The Wiring Behind Australia’s Electrification

Famed World War II historian James Holland has argued that general histories overemphasise WWII commander strategies and battlefield tactics while neglecting the link between them. The practical systems of logistics, equipment, production, and supply chains that make success and victory possible.

Consider another brief example, while Nvidia has become the world’s most valuable company, other perhaps less visible companies have benefited from Nvidia's success; primarily its suppliers. Taiwan Semiconductor Manufacturing Company (TSMC) is perhaps the most significant beneficiary. It is the exclusive manufacturer of Nvidia's most advanced AI chips, while ASML Holding design and manufacture lithography machines essential for the latest generation of advanced chips. Both companies sit at the operational level within the value chain and are essential to the semiconductor highway. TSMC and ASML shares returned 54% and 53% respectively in 2025. (Dividends reinvested)

In a similar way, IPD Group Ltd (ASX: IPG) operates at the nuts and bolts layer of Australia’s electrification and infrastructure build out. While attention often focuses on headline themes such as renewable generation, electric vehicles, or data centres, these projects cannot function without the underlying cables, switchboards, power distribution systems, and ongoing maintenance necessary to keep these mammoth projects operational. It is not a classic picks and shovels moment, but it plays a comparable enabling role, providing essential infrastructure for working, reliable systems. This lens frames the analysis that follows.

IPD Group is a national distributor and technical service provider in the Australian electrical infrastructure market. The company sources and distributes electrical components from global manufacturers such as ABB, Elsteel, and Emerson. Additionally, IPD Group provides value added services like product assembly and maintenance. Through its divisions and subsidiaries, IPD Group has positioned itself as a full lifecycle solution within the electrical market.

IPD Group is led by a high-quality management team, headed by CEO Michael Sainsbury, with a strong track record of prudent capital allocation and credible execution. Management has consistently met or exceeded guidance. Their capital allocation strategy has targeted strategic acquisitions that complement the core business, alongside a consistent and growing dividend policy, with management targeting a 40-60% payout ratio (16.1% DPS increase in FY24).

IPD’s revenue is diversified across a number of clearly defined end markets, with Water and Wastewater representing approximately 33% of FY23 revenue. Data centres account for around 14% of revenue and represent a high growth area, with IPD providing high end switchgear and advanced power monitoring solutions capable of managing large electrical loads required for cloud computing and data storage. Power utilities services and maintenance activity account for a further 9% of revenue.

Through its value additive services, IPD’s role within the industry extends from initial product specification and supply through to installation, commissioning, and long-term maintenance. This business model reduces customer integration risk and time to delivery, creating value beyond individual components. Within the industry, relationships and reputation form a significant moat. Original Equipment Manufacturers (OEMs) are unlikely to grant distribution rights to a new, unproven entrants. There is also a knowledge barrier, staff include engineers and technicians who understand complex standards (like hazardous area certifications, grid codes) not easily replicated by an industry newcomer or generalist wholesalers.

Further barriers include the fact that many OEMs prefer a proven local partner; IPD’s track record and national reach make it the distributor for many premium brands . IPD is an exclusive channel partner and master distributor for ABB and Elsteel, giving IPD pricing power in those product lines.

FY24 revenue was $290.4M, up 28.0% year on year. Growth has been driven by a combination of organic demand and acquisitions. Organic growth remains positive but has moderated, with around 5% organic growth reported in early FY25, while headline growth has been elevated by acquisitions including EX Engineering (2023) and CMI Operations (2024). Gross margin was 37.1% in FY24.

IPD exhibits meaningful operating leverage due to a largely fixed operating cost base. EBIT growth has consistently outpaced revenue growth, with FY24 revenue growth of 28% translating into underlying EBIT growth of approximately 46%. EBIT margin expanded to 11.8% in FY24, despite modest gross margin dilution, reflecting IPDs ability to pass on cost inflation, scale benefits and management cost discipline; a key criteria for Moreton Financial.

The quality of earnings is illustrated in the company's strong free cash flow generation. Cash conversion improved materially in FY24, with operating cash flow reaching 88% of EBITDA. This was primarily due to the normalisation of supply chains and the stabilisation of inventory levels, following a strategic $9.4 million inventory build in the prior year to support rapid growth. Management have explained the changes in inventory build-up from FY24-25 as intentionally increasing inventory levels post FY25 to support anticipated revenue growth. This is worth monitoring; however has proven to be a sound management call up to this point.

The data centre segment is strategically important because it sits at the intersection of two structural demand drivers, cloud migration and AI workloads. Both are electricity intensive, favouring suppliers that can deliver premium switchgear and sophisticated monitoring. Moreton Financial believe that current growth margins are therefore to a lesser extent about current sales numbers, and more about being positioned for future high specification buildouts.

As the broader pipeline expands over time, new power solutions and planning approvals unlock additional capacity. Whilst sector headwinds such as lack of construction activity in commercial property has been noted in recent commentary by management, we believe one runway for future growth also lies in the vast market for EV charging infrastructure, with management believing they can capture $1 billion of the anticipated $20 billion opportunity by 2030.

Consider the increased popularity of EVs in conjunction with many buildings increasingly required to include EV chargers under the National Construction Code. Equally so, consider not just the expected demand for EV charging stations and installation revenues but the ongoing servicing revenue. Helping smooth earnings as IPD embeds itself into clients’ operational workflows, making switching costly and disruptive.

The competitive landscape includes large, broad-based electrical wholesalers like Lawrence & Hanson and Rexel Australia, as well as more specialised distributors like NHP Electrical. While the large wholesalers compete primarily on price and product offerings, they lack the ongoing technical expertise services IPD provides. Conversely, smaller specialist engineering firms offer technical services do not match IPD's comprehensive product portfolio and national distribution footprint. Management has explicitly stated that the company is gaining market share, a claim which appears supported by its above market growth rates. Market share is therefore meaningful, but not dominant at a total market level.

At the current share price around the mid four dollar range, with a market cap near AUD $450 million, IPD Group is valued at a P/E multiple of roughly 14.5x estimated FY25 earnings and an EV/EBITDA multiple of 8-9x.

These multiples suggest that the market is the market appears to be pricing a base case of mid-single digit organic growth with stable EBIT margins of 11-12%.

Moreton Financial believes this underappreciates the reacceleration in organic growth, strong EV infrastructure spending and data centre demand, and margin expansion through synergies. Our expectation is a forward P/E multiple expansion to above 18x earnings, reflecting a modest re rating from current levels but well below historical peaks—such as the 23x observed in 2020 and 2023.

IPD Group presents a cyclicality risk as opposed to balance sheet risk. The model portfolio is deliberately targeting a factor tilt towards industrial and infrastructure capex spending; with a wide runway for growth acceleration and expanding margins.

With low levels of short interest (.06) and strong levels on management ownership (ED - 10%), and in the absence of a stretched valuation, IPD Group is a clear pick for the Moreton Financial model portfolio.

Inset: IPD Group product offerings such as Modular Switchboard Systems and EV Chargers. Source: IPD Group