PWR Holdings (ASX PWH) – De-risked and Returning to Growth
PWR Holdings (ASX: PWH) designs and manufactures advanced cooling solutions for the world’s most demanding applications, from Formula 1 to aerospace and defence. After a challenging FY25 driven by the transition to a new Australian facility, the operational risk has now been removed with the Stayplton plant completed in December 2025 and currently running at just 50% utilization. The secured pipeline across both A&D and Motorsport continues to grow, eVTOL production is ramping from FY27, and the employee base is expanding at a pace that signals management confidence in the revenue outlook. The 12-month price target of A$10.40 implies 9% upside with a 3-year NPAT CAGR of 29%.
Research published 23 February 2026. Price target and upside based on prices at time of publication.
About PWR Holdings
PWR Holdings Limited (ASX: PWH) is a Gold Coast-headquartered designer and manufacturer of advanced cooling solutions for high-performance applications. The company operates across four key segments including motorsport (supplying F1, NASCAR and IndyCar teams), aerospace and defence, OEM automotive and emerging technologies such as eVTOL. PWR completed the transition to its new expanded facility in Stayplton in December 2025, which adds more than 100% additional manufacturing capacity. Listed on the ASX with a market capitalisation of approximately A$960m and an enterprise value of A$724m, the company is founder-led with the CEO holding a c.17% stake.
Why We Like PWH at Current Levels
PWR has been through a painful period. FY25 saw multiple downgrades driven by disruptions related to the facility transition, and the stock has taken a beating as a result. But the key point is that the operational risk that caused those downgrades is now behind the company. The Stayplton facility was completed in December 2025 and is currently running at roughly 50% utilisation, which means the capacity headroom to grow into is substantial. At A$9.55, the Buy-rated stock carries a 12-month price target of A$10.40 and 8.9% upside, supported by institutional research from Goldman Sachs. We think the setup from here is compelling for investors who can look through the noise of FY25 and focus on the earnings trajectory that is now in front of the business.
The transition disruptions masked what is fundamentally a high-quality industrial compounder with genuine competitive advantages. PWR’s technology is embedded in the most demanding cooling environments on the planet, from Formula 1 cars to defence platforms, and that kind of engineering IP and supplier status is extraordinarily difficult to replicate. The question was never whether the business model was broken, just whether the facility move would cause a lasting setback. The answer appears to be no, and the recovery is tracking to plan.
Operating Leverage From Here Looks Significant
This is where the opportunity gets interesting. PWR’s NPAT margin compressed to around 7% in FY25, well below the FY24 level of 17.8%. Management has guided that margins should return to those FY24 levels over a 3 to 5 year period, and we think that trajectory is credible given the dynamics now in play. The Stayplton facility is built and operational with only half the capacity being used. As revenue scales into that capacity, the incremental margin on each additional dollar of revenue should be meaningfully higher than what the company achieved while running two facilities simultaneously and managing a complex physical transition.
The financial profile supports this view:
- Revenue is expected to grow from A$132m in FY25 to A$170m in FY26, A$180m in FY27 and A$203m in FY28
- EBITDA should expand from A$25.6m to A$40.2m in FY26 and reach A$55.6m by FY28
- NPAT is forecast to grow at a 29% CAGR over the next three years, from A$9.8m in FY25 to A$26.4m by FY28
- Operating EBITDA margins recover from 16% in FY25 to 23% in FY26 and sustain around that level through FY28
- EPS follows a similar recovery path, from A$0.10 in FY25 to A$0.16 in FY26 and A$0.26 by FY28
That kind of earnings growth trajectory is rare in the ASX Small Ords universe and explains why the stock has historically commanded a premium multiple. The three-year average EPS growth forecast of 13% supports the company’s long-term incentive targets, and net debt is manageable at A$13.4m with leverage of 0.8x in 1H26 having peaked and set to decline from the second half of FY26. Cash conversion at 103% on a rolling twelve-month basis as of 1H26 is excellent.
Aerospace and Defence Has Real Runway
The A&D segment is arguably the most exciting growth vector within PWR. With the Stayplton facility complete, the company now has both the physical capacity and the accreditation base to pursue much larger defence contracts. Approved Supplier relationships have grown rapidly, from just 11 in FY22 to 44 in FY24 and now 51 as at 1H26. That trajectory is important because supplier accreditation in defence is a slow and deliberate process. Each new approval opens up a pipeline of potential programs, and the compound effect of having 51 relationships is a much broader opportunity set than the market may appreciate.
