PWR Holdings: Initiating on the Narrow-Moat Cooling Specialist

We initiate coverage of PWR Holdings with a fair value estimate of AUD 8.50 per share, implying a fiscal 2024 P/E of about 32. At current prices, shares screen as expensive. Granted, PWR is poised for a continuation of considerable growth in advanced cooling, headlined by continued success in motorsport, further wins of low-run, high-performance vehicle manufacturer contracts, and continued growth as a supplier to defense prime contractors. PWR has a healthy pipeline of OEM contracts, with high-end, low-volume production of vehicles like the Aston Martin Valkyrie and Rimac Nevera, and a strong pipeline of production and prototyping with prime defense contractors. But we think the market is overly optimistic on its still relatively nascent foray into aerospace and defense, where we think its competitive position is not nearly as strong as it is in automotive.