Since 1996, Teslin has been investing in Kendrion, known as Schuttersveld at the time. Over the years we have experienced ups and downs with the company. Currently, both Teslin Participaties and Midlin hold stakes in Kendrion. While both funds operate under the umbrella of Teslin, they each have their own fund manager, responsible for making independent assessments and decisions. Teslin Participaties is the largest shareholder in Kendrion, holding a 21% stake, while Midlin holds a 3% stake.
Kendrion designs, manufactures, and sells electromagnetic and mechatronic components and systems for clients in the automotive and industrial sectors. Its operations are divided into four business segments: Automotive Core (accounting for 35% of the 2022 revenue), Automotive E (12%), Industrial Brakes (29%), and Industrial Actuators and Controls ('IAC’, 24%). To gain a better understanding of the IAC segment, we recently visited Kendrion's factory in Malente, Germany, a significant production facility within the IAC segment. Next to IAC products, the factory also produces some products for the Automotive E and Automotive Core segments.
During our visit, Robert Lewin (General Director of IAC) and Florian Perkiewicz (Commercial Director of IAC) provided us with insights into the strategy and operations of the IAC segment. Within IAC Kendrion designs and manufactures high-quality custom solutions for industrial applications based on electromagnetic actuators, control technology, and fluid technology. Examples of these solutions include a powerful pinch valve for dialysis equipment in hospitals, a high-quality water valve for a dentist's chair, locks for industrial washing machines, and induction-based heating systems used in textile and food production.
A significant portion of the IAC products concern tailor-made solutions for specific customers, where the products are integrated into machines produced by those customers. As a result, the production volumes of these high-quality products are relatively low compared to Kendrion's other segments. However, they add substantial value and customer loyalty is high.
IAC mainly produces products under long-term contracts. Next to these long-term contracts it actively seeks new niche markets for which it can develop products. Market entry is subject to strict criteria including a good fit with IAC’s existing portfolio of electromagnetic actuators. Product development is only initiated once demand has been guaranteed, with a minimum profitability threshold. Furthermore, Kendrion should be able to achieve and maintain a market-leading position and the target market must be assessed internally as an attractive growth market. These factors contribute to the IAC segment generating strong EBITDA margins, exceeding those of the overall group. Additionally, the segment's diversity in customers base and end markets provides revenue diversification, making it less vulnerable.
We believe that the IAC segment is a strong part of the Kendrion group. It has consistently demonstrated the ability to identify and enter new interesting niche markets with high-quality products, and establish a market-leading position. While growth expectations might be limited due to the low volumes, the segment's diversification and high margins are valuable additions to the group's activities.
Company visits are an essential component of our analysis for existing and potential investments. These visits enable us to engage with management, tour facilities, and gain a deeper understanding of the company, which leads to more informed investment decisions.
Lisa Schellens
Quentin Stikkers
This is an advertisement. Teslin Participaties and Midlin are registered as investment institutions in the register maintained by the Authority for Financial Markets. The tradability of the participation rights in Teslin Participaties is limited because Teslin Participaties is a closed-end investment institution. For more information about this risk, please refer to Teslin Participaties' information memorandum and the essential information document.
