Nordic #1 Leader in Electric Vehicle (EV) Charging Infrastructure Solution | H.E.R.O. Issue 22, 22 February 2021
Skate to where the puck is going to be - the value chain profits in the electric vehicle (EV) revolution will be shifting towards addressing the bottleneck in the critical charging infrastructure, as evident from how the Nordic countries are leading the way when it comes to the adoption of EVs, led by Norway and Sweden. Norway is the first country in the world where the sale of EVs has overtaken those powered by petrol, diesel and hybrid internal combustion engines, with EVs making up 54.3% of all new cars sold in 2020, up from 42.4% in 2019 and from a mere 1% of the overall market a decade ago.
And a highly-profitable quiet innovator has been critical in this e-mobility revolution as the Nordic #1 leader in EV charging infrastructure with a broad product portfolio, from wall boxes for single-family homes to charging stations for residential areas, companies, service stations and other public environments, with an estimated market share of 50% of the public and residential EV charging market in Sweden and 20% in Norway.
The market for EV charging infrastructure is growing structurally with rising numbers of rechargeable vehicles and the management see a continuing strong trend with further expansion of the charging infrastructure in all markets. Strong demand and high interest for products to improve energy efficiency. In Sweden, it is predicted that 50% of all new vehicle purchases will be rechargeable by the end of 2023. Seeking to become the first nation to end the sale of petrol and diesel cars by 2025, oil-producing Norway exempts fully electric vehicles from taxes imposed on those relying on fossil fuels.
This week, we highlight one of our portfolio companies of which we are one of its top 20 institutional shareholders (based on S&P Capital IQ and TIKR data): Nordic #1 Leader in Electric Vehicle (EV) Charging Infrastructure Solution. The company is part of the Portfolio of Global Dividend-Yielding Innovators whose overall NAV rose above S$40 million (€25 million), outperforming major world indexes in MSCI ACWI All World Index, S&P 500 and NASDAQ in SGD terms since her recent inception on 28 August 2020, during which MSCI ACWI All World index +15.7% (in USD, or +12.7% in SGD), S&P 500 +11.4%. This rising dividend-yielding highly profitable and cashflow generative innovator, with operating profit margin of 14.3% and ROE (= EBIT/Equity) of 36.2% has also compounded 584% in capital gains since its listing in March 2016 vs MSCI ACWI World index +71.1%.
The company had reported on 12 Feb 2021 a strong 4Q/FY2020 results, in which its E-mobility product area reported growth of 39% for the fourth quarter, with high demand across the entire product range. The company’s solutions include ready-assembled cable cabinets for power supply, as well as software for measurement collection and cloud services connected to operators to monitor the energy use of every user to create the basis for charges. The company has also forged long-term agreements with major European energy providers and charging infrastructure operators such as E.ON, Vattenfall and OKQ8. In May 2020, the company acquired a fast-growing company focusing on support and maintenance of charging stations for electric vehicles, significantly strengthening its offering.
An innovator in control and energy efficiency that also spans to solar power applications in its electrical distribution products portfolio, the company has developed an entirely new type of fire switch able to interrupt the direct current that the solar panels produce if, for example, a fire should break out. The company thus guarantees a safe and secure total solution with solar panels, inverters and all the accompanying installation equipment. The company’s solar segment primarily targets larger properties, commercial buildings, agriculture and industry.
The company is also enjoying good demand of recreational products and its innovative system which gives the owner full control over car heaters and products to power marinas and camping sites and to be connected to its cloud service that facilitates monitoring, control and charging for energy-efficient electricity consumption.
The H.E.R.O.'s Journey with Purpose Quotient (PQ) started in 1939 when three relatives, Mr. S, Mr. J and Mr. P, founded the family-owned company in Gnosjö, a region in southern Sweden where it is famous for its enterprising and networking culture, characterized by "the Spirit of Gnosjö" (or in Swedish, Gnosjöandan), which is synonymous as representing profitable businesses, innovativeness, formal and informal cooperation in networks between owner-managers, helpfulness and solidarity between employers and employees, and the importance of having integrity and being nice.
Known for its Småland thrift, this innovator is now run by its second-generation business owners who own over 40.5% of the shares in the company. As per its heritage, "there are actually two things we have never changed throughout the years. The most important is caring for our employees. The second is the resources we place in 'moving ahead'. Developing ourselves and our products." The company initially produced cheaper and better versions of existing products within the electrical installation market. An increasing focus on creating new innovative solutions set the course leading to where the Nordic e-mobility leader stands today in developing, manufacturing and supplying innovative products and systems for the electrical installations market in industry, residential and commercial new-builds and renovation projects.
As a result of long history and expertise in block heater products, the company had an early interest in EV charging and presented its first charging station already in 2008, starkly distinctive from nearly all the other opportunistic loss-making mercenaries-competitors. The company has established itself as a seller of more premium products in this segment versus its competitors.
The company’s home-use Wallbox has Wi-Fi connectivity and RFID capabilities, which enable communication between charge boxes for efficient distribution/steering of energy, and allow energy providers to gather data on charging behaviour and accordingly adjust prices and incentives, and they enable consumers to futureproof charge boxes to benefit from smart home possibilities and other future applications. Home-use EV chargers are priced at SEK 4K to 19K; semi-fast chargers for public charging infrastructure are SEK 20K to 50K; fast chargers are SEK 150K to 250K.
During 2019, the company sold its first products for charging buses to the city of Ystad. A fastcharger for buses is a special product, adapted for buses with batteries that require higher voltage. This type of charging means they can manage a full day of driving, and be charged at the depot overnight.
