Energised by electrification

Kendrion 19 April 2021 Initiation
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Kendrion

Energised by electrification

Initiation of coverage

Industrial engineering

19 April 2021

Price

€22.5

Market cap

€336m

Net debt (€m) at 31 December 2020

103

Shares in issue

14.9m

Free float

49%

Code

KENDR

Primary exchange

Euronext Amsterdam

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

7.1

19.3

135.9

Rel (local)

2.2

8.5

63.2

52-week high/low

€23.55

€8.84

Business description

Kendrion develops, manufactures and markets high-quality electromagnetic systems for automotive (52% of revenues) and industrial applications (48%). The geographical spread of revenues is Germany 39%, other Europe 30%, the Americas 15% and Asia 16%.

Next events

4 May 2021

Q121 trading update

Analyst

Johan van den Hooven

+44 (0)20 3077 5700

Kendrion is a research client of Edison Investment Research Limited

Kendrion is a global player in high-quality electromagnetic systems that optimise safety, performance and comfort in automotive and industrial applications. The coronavirus pandemic creates a short-term uncertain market environment but the underlying demand for Kendrion’s products is strong and it will benefit from multiple long-term disruptive trends, such as autonomous driving, electrification, emission reduction and industrial automation. Its valuation shows a discount to peers, which should gradually vanish when company targets are met.

Year end

Revenue (€m)

EBITDA*
(€m)

EPS*
(€)

DPS
(€)

EV/EBITDA
(x)

P/E
(x)

12/19

412

43.8

0.94

0.00

8.7

22.4

12/20

396

44.6

0.79

0.40

8.3

20.9

12/21e

432

52.0

0.99

0.50

8.8

22.7

12/22e

475

61.9

1.47

0.73

7.2

15.3

Note: *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Benefiting from disrupting trends

Kendrion focuses on three growth areas: automotive, industrial brakes and China. Automotive will benefit from trends such as autonomous driving, electrification, connected vehicles and shared mobility with a higher value of Kendrion products in hybrid and electric cars compared to combustion-only cars. Kendrion expects >5% growth in industrial brakes with higher growth in robotics & automation, wind power, industrial trucks and automated guided vehicles. The activities in China reported 72% revenue growth in 2020 due to the acquisition of INTORQ combined with 5% organic growth. Kendrion will more than double its capacity in China by 1H22, which should support strong revenue growth locally of at least 20% per year.

FY21–25e EBITDA CAGR of 16%

COVID-19 had a significant effect in 2020, with revenues down 17% organically. The company, however, saw a promising recovery in Q420 with revenues almost at pre-pandemic levels. Driven by good underlying demand, high project nominations in automotive and an after-pandemic recovery, we estimate sales growth of 8–10% in 2021–23. Operating leverage and efficiency gains will result in an improvement in EBITDA margin of 230bp to 13.6% in 2021–23. In September 2020, Kendrion set ambitious targets for 2019–2025, thereby considering the pandemic effect. Organic revenue growth is targeted at 5% or more on average and EBITDA margin at >15%, driving a revenue CAGR of 9.5% and an EBITDA CAGR of 16% in 2021–25.

Valuation: Discount to peers

We value Kendrion at around €28 per share, which is the average of historical multiples (€28), DCF (€29) and peer comparison (€26). Higher revenues and margins will result in higher cash flows over the next few years supporting our DCF valuation. Kendrion is valued at a discount to peers of 11% on 2022e EV/EBITDA, which might vanish over time as we believe that the company will be able to accelerate growth and significantly improve margins.

Investment summary

Company description: High-potential balanced portfolio

In January 2020, Kendrion acquired industrial brakes specialist INTORQ and total revenues are now evenly spread over automotive and industrial applications. With this acquisition it also expanded its activities in China to more than 10% of its revenues. Kendrion is well positioned in its chosen niche segments, as its actuators are crucial in the interface between electricity and movement. Over the past three years, the company received order nominations in automotive for a total of €900m, of which 60% represents technologies that are not related to combustion engines. With a relatively high R&D spending of 6–7% of revenues, Kendrion is continuously developing new applications such as sound systems for electric cars, battery cooling systems and sensor cleaning systems.

Valuation: Closing the gap to peers

Having fallen to a low of €8 per share in Q220, Kendrion’s share price benefited from the v-shape recovery in stock markets and has now bounced back to pre-COVID-19 levels. The anticipated recovery in automotive and continued good underlying demand in its key industrial segments, such as robotics and wind power, should be positive catalysts for Kendrion’s share price and help narrow the valuation gap with peers. Kendrion is currently valued at an 11% discount to peers on 2022e EV/EBITDA, which in part could be a result of lower profitability and a misperception that the company is predominantly a supplier to the traditional automotive sector. We value Kendrion at around €28 per share based on the average of historical multiples (€28), DCF (€29) and peer comparison (€26). Our model is purely based on organic growth although we do not rule out that the company will strike again on the M&A front over the next few years, after the relatively large acquisition of INTORQ in early 2020.

Financials: Recovery expected as of 2021

Kendrion has faced two years of declining organic revenue growth due to the slowdown in automotive and the coronavirus pandemic. As of 2021, we expect improving results, driven by the fading effect of the pandemic and positive trends towards electrification in both automotive and industry pushing high underlying demand. For FY21–23 our estimates currently assume a revenue CAGR of 9%, an EBITDA CAGR of 16% and an EPS CAGR of 33%.

With a net debt level of €103m, net debt/EBITDA was 2.3 in 2020 while the equity ratio was 47%. The company’s balance sheet offers ample room for the financing of organic revenue growth with free cash flow estimated to increase to more than €26m in 2023. The funds available for acquisitions are building up again, although in the past the company has also used equity financing.

Sensitivities: Upside and downside risks

With an exposure to the automotive and other industrial segments, Kendrion is dependent on the economic cycles in these segments.

We see the following triggers to Kendrion’s investment case and our forecasts: a faster than anticipated increase in the penetration of electric vehicles; a higher government push to lower CO2 emissions faster; higher operating leverage than anticipated; and a faster expansion in China.

The downside risks include: a longer drag from the pandemic on the overall economic environment and investment climate; a prolonged shortage of materials; increased competition in the actuator segment; and the emergence of alternative products in the different market segments.

