Accelerated Global Infrastructure Will Transform Composite Markets

Key Takeaways

• Rapid operational efficiencies, vertical integration, and new product launches are expected to drive sustained margin expansion and increased free cash flow flexibility.
  
• Strong growth in high-demand sectors and successful backlog conversion position Connection Technologies and Xerxes for outsized revenue acceleration over industry expectations.
  
• Exposure to shifting energy demand, tariffs, project execution risks, customer concentration, and slow innovation threatens revenue stability and long-term growth potential.

Catalysts

Operates as a materials technology company that serves the transportation, communication, water management, and energy and electrification markets in Canada, the United States, Latin America, Europe, the Middle East, Africa, and the Asia Pacific.

• While analyst consensus expects operational efficiencies from new North American manufacturing sites and the elimination of MEO costs to drive margin gains, these improvements are likely understated; rapid acceleration in productivity and cost savings as sites surpass pre-move output and run at optimal scale can deliver a structural step-change, positioning EBITDA margins well above historic norms within 12 months.
  
• Analyst consensus anticipates revenue and EBITDA accretion from AmerCable integration and cross-selling, but early traction in high-growth sectors such as data centers, robust backlog conversion, and nimble pivoting to new industrial segments indicate that combined Connection Technologies segment revenue growth could meaningfully outpace current forecasts and drive double-digit EBITDA margin expansion.
  
• Mattr's Flexpipe business is on the verge of accessing a substantially larger portion of the global oil and gas gathering market with its imminent launch of >6-inch composite pipe and higher temperature offerings, a move timed to coincide with accelerating global infrastructure and energy security investment, setting up a multi-year period of high single-digit to low double-digit revenue growth and operating leverage.
  
• Escalating environmental regulations and long-term decarbonization commitments are driving secular demand for next-generation water management and fuel storage solutions, evidenced by record backlog and sustained end-market growth for Xerxes, which is set to deliver both rapid revenue scaling and substantial net margin uplift as production bottlenecks are resolved.
  
• The recently initiated vertical integration of key supply chain components (e.g., metallic components for composites) and ongoing digitalization efforts will not only buffer against tariff risk and cost volatility but will underpin incremental margin accretion and free cash flow strength, enabling flexible capital allocation to ongoing buybacks, rapid deleveraging, and further high-return technology investments.

Mattr Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Mattr compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Mattr's revenue will grow by 14.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.8% today to 8.1% in 3 years time.
• The bullish analysts expect earnings to reach CA$132.2 million (and earnings per share of CA$2.58) by about August 2028, up from CA$29.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 7.5x on those 2028 earnings, down from 20.9x today. This future PE is lower than the current PE for the CA Energy Services industry at 9.6x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.94%, as per the Simply Wall St company report.

Mattr Future Earnings Per Share Growth

Risks

• Investment in new pipelines and fossil-fuel related infrastructure, a key market for Mattr's Composite Technologies and Flexpipe businesses, faces long-term secular headwinds from the accelerating transition toward renewables and declining global demand for oil and gas, which risks suppressing future revenue growth and profit potential as end-market activity softens.
  
• Mattr's earnings and margins remain vulnerable to shifting and unpredictable U.S. tariff regimes and potential retaliatory counter-tariffs from Canada, especially given the company's significant annual expenditures on copper and ongoing challenges in passing through these incremental costs to customers, which could ultimately compress net margins and earnings if unable to be fully passed on.
  
• Execution risks persist for Mattr related to large, fixed-cost projects and ongoing ramp-up of new or modernized manufacturing facilities, with continued delays, under-absorption of costs, or workforce development challenges materially impacting efficiency improvements and constraining both segment and consolidated profitability.
  
• The company continues to be exposed to customer concentration and project cyclicality, with evidence of sharp revenue declines in segments tied to large episodic deliveries or specific projects (such as international Flexpipe orders or mining), which increases the volatility of both revenue and EBITDA, especially if replacement orders are delayed or macro cycles persist.
  
• Slow adoption of new technology or underinvestment in R&D relative to competitors, at a time when alternative pipeline materials and advanced construction solutions are gaining ground, could limit Mattr's ability to capture new market share and impair long-term revenue streams if legacy products like Flexpipe or traditional tank solutions are displaced by new entrants or substitutes.

Valuation

• The assumed bullish price target for Mattr is CA$16.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Mattr's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$16.0, and the most bearish reporting a price target of just CA$11.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be CA$1.6 billion, earnings will come to CA$132.2 million, and it would be trading on a PE ratio of 7.5x, assuming you use a discount rate of 7.9%.
  
• Given the current share price of CA$10.08, the bullish analyst price target of CA$16.0 is 37.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.