Intrinsic Value Starrag Group Holding AG (0QQA.L)

• Previous Close: £30.70
• Intrinsic Value: £14.56
• Upside potential: -53%

Stock Valuation Context

Business Model And Market Position

Starrag Group Holding AG operates in the industrial machinery sector, specializing in high-precision machine tools for milling, turning, boring, and grinding applications. The company serves demanding industries such as aerospace, energy, and transportation, where precision and reliability are critical. Its diversified product portfolio includes vertical and horizontal machining centers, grinding machines, and integrated automation solutions, marketed under well-established brands like Berthiez, Bumotec, and Scharmann/Ecoforce. Starrag’s revenue model combines equipment sales with value-added services such as maintenance, engineering support, and software solutions, enhancing customer retention and recurring revenue streams. The company maintains a strong international presence, with operations in Switzerland, Germany, France, and beyond, positioning it as a key player in niche markets requiring advanced manufacturing technology. Its focus on innovation and tailored solutions allows it to compete effectively against larger industrial conglomerates, particularly in specialized segments like aerostructures and blisk machining.

Revenue Profitability And Efficiency

In its latest fiscal year, Starrag reported revenue of CHF 494.1 million, with net income of CHF 11.9 million, reflecting a net margin of approximately 2.4%. Operating cash flow stood at CHF 7.7 million, though capital expenditures of CHF 17.9 million indicate ongoing investments in production capabilities. The diluted EPS of CHF 2.17 suggests modest but stable earnings power, supported by disciplined cost management and a focus on high-margin service offerings.

Earnings Power And Capital Efficiency

Starrag’s earnings are driven by its ability to secure contracts in aerospace and energy, where precision machining demand remains resilient. The company’s capital efficiency is tempered by significant capex, but its cash position (CHF 60.7 million) and manageable debt (CHF 61 million) provide flexibility. The modest net income highlights the capital-intensive nature of the industry, though service revenue helps stabilize margins.

Balance Sheet And Financial Health

Starrag’s balance sheet reflects a conservative leverage profile, with total debt of CHF 61 million offset by cash reserves of CHF 60.7 million. The near parity between debt and liquidity suggests prudent financial management, though the negative free cash flow (after capex) warrants monitoring. The company’s equity base and low beta (0.372) indicate lower volatility relative to the broader market.

Growth Trends And Dividend Policy

Growth is likely tied to aerospace and industrial demand, with automation trends offering long-term tailwinds. Starrag pays a dividend of CHF 1 per share, signaling confidence in cash flow stability despite cyclical end markets. The payout ratio appears sustainable, though reinvestment needs may limit aggressive dividend hikes in the near term.

Valuation And Market Expectations

With a market cap of CHF 194.6 million, Starrag trades at a P/E of approximately 16.4x, aligning with niche industrial peers. The valuation reflects expectations of steady, rather than explosive, growth, given its specialized market positioning and moderate profitability. Investors likely prize its defensive exposure to high-precision manufacturing sectors.

Strategic Advantages And Outlook

Starrag’s key strengths include its technical expertise, strong brand portfolio, and service-driven revenue model. The outlook hinges on sustained demand from aerospace and energy clients, though macroeconomic volatility could pose risks. Strategic investments in automation and digital solutions may enhance competitiveness, particularly in advanced manufacturing applications.

Sources

Company filings, London Stock Exchange data