Last close As at 05/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: Industrials
Kendrion’s results for the first quarter of 2021 showed a strong recovery after the declines in 2020, which were caused by the COVID-19 pandemic. Both the short-term and long-term outlooks are promising, driven by trends such as autonomous driving, electrification, emission reduction and industrial automation. We have slightly raised our estimates and expect a CAGR in EBITDA of 17% in 2021–23e. Kendrion’s valuation shows a discount of 8% to peers based on 2022e EV/EBITDA, which should gradually diminish when its financial targets for 2025 in terms of revenue growth and margins are met.
Kendrion |
Strong recovery set to continue |
Q121 results review |
Industrial engineering |
10 May 2021 |
Share price performance
Business description
Next events
Analyst
Kendrion is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||
Kendrion's results for the first quarter of 2021 showed a strong recovery after the declines in 2020, which were caused by the COVID-19 pandemic. Both the short-term and long-term outlooks are promising, driven by trends such as autonomous driving, electrification, emission reduction and industrial automation. We have slightly raised our estimates and expect a CAGR in EBITDA of 17% in 2021–23e. Kendrion's valuation shows a discount of 8% to peers based on 2022e EV/EBITDA, which should gradually diminish when its financial targets for 2025 in terms of revenue growth and margins are met.
Year end |
Revenue (€m) |
EBITDA* |
EPS* |
DPS |
EV/EBITDA |
P/E |
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 |
438 |
54.1 |
1.10 |
0.55 |
8.7 |
21.5 |
12/22e |
478 |
62.9 |
1.52 |
0.76 |
7.3 |
15.5 |
Note: *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Good organic revenue recovery in Q121
Kendrion experienced a strong start of 2021 despite the ongoing effects of the COVID-19 pandemic. Organic revenue was up 6% y-o-y compared with the decline of 12% in Q120. All three business groups reported good organic revenue growth, ie automotive 4%, industrial brakes 11% and industrial actuators & controls 5%. Driven by revenue growth, operating leverage and cost savings, normalised EBITDA showed a strong recovery of 18% to €16.1m, driving a solid improvement in margin of 150bp to 14%.
Positive trends will support acceleration of growth
Kendrion is positive about its short- and long-term outlooks. It expects strong underlying demand in its segments to continue in Q221 and the rest of the year (albeit dependant on national vaccination programmes). Longer term, Kendrion will benefit from multiple disruptive trends, such as autonomous driving, electrification, emission reduction and industrial automation. We have slightly raised our estimates after the good start of the year and now expect 10.5% revenue growth in 2021 versus 9% previously, with a stronger improvement in the EBITDA margin (+110bp versus 70bp previously). We expect sales growth of 8–10% in 2021–23e, and operating leverage and efficiency gains to result in an improvement in EBITDA margin of 240bp to 13.7% in 2021–23 (was 13.6%).
Valuation: Discount to peers
We value Kendrion using three different methods: historical multiples, discounted cash flow (DCF) and peer comparison. On our increased estimates, the updated blended average of these three valuation methods points to a value of €28.2 per share, up from €27.9 previously. Kendrion is currently valued at an 8% discount to peers based on 2022e EV/EBITDA, which could diminish over time when the company is able to accelerate growth and significantly improve margins.
Q121 results: Strong start to the year
Kendrion’s Q121 trading update showed a strong start of the year despite the ongoing impact of the COVID-19 pandemic. Revenues increased 5% y-o-y to €115.3m, with strong organic growth of 6%, driven by all three business groups. In Q120, the company faced an organic revenue decline of 12%, mainly caused by the COVID-19 pandemic. Automotive continued its recovery with organic revenue growth of 4%, despite the shortage in materials such as semiconductors, certain types of steel and some plastics. Growth was mainly driven by strong demand in passenger cars in Europe, whereas demand for commercial vehicles remained weak. Industrial brakes reported a stronger recovery with 11% organic revenue growth, broadly driven by all segments and geographies. Industrial actuators & controls reported 5% revenue growth, with strong growth in medical and machine safety offsetting a weaker performance in aerospace and textiles.
Growth continued in operations in China, with an easier comparison base as in Q120 this was the first region to be affected by COVID-19. Kendrion did not disclose the quarterly growth rate in China, but management commented that all three business groups showed growth excluding the reported growth in China. The company’s financial targets for 2025 assume ongoing strong growth in China of at least 20% per year. To fulfil high local demand, Kendrion is constructing a new plant in China, which will add 28,000m2 in capacity (doubling current local capacity). The new plant is on schedule to be operational in H122.
