Belimo Holding AG (BEAN.SW) - Investment Analysis

Analysis Date: December 25, 2025 Current Price: CHF 780.50 Market Cap: CHF 9.6 billion Exchange: SIX Swiss Exchange

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Executive Summary

Investment Thesis (3 Sentences)

Belimo is the undisputed global market leader in HVAC (heating, ventilation, air conditioning) field devices - actuators, control valves, and sensors - with a 50-year track record of innovation and consistent profitability. The company benefits from powerful secular tailwinds including data center growth, building renovation requirements, and energy efficiency regulations, while maintaining exceptional returns on capital (ROE 26%, ROIC 26%) and a fortress balance sheet with 76% equity ratio. However, at P/E 65x and trading at 12.7x the Graham Number, the current valuation offers no margin of safety and prices in decades of perfect execution.

Key Metrics Dashboard

Decision

WAIT - Belimo is a world-class company trading at a valuation that requires sustained 15%+ earnings growth for 15+ years to justify. The business quality is exceptional, but the margin of safety is deeply negative. Recommend waiting for a 40%+ pullback before initiating a position.

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Phase 0: Opportunity Identification

Why Does This Opportunity Exist?

Short Answer: It doesn't. This is not a mispriced opportunity - it's a high-quality company trading at a premium valuation that reflects its quality.

Conclusion: The current price reflects the market's accurate recognition of Belimo's quality. There is no mispricing opportunity at current levels. The only scenario justifying purchase would be a significant market correction or company-specific setback that creates a valuation gap.

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Phase 1: Risk Analysis (Inversion Thinking)

"All I want to know is where I'm going to die, so I'll never go there." - Munger

How Could This Investment Lose 50%+ Permanently?

1. Valuation Compression (Most Likely): At P/E 65x, if the market re-rates Belimo to a still-premium P/E of 25x (common for high-quality industrials), the stock would fall 62% to CHF 298. This requires no deterioration in the business whatsoever.

2. Data Center Bubble Burst: 46% of sales come from Americas, driven increasingly by data center cooling. If AI infrastructure investment slows dramatically (similar to telecom bust 2000-2002), Belimo could see revenue decline 20-30% from peak.

3. Chinese Competitor Emergence: Belimo currently has minimal Chinese competition in premium segments. A well-funded Chinese competitor (like what happened in solar panels, EVs) could eventually commoditize the market.

4. Swiss Franc Appreciation: As a Swiss exporter, CHF strength hurts reported revenues and competitiveness. A 20% CHF appreciation would meaningfully impact both earnings and valuation.

Risk Quantification

Aggregate Risk-Weighted Downside: -53%

Bear Case Summary (3 Sentences)

"Belimo trades at 65x earnings for a business growing revenues at 10% and profits at 7% in 2024. Even maintaining current excellence, if the multiple contracts to 30x (still premium for industrials), investors would lose 54%. The data center boom driving American growth is cyclical and competitive, and the company's biggest risk is simply the expectations embedded in its price."

Pre-Defined Sell Triggers

1. ROIC falls below 20% for two consecutive years
2. Loss of market leadership in any major product category
3. Management makes dilutive acquisition paying >15x EBITDA
4. Insider selling exceeds CHF 10M in any 12-month period
5. Price reaches CHF 1,000 (P/E ~85x) - exit regardless

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Phase 2: Financial Analysis

5-Year Financial Summary

Profitability Metrics

DuPont ROE Decomposition (2024)

ROE = Net Margin × Asset Turnover × Equity Multiplier
26.4% = 15.5% × 1.24 × 1.38

Where:
- Net Margin: 146.7 / 943.9 = 15.5%
- Asset Turnover: 943.9 / 763.7 = 1.24x
- Equity Multiplier: 763.7 / 580.7 = 1.32x

Assessment: High ROE is driven primarily by exceptional margins, not leverage. This is the hallmark of a moat-protected business.

Owner Earnings Calculation (2024)

Owner Earnings = Net Income + D&A - Maintenance CapEx - ΔWorking Capital

Net Income:                 CHF 146.7M
+ Depreciation/Amort:       CHF  36.5M (EBITDA - EBIT = 217.6 - 181.1)
- Maintenance CapEx:        CHF -30.0M (estimated 50% of total capex)
- ΔWorking Capital:         CHF -10.0M (estimated)
= Owner Earnings:           CHF 143.2M

Owner Earnings per Share = 143.2M / 12.3M = CHF 11.64

Valuation Trinity

1. Liquidation Value (Floor)

Net Current Assets = Current Assets - Total Liabilities
                   = ~350M - 183M = CHF 167M
NCAV per Share = 167M / 12.3M = CHF 13.58

Current Price = CHF 780.50
Premium to NCAV = 5,647%

Assessment: Liquidation analysis is meaningless for a high-quality operating business.

