Shares in Imdex (ASX:IMD) have enjoyed a solid run in the last several months. This has been driven by supportive macro factors as well as internal initiatives that have improved financial performance. We recently recommended the Company in The Dynamic Investor. With the shares having recovered from its recent lows, are current levels still an attractive entry point?
About Imdex
Imdex is a global mining technology company that provides commodity agnostic solutions. Its customer base includes drilling contractors and resources companies. These solutions enable accurate, efficient and high-speed exploration and real-time analysis of orebodies, as well as extraction.
The Company has a global footprint operating in all key mining regions and operates through the AMC and REFLEX brands. The AMC brand deals with drilling fluids, equipment, technologies, and software. The REFLEX brand includes downhole instrumentation, data management and analytical software for geological modelling.
Key Fundamental Drivers
Revenue Indicators have Improved
Improving revenue trends towards the end of financial year 2025 (FY25) have continued into the 1st quarter of FY26 (1Q26). Revenue growth for the 4th quarter of FY25 (4Q25) was +10% compared to the prior corresponding period and +19% compared to the prior quarter (3Q25). The improvement in 4Q25 arrived following a prolonged downturn the mineral exploration cycle.
For 1Q26, IMD reported revenue growth on +10% compared to the prior corresponding period and is 3% higher than 4Q25. The improvement was primarily driven by the sensors/technology side of the business. This is considered higher quality and with higher incremental margins. IMD stated 68% of 1Q26 revenue was from sensors, services and software, which was 3% higher than 4Q25. Drilling fluids revenue (which are lower-margin) declined by 3% compared to 4Q25, which implies mid- to-high single-digit growth from sensors, services and software.
Macro Factors Becoming Increasingly Supportive
Several factors point to an increasingly positive outlook across all regions.
i. Capital markets activity for junior miners is the key lead indicator for exploration spend and IMD’s sensor volumes and account for ~15% of IMD’s revenue. September 2025 figures indicated that commodities dominated raisings, with gold raising also remaining strong. According to S&P Global Market, Junior / intermediate raisings in the three months to 30 September 2025 increased to $6b from $3b vs the prior corresponding period. Notably, Junior raisings in September reached >US$2b for the second time in three months and marked six consecutive months of raisings >US$1b.
ii. Prices for gold (~US$4160/oz) and copper (US$5.13lb) are at or around all-time highs. Together, these two commodities comprise ~75% of exploration spend, Further, the equities for gold juniors are outpacing the rise in the underlying commodity. Notably, the ETF for gold juniors – VanEck Junior Gold Miners (GDXJ) has increased by +56% since the beginning of August. This trend augurs well for continued strength in capital markets activity.
iii. Industry feedback to date indicates that increased activity (i.e. higher rig utilisation) is still being driven by the major miners. Given elevated levels of junior raisings in the past six months and supportive commodity prices, an increase in activity for juniors appears on the horizon. It is estimated that the return of junior minors (i.e. deploying capital raised to exploration) could result in an additional 15-20% in activity levels.
Margin Expansion
The Average Revenue Per User (ARPU) growth accelerated in 2H25. This appears to have been driven by increasing take-up of next generation of products across IMD’s geographical footprint. There is potential for further ARPU growth, which would be underpin higher margins. This comes from IMD’s strategy to increasingly push more of its existing and potential customer base to newly developed products.
In addition, the favourable business mix shift evident in 1Q26 and the likely return of junior miners should see incremental EBITDA margin expansion. In particular, junior miners represent ~15-20% of overall activity levels through the cycle. Given their likely lower bargaining power, increased activity from junior miners would result in an uplift in take-up of products and services offered by IMD.
Balance Sheet Scope to Fund Further Growth
As at 30 June 2025, IMD held a minimal gearing position. The strong balance sheet provides headroom for continued investment in innovation and Merger & Acquisition opportunities. Use of capital has been prudent, with each of the recent acquisitions performing well.
Fundamental View
IMD is currently trading on a 1-year forward P/E multiple of ~30x. Notwithstanding the elevated multiple, we consider that there are several catalysts likely to lead to a further re-rating in the shares. These include: i) Continued support from macro factors, ii) Upside risk to the scope of EBITDA margin expansion from the increased uptake of higher-margin products and iii) Balance sheet capacity to strengthen market position in existing offerings as well as to expands into new areas.
These factors also offer upside risk to an already-attractive EPS growth profile of +12% over FY25-28 on a CAGR basis.
Charting View
IMD has been in an uptrend for the past two years, making higher highs and higher lows along the way. The recent decline has seen it pull back towards support. This pull back is a buying opportunity. That is, IMD is a buy here and investors can consider an initial stop near $3. We expect IMD to continue to trend higher from here.
Michael Gable is managing director of Fairmont Equities.
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