Acceleron Industries was originally part of the Swiss industrial company ABB and was spun out through an IPO in October 2022.
Acceleron Industries develops, produces and services turbochargers and related components for engines in several off-highway sectors including marine, power, oil and gas and rail. The company’s products are good for the environment in that they lead to lower usage of fossil fuels and a reduction in engine emissions.
Acceleron Industries pioneered turbocharger technology in 1924 and ever since then has continued to invest in research and development to further improve its offering and lower overall engine running costs for its customers. With approximately 40% to 60% market shares across the range from low to medium speed and high speed gasoline verticals, Acceleron Industries is by far the leader in the off-highway market. This is a lower volume, but more customised segment of the turbocharger industry. The business has highly visible and recurring revenues from its installed base of 180,000 turbocharger units that require regular servicing through the company’s global service network.
The quality of Acceleron Industries’ business model shows up in consistently high profit margins and returns as well as strong cash flow generation.
The shares were undervalued at the time of our purchase because
of technical factors as ABB shareholders sold their holdings in
Acceleron Industries following the IPO. Given the company serves
the fossil fuel powered engines industry, we believe there were
also some investor misconceptions about the growth potential of
the business and we were able to buy a holding at an attractive
multiple of cash flow.
Decarbonisation and regulations related to energy efficiency
create reliable growth tailwinds behind the company. In addition,
management have an ambitious growth strategy that involves
entering into the adjacent high speed diesel market, geographic
expansion, development of new products and services and
opportunistic acquisitions. As management execute on these
exciting growth initiatives we have a high level of confidence that
the company will be more valuable in the future.