Company description: Electromagnetic specialist

Kendrion focuses on the development, production and marketing of high-quality electromagnetic systems and components for industrial and automotive applications. An actuator is a mechanical device that converts (electric) energy into force or motion. Its products are used in systems such as lifts, door-locking, robots, medical equipment, wind turbines and advanced actuators for electrical and hybrid vehicles in applications such as sensor cleaning, battery cooling and acoustic alerting. Through organic growth and acquisitions, Kendrion has developed into a global player in electromagnetic systems. In 2020, the company realised revenues of €396m with 2,456 employees.

Exhibit 1: Examples of Kendrion products

Smart sensor cleaning valve block

Single disk brake for servo motor

Valves for active damping

Source: Kendrion

Focus on automotive and industrial applications

In January 2020, Kendrion acquired industrial brakes specialist INTORQ and total revenues are now evenly spread over automotive and industrial applications. Looking at profitability, Industrial traditionally realises higher margins than Automotive and this difference is amplified by the pandemic, as can be seen in Exhibit 3 with Industrial representing 65% of EBITDA in FY20. Automotive realised €206m in revenues in FY20 and represented 52% of total. This division is focused on drive systems, fluid control and smart actuation technologies and offers solutions for passenger cars (two-thirds of Automotive) and commercial vehicles (one-third of Automotive). Industrial realised €190m in revenues in FY20, represented 48% of total. This division can be split in Industrial Brakes (55%) and Industrial Actuators & Controls (45%). In 2020, the acquisition of INTORQ significantly strengthened Kendrion’s position in industrial brakes. With annual revenues of around €54m, INTORQ added 13% to Kendrion’s revenues in 2020 and around 35% to the Industrial division (see section ‘Active M&A strategy’ on page 6-7 for more information on INTORQ).

Exhibit 2: FY20 revenue spread of activities

Exhibit 3: FY20 EBITDA spread of activities

Source: Kendrion, Edison Investment Research

Source: Kendrion

Exhibit 2: FY20 revenue spread of activities

Source: Kendrion, Edison Investment Research

Exhibit 3: FY20 EBITDA spread of activities

Source: Kendrion

Kendrion’s products are used in a wide range of applications, in both the Automotive and Industrial segments, which are shown in Exhibit 4.

Exhibit 4: Overview of applications

Automotive

Industrial

Active suspension systems

Access control systems

Belt damping systems

Aircraft interiors

Engine brakes

Elevator systems

Engine management

Energy generation and distribution

Fuel systems

Food and beverage industry

Hydraulics

Industrial appliances

Acoustic vehicle alerting systems

Industrial automation

Thermal management

Intralogistics

Sensor cleaning systems

Medical equipment

Transmission

Robotics

Safety systems

Textile machinery

Wind Power

Automotive

Active suspension systems

Belt damping systems

Engine brakes

Engine management

Fuel systems

Hydraulics

Acoustic vehicle alerting systems

Thermal management

Sensor cleaning systems

Transmission

Industrial

Access control systems

Aircraft interiors

Elevator systems

Energy generation and distribution

Food and beverage industry

Industrial appliances

Industrial automation

Intralogistics

Medical equipment

Robotics

Safety systems

Textile machinery

Wind Power

Source: Kendrion

The largest part of Kendrion’s revenues still comes from Germany (39% of revenues), where the roots of the company’s electromagnetic systems lie. In recent years, Kendrion has focused on growing its business outside Germany and now it generates 30% of revenues in the rest of Europe, 15% in the Americas and 16% in Asia (see Exhibit 5).

Exhibit 5: Geographical spread of revenues, FY20

Total revenues

Automotive

Industrials

Source: Kendrion

Kendrion serves a wide range of customers all over the world, the top customers in each segment are listed in the Exhibit below. In 2020, three customers represented more than 5% of total revenues, being Volkswagen and Bilstein within Automotive and Siemens within Industrial. Within Automotive, the top 15 customers represent three-quarters of divisional revenues, within Industrial Brakes half and within Industrial Actuators and Controls one-third.

Exhibit 6: Overview of customers

Automotive

Industrial

Continental

Bosch Rexroth

Daimler Group

Collins Aerospace

Danfoss

Dräger

Delphi

Eaton Corp

FCA

Euchner

Ford

Fresenius

Great Wall Motors

Lenze

Hyundai Kia

Oerlikon

KYB

PerkinElmer

Stanadyne

Schindler

ThyssenKrupp Bilstein

Siemens

Volkswagen Group

ST Drives

ZF Friedrichshafen

Stoll

Automotive

Continental

Daimler Group

Danfoss

Delphi

FCA

Ford

Great Wall Motors

Hyundai Kia

KYB

Stanadyne

ThyssenKrupp Bilstein

Volkswagen Group

ZF Friedrichshafen

Industrial

Bosch Rexroth

Collins Aerospace

Dräger

Eaton Corp

Euchner

Fresenius

Lenze

Oerlikon

PerkinElmer

Schindler

Siemens

ST Drives

Stoll

Source: Kendrion

Within Automotive, the contracts are typically running for around seven years, which is the lifetime of a car model. Volumes are relatively large and production is highly automated. The ramp-up of new orders can result in a lumpy development in revenues. Within Industrial, contracts tend to be shorter and Kendrion has a broad roster of clients with relatively smaller volumes when compared to automotive. Production has been increasingly automated when sufficient volumes allow.

Kendrion’s competitive advantages can be described as follows:

High quality products supported by high level of R&D spending, which is around 6–7% of annual revenues. Only a small part of this amount is capitalised on its balance sheet.

Scale benefits as Kendrion is one of the largest players in the electromagnetic systems market in the world.

Global presence to serve customers worldwide, with the company having strong positions in Europe and the United States and is increasing its presence in Asia.

Strategy

At its capital markets day (CMD) in September 2020, Kendrion presented its three growth areas.

First, Automotive will benefit from trends such as autonomous driving, electrification, connected vehicles and shared mobility. The total value of Kendrion’s products in electric and hybrid platforms is much higher than in ICE-only (Internal Combustion Engine). Based on information provided by the company, the value of Kendrion products for a combustion engine is €143, for a hybrid car €253 and for an electric car €215. Kendrion’s valves and actuators help create cleaner and more efficient internal combustion engines and a more comfortable and safer driving experience. Additional applications for electric and hybrid cars are for example sensor cleaning, battery cooling, acoustic alerting and clutches for hybrid off-highway vehicles.

Second, Industrial Brakes are expected to show more than 5% growth per annum, according to Kendrion management. Stronger expansion is anticipated in automation (including collaborative and medical robots), wind power and intra logistics (forklifts and automated guided vehicles). For the different growth rates, we refer to the section about the market, see pages 8–10.

