Kinaxis is a Buy, says ATB Capital

New product innovations look to be long-term needle-movers for supply chain management company Kinaxis (Kinaxis Stock Quote, Charts, News, Analysts, Financials TSX:KXS), according to ATB Capital Markets analyst Martin Toner. Toner delivered an update to clients on Tuesday where he reiterated an “Outperform” rating on KXS and one-year target price of C$220.00, which at press time represented a projected return of 21.9 per cent.

Kinaxis held its annual customer community conference, Kinexions, in Nashville this week, with the company debuting a number of new capabilities for its platform, including Enterprise Scheduling for companies to Crete and manage a globally integrated production scheduling strategy, and Supply Chain Execution (formerly MPO), which includes transportation management, order management and returns management.

“Today, CEOs and boards of directors are demanding their supply chains operate in real time and with one view of information across planning and execution,” said CEO John Sicard in a press release. “The innovations we announced today make it easier for teams to collaborate and make decisions, as well as narrow the gap between planning and execution, to create both resiliency and efficiency at scale.”

Kinaxis said both the Execution and Scheduling products are separate modules that involve an uplift in average revenue per user (ARPU), with Toner saying the new products give him increased confidence in his estimates for a long-term SaaS revenue CAGR of 18.1 per cent through 2032.

“Despite the introduction of RapidStart, the sales cycle for these products remains long, often more than one year. While the impact of these new product introductions could be significant, they will likely not impact fiscal 2023,” Toner wrote.

On the financials, Toner is calling for revenue to go from $250.7 million in 2021 and $366.9 million in 2022 to $427.2 million in 2023 and to $514.1 million in 2024. Adjusted EBITDA is expected to go from $39.8 million in 2021 and $79.4 million in 2022 to $63.4 million in 2023 and $100.3 million in 2024. (All figures in US dollars except where noted otherwise.)

“The Company is seeing customer conversations broadening to include its customer’s finance department, a natural direction given the importance of inventory and working capital to cash flow. While the Company had nothing to officially report in terms of product road map, we believe this represents interesting optionality for shareholders to consider,” Toner said.

Kinaxis’ share price shot up in the early days of the pandemic in 2020 but then stayed up and down over the next year or so before generating a nice rally so far in this year. Currently trading around C$180 per share, the stock is up 21 per cent year-to-date.