TGI 2025: Tmach carries the group, but Spain still has not cleared the bottleneck

Getting to Know the Company

TGI is no longer a magnesium-casting story. Since the fire at Ortal in November 2022, and after the March 2024 decision to discontinue the magnesium activity, the listed company effectively rests on two very different industrial businesses: Tmach in Israel, which manufactures electrical cabinets and metal products for construction and infrastructure, and Lordan, which manufactures heat exchangers in Israel, the UK and now Spain. Anyone still reading 2025 through Ortal is reading the wrong company.

What is working now is mostly Tmach. The metal and electricity segment increased revenue to NIS 85.8 million in 2025, from NIS 78.4 million in 2024, and operating profit rose to NIS 19.4 million from NIS 14.3 million. This is no longer a side engine. It is the stabilizer carrying the group while Lordan is still dealing with delivery gaps, labor shortages and wage pressure.

The active bottleneck now sits in Lordan, not in the balance sheet. In the Israeli plant, the production workforce remained around 70 employees, output fell and delivery gaps opened up. At the same time, Lordan UK is still operating at about 75% of production capacity, and the Spanish move is not yet producing revenue, it is only supposed to begin ramping gradually in the second quarter of 2026. So 2025 looks acceptable in the reported numbers, but the real friction is still operational.

That is also why the year looks cleaner than it really is. Profit from ordinary operations rose to NIS 27.2 million, but other income expanded to NIS 7.9 million, management's presentation also points to roughly NIS 8.5 million of Swords of Iron compensation income, and the financing layer included about NIS 12 million from option exercises. This is not a balance-sheet rescue story anymore. It is a proof year story.

There is also a simple actionability constraint. At the April 3, 2026 close, the stock traded on only about NIS 8.6 thousand of daily turnover, while short interest stood at 0.01% of float with a 0.62 SIR. This is not a name where the debate will be decided by technical positioning. If the reading changes, it will change through execution.

Four non-obvious findings right at the start:

• The group did not really grow, but its internal engine changed. Consolidated revenue slipped slightly to NIS 162.0 million, yet Tmach grew 9% while Lordan fell 10%, so the center of gravity shifted toward the domestic business.
• Operating profit rose even as gross profitability weakened. Gross profit fell to NIS 54.3 million and gross margin slipped to roughly 33.5%, but profit from ordinary operations rose thanks to Tmach, lower product-development spending and a larger other-income layer.
• The balance sheet is not tight, but the cash increase did not come from operations alone. The year also included roughly NIS 12 million from option exercises and another NIS 12.4 million compensation receipt from the Tax Authority.
• Spain still belongs to the near future, not to 2025 results. The new production line is only expected to start ramping in the second quarter of 2026, so 2025 does not yet prove that the move works.

The economic map for TGI now looks like this:

This chart shows why 2025 is not just a flat year. The group looks almost unchanged at the topline, but inside the mix shifted materially: Tmach has become larger than Lordan. Until proven otherwise, the whole group now reads through whether Lordan can get back to being an engine rather than just a European option.

Events and Triggers

The first trigger: Spain is the thesis, but not yet the result. In August 2024 Lordan UK entered into an agreement package with the Spanish company Sereva Cooling and its shareholders, and in October 2024 the deal was completed. Lordan bought 19.9% of Sereva for EUR 300 thousand, received a Call option exercisable from the end of 2026 to raise its holding to 65%, and together with the sellers established LIC, a Spanish company in which Lordan UK holds 65%. Under that structure, Lordan UK committed to provide up to EUR 1.275 million of shareholder loans to LIC, and by the report date about EUR 540 thousand had already been advanced. This is a real industrial move, not just a financial minority investment.

What is still missing is proof. According to the annual report, the new Spanish production setup is only expected to begin operating gradually in the second quarter of 2026, and the new machines are expected to support the start of sales to Lordan's customers in Spain and elsewhere in Europe. That means 2025 did not yet benefit from the move. It only funded it and positioned it on the runway.

The second trigger: the UK expansion is also meant to relieve pressure, but it too is still mostly a promise. The expansion works at the Lordan UK plant were completed in December 2024, and the company says the new machines are expected to begin producing in the first half of 2026. That matters because the UK operation is part of the answer to the European capacity problem. Still, until that contribution shows up in the numbers, it should be treated as a bridge, not as delivered fact.

