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AutoStore: warehouse robotics group puts its valuation on a high shelf

IPOs updates

Logistics automation company AutoStore could be Norway’s biggest initial public offering in two decades. The SoftBank-backed group has reason to be confident. Ecommerce growth has driven up investment in logistics. The fragility of supply chains and their reliance on human workers is on full display this year. A punchy potential valuation of up to $12bn would be nearly 50 per cent higher than the Japanese investment group’s valuation of the company in April.

AutoStore operates in so-called cubic storage micro fulfilment, in which robots pick orders from vertical stacks. This maximises space for goods. Micro fulfilment robots retrieve individual orders, replacing human pickers. It is a fast growing subsector of the automation industry.

Warehouse robotics has been in vogue since the onset of the pandemic, following a boom in online purchases. Sales in the sector should hit $30bn by 2026 — double 2019 levels — according to LogisticsIQ. With only 10 to 15 per cent of existing warehouses fully automated, there is a significant growth opportunity. AutoStore has an order book of $3.4bn or about 2,000 new projects. It expects revenues to reach $300m this year and rise to $500m next year. This exceeds the growth rate for UK rival Ocado.

Ebitda margins of 50 per cent suggest a technological edge over competitors too. Ocado, which AutoStore is taking legal action against for alleged intellectual property infringements, reported a 7 per cent margin at its logistics division last year. Including revenues from its food delivery business, Ocado as a whole trades at 4 times next year’s revenues. But much of its valuation depends on the prospects for logistics. On Lex calculations, this important unit implicitly trades at between 10 to 15 times forward revenues.

Lex scatter plot showing revenue growth vs valuation of automation stocks

AutoStore might then look expensive by comparison. At the top end of the range it would fetch 24 times next year’s sales. Yet consider that even if revenue growth slows to half and margins are maintained its earnings multiple should reach 15 times 2025 ebitda.

That should satisfy the bulls. In a sector with limited options, AutoStore makes a convincing case worth picking out.

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