AutoStore: robot warehouses continue to stack up

On the British television programme Robot Wars inventors battled with their homemade machines. Life now imitates art in the mundane theatre of ecommerce warehouses. Results from AutoStore, the Norwegian robotic group that listed in October, show the fight remains mostly focused on defeating the humans first.

Demand for the robotic vertical stacking systems continues to accelerate. Supply chain disruption remains a net positive for the group. Revenues in the third quarter of the year almost doubled to $85m, though its costs are increasing.

As an example, prices for aluminium, its biggest input, have climbed to decade highs. Operating margins slipped a bit, falling 2 percentage points to 47 per cent. A push to replace humans with robots in warehouses should continue to support earnings growth.

Another income source could come from its legal spat with UK automation rival Ocado. Their spat over patent infringement is being heard at the US International Trade Commission, with an initial decision expected in early December. Both earn substantial business there. Should AutoStore win, that could mean a lump sum settlement from Ocado or annual royalty payments. The size of the former would be at least a few hundred million dollars, think Berenberg analysts.

Valuations reflect optimism for the sector. AutoStore shares have risen 25 per cent since they began trading. An enterprise value multiple of 22 times 2023 sales chimes with analyst estimates for Ocado’s automation division.

But there are reasons to believe AutoStore will beat revenue estimates for $500m next year. Already orders converted from the group’s $3.4bn pipeline reached $423m in the first three months of this year, or almost three times more than in 2020. Assuming full-year orders continue apace that represents a conversion rate of about one-fifth of the total pipeline, double recent conversion rates. Even at historical conversion rates that would add at least $100m to next year’s sales forecasts.

A battle for robot supremacy within warehouses should mean good news to come for AutoStore shareholders.


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