand remains strong across copper, gold

and oil sands. Taken together, these indicators support our expectation of continued

order growth in the coming quarters. We also note that mining exposure has increased

from 74% of orders in H1 2025 to 82% in H1 2026, increasing Weir's exposure to what

we see as its fastest-growing end market.

Thoughts on the margin performance

In our view, this was the main disappointment in the results. Group margins declined

100bps year-on-year, from 19.8% in H1 2025 to 18.8% in H1 2026. While

management attributed the shortfall to largely temporary factors, we come away with

several questions around the margin trajectory from here.

Interestingly, ERP spend and R&D ramp weren't the problem