AutoStore: A Warehouse Automation Leader with 20% Upside Potential - if growth comes.

Catalysts

• Scalability and Space Efficiency: AutoStore’s cube-based, modular system delivers up to 60% more storage per square foot, enabling rapid expansion and optimal use of limited warehouse space, a critical advantage in booming e-commerce and urban environments.
• Favorable Industry Tailwinds: The convergence of surging e-commerce, persistent supply chain pressures, and the demand for leaner, more efficient operations creates a robust growth environment, supporting the projected 14% CAGR over the next 5–10 years.

Assumptions

• Assuming 2025 is flat (as indicated by management) and growth accelerates to about 14% thereafter, a 5-year CAGR would average roughly 11%. However it may be more resonable to expect a gradual "pick up" in the Revenue growth making the range somewhere between 8.5-11% for the upcoming 5-years. Putting us at the 10% middle would then be fair. Given that the market tailwinds are strong and most likely will persist over a longer time it may be resonable to evaluate this over 10-years rather than 5-years, however that is not the scope of this analysis.
• Based on the full‐year numbers in the Q4 2024 report, the latest net profit margin is about 22.7% . It’s important to note that 2023 was affected by a one‐off settlement with Ocado Group, resulting in a net loss (–32.6 million on 645.7 million in revenues, or roughly –5%). If you normalize for that non‐recurring impact, historical full‐year margins in the prior years have generally been in the low-to-mid 20% range. In that light, using a normalized approach you might estimate:
  • A five‐year average net profit margin of roughly 22–23%
  • A three‐year average of about 22%
  • And the latest (2024) margin at approximately 22.7%
  Giving us a range of 22-23% for the net profit margin. I see no reasons why this should decrease over the coming years (rather improve)

Risks

• Catalyst Execution Risks: There’s a risk that the anticipated catalysts may not fully materialize. For example, if market conditions remain subdued or the pace of technology adoption slows, revenue growth could fall short of the projected 11–14% CAGR, and margins might compress instead of remaining robust. Additionally, delays in the expansion of AutoStore’s deployments or execution challenges could undermine the expected earnings acceleration.
• Regulatory Risks: Regulatory risks include potential changes to trade policies, tariffs, and compliance requirements—especially given that a significant portion of AutoStore’s products is manufactured outside key markets (US).

Valuation

• With revenue growth likely accelerating in the 11–14% range, the company should expand its market share, driven by its proven high-density, scalable systems. Profit margins are expected to remain robust—around 22–25%—as operational efficiencies and economies of scale take effect. During this period, a forward PE in the mid-to-high 20s (roughly 23–26x) seems reasonable. Using the higher end of the range in the mode - 25x.
• I see no other immediate risks which warrant a higher discount rate than the one suggested by simply (7.23%).

On the Look Out For in the upcoming Qs

• Accelerated Global Deployment: growth rate to pick up. As this will support the thesis of this narrative.