The third trigger: 2025 distributed cash as if the proof year were already behind it. During the year the company paid four dividends totaling NIS 15.1 million, and in March 2026 another NIS 4 million dividend was declared. At the same time, 4.16 million options were exercised in August 2025 for total proceeds of about NIS 12 million. That combination strengthens equity and liquidity, but it also means the year looks more generous because fresh capital came in while the group is still building Spain.

The fourth trigger: US tariffs are real friction, even if not existential. About 9% of group revenue, through Lordan, comes from exports to the US. A 15% tariff on Israeli exports to the US took effect in August 2025, in February 2026 the US Supreme Court ruled the emergency-law tariffs illegal, and further 10% tariffs were then announced and later updated back to 15%. Management says it is examining alternatives to reduce the effective tariff burden, but the uncertainty is still here.

The fifth trigger: Tmach's founder is no longer at the board table. Yehonatan Havardi, who founded Tmach in 1982, ceased serving as an ordinary director on January 11, 2026, and the company reported that the resignation was not connected to any circumstances requiring disclosure to holders. That is not a red flag by itself, but it does underline that TGI is now run as an industrial group under DBSI-Brin control, not as a founder-led operating company.

Efficiency, Profitability and Competition

The main insight here is that the 2025 improvement was not a broad-based improvement in earnings quality. In fact, the opposite is true. Gross margin fell from roughly 34.8% in 2024 to roughly 33.5% in 2025, and gross profit itself declined from NIS 56.6 million to NIS 54.3 million. And yet profit from ordinary operations rose from NIS 24.6 million to NIS 27.2 million. That is exactly what a first read can miss: the rise in operating profit does not mean the whole business became cleaner. It means one engine improved enough to offset weakness in the other engine and a softer gross layer.

Tmach, the engine already proving itself

At Tmach, the story is much cleaner. Revenue rose to NIS 85.8 million, operating profit rose to NIS 19.4 million, and the operating margin jumped to about 22.6%, from about 18.2% in 2024. The company attributes this to recovery from the war's effects and lower product-development spending. There is also a real competitive position here: strict standards compliance, certification of panel builders, geographic proximity to customers and faster delivery times.

This is also a relatively diversified business. The company explicitly says Tmach has no single customer accounting for 10% or more of segment revenue in 2023 through 2025. That means the improvement was not driven by one anchor customer or one exceptional project. It was driven by a domestic manufacturing platform that likely benefited from both recovering demand and stronger pricing and operational discipline. Electrical cabinets alone generated NIS 57.7 million in 2025, about 36% of consolidated revenue.

Lordan, the engineering is there, the capacity is not

At Lordan, the picture is almost the mirror image. Revenue fell to NIS 76.2 million, operating profit fell to NIS 13.7 million, and operating margin slipped to 18.0% from roughly 19.3% in 2024. The company links the decline to delivery gaps due to labor shortages, lower order intake, mandatory wage increases in the UK, and higher IT, depreciation and professional-services costs. That matters because the problem here is not that the product lost its edge. The problem is that the operating system has not yet returned to pace.

It is also important to be precise about what did not happen. Lordan says it does not have a single customer representing more than 10% of revenue in 2023 through 2025. So the decline is not about losing one anchor customer. It is about wider pressure, both on order intake and on the ability to produce and deliver. At the same time, wage inflation in the UK was partly mitigated through price increases, so the margin did not collapse, but it did not improve either.

This is the core of the 2025 story. Anyone looking only at the group line sees improvement. Anyone breaking the business into segments sees that the improvement sits almost entirely on one side of the house.

The gap between reported and adjusted is already part of the thesis

It is worth pausing on the way management chose to frame the year. In the investor presentation it highlights operating profit attributable to shareholders of NIS 27.3 million and adjusted net profit attributable to shareholders of NIS 23.7 million, after excluding discontinued operations and after excluding NIS 6.4 million of excess-cost amortization. Management is allowed to do that. But the reported picture still matters:

| 2025 metric | Reported attributable to shareholders | Adjusted in the presentation | What it means | |-----|------|-------| | Profit from ordinary operations attributable to shareholders | NIS 27.0 million | NIS 27.3 million | Almost no gap at the operating layer | | Net profit attributable to shareholders | NIS 16.0 million | NIS 23.7 million | At the bottom line, management is already selling the cleaner 2026 version |

That gap matters because it shows where management wants the market to look, not at net profit as reported, but at net profit as it should look after stripping out the past and acquisition accounting. That is not automatically wrong. But it is also not the same economics. As long as Spain is not yet working, and as long as Lordan has not yet returned to a steadier operating rhythm, the reported numbers deserve priority and the adjusted layer should remain exactly that, an explanatory layer.

