Raute - Western markets hold up well

Bottom line and new orders a bit soft, but no major news

Raute’s EUR 45.7m Q4 revenue grew 4% y/y and was clearly above our EUR 38.0m estimate. The EUR 0.5m Q4 EBIT was soft relative to our EUR 0.7m estimate, despite the high revenue figure, as inflation still limited projects’ profitability; Services revenue continued to grow y/y, but there were changes in mix and certain delivery challenges. The EUR 28m Q4 order intake lacked modernization orders and was soft relative to EUR 36m estimate, however there seem to have been no significant negative changes in market demand since Q3.

We revise our FY ’23 revenue estimate down to EUR 133m

Raute’s earnings recovery path continues without major surprises, however we revise our estimates down as Q4 order intake was lower than we expected; the company begins the year with slightly lower order book than we estimated. European plywood investments (particularly within birch) should remain high, but we estimate European and North American revenues to remain roughly flat this year (both almost doubled in FY ’22); there is more scope for growth in Latin America and Asia-Pacific, but these markets have traditionally been more marginal for Raute. We likewise expect the Services and Analyzers businesses to remain stable in FY ’23, whereas the missing Russian revenue could leave Wood Processing top line down by 20%.

We now estimate FY ’23 EBIT at EUR 2.5m (prev. EUR 5.3m)

Raute’s guidance doesn’t seem challenging from profitability perspective as the minimum implies comparable EBITDA of only ca. EUR 6m (Raute’s comparable EBITDA amounted to EUR 8.7m in H2’22); further growth this year in Europe and North America within smaller equipment orders may not be that easy but a larger (European) order, should it materialize in early FY ‘23, could add a significant amount of revenue and thus help Raute specify its guidance upwards. Raute’s high operating leverage works both ways, but in our view comparable EBITDA of around EUR 8m should be achievable this year even if revenue declines by some 15%. The 17.5x EV/EBIT multiple, on our updated FY ’23 estimates, is not low but acceptable given earnings potential in the long-term. We retain our EUR 11 TP and BUY rating.