Morningstar | Jungheinrich 1H18 Posts Great Revenue Growth but Similar Margin Pressure to Peers; Shares Attractive
Narrow-moat Jungheinrich's first-half 2018 revenue growth was stronger than expected while margins were weaker, with the net effect not having a significant impact on our EBIT forecast for the year. We retain our EUR 36 fair value estimate and believe the shares are trading at attractive levels. Revenue grew by 9%, while the EBIT margin ticked down by 45 basis points year over year. Similar to peers Kion and Hyster-Yale, Jungheinrich's margins came under pressure from raw material prices increases, supply-chain bottlenecks, and rising personnel costs, with the latter driven by the outsize growth for forklifts in the past couple of years.Since 2017, global forklift industry unit demand has been growing by double digits, well above the 5% historical trend. This has stretched suppliers of components for forklift assembly, with supply-chain issues cited both by Jungheinrich and Kion as causing margin pressure from extra costs associated with compensatory changes to the forklift assembly process, as well as increased prices from suppliers. Both companies have also added personnel to keep with demand, with Jungheinrich and Kion adding 6% and 4% to their employee bases, respectively, since year-end 2017. Piling on to margin pressure has been the increase in raw material prices experienced across the capital goods sector. The net effect has been margin pressure across the sector and for Jungheinrich and its peers, particularly in their forklift divisions, with price increases implemented around once a year. Jungheinrich, Kion, and Hyster-Yale saw 48-, 45-, and 112-basis-point declines in division margins.
We expect material improvements in margins in the fourth quarter and for most of these issues to be ironed out by the end of first-quarter 2019. Annual price increases should take effect in the fourth quarter and first quarter, improving new order pricing, while the current order backlog carrying lower margins should be worked through in the next several months.
Jungheinrich is engaged in the development of new trucks and logistics solutions. Co.'s operating activities are divided into two segments: Intralogistics, which is engaged in the development, production and sale of new trucks including logistics systems as well as the mail-order business, short-term hire which include the rental of new and used material handling equipment, reconditioning and sale of used equipment and the provision of after-sales services including the maintenance, repair and spare parts businesses; and Financial Services, which encompasses the usage transfer and sales financing of material handling equipment and warehousing technology products.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.