Third, growth in China. After strong growth in recent years, Kendrion expects at least 20% per annum growth over the next five years in its Chinese operations that, including INTORQ, now represent >10% of total revenues. Focus here is on growth areas such as wind power, electrification, cleaner internal combustion engines, robotics and industrial automation. As Kendrion’s current production location is nearing full capacity, the company announced plans to more than double capacity by building a new 28,000 sq m facility in Suzhou which should be operational in 1H22. Capex for this expansion is estimated at €15m of which the largest part will fall in 2021.

For Industrial Actuators and Controls, Kendrion’s focus is on profitable business with custom-made solutions. This Industrial activity operates in segments such as energy distribution, fluid controls, medical technology and transportation applications.

Financial targets for 2025

At its CMD in September 2020, Kendrion set its financial targets for the period to 2025, thereby also considering the (anticipated) effect of the pandemic on its results.

Exhibit 7: Kendrion’s financial targets for 2025 (%)

Key performance indicators

Target 2025

Realised 2019

Realised 2020

Organic revenue growth

>5% on average

-9%

-17%

EBITDA margin

>15%

10.6%

11.3%

Return on invested capital (ROIC)

>25%

11.7%

10.8%

Payout ratio

35–50%

0%

50%

Source: Kendrion

The organic revenue growth target is 5% or more on average per annum, with 2019 as the starting point including pro forma revenues for INTORQ, thus the basis is €467m.

For 2025, management is targeting an EBITDA margin of at least 15% compared to the 11% reported in 2019.According to management, the anticipated improvement of at least 400bp should be driven by operating leverage (300bp) with the remaining 100bp expected to come from operating excellence within Automotive and synergies between industrial brakes and industrial actuators and controls. As Industrial is already at a margin of >15%, the improvement in the overall margin has to come from Automotive, which reported a margin of 7.5% in 2020. We believe that there is further upside in the Industrial margin towards 16–17%, while Automotive is potentially capable of achieving close to 15% by 2025.

Assuming that the company achieves its targets, this should result in revenues of at least €625m in 2025 and EBITDA of €94m. We prefer to be somewhat more cautious at the moment given the economic uncertainty and assume revenues of €590m and EBITDA of €86m (see pages 12–13 for our discussion on forecasts).

Kendrion is targeting a ROIC of >25% versus the reported 10.8% in 2020, which was down 90bp from 2019. When calculating invested capital Kendrion excludes acquisition-related intangibles, as these distort the trend in returns in the years of an acquisition, while returns on organic investments are normally higher than returns on acquired assets. We prefer to also look at the ROIC including all acquisition-related intangible assets (see Exhibit 8).

Exhibit 8: Kendrion ROIC

2019

2020e

2021e

2022e

2023e

2024e

2025e

Normalised invested capital, € m

274.2

323.7

334.6

340.1

341.0

343.4

347.2

Normalised invested capital excl acquisition intangibles, € m

170.4

174.3

189.0

198.3

203.0

209.2

216.8

ROIC (Kendrion definition)

11.6%

10.8%

14.4%

18.3%

21.2%

24.3%

27.4%

ROIC (Edison definition)

7.2%

5.8%

8.2%

10.6%

12.6%

14.8%

17.1%

Source: Kendrion, Edison Investment Research

The company maintained its dividend policy to distribute 35–50% of normalised net profit, which is based on the condition that the equity ratio is at least 35%. Over the last few years, the payout ratio has been around 50%, except for 2019 when the company passed the dividend payment because of the pandemic.

Active M&A strategy

Although the focus currently seems on organic growth, Kendrion may look for acquisitions from time to time as it has been the consolidator in its market segments over the past 20 years. The table below gives an overview of the acquisitions Kendrion has made in the field of electromagnetic systems since 1997.

Exhibit 9: Acquisition track record Kendrion

Year

Company

Activity

Revenues (€m)

1997

Binder Magnete

Automotive and Industrial

52

1998

Magnet and Neue Hahn

Automotive and Industrial

10

2000

Thoma Magnettechnik

Industrial

8

2007

Linnig Antriebstechnik

Commercial Vehicle

40

2008

Tri-Tech

Industrial Drive

4

2010

Magneta

Industrial Drive

9

2011

FAS controls

Passenger Cars and Commercial vehicles

25

2013

Kühnke

Automotive and Industrial

110

2020

INTORQ

Industrial Brakes

57

Source: Kendrion, Edison Investment Research

The latest acquisition, the industrial brakes specialist INTORQ, was announced in November 2019 and finalised in early 2020. INTORQ manufactures spring-applied brakes, electromagnetic brakes and clutches for electrical drive technologies. The company was on Kendrion's short-list for a long time and the timing of the acquisition had to do with the age of the owners. INTORQ has contributed significantly to Kendrion's position in industrial brakes, adding 13% to total revenues and 35% to the Industrial division. Profitability was good and comparable to Kendrion's margin in Industrial with an EBITDA margin of 13.5% in the last financial year. The acquisition is a good strategic fit for the following reasons: 1) adding position in spring applied brake technology which is complementary to Kendrion's leading position in permanent magnet brakes; 2) adding new market segments and customers for industrial brakes; 3) adding to Kendrion's position in China; 4) has better margins compared to automotive; and 5) reducing the dependency on automotive. Kendrion paid an EV of around €80m for INTORQ which implies an EV/EBITDA multiple of 10.4x for FY18/19 (financial year to April) and 8.0x when including cost synergies.

Sustainability targets

Kendrion’s global sustainability programme is part of its overall strategic plan. The company increasingly provides information about its sustainability targets and is making good progress in lowering energy consumption and emissions. Also. many of Kendrion’s products contribute to reducing the environmental impact of the vehicles and systems in which they are used, for example by energy efficiency, fuel efficiency and lowering weight. Sustainable sourcing is also part of the strategy with sourcing only from approved suppliers and regular implementation audits. The reduction in energy usage and emissions will be achieved by streamlining processes in the company’s production plants and offices. For example, the new facility in China, which will be operational in the first half of 2022, will have photovoltaic panels on the roof, which should potentially generate 1.10MWh per annum, which is up to 60% of the internal energy requirement.

Exhibit 10: Kendrion sustainability targets

Subject

Realised in 2020

Target 2023

Relative reduction in energy consumption*

-1.3%

-15%

Relative reduction in CO2 emissions*

-3.2%

-15%

Waste management

10% reduction and recycling rate at 82%

N/A

Source: Kendrion. Note: *Relative is per €m added value.

Management

Kendrion’s management board consists of a CEO and CFO. Mr Joep van Beurden has been the company’s CEO since December 2015. In his first three years he led the company’s strategy of Simplify, Focus and Grow, which resulted in less plants, less management layers and better margins. Before 2015, Joep van Beurden was CEO of UK-listed CSR for about eight years and CEO of NexWave for about three years. Before that he had roles at Royal Dutch, Philips, Canesta and McKinsey.

Mr Jeroen Hemmen was appointed CFO in July 2019. He joined Kendrion in 2005 and occupied several financial roles such as group treasurer, group controller, finance director industrials and finance director automotive. Before 2005, Jeroen Hemmen held financial planning and treasury roles at Rabobank and AVEBE.

Shareholders

Kendrion has been listed on the Amsterdam Stock Exchange since 2001. Currently there are 14.9m shares outstanding and this amount has gradually increased over the past few years. In 2017, Kendrion started a share buyback programme to mitigate the impact of stock dividend and share-based payments to management. In 2019 Kendrion issued 10% new equity for the financing of the INTORQ acquisition, adding 1.4m shares. Almost 51% of the shares are in the hands of seven shareholders, listed in the Exhibit below, leaving a free float of 49%.

Exhibit 11: Shareholder overview

Shareholder

Stake

Latest filing date

Type of investor

Teslin Capital Management

15.1%

14-Jun-19

Family office (NL)

Kempen Capital Management

10.1%

26-May-20

Institutional investor (NL)

Fidelity International Limited

6.8%

25-Mar-21

Institutional investor (US)

Invesco

5.4%

15-May-20

Institutional investor (UK)

Cross Options

5.4%

8-May-17

Family office (NL)

T. Rowe Price

5.0%

5-May-17

Institutional investor (UK)

Midlin

3.1%

11-Dec-20

Family office (NL)

Total

50.8%

Source: AFM (Dutch Authority for the Financial Markets)

Market

Public information about the electromagnetic systems market is scarce. According to Market Research Future, the global actuators market is expected to grow at a CAGR of around 5.2% during the period 2017–2025, which is broadly in line with Kendrion’s growth target.

Competition

Kendrion entered the electromagnetic systems market in 1997 through the acquisition of Binder Magnete and through organic growth and acquisitions it has developed into a global player in the chosen market niches for electromagnetics. The electromagnetic systems market has its origin in Germany, hence most of the competitors are from this region. The market for actuators is very fragmented with mainly family-owned businesses. The Exhibit below shows a list of European players within this market segment, with their revenues at pre-covid level as 2020 results are not available yet.

Exhibit 12: Competitors in electromagnetic systems

Company

Country

Ownership

Revenues (€m)

Kendrion

NL

Listed

396

Magnet Schultz

DE

Family-owned

395

ETO Gruppe

DE

Family-owned

392

Thomas Magnete

DE

Family-owned

190

RAPA

DE

Family-owned

186

Mechatronic Systems GmbH

DE

Family-owned

91

NASS Magnet

DE

Family-owned

50

Source: Kendrion, Edison Investment Research, www.unternehmensregister.de

Growth expectations per market segment

Kendrion is well positioned to benefit from trends such as electrification and industrial automation. Several drivers for growth are saving fuel, lowering weight and improving comfort and safety.

Kendrion’s expectation of realising 5% organic revenue growth on average over the period 2019–2025 is based on strong underlying demand in many of its chosen market segments. Below we describe the expected growth for the different market segments.

Automotive: Focus on the car of the future

The automotive market was weaker in 2019 and the pandemic worsened the situation in 2020. Based on information from IHS Markit, total car volumes globally declined 5.5% in 2019 and 16% in 2020 (c 20% declines in the United States and Europe). Kendrion reported a decline in automotive of 20% in 2020 but witnessed a strong end to the year with revenues in Q420 only down 5% y-o-y after the decline of 44% in the second quarter. IHS Markit expects a recovery in global cars sales of 14% in 2021 followed by growth of 4.5% in 2022.

Kendrion traditionally had significant exposure to the diesel segment but that has declined over the last few years. Currently, €25–30m of revenues relate to diesel engines in passenger cars and €10-15m to trucks where diesel is still stable. Due to the increasing penetration of electric cars, diesel is set to disappear over time, although the pace of decline is unpredictable. If Kendrion’s diesel turnover would disappear over the next 10–15 years, it will only have an impact on revenues of <1% per year on average. Also, this effect is included in Kendrion’s financial targets and diesel projects will be phased out and replaced by newer technologies.

With the total car market growing modesty over the next few years, the mix will obviously change in favour of electric cars. According to BloombergNEF (New Energy Finance), growth in e-cars will be 38% per annum until 2025 and 31% per annum until 2030, with the number of e-cars growing from 1.7m in 2020 to 8.5m in 2025 and 26m in 2030.

With existing but particularly with relatively new products, Kendrion is focusing on the car of the future, the fully electric and autonomous one. The in-car architecture will completely change with one central computer system managing all different functions. In the period 2018–2020, Kendrion received project nominations in automotive for a total of €900m of which 40% is related to ICE (and less than 20% to the combustion engine of passenger cars/light vehicles) and 60% is related to projects that are independent of the type of engine.

When looking at automotive, new applications are normally first implemented in high-end car models before being rolled out to all models over a period of 10–15 years.

The number of actuators in a car has significantly increased over the past few years and this trend is set to continue. Below we list a few examples of (relatively) new products:

Active damping systems (infinitely variable damper control that can adapt the damping force for each wheel individually within a few milliseconds)

Electric tailgate (a power-operated boot lid that makes loading the vehicle easier)

Sound systems, which add sound to an otherwise silent electric car, have high potential as it will be obligatory for electric cars to make a noise in city centres given safety standards

Sensor cleaning (an autonomous car with dirty sensors cannot drive)

Battery cooling via water valves

Hybrid clutches for commercial vehicles

Industrial: Focus on high growth niche segments

Within Industrial Brakes, Kendrion is active in many different segments as shown in Exhibit 13.

Exhibit 13: Industrial Brakes focus segments

Source: Kendrion

Kendrion expects above 5% growth on average in the Industrial Brakes segment with above-average growth in the following segments, which represent around 40% of segmental revenues.

Robotics: according to the International Federation of robotics, the robotic market will show a recovery in 2021 but a full recovery towards pre-pandemic levels might take until 2022 and 2023. The long-term growth prospects are still good, with the estimated 10% growth driven by further industrial automation. Kendrion’s brakes are used in servo motors which keep the robot arm in place. Kendrion aims to double its revenues in robotic applications in the next 5 years.

Wind power: according to the Global Wind Energy Council the global capacity for wind energy is expected to grow at a CAGR of 7% in the period 2021–25, with 8% growth in Asia and 10% in Europe. Kendrion’s products are used in the Azimut drive (to adjust position in response to changes in wind direction) and pitch control (to adjust the angle of the rotor blades).

Forklifts: according to IDTechEx, the global forklift battery market is expected to show a CAGR of 20% in the period 2018–2025 with much stronger growth in the lithium-ion battery segment of over 65% growth pa, driven by the replacement of lead-acid batteries. Kendrion’s products are used for holding and emergency stopping.

AGVs: according to Grand View Research, the global market for automated guided vehicles (AGVs) had a value of US$3.0bn in 2019 and is expected to show a CAGR of 14.1% in 2020–27. According to Mordor Intelligence, the European market for AGVs (€0.9bn in 2019) will show a CAGR of 16% until 2025. Market growth is driven by further automation, especially in retail, automotive and pharma, and within the market lead-acid batteries will be gradually replaced by lithium-ion ones.

Within Industrial Actuators and Control, the focus is on profitable growth in a range of industrial segments. This division comprises four market segments:

1.

Electrical Automation, representing 37% of divisional revenues and including Food & Beverage Machinery, Textile Machinery and other Machinery;

2.

Infrastructure (28%), including Energy Distribution and Access Control;

3.

Appliances (24%), with Medical and Non-Medical systems; and

4.

Mobility (11%), including aircraft applications.

Valuation

We value Kendrion based on historical valuation, DCF and peer comparison, with the average pointing at a value per share of around €28. The company also offers a dividend payout of 50%, reflecting a current dividend yield of 2%.

Exhibit 14: Valuation methods Kendrion

Valuation method

Edison assumptions

Equity value per share (€)

Historical valuation

2022e EV/EBITDA in line with historical multiples

28.3

DCF

Terminal growth 1.5%, terminal EBITA margin 7.5%

29.0

Peer group

2022e EV/EBITDA in line with peers

26.3

Average value per share

27.9

Current share price

22.5

Upside/(downside)

24%

Source: Edison Investment Research

Historical multiples

On EV/EBITDA 2022e Kendrion is valued at a discount of 16% compared to its historical valuation, with this discount increasing to 28% for 2023e. As the company is expected to recover from the pandemic during 2021, its results in 2022 will most likely reflect a more normalised year with stronger revenue growth and improving margins. We estimate an EBITDA margin of 13.0% in 2022 which is higher than the company’s 10-year average of 12% and we believe that the discount to the historical valuation is unjustified. If we assume a valuation in line with its average historical EV/EBITDA multiple for 2022e the value per share would be €28.3.

Exhibit 15: Historical multiples

Historical valuation
(eight years)

Current valuation

Premium/(discount)
versus average

Average

Min

Max

2021e

2022e

2023e

2022e

2023e

EV/sales

1.0

0.9

1.4

1.1

0.9

0.8

(5%)

(15%)

EV/EBITDA

8.6

6.5

10.5

8.8

7.2

6.2

(16%)

(28%)

P/E

18.5

12.4

23.1

22.7

15.3

12.2

(17%)

(34%)

Assumed premium, EV/EBITDA

0%

0%

Value per share, €

28.3

33.7

Source: Kendrion, Edison Investment Research

DCF

Our discounted cash flow model is based on the following assumptions:

We only consider organic revenue growth although we do expect the company to remain active in M&A.

Terminal revenue growth rate of 1.5% as the proportion of higher growth segments is increasing.

Terminal EBITA margin of 7.5% as Kendrion is well on its way to margin recovery. This corresponds to an EBITDA margin of around 12.5%, below the company’s target of at least 15% for 2025. If Kendrion succeeds in realising its target there is upside to our terminal margin assumption, which is essentially our ‘mid-cycle’ estimate.

Effective tax rate of 25%, which reflects Kendrion’s country mix.

We use a Beta of 1.25 to reflect the relatively low liquidity of the shares.

We set a risk-free rate and market equity risk premium of 2.0% and 5.0%, delivering a WACC of 7.1%.

Our DCF model suggests a fair value for Kendrion of €29.0 per share. The sensitivity analyses in Exhibits 16 and 17 show the fair value outcome under different sales growth, EBITA margins and WACC scenarios.

Exhibit 16: Kendrion sensitivity analysis, WACC versus terminal growth rate

Value per share, €

Terminal growth rate

0.5%

1.0%

1.5%

2.0%

2.5%

WACC

6.1%

31.5

34.2

37.5

41.6

46.9

6.6%

28.0

30.2

32.8

36.0

39.9

7.1%

25.1

26.9

29.0

31.5

34.5

7.6%

22.6

24.1

25.8

27.8

30.2

8.1%

20.4

21.7

23.1

24.7

26.6

Source: Edison Investment Research

Exhibit 17: Kendrion sensitivity analysis, WACC versus EBITA margin

Value per share, €

EBITA margin

6.0%

6.5%

7.0%

7.5%

8.0%

WACC

6.1%

32.4

35.0

37.5

40.1

42.6

6.6%

28.4

30.6

32.8

35.1

37.3

7.1%

25.0

27.0

29.0

31.0

32.9

7.6%

22.3

24.0

25.8

27.5

29.3

8.1%

19.9

21.5

23.1

24.7

26.2

Source: Edison Investment Research

Peer comparison

There are no other listed companies matching the profile of Kendrion. For comparison we have selected several industrial companies and several automotive companies and used the blended average. Kendrion is valued at a discount to the peer group based on 2022e EV/EBITDA, which in part could be a result of lower profitability and a misperception that the company is predominantly a supplier to the traditional automotive sector. As it is gradually closing the margin gap to peers and is diversifying into new, faster growing segments geared towards electrification, we believe this should justify a valuation at least on par with peers. When assuming a valuation in line with peers on EV/EBITDA 2022e, the implied value per share would be €26.3.

