Modine Manufacturing (MOD)

The sleeper story here is that Modine is buying data center growth with massive margin compression that won't reverse until FY27 at earliest, while the Performance Technologies segment is structurally broken with Genset deterioration revealing deeper issues. Management buried that incremental DC revenue converts at only 15% EBITDA vs 20% segment average, meaning the $100M capacity investment makes this worse before better. The binding constraint isn't demand, it's that they can't grow profitably at speed, evidenced by FCF collapsing from 7% to 3% of sales. Most revealing quote: 'We're okay having a 20% plus type EBITDA margin' when asked about CS margins, essentially admitting they've given up on margin expansion. My view changes if they can show H2 DC revenue converting above 20% EBITDA, but the math suggests that's impossible with the capacity investments.