Cash Flow, Debt and Capital Structure

The core point here is straightforward: TGI's balance sheet is strong enough to fund 2026, but the rise in cash during 2025 did not come from the operating core alone. Anyone looking only at the year-end cash line will miss the composition.

normalized / maintenance cash generation

On recurring operating cash generation, the picture is good. Cash flow from continuing operating activities reached NIS 37.8 million, up from NIS 28.4 million in 2024, while profit from continuing operations stood at NIS 23.2 million. At the continuing-operations layer, the business is clearly producing cash.

But this is not an asset-light system. At December 31, 2025 the group carried NIS 56.6 million of receivables and NIS 47.7 million of inventory. At the group level, average customer credit stood at around 130 days, versus roughly 100 supplier days. At Tmach the gap is even more pronounced, around 150 customer days versus 110 supplier days. At Lordan the gap is smaller, 86 customer days versus 49 supplier days, but there the company holds raw-material inventory around a seven-month average consumption profile. In other words, even when the business generates cash, it still sits on meaningful working-capital intensity.

The point in this chart is not just which business is higher. It shows what kind of growth quality the group is living with. Tmach produces better margin, but its cash moves more slowly. Lordan collects faster, but carries more operating complexity and inventory.

all-in cash flexibility

The all-in picture is less clean. Cash and equivalents rose from NIS 8.7 million at the end of 2024 to NIS 23.6 million at the end of 2025. But that increase ran through several one-off or semi one-off layers: roughly NIS 12 million from option exercises in August, and another NIS 12.4 million compensation receipt in November. Against that, the group spent NIS 15.3 million on continuing investing activities, including NIS 7.85 million of remaining consideration on the Lordan acquisition and roughly NIS 7.5 million of capital expenditure, and NIS 6.3 million net on continuing financing activities.

This does not say there is a liquidity problem. It says something else: the group did build a cash cushion, but not only from operations. Within continuing financing cash flow, there were roughly NIS 15 million of dividends, about NIS 4.7 million of lease cash, around NIS 10.5 million of debt repayments, partly offset by about NIS 12 million of new borrowings and the NIS 12 million option exercise proceeds. This is a healthy cash picture, but not a pure one.

Debt and covenants

On debt, this is not a company fighting for oxygen. Bank debt stood at NIS 43.6 million at year-end, of which NIS 19.6 million was short-term and NIS 24.0 million long-term. In addition, lease liabilities amounted to NIS 15.2 million. Against that, the company had roughly NIS 72 million of unused credit facilities and about NIS 23.5 million of positive bank balances.

Covenants also look comfortable. Debt coverage stood at 0.6 against a ceiling of 3, and the solo ratio between short-term credit net of financial assets and operating working capital stood at 0.34 against a ceiling of 0.9. The company says it is in compliance with all financial covenants. So anyone looking for drama in the capital structure is probably looking in the wrong place. The 2026 problem is not refinancing. It is proving that the new operating footprint actually starts to work.

Forecast and Forward View

Four points that need to hold the 2026 reading together:

• This is a proof year, not a breakout year. Spain and Wales are only expected to begin contributing during 2026.
• The fourth quarter did not end the year on an upswing. The group exited 2025 at a lower earnings pace than in the first and third quarters.
• Tmach is already proving itself, Lordan still has to. The next report will be judged first on early improvement signs at Lordan.
• The question is execution, not funding. The balance sheet buys time, but it does not create sales on Spain's behalf.

2026 will stand or fall on operational ramp-up

Spain is only expected to begin ramping gradually in the second quarter of 2026, and in the same general window the new UK machines are supposed to begin working. That makes any contribution back-end loaded within the year. So 2026 should not be judged only on the annual total, but on quarterly signs of progress: delivery times, order flow, new machine utilization, and a return to growth at Lordan.

The more interesting point is that the corporate optionality is still further out. The Call option to buy more of Sereva is exercisable only from the end of 2026. That means the coming year is not really about another acquisition. It is about whether Lordan can turn Spain into another production and sales leg rather than just another strategic slide.