Exhibit 18: Peer comparison

Company name 

Currency

Share

Market cap (local FX)

EV/Sales (x)

EV/EBITDA (x)

EBITDA margin

price

2021e

2022e

2023e

2021e

2022e

2023e

2022e

Aalberts

44.43

4,918

1.9

1.8

1.7

10.7

9.6

9.1

18%

Emerson Electric

US$

91.72

55,035

3.3

3.0

2.8

14.8

13.3

12.0

22%

SKF

NOK

249.8

113,597

1.6

1.5

1.4

9.2

8.3

7.5

17%

TKH

41.86

1,739

1.5

1.4

1.3

10.4

8.9

7.5

15%

Industrial average

2.1

1.9

1.8

11.3

10.0

9.0

18%

BorgWarner

US$

47.88

11,444

1.0

0.9

0.9

7.0

6.2

5.6

15%

Continental AG

114.24

22,873

0.8

0.7

0.7

6.3

5.4

4.6

14%

ElringKlinger

12.65

801

0.9

0.8

0.7

7.5

6.5

5.4

13%

Hella

45.22

5,024

0.9

0.8

0.8

7.4

6.3

5.4

13%

Automotive average

0.9

0.8

0.8

7.0

6.1

5.2

14%

Universe average

1.5

1.4

1.3

9.2

8.1

7.1

16%

Kendrion

22.5

336

1.1

0.9

0.8

8.8

7.2

6.2

13%

Premium/(discount)

-30%

-32%

-34%

-4%

-11%

-13%

Assumed premium/(discount)

0%

0%

0%

0%

Implied value per share (€)

36.5

37.4

26.3

26.7

Source: Refinitiv, Edison Investment Research. Note: Prices as at 16 April 2021.

Financials

With its exposure to the automotive and other industrial segments, the effect of the coronavirus pandemic was unavoidable and revenues and profitability came under significant pressure in FY20. Total revenues declined 4% on a reported basis to €396m including the €54m contribution from INTORQ (or a contribution of 13%). Revenues declined 17% organically with a 20% decline in Automotive and 11% decline in Industrials. Kendrion implemented cost-saving measures to mitigate the effect of the pandemic and also made use of Kurzarbeit in Germany (short-time work) which saved an estimated €8m on personnel costs. With a strong contribution from INTORQ, which realised an above-average margin, EBITDA increased by 2% to €44.6m in 2020, driving a margin increase of 70bp. Automotive reported a lower normalised EBITDA margin of 7.5% (-210bp) while margins in Industrial were strong and ended up at 15.3% (+320bp), with a margin in excess of 16% in the second half.

Kendrion is positive about its long-term growth prospects but admits uncertainty in the short term. Underlying demand is strong, but a prolonged pandemic and the current shortage of components might affect the short-term performance.

Earnings: Strong recovery expected

For the years 2021 and 2022 we expect a recovery in earnings from the low level in 2020 which was caused by the pandemic. IHS Markit expects growth of 14% in global car sales in 2021 and according to Kendrion’s management, underlying demand in its segments remains high. We expect 9–10% revenue growth in 2021–22, driven by both divisions, followed by 7–8% in subsequent years. New projects will be ramped up and the doubling of capacity in China will also contribute to growth.

Several cost saving measures taken in 2020 will show their full benefit in 2021 and 2022. Total run rate savings of €4.4m were achieved in 2020 with €2m of savings falling in 2020 and the remaining €2.4m to fall in 2021. In 2020, Kendrion decided to close a plant in Austria and transfer production to other subsidiaries. Costs related to this closure are €2.5–3.0m which will be taken in 2021 and 2022. Annual savings are estimated at €2m with the full effect in 2022. Driven by higher revenue growth and cost savings we estimate an EBITDA margin improvement of 230bp to 13.6% in 2023.

Exhibit 19: Divisional forecast

Divisions (€m)

2019

2020

2021e

2022e

2023e

Automotive

259

206

227

249

269

Industrial

154

190

206

226

242

Total revenues

412

396

432

475

511

Automotive

-9%

-20%

10%

10%

8%

Industrial

-7%

24%

8%

10%

7%

Total revenue growth (%)

-8%

-4%

9%

10%

8%

Automotive

-9%

-20%

10%

10%

8%

Industrial

-4%

-11%

8%

10%

7%

Total organic revenue growth (%)

-7%

-17%

9%

10%

8%

Automotive

24.8

15.5

20.2

26.2

30.6

Industrial

18.6

29.1

31.9

35.7

38.7

Total EBITDA normalised

43.4

44.6

52.0

61.9

69.3

Automotive

9.6%

7.5%

8.9%

10.5%

11.4%

Industrial

12.1%

15.3%

15.5%

15.8%

16.0%

Total EBITDA margin (%)

10.5%

11.3%

12.0%

13.0%

13.6%

Source: Kendrion, Edison Investment Research

Kendrion’s EBITDA margin target of >15% for 2025 reflects an increase of 400bp versus 20219 of which management states 300bp is expected to come from operating leverage and the remaining 100bp from further efficiency improvements.

Financial expenses are expected to gradually decline in line with the lower net debt over the years. The rax rate is expected to remain stable at around 25% which reflects Kendrion’s country mix. This results in a CAGR in our estimated EPS of 33% in 2021–23.

Exhibit 20: Kendrion profit & loss account

(€m)

2019

2020

2021e

2022e

2023e

Revenues

412.4

396.4

432.2

475.5

511.2

Growth y-o-y

-8.1%

-3.9%

9.0%

10.0%

7.5%

Organic growth

-9.0%

-17.0%

9.0%

10.0%

7.5%

Gross margin

46.9%

48.2%

48.3%

48.5%

48.7%

EBITDA normalised

43.8

44.6

52.0

61.9

69.3

EBITDA growth

-25%

2%

17%

19%

12%

EBITDA margin

10.6%

11.3%

12.0%

13.0%

13.6%

Depreciation

(24.0)

(25.7)

(24.8)

(25.7)

(26.3)

EBITA normalised

19.8

18.9

27.3

36.2

43.1

Growth y-o-y

-44%

-5%

44%

33%

19%

EBITA margin

4.8%

4.8%

6.3%

7.6%

8.4%

Amortisation, acquisition related

-(.2)

(4.4)

(3.8)

(3.8)

(3.8)

EBIT normalised

17.6

14.5

23.5

32.4

39.3

Restructuring and other items

(5.7)

(2.8)

(2.0)

(1.0)

0.0

Impairment

0.0

-1.6

0.0

0.0

0.0

EBIT reported

11.9

10.1

21.5

31.4

39.3

Financial income and expenses

(0.9)

(4.4)

(3.8)

(3.3)

(2.8)

Pre-tax income

11.0

5.7

17.7

28.1

36.5

Taxes

(2.7)

(1.4)

(4.3)

(6.9)

(9.0)

Tax rate

25%

25%

25%

25%

25%

Net profit

8.3

4.3

13.3

21.2

27.5

Net profit adjusted

12.6

11.7

14.8

21.9

27.5

Growth y-o-y

-44%

-7%

27%

48%

25%

Shares outstanding, average (m)

13.5

14.8

14.93

14.93

14.93

EPS reported (€)

0.62

0.29

0.89

1.42

1.84

EPS normalised (€)

0.94

0.79

0.99

1.47

1.84

DPS (50% payout ratio of EPS normalised)

0.00

0.40

0.50

0.73

0.92

Source: Kendrion, Edison Investment Research

Cash flow to be optimised

Free cash flow increased in 2020, partly helped by lower working capital due to higher stock turnover. Normalised working capital as a percentage of revenues was 10.4%. Strict working capital management remains high on management’s agenda and we see some further improvement over the next few years.

Capex has been below depreciation in the last two years, due to the weaker market conditions. In the period 2016–18, Kendrion made large investments in new products and increased capacity and as a result maintenance capex should not exceed depreciation like it did in those years (15–20% above depreciation). We expect maintenance capex to remain relatively stable as a percentage of revenues and to amount to €24–28m in 2021–23. Kendrion has announced a doubling of its capacity in China which should be operational in 1H22. Capex needed for this expansion is estimated at €15m, most of which will be spent in 2021. Therefore, total capex will be higher in 2021 and 2022 before returning to normal levels of maintenance capex.

Kendrion’s dividend policy is for a payout ratio of 35–50% of normalised net profit. Over the past five years, except for the 2019 dividend due to the pandemic, Kendrion has paid out around 50% of normalised net profit.

Due to improving results and relatively stable capex as a percentage of revenues, we expect the company’s free cash flow generation to strongly improve over the next few years towards more than €26m in 2023.

Exhibit 21: Kendrion cash flow statement

(€m)

2019

2020

2021e

2022e

2023e

EBIT

11.2

9.8

21.5

31.4

39.3

Depreciation

24.0

25.7

24.8

25.7

26.3

Amortisation

2.2

6.8

3.8

3.8

3.8

Change in provisions

(1.6)

(2.0)

0.0

0.0

0.0

Change in working capital

13.0

5.4

(3.7)

(4.0)

(3.1)

Other

(7.9)

(3.9)

(8.1)

(10.2)

(11.8)

Cash flow from operations

40.9

41.8

38.2

46.8

54.4

Capex

(20.0)

(16.0)

(34.3)

(31.1)

(27.9)

Acquisitions

0.0

(77.7)

0.0

0.0

0.0

Disposals

0.1

(0.5)

0.0

0.0

0.0

Cash flow from investments

(19.9)

(94.2)

(34.3)

(31.1)

(27.9)

Change in interest bearing debt

(41.3)

55.3

(5.0)

(5.0)

(10.0)

Change in equity

23.3

0.0

0.0

0.0

0.0

Dividend paid

(8.1)

0.0

(6.0)

(7.4)

(11.0)

Cash flow from financing

(24.1)

58.3

(11.0)

(12.4)

(21.0)

Change in cash

(3.1)

5.9

(7.0)

3.2

5.6

Free cash flow

20.9

25.8

4.0

15.7

26.6

Source: Kendrion, Edison Investment Research

Balance sheet

In August 2020, triggered by the (anticipated) impact of COVID-19, Kendrion agreed with its banks upon adjusted covenants (including IFRS 16): net debt/EBITDA of 4.7 at year-end 2020, 5.8 in Q121 declining to 3.25 in Q421 and onwards. In 2020, net debt increased from €47m to €103m, largely due to the financing of the acquisition of INTORQ. Net debt/EBITDA increased from 1.1 in 2019 to 2.3 in 2020 and was well within the covenant level of 4.7.

Exhibit 22: Kendrion balance sheet

(€m)

2019

2020

2021e

2022e

2023e

Intangible fixed assets

115.5

158.1

154.4

150.8

147.4

Tangible fixed assets

111.4

118.7

128.1

133.3

134.5

Financial fixed assets

17.9

22.8

22.8

22.8

22.8

Inventories

56.3

61.7

67.3

73.5

78.6

Receivables

42.9

47.2

51.5

56.6

60.9

Other current assets

6.9

7.6

8.3

9.1

9.8

Cash

7.1

13.0

6.0

9.2

14.8

Total assets

358.0

429.1

438.3

455.4

468.8

Equity

203.5

203.4

210.8

224.5

241.1

Payables

41.3

44.0

48.0

52.8

56.7

Other current liabilities

26.9

31.9

34.8

38.3

41.1

Short-term interest-bearing debt

5.6

12.0

12.0

12.0

12.0

Long-term interest-bearing debt

48.9

104.2

99.2

94.2

84.2

Provisions and other

31.8

33.6

33.6

33.6

33.6

Total balance sheet

358.0

429.1

438.3

455.4

468.8

Net working capital

37.9

40.6

44.3

48.2

51.4

Net debt

47.4

103.2

105.2

97.0

81.4

Net debt / EBITDA

1.1

2.3

2.0

1.6

1.2

EBITDA / Net interest

48.7

10.1

13.7

18.8

24.8

Capital employed

264.8

317.4

326.8

332.3

333.2

ROIC (Kendrion definition)

19.7%

11.6%

10.8%

14.4%

18.3%

ROIC (Edison definition)

12.4%

7.2%

5.8%

8.2%

10.6%

Equity ratio

57%

47%

48%

49%

51%

Source: Kendrion, Edison Investment Research

Intangible assets amount to €158m, or 37% of the balance sheet total, which is largely goodwill (73%) and the carrying amount of customer relationships (21%). Capitalised development costs amounted to €5m in 2020. Tangible assets of €119m include leases for an amount of €14m.

Driven by increasing cash flow generation, we expect Kendrion’s financial position to further improve over the next few years. Net debt/EBITDA is expected to further decline to 1.2 in 2023 and the equity ratio is expected to improve to 51% in 2023.

With net debt further declining, the funds available for potential acquisitions will increase again without the need for another equity issue (see Exhibit 23).

Exhibit 23: Financial room for acquisitions

(€m)

2020

2021e

2022e

2023e

Net debt

103.2

105.2

97.0

81.4

EBITDA

44.6

52.0

61.9

69.3

Net debt/EBITDA

2.3

2.0

1.6

1.2

Financial room at net debt/EBITDA of 2.5

8

25

58

92

Potential acquired revenues at EV/Sales of 0.9

9

28

64

102

Source: Kendrion, Edison Investment Research


Exhibit 24: Financial summary

€m

2018

2019

2020

2021e

2022e

2023e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

448.6

412.4

396.4

432.2

475.5

511.2

Gross Profit

211.9

193.3

191.0

208.8

230.6

249.0

EBITDA normalised

58.5

43.8

44.6

52.0

61.9

69.3

EBITDA reported

49.7

38.1

40.2

50.0

60.9

69.3

Depreciation & Amortisation

(23.1)

(24.0)

(25.7)

(24.8)

(25.7)

(26.3)

EBIT normalised

35.4

19.8

18.9

27.3

36.2

43.1

Amortisation of acquired intangibles

(2.3)

(2.2)

(4.4)

(3.8)

(3.8)

(3.8)

Exceptionals (Edison definition)

(8.8)

(5.7)

(4.4)

(2.0)

(1.0)

0.0

EBIT reported

24.3

11.9

10.1

21.5

31.4

39.3

Net Interest

(3.1)

(0.9)

(4.4)

(3.8)

(3.3)

(2.8)

Participations

(0.1)

0.0

0.0

0.0

0.0

0.0

Profit Before Tax

21.1

11.0

5.7

17.7

28.1

36.5

Reported tax

(7.3)

(2.7)

(1.4)

(4.3)

(6.9)

(9.0)

Profit After Tax

13.8

8.3

4.3

13.3

21.2

27.5

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

22.6

12.6

11.7

14.8

21.9

27.5

Net income (reported)

13.8

8.3

4.3

13.3

21.2

27.5

Average number of shares (m)

13.4

13.5

14.8

14.9

14.9

14.9

Total number of shares (m)

13.5

14.9

14.9

14.9

14.9

14.9

EPS normalised (€)

1.69

0.94

0.79

0.99

1.47

1.84

EPS reported (€)

1.03

0.62

0.29

0.89

1.42

1.84

DPS (€)

0.87

0.00

0.40

0.50

0.73

0.92

Revenue growth

-2.9%

-8.1%

-3.9%

9.0%

10.0%

7.5%

Gross Margin

47.2%

46.9%

48.2%

48.3%

48.5%

48.7%

EBITDA Margin

13.0%

10.6%

11.3%

12.0%

13.0%

13.6%

Normalised Operating Margin

7.9%

4.8%

4.8%

6.3%

7.6%

8.4%

BALANCE SHEET

Fixed Assets

246.4

244.8

299.6

305.3

306.9

304.7

Intangible Assets

116.1

115.5

158.1

154.4

150.8

147.4

Tangible Assets

113.6

111.4

118.7

128.1

133.3

134.5

Investments & other

16.7

17.9

22.8

22.8

22.8

22.8

Current Assets

128.9

113.2

129.5

133.0

148.5

164.1

Stocks

63.5

56.3

61.7

67.3

73.5

78.6

Debtors

48.0

42.9

47.2

51.5

56.6

60.9

Other current assets

7.2

6.9

7.6

8.3

9.1

9.8

Cash & cash equivalents

10.2

7.1

13.0

6.0

9.2

14.8

Current Liabilities

81.2

73.8

87.9

94.8

103.0

109.9

Creditors

41.7

41.3

44.0

48.0

52.8

56.7

Other current liabilities

27.3

26.9

31.9

34.8

38.3

41.1

Short term borrowings

12.2

5.6

12.0

12.0

12.0

12.0

Long Term Liabilities

112.0

80.7

137.8

132.8

127.8

117.8

Long term borrowings

78.5

48.9

104.2

99.2

94.2

84.2

Other long term liabilities

33.5

31.8

33.6

33.6

33.6

33.6

Shareholders' equity

182.1

203.5

203.4

210.8

224.5

241.1

Balance sheet total

375.3

358.0

429.1

438.3

455.4

468.8

CASH FLOW

Op Cash Flow before WC and tax

51.4

36.1

40.6

50.0

60.9

69.3

Working capital

(8.3)

13.0

5.4

(3.7)

(4.0)

(3.1)

Exceptional & other

Tax

(4.2)

(6.1)

(1.3)

(4.3)

(6.9)

(9.0)

Net interest

(2.2)

(2.1)

(2.9)

(3.8)

(3.3)

(2.8)

Net operating cash flow

36.7

40.9

41.8

38.2

46.8

54.4

Capex

(31.4)

(20.0)

(16.0)

(34.3)

(31.1)

(27.9)

Acquisitions/disposals

(2.6)

0.1

(78.2)

0.0

0.0

0.0

Equity financing

(6.6)

23.3

0.0

0.0

0.0

0.0

Dividends

(5.8)

(8.1)

0.0

(6.0)

(7.4)

(11.0)

Other

(0.2)

(3.1)

(3.4)

0.0

0.0

0.0

Net Cash Flow

(9.9)

33.1

(55.8)

(2.0)

8.2

15.6

Opening net debt/(cash)

70.6

80.5

47.4

103.2

105.2

97.0

Closing net debt/(cash)

80.5

47.4

103.2

105.2

97.0

81.4

Source: Kendrion, Edison Investment Research

Contact details

Revenue by geography

Kendrion N.V.

Vesta Building - 5th floor

Herikerbergweg 213
1101 CN Amsterdam
The Netherlands
+31(0)850731500
www.kendrion.com

Contact details

Kendrion N.V.

Vesta Building - 5th floor

Herikerbergweg 213
1101 CN Amsterdam
The Netherlands
+31(0)850731500
www.kendrion.com

Revenue by geography

Management team

CEO: Joep van Beurden

CFO: Jeroen Hemmen

Mr Joep van Beurden has been the company’s CEO since December 2015. He was previously CEO of UK-listed CSR for around eight years and CEO of NexWave for about three years.

Mr Jeroen Hemmen was appointed CFO in July 2019 after holding several finance roles at Kendrion since 2005.

Management team

CEO: Joep van Beurden

Mr Joep van Beurden has been the company’s CEO since December 2015. He was previously CEO of UK-listed CSR for around eight years and CEO of NexWave for about three years.

CFO: Jeroen Hemmen

Mr Jeroen Hemmen was appointed CFO in July 2019 after holding several finance roles at Kendrion since 2005.

Principal shareholders

(%)

Teslin Capital Management

15.1%

Kempen Capital Management

10.1%

FIL

6.8%

Invesco

5.4%

Cross Options

5.4%

T. Rowe Price

5.0%

Midlin

3.1%


General disclaimer and copyright

This report has been commissioned by Kendrion and prepared and issued by Edison, in consideration of a fee payable by Kendrion. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Kendrion and prepared and issued by Edison, in consideration of a fee payable by Kendrion. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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