XP Power — H121 order intake drives upgrades

XP Power (LSE: XPP)

Last close As at 28/03/2024

GBP10.60

−24.00 (−2.21%)

Market capitalisation

GBP257m

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Research: TMT

XP Power — H121 order intake drives upgrades

XP Power has reported another strong set of results, with H121 revenue up 14% y-o-y and normalised EPS up 33% y-o-y. The semiconductor equipment sector continues to be a strong driver of revenue and orders, and industrial technology has returned to growth. As expected, healthcare declined from the exceptional levels seen last year with demand reverting back to non-COVID applications. Overall, exceptional revenue growth and order intake drive upgrades to our forecasts, with EPS up 5.4% in FY21 and 6.9% in FY22.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

XP Power

H121 order intake drives upgrades

H121 results

Tech hardware & equipment

2 August 2021

Price

5,140p

Market cap

£1,009m

US$1.39:£1

Net debt (£m) at end H121

20.3

Shares in issue

19.6m

Free float

90%

Code

XPP

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(7.9)

1.2

35.3

Rel (local)

(8.2)

0.0

11.6

52-week high/low

5,700p

3,700p

Business description

XP Power is a developer and designer of power control solutions with production facilities in China, Vietnam and the United States, and design, service and sales teams across Europe, the United States and Asia.

Next events

Q3 trading update

11 October 2021

Analyst

Katherine Thompson

+44 (0)20 3077 5730

XP Power is a research client of Edison Investment Research Limited

XP Power has reported another strong set of results, with H121 revenue up 14% y-o-y and normalised EPS up 33% y-o-y. The semiconductor equipment sector continues to be a strong driver of revenue and orders, and industrial technology has returned to growth. As expected, healthcare declined from the exceptional levels seen last year with demand reverting back to non-COVID applications. Overall, exceptional revenue growth and order intake drive upgrades to our forecasts, with EPS up 5.4% in FY21 and 6.9% in FY22.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/19

199.9

32.3

141.4

55.0

36.4

1.1

12/20

233.3

44.3

198.4

74.0

25.9

1.4

12/21e

241.1

43.9

180.6

94.0

28.5

1.8

12/22e

252.0

47.9

198.0

98.0

26.0

1.9

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

Robust performance in H121

In H121, XP reported revenue growth of 14% y-o-y (23% constant currency (cc)), driven by 47% growth from the semiconductor manufacturing equipment sector. The company also saw improving demand from the industrial technology sector (+5% cc) while, as expected, healthcare demand reverted back to pre-COVID levels, although revenue was still 6% higher y-o-y. Strong revenue growth combined with y-o-y gross margin improvement resulted in normalised diluted EPS growth of 33% y-o-y.

Outlook: Trading ahead of consensus

Order intake was 8% higher y-o-y (17% cc), with Q2 order intake accelerating to 15% growth y-o-y from 1% in Q1. As trading has been so strong in H1, management expects to be modestly ahead of consensus for FY21, while also noting that several potential risks remain (COVID, component shortages). We have revised our forecasts to reflect higher revenues in FY21 and FY22, although in FY21 underlying revenue growth is masked by the strength of sterling versus the dollar this year. This results in EPS upgrades of 5.4% in FY21 and 6.9% in FY22.

Valuation: Semiconductor sector drives volatility

The stock is up 7% year to date, although it is down 10% from the recent peak of 5,690p reached in early July, despite continued positive news from the semiconductor sector regarding fab investment plans. On an FY21e P/E basis, XP is trading at a 17% premium to global power-converter companies but at a 2% discount to UK electronics companies, with a dividend yield at the upper end of the range. The company generates EBITDA and EBIT margins at the top end of both peer groups. Strong cash management during the crisis leaves the company well-funded to pursue both organic and acquisitive growth.

Review of H121 results

Exhibit 1: H121 results highlights

£m

H121

H120

y-o-y

Revenues

119.9

105.1

14.1%

Gross profit

55.9

47.2

18.4%

Gross margin

46.6%

44.9%

1.7%

EBITDA

28.3

23.7

19.4%

EBITDA margin

23.6%

22.5%

1.1%

Normalised operating profit

23.2

18.0

28.9%

Normalised operating margin

19.3%

17.1%

2.2%

Reported operating profit

17.1

11.3

51.3%

Reported operating margin

14.3%

10.8%

3.5%

Normalised PBT

22.5

17

32.4%

Normalised net income, after minority interest

18.5

13.8

34.1%

Reported net income, after minority interest

13.5

8.1

66.7%

Normalised diluted EPS (p)

