CSW Industrials reports robust FY 25 results

CSW Industrials witnessed a solid yearly performance, demonstrating significant net income growth for FY 25. The company's latest financial results reveal strong fundamentals, supported by strategic acquisitions and advanced product offerings. The acquisitions provide an opportunity to be value-accretive and support the revenue expansion of the group. Overall, analysts have favorable opinions about the company.

CSW Industrials, Inc., established in 2015 and headquartered in Texas, US, specializes in manufacturing products that enhance efficiency and performance, primarily for residential and commercial heating, ventilation, air conditioning, and refrigeration (HVAC/R) systems, as well as plumbing applications. These products are designed for professional end-use customers. Additionally, CSW Industrials offers solutions to improve reliability, efficiency, performance, and lifespan of industrial assets, addressing various equipment maintenance challenges. The company also provides code-driven, life-safety products engineered for the construction, refurbishment, and modernization of commercial, institutional, and multifamily residential buildings. Furthermore, CSW Industrials supplies protection and load management products.

The company has about 2,600 employees and operates across three main segments: Contractor Solutions (69% of FY 24 revenue), Specialized Reliability Solutions (17%), and Engineered Building Solutions (14%). Revenue distribution by geography is as follows: United States (88%) and other regions (12%).

Robust net income growth in FY 25

CSW Industrials released its FY 25 results on May 22, 2025, including a decent 10.7% y/y increase in revenue to $878m. Operating income surged 14.9% y/y to $185m, with margins expanding by 77bp to 21.1%. Net profit rose 34% y/y to $137m.

Strategic acquisitions

CSW Industrials aims to identify and execute accretive acquisitions to expand and complement its portfolio of brands and products. The focus is on commercially proven products and solutions that are attractive in target end markets and have limited access to distribution channels that can benefit from CSW Industrials' market reach. The company utilizes strong FCF or financing to fund these acquisitions. Since October 2015, CSW Industrials has completed 17 acquisitions, deploying a cumulative capital of $1bn.

On May 1, 2025, CSW Industrials acquired Aspen Manufacturing for $313.5m. This acquisition is intended to strengthen CSW Industrials' portfolio in the industrial sector by leveraging Aspen's manufacturing capabilities, enhancing operational efficiencies, and increasing market share.

Robust growth in cash

CSW Industrials posted a decent revenue CAGR of 11.9% over FY 22-25, reaching $878m. Operating income increased at a CAGR of 21.2% over the same period, reaching $185m in FY 25, with margins expanding from 15.7% to 21%. Net income rose at a CAGR of 27.2% to $137m in FY 25.

Consistent growth in net profit led to positive FCF over FY 22-25, reaching $131m in FY 25 from $52.4m in FY 22. Cash and equivalent reached $226m at end-FY 25, a lot higher than the $16.6m at end-FY 22. The group's total debt decreased to $69.4m at end-FY 25, compared to $326m at end-FY 22. In addition, total debt to equity improved from 67.2% to 6.4%.

In comparison, its local peer Quanta Services, Inc., reported a higher revenue CAGR of 22.2% FY 21-24, reaching $23,700m in FY 24. Operating income increased at a CAGR of 27.3% to $1,300m in FY 24. However, net income outperformed over the same period, rose at a CAGR of 23% to reach $905m in FY 24.

Outpacing peers' returns

Over the past 12 months, the company's stock has delivered impressive returns of approximately 36.8%. In comparison, Quanta Services delivered higher returns of about 29.7%.

CSW Industrials is currently trading at a P/E of 30.4x, based on FY 26 estimated EPS of $9.4, which is lower than its 3-year historical average of 31.1x and Quanta Services (41.2x). The company is currently trading at at an EV/EBIT multiple of 21.9x, based on FY 26 estimated EBIT of $218.9m, which is lower than its 3-year historical average of 22.2x and Quanta Services’ valuation of 27.7x.

CSW Industrials is liked by one in the five analysts who follow it; this analyst has an ‘Outperform’ rating, while the other four have ‘Hold’ ratings for an average target price of $341.6, implying 20.3% upside potential from its current price.

Their views are further supported by an anticipated revenue CAGR of 11.5% over FY 25-28, reaching $1,216m. In addition, analysts estimate EBIT CAGR of 14.2% to $270m, with margins expanding by 72bp to 22.2% in FY 28. Net profit CAGR of 11.8%, reaching $191m with margins expanding by 26bp to 15.7% in FY 28, with EPS expected to increase to $11.5 in FY 28 from $8.4 in FY 25.

Overall, CSW Industrials has demonstrated strong performance in FY 25, with significant growth in revenue, operating income, and net profit. The company's strategic acquisitions, including Aspen Manufacturing, have bolstered its portfolio and market share. With a focus on efficiency-enhancing products and solutions, CSW Industrials continues to expand its reach and improve operational efficiencies. Analysts are optimistic about the company's future growth, supported by positive free cash flow, reduced debt, and impressive stock returns, indicating a promising outlook for continued success.

However, the company faces several risks, including variable rate indebtedness, which could impact its financial stability due to fluctuating interest rates. The company is also exposed to FX risk, affecting profitability in international transactions. In addition, operating in international markets presents challenges such as regulatory differences and geopolitical uncertainties, which can influence business operations and growth prospects.