Intrinsic Value Starrag Group Holding AG (STGN.SW)

• Previous Close: CHF30.40
• Intrinsic Value: CHF14.48
• Upside potential: -52%

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 distinguishes itself through advanced engineering and tailored solutions, positioning it as a trusted partner for complex manufacturing needs. The company’s global footprint, with operations in Switzerland, Germany, France, and India, allows it to cater to international clients while maintaining a strong presence in Europe. Its focus on innovation and after-sales services, including maintenance and software solutions, enhances customer retention and recurring revenue streams. Despite competition from larger industrial conglomerates, Starrag’s niche expertise in high-precision machining secures its relevance in specialized markets.

Revenue Profitability And Efficiency

Starrag reported revenue of CHF 494.1 million for the period, with net income of CHF 11.9 million, reflecting modest profitability in a capital-intensive industry. The diluted EPS of CHF 2.17 indicates reasonable earnings distribution among shareholders. Operating cash flow stood at CHF 7.7 million, though capital expenditures of CHF -17.9 million suggest ongoing investments in production capacity and technology, which may pressure short-term liquidity but support long-term competitiveness.

Earnings Power And Capital Efficiency

The company’s earnings power is constrained by the cyclical nature of the industrial machinery sector, though its diversified client base mitigates some volatility. Capital efficiency appears balanced, with investments in automation and precision tools aligning with high-margin demand segments. The moderate beta of 0.372 suggests lower systematic risk compared to broader industrials, reflecting its niche focus and stable customer relationships.

Balance Sheet And Financial Health

Starrag maintains a solid balance sheet with CHF 60.7 million in cash and equivalents, providing liquidity against total debt of CHF 60.9 million. The near parity between cash and debt indicates manageable leverage, though the negative free cash flow (after capex) warrants monitoring. The company’s financial health is adequate for its size, with no immediate solvency concerns.

Growth Trends And Dividend Policy

Growth is likely tied to industrial demand cycles, with aerospace and energy sectors being key drivers. The dividend of CHF 1 per share signals a commitment to shareholder returns, though payout sustainability depends on earnings stability. The company’s focus on high-value niches may support gradual top-line expansion, but macroeconomic headwinds could temper near-term growth.

Valuation And Market Expectations

With a market cap of CHF 194.1 million, Starrag trades at a modest valuation, reflecting its small-cap status and sector cyclicality. Investors likely price in steady but unspectacular growth, given the company’s niche positioning and reliance on industrial capex trends. The low beta implies muted sensitivity to market swings, appealing to risk-averse investors.

Strategic Advantages And Outlook

Starrag’s strategic edge lies in its precision engineering expertise and strong brand legacy in specialized machining. The outlook hinges on industrial demand recovery, particularly in aerospace, where precision tools are critical. Continued investment in automation and service offerings could enhance margins, though global supply chain risks and competition remain challenges.

Sources

Company filings, SIX Swiss Exchange data