Aug. 25 at 7:55 PM
JPMorgan initiated coverage of Gates Industrial Corp with an Overweight rating and a
$35 price target, implying ~39% upside. The firm sees Gates transitioning from a traditional supplier to a “growth engine,” supported by exposure to long-term trends in data centers and mobility. Gates holds the leading global share in power transmission, derives ~70% of sales from aftermarket, and has delivered >40% gross margins for five straight quarters. JPM highlighted emerging growth drivers including high-performance thermal management systems for data centers—expected to reach $ 100M by 2026—and lightweight drives for personal mobility and powersports batteries, projected to triple from $ 100M to $ 300M by 2028. By then, data centers and mobility could account for >10% of revenues vs. 3% in 2024. Strong supply chain, pricing, and manufacturing improvements have supported margins, while FCF conversion exceeds 90% and net leverage is on track to fall below 1.5x by 2026.
$GTES $JPM