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1. Company Snapshot

1.a. Company Description

The Weir Group PLC produces and sells highly engineered original equipment worldwide.It operates in two segments, Minerals and ESCO.The Minerals segment offers slurry handling equipment and associated aftermarket support services for abrasive high-wear applications used in the mining and oil sands markets.


The ESCO segment provides ground engaging tools for mining machines.This segment also produces smart and rugged cameras that monitor and provide valuable and timely data on equipment performance, faults, payloads, and rock fragmentation.The company offers its products under the Accumin, Aspir, Cavex, Delta Industrial, Enduron, Envirotech, Floway, GEHO, Gemex, Hazleton, Hydrau-Flo, R.


Wales, Isodry, Isogate, Lewis, Linatex, Multiflo, Synertrex, Stampede, Trio, Vulco, FusionCast, ESCO, Motion Metrics, and Warman brands.The company was founded in 1871 and is headquartered in Glasgow, the United Kingdom.

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1.b. Last Insights on WEIR

The Weir Group PLC's recent performance has been positively driven by upward revisions in its fair value estimate, from £28.63 to £29.15 per share, reflecting increased confidence in the company's growth prospects. Strong revenue momentum and positive analyst sentiment have contributed to this adjustment. Additionally, the company's acquisition of Brazilian mining software company Fast2Mine is expected to enhance its existing software offerings. A dividend payment of £0.196 per share has also been announced.

1.c. Company Highlights

2. Weir Group: Strong Performance Fueled by Aftermarket Strength and Strategic Initiatives

Weir Group delivered a robust first half of 2023, with revenue increasing by 4% to GBP 1.2 billion. Operating profit surged by 17% to GBP 237 million, resulting in an operating margin of 19.8%, a significant 220 basis point increase year-on-year. This margin expansion was driven by a combination of factors, including a shift in revenue mix towards higher-margin aftermarket products, cost savings from the Performance Excellence program, and contributions from the recently acquired Micromine software company. The company's earnings per share (EPS) came in at 0.584, slightly exceeding analyst estimates of 0.579.

Publication Date: Aug -13

📋 Highlights
  • Operating Profit Surge: Operating profit rose 17% to GBP 237 million, with margin expanding 220 bps to 19.8%.
  • Revenue Growth and Mix Shift: Revenue hit GBP 1.2 billion (+4%), driven by 7% aftermarket growth and OE decline due to order phasing.
  • Performance Excellence Savings: GBP 40 million in cumulative savings from cost program, with GBP 50 million annual run rate by 2025 and GBP 80 million by 2026.
  • Micromine Acquisition Impact: GBP 40 million revenue boost from Micromine and strategic digital investments, including GBP 80 million savings potential.
  • Full-Year Guidance Upgrade: Margin guidance raised to ~20%, despite FX and mix headwinds, citing strong OE demand and brownfield projects.

Strategic Growth Initiatives Paying Off

Weir Group's strategic focus on digital solutions, product extensions, and geographic expansion is evident in its recent acquisitions. The company completed the acquisition of Micromine in April, a software company with a strong track record of recurring revenue growth and sector-leading margins. This deal, along with the strategic equity investment in CiDRA, is expected to contribute significantly to Weir Group's future growth. The company also highlighted the success of its Performance Excellence program, which is on track to deliver GBP 80 million in annual cumulative savings by 2026.

Market Tailwinds and Strong Outlook

The company is benefiting from positive market conditions, particularly strong demand for its products in key commodities like copper and gold. This demand is driven by favorable commodity prices and a global shortage of copper. Weir Group expects continued order and revenue growth in the second half of the year, fueled by a strong pipeline of brownfield optimization projects and a shift in order mix towards original equipment (OE). The company has also seen opportunities to gain market share from competitors less diversified in their manufacturing footprint.

Valuation Considerations

Based on current market data, Weir Group's valuation metrics suggest that the market is pricing in continued growth and profitability. The company's P/E ratio is 20.54, relatively high compared to its historical average. However, considering the company's strong earnings growth and margin expansion, this valuation could be justified. The P/B ratio of 3.48 also indicates that the market values Weir Group's assets at a premium.