93.3

70.2

32.9%

Reported basic EPS (p)

69.3

42.0

65.0%

Net debt

20.3

34.4

-41.0%

Source: XP Power

XP Power reported strong revenue growth for H121, up 14% y-o-y (or 23% on a constant currency (cc) basis). With an improvement in the gross margin of 1.7pp, gross profit increased 18% y-o-y. The gross margin benefited from favourable product mix and the transfer of US manufacturing to Asia, partially offset by higher freight costs. Normalised operating profit increased 29% y-o-y and the operating margin expanded by 2.2pp. The company reported an exceptional charge of £4.7m consisting of £3.7m for an ongoing legal case, £0.9m for the ongoing ERP roll-out and £0.1m fair value adjustment on currency hedge. The effective tax rate on adjusted PBT was 17.3%; guidance is for a rate of 16–18%. Normalised diluted EPS grew 33% y-o-y. The company declared a Q2 dividend of 19p, in line with our expectations, with the total dividend for H121 at 37p.

The company closed H121 with net debt of £20.3m, down from £34.4m a year ago and up from £17.9m at the end of FY20. Net debt/EBITDA at the end of H121 was 0.33x, well within its covenant maximum of 3x. Adjusted cash from operations of £26.4m was 3% higher y-o-y, after working capital consumption of £3.6m (H120: £0.8m inflow) to support customer demand, and equated to cash conversion of 113%. Capex totalled £10m in H1, with £2.2m for maintenance and to increase capacity, £3.6m for the ERP system roll-out in Asia and £4.2m capitalisation of product development costs.

Segmental performance

Exhibit 2: Revenue by vertical and geography

£m

H121

H120

y-o-y

H121

H120

y-o-y

Europe

Asia

Semi manufacturing

1.5

0.6

150.0%

Semi manufacturing

6.6

2.5

164.0%

Industrial technology

22.1

20.7

6.8%

Industrial technology

5.5

8.3

-33.7%

Healthcare

11.0

8.8

25.0%

Healthcare

2.8

2.6

7.7%

Total

34.6

30.1

15.0%

Total

14.9

13.4

11.2%

N. America

Group

Semi manufacturing

36.4

27.2

33.8%

Semi manufacturing

44.5

30.3

46.9%

Industrial technology

17.8

17.5

1.7%

Industrial technology

45.4

46.5

-2.4%

Healthcare

16.2

16.9

-4.1%

Healthcare

30.0

28.3

6.0%

Total

70.4

61.6

14.3%

Total

119.9

105.1

14.1%

Source: XP Power

Exhibit 2 shows revenue by end-market and geography.

Semiconductor manufacturing equipment: this sector remains strong, with revenue up 47% y-o-y (62% cc). We note that growth from this sector in H120 was 65%, so this period’s growth was despite a tough comparative. Order intake was also strong during H1, up 40% cc y-o-y. The sector remains buoyant for several reasons: chipmakers are investing in short-term capacity increases to deal with ongoing chip shortages, governments are increasingly supporting local chip manufacturing (US and Europe planning to fund new fabs) and technology trends such as big data, AI, IoT and 5G support long-term growth of the chip sector.

Industrial technology: revenue from this sector declined 2% y-o-y, although was 5% higher on a constant currency basis. Within this total, XP saw 12% growth in revenue from the distribution channel, where it believes it has grown its market share. The company is seeing increasing demand from this sector as lockdowns are progressively lifted around the world, with orders 50% higher y-o-y in constant currency.

Healthcare: revenue from this sector increased 6% y-o-y (14% cc). XP received a high volume of orders in H120 for use in critical care equipment to support COVID-19 patients – much of this was shipped in H220 and orders in H1 declined 37% cc y-o-y. However, XP is now starting to see increased demand for non-COVID-related healthcare equipment such as robotic surgical tools, medical imaging and endoscopy.

Manufacturing update

The company noted that the transfer of production of low-power, high-voltage DC-DC modules from the Minden facility in Nevada, US to Vietnam is now complete. The Vietnam facility is qualified to produce 2,688 different low-voltage products, up from 2,616 at the end of FY20. Vietnam has recently seen a surge in COVID-19 cases, after a long period of successfully suppressing the virus, and the government has imposed a lockdown. XP’s facility is classified as a ‘3-in-1’ site, where staff work, eat and sleep, so has been allowed to continue operating essentially as a sealed site.

