Spirax-Sarco Delivers Strong 2021 Results and Favorable Outlook; Shares Are Fairly Valued

We expect to moderately increase our GBX 10,910 fair value estimate for wide-moat Spirax-Sarco as there appears to be no signs of demand falling away, particularly at the Watson-Marlow division. Full-year results broadly met our expectations and were impressive, despite supply chain disruptions, which led to a record order book and pushed deliveries into 2022. Management anticipates current-year revenue growth to be well above global industrial production growth estimates of 4.4%, which the company managed to exceed by more than 2 times in 2021. We anticipate similar levels of outperformance for 2022. Spirax-Sarco’s direct sales model requires higher demand to be met with additional investments in staff and production expansion, which will have a dilutive impact on the group’s record EBIT margin of 25.3%. Having been priced for perfection, the share price has converged with our fair value estimate. We view shares as fairly valued.