Back to catalogue
№ 130 22 filings · 2021-05-06 → 2026-05-12

IMI PLC

IMI
Industrial Goods and Services Market cap £6.6bn Overall fit 580 /1000

High-quality compounder with genuine but modest AI/data-centre exposure (£18m orders, doubling YoY) and fair-not-cheap valuation; operating leverage is good for an industrial but not platform-like; downside well protected by 1.0x leverage and 96% cash conversion.

Fair value range 2,640p–3,060p Mid case · £6.8bn
Absolute upside +2.6% vs current market cap
Conviction 4/5 confidence in fair call
Supports the call
  • consistent multi-year execution and clean disclosure
  • high cash conversion (96%) and low leverage anchor balance sheet quality
  • management guidance has been reliable across cycle
Limits the call
  • AI/data-centre uplift is real but small, hard to quantify
  • valuation hinges on forward-multiple range for a quality industrial
Methodology

Forward P/E multiple (19-22x) on 2026 guided adjusted EPS, cross-checked vs EV/EBIT

In one line · bull case

High-quality compounder with emerging data-centre/AI tailwinds, fair-to-cheap valuation, strong balance sheet and disciplined capital returns.

In one line · biggest risk

AI/data-centre exposure is small today (<1% of revenue) so the AI bull case is only directional, not yet a P&L story.

Drivers
AI beneficiary 50 /100
Real exposure via data-centre direct-liquid-cooling and power infrastructure for data centres, but only £18m of orders in 2025 — directional positive, not transformational.
Operating leverage 55 /100
580bps margin expansion since 2019 and aftermarket-rich mix give moderate-good leverage, but incremental margins are 25-35% not software-like 60%+.
Earnings vs expectations 65 /100
Consistent meet-or-modest-beat track record across 2021-2025 with reliable mid-year raises and no profit warnings.
Growth momentum 65 /100
Five consecutive years of mid-single-digit organic growth with 2026 guidance pointing to a sixth, supported by record order book.
Moat 62 /100
Specialised engineering, installed-base lock-in (200,000+ severe-service valves tracked) and switching costs in process industries.
Earnings quality 82 /100
96% cash conversion, modest adjusting items, clean accounting and unqualified audit reports.
Management quality 75 /100
Disciplined capital allocation: >£1bn returned to shareholders since 2019, selective bolt-on M&A, ROIC up 60bps to 14%.
Cyclicality 55 /100
Process and industrial automation tied to capex cycles, partly offset by ~45% aftermarket recurring revenue.
Leverage 28 /100
Net debt/EBITDA at 1.0x — bottom of 1-2x target range, with strong free cash flow funding £500m buyback.

IMI PLC (IMI) — Investment Research Note

Executive summary

IMI is a UK-listed FTSE 100 specialist in fluid and motion control (valves, actuators) operating through two platforms — Automation (65% of 2025 sales) and Life Technology (35%) — with roughly 45% of revenue from high-margin aftermarket. Across the period, IMI has delivered five consecutive years of mid-single-digit organic revenue growth, expanded adjusted operating margin by 580bps to 20.0%, and grown adjusted EPS at a 10% CAGR since 2019 2026-03-06 full year. The single most important point for valuation today is that IMI trades on ~20x forward earnings — a fair price for a high-quality compounder with emerging but still-modest data-centre/AI tailwinds.

Fair value estimate

  • Methodology: forward P/E multiple cross-checked against EV/EBIT and an implied DCF. With 2026 guided adjusted EPS of 136-142p (mid 139p), strong cash conversion (96%), ROIC of 14%, low leverage (1.0x ND/EBITDA), and an ongoing £500m buyback, an appropriate forward multiple range is 19x-22x.
  • Per-share fair value range: ~2,640p – 3,060p (mid ~2,850p).
  • Implied market-cap range: £6,300m – £7,300m (mid ~£6,800m), using a 239m post-buyback share count.
  • Current market cap £6,744m (implied share price ~2,796p on 241m shares).
  • Absolute upside vs. mid: ~+1% (range −7% to +9%).

The stock is fair, not cheap and not expensive.

Sector context

ICB classification confirmed: Industrials / Industrial Goods & Services. IMI's quality (20% adj. op. margin, 14% ROIC, 1.0x leverage, 96% cash conversion) sits comfortably above the typical industrial peer, comparable to high-quality UK compounders. Closest listed peers: Spirax Group, Rotork, Halma, Smiths Group.

Investment thesis

  • Genuine but emerging data-centre tailwind in Process Automation and Climate Control. Data-centre orders more than doubled to £18m in 2025 (2024: £7m), conventional-power orders rose 20% organically, and Climate Control's direct-liquid-cooling product line continues to grow 2026-03-06 full year; 2026-05-12 Q1 update.
  • High-quality compounder with disciplined capital allocation. Five consecutive years of mid-single-digit organic growth, 580bps of margin expansion since 2019, >£1bn returned to shareholders since 2019 (now a further £500m buyback announced March 2026), and ROIC up 60bps to 14.0% 2026-03-06 full year.
  • Recurring high-margin aftermarket (~45% of sales) underpins resilience and pricing power, with Process Automation aftermarket orders up 11% organically in 2025 and a record £206m of Growth Hub orders, up 38% YoY 2026-03-06 full year.

