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1. Company Snapshot

1.a. Company Description

Melrose Industries PLC engages in the aerospace, automotive, powder metallurgy, and other industrial businesses in the United Kingdom, rest of Europe, North America, and internationally.Its Aerospace segment provides airframe and engine structures, and electrical interconnection systems for the aerospace industry in civil airframe and defense platforms.The company's Automotive segment designs, develops, manufactures, and integrates driveline technologies, including electric vehicle components.


Its Powder Metallurgy segment offers precision powder metal parts for the automotive and industrial sectors; and metal powder for powder metallurgy, as well as commercializes additive manufacturing.The company's Other Industrial segment designs, manufactures, and distributes ergonomic products for use in a various working, learning, and healthcare environments; and offers metal hydride hydrogen storage solutions for use in a range of industrial and commercial applications.The company was formerly known as New Melrose Industries PLC and changed its name to Melrose Industries PLC in November 2015.


Melrose Industries PLC was founded in 2003 and is headquartered in London, the United Kingdom.

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1.b. Last Insights on MRO

Melrose Industries' recent performance has been impacted by evolving industry conditions and analyst views. A slight uptick in discount rate due to ongoing sector volatility has been observed, despite a modest improvement in fair value estimate from £6.58 to £6.73. Analysts are balancing robust demand expectations in the global aerospace sector with caution around execution risks and valuation. The company's valuation story is also influenced by a subtle shift in analyst outlook, with a lowered discount rate from 8.42% to 8.26%. Recent news indicate steady confidence in Melrose’s valuation.

1.c. Company Highlights

2. Melrose Industries Reports Strong Financial Performance

Melrose Industries reported strong financial performance in the first half of 2025, with revenue up 6% and operating profit up 29% to £310m. Free cash flow improved by £91m to an outflow of £54m. The company's transformation program, which completes this year, has driven margin expansion, with group margin up 380 basis points to 18%. Earnings per share (EPS) came out at 0.151, beating estimates of 0.1458.

Publication Date: Aug -07

📋 Highlights
  • Revenue Growth: Revenue increased by 6% in the first half of 2025.
  • Operating Profit Increase: Operating profit rose by 29% to £310m, driven by margin expansion.
  • Transformation Program Impact: The program, completing this year, boosted group margin by 380 basis points to 18%.
  • Engines Division Performance: Revenue grew by 11% with a 26% increase in operating profit to £261m.
  • Structures Division Growth: Revenue rose by 3% and operating profit increased by 32% to £63m.

Revenue and Margin Growth

The Engines division delivered revenue growth of 11%, driven by aftermarket growth and OE growth, with operating profit up 26% to £261m. The Structures division delivered revenue growth of 3%, with operating profit up 32% to £63m. According to the company's management, "the Aerospace and defense markets are growing structurally, with record order backlogs and expanding aftermarket."

Growth Outlook and Valuation

The company has a clear path to value creation, with a growth strategy centered around three core levers: delivering growth from existing platform positions, expansion in new target opportunities, and participating in the future of flight. The company's valuation metrics suggest that there is room for upside, with a P/E Ratio of -155.22 and a P/S Ratio of 2.13. The EV/EBITDA ratio of 27.68 suggests that the company's earnings are expected to grow significantly.

Free Cash Flow and Dividend Yield

The company achieved its target of having 85% of its defense portfolio sustainably repriced by the end of 2025, six months ahead of schedule. The company is confident about delivering its recently announced 5-year targets and its full-year guidance at constant currency. The free cash flow guidance remains at £100m plus, with a dividend yield of 1.03%. However, the free cash flow yield is -3.1%, suggesting that the company is investing heavily in growth initiatives.

Long-term Targets and Guidance

The company expects high single-digit revenue growth to £5 billion by 2029, coupled with further margin expansion, leading to £1.2 billion plus of operating profit. The company assumes that engine OEMs' projected aftermarket cash flows for respective engines will be achieved, and that current OEM target build rates will be achieved by 2029. With a net debt / EBITDA ratio of 4.82, the company has a clear line of sight to £600 million of free cash flow.

