Kempower Oyj went public last December 14th, 2021 on Nasdaq Helsinki First North market. The IPO was priced at €5.74 and the stock closed at €23.09 at time of writing a year later (Wednesday 14th of December 2022). It generated a great return for investors, and on its one year anniversary was up +190.44%.
The best listed stock in Finland, Kempower is still a great buying opportunity with the all time high of €25.76 with a market cap of €1.282 billion just one month ago. This tightly held gem has further to go – now Kempower has even received Green Equity Designation from Nasdaq markets as of September 1st, 2022. Its future is indeed electrifying. But why? It combines very rapid international growth with the strength of the anchor ownership (68%) of the industrial Kemppi Group.
Kempower Oyj is the leading rapid EV charging technology provider in the Nordic region, perhaps in Europe. Kempower designs and manufactures DC fast charging solutions for electric vehicles and machines. The company only deals with B2B customers.
Kempower’s turnover in Q1-Q3/2022 was €95.1 million (for the whole of 2021 it was €27.4 million). The target is €200 million turnover p.a. in four to six years (modest Finns). I forecast closer to two years. The orders inventory is now €147.2 million and gross margin stands at 46%. It has positive cash flow. The IPO provided more operating cash to the tune of nearly €100 million. The company has increased its headcount by over 100% from 124 to 260, mostly in sales. The new factory in Lahti, Finland can deliver a turnover of €200 million already and the projected US factory in 2023-2024 will double that capacity.
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Major player already in Nordic region
The company already has large orders in the Nordics: Finland (S-Group and Neste, the largest gas station network with over 800 stations), 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 US expansion is also now moving forward to 2022/2023 (Kempower already have two clients Stateside – Greencore & ZEF Energy).
The company has a scalable and flexible business model with limited capital expenditure needs. ChargEye, its SaaS service rolling out in 2021/22, looks like a highly successful launch. Its recyclability rate over 99% and eNPS score is 83. Kempower is expected to be active in the US markets in 2022/2023 at the latest. In conclusion the business has become a major player in the Nordic market and is taking market share in Continental Europe and the UK.
High profitable growth continues
Turnover over Q3/Q3 rose 247% (225% Q2/Q2), which is “very rare in industrial production”, according to CEO Tomi Ristimäki (an industry veteran in EV charging, everything from small to large). Best of all the gross margin stayed at 46% and the operating cash flow was positive for the first time at €3 million. It is no surprise that Kempower Oyj was awarded the best growth company award by the Finnish President in November 2022.
The list of B2B clients it sells to is a long one but includes charge point operators and retail chains: S-Group (large deal), Recharge Infra, Osprey Charging, Vattenfall (large deal) and Power Dot. Bus and truck operators include Nobina, VY buss, Koiviston Auto and Keolis. OEMs clients cover the likes of Volvo, Scania, Normet, Epiroc, Gilbardo Veeder-Root. Distributor and installer networks working with Kempower include Omexom, Vital EV Solutions and Wennstrom, European Electrical Bus Company Gmbh.
USA partnerships or even mergers 2023?
CEO Ristimäki even hinted this summer that the company plans to establish operations in the United States in the course of 2023. At the moment the US is behind Europe in electrification of traffic, but Kempower expects the $5 billion National Electric Vehicle Infrastructure (NEVI) Formula Program and Inflation Reduction Act to speed up electrification in the US in 2023. Speed is a key factor in the US market entry, and Kempower is currently looking at a range of entry options including possible mergers and acquisitions, or partnerships. In my opinion ChargePoint Holdings Inc NYSE:CHPT might be a great partner or even a target at a market cap of $3.8 billion. ChargePoint is currently very leveraged and would need a strong financial partner.
Germany and Austria
During the year 2023 Kempower’s target is to become fully compliant with German Eichrecht regulation, which relates to kWh metering and billing. Eichrecht compliance will give Kempower access to charge point operators (CPO) and retails chain customers in Germany and Austria, according to CEO Tomi Ristimäki.
The limited free float
The initial offering was priced at €5.74 and was heavily oversubscribed. The Kemppi Group and institutions have not sold almost any stocks since the IPO and there are only a few sellers and buyers in the top 20 stockholders. They control 83.3% of the stock. So 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.
Still early days
There are now three Finnish analysts following the company, Carnegie (Swedish) Investment Bank AB (IPO), which is one of the leading investment Bbanks in Nordic region. Other analysts covering the stock include Inderes and OP Bank which initiated in late 2022. Near term target prices range between €22 to €23, but all analysts state volatility and long term growth/risk tolerant investors should be involved in the medium/long term.
The next report date is February 15th, 2023 for Q4/2022. I would start a new position now when we have down days on the stock especially when the market is selling off – the free float of the stock is small, at only around 15%. I would add to the position when market bounces around during US interest rate hikes. This stock will reward you handsomely in 2023 -2025, if you stay the course and buy the dips the market gives you.
Kemppi Group Oyj – the parent company
Kemppi Oyj is the design leader of the arc welding industry. Kemppi are 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. The Kemppi Group has a history of facilitating innovation and development.
Kempower’s main shareholder is still Kemppi Group (founded in 1949 and now run by the third generation of Kemppi family) with a 68% share of the stock. Both Finnish pension giants have small stakes, Varma with 3.14% and Ilmarinen with 1.93%. Individual investors felt short changed about the listing, because they only got roughly €200 euros worth of stock each. Now they are bidding up the stock.