Normalised EBITDA recovered strongly by growing 18% to €16.1m, driving solid margin improvement of 150bp to 14%. Drivers of the improvement were a better gross margin (due to higher growth in the higher-margin industrial business), operating leverage and cost savings of €0.6m (full-year cost saving effect is estimated at €2.4m). Reported EBIT included restructuring changes of €0.2m and a tax claim receipt of €0.4m. With no material changes in financial expenses and tax rate, normalised net profit increased 36% y-o-y to €6.4m, or €0.43 per share.
Exhibit 1: Kendrion Q121 results
€m |
Q120 |
Q121 |
% change |
Revenues |
109.7 |
115.3 |
5% |
Gross margin |
49.6% |
50.1% |
|
EBITDA normalised |
13.7 |
16.1 |
18% |
EBITDA margin |
12.5% |
14.0% |
|
Depreciation |
(6.6) |
(6.3) |
-4% |
Amortisation, acquisition related |
(1.1) |
(0.9) |
-14% |
EBIT normalised |
6.1 |
8.9 |
46% |
EBIT margin |
5.6% |
7.7% |
|
Restructuring and other items |
(1.1) |
0.2 |
|
EBIT reported |
5.0 |
9.1 |
82% |
Financial income and expenses |
(0.7) |
(0.7) |
|
Pre-tax income |
4.3 |
8.4 |
95% |
Taxes |
(1.3) |
(2.5) |
92% |
Net profit |
3.0 |
5.9 |
97% |
Net profit normalised |
4.7 |
6.4 |
36% |
Shares outstanding, average |
14.9 |
14.9 |
0% |
EPS reported (€) |
0.20 |
0.40 |
97% |
EPS normalised (€) |
0.31 |
0.43 |
36% |
Source: Kendrion
Net debt increased from €103m at year-end 2020 to €110m in Q121 due to seasonal effects. Kendrion’s financial position remains strong with net debt/EBITDA of 2.3x, well within the covenant of 5.8x at the end of Q1 and the long-term covenant of 3.25x from 31 December 2021. The equity ratio increased 300bp y-o-y to 47%.
Estimates slightly raised
Kendrion expects the strong underlying demand in its segments to continue in Q221 and the rest of the year (albeit dependant on national vaccination programmes). IHS Markit expects a recovery in passenger cars in 2021 with 14% growth. The coronavirus pandemic creates an uncertain market environment in the short term, but in the longer term Kendrion will benefit from multiple disruptive trends, such as autonomous driving, electrification, emission reduction and industrial automation. The shortage of materials might have an impact in the short term, although management commented that there had been hardly any effect on profitability in the first quarter.
Kendrion remains committed to its financial targets for 2025, ie organic revenue growth of 5% or more on average pa and an EBITDA margin of at least 15%, which compares to the 11% reported in 2020. Assuming the company achieves its targets, this should result in revenues of at least €625m in 2025 and EBITDA of at least €94m in 2025.
We have slightly raised our estimates after the strong start of the year (see Exhibit 2). We still assume a recovery in 2021 and 2022 from the low level in 2020, which was caused by the pandemic. For 2023 and beyond, we continue to expect 7–8% revenue growth, driven by positive underlying trends, new projects and the doubling of capacity in China.
For 2021–23, we expect an improvement in the EBITDA margin of 240bp to 13.7% (was 13.6%), driven by operating leverage and efficiency gains. This reflects a CAGR in EBITDA of 17%. Financial expenses are expected to decline gradually in line with lower net debt over the next few years. The tax 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 34% in 2021–23e.
Exhibit 2: Change in estimates
€m |
2021e |
2022e |
2023e |
||||||
Old |
New |
Change |
Old |
New |
Change |
Old |
New |
Change |
|
Sales |
432 |
438 |
1.4% |
475 |
478 |
0.4% |
511 |
513 |
0.4% |
EBITDA normalised |
52.0 |
54.1 |
3.9% |
61.9 |
62.9 |
1.6% |
69.3 |
70.4 |
1.6% |
EBITDA margin |
12.0% |
12.3% |
13.0% |
13.2% |
13.6% |
13.7% |
|||
EBITA margin |
6.3% |
6.7% |
7.6% |
7.8% |
8.4% |
8.6% |
|||
Net profit adjusted |
14.8 |
16.4 |
10.3% |
21.9 |
22.7 |
3.4% |
27.5 |
28.3 |
3.0% |
EPS adjusted (€) |
0.99 |
1.10 |
10.3% |
1.47 |
1.52 |
3.4% |
1.84 |
1.90 |
3.0% |
DPS (€) |
0.50 |
0.55 |
10.3% |
0.73 |
0.76 |
3.4% |
0.92 |
0.95 |
3.0% |
Source: Edison Investment Research
Capex was below depreciation in the first quarter, but management expects full-year regular capex to be in line with depreciation, or around €25m. In addition, capex for the new plant in China is estimated at €15m, of which more than half will fall in 2021.
