Morningstar | Kion Reports Solid 2018; Shares Attractive
Kion reported a solid 2018, coming in line on revenue and EBIT with growth of 5% and 6%, respectively. We continue to find the shares attractive and maintain our EUR 90 fair value estimate. While the shares are up 20% year to date, they trade at 12 times 2019 consensus earnings estimates, well below the sector average. We think the gap will close with greater earnings consistency and as the market becomes more adept at judging the longer-order-book Dematic (supply chain solutions) business.Management's midpoint guidance of 10 basis points of margin expansion looks achievable if not low, given that the revenue growth outlook at the midpoint is 5%, including 4% for industrial trucks and services (forklifts) and nearly 10% for SCS/Dematic, which should help utilisation rates there. Our forecasts lie on the more optimistic side of the midpoint of guidance as we continue to see good potential in the SCS division.
Since 2016, the market has been concerned about inconsistency in earnings delivery that came with the Dematic acquisition, which brought a long-order-book project business (with lumpy quarterly performance). Kion investors were used to the short-order-book, relatively consistent forklift business. It has taken time for both the markets and management to become more adept at forecasting a business with a longer lead time. With two years of the acquisition in the books, we have better divisional data and can see that revenue per employee for Dematic is about 25% above that of the forklift business. While the 2018 margins for Dematic were 130 basis points lower than for forklifts, we see greater margin upside in the former from higher utilisation rates of newly built plant capacity. The growth rates in this division also promise to outpace the forklift business. Our model includes return on invested capital expansion of 300 basis points over the next five years, which should help to close the gap between the current value and our fair value estimate.
Kion Group AG Formerly known as Kion Group AG (Pre-Reincorporation). Kion Group AG is a Germany-based supplier of industrial trucks, related services and supply chain solutions. The activities of the Company are divided into three segments: Industrial Trucks and Services, Supply Chain Solutions and Corporate Services. The Industrial Trucks and Services segment comprises forklift trucks, warehouse technology, counterbalance trucks, towing vehicles, as well as automated trucks and autonomous trucks. It operates through three international brands: Linde, STILL and Baoli, as well as through three regional brands: Fenwick (France), OM STILL (Italy) and OM Voltas (India). The Supply Chain Solutions segment offers integrated technology and software solutions, picking equipment, automated storage and retrieval systems, sorters, and conveyors, marketed under the Dematic brand. The Company is active in more than 100 countries across the world.
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.