Belimo's 1H 2025 Outperformance and Outlook Upgrade: A Strategic Buy Opportunity Amid Strong Industry Tailwinds

Belimo Holding AG (SIX: BELN) has emerged as a standout performer in the high-margin, high-growth niche of energy-efficient HVAC and data center cooling solutions. The company's first-half 2025 results underscore its ability to capitalize on structural tailwinds in the data center sector, driven by AI and high-performance computing (HPC) demand. With a revised full-year outlook, expanding EBIT margins, and a strategic focus on operational leverage, Belimo presents a compelling case for investors seeking exposure to a company poised to outperform in a rapidly evolving market.

1H 2025: A Masterclass in Operational Execution

Belimo's financial performance in 1H 2025 was nothing short of exceptional. Net sales surged 20.6% year-over-year in local currencies to CHF 561.5 million, with Q1 alone delivering a 21.8% growth in local terms (CHF 275.8 million). The Americas region, now Belimo's largest revenue contributor, was a standout, fueled by its leadership in next-generation data center cooling solutions. The company's EBIT margin expanded to 22.8%, up from 19.2% in 2024, reflecting strong pricing power and a favorable product mix.

This margin expansion is a direct result of Belimo's operational leverage. The company's modular product design and scalable manufacturing capabilities allow it to reduce per-unit costs as demand grows. For instance, its EPIV and Energy Valve technologies—smart control valves with integrated sensors and real-time monitoring—have become indispensable in high-density data centers. These products not only command premium pricing but also drive recurring revenue through service contracts and upgrades.

Data Center Cooling: A $40.7 Billion Opportunity by 2030

The data center cooling market is a key growth engine for Belimo, with global demand projected to grow at a 16.46% CAGR through 2030, reaching USD 40.72 billion. This surge is driven by two megatrends:
1. AI and HPC Workloads: As AI models grow in complexity, data centers face unprecedented cooling challenges. Belimo's liquid cooling solutions, including cold plates and two-phase immersion systems, are uniquely positioned to address these needs.
2. Sustainability Pressures: With data centers accounting for ~2% of global electricity use, operators are under intense pressure to reduce energy consumption. Belimo's variable flow control technology and closed-loop liquid cooling systems align perfectly with ESG goals, offering energy savings of up to 40% compared to traditional air-cooled systems.

Competitive Advantages: Innovation, Global Reach, and Strategic Pricing

Belimo's dominance in data center cooling is underpinned by three pillars:
1. Technological Leadership: The company's R&D investment (8% of revenue) has resulted in cutting-edge products like the Energy Valve, which calculates thermal energy transfer in real time. These innovations provide a moat against competitors.
2. Global Market Penetration: With a presence in 50+ countries, Belimo benefits from diversified demand. The Americas (53% of 2025 H1 growth) and Asia-Pacific (notably China and India) are now core growth drivers, with EMEA showing strong RetroFIT+ project momentum.
3. Strategic Pricing Power: In July 2025, Belimo announced price increases to offset rising tariffs and input costs. This move, combined with its premium product positioning, ensures margins remain resilient even in a mixed construction market.

Why This Is a Strategic Buy Opportunity

1. Margin Expansion and Cash Flow Generation: With EBIT margins now at 22.8%, Belimo is well-positioned to reinvest in R&D and capitalize on its backlog of data center orders. Free cash flow margins of ~25% provide flexibility for dividends or strategic M&A (e.g., its recent acquisition of Opera Electronics to enhance air quality sensing capabilities).
2. Defensive Growth Profile: While the broader construction sector faces volatility, data center demand is structural. The sector is expected to grow at 143% in North America alone between 2024–2030, with Belimo's next-gen cooling solutions capturing a disproportionate share of this growth.
3. Upside from Tariff Mitigation: The company's July 2025 price increases and expansion of its Danbury, CT, headquarters signal proactive risk management. This infrastructure investment will further scale production capacity, reducing lead times and enhancing customer retention.

Risks and Mitigants

• Geopolitical Tariffs: While Belimo's price increases offset immediate costs, prolonged trade tensions could pressure margins. However, the company's global supply chain diversification and strong pricing power mitigate this risk.
• Market Saturation in Core HVAC: The traditional HVAC market is mature, but Belimo's pivot to data center cooling and building retrofit projects (e.g., RetroFIT+) provides a clear growth trajectory.

Investment Thesis

Belimo's 1H 2025 results validate its strategic focus on high-margin data center cooling. With a revised full-year outlook (15–20% sales growth and EBIT margin >20%) and a robust competitive moat, the company is well-positioned to outperform in a sector experiencing exponential demand. At a forward P/E of ~14x and a dividend yield of 1.8%, Belimo offers both earnings growth and income potential.

Recommendation: Buy Belimo shares for a medium-term hold, with a target price of CHF 180 (30% upside from current levels). Investors should monitor the company's Q2 guidance and progress in scaling its Americas operations.