Powell Industry specializes in the development, design, and maintenance of bespoke equipment and systems that facilitate the distribution, monitoring, and control of electrical power. Its offerings are predominantly marketed to either direct end-users or through engineering, procurement, and construction (EPC) firms acting on behalf of these end-users. Presently, the company provides tailor-made system solutions and services to a diverse range of customers and markets. The company also offers value-added services like spare parts, field service, installation, and modification.

It is also involved in custom-engineered solutions for Industrial and Commercial applications (Data Centers, Pulp & Paper, Mining), including utilities (Targeting power distribution and power generation facilities), Oil & Gas (Midstream & Downstream processing, refining, pipelines, LNG), and Petrochemicals (Downstream industrial transformational processes), Municipal (Supporting global light rail infrastructure and Other (Universities, OEM, Government). Powell Industries serves clients operating in voltage ranges from 480 volts to 38,000 volts.

The group boasts a significant global presence, underpinned by its strategic distribution of manufacturing sites and service/sales offices. It operates five manufacturing sites and three service/sales offices within the United States, accounting for 79% of its revenue, highlighting its strong footprint in the domestic market. Additionally, the company extends its reach into Canada with two manufacturing sites and one service/sales office, as well as into the UK and the rest of the world with one manufacturing site and three service/sales offices, collectively contributing to 21% of its international revenue.

Global Presence

It has developed a reputation for fostering growth and enhancing its business model by prioritizing investments in skilled personnel and research and development (R&D). This strategy has allowed Powell to achieve better performance than its competitors and sustain a reliable revenue base, even in times when market demand decreases.

Powell's focus on innovation is exemplified by the introduction of PowlSmart intelligent devices. These devices are designed to enhance system reliability, enable remote monitoring around the clock, and facilitate the proactive scheduling of maintenance to minimize operational interruptions and improve efficiency. Additionally, the BriteSpot® Thermal Monitoring Solution, another technological advancement from Powell, employs modern technology to continuously monitor the temperature of switchgear components in compliance with standard building practices. This tool supports predictive maintenance strategies by providing real-time data, thereby improving reliability and helping to prevent costly downtime and repairs by early detection of potential issues.

Such technological advancements contribute to Powell's ability to remain competitive in the market by offering products that are cost-effective for end-users. Furthermore, its continuous focus on innovation and expansion into new areas, including compatibility with renewable energy systems, supports its long-term growth prospects and strengthens its position in the industry without suggesting a commercial promotion.

In 2021, Powell Industry reported revenues of $517.2 million, which grew to $699.3 million by 2023, marking a 35.2% increase. Gross profit in 2021 was $86.9 million, significantly expanding to $147.6 million in 2023, reflecting a growth of 70%. Net income saw a remarkable turnaround from $9.9 million in 2021 to $54.5 million in 2023, a substantial increase indicating improved profitability. Basic earnings per share (EPS) also showed a notable rise from $0.85 in 2021 to $4.59 in 2023, evidencing a significant enhancement in shareholder value. Total assets more than tripled from $403.9 million in 2021 to $1,396.6 million in 2023, showcasing the company's robust growth and expanded operational capacity over these two years​​.

The company has a valuation of 18.4x-earning for the exercise 2023 and should remain stable around 19x-20x for 2024 and 2025. It’s noteworthy that they enhance shareholder returns through dividends with consistent quarterly dividend for 39 consecutive quarters with a current dividend yield of 1.7%.

Backlog as defined as the estimated value of the remaining work to be completed under firm orders from uncompleted contracts and customer purchase orders. This includes both approved change orders and new contractual agreements where work has not yet commenced. As of September 30, 2023, the backlog stood at $1.3 billion, a significant increase from $592.2 million on September 30, 2022. This growth in backlog is evident across various end markets, with a notable emphasis on the core sectors of oil, gas, and petrochemicals. The company anticipates that the backlog will contribute to bookings into Fiscal 2025, with a typical conversion timeline of 12 to 18 months.

Furthermore, there has been a marked rise in orders, escalating from $404 million in 2021 to $719 million in 2022, and further to $1.225 billion in 2023. The 12-month rolling Book to Bill ratio has reached 2.3 times, indicating a robust increase in orders relative to billings.

The company relies as well on its partner to face its competitor where it can enjoy a unique position as a full line manufacturer with complete integration capability at multiple locations. Among them, we can see major industry players such as ABB, Schneider Electric, Siemens, Protect Controls and Tarpon.

The company highly depends on various parties to obtain raw materials and components such as copper, steel, and aluminum. However, its supplier base for some specific components is limited to a single provider. If the firm fails to obtain these materials for any reason, it can negatively impact its production levels and can further contract its profit margins. In addition, if the prices of these components increase due to inflationary pressures or tariffs, it might increase the company's cost of production and reduce its profitability.

Powell Industries is showing indicators of potential for future growth, highlighted by a stable dividend, recent sector outperformance, and innovations contributing to organic growth. The company has experienced a 76% increase in its valuation since the beginning of the year, suggesting a positive position. However, navigating a highly fragmented market presents challenges, and potential regulatory changes could impact the company's revenue.