{"id":24055,"date":"2023-06-17T18:33:49","date_gmt":"2023-06-17T22:33:49","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/kion-stock-significant-continued-upside-remains-in-the-company-otcmktsknngf\/"},"modified":"2023-06-17T18:33:51","modified_gmt":"2023-06-17T22:33:51","slug":"kion-stock-significant-continued-upside-remains-in-the-company-otcmktsknngf","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=24055","title":{"rendered":"KION Stock: Significant, Continued Upside Remains In The Company (OTCMKTS:KNNGF)"},"content":{"rendered":"
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Author’s Note: This article was published on iREIT on Alpha back in late May of 2023.<\/em><\/p>\n

Dear subscribers,<\/h2>\n

KION AG (OTCPK:KNNGF) is a company that has already been paying off quite a bit as an investment for the past few months. My last major buy was made during later periods of 2022 – and my stance in September has produced a TSR of around 12.38% including the dividend, compared to the 3.82% of the S&P500 as of the time of writing this article.<\/span><\/p>\n

Still, KION’s recovery is likely to remain somewhat muted in the near term. The company has plenty of hurdles to overcome – that’s why it’s so cheap. However, I believe the company will overcome these and significantly outperform – which is where I take my conviction from.<\/p>\n

In this article, I’ll update my thesis, and show you why I expect a non-trivial upside of <\/span>250%<\/strong> for KION – at least in the end, once things really normalize.<\/span><\/p>\n

KION – Upside in materials handling and automation<\/h2>\n

KION is the market leader in several crucial technologies not only important for the current development in industrial technologies and materials as well as logistics, but crucial.<\/p>\n

KION is the world leader in industrial truck solutions in EMEA, and the global #2 in the same segment. It’s #1 in global supply chain solutions<\/em> and can report an annual order intake climbing toward the \u20ac13B on an annual basis. This has seen some pressure over the past year or so, but the problem with KION and what has caused it to fall is not top-line growth or lack thereof. The company in fact has a well-filled orderbook and excellent demand trends. Still, it’s down to around \u20ac11.1B in 2022, with a new intake of slightly above that.<\/p>\n

The issue is really found in the company’s margins. On a pre-tax, or EBIT basis, the company made only 2.6% for FY22, and that’s really quite terrible for a market leader in supply chain solutions and 1-2nd place in industrial trucks.<\/p>\n

The company’s revenue split and footprint remain appealing…<\/p>\n

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\"KION<\/span>
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KION IR (KION IR)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

…and it’s the first company to offer the sort of fully-automated large-scale warehousing and logistics solutions to automated warehouses with a full life cycle product offering, including services. Toyota may currently be the leader in Industrial Trucks, but KION leads the charge, by far, in Automation and logistics.<\/p>\n

The troubles that KION faces are broad-based and not unique to KION as a company. We saw many of those issues reappear, or clarify during 1Q23. The company had a strong start to the year, with a good-sized order intake and a 2% revenue increase, but margins are anything but solved. With a -8% YoY adjusted EBIT, we’re not seeing 2.6% EBIT, but we’re seeing 5.6% compared to the usual double digits. Still, results were up significantly quarterly, so the recovery has at the very least begun.<\/p>\n

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\"KION<\/span>
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KION IR (KION IR)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Also, the company has delivered significant upside for its customers during 1Q, including new Li-ion partnerships, its own fuel cell system, and a new multi-brand global strategy, with significant focus on new export products from China. The company’s ITS segment result were better than expected, with supply chain recovery driving revenue and margin recovery.<\/p>\n

Postponements are really the main issue and reason as to why the company isn’t recovering faster. The current economic uncertainty, with people expecting a recession to begin and perhaps last for some time, decisions on new orders for logistics systems and industrial trucks are being postponed, leading to order uncertainty for KION. There is good visibility in the near-term order book, but most of the reason why KION saw a good 1Q23 is due to the specific ITS segment.<\/p>\n

Simply put, the company’s margin development and recovery will be aided by recoveries and trends in the overall macro, which is currently uncertain. One of the primary drivers of the company currently being down is investors and customers being uncertain of when this will be.<\/p>\n

However, it’s obviously important to not mistake this for it never recovering.<\/strong> And that is a common mistake I see investors making, value-oriented or not. When a company is trading down as KION once did, it is as though investors do not expect the company to ever<\/strong> recover. While this may be true for some businesses, which then do end up going bankrupt, a market leader like KION is incredibly unlikely<\/strong> to go to zero in as short a time as that.<\/p>\n

For that reason, I view the current trends as very favorable in terms of valuation, which we’ll look closer at in a little while.<\/p>\n

For now, I want to highlight the following:<\/p>\n