The future is motorhomes. KABE operates in a seemingly stagnant market. However, the market is relatively sensitive to market fluctuations. Nonetheless, it has shown that the demand for motorhomes has increased as well as a decrease in caravans throughout the industry. Therefore, the future of the market is motorhomes as well as sales of accessories. On the other hand, they have a reliable source of income from their sales of fixtures which has an EBIT margin of 10% as well as the group’s motorhome and vehicle segment is expected to maintain an EBIT margin of ~7% between 2019- 2023.
New tax system introduced to Swedish market. KABE’s primary market, Sweden, is prone to reduced motorhome sales as a result of the ‘bonus-malus’ tax system that penalizes heavy and high-emission vehicles for 3 years after its registration.
Other risks. The primary concern is that it has been difficult for KABE group to penetrate the European market. Their competitors have comparatively higher production. Furthermore, the local players have greater brand recognition and market share acting as an entry barrier. This is considered a critical risk since it makes KABE further dependent on Norway and Sweden as driving markets. Furthermore, Kabe Group imports a large number of their vehicles. (imported vehicles stand for approx. 40% of total revenue) opening up for currency exposure.
Potential upside of 7.2% based on a DCF analysis. Forecasting a future revenue CAGR of ~6% and stable EBITDA margin at ~8% give us an implied share-value of 159 SEK based on a base case.
ANALYSTS: DANIEL JAVADINEJAD & ANNA SAHLBERG CARLSSON