Stock Analysis & Valuation Schlatter Industries AG (STRN.SW)

• Previous Close: CHF19.40
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, CHF	Upside, %
Artificial intelligence (AI)	2125.74	10857
Intrinsic value (DCF)	8.30	-57
Graham-Dodd Method	24.25	25
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

Schlatter Industries AG (SIX: STRN) is a Swiss-based industrial machinery company specializing in welding systems and weaving machines. Founded in 1916 and headquartered in Schlieren, Switzerland, the company operates globally, offering a diverse portfolio of machinery for reinforcing mesh, industrial fences, wire processing, and textile applications. Its product range includes welding machines, wire straightening and cutting systems, 3D mesh design software (MeshStudio), and weaving machines for press fabrics, dryer fabrics, and industrial filters under the Jäger brand. Schlatter serves industries such as construction, manufacturing, and filtration, leveraging Swiss engineering precision and innovation. With a market capitalization of CHF 25.4 million, Schlatter maintains a niche but technologically advanced position in industrial machinery, balancing traditional manufacturing expertise with digital solutions like MeshStudio. The company’s dual focus on welding and weaving systems provides diversification, though its small scale limits broad market penetration compared to global industrial giants.

Investment Summary

Schlatter Industries AG presents a mixed investment profile. Its strengths lie in specialized machinery for niche markets (welding and weaving), Swiss engineering reputation, and a modest dividend yield (~3.9% based on a CHF 1 dividend and current share price). However, risks include limited scale (CHF 113.2M revenue), negative operating cash flow (CHF -7.45M in the last period), and exposure to cyclical industrial demand. The low beta (0.186) suggests lower volatility relative to the market, but stagnant growth (net income of CHF 1.55M) and high reliance on industrial capex cycles are concerns. Investors may value its dividend stability and niche expertise, but broader industrial downturns could pressure margins. Competitors with larger R&D budgets pose long-term threats.

Competitive Analysis

Schlatter Industries competes in two primary segments: welding systems (industrial mesh, rail welding) and weaving machines (textile/filtration). Its competitive advantage stems from Swiss precision engineering, customization capabilities, and the Jäger brand’s reputation in weaving. However, its small size limits economies of scale and global reach compared to multinational rivals. In welding, Schlatter’s MeshStudio software differentiates it with 3D design integration, but competitors like Lincoln Electric dominate with broader product lines and stronger distribution. In weaving, Jäger machines are well-regarded for durability, but Chinese manufacturers offer lower-cost alternatives. Schlatter’s dual-segment focus provides diversification but dilutes resource allocation. The company’s reliance on industrial capex makes it vulnerable to downturns, while its negative operating cash flow raises liquidity concerns. To compete, Schlatter must emphasize high-margin customization and aftermarket services, though its CHF 2.7M cash position and CHF 5.2M debt suggest limited flexibility for aggressive expansion or R&D.

Major Competitors

• Lincoln Electric Holdings (LECO): Lincoln Electric dominates the welding equipment market with a global footprint, strong brand recognition, and extensive R&D resources. Its product range surpasses Schlatter’s in breadth, including automation solutions. However, Lincoln lacks Schlatter’s niche focus on mesh welding and 3D design software (MeshStudio). Lincoln’s scale provides cost advantages, but Schlatter’s customization may appeal to specialized clients.
• Zhejiang Jingsheng Mechanical & Electrical (603338.SS): A Chinese competitor in weaving machinery, Jingsheng offers lower-cost alternatives to Schlatter’s Jäger machines, particularly in Asian markets. Its strength lies in cost efficiency and growing domestic demand, but it lacks Schlatter’s reputation for high-precision European engineering. Schlatter retains an edge in premium filtration and industrial fabrics.
• Swiss Precision Machinery AG (SPSN.SW): A peer in Swiss industrial machinery, SPSN competes indirectly in precision engineering. While not a direct competitor in welding/weaving, it highlights Schlatter’s challenge of competing against diversified Swiss firms with broader industrial portfolios. SPSN’s stronger financials (higher revenue/market cap) could pressure Schlatter for investor attention.
• Mannatech Incorporated (MTEX): Mannatech’s filtration solutions overlap with Schlatter’s weaving machines for industrial filters. Mannatech’s focus on health/wellness filters differentiates it, but Schlatter’s Jäger machines are more specialized for heavy-duty industrial applications. Schlatter’s advantage lies in B2B industrial expertise, whereas Mannatech targets consumer-facing markets.