3. NewsRoom

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Why Analysts See Weir Group’s Story Shifting as Growth Prospects and Risks Evolve

Nov -30

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FTSE 100 LIVE: Markets in the green as Black Friday shoppers warned against scams

Nov -28

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FTSE 100 and US markets higher as Thanksgiving week rally continues

Nov -28

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What Analysts Say Is Shifting the Story for Weir Group Shares

Nov -16

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How Recent Analyst Updates Are Shaping the Weir Group Investment Story

Nov -01

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Graco Inc. Appoints Andrea (Andi) H. Simon to the Board of Directors

Oct -30

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Why Analysts Say the Weir Story Is Evolving After Bullish Upgrades and Margin Shifts

Oct -18

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Weir to acquire Brazilian mining software company Fast2Mine

Sep -25

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.47%)

6. Segments

Minerals

Expected Growth: 6%

The Weir Group PLC's Minerals segment growth is driven by increasing demand for commodities, urbanization, and infrastructure development. Rising adoption of electric vehicles and renewable energy technologies boosts demand for minerals like copper, lithium, and nickel. Additionally, Weir's innovative solutions and services, such as its Trio comminution products, enhance mining efficiency and productivity, further supporting growth.

ESCO

Expected Growth: 4%

ESCO's 4% growth driven by increasing demand for energy-efficient solutions, rising adoption of digital technologies, and growing need for predictive maintenance in the oil and gas industry. Additionally, Weir Group's expansion into new markets and strategic partnerships contribute to ESCO's growth.

7. Detailed Products

Minerals

The Weir Group PLC provides a range of minerals processing equipment and services, including crushers, screens, and pumps, to the mining industry.

Oil and Gas

The company offers a range of products and services to the oil and gas industry, including pumps, valves, and wellhead equipment.

Power and Industrial

The Weir Group PLC provides a range of products and services to the power and industrial markets, including pumps, valves, and compressors.

Flow Control

The company offers a range of flow control products, including valves, pumps, and actuators, to the oil and gas, power, and industrial markets.

8. The Weir Group PLC's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for The Weir Group PLC is medium due to the availability of alternative products and services in the mining and industrial sectors.

Bargaining Power Of Customers

The bargaining power of customers for The Weir Group PLC is low due to the company's strong brand reputation and the lack of buyer concentration in the industry.

Bargaining Power Of Suppliers

The bargaining power of suppliers for The Weir Group PLC is medium due to the presence of multiple suppliers in the market, but the company's large scale of operations gives it some bargaining power.

Threat Of New Entrants

The threat of new entrants for The Weir Group PLC is low due to the high barriers to entry in the industry, including the need for significant capital investment and technical expertise.

Intensity Of Rivalry

The intensity of rivalry for The Weir Group PLC is high due to the presence of several established competitors in the industry, leading to a competitive market environment.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 43.60%
Debt Cost 6.42%
Equity Weight 56.40%
Equity Cost 10.95%
WACC 8.97%
Leverage 77.30%

11. Quality Control: The Weir Group PLC passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Burckhardt Compression

A-Score: 6.2/10

Value: 4.3

Growth: 7.8

Quality: 7.4

Yield: 5.0

Momentum: 5.0

Volatility: 8.0

1-Year Total Return ->

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Stock-Card
Weir

A-Score: 5.7/10

Value: 2.7

Growth: 6.1

Quality: 6.1

Yield: 2.5

Momentum: 8.0

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Wärtsilä

A-Score: 5.5/10

Value: 2.9

Growth: 6.3

Quality: 7.6

Yield: 3.8

Momentum: 7.5

Volatility: 5.0

1-Year Total Return ->

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Stock-Card
Krones

A-Score: 5.5/10

Value: 5.7

Growth: 6.9

Quality: 6.1

Yield: 3.1

Momentum: 4.0

Volatility: 7.0

1-Year Total Return ->

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Stock-Card
Pentair

A-Score: 4.9/10

Value: 1.8

Growth: 4.8

Quality: 7.2

Yield: 1.9

Momentum: 6.5

Volatility: 7.3

1-Year Total Return ->

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Stock-Card
Rational

A-Score: 4.7/10

Value: 1.4

Growth: 6.4

Quality: 8.8

Yield: 2.5

Momentum: 1.5

Volatility: 7.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

28.8$

Current Price

28.8$

Potential

0.00%

Expected Cash-Flows