New KPIs introduced: Renishaw has introduced 4 new KPIs to focus on long-term value creation: organic revenue growth >7%, adjusted operating margins >20%, ROIC >15%, and cash conversion >70%. Based on the group’s track record and the cyclical/volatile markets it operates in, these are through-cycle targets. Applying the average of the last 5 years, both organic revenue growth and adjusted operating margins would miss the new targets. However, with volume recovery, organic investment and targeted pricing actions margins should improve incrementally towards its >20% target. Margins at inflection point: We have conducted sensitivity analysis, testing the organic growth and margin targets against our FY25E forecasts. Our forecasts are prudent versus consensus. However, assuming the new KPIs are achieved in FY25, there is considerable upside to our adjusted estimates: EBIT by >17%, earnings by >15%. Productivity initiatives, scaling new product volumes, improved operating leverage, and recovery in position measurement and semiconductor markets will be the core drivers of margin in the near- and medium-term. Upgrade to BUY: Given Renishaw is positioned early in the cycle, and that strong signs of recovery are emerging with management “expecting to achieve solid revenue growth in the year ahead”, the current valuation does not reflect the positive outlook, in our view. While we cut FY25E and FY26E adjusted EPS by 5% and 3%, respectively, the shares nonetheless trade at discounts of 24% and 22% to the historic 10-year NTM P/E and EV/EBITDA multiples. We view this as a compelling entry point, with both margins and earnings at inflection point. Next catalyst: Q1 trading update 24 October.