On Wednesday of next week, 20th November, Renold (LON:RNO), the chain and transmission equipment group, will be reporting its Interim Results for the six months to end-September.
They should be showing a good set of figures and a near record order book for the full year to end March 2025.
On broker’s estimates the group’s shares are trading at least a third below real value.
The Business
The 150-year old Wythenshawe, Manchester-based group has an unsurpassed reputation for innovation, design and manufacturing skill, and is the world’s leading manufacturer of industrial transmission chains, gearboxes and couplings.
The business, which has operations in some 20 countries and an international network of distribution partners, while its products are employed in tackling thousands of demanding operating environments.
Its ranges are specified for use in power transmission, lifting, conveying and processing applications on a global basis.
Renold’s market-leading products can be seen in diverse applications from cement making to chocolate manufacturing, subway trains to power stations, escalators to quarries; in fact, anywhere something needs to be lifted, moved, rotated or conveyed.
Overall Performance
Over the last five years, to end-March, its group revenues have risen 27.5% from £189.4m to £241.4m in 2024.
In the same period its pre-tax profits have more than quadrupled from £4.9m to £22.9m, while its earnings have risen more than impressively from 2.9p to 7.8p per share.
In early September the group issued its AGM Trading Update, covering its first five months to end August this year.
Order intake for that period was £105.5m (£92.6m), an increase of 14.0%, or an increase of 15.5% at constant exchange rates.
Excluding the impact of the large military contract for the Canadian Navy announced on 1st May 2024, underlying order intake increased by 2.6%, an increase of 4.0% at constant exchange rates.
The order book at 31st August, was £85.5m (FY24: £85.4m) and stood close to a record high level.
The company stated that global markets continued to be uncertain, with activity levels in both mainland Europe and China recovering more slowly than initially anticipated.
However, material and labour inflation costs were reducing, while the group retained a strong order book which remained high by historical standards.
It noted that good trading performance in the period, coupled with the strong order book underpins management's confidence in the outturn for the year.
Trading and profitability for the first half was reported to be in line with the Board's expectations, whilst the full year will now also include six months contribution from the $31.4m MAC Chain acquisition.
Analyst View
At Cavendish Capital Markets, analyst David Buxton has recently increased his Price Objective for the group’s shares from 75p to 86p.
His current year estimates, to end-March 2025, are for revenues of £252.6m and £23.4m of adjusted pre-tax profits, generating 7.5p of earnings and paying a 0.5p dividend per share.
Looking forward to the 2026 year he now sees £269.7m sales, £26.0m profits, 8.5p in earnings and a maintained 0.5p per share dividend.
In My View
Capitalised at just £125m, this group is continuing to push forward its trail of profits to £23.4m this year and then £26.0m next year.
With its shares now at around 55.50p, it is trading on a mere 7.4 times current year earnings and just 6.5 times prospective – that is far too cheap a rating.
They could so easily break upwards to smash through their 5-year High of 66.80p – and even then, still look cheap on sub-10 times earnings estimates.
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