3. NewsRoom

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FTSE, US stocks and bitcoin see downbeat start to December

Dec -01

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How Recent Analyst Upgrades Are Reshaping the Story for Melrose Industries

Nov -29

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What Recent Analyst Shifts Mean for Melrose Industries’ Evolving Valuation Story

Nov -12

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What Catalysts Could Shift the Narrative for Melrose Industries Amid Changing Analyst Views?

Oct -29

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Looking at the Narrative for Melrose as Analysts Weigh Market Shifts and Growth Prospects

Oct -15

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Airbus and 3 More Aerospace Stock Picks From Goldman Sachs

Sep -19

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Airbus and Three More Aerospace Picks From Goldman Sachs

Sep -19

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Is Now An Opportune Moment To Examine Melrose Industries PLC (LON:MRO)?

Sep -18

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.71%)

6. Segments

Structures

Expected Growth: 5%

Melrose Industries PLC's 5% growth is driven by its diversified industrial portfolio, strong aftermarket demand, and strategic acquisitions. The company's focus on cost savings, operational efficiencies, and investment in digital technologies also contribute to its growth. Additionally, its exposure to growing end-markets such as aerospace, defense, and automotive supports its expansion.

Engines

Expected Growth: 7%

Melrose Industries PLC's 7% growth in Engines segment is driven by increasing demand for energy-efficient solutions, rising adoption of electric vehicles, and growing need for reduced emissions. Additionally, strategic acquisitions, investments in R&D, and expansion into emerging markets have contributed to the segment's growth.

7. Detailed Products

GKN Aerospace

Designs and manufactures complex aerospace systems, including aerostructures, engine systems, and electrical wiring interconnection systems.

GKN Automotive

Develops and manufactures driveline systems, including all-wheel drive systems, transaxles, and eDrive systems.

GKN Powder Metallurgy

Produces precision powder metal components, including gears, bearings, and other precision parts.

GKN Hydrogen

Develops and manufactures hydrogen storage systems, including fuel tanks and storage vessels.

8. Melrose Industries PLC's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Melrose Industries PLC is medium due to the presence of alternative products and services in the market.

Bargaining Power Of Customers

The bargaining power of customers for Melrose Industries PLC is low due to the company's strong brand reputation and customer loyalty.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Melrose Industries PLC is medium due to the presence of multiple suppliers in the market.

Threat Of New Entrants

The threat of new entrants for Melrose Industries PLC is high due to the low barriers to entry in the industry.

Intensity Of Rivalry

The intensity of rivalry for Melrose Industries PLC is high due to the presence of multiple competitors in the market.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 15.81%
Debt Cost 3.95%
Equity Weight 84.19%
Equity Cost 11.88%
WACC 10.63%
Leverage 18.78%

11. Quality Control: Melrose Industries PLC passed 1 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
Melrose

A-Score: 4.7/10

Value: 4.8

Growth: 2.1

Quality: 6.0

Yield: 2.5

Momentum: 8.5

Volatility: 4.0

1-Year Total Return ->

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Stock-Card
Interpump

A-Score: 4.5/10

Value: 4.0

Growth: 6.4

Quality: 6.8

Yield: 1.2

Momentum: 4.0

Volatility: 4.7

1-Year Total Return ->

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Spirax-Sarco Engineering

A-Score: 4.4/10

Value: 2.2

Growth: 5.2

Quality: 5.4

Yield: 3.1

Momentum: 5.0

Volatility: 5.7

1-Year Total Return ->

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Beijer Ref

A-Score: 4.4/10

Value: 2.4

Growth: 8.7

Quality: 5.5

Yield: 1.2

Momentum: 3.0

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
FLSmidth

A-Score: 4.3/10

Value: 2.7

Growth: 2.7

Quality: 4.7

Yield: 2.5

Momentum: 7.5

Volatility: 6.0

1-Year Total Return ->

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Stock-Card
Interroll

A-Score: 4.0/10

Value: 2.0

Growth: 4.7

Quality: 7.4

Yield: 2.5

Momentum: 4.0

Volatility: 3.7

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

5.87$

Current Price

5.87$

Potential

-0.00%

Expected Cash-Flows