The fourth quarter already shows the road is not yet clean

The annual report did not end with a peak quarter. In the fourth quarter of 2025, revenue fell to NIS 37.0 million, profit from ordinary operations fell to NIS 5.5 million, and profit attributable to shareholders was only NIS 3.8 million. For comparison, first-quarter revenue stood at NIS 43.0 million with NIS 8.7 million of profit from ordinary operations, and third-quarter profit from ordinary operations was NIS 8.0 million.

That is critical for the market reading. If 2026 starts with mediocre quarters and another explanation built on future ramp-up, investors will struggle to give full credit to the European move. If, by contrast, Q1 and Q2 already show a halt in Lordan's decline and some improvement in delivery pace, the tone around the stock can change quickly.

Tmach has to hold the floor, not just the headline

There is also an important supporting signal at Tmach. The impairment test for Tmach as of December 31, 2025 showed a carrying value of NIS 83.9 million against a recoverable amount of NIS 133.8 million. That does not prove everything is perfect, but it does show the current TGI problem is not accounting stress around Tmach. If anything, the balance-sheet value there still appears well supported.

That leads directly to Tmach's 2026 question: can it maintain an operating margin above 20% even after the post-war recovery effect normalizes. If yes, it will continue financing Lordan's transition year. If not, the whole story becomes much more dependent on Spain and the UK.

What kind of year lies ahead

2026 looks like a proof year. Not a reset year, because the group is no longer in a liquidity fight. Not a breakout year, because Spain has not yet contributed in reported numbers. It is a year in which the market will want to see three things at once: Tmach not losing altitude, Lordan stopping its decline, and Spain starting to turn installed capacity into orders and sales.

Risks

The first risk is that Lordan remains stuck in a labor bottleneck. The company explicitly says some employees evacuated from northern border communities have still not fully returned, that the production workforce remained around 70 employees, and that output fell and delivery gaps opened as a result. If that persists, Spain may not solve the problem quickly enough.

The second risk is that the external friction remains stronger than expected. Nine percent of revenue comes from US exports, tariff policy is still unstable, and wage inflation in the UK is already visible. Yes, Lordan UK has raised prices and mitigated part of the pressure. But that still means part of the margin depends on the ability to pass costs through.

The third risk is that net profit is still less clean than the message around it. War compensation, option exercises, and the gap between reported profit and the adjusted presentation layer do not invalidate the thesis. They do mean the company has not yet reached the stage where the operating core alone tells a sufficiently strong story.

The fourth risk is capital allocation becoming too generous too early. Paying NIS 15.1 million of dividends in 2025 and another NIS 4 million after the balance-sheet date is not a problem while the balance sheet is strong. But if Spain slips and Lordan does not improve at the pace management hopes for, that payout will look less obvious in hindsight.

The fifth risk is working capital and liquidity, two risks that do not always sit in the headline. On one side, the group still funds an industrial system with slow receivables and meaningful inventory. On the other, the stock itself is extremely illiquid. So even if the thesis improves, the market's repricing path may remain slow and noisy.

Conclusions

TGI ends 2025 as a two-legged industrial group, with one engine that is already working and one that still needs fixing. Tmach is now clearly proving it can carry a much larger share of the group. Lordan, by contrast, has not yet returned to a production and delivery rhythm that justifies the European expansion story. That is the core thesis.

The main blocker is not debt, covenants or cash. It is execution. Spain and Wales are supposed to solve a capacity problem, not just create a growth story. So what will determine the market reaction in the short to medium term is not another description of the platform, but real operational signs in the next reports.

Current thesis in one line: TGI has moved from a balance-sheet stabilization story to an execution proof story, where Tmach is already delivering, but Lordan and Spain are still asking for time.

What has really changed? The center of gravity moved. The older question was how to assemble industrial assets under one listed group. The current question is whether one of them, Tmach, can fund and stabilize the other until the European move turns from map to factory.

The strongest counter-thesis is that the caution here is excessive, because the group ends the year with NIS 146.4 million of equity, NIS 72 million of unused facilities, comfortable covenants, and a strong Tmach business that already generates enough to bridge the transition year. That is a fair argument. But for it to dominate, 2026 needs to show real improvement at Lordan, not just another repetition of the promise.

What could change the market interpretation in the short to medium term? An early update showing Spain started on time. A quarterly report in which Lordan stops deteriorating. And another signal that Tmach can keep profitability elevated even after the recovery year.

Why does this matter? Because TGI is no longer being judged as an industrial shell. It is being judged as a group that now has to prove it can turn acquisitions, engineering capability and European capacity into repeatable net profit and repeatable cash.