Buy this ASX 300 stock after 'milestone' contract win

Goldman Sachs is feeling bullish about this stock. Let's see what the broker is saying.

| More on:
Two smiling work colleagues discuss an investment or business plan at their office.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

PWR Holdings Ltd (ASX: PWH) shares were on form on Tuesday and charged higher.

Investors were buying the ASX 300 stock after it announced a new contract win.

The advanced cooling products and solutions company revealed that its North American subsidiary, C&R Racing, has secured a US$5.5million (~A$8.9 million) order to supply advanced cooling solutions for a US government project.

Management advised that this order, which is scheduled for delivery in calendar year 2025, marks an important milestone in PWR's growth strategy within the Aerospace and Defence sector.

Broker response

Goldman Sachs agrees that this is a milestone moment for the ASX 300 stock and believes it could be the start of big things. It said:

While specific details are limited, given confidentiality, the magnitude of the initial contract represents c.6% of FY24 revenue (to be delivered in CY25) and is validation for PWH of R&D, prototype and professional accreditations achieved to-date.

We expect this announcement to be the first of a number of long-term opportunities in the A&D division with the emerging eVTOL space providing a material opportunity as it continues to progress towards regulatory approval and production capacity is built out to meet customer demand.

It also reminds investors that this side of the business is only new. Goldman adds:

It is important to consider that PWH only entered the A&D market in 2020 with the majority A&D revenue generated to-date from R&D and prototype work, with the transition from R&D to contracted production generally taking 3-4 years and contract lengths in A&D typically up to 5-10 years. In terms of materiality of contracted work going forward, we expect PWH to only announce contracted revenue that is likely to generate >A$5m in revenue per year.

Should you buy this ASX 300 stock?

In response to the news, the broker has retained its buy rating and $9.10 price target on its shares.

Based on its current share price of $7.62, this implies potential upside of 19.5% for investors over the next 12 months.

Commenting on its bullish view of the ASX 300 stock, the broker said:

PWR Holdings is a market-leading, founder-led business centered on the customized design, prototyping and production of advanced cooling products and solutions. With a deep history of product-led investment and engineering relationships with OEMs across all levels of high-performance motorsports, PWH are well positioned to leverage their expertise as they expand into aerospace and defense (A&D) and higher-volume OEM work.

Further, with management noting that demand continues to outstrip supply, PWH have plans in place to increase their Australia manufacturing footprint by +87% to c.29k sqm in FY26, vs FY22 levels, and improve automation. We consider PWH to have a runway to grow earnings long term, hence are Buy rated.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and PWR Holdings. The Motley Fool Australia has positions in and has recommended PWR Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Broker Notes

A concerned man looking at his laptop.
Broker Notes

Why this broker just downgraded Pro Medicus shares

Let's see what Bell Potter is saying about this high-flying stock.

Read more »

Man pointing at a blue rising share price graph.
Resources Shares

Up 275% in a year, why this ASX All Ords mining stock could keep racing higher into 2026

A leading fund manager forecasts more outperformance to come for this rocketing ASX All Ords miner. But why?

Read more »

children and teacher in childcare education setting
Broker Notes

Why did Macquarie just re-rate G8 Education shares?

G8 Education shares are down 23% this year.

Read more »

A man looking at his laptop and thinking.
Broker Notes

After crashing more than 21% yesterday, does Macquarie rate Helia shares a buy?

Should I buy the big dip on Helia shares? Here’s Macquarie’s latest share price forecast.

Read more »

Happy work colleagues give each other a fist pump.
Broker Notes

Buy this ASX 200 share that is having a 'milestone year'

Bell Potter has good things to say about this high-flying stock.

Read more »

A woman presenting company news to investors looks back at the camera and smiles.
Broker Notes

Bell Potter names the best ASX 200 stocks to buy in July

The broker is feeling bullish on these names this month. Let's find out why.

Read more »

Woman and man calculating a dividend yield.
Financial Shares

With a 3.8% dividend yield, does Macquarie rate QBE shares a buy, hold or sell?

Can QBE shares continue to outperform in FY 2026? Here’s Macquarie’s latest forecast.

Read more »

watch
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »