Currency in EUR
Last close As at 24/03/2023
EUR15.14
▲ 0.40 (2.71%)
Market capitalisation
EUR220m
Research: Industrials
Kendrion is a global player in high-quality electromagnetic systems that optimise safety, performance and comfort in automotive and industrial applications. Kendrion expects current positive economic activity levels to continue, but management is cautious about the impact of supply chain constraints and volatile order patterns. Underlying trends such as autonomous driving, electrification and industrial automation continue to support underlying growth.
Kendrion |
Automotive and industrial in recovery mode
Industrial engineering |
Deutsches Eigenkapitalforum 2021
3 November 2021 |
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Kendrion is a global player in high-quality electromagnetic systems that optimise safety, performance and comfort in automotive and industrial applications. Kendrion expects current positive economic activity levels to continue, but management is cautious about the impact of supply chain constraints and volatile order patterns. Underlying trends such as autonomous driving, electrification and industrial automation continue to support underlying growth.
Recovering markets in 2021
COVID-19 had a significant effect in 2020, but this year both the automotive and industrial segment show strong recovery, with industrial above pre-pandemic levels in Q3. The impact of supply chain constraints and volatile order patterns could hamper the company’s performance in the short term. We currently expect revenue growth of 16.5% for FY21, with automotive growing 15.5% and industrial 17.5%. From FY22 onwards, we expect overall revenue growth of 6–8%, driven by underlying market trends and new products coming to market.
Many positive long-term trends
In its strategic plans until 2025, Kendrion has selected three growth areas: automotive, industrial brakes and China, with several disruptive trends supporting future growth. Automotive will benefit from autonomous driving, electrification, connected vehicles and shared mobility with higher value of Kendrion products in hybrid and electric cars compared to combustion-only cars. Industrial brakes are expected to grow by at least 5% pa, with above average growth in industrial trucks, automated guided vehicles, robotics & automation and wind power. In China, Kendrion is constructing a new manufacturing plant, which will double the total floor area to 28,000m2, planned to be fully operational after the summer in 2022. These positive long-term trends should underpin the company’s organic revenue growth target for 2019–25 of 5% pa or more on average. Operating leverage and further efficiency gains should be the drivers for an increasing EBITDA margin, with the company’s target set at 15% or more in 2025 (versus the FY20 margin of 11.3%).
Valuation shows discount to peers
We use three different methods to value Kendrion: historical multiples, discounted cash flow and peer comparison, and the average outcome points to a value of €27 per share. Kendrion is valued at a 14% discount to peers based on 2022e EV/EBITDA, which we think could diminish over time when it demonstrates accelerating growth and higher profitability.
Edison estimates
Source: Edison Group. *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items |
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Research: TMT
In H122 Datatec saw strong growth globally, with elevated demand for networking, cyber security and cloud infrastructure. The H122 results show good operational growth across the group, with a notably stronger performance from Westcon after its turnaround. Semiconductor supply-chain issues remain challenging, with the group seeing growing inventory levels and a building backlog of unfulfilled work. However, with technology trends continuing from H122, the outlook for H222 looks promising. Trading on 15.4x FY22 earnings and 3.6x FY22 EV/EBITDA, Datatec looks attractively priced, bolstered by the 512 ZAR cents (c 33 US cents) per share special dividend and with the results of management’s ongoing strategic review as potential upside for 2022.
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