Alfen Update of EV Sales expectations, lowering the bar

In our Initiation note link: “Highway to EV-heaven”, we warned for a speed limit till 2025. Now we know that was an understatement. The excess channel inventory for EV-chargers seems to have worsened over 2Q23 and will not improve much over 2H23. The stellar performance of Alfen over FY22 was driven by its excellent supply chain, while others were struggling for components. The supply chain has long normalised, but back-orders have been accumulating. These inventories now seem to oversupply the EV-charger market. The EV-adoption continues its gradual increase in the car sales mix, but mass adoption will take some more years and technology hurdles. In this note, we re-assess our estimates, mainly for EV-charging. We believe that tracking market share in destination charging doesn't make much sense as low-end products for the home segment differ significantly from “smart” chargers. Alfen also introduces a DC destination charger (30Kw) at higher ASP. Despite the unit shortfall, Alfen managed to increase its 1H23 ASP 18% yoy to 1047 Euro as a sign of its mid-to-high end focus.
1H23 Headline figures
The EBITDA margin fell from 17.7% to 9.4% due to the mix effect of lower EV-charging sales that typically carries higher Gross Margins of around 41% vs. 31% for smart grid solutions. Alfen believes that it is not losing much market share in the destination charging end-user market as other competitors also report sales declines. Its visibility is relatively low as it is selling into wholesalers. Alfen benefited last year from a good supply chain and is giving back volumes to suppliers with back-orders.