Canaccord initiates coverage on kettle maker Strix with 'buy' rating

With high margins, low capital intensity and strong cash conversion, kettle controls manufacturer Strix looked like an attractive prospect to Canaccord Genuity's analysts, pressing the button on a 'buy' rating for the AIM-quoted firm on Monday.

Strix, which has an approximate 38% market share of the design, manufacture and supply of safety controls for electric kettles across the globe, produces roughly 70m kettle controls each year, most of which are sold to 180 original equipment manufacturers in China, as well as 400 brands and retailers worldwide where its products are used an estimated 1bn times per day.

Canaccord pointed to Strix's long track record of sustainable profitability, having generated over £30m of adjusted EBITDA in each of the last ten years.

On top of that, the 5.6% gain in the electric kettle market last year is coupled with the firm's high margins, low capital intensity and strong cash conversion, leading to an estimated 7.1% increase in demand over the next two years and enabling a progressive distribution policy.

Canaccord saw further growth potential flowing from Aqua Optima, Strix's UK water filter brand, which has a long-term licence to supply Tommee Tippee with bespoke filters for its successful Perfect Prep baby formula appliance and also from its work on expanding its technologies into different geographies including China and the USA.

In addition to the 'buy' rating, Canaccord issued Strix, which was currently trading at 137p, a price target of 210p per share.