Earnings call transcript: Mersen lifts 2026 outlook after record Q3 sales

Mersen reported record Q3 sales of EUR 329 million, up 14.2% organically versus 3.9% growth in the first half, and raised its 2026 organic growth outlook to 6.5%-7.5% from 4%-6%. Electrical Power grew 22.8%, while data-center revenue is expected to exceed EUR 40 million in 2026, roughly double last year; EBITDA margin guidance remains 16%-16.5%, with elevated input costs and project mix limiting margin expansion. Management said silicon carbide is unlikely to recover meaningfully before late 2027 and China solar remains weak; shares rose 5.26% to $39.05.

Analysis

The key debate is earnings quality, not demand direction. Project-led OEM orders can widen Mersen’s future installed base and service/spares opportunity, but shift revenue toward lower-margin work now; copper and silver inflation adds a lag between price actions and cost recovery. Thus strong sales can coexist with limited near-term operating leverage, and unchanged margin guidance is the constraint on how much of the growth deserves a premium.

The data-center narrative may be overcapitalized in the stock: even a doubling of that business leaves it a modest share of group sales on the figures disclosed. The broader electrical-infrastructure exposure is more consequential, but it is also more exposed to project mix and execution. Traditional silicon-semiconductor strength should not be treated as evidence of a SiC recovery; management’s capacity comments suggest Mersen can gain share without an end-market rebound, while SiC remains a drag into late 2027.

For the next few months, the January sales update is the key check on Q4 moderation: compare organic growth with the company’s implied range, but separate base effects from true order weakening. LFUS’s outlook is a useful, imperfect cross-check for electrical protection demand, not a direct read-through given portfolio differences. GEV’s grid project is strategically supportive but no disclosed award economics justify an earnings revision. Contrarian risk: investors may focus on top-line acceleration and underweight margin conversion and cash generation. The thesis weakens if margin guidance is cut, pricing fails to catch cost inflation, or data-center demand/order visibility deteriorates.

Key Decisions for Investors

• MRN: avoid chasing the immediate earnings reaction; consider adding on weakness only if the January update sustains growth and confirms EBITDA-margin guidance. Reassess if margin expectations are cut or project mix continues to dilute profitability.
• Track MRN’s quarterly margin conversion, working-capital/cash-flow trend, and price-cost lag alongside sales. These are more useful confirmation signals than headline data-center growth alone.
• Use LFUS commentary as a corroborating indicator for electrical-protection demand, not as a valuation or segment proxy for MRN. A sharp divergence in order trends would warrant revisiting the demand thesis.
• Keep WOLF out of a near-term SiC-recovery thesis: Mersen’s outlook points to a prolonged end-market delay, while the reported contract renegotiation limits the basis for inferring a large incremental hit to MRN. Revisit only with verified customer demand and a durable improvement in SiC utilization.