Raute - Higher sales, lower order intake
Higher revenue negated by lower margin and order intake
Stronger than expected Q4 project deliveries (EUR 39m vs. EUR 33m in the previous quarter, according to our estimates) pushed the company to book a record quarter. On the other hand, the released figures reflect a lower EBIT margin on project deliveries. We estimate the Q4 project deliveries EBIT margin at below 5%, while previously the business has averaged margins above 6%. It should be noted that the lower margin may be due to possible conservative assumptions by the company regarding the unfinished projects. Whereas Q4 sales came in EUR 10m higher than our expectations, the order intake fell short by EUR 9m (at EUR 28m vs. our estimate of EUR 37m).
We maintain HOLD with a TP of EUR 27.0 (27.5)
All in all, we don’t see material changes in the company’s operating environment. We continue to expect negative sales and EBIT development for the next couple of years following a very strong investment cycle by Raute’s customers. Our estimates for 2019 sales and EBIT remain at EUR 149m and EUR 12m, respectively. We make no significant changes to our longer-term estimates and maintain our HOLD rating, lowering our target price as peer valuation multiples have declined during the recent months. In our view an EBIT level of around EUR 10m and EV/EBIT multiple of 8x remain the relevant yardsticks for long-term over-the-cycle valuation.