Driven by improving results and relatively stable capex as a percentage of revenues, we expect Kendrion’s free cash flow generation to improve strongly over the next few years and to exceed €27m in 2023. 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 decline to 1.1x in 2023 and the equity ratio is expected to improve to 52% in 2023.
Kendrion’s balance sheet offers ample opportunities to finance further organic revenue growth and solid dividend payments. The company has a dividend policy of 30–50% of normalised net profit, but has paid around 50% in recent years.
Valuation
When valuing Kendrion, we look at three different methods: historical multiples, discounted cash flow (DCF) and peer comparison. Please refer to our recently published initiation note for more details.
We have not changed our assumptions for historical multiples, which show a discount of 15% on 2022e EV/EBITDA. Assuming a valuation in line with its historical multiples, as current profitability is in line with its historical average, this points to a value of €29.0 per share (versus €28.3 previously). For our DCF, we have not changed our assumptions, but our increased estimates have resulted in a slightly higher value per share of €29.4 versus €29.0.
The peer group multiples have not changed much since mid-April, resulting in the same potential value per share of €26.2 (was €26.3). The updated blended average of these three valuation methods points to a valuation of €28.2 per share, up from €27.9 previously.
Exhibit 3: Valuation methods Kendrion
Valuation method |
Edison assumptions |
Equity value per share (€) |
Historical valuation |
2022e EV/EBITDA in line with historical multiples |
29.0 |
DCF |
Terminal growth 1.5%, terminal EBITA margin 7.5% |
29.4 |
Peer group |
2022e EV/EBITDA in line with peers |
26.2 |
Average value per share |
28.2 |
|
Current share price |
23.5 |
|
Upside/(downside) |
20% |
Source: Edison Investment Research
Exhibit 4: Peer comparison
Company name |
Currency |
Share |
Market cap (local FX) |
EV/Sales (x) |
EV/EBITDA (x) |
EBITDA margin |
|||||
2021e |
2022e |
2023e |
2021e |
2022e |
2023e |
2022e |
|||||
Aalberts |
€ |
45.95 |
5,056 |
2.0 |
1.8 |
1.8 |
10.9 |
9.8 |
9.5 |
18% |
|
Emerson Electric |
US$ |
93.72 |
56,204 |
3.3 |
3.0 |
2.8 |
14.5 |
13.0 |
11.8 |
23% |
|
SKF |
NOK |
227.5 |
102,905 |
1.5 |
1.4 |
1.3 |
8.6 |
7.8 |
7.2 |
17% |
|
TKH |
€ |
44.5 |
1,837 |
1.5 |
1.4 |
1.3 |
10.5 |
8.5 |
7.6 |
15% |
|
Industrial average |
2.1 |
1.9 |
1.8 |
11.1 |
9.8 |
9.0 |
18% |
||||
BorgWarner |
US$ |
52.23 |
12,527 |
1.1 |
1.0 |
0.9 |
7.3 |
6.5 |
5.7 |
15% |
|
Continental AG |
€ |
112.12 |
22,314 |
0.8 |
0.7 |
0.7 |
6.3 |
5.2 |
4.6 |
14% |
|
ElringKlinger |
€ |
14.02 |
888 |
0.9 |
0.8 |
0.7 |
7.5 |
6.4 |
5.2 |
13% |
|
Hella |
€ |
51.18 |
5,686 |
1.0 |
0.9 |
0.8 |
7.7 |
6.6 |
5.6 |
13% |
|
Automotive average |
1.0 |
0.9 |
0.8 |
7.2 |
6.2 |
5.3 |
14% |
||||
Universe average |
1.5 |
1.4 |
1.3 |
9.2 |
8.0 |
7.1 |
16% |
||||
Kendrion |
€ |
22.5 |
336 |
1.1 |
1.0 |
0.9 |
8.7 |
7.3 |
6.3 |
13% |
|
Premium/(discount) |
-29% |
-30% |
-32% |
-5% |
-8% |
-11% |
|||||
Assumed premium/(discount) |
0% |
0% |
0% |
0% |
|||||||
Implied value per share (€) |
36.9 |
37.9 |
26.2 |
27.4 |
|||||||
Source: Refinitiv, Edison Investment Research. Note: Prices as at 7 May 2021.
