Graham Corporation (GHM): From Legacy to Platform: Visibility + Margins Upside; Initiating Overweight, YE27 PT $120

We are initiating coverage of Graham Corporation (GHM) with an Overweight rating and a Dec. 2027 price target of $120, implying ~38% upside. GHM designs and manufactures mission-critical fluid, power, heat transfer, vacuum, and advanced mixing technologies serving Defense, Space, and Energy & Process end markets. After a multi-year repositioning that lifted Defense from ~25% of FY21 revenue to ~60% in FY26, we believe GHM is entering its next stage, with sole-sourced Navy content and a legacy vacuum franchise anchoring resilient growth. More than 80% of GHM's defense revenue is sole-sourced with high barriers to entry, anchored in the U.S. Navy's nuclear propulsion programs, where management sizes a ~$1.8B opportunity. We see long-term optionality across cryogenics, SMRs, power generation, and space, supporting +DD topline growth and mid-20s adj. EBITDA growth through FY28. We forecast Defense revenue growth of ~19%/13% YoY in FY27/28, Space as the fastest-scaling segment, and Energy &