EUR 850.00 For Business Accounts Only

Morningstar | Kion Group in Pole Position to Benefit From E-commerce Growth and Warehouse Automation

As a market leader in forklift manufacturing, Kion is already well positioned to benefit from growing e-commerce. Given this, combined with its Dematic acquisition, we think the company will offer attractive long-term revenue growth and increasing returns. Despite rapid growth, e-commerce still accounts for only a small portion of global retail sales, just 12% in the United States and near 14% in China. The low penetration levels suggest a long runway for growth, as we believe forklift sales will naturally follow the expansion of warehouses needed to support an e-commerce supply chain. Kion and Dematic’s respective leading market share positions in forklifts and warehouse automation secure dominance in a complementary product set that could increase the combined company’s importance to customers over time. Eventually, we think Kion and Dematic will be able to offer a one-stop software-driven solution that combines the management of forklifts with automation systems. Given that warehouse automation is still in its early stages, we think Kion has an opportunity to gain critical early-mover ground with the addition of Dematic’s solutions. This could offer upside to our current revenue growth outlook.On its own, the company has been consolidating plants and modernising its own manufacturing facilities, leading to near-term margin improvements and earnings growth acceleration. We think the company previously operated with a bloated cost structure, and current management has done a good job of streamlining the business. Robust volume growth over the longer term should also increase operating efficiencies, boosting the company’s longer-term operating income margin and returns on invested capital.