Exhibit 5: 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 |
438.1 |
477.5 |
513.5 |
Gross Profit |
211.9 |
193.3 |
191.0 |
211.6 |
231.6 |
250.1 |
EBITDA normalised |
58.5 |
43.8 |
44.6 |
54.1 |
62.9 |
70.4 |
EBITDA reported |
49.7 |
38.1 |
40.2 |
52.1 |
61.9 |
70.4 |
Depreciation & Amortisation |
(23.1) |
(24.0) |
(25.7) |
(24.8) |
(25.7) |
(26.3) |
EBIT normalised |
35.4 |
19.8 |
18.9 |
29.3 |
37.2 |
44.2 |
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 |
23.5 |
32.4 |
40.4 |
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 |
19.7 |
29.1 |
37.6 |
Reported tax |
(7.3) |
(2.7) |
(1.4) |
(4.8) |
(7.1) |
(9.2) |
Profit After Tax |
13.8 |
8.3 |
4.3 |
14.9 |
21.9 |
28.3 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Net income (normalised) |
22.6 |
12.6 |
11.7 |
16.4 |
22.7 |
28.3 |
Net income (reported) |
13.8 |
8.3 |
4.3 |
14.9 |
21.9 |
28.3 |
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 |
1.10 |
1.52 |
1.90 |
EPS reported (€) |
1.03 |
0.62 |
0.29 |
0.99 |
1.47 |
1.90 |
DPS (€) |
0.87 |
0.00 |
0.40 |
0.55 |
0.76 |
0.95 |
Revenue growth |
-2.9% |
-8.1% |
-3.9% |
10.5% |
9.0% |
7.5% |
Gross Margin |
47.2% |
46.9% |
48.2% |
48.3% |
48.5% |
48.7% |
EBITDA Margin |
13.0% |
10.6% |
11.3% |
12.3% |
13.2% |
13.7% |
Normalised Operating Margin |
7.9% |
4.8% |
4.8% |
6.7% |
7.8% |
8.6% |
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 |
135.7 |
150.4 |
166.5 |
Stocks |
63.5 |
56.3 |
61.7 |
68.2 |
73.9 |
78.9 |
Debtors |
48.0 |
42.9 |
47.2 |
52.2 |
56.9 |
61.1 |
Other current assets |
7.2 |
6.9 |
7.6 |
8.4 |
9.2 |
9.8 |
Cash & cash equivalents |
10.2 |
7.1 |
13.0 |
6.9 |
10.5 |
16.6 |
Current Liabilities |
81.2 |
73.8 |
87.9 |
95.9 |
103.4 |
110.3 |
Creditors |
41.7 |
41.3 |
44.0 |
48.6 |
53.0 |
57.0 |
Other current liabilities |
27.3 |
26.9 |
31.9 |
35.3 |
38.4 |
41.3 |
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 |
212.3 |
226.0 |
243.0 |
Balance sheet total |
375.3 |
358.0 |
429.1 |
441.0 |
457.3 |
471.1 |
CASH FLOW |
||||||
Op Cash Flow before WC and tax |
51.4 |
36.1 |
40.6 |
52.1 |
61.9 |
70.4 |
Working capital |
(8.3) |
13.0 |
5.4 |
(4.3) |
(3.6) |
(3.1) |
Tax |
(4.2) |
(6.1) |
(1.3) |
(4.8) |
(7.1) |
(9.2) |
Net interest |
(2.2) |
(2.1) |
(2.9) |
(3.8) |
(3.3) |
(2.8) |
Net operating cash flow |
36.7 |
40.9 |
41.8 |
39.2 |
47.9 |
55.3 |
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) |
(8.2) |
(11.3) |
Other |
(0.2) |
(3.1) |
(3.4) |
0.0 |
0.0 |
0.0 |
Net Cash Flow |
(9.9) |
33.1 |
(55.8) |
(1.1) |
8.6 |
16.1 |
Opening net debt/(cash) |
70.6 |
80.5 |
47.4 |
103.2 |
104.3 |
95.7 |
Closing net debt/(cash) |
80.5 |
47.4 |
103.2 |
104.3 |
95.7 |
79.6 |
Source: Kendrion, Edison Investment Research
|
|
Research: Industrials
Schaltbau Holding reported Q121 results that showed good revenue growth, despite the ongoing effect of the COVID-19 pandemic. Profitability improved strongly, with reported EBIT margin up 170bp to 4.9%. Cost saving and efficiency efforts will continue to drive higher profitability and we expect a further improvement in the EBIT margin to 7% in 2023, reflecting an EBIT CAGR of 26% in 2021–23. Schaltbau’s valuation offers re-rating potential now that it is on the verge of restoring profitability.