Stelrad delivered a year of earnings growth in FY25 despite a challenging market backdrop. Management has focused on growth in key markets, alongside proactive margin management and cost reduction. This resulted in a further improvement in contribution per radiator and, despite a 4% volume decline, underpinned growth in adj. operating profit of c.3% to c.£32.5m, slightly better than forecast and representing an improved margin of 11.6% (FY24: 10.8%). Whilst the timing of recovery remains uncertain, margin initiatives implemented during FY25 underpin most of our profit growth forecast - we expect PBT growth of 10% p.a. in FY26/FY27. Whilst we assume little improvement in the market backdrop, as the European market leader in radiator manufacturing, Stelrad remains highly geared towards the recovery when it materialises. Given the quality and resilience of Stelrad’s operation, we believe a rating at least in line with the sector is justified. We target a 15x Dec. ’26 PER to drive our 215p target price.