Key risks

  • AI/data-centre exposure is real but small (~£18m, <1% of revenue) — multiple compression risk if narrative re-rates. Press-release AI mentions have outrun revenue uplift 2026-03-06 full year.
  • Cyclical end-markets and geopolitical exposure. 6% of 2025 revenue from the Middle East (mostly Process Automation), Industrial Automation tied to global industrial activity, and Process Automation exposed to capex cycles in energy/petrochemical 2026-05-12 Q1 trading update.
  • Execution risk on Transport strategic review and ongoing acquisition strategy. Transport (7% of sales) is under review; bolt-on M&A could prove margin-dilutive if not selective 2026-03-06 full year; 2025-05-08 trading update.

Operating leverage

IMI shows moderate-to-good operating leverage for an industrial — clearly visible in the 580bps margin expansion since 2019 against single-digit revenue growth. The aftermarket mix (~45% of sales, higher margin and recurring) provides a structural tailwind, and the completed 2019-2024 restructuring (20 sites consolidated or sold) reduced fixed-cost intensity. In 2025, organic revenue rose 5% while organic adjusted operating profit rose 8%; on Automation specifically, 8% organic revenue growth converted to 11% organic operating-profit growth and statutory operating profit jumped 25% 2026-03-06 full year. However, this is not the platform-style 80-100 leverage the buyer seeks: incremental revenue at scale plausibly carries 25-35% contribution margin (not 80%+), so a 10-20% revenue surprise might add ~40-60% to operating profit — meaningful but not a multiple. A genuine AI-capex upside surprise would lift Process Automation aftermarket and Climate Control most.

Value-trap signals

None identified. Cash conversion is 96%, leverage is at the low end of the 1-2x target range, ROIC is rising, growth is consistent, and disclosure is high quality.

Earnings vs. expectations

  • 2021: H1 raise to FY EPS 85-90p; delivered ~92p adj. → beat raised guidance.
  • 2022: FY guidance ">100p"; delivered 105.5p → beat.
  • 2023: FY guidance 112-117p; delivered 116.8p → top of range / beat.
  • 2024: FY guidance 120-126p; delivered 122.5p → in line.
  • 2025: FY guidance 129-136p (after cyber incident); H1 reconfirmed; delivered 132.3p → in line / mid-range.
  • 2026: guided 136-142p; Q1 (May 2026) trading update reconfirmed.

Pattern: consistent meet-or-modest-beat, with occasional mid-year raises. No misses or warnings across the period.

Conviction

Conviction: 4 (high).

  • Anchors: clean, well-disclosed financials with high cash conversion; multi-year track record of consistent execution; methodology (forward P/E on guided EPS) is unambiguous and corroborated by the implied multiple range typical of high-quality industrials.
  • Caveats: the AI/data-centre tailwind quantum is genuinely small today, so an aggressive bull case would require a leap of faith; the forward multiple range itself is the main valuation lever.
Filings consulted · 24

Every document the LLM read for this note. Click any row to open the source.

  1. 2026-05-12Trading Update2026-05-12_9562834_trading-update.md0.85
  2. 2026-05-12Result OF Agm2026-05-12_9564344_result-of-agm.md0.30
  3. 2026-03-06Full Year Results2026-03-06_9461477_full-year-results.md1.00
  4. 2025-11-06Trading Update2025-11-06_9215494_trading-update.md0.72
  5. 2025-08-01Interim Results2025-08-01_9018178_interim-results.md0.77
  6. 2025-05-08Trading Update2025-05-08_8866541_trading-update.md0.55
  7. 2025-05-08Result OF Agm2025-05-08_8868329_result-of-agm.md0.20
  8. 2024-11-07Trading Update2024-11-07_8534647_trading-update.md0.55
  9. 2024-10-31Acquisition OF Twtg2024-10-31_8521543_acquisition-of-twtg.md0.49
  10. 2024-07-26Interim Results2024-07-26_8332250_interim-results.md0.58
  11. 2024-05-09Result OF Agm2024-05-09_8186125_result-of-agm.md0.14
  12. 2023-07-28Interim Results2023-07-28_7660523_interim-results.md0.41
  13. 2023-05-04Result OF Agm2023-05-04_7513593_result-of-agm.md0.07
  14. 2022-12-28Completion OF Heatmiser UK Ltd Acquisition2022-12-28_7258301_completion-of-heatmiser-uk-ltd-acquisition.md0.19
  15. 2022-11-08Proposed Acquisition OF Heatmiser2022-11-08_7296693_proposed-acquisition-of-heatmiser.md0.19
  16. 2022-10-31Acquisition OF Corsolutions2022-10-31_7206460_acquisition-of-corsolutions.md0.19
  17. 2022-07-29Interim Results2022-07-29_6916542_interim-results.md0.23
  18. 2022-06-13Completion OF Acquisition2022-06-13_6937262_completion-of-acquisition.md0.19
  19. 2022-05-30Proposed Acquisition2022-05-30_7071819_proposed-acquisition.md0.19
  20. 2022-05-05Result OF Agm2022-05-05_7194514_result-of-agm.md0.07
  21. 2021-12-20Completion OF Adaptas Solutions Acquisition2021-12-20_6879340_completion-of-adaptas-solutions-acquisition.md0.19
  22. 2021-11-15Proposed Acquisition OF Adaptas Solutions2021-11-15_6737740_proposed-acquisition-of-adaptas-solutions.md0.19
  23. 2021-07-30Interim Results2021-07-30_6785464_interim-results.md0.23
  24. 2021-05-06Result OF Agm2021-05-06_6250953_result-of-agm.md0.03

This research note was authored by a large language model after reading 22 regulatory filings published between 2021-05-06 and 2026-05-12. Each citation refers to a specific RNS announcement in the underlying data set. The note is an opinion, not advice. Do your own work before risking capital.