Stealth Group (ASX:SGI) NPAT jumps 87% as the HBT acquisition starts paying for itself

FY28 sales target of A$500m suddenly looks credible once the 1,200-store network compounds fully

Stealth Group Holdings (ASX:SGI) has delivered a preliminary FY26 trading update that does two things at once. It confirms the underlying business is growing nicely, and it shows the Hardware & Building Traders acquisition completed in November 2025 is already reshaping the financials.

The headline numbers tell the story. Sales of A$165 million are up 13.7%, EBITDA of A$14.3 million is up 44.4%, and NPAT of A$5.8 million is up 87.1%. The EBITDA margin has climbed 170 basis points to 8.7% of sales, which is the part of this result that matters most for how the market should value the business.

For investors, the question is whether the FY28 target of A$500 million in annual sales and an 8 to 12% EBITDA margin is still a stretch goal or now a base case. Today’s update pushes it closer to the latter.

What was a A$145 million business with 10 branches a year ago is now tracking through A$165 million with around 1,200 store locations and 1,300 suppliers. That is a different company.

The HBT deal at A$22 million looks cheap once you do the maths

Stealth paid A$22 million for HBT, Australia’s largest privately owned membership-based buying group, with around 1,165 independent member stores and 490 preferred suppliers. HBT brought FY25 revenue of A$6.9 million and normalised EBITDA of A$3.7 million in the door.

On the surface that is a roughly six-times EBITDA multiple. The more interesting number is what HBT did to Stealth’s procurement scale. Suppliers went from 800 to 1,300, and the national network jumped from 32 stores to approximately 1,200.

Procurement leverage is the unglamorous engine behind the EBITDA margin lift. When you can negotiate volume rebates across 1,300 suppliers and 1,200 stores, the same dollar of sales drops more profit to the bottom line.

Why FY27 is the year that actually proves the thesis

FY26 only captures roughly seven months of HBT contribution. FY27 is the first full year, and management is explicitly flagging a significant step change in sales, revenue and EBITDA.

Layered on top of that are the exclusive distribution deals signed in the past two months. Panzer Glass came in June, Tech21 in May, and the CAT, Harden Tools and RIVO ranges are rolling into 42 hardware retail stores in Q4 FY26 with minimal sales contribution this year.

The digital channel expansion adds another lever. Stealth is now live on Woolworths Marketplace, Amazon and JB Hi-Fi, with management guiding to more than A$10 million of incremental sales from these channels by the end of FY28.

Where the bear case still lives

We think the result deserves credit, but the skeptical read is worth airing. Getting from A$165 million in FY26 to A$500 million in FY28 requires sales to triple in two years, and the bridge depends heavily on HBT member purchasing growth and central services adoption that is still in the active rather than completed column.

The A$19.5 million capital raise completed in December 2025 gave the balance sheet room to fund the organic plan, which is good. The flip side is that any additional acquisition to hit the FY28 number could mean more dilution against the 149.6 million shares already on issue.

Our concern is execution risk on integration. The scorecard shows systems, supplier and member engagement as completed, but procurement initiatives, cross-selling and national accounts are all still active. Those are exactly where the synergy promises live or die.

The Investors Takeaway for Stealth Group Holdings

Stealth has spent FY26 quietly turning itself into a fundamentally different business. The headline 87% NPAT growth will get the attention, but the structural shift is the procurement scale and store network, which now sit at a level that makes the company genuinely relevant in a A$120 billion fragmented market.

FY27 is the proving ground. A full year of HBT, the exclusive product ranges hitting the shelves and the digital marketplace ramp should combine to deliver the step change management is guiding to. If that lands, the FY28 target stops being aspirational and starts being arithmetic.

Investors can read our previous coverage of small-cap distribution and resource stories at stocksdownunder to see how we frame execution-driven thesis work in similar situations.