There are a few specific catalysts worth watching. A recent US government contract extension is expected to be the initial phase of a much wider scope of work. The eVTOL production ramp is set to begin from FY27/28, with PWR supplying cooling solutions to seven manufacturers, including those selected for the LA Olympics 2028 air mobility program. That represents a genuinely new addressable market for PWR’s technology. MRO (maintenance, repair and overhaul) work is also becoming a more meaningful contributor as the installed base of PWR equipment in defence applications grows and reaches its service cycle.
A&D revenue is expected to reach approximately A$45m in FY26, and the secured pipeline for FY26/27 has increased to 34/35 programs, up from 30/24 in the prior corresponding period. The direction of travel is clear.
Motorsport Revenue Step-Change Coming
Motorsport remains PWR’s largest segment at around A$96m in FY26 revenue, and the near-term outlook is shaped by a specific set of regulatory and format changes in Formula 1. FY26 is expected to see a strong 37% revenue increase in motorsport, driven by F1 design regulation changes and new product development requirements. FY27 is expected to be flat as teams settle into the new regulations, with growth resuming at around 7.5% in FY28.
PWR supplies cooling systems to the majority of F1 teams, and regulatory changes that require redesigns of car components are a direct revenue driver for the business. Every new regulation cycle forces teams back to PWR for updated cooling solutions, and the company’s long-standing relationships and technical capability mean it captures a dominant share of this spend. The secured pipeline for motorsport in FY26/27 has increased to 22 programs from 19 in the prior corresponding period, which gives good visibility on near-term revenue.
Strong Pipeline Across All Segments
One of the most encouraging data points from the 1H26 result was the breadth of pipeline growth. OEM and motorsport secured programs for FY26/27 increased to 30/22 respectively, up from 24/19 in the prior period. A&D secured programs for FY26/27 are at 34/35, up from 30/24. This is not a business reliant on one or two large contracts. The diversification across segments and the growing pipeline depth give us confidence that the revenue trajectory is well supported.
The employee base tells a similar story. As at December 2025, PWR had 632 employees, up 82 year on year and 51 in the half alone, with approximately 20 current vacancies still to be filled. Companies do not hire at that pace unless they have strong visibility on future workload. The CEO’s 17% stake alignment reinforces our confidence that capital allocation and hiring decisions are being made with a long-term ownership mindset.
Valuation
The A$10.40 price target is derived from a 50/50 blend of DCF analysis at A$10.70 (using a 9.2% WACC, 3.0% terminal growth rate and 3.5% risk-free rate) and a P/E-based valuation at A$10.06 (applying 35x to FY29 earnings, discounted back). The 35x P/E multiple is consistent with PWR’s 5-year average NTM PE and is justified by the scarcity of companies in the ASX Small Ords with a comparable combination of quality, IP moats and growth. There are very few ASX-listed industrials with genuine global competitive advantages in niche high-performance markets, and that scarcity premium has historically been reflected in PWR’s valuation.
Revenue by segment in FY26 is expected to break down as follows:
- Motorsport at approximately A$96m
- Aerospace and Defence at approximately A$45m
- OEM Automotive at approximately A$18m
- Aftermarket at approximately A$18m
- Other at approximately A$2m
The dividend yield is minimal at around 0.5% in FY26, which is typical for a growth-oriented industrial business reinvesting in capacity and capability. M&A probability is assessed as low, though we note that a business of this quality with embedded IP in defence and motorsport supply chains would logically attract interest at the right price.
Key Risks
The primary risks centre on execution. Pipeline delivery and the timing of revenue generation across new programs remains inherently lumpy, particularly in A&D where procurement timelines can shift. The new Stayplton facility needs to ramp utilisation to justify the investment and deliver the margin recovery that underpins the earnings trajectory. Supply chain disruptions and competitor encroachment are ever-present risks in advanced manufacturing, though PWR’s deep technical relationships and switching costs provide meaningful insulation. Key person risk exists given the founder-led nature of the business, although the CEO’s 17% stake provides strong alignment and reduces the probability of departure.
Our View
PWR Holdings is a business that has navigated its way through a difficult facility transition and is now positioned for a meaningful earnings recovery. The operational risk is behind it, the new capacity is in place, and the pipeline across motorsport, A&D, OEM and emerging technologies is growing. At A$9.55, we think the stock offers a genuine opportunity to own a high-quality industrial compounder at a point where the earnings base is depressed and the trajectory is turning. The 29% NPAT CAGR over the next three years provides a clear path to re-rating, and the combination of F1 regulatory tailwinds, A&D contract growth and eVTOL production ramp gives the business multiple avenues to deliver on that growth. We are comfortable owning this at current levels and think it warrants attention from investors looking for quality industrial exposure on the ASX.
If you would like to discuss PWR Holdings or how it might fit within your portfolio, request a callback or call us on 1300 889 603.
