Kevin Durkin of Ballina Capital presented his investment thesis on SFS Group (Switzerland: SFSN) at European Investing Summit 2025.
Thesis Summary
SFS Group is a Swiss industrial company specializing in application-critical precision components, assemblies, and fastening solutions. The business operates in three segments: Engineered Components (EC), Fastening Systems (FS), and Distribution & Logistics (D&L). EC (~37% of sales) acts as a development partner for customer-specific components in end markets like automotive, medical, and electronics. FS (~20% of sales) provides mechanical fastening systems for the construction industry. The D&L segment (~44% of sales), which grew following the 2022 Hoffman acquisition, is a leading European distributor of tools, fasteners, and C-parts.
Kevin highlights SFS’s position as a “mission-critical value engineering specialist.” The company’s components often represent a small fraction of a customer’s manufacturing cost but are engineered to lower the customer’s total cost of assembly, logistics, and reliability. This approach creates embedded, loyal relationships. SFS is characterized by its “local-for-local” global footprint, high family ownership (over 50%), and a strong financial profile. Historically, the company generates ROIC above 20% and converts a high portion of its cash flow to FCF.
The investment opportunity arises from recent share price stagnation, which reflects several headwinds. The company is suffering from the broader industrial weakness in Europe, particularly in its key markets of Germany and Switzerland; Kevin notes the German Fabricated Metal Products IFO survey remains a key indicator of this pressure. This cyclical downturn has led to lower capacity utilization, pressuring margins. Furthermore, the strength of the Swiss franc has masked modest underlying top-line growth, and the 2024 results and 2025 outlook disappointed market expectations.
The thesis rests on both a cyclical recovery and company-specific “self-help” initiatives. SFS is undergoing a reorganization to close smaller, less productive satellite locations and consolidate volumes, which is expected to add 80 bps to operating margins. Management has also been streamlined to accelerate decision-making. Kevin sees a path for margins in the core EC segment to expand from ~14% toward a target range of 18-21% as capacity utilization improves. Long-term growth is supported by M&A, R&D spending aligned with trends like electrification, and a strategic push to rebalance sales geographically toward North America and Asia.
The shares recently traded at ~110 CHF. He believes the valuation is supported by a DCF estimate of approximately 115 CHF (using a 9% WACC). The company trades at multiples below its own 5-year reflexive history and at a discount to peers on an EV/EBIT basis, despite most peers having lower margins. The thesis anticipates that as SFS executes its self-help plan and the industrial economy recovers, the company should see its multiple expand closer to 12-13x EBITDA on a higher base of earnings.
Disclaimer
European Investing Summit 2025 was held from October 28 to November 3, 2025. The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.
Slides
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