Raute - Only missing some smaller orders
Pick-up in small orders would improve outlook even further
Raute’s earnings have been recovering gradually for the last 12 months, however Q2 was a bit softer than the previous quarters due to a lack of Wood Processing and Services revenue. Very high North American orders were a positive surprise; although Europe may continue to miss some smaller equipment orders going forward the outlook for the next year or two isn’t too bad given the three large projects to be delivered to Europe and Uruguay. We therefore believe Raute’s EBIT is poised to trend towards an annual level of EUR 10m in the medium term. Raute didn’t disclose any larger new orders during Q3, and smaller equipment orders are one of the key short-term focus issues. We expect Q3 order intake to have amounted to EUR 29m; the figure could end up lower than that if there’s a temporary lack of North American orders after the Q2 burst and if Europe also proves very soft, but we believe EUR 30m to be a reasonable quarterly ballpark estimate for now. The small order level could also gain considerably if the outlook in Europe begins to improve.
We upgrade our FY ’23 earnings estimates by EUR 1m
We estimate Raute’s Q3 top line to have improved considerably q/q but been soft y/y (we see no very large y/y changes in mix). We see Q3 EBIT at EUR 1.5m, in other words roughly flat y/y. The new ERP system may cause no larger issues, and in our view quarterly EBIT is set to improve closer to EUR 2m and above over the next year or so. Raute’s guidance update wasn’t a very big surprise; we now estimate 6.5% adj. EBITDA margin on a revenue of EUR 148m. We make only marginal estimate revisions for the coming years. Wood Processing revenue will gain significantly next year, whereas Analyzers should have more stable long-term potential in terms of revenue and earnings.
EBIT likely to reach EUR 8m and above in the coming years
FY ’23 profitability will remain rather modest as H1 lacked volumes, however H2 should show solid improvement which is to be continued also next year. We estimate Raute to reach above EUR 8m FY ’24 EBIT, on which the company remains valued at a multiple of 5.1x. We retain our EUR 12.0 TP and BUY rating.