Wed. Oct 27th, 2021

IPO Updates

The logistics automation company AutoStore could be Norway’s largest initial public offering in two decades. The SoftBank Group has reason to be confident. The growth in e-commerce has encouraged investments in logistics. The fragility of supply chains and their reliance on human workers is fully displayed this year. A definite potential valuation of up to $ 12 billion would be nearly 50 percent higher than the Japanese investment group’s valuation of the company in April.

AutoStore operates in the so-called cubic storage micro-fulfillment, in which robots retrieve orders from vertical stacks. This maximizes space for goods. Micro-fulfillment robots pick up individual orders and replace human pickers. It is a fast growing sub-sector of the automation industry.

Warehouse robotics has been in vogue since the onset of the pandemic, following a boom in online shopping. Sales in the sector should amount to $ 30 billion by 2026 – double levels of 2019 – according to LogisticsIQ. With only 10 to 15 percent of existing warehouses being fully automated, there is a significant growth opportunity. AutoStore has an order book of $ 3.4 billion or about 2,000 new projects. It expects revenue to reach $ 300 million this year and rise to $ 500 million next year. This is greater than the growth rate for British competitor Ocado.

Lex bar graph with the top 20 global warehouse automated players in 2020

Ebitda margins of 50 percent also indicate a technological advantage over competitors. Ocado, which takes AutoStore legal action against alleged infringement of intellectual property, last year reported a margin of 7 percent at its logistics department. With revenue from its food delivery business, Ocado trades four times the revenue of next year as a whole. But much of its valuation depends on the prospects for logistics. On Lex calculations, this important unit implicitly trades between 10 to 15 times forward income.

Lex distribution ground shows revenue growth versus automation stock valuation

AutoStore can then look comparatively expensive. At the top of the range, it will achieve 24 times next year’s sales. However, keep in mind that even if revenue growth slows to half and margins are maintained, its earnings multiple should reach 15 times 2025 ebitda.

This should satisfy the bulls. In a sector with limited options, AutoStore makes a compelling case worth taking out.

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