Outlook and changes to forecasts

XP received orders worth £157.6m in H121 (£73.7m in Q1 (+1% y-o-y), £83.9m in Q2 (+15% y-o-y), 8% higher y-o-y on a reported basis and 17% higher cc. XP saw continued high demand from semiconductor manufacturing equipment customers, while industrial technology started to recover, and healthcare declined after a strong period of ordering for equipment related to treating COVID patients. Book-to-bill was 1.31x for H121 (Q1 1.29x, Q2 1.34x). At the end of H121, the order book stood at £150.3m, up 9% y-o-y and 21% h-o-h.

The board expects FY21 trading to be modestly ahead of analysts’ consensus expectations (adjusted PBT of £44.6m for FY21), injecting a note of caution considering the various headwinds (eg COVID, component shortages, currency).

We have revised our forecasts to reflect H121 results and order intake. We have revised up our revenue forecasts for FY21 (+5.9%) and FY22 (+6.0%) and factored in a small increase in gross margins. We note that reported revenue growth for FY21 is reduced by the strengthening of sterling versus the US dollar (we use 1.39 for FY21 versus 1.28 in FY20); our dollar-based revenue forecast assumes 12% revenue growth in FY21. Overall, we lift our normalised diluted EPS forecast by 5.4% for FY21 and 6.9% for FY22.

Exhibit 3: Changes to forecasts

£m

FY21e

FY22e

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Revenues

227.8

241.1

5.9%

3.4%

237.8

252.0

6.0%

4.5%

Gross profit

104.5

111.4

6.6%

1.2%

110.4

117.8

6.7%

5.7%

Gross margin

45.9%

46.2%

0.3%

(1.0%)

46.4%

46.7%

0.3%

0.5%

EBITDA

54.6

57.0

4.4%

0.4%

58.4

61.4

5.2%

7.7%

EBITDA margin

24.0%

23.6%

(0.3%)

(0.7%)

24.5%

24.4%

(0.2%)

0.7%

Normalised operating profit

43.0

45.4

5.6%

(1.3%)

46.2

49.2

6.6%

8.3%

Normalised operating margin

18.9%

18.8%

(0.1%)

(0.9%)

19.4%

19.5%

0.1%

0.7%

Reported operating profit

38.3

35.7

(6.8%)

(4.5%)

43.0

46.0

7.1%

28.8%

Reported operating margin

16.8%

14.8%

(2.0%)

(1.2%)

18.1%

18.3%

0.2%

3.4%

Normalised PBT

41.5

43.9

5.8%

(0.8%)

44.9

47.9

6.8%

9.1%

Reported PBT

36.8

34.2

(7.1%)

(4.1%)

41.7

44.7

7.3%

30.6%

Normalised net income

34.2

36.1

5.4%

(7.5%)

37.0

39.5

6.9%

9.6%

Reported net income

30.3

28.2

(7.1%)

(10.6%)

34.3

36.9

7.4%

30.9%

Normalised basic EPS (p)

174.3

183.6

5.4%

(9.0%)

188.4

201.3

6.9%

9.6%

Normalised diluted EPS (p)

171.4

180.6

5.4%

(9.0%)

185.3

198.0

6.9%

9.6%

Reported basic EPS (p)

154.4

143.4

(7.1%)

(12.0%)

174.8

187.7

7.4%

30.9%

Dividend per share (p)

94.0

94.0

0.0%

27.0%

98.0

98.0

0.0%

4.3%

Net debt/(cash)

18.8

24.0

28.2%

34.3%

9.4

12.4

32.5%

(48.3%)

Source: Edison Investment Research

Valuation

On an FY21e P/E basis, XP is trading at a 14% premium to global power-converter companies but at a 5% discount to UK electronics companies, with a dividend yield at the upper end of the range. The company generates EBITDA and EBIT margins at the top end of both peer groups. Strong cash management during the crisis leaves the company well-funded to pursue both organic and acquisitive growth

Exhibit 4: Peer financial and valuation metrics

Rev growth

EBITDA margin

EBIT margin

P/E (x)

EV/EBIT (x)

