Initiation of Research Coverage: PMFG, Inc.

Wednesday, April 25, 2012

William Blair & Company initiated research coverage of PMFG, Inc. (PMFG $13.39) with an Outperform rating and Aggressive Growth company profile. Dallas-based PMFG provides custom-engineered filtration, separation, and environmental control systems to support the delivery of energy in a safe, efficient, and clean manner.

Analyst Brian Drab estimated the company would earn $0.14 per share in fiscal 2012 and $0.41 per share in fiscal 2013.

"PMFG has exposure to several growing markets, Drab said. "We believe the global market for selective catalytic reduction (SCR) systems for natural-gas-fired power plants is greater than $150 million. We expect this market to expand significantly as retirement of coal-fired power plants in the United States leads to increased construction of natural-gas-fired power plants. Management estimates the addressable market for its natural-gas separation business is more than $500 million. We expect the market for the company's process products to grow at a low-double-digit rate over the next few years, largely driven by expansion of natural gas infrastructure. Other end-markets include industrial silencing, marine, nuclear power, and oil production."

He added, "Shares of PMFG offer investors a rare, near-pure-play way to invest in the natural gas industry. We believe building demand (order activity is at the highest level in the last five years) and strong operating leverage (combined with the opportunity for material upside related to the company's investment in possibly revolutionary pollution-control technology) could lead to explosive growth over the next few years."

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