Kendrion's Turnaround in Focus: Riding Industrial Trends and Insider Confidence

Amid a landscape of global economic uncertainty and supply chain volatility, Kendrion N.V. (Euronext: KENDR) stands at a pivotal juncture. Once a diversified player in automotive and industrial markets, the company has repositioned itself as a pure-play industrial solutions provider post its 2024 automotive division sale. This strategic pivot, coupled with recent insider buying activity and alignment with long-term industrial trends, positions Kendrion as a compelling turnaround opportunity—despite near-term headwinds.

Strategic Restructuring: A Necessity or a Masterstroke?

Kendrion's decision to divest its automotive business to Solero Technologies in 2024 was a bold move. By exiting a sector increasingly dominated by giants like Tesla and BYD, the company streamlined its focus on high-margin industrial markets. The move freed up €9 million in annual cost savings, fully realized by early 2025, while sharpening its portfolio around electromagnetic systems critical to electrification, robotics, and automation.

The restructuring, however, came at a cost. FY 2024 revenue dipped 2% to €301.5 million, with both core segments—Industrial Brakes (IB) and Industrial Actuators and Controls (IAC)—struggling against weak global demand. Yet, the retained Mobility division (focused on automotive electronics and China) surged 21%, highlighting the wisdom of maintaining a foothold in high-growth markets like China.

Financials: Navigating the Storm

While profitability metrics like EBITDA (down 11% to €37 million) and EBITA (down 23% to €21.1 million) reflect the turbulence of 2024, the story isn't all gloom. Cost discipline is bearing fruit: net debt fell to €103.4 million, and the company maintained a steady dividend of €0.45 per share—a signal of cash flow resilience.

The critical question is whether the pain of restructuring is temporary. Management's 2025 outlook is cautiously optimistic, citing early signs of restocking in Europe, a potential business-friendly German government, and robust demand in China's industrial sector. With a target of 15% EBITDA margins by year-end and ROIC of 23-27% by 2027, the path forward hinges on executing on three pillars:

1. Margin Expansion: Focusing on higher-value products in IB (e.g., advanced braking systems for robotics) and IAC (e.g., precision actuators for clean energy).
2. Geographic Diversification: Leveraging its “local-for-local” supply chain strategy to mitigate trade risks, particularly in Germany and China.
3. Operational Efficiency: Cloud-based ERP implementation and expense optimization should further lower costs.

Insider Buying: A Vote of Confidence

In February 2025, multiple insiders purchased Kendrion shares—a stark contrast to market skepticism. Such activity often foreshadows undervalued stocks poised for rebound. While the stock has underperformed peers like ABB or Siemens in recent years, the insider buying suggests management believes the company's repositioning will unlock value.

Growth Drivers: Betting on the Future of Industry

Kendrion's core markets are aligned with secular trends:
- Electrification: Demand for electromagnetic components in renewable energy infrastructure (e.g., wind turbines, EV charging systems) is soaring.
- Autonomous Systems: While Kendrion exited automotive manufacturing, its retained Mobility division supplies electronics to autonomous vehicle ecosystems.
- Robotics and Automation: Industrial Brakes and Actuators are essential for warehouse automation and smart manufacturing, which remain underpenetrated in regions like Southeast Asia.

These trends are not fleeting. The global robotics market, for instance, is projected to grow at 12% CAGR through 2030, directly benefiting Kendrion's IAC segment.

Risks and Realities

No turnaround is without risks. A prolonged European recession or further trade tariffs could delay restocking cycles. Competitor pricing pressure in Germany's mature markets also looms. However, Kendrion's streamlined cost structure and focus on high-margin niches provide a buffer.

Investment Thesis: A Bottom in Sight?

Kendrion's stock currently trades at 7.2x EV/EBITDA—a discount to its five-year average of 9.5x—and below peers like Schaeffler (9.8x). With a normalized EBITDA recovery to €45 million (based on 2025 targets) and a potential EPS rebound, the stock could offer a 30-40% upside over 12-18 months.

The catalysts are clear:
- Margin Expansion: Achieving 15% EBITDA by year-end would validate management's strategy.
- China Growth: The Mobility division's 21% revenue surge in 2024 hints at untapped potential in Asia's industrial boom.
- Dividend Flexibility: Shareholders can elect stock dividends, reducing cash payout pressure while boosting liquidity.

Final Verdict: A Buy for the Long Game

Kendrion is no longer a “me too” player in cyclical markets. Its strategic shift to high-growth industrial niches, coupled with insider confidence and improving fundamentals, suggests the worst is behind it. While short-term volatility remains, the alignment with electrification, robotics, and automation makes this a compelling contrarian play. For investors with a 3–5 year horizon, Kendrion offers a rare mix of value and growth in an increasingly bifurcated industrial sector.

Investment Recommendation: Accumulate on dips below €12/share, with a 12-month target of €15–€16.