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Gaussin

CR
Bloomberg   ALGAU FP
Engineering-Heavy Constr.  /  France  Web Site   |   Investors Relation
Pioneer in green-powered closed space mobility but troubled by operational scares
Target
Upside 238%
Price (€) 0.25
Market Cap (€M) 11.0
Perf. 1W: -2.73%
Perf. 1M: -21.7%
Perf. 3M: -54.7%
Perf Ytd: -53.1%
10 day relative perf. to stoxx600: -40.8%
20 day relative perf. to stoxx600: -19.4%
Initiation cov.03/02/2023

Greening up transport in closed spaces

Founded in 1880 by Eugène Gaussin, and currently headed by Christophe Gaussin, Gaussin is an engineering company that designs, assembles, and sells innovative products and services in the transport and logistics sectors. Gaussin’s know-how spans across off- and on-road vehicles (manned and autonomous), with expertise in the integration of all types of batteries (electric and hydrogen fuel cells). It also owns a subsidiary in Metalliance, which specialises in the design and construction of industrial and mobile equipment used in transport infrastructure.


Catering to attractive markets

According to various market reports, the global terminal tractor market stood at c. $700m in 2020 and is expected to grow to $1.05bn by 2027 at a CAGR of 6%. The company’s main markets are Logistics, Seaports, Airports, and Mobility, with the first two markets being the key addressable markets in the near term but all of them offering strong potential. For example, within Logistics, there are about 150,000 warehouses globally with a third located within the EU and the US. An average warehouse uses 2-10 vehicles for movement within the premises and, assuming a conversion rate of 10% from diesel to electric vehicles, the case for demand is solid. Similarly, attractive business cases exist for other markets.

With a wide customer base

Even before entering into purchase contracts with Amazon and UPS, Gaussin’s customer base comprised of global, regional and national customers. To date, it has signed contracts with more than 60 customers across various sectors including Logistics, Seaports, and Airports. Such a diverse base validates the company’s products, minimises customer concentration risk, and ensures a stable revenue stream. Additionally, this diversified customer base offers resilience under volatile demand environments.

And an entrenched partner network

Over many years of operation, Gaussin has developed a number of collaborative partnerships including ecosystem partners, suppliers, and strategic stakeholders. With the help of its ecosystem partners Gaussin can fulfil the majority of its customers’ requirements and facilitate the ease of transition as the latter increasingly opt for sustainable solutions. These partners include companies such as Plug Power, McPhy, Lhyfe, HRS, etc., to support the hydrogen-run products to names such as ABB, and EDN for charging solutions. In addition to its ecosystem partners, Gaussin also has several partners to ensure the supply of critical components and technologies. These include NVIDIA, Meritor, Plastic Omnium, Faurecia, Bosch, and more.

Diverse revenue streams

Gaussin’s revenue stream comes from three main sources: sale of products, licensing, and services. In the products category, the company generates revenues from the sale of its innovative modular vehicles and underground works (Metalliance). The second category, i.e. licensing, is the most recently developed and has become a key pillar for the company’s growth over the last four years. This category capitalises on the strengths of the company and is a lucrative avenue for future growth (please see Money Making for a detailed description). Finally, there is services whose scope covers the potential opportunities arising from aftersales across its deployed fleet. Currently small, this category holds potential for expansion.

Aiming to improve profitability

Despite an increase in licensing revenues in the recent past and their strong drop-down to profitability, Gaussin has been unable to break-even consistently at the EBIT level. Moving forward, Gaussin is determined to change this by pulling various levers. First, as the end-markets become more conducive, Gaussin will be selling significantly more units per annum than it has done in the recent past. This will improve unit economics as the company will have more purchasing power due to increased scale. Secondly, being a first mover in its markets, the company can, and will, execute planned price increases to generate stronger revenue growth. Finally, it is dedicated to improving margins by reining in discretionary spend (some marketing expenses, prototyping expenses, etc.) by c. €3m per year. Going forward, provided proper execution, these levers will help Gaussin become a consistently profitable company.

Conclusion

Following a sustained development in R&D (c. €22m between 2017-22 and c. 100 patents) and testing, Gaussin is now scaling up its operations. With material orders from customers such as Amazon and UPS, the company has indicated that, in 2023, it will sell over 400 units compared to only 30 units in 2022. Additionally, the company is also actively seeking licensing partners across the globe to expand its geographical footprint. Lastly, the company is committed to improving profitability across the board to generate operating profits consistently. So, with increased demand from its main end-markets, there is ample room for Gaussin to grow and differentiate itself as a pioneer.


Updates

23 Oct 23 Shareholding structure
CSG could take the wheel

08 Aug 23 Earnings/sales releases
The H1 results were below expectations but the...

03 Feb 23 Initiation cov.
Greening up transport in closed spaces

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