Fund Manager Summary
The outlook for SDI Ltd appears cautiously optimistic, as fund managers believe the company is navigating challenges effectively. Despite a 1.5% decline in sales attributed to currency fluctuations and the winding down of lower-margin products, they note a 2% growth in adjusted sales. The increase in gross margins from 61.5% to 63.5% indicates operational efficiency, suggesting that profits will remain stable year-on-year. While results fell slightly short of expectations, the seasonally stronger second half may boost performance. With the stock trading at a 9.5x earnings ratio, in their opinion, the current valuation presents a compelling investment opportunity, leading them to maintain their position in the company.
Source: Trading View
Commentary From The Managers
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DMX Asset Management
31 Oct 2025
$0.91
Summary
- SDI is a long-established Melbourne-based manufacturer of dental materials with a market value of around $120m.
- The company is tightly held, with its founder owning 43% and low institutional participation.
- DMX Asset Management took advantage of a liquidity window to establish a position for the Monash Fund and re-establish a position for the DMX Australian Shares Fund.
- SDI has a diverse range of innovative dental products, with a focus on high-value solutions, reflected in increasing gross margins of 63%.
- The company’s Australian manufacturing base provides counter-cyclical properties, benefiting from a lower AUD during domestic downturns.
- SDI is expanding and consolidating its manufacturing facilities, which may cause short-term investor nervousness due to balance sheet and development risks.
- DMX Asset Management is comfortable with SDI utilizing more debt given its consistent revenue and earnings, especially as the company trades at a low earnings multiple.
- At the purchase price of 89-89.5c, SDI was trading at approximately 10 times earnings, with potential for significant earnings growth post-manufacturing transition.
- With a robust R&D program and global distribution, SDI has considerable growth potential in the coming years.
- DMX Asset Management expects a healthy dividend yield and a potential P/E re-rate on earnings in the near future.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
DMX Asset Management
31 Oct 2025
$0.91
- SDI is a long-established Melbourne-based manufacturer of dental materials with a market value of around $120m.
- The company is tightly held, with its founder owning 43% and low institutional participation.
- DMX Asset Management took advantage of a liquidity window to establish a position for the Monash Fund and re-establish a position for the DMX Australian Shares Fund.
- SDI has a diverse range of innovative dental products, with a focus on high-value solutions, reflected in increasing gross margins of 63%.
- The company’s Australian manufacturing base provides counter-cyclical properties, benefiting from a lower AUD during domestic downturns.
- SDI is expanding and consolidating its manufacturing facilities, which may cause short-term investor nervousness due to balance sheet and development risks.
- DMX Asset Management is comfortable with SDI utilizing more debt given its consistent revenue and earnings, especially as the company trades at a low earnings multiple.
- At the purchase price of 89-89.5c, SDI was trading at approximately 10 times earnings, with potential for significant earnings growth post-manufacturing transition.
- With a robust R&D program and global distribution, SDI has considerable growth potential in the coming years.
- DMX Asset Management expects a healthy dividend yield and a potential P/E re-rate on earnings in the near future.
Summary
Mereweather Capital
31 July 2025
$0.88
- Mereweather Capital continues to hold a position in SDI Limited (SDI) based on recent performance updates.
- SDI announced sales of $111m and a net profit of $10-10.4m, which are flat compared to last year.
- Despite the headline numbers appearing weak, there are two significant headwinds affecting performance.
- Similar to LBL, SDI experienced a weak first half of the year.
- The company is in the process of phasing out its Amalgam segment, impacting overall results.
- However, SDI’s core segments grew approximately 6% in the second half, indicating resilience.
- This growth rate, while below the 12% CAGR of the last decade, is still viewed as a solid outcome.
- With a current market capitalisation of $100m, SDI trades at just 10x earnings, suggesting potential value.
- After accounting for the declining Amalgam segment, SDI demonstrates consistent growth in its core operations.
Summary
Mereweather Capital
28 Feb 2025
$0.83
- SDI Limited reported revenue aligned with guidance, reflecting stable performance.
- Net profit exceeded expectations due to effective operating cost management.
- The balance sheet is strong, with EBITDA ratio below 1x, providing financial flexibility.
- Increased capital requirements are anticipated with the transition to a new manufacturing facility.
- The management team, known for their conservatism, is enthusiastic about the launch of the new Stela product.
- There is a potential for Stela to replace the declining Amalgam segment in the future.
Summary
Mereweather Capital
31 Jan 2025
$0.98
- SDI Limited (SDI) announced a trading update prior to releasing full statutory accounts in February.
- Sales for the first half of the fiscal year were down 1.5% compared to last year, influenced by currency fluctuations and the reduction of the lower-margin Amalgam product.
- After adjusting for currency and the Amalgam decline, sales growth stood at approximately 2%, below historical high single-digit growth levels.
- Gross margins improved from 61.5% to 63.5%, suggesting potential for profit to remain flat year-on-year.
- Despite the slightly weaker performance than expected, with a stronger second half anticipated, SDI is currently trading at just 9.5x earnings.
- Mereweather Capital continues to hold their position in SDI Limited due to the factors noted above.
Summary
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
ANALYST INSIGHT
Equity Research Analyst
"While SDI Ltd's recent sales figures may raise eyebrows, the uptick in gross margins suggests resilience. With a potentially stronger second half and an attractive earnings multiple, this could be a strategic hold for discerning investors looking for value amidst volatility."
Last Updated: 31 Oct 2025
Query The Data
Frequently Asked Questions
Who is investing in SDI Ltd (ASX:SDI)?
Fund managers including Mereweather Capital and DMX Asset Management have invested in SDI Ltd (ASX:SDI).
Why do fund managers invest in SDI Ltd?
Fund managers are investing in SDI Ltd due to its resilient gross margin growth, which increased from 61.5% to 63.5%, indicating effective cost management despite a slight decline in sales. The company's adjusted sales growth of approximately 2% reflects stability, particularly in light of currency challenges and the winding down of lower-margin products. With a favorable valuation at 9.5x earnings and expectations for a stronger second half, fund managers see potential for profit stability and future growth.
What happened to SDI Ltd (ASX:SDI)?
Fund managers are investing in SDI Ltd due to its solid core growth despite recent challenges, including the decline of its Amalgam segment. The company reported stable sales and profit figures, with a projected 6% growth in core segments. SDI's strong gross margins and innovative dental products enhance its appeal, while its Australian manufacturing base offers resilience against domestic downturns. The ongoing expansion of its manufacturing facilities is expected to improve efficiency and capacity, positioning SDI for significant growth. With a market capitalization around $100-120 million and trading at 10-11 times earnings, fund managers see potential for a re-rating of earnings and healthy dividend yields as the company transitions to a more efficient operational model.