Dividend yield

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

XP Power

3.4%

4.5%

23.6%

24.4%

18.8%

19.5%

28.5

26.0

22.6

20.9

1.8%

1.9%

Cosel

9.7%

4.2%

17.5%

18.0%

N/A

N/A

12.9

11.9

N/A

N/A

2.7%

2.9%

Delta Electronics

14.1%

9.5%

17.3%

17.9%

12.1%

12.9%

23.4

19.7

19.6

16.9

2.3%

2.7%

Advanced Energy Industries

4.9%

9.4%

19.4%

20.4%

17.2%

18.4%

18.5

15.6

14.5

12.4

0.0%

0.0%

Comet Holdings

21.1%

13.4%

19.1%

20.4%

14.8%

16.4%

42.4

33.8

32.7

26.1

0.6%

0.8%

Diploma

43.0%

8.5%

21.1%

20.8%

18.8%

18.7%

35.3

32.7

27.1

25.1

1.3%

1.4%

Electrocomponents

14.6%

6.1%

13.9%

14.6%

11.6%

12.3%

24.7

21.8

18.7

16.6

1.7%

1.8%

Gooch & Housego

2.4%

2.9%

16.0%

17.1%

10.1%

11.4%

38.5

33.4

28.5

24.5

0.9%

0.9%

TT Electronics

7.7%

4.7%

11.1%

12.1%

7.0%

8.5%

18.2

14.9

16.7

13.1

2.1%

2.5%

Average power converter companies

12.4%

9.1%

18.3%

19.2%

14.7%

15.9%

24.3

20.3

22.3

18.4

1.4%

1.6%

Premium/(discount)

17%

28%

2%

13%

Average UK electronics companies

16.9%

5.6%

15.5%

16.1%

11.9%

12.8%

29.2

25.7

22.8

19.8

1.5%

1.7%

Premium/(discount)

(2%)

1%

(1%)

5%

Source: Edison Investment Research, Refinitiv (as at 29 July)

Exhibit 5: Financial summary

£m

2015

2016

2017

2018

2019

2020

2021e

2022e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

109.7

129.8

166.8

195.1

199.9

233.3

241.1

252.0

Cost of Sales

(55.1)

(67.8)

(89.2)

(102.8)

(109.8)

(123.2)

(129.7)

(134.3)

Gross Profit

54.6

62.0

77.6

92.3

90.1

110.1

111.4

117.8

EBITDA

 

 

29.7

33.0

41.7

49.2

44.5

56.8

57.0

61.4

Normalised operating profit

 

 

25.9

28.8

36.4

42.9

35.0

46.0

45.4

49.2

Amortisation of acquired intangibles

0.0

(0.4)

(0.6)

(2.8)

(3.2)

(3.2)

(3.2)

(3.2)

Exceptionals

(0.3)

(0.4)

(3.3)

(0.8)

(5.1)

(5.4)

(6.5)

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Reported operating profit

25.6

28.0

32.5

39.3

26.7

37.4

35.7

46.0

Net Interest

(0.2)

(0.2)

(0.3)

(1.7)

(2.7)

(1.7)

(1.5)

(1.3)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptional & other financial

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

25.7

28.6

36.1

41.2

32.3

44.3

43.9

47.9

Profit Before Tax (reported)

 

 

25.4

27.8

32.2

37.6

24.0

35.7

34.2

44.7

Reported tax

(5.5)

(6.3)

(3.6)

(7.2)

(3.2)

(4.0)

(5.8)

(7.6)

Profit After Tax (norm)

20.2

22.3

28.8

33.9

27.9

39.2

36.3

39.8

Profit After Tax (reported)

19.9

21.5

28.6

30.4

20.8

31.7

28.4

37.1

Minority interests

(0.2)

(0.2)

(0.3)

(0.2)

(0.3)

(0.2)

(0.3)

(0.3)

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

20.0

22.1

28.5

33.7

27.6

39.0

36.1

39.5

Net income (reported)

19.7

21.3

28.3

30.2

20.5

31.5

28.2

36.9

Basic average number of shares outstanding (m)

19.0

19.0

19.1

19.1

19.2

19.3

19.6

19.6

EPS - basic normalised (p)

 

 

105.3

116.2

149.4

176.1

144.1

201.8

183.6

201.3

EPS - diluted normalised (p)

 

 

104.3

115.3

147.0

172.8

141.4

198.4

180.6

198.0

EPS - basic reported (p)

 

 

103.7

112.0

148.3

157.8

107.0

163.0

143.4

187.7

Dividend (p)

66

71

78

85

55

74

94

98

Revenue growth (%)

8.5

18.3

28.5

17.0

2.5

16.7

3.4

4.5

Gross Margin (%)

49.8

47.8

46.5

47.3

45.1

47.2

46.2

46.7

EBITDA Margin (%)

27.0

25.4

25.0

25.2

22.3

24.3

23.6

24.4

Normalised Operating Margin

23.6

22.2

21.8

22.0

17.5

19.7

18.8

19.5

BALANCE SHEET

Fixed Assets

 

