Kion Posts Another Exceptional Quarter of Demand; ITS Margins Remain Challenged

Kion saw exceptionally strong demand for both its ITS (forklifts) and SCS (warehouse automation equipment) divisions. Management expects demand to hit the high end of its guidance range for the 2021. Shares look fairly valued after a 5% increase at the time of writing. Our narrow moat rating remains intact. ITS orders were up 20% and SCS 58% in the quarter. Demand for both divisions has been bolstered by the whipsaw rebound in the economic recovery this year as well as labor shortages in the warehouse sector. For ITS, we expect order growth to normalize again in the near term, whereas SCS has more structural tailwinds from increasing warehouse automation equipment adoption as well as growth in e-commerce globally.