While the markets remain focused on Ampco-Pittsburgh's (<a href="https://seekingalpha.com/symbol/AP" title="Ampco-Pittsburgh Corporation" alt="Ampco-Pittsburgh Corporation on Seeking Alpha">AP</a>) struggles in the European cast roll market and the recent asbestos revaluation charge, a hidden gem lies buried within the Q1 2024 earnings call transcript. This quiet powerhouse, the Air and Liquid Processing (ALP) segment, is poised for explosive growth, potentially transforming Ampco-Pittsburgh from an industrial laggard to a market darling.

A deeper dive into the transcript reveals a story of relentless growth for the ALP segment, a story that seems to be flying under the radar. Dave Anderson, President of ALP, paints a picture of a segment operating at full throttle, having substantially increased its manufacturing capacity in the last two years.

Yet, despite these expansions, Anderson reveals a startling fact: "We continue to sell out that capacity."

This statement, seemingly innocuous, speaks volumes about the pent-up demand for ALP's products. The segment's backlog, while temporarily down due to the air handler business unit being at full capacity for 2024, is poised to surge as Anderson reports a surge in April bookings, exceeding the entire first quarter.

The ALP segment's success story doesn't end there. Several projects are already in motion to further increase capacity, including the arrival of new equipment funded by a US Navy grant and the exciting development of additive manufactured parts.

This latter initiative, a collaboration with the US Navy and Oak Ridge National Laboratory, promises to revolutionize ALP's production process, circumventing the notorious lead times and quality issues plaguing traditional foundries. The implementation of additive manufactured parts in the second half of 2024 could unleash a wave of efficiency and cost savings, further bolstering ALP's profitability.

While the market fixates on Ampco-Pittsburgh's struggles, a simple question arises: what if the ALP segment, currently representing a smaller portion of the corporation's revenue, becomes the driving force behind its growth?

Consider this: ALP's revenue increased by a remarkable 18% in Q1 2024, compared to the corporation's overall 5% growth. Projecting this trend forward, with ALP continuing its aggressive capacity expansions and unlocking the potential of additive manufacturing, a compelling hypothesis emerges.

Hypothesis:

The ALP segment, fueled by sustained demand, capacity expansions, and the adoption of additive manufacturing, will become the dominant revenue generator for Ampco-Pittsburgh within the next 24 months.

Supporting Numbers:

Projected ALP Revenue Growth: Assuming a conservative 15% annual growth rate, ALP's revenue could reach approximately $200 million by Q1 2026.

Current FCEP Revenue: Approximately $300 million (based on 2023 results).

Conservative FCEP Growth: Assuming a modest 3% annual growth, FCEP's revenue would reach roughly $320 million by Q1 2026.

These projections, while subject to market fluctuations, highlight the possibility of ALP eclipsing FCEP as the primary revenue engine for Ampco-Pittsburgh within the next two years.

Projected Revenue Growth

This chart illustrates the projected revenue growth of both ALP and FCEP segments, showcasing the potential for ALP to become the dominant revenue generator.

The implications for investors are significant. If the ALP segment continues its trajectory, Ampco-Pittsburgh's valuation, currently depressed by market skepticism, could experience a dramatic upward revaluation.

While the sleeping giant may be slumbering now, the rumbling of the ALP segment suggests an awakening may be imminent. Astute investors, willing to look beyond the headlines, could find themselves handsomely rewarded as this powerhouse segment flexes its muscles and reshapes the future of Ampco-Pittsburgh.

"Fun Fact: Ampco-Pittsburgh's roots trace back to 1929, surviving the Great Depression and numerous economic cycles. Could the ALP segment be the key to its next era of prosperity?"