2. DCF Valuation (Conservative)

Assumptions:

• Owner Earnings (Base): CHF 143M
• Growth Rate Years 1-5: 8%
• Growth Rate Years 6-10: 5%
• Terminal Growth: 2.5%
• Discount Rate: 9%

Year | Owner Earnings | PV Factor | Present Value
1    | 154.4         | 0.917     | 141.6
2    | 166.8         | 0.842     | 140.4
3    | 180.1         | 0.772     | 139.0
4    | 194.5         | 0.708     | 137.7
5    | 210.1         | 0.650     | 136.6
6    | 220.6         | 0.596     | 131.5
7    | 231.6         | 0.547     | 126.7
8    | 243.2         | 0.502     | 122.1
9    | 255.4         | 0.460     | 117.5
10   | 268.1         | 0.422     | 113.1

Sum of PV (Years 1-10): CHF 1,306M

Terminal Value = 268.1 × 1.025 / (0.09 - 0.025) = CHF 4,229M
PV of Terminal = 4,229 × 0.422 = CHF 1,785M

Total Intrinsic Value = 1,306 + 1,785 = CHF 3,091M
Per Share = CHF 251

Margin of Safety at CHF 780.50 = -211% (DEEPLY OVERVALUED)

3. Private Market Value

Recent HVAC/building automation M&A transactions:

Belimo Current Valuation:

• EV ≈ CHF 9.4B (Market Cap - Net Cash)
• EV/EBITDA = 9,400 / 218 = 43x
• EV/Revenue = 9,400 / 944 = 10x

At typical premium M&A multiple of 18x EBITDA:

• Implied Value = 218 × 18 = CHF 3,924M
• Per Share = CHF 319

Assessment: Even at aggressive private equity prices, Belimo is worth ~CHF 320/share, vs. current price of CHF 780.50.

Graham Number

Graham Number = √(22.5 × EPS × BVPS)
             = √(22.5 × 11.94 × 47.20)
             = √12,681
             = CHF 112.61

Current Price / Graham Number = 780.50 / 112.61 = 6.9x

Assessment: Trading at 6.9x the Graham Number - extraordinarily expensive.

Valuation Summary

Weighted Intrinsic Value Estimate: CHF 270 Required Buy Price (30% MOS): CHF 189 Current Price: CHF 780.50 Implied Margin of Safety: -189%

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Phase 3: Moat Analysis

Moat Sources Identified

1. Market Leadership & Specialization (STRONG)

• Evidence: "Global market leader" in HVAC field devices for 50 years
• Measurement: No specific market share disclosed, but dominance in premium segment clear from pricing power
• Duration: Decades of accumulated expertise, customer relationships, application knowledge

2. Product Quality & Innovation (STRONG)

• Evidence: CHF 72.9M (7.7% of sales) invested in R&D annually
• Measurement: "Numerous patents and several industry-first proprietary technologies"
• Duration: Continuous investment maintains lead; 50-year history of innovation

3. Customer Switching Costs (MODERATE-STRONG)

• Evidence: Products installed in commercial buildings for 15-25 year lifespans
• Measurement:
  • 44% sales to OEMs who design-in Belimo products
  • 56% to contractors who specify Belimo based on reliability track record
  • Installed base creates replacement/upgrade demand
• Duration: Each installation creates multi-decade customer relationship

4. Global Service Infrastructure (MODERATE)

• Evidence: 2,361 employees across 3 regions; 8 customization centers globally
• Measurement: "Shipped 90.5% of delivery line items within first confirmed time frame"
• Duration: Hard for competitors to replicate global distribution without years of investment

5. Reputation/Trust (MODERATE)

• Evidence: Premium pricing maintained across cycles; specified in mission-critical applications (data centers, hospitals)
• Measurement: 50+ years without major quality failures mentioned
• Duration: Trust takes decades to build, can be lost quickly

Moat Durability Assessment

Key Question: Will this moat be wider or narrower in 10 years?

Assessment: STABLE to SLIGHTLY WIDER

The data center/AI infrastructure boom and building renovation requirements strengthen demand for precision HVAC control. Belimo's R&D investments (7.7% of sales) are industry-leading and should maintain technology leadership. The main risk is a well-funded Chinese competitor eventually emerging in the mid-tier segment and slowly moving upmarket.

Moat Score: 8/10

Belimo has a genuine, durable competitive moat based on:

• Market leadership in a niche specialty
• High customer switching costs from installed base
• Continuous innovation protected by patents
• 50-year reputation for quality and reliability

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Phase 4: Management & Incentive Analysis

Ownership Structure

Assessment: Founder family stake of ~20% is positive for long-term alignment. Management is professional but non-owner.

CEO Profile

Lars van der Haegen (CEO since July 2015)

• Age: 56
• Background: Internal promotion; various roles including CFO
• Tenure: 10 years as CEO

Compensation Analysis (2024)

Total CEO compensation: Not disclosed in extracted pages, but Swiss governance standards typically mean reasonable (non-excessive) pay.

