Mission Critical Flow Solutions Will Drive Major Long Term Earnings Upside

Catalysts

About Georg Fischer

Georg Fischer focuses on global Flow Solutions for industry, infrastructure and buildings, with a growing emphasis on mission-critical, high value water and cooling applications.

What are the underlying business or industry changes driving this perspective?

• Completion of the portfolio transformation into a pure Flow Solutions group, including the divestment of Machining Solutions and the advanced sale process for Casting Solutions, should concentrate capital and management attention on higher margin, structurally growing end markets, supporting sustained EBIT margin expansion and higher return on invested capital.
• Accelerating integration of Uponor, with synergy targets of CHF 40 million to CHF 50 million by 2027 and CHF 14 million EBIT savings already realized in the first half of 2025, points to further procurement, footprint and overhead efficiencies that can lift net margins and earnings even on modest top line growth.
• Rising global investment in resilient water infrastructure and urban storm water management, supported by GF’s acquisition of VAG and a strong project pipeline in Europe and the Middle East, is set to drive recurring, project-based revenue growth and a richer infrastructure mix that should enhance Flow Solutions’ overall margin profile.
• Rapid growth in advanced cooling solutions for data centers and the expected rebound in semiconductor investments, where GF is homologating liquid cooling systems and mission-critical components with major players, positions the company to scale from a low base in highly profitable niches, supporting double digit growth pockets and mix driven EBIT improvement.
• Global push for energy efficient, sustainable buildings, evidenced by LEED oriented landmark projects and award winning digital shower and heating offerings, should accelerate adoption of GF’s integrated building flow systems, supporting steady revenue growth, higher value system sales and structurally stronger earnings over the cycle.

Assumptions

This narrative explores a more optimistic perspective on Georg Fischer compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Georg Fischer's revenue will decrease by 4.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.5% today to 9.1% in 3 years time.
• The bullish analysts expect earnings to reach CHF 295.8 million (and earnings per share of CHF 3.61) by about December 2028, up from CHF 242.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as CHF236.0 million.
• 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 29.1x on those 2028 earnings, up from 18.0x today. This future PE is greater than the current PE for the GB Machinery industry at 28.9x.
• The bullish analysts expect the number of shares outstanding to grow by 0.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.33%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company is increasingly dependent on cyclical capital expenditure in industrial segments such as microelectronics, chemical process industries and water treatment, which were already described as subdued in the first half of 2025. If geopolitical tensions, tariffs and hesitant investment climates persist, this could suppress industrial project execution and reduce revenue and EBIT over several years.
• Management is guiding for margin recovery in the second half of 2025 based on a stronger project mix in semiconductors and U.S. infrastructure. However, the current decline from a 13.7% to 11.5% comparable EBIT margin in Industry and Infrastructure Flow Solutions and the overall fall to a 10.4% Flow Solutions margin shows how sensitive profitability is to mix and FX, so any prolonged weakness or delays in high margin projects could structurally cap future EBIT margin expansion and earnings growth.
• The bullish case rests heavily on successful integration of Uponor and delivery of CHF 40 million to CHF 50 million of synergies by 2027. Yet ongoing restructuring, plant closures in Italy and Turkey, footprint consolidation and One GF operating model changes create execution risk, and if savings are offset by integration costs, operational disruptions or slower commercial traction, the expected uplift in net margins and earnings could fail to materialize.
• The portfolio shift to a pure Flow Solutions group, including the advanced divestment process for Casting Solutions after already selling Machining Solutions, concentrates the business in fewer end markets and products. If the sale of Casting Solutions occurs on less favorable terms than expected, or if global infrastructure and building cycles weaken after this simplification, the group could face lower diversification benefits and more volatile revenue and net profit.
• Foreign exchange headwinds from a strong Swiss franc, tariff related costs on imports into China and price pressure tied to raw material pass through mechanisms have already driven negative impacts on sales and EBIT in 2025. If these currency and tariff dynamics persist or intensify while competition limits pricing power, they could structurally weigh on revenue, comparable EBIT margin and long term earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Georg Fischer is CHF87.0, which represents up to two standard deviations above the consensus price target of CHF72.8. This valuation is based on what can be assumed as the expectations of Georg Fischer'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 CHF87.0, and the most bearish reporting a price target of just CHF47.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be CHF3.3 billion, earnings will come to CHF295.8 million, and it would be trading on a PE ratio of 29.1x, assuming you use a discount rate of 6.3%.
  
• Given the current share price of CHF53.1, the analyst price target of CHF87.0 is 39.0% 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.