PWR Holdings (PWH) : Hot rod player

PWR Holdings provides high-performance engine cooling solutions, manufacturing aluminium radiators, inter-coolers and oil coolers for leading race categories and teams such as Formula One, NASCAR, V8 Supercars, Deutsche Tourenwagen Masters and the World Rally Championship. We recently initiated coverage of PWR with a Lighten recommendation and a fair value estimate of $8.50 per share. At current prices, its shares screen as expensive. That said, PWR is poised for a continuation of considerable growth in advanced cooling, headlined by continued success in motorsport, further wins of low-run, high-performance vehicle manufacturer contracts, and continued growth as a supplier to defence prime contractors. PWR has a healthy pipeline of original equipment manufacturers (OEM) contracts, with high-end, low-volume production of vehicles like the Aston Martin Valkyrie and Rimac Nevera, and a strong pipeline of production and proto-typing with prime defence contractors. In our view, however, the market is overly optimistic on its still relatively nascent foray into aerospace and defence, where we see its competitive position as not nearly as strong as it is in the automotive industry.

The company is a high-quality business, having carved out a formidable position in the high-performance automotive cooling niche, with a presence across practically all motorsport competitions, most notably Formula One, where PWR supplies every car on the grid. These competitive advantages also allow PWR to command top-tier aftermarket pricing and position itself as a trusted supplier for high-performance, low-volume production of supercars and hypercars with vehicle manufacturers.