Kinaxis’s new deal with Toyota gets thumbs up at Laurentian Bank Securities

A new deal with Toyota announced Tuesday by Kinaxis (Kinaxis Stock Quote, Chart, News: TSX:KXS) is getting the thumbs up from Laurentian Bank Securities analyst Nick Agostino.

On Tuesday, Kinaxis annonced that Toyota Motor Corp. has selected the Ottawa-based company to manage its automotive demand and supply chain processes, replacing manual planning systems with Kinaxis’s RapidResponse.

“We are excited to help drive breakthrough results for one of the world’s most prestigious brands,” said Kinaxis CEO John Sicard. “With a proven track record of increasing supply chain efficiencies for automotive manufacturers, we’re looking forward to deploying our revolutionary cloud-based concurrent planning platform to help Toyota instantly create what-if scenarios and better understand the impact of various supply change management strategies to create positive outcomes.”

Agostino, noting that Toyota joins Ford and Nissan as Kinaxis customers in automotive sector, says this is a systems integrator assisted win that could lead to more business.

“As 2/3s of KXS’s current customer wins are SI partner influenced, we believe the Toyota win falls in this camp,” the analyst says. “At KXS 2017 User Conference, Accenture noted that “many large players” are awaiting data on Ford’s RapidResponse deployments prior to taking action themselves. Furthermore Deloitte commented to us that KXS clients Ford and Nissan, with other players in the Automotive space, have begun shifting to next-generation SCM solutions due to an increased focus on driving performance through demand planning, causing them to move away from their historical reliance on static spreadsheets. Deloitte also expects other automakers to follow Ford and Nissan’s lead. We believe the Toyota win is a validation of Deloitte’s commentary and suggests a positive read-through regarding Ford’s RapidResponse deployment experience. We expect other car manufacturers to follow suit, particularly from North America, leveraging on the positive experience from Ford.”

In a research update to clients today, Agostino maintained his “Buy” rating and one-year price target of $88.00 on Kinaxis, implying a return of 15.6 per cent at the time of publication.