 

65.4

73.2

88.1

129.2

137.4

135.2

141.4

143.5

Intangible Assets

48.2

53.0

63.9

97.7

99.6

98.8

105.4

107.8

Tangible Assets

16.1

19.1

22.5

30.7

35.9

33.5

33.1

32.8

Investments & other

1.1

1.1

1.7

0.8

1.9

2.9

2.9

2.9

Current Assets

 

 

53.5

65.7

83.5

105.1

96.0

107.0

106.2

116.5

Stocks

28.7

32.2

37.8

56.5

44.1

54.2

55.1

57.0

Debtors

17.5

21.5

23.8

33.0

34.8

30.2

39.6

41.4

Cash & cash equivalents

4.9

9.2

15.0

11.5

11.2

13.9

2.8

9.4

Other

2.4

2.8

6.9

4.1

5.9

8.7

8.7

8.7

Current Liabilities

 

 

(19.8)

(25.8)

(25.1)

(26.8)

(30.4)

(34.7)

(36.7)

(37.7)

Creditors

(14.6)

(16.1)

(21.4)

(22.4)

(25.2)

(28.3)

(30.3)

(31.3)

Tax and social security

(1.2)

(3.3)

(3.5)

(4.2)

(3.1)

(4.9)

(4.9)

(4.9)

Short term borrowings

(4.0)

(5.5)

0.0

0.0

(1.6)

(1.5)

(1.5)

(1.5)

Other

0.0

(0.9)

(0.2)

(0.2)

(0.5)

0.0

0.0

0.0

Long Term Liabilities

 

 

(10.0)

(6.2)

(29.6)

(70.1)

(64.1)

(43.0)

(36.3)

(29.6)

Long term borrowings

(4.6)

0.0

(24.0)

(63.5)

(57.3)

(35.2)

(28.5)

(21.8)

Other long-term liabilities

(5.4)

(6.2)

(5.6)

(6.6)

(6.8)

(7.8)

(7.8)

(7.8)

Net Assets

 

 

89.1

106.9

116.9

137.4

138.9

164.5

174.6

192.6

Minority interests

(0.8)

(0.8)

(0.9)

(1.0)

(0.7)

(0.7)

(0.8)

(0.8)

Shareholders' equity

 

 

88.3

106.1

116.0

136.4

138.2

163.8

173.8

191.8

CASH FLOW

Op Cash Flow before WC and tax

29.7

33.0

41.7

49.2

44.5

56.8

57.0

61.4

Working capital

(4.6)

(6.1)

0.4

(21.6)

10.6

(6.2)

(8.4)

(2.6)

Exceptional & other

0.6

5.1

(6.3)

3.2

(4.4)

(1.7)

(6.5)

0.0

Tax

(4.7)

(4.1)

(6.1)

(4.1)

(4.5)

(3.3)

(5.8)

(7.6)

Net operating cash flow

 

 

21.0

27.9

29.7

26.7

46.2

45.6

36.3

51.2

Capex

(5.4)

(6.8)

(10.1)

(15.0)

(16.3)

(14.9)

(21.0)

(17.5)

Acquisitions/disposals

(8.3)

0.1

(18.3)

(35.4)

0.0

(0.5)

0.0

0.0

Net interest

(0.1)

(0.2)

(0.2)

(1.5)

(2.7)

(1.3)

(1.5)

(1.3)

Equity financing

0.0

0.2

(0.2)

0.6

0.5

3.5

0.0

0.0

Dividends

(12.2)

(13.1)

(14.2)

(15.6)

(17.2)

(7.3)

(18.3)

(19.0)

Other

0.2

0.0

0.0

0.0

(1.5)

(1.7)

(1.7)

(1.7)

Net Cash Flow

(4.8)

8.1

(13.3)

(40.2)

9.0

23.4

(6.1)

11.6

Opening net debt/(cash)

 

 

(1.3)

3.7

(3.7)

9.0

52.0

41.3

17.9

24.0

FX

(0.2)

(0.5)

0.6

(2.7)

1.7

0.0

0.0

0.0

Other non-cash movements

0.1

(0.2)

0.0

(0.1)

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

3.7

(3.7)

9.0

52.0

41.3

17.9

24.0

12.4

Source: XP Power, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by XP Power and prepared and issued by Edison, in consideration of a fee payable by XP Power. 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.

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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

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London +44 (0)20 3077 5700

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United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

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United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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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 XP Power and prepared and issued by Edison, in consideration of a fee payable by XP Power. 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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