Kempower Oyj [HEL: KEMPOWR] went public last December 14th, 2021 on the Nasdaq Helsinki First North market. The IPO was priced at EUR 5.74 and on August 21st, 2022 the stock closed at EUR 16.278. It is now a great buying opportunity since the all time high of EUR 20.2 with a market cap of EUR 1.005 billion was just two weeks ago.
Kempower Oyj is the leading rapid EV charging technology provider. Kempower designs and manufactures DC fast charging solutions for electric vehicles and machines. The company only works with B2B customers.
Kempower’s turnover in H1/2022 was EUR 33.2 million (the whole of 2021 was EUR 27.4 million). Kempower’s target is EUR 200 million turnover p.a. in four to six years (modest Finns). I am forecasting closer to four years than six. The orders inventory is now EUR 62.4 million and with gross margin at 46%. The company has positive cash flow. The IPO provided more operating cash near EUR 100 million. They increased headcount over 100% from 124 to 260, mostly in sales. The new factory in Lahti, Finland, can deliver a turnover of EUR 200 million already and the US factory in 2023-2024 will double that capacity.
Major player already in Nordic region
Kempower is receiving large orders already in the Nordics: Finland (S-Group), Sweden, Norway and Denmark. Subsidiaries outside Nordic region include Germany, the Netherlands, the UK, France and Spain. In 2022 Kempower also opened in Sweden and Italy. The USA expansion is also now moving forward to 2022/2023 (Kempower already have two clients there, Greencore & ZEF Energy).
Kempower has a scalable and flexible business model with limited capital expenditure needs. ChargEye – Kempower’s SaaS service – is rolling out in 2021/22, a highly successful launch. Its recyclability rate is over 99%, and its eNPS Score is 83. It is entering the US markets in 2022/2023 at the latest. In conclusion Kempower is a major player in the Nordic market and taking market share in Continental Europe and the UK.
The company’s turnover in Q2 rose 225%, which is “very rare in industrial production”, according to CEO Tomi Ristimäki (an industry veteran in EV charging, everything from small to large). Kempower sells directly to B2B clients: charge point operators and retail chains like S-Group (a large deal), Recharge Infra, Osprey Charging, Vattenfall (large deal) and Power Dot; bus and truck operators like Nobina, VY buss, Koiviston Auto and Keolis; original equipment manufacturers (OEMs) like Volvo, Scania, Normet, Epiroc, Gilbardo Veeder-Root; and distributor and installer networks like Omexom, Vital EV Solutions, Wennstrom, European Electrical Bus Company Gmbh.
The limited free float
The initial offering was priced at EUR 5.74 euros – heavily oversubscribed. When I was writing this first piece of this stock the Kempower stock price had already more than doubled from the IPO. The stock has been trading between EUR 7.5 and 13.1 until the second half results published last week in August 2022. The Kemppi Group and institutions have not sold almost any stock since the IPO; there has been only one seller and buyer in the top 20 stockholders. Kemppi control 83.3% of the stock. It is no surprise that individual investors and other interested parties have to bid up the stock. The company is moving soon to the main list of the Finnish Stock Exchange where it belongs. The only Finnish business daily magazine “Kauppalehti” ran a very favorable article on the company last Friday.
Still early days
There are now three Finnish analysts following the company, Carnegie (Swedish) Investment Bank AB (IPO), which is oneof the leading investment banks in Nordic region with a history of over 200 years, and Inderes and OP Bank which started covering the stock Monday 22nd, August.
Inderes’ target price is EUR 20 and OP/Carnegie do not publish their targets, but all state that volatility and long term growth/risk tolerant investors should be involved. The next report date is October 28th, 2022 for Q3/2022. I would start a new position now, when we have down days on the stock, especially during September/October; the free float of the stock is small at only around 15%. I would add to the position when the market bounces around during US interest rate hikes.
A note on Kemppi Group Oyj
Kemppi Group Oyj is the parent company of Kemppi Oyj and Kempower Oyj. The whole group had total revenue of EUR 142 million in 2021. The main shareholder of Kempower stock is still the private industrial group Kemppi Group (founded 1949 now run by third generation of Kemppi family) with 68% share of the stock. Both Finnish pension giants have small stakes Varma with 3.14% and Ilmarinen with 1.93%. Individual investors felt heavily negatively about the listing, because they only got roughly EUR 200 worth of stock. Now they are bidding up the stock.
Kemppi Oyj is the design leader of the arc welding industry. Kemppi is committed to boosting the quality and productivity of welding by continuous development of the welding arc. The Italian welding torch manufacturer Trafimet Group SpA is part of the Kemppi Oyj.