SDI (ASX:SDI): Will slow and steady win the race?

If you’re looking for a stock that’ll make you a fortune, SDI (ASX:SDI) might not be the best one for you. But if you just want a stock that has little downside risk, it might be more appropriate – but we can only say might.

Given the record of dental stocks on the ASX, you might think it is a blessing that it has been around along that it has given the saga at Smiles Inclusive, how 1300 Smiles was underrated for years before being taken over and the saga around Pacific Smiles’ takeover has not completed. SDI is worth just under $100m and a P/E of >9x. This may scream ‘buy’, but we’d say not so fast.

It is true, that there might be exciting times ahead of the company, but it is not a guarantee. Yes, nothing is ever a guarantee in the business world, but it may take more than its latest product to gain the attention of investors.

SDI: A dental equipment maker

SDI stands for Southern Dental Industries, but the company is just known as SDI today. It sells dental consumables and products in over 100 countries and has done so for over 50 years. The company’s products include adhesives, alloys, amalgams…essentially restorative dental materials. While investors arguably haven’t taken notice, export awarders have – the company has won the Victorian Export Award for International Health for the last 3 years in a row and won the federal award once in that time span.

It was founded by Jeffery Cheetham in Melbourne, and the company is led today by his daughter Samantha, still in Victoria’s capital. The company is currently working on a new site which it hopes to move into by the end of 2027. It is truly an international company with only 33% of sales in Australia, 22% in North America, 37.2% in Europe and 7.9% in Brazil.

FY24 was a great year for the company with record revenue of $111.2m, a $11.4m underlying profit and a 62.1% gross profit margin. Its $111.4m revenue figure was only $4.3m higher than a year ago, but 65% ahead of 4 years ago.

In that year, SDI laid the foundations for the future with the company beginning work on its new site which will be 50% bigger and deliver over $200m in sales capacity. Major building works are expected to commence in 2025.

Is it exciting after all?

Investors have only sent the company up 20% in 5 years and 10% in the last year. It has been a lot more volatile in the last year, gaining over 50% in the first half of FY25, only to collapse 30% in the first couple of months of the year but lag since. Its half yearly results (foreshadowed in a trading update right at the start of CY25) disappointed with sales retreating 1% and EBITDA by 4%. Trump’s tariffs didn’t help the company’d cause either.

But it is not all bleak. We already mentioned the company’s warehousing that is on track. And you notice we mentioned above that it is launching a new product. We’re talking about Stela, a replacement for amalgam jobs and back fillings. It delivers a better natural tooth colour and strength, doing so in a more environmentally friendly way.

Stela has been approved in Australia, the USA, the EU Brazil. SDI reports that it was SDI’s ‘most successful product launch to date’, but has not given specific figures. Perhaps this is what investors need to get excited about the company.

Conclusion

SDI is not going to go bust, at least not anytime soon. But will it grow? Perhaps not in a way that companies that discovered new drugs like Telix and Neuren have. But if it returns to growth, then it could be a slow and steady growth machine for investors over the next 3-5 years. We do think the company needs to improve its IR efforts and perhaps provide specific Stela figures. If it can do this, SDI may not fly under the radar for too much longer.

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