In 2019, the company launched a complete solution with charging stations and cable cabinets during the year, which will markedly simplify work for installation engineers. The cable cabinet for E-mobility is delivered, ready-assembled and preconfigured, together with the charging stations. The installation engineer avoids complicated programming, and can instead enjoy a quick and simple installation.
Launched in 2019, its Cloud service can monitor the energy use of every user to create the basis for charges. The company’s charger products can also be connected to energy company and operator cloud services upon customer request. Tenant-owner associations, property owners and companies are investing more than ever in charging for electric cars. Insight into how much the attractive value is increasing has also made them means-test their choices of charging solutions. The company's Cloud service can deliver measurements broken down into each individual charge, wall box and period. This means fair payments can be collected by a specific rent increase for the apartment owner, or a deduction from employees’ salaries.
After many years of experience in developing charger products, in early 2020, the company launched a completely new model of DC chargers. The product is adapted for tough climates, and tolerates both cold and moisture. The fastcharger can be equipped with two types of charging cables to charge all types of electric cars.
The company has successfully expanded outside of the Nordics, where overseas markets contribute 15.2% of total revenue. The company has strengthened its presence in the UK with a local subsidiary to establish its range in electrical distribution products and E-mobility. The UK market is one of the largest in Europe with over 250,000 rechargeable cars on the roads, and high political aspirations to transform the vehicle fleet to be electric driven.
In its electrical distribution products business, the company offers a portfolio of 3,500 products and turnkey solutions, which range from connectors to complete distribution cabinets containing media, control and metering, or complete solar package solutions. From smart electrical sockets with automatic controls for cars, camping and marinas to outlet boxes and safety switches for machinery in industry and smart time switches that program lighting, and load balancing so as not to overload fuses.
Electrical distribution products are in the majority of homes. They feature safe, sustainable components that provide high energy efficiency and energy savings. Often with smart user functions that can be quickly and easily programmed via a mobile phone or online. In new builds, this is most often a central unit that could contain media, control and energy readings. The company's ground meter cabinets are installed outside the home. Also, commercial buildings often contain a large number of products from Electrical distribution products – everything from individual components to safety switches, KNX and complete solar energy solutions. For the Electrical Distribution Products business, even if fewer construction starts are predicted over the next few years, the company notes that increased demand in energy efficiency and renovation, conversion and extension (RCE) projects, which will balance its sales.
In its Projects business, the company assembles ready-to-install switchboards tailored to customer-specific requirements, mainly for the overall construction market and new-builds and commands a market-leading position in complete solutions in low-voltage distribution. The company is also a full supplier of products for temporary electricity and lighting. The products are mainly used on construction sites, but also at other venues such as concerts and sporting occasions. This includes the market’s most energy-efficient and climate-smart LED working light for demanding environments. The company has also created a new product category and developed a new series of drying fans and fan heaters with several unique properties: The smart digital control provides maximum effect while making robust energy savings possible, and an electronic thermostat creates a comfortable, even temperature in all types of spaces. The drying fans are equipped with integrated filters that purify the air, providing an optimal working climate.
What is so unique about the company's products and solutions? Many products now in the market can appear quite similar after installation. What is not apparent is how long it took to install them. The company's products are extremely efficient and highly regarded by electricians. With its smart installation solutions, which have been prepared for the simplest possible installation, the best total cost is achieved for the least demanding effort. In 2019, the company introduced QR labeling on all of its products. Through scanning with a mobile phone, the installation engineer has immediate access to a complete wiring plan showing how the cabinet was constructed, together with a table of contents. This will save a great deal of time during installation, future applications, service and maintenance. In addition, large facilities often require cable cabinets and switchgears in bigger dimensions, with complex contents. Here, the company focuses sharply on delivering complete, customer-specific and meticulously tested products that create solid value for both installation engineer and end user. To offer fast and efficient service, the company has created an app in which installation engineers can configure their distribution cabinets via a mobile phone or the Internet, which they assemble and ship out the day after for quick delivery. By increasing access to its popular socket outlet distribution boards, the company believe sales will increase.
The company has close dialogue with customers to foster new innovation. The company's team are often out at construction sites and in the industry to keep a close dialogue with the electricians or electrical installers who use their products, listening to their needs and to find ideas for new innovations that will save time and energy in a profitable and sustainable way. The company shares its knowledge through courses for customers and installation engineers. For instance, a charging station is still something new and a bit strange for many installation engineers, since it involves load balancing, connection to Internet services and programming software.
The company also stands out for its software development which focuses on increased digitalization to achieve better energy efficiency and smarter use. The company has several new energy-saving products that can be easily configured and programmed via an app. This applies to devices such as time switches, KNX and engine heaters, as well as electric posts for camping and marinas. All its products have a user-friendly interface, which makes daily life easier for both installation engineers and end users.
CEO Mr. A sums up: "Sustainability has always been an important building block of the company’s strategy. Creating solutions for a better environment is part of the company’s business mission, and all the products we launch have sustainability in mind. In our development work, we are building more digital technology into our products. Our company continued to present a range of digital solutions concerning control and energy efficiency. Market interest in our products and digital solutions has generated growth in all product areas. Demand for the Twin wall box with double outlets, which has the capability to charge two cars at once and launched during the first quarter of 2020, has been high. The programs that were adopted during the latter half of 2019 to support the expansion of the charging infrastructure for electric cars and chargeable hybrid cars have, to a certain extent, also had a favorable effect on demand. In 2019, the company celebrated its 80th anniversary with a strong confidence in the future. Our history and expertise are a strength for our customers and users. The drive to continually develop simpler, better and smarter electrical products continues to challenge us. Our goal is to stand on the leading edge of both function and sustainable concepts."