Key Compensation Elements:

• Balanced Scorecard metrics include: Group EBIT margin, ROCE, sales growth
• 30% of bonus tied to "solution leadership" (innovation metrics)
• Long-term BSC promotes "stronger long-term focus"

Capital Allocation Track Record

Assessment: Conservative, organic-growth focused capital allocation. Management avoids large M&A, maintains net cash position. This is appropriate capital allocation for a quality compounder.

Management Score: 8/10

• Stable, long-tenured leadership
• Founder family anchor provides alignment
• Conservative capital allocation
• No concerning red flags
• Professional governance

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Phase 5: Decision Synthesis

Buffett/Munger Quality Checklist

Quality Score: 10/10 - Exceptional Business

Graham Defensive Criteria

Valuation: FAILS Graham criteria spectacularly

Megatrend Resilience Score

Total: +5 (Tier 2 - Resilient)

Position Sizing Calculation

Position Size = Base × (MOS/Target) × (Quality/100) × (1-Risk) × Catalyst
             = 3% × (0/30%) × (100/100) × (1-0.3) × 0.7
             = 0%

Where:
- Base Allocation: 3% (quality company)
- Margin of Safety: 0% (actually negative)
- Quality Score: 100% (exceptional)
- Risk Score: 30% (valuation risk)
- Catalyst Multiplier: 0.7 (no catalyst for re-rating lower)

Recommended Position: 0% until significant pullback

Expected Return Probability Tree

Expected 5-Year Return: -11%

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Final Recommendation

┌─────────────────────────────────────────────────────────────────┐
│                     INVESTMENT RECOMMENDATION                    │
├─────────────────────────────────────────────────────────────────┤
│ Company: Belimo Holding AG          Ticker: BEAN.SW             │
│ Current Price: CHF 780.50           Date: December 25, 2025     │
├─────────────────────────────────────────────────────────────────┤
│ VALUATION SUMMARY                                                │
│ ┌─────────────────────────┬─────────────┬─────────────────────┐ │
│ │ Method                  │ Value/Share │ vs Current Price    │ │
│ ├─────────────────────────┼─────────────┼─────────────────────┤ │
│ │ Graham Number           │ CHF 113     │ -86% (overvalued)   │ │
│ │ DCF (Conservative)      │ CHF 251     │ -68% (overvalued)   │ │
│ │ Private Market Value    │ CHF 319     │ -59% (overvalued)   │ │
│ │ Owner Earnings × 15     │ CHF 175     │ -78% (overvalued)   │ │
│ │ Owner Earnings × 25     │ CHF 291     │ -63% (overvalued)   │ │
│ └─────────────────────────┴─────────────┴─────────────────────┘ │
│                                                                  │
│ INTRINSIC VALUE ESTIMATE: CHF 270 (weighted average)            │
│ MARGIN OF SAFETY: -189% (OVERVALUED)                            │
├─────────────────────────────────────────────────────────────────┤
│ RECOMMENDATION:  [ ] BUY  [ ] HOLD  [ ] SELL  [X] WAIT          │
├─────────────────────────────────────────────────────────────────┤
│ STRONG BUY PRICE:        CHF 189 (30% below IV)                 │
│ ACCUMULATE PRICE:        CHF 216 (20% below IV)                 │
│ FAIR VALUE:              CHF 270                                │
│ CURRENT PRICE:           CHF 780.50 (+189% PREMIUM)             │
├─────────────────────────────────────────────────────────────────┤
│ POSITION SIZE: 0% until pullback                                │
│ QUALITY SCORE: 10/10 (Exceptional business)                     │
│ PRIMARY RISK: Valuation compression - no margin of safety       │
│ SELL TRIGGER: N/A (no position recommended)                     │
└─────────────────────────────────────────────────────────────────┘

The Final Word

Belimo is an exceptional business with a genuine moat, pristine financials, and powerful secular tailwinds from data centers and building renovation. It is exactly the type of company Warren Buffett would admire - a dominant specialist with pricing power, high returns on capital, and a 50-year track record.

However, the price is wrong.

At CHF 780.50 (P/E 65x, P/B 16.5x), Belimo is priced for perfection extended indefinitely. Even assuming 8% earnings growth for 10 years, the stock would need to maintain a P/E of 40x just to deliver market-matching returns. Any normalization of valuation toward historical averages for quality industrials (P/E 20-30x) would result in substantial losses.

The Munger Test: "If this dropped 50% tomorrow, would I buy more or panic?"

At CHF 390, the answer would be enthusiastic buying. At CHF 780, the answer is patience.

Recommended Action:

1. Add BEAN.SW to watchlist
2. Set price alerts at CHF 450 (begin research refresh), CHF 350 (serious consideration), CHF 270 (accumulate)
3. Do not initiate position until at least CHF 450 (-42% from current)

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Monitoring Metrics

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Source Documents

• Annual Reports 2019-2024 (PDFs downloaded)
• Semiannual Report 2024
• EODHD historical prices 2020-2025
• EODHD live price data
• Company investor relations website

Analysis prepared in accordance with the Investment Analysis Framework.

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This analysis represents an independent first-principles assessment. No analyst reports or third-party price targets were consulted.