IPD Group

The Business

IPD Group distributes electrical switchgear, cables and power distribution equipment across Australia, built on exclusive distribution rights for brands including ABB, Emerson and Elsteel. Roughly 95% of revenue comes from the Products division, with a smaller Services arm doing installation and maintenance work. The exclusivity arrangements let IPD sell at prices commodity distributors cannot match, because customers specify these brands into designs before a project ever goes to tender. Three acquisitions in recent years, most notably Platinum Cables, have added scale and pushed the group into cabling for data centres and mining.

Recent Performance

Revenue grew 16.8% in FY26 to $414.3 million, on top of a base that itself grew strongly the prior year, so this is not a low-base illusion. Data centre-related revenue rose 27% and now makes up 17% of the group. The stock has re-rated hard on this story, trading at 10.6 times forward EBITDA, a premium of roughly 25% to the closest listed peers. Gross margin, however, slipped 80 basis points over the same period, the first sign that growth is coming at a cost.

Outlook

We expect revenue growth to decelerate over the next few years as the Platinum acquisition annualises and organic growth normalises toward a more sustainable range. EBITDA margin is likely to drift modestly lower, as gross margin compression outpaces the cost efficiencies scale is delivering. Earnings should still grow, but at a materially slower clip than the near-30% pace of the past five years, and the trajectory of gross margin over the next few reporting periods will determine how much of that deceleration plays out.

Key Risks

Gross margin compression is already visible in the FY26 result and looks structural rather than cyclical, driven by a sales mix shifting toward larger, more competitively tendered orders and lower-margin cable products. There is no historical trough to confirm where the floor sits, which is the central uncertainty in the outlook. Loss of a brand exclusivity, such as ABB or Emerson appointing a second distributor, would be a low-probability but high-severity event, hitting both margin and revenue simultaneously and difficult to hedge against once triggered. Data centre revenue, now 17% of the group and growing fast, creates concentration risk if hyperscaler capital spending pauses, even though the bulk of group revenue still sits outside this segment.

What to Watch

The thesis-defining event is the February 2027 half-year result, which will confirm whether gross margin has stabilised as management claims or continues its structural decline.

• February 2027 1H27 results, gross margin trajectory — the key number to watch is whether gross margin has stabilised or continues declining from FY26's 33.4%.
• Next 12 months Bolt-on M&A announcement — management's acquisition strategy has driven much of the group's growth to date, and further deals at historical multiples would extend it.

Company Description

IPD Group operates two segments. Products, roughly 95% of revenue, distributes switchgear, cables, and power distribution equipment through exclusive Australian rights to global brands including ABB, Emerson and Elsteel. Services, the smaller remainder, provides installation and electrical maintenance, including the Addelec business, which has been under a restructure. The 2025 acquisition of Platinum Cables added a cabling manufacturing and distribution capability, pushing IPD deeper into mining and data centre infrastructure. The group sells primarily to switchboard manufacturers, electrical contractors and infrastructure developers rather than end consumers, making it a business-to-business supplier embedded in Australia's construction and industrial project pipeline.

Where the Growth Is

Data centre and power distribution equipment is the standout growth segment, contributing 17% of group revenue ($71.5 million) and growing 27% year-on-year, with the power distribution sub-category up 19%. This is a structural trend tied to Australia's hyperscaler data centre buildout and should support above-GDP growth for the next three to five years. The flip side is concentration: a segment this large, growing this fast, is also a segment whose demand could pause abruptly if hyperscaler capital spending slows.

Competitive Position

The exclusivity arrangements with ABB, Emerson and Elsteel are the core of IPD's competitive position. They create switching costs because engineers specify these brands into project designs well before construction begins, and they support a gross margin premium of roughly 300-500 basis points over commodity electrical distributors. This advantage is real but not indefinite: we estimate it holds for three to five years before competitive or principal-driven erosion becomes a live risk. The Australian electrical distribution market remains fragmented, with no single player holding more than roughly 15% share, which gives IPD room to keep consolidating through bolt-on acquisitions, the strategy that has driven much of its growth to date.

Management & Capital Discipline

Management has funded three acquisitions, CMI, EX Engineering and Platinum Cables, at 7-9 times earnings before interest and tax, while keeping net debt at a conservative 0.3 times EBITDA and paying out 50% of profit as a fully franked dividend. CMI is now performing above pre-acquisition levels, evidence the integration playbook works. The one point worth flagging plainly: management uses an 8% discount rate to test goodwill for impairment, below the 10% cost of capital we use in our own model, a choice that flatters the carrying value of $111 million in goodwill sitting on the balance sheet.

Financial Position

The balance sheet is conservatively geared, with net debt at 0.3 times EBITDA, giving IPD ample room to fund further acquisitions or absorb a downturn without covenant stress. Free cash flow of $24.1 million in FY26, expected to recover over the next few years as working capital normalises post-Platinum, comfortably covers the dividend. Capital intensity is low, with capital expenditure running at just 0.6% of revenue, leaving most of earnings available for distribution or reinvestment.