Raute - This year relies on a record order

Raute did not disclose any large orders in late ‘19

We see no reason to update our estimates for Q4 and beyond as Raute hasn’t released information regarding any larger booked orders since the company disclosed the record-large EUR 58m Russian project. Raute booked the Segezha order at the end of Q3 and the project will be delivered this year, meaning Raute has a decent backbone from which to work on in an environment of cooling demand. All in all, our view towards Raute hasn’t changed in the sense that we continue to wait to see more positive signals in the market, which is still mostly cooling in the wake of a strong capacity investment boom in Europe.

We expect Q4 order intake to have declined to EUR 19m

Raute’s Q3 revenue decreased by 30% y/y to EUR 33.7m as project deliveries sales fell by 51% y/y to EUR 16.5m. Meanwhile technology services top line grew by 20% y/y to EUR 17.2m. However, we note services order intake fell to only EUR 8m in Q3 because of the slow demand for more cyclical modernization projects (the order intake had averaged some EUR 15m in recent quarters). Overall, Q3 order intake increased to EUR 73m from EUR 42m in Q3’18 owing to the Segezha order. We expect Q4 revenue to decline 32% y/y to EUR 37.0m as we see project deliveries down by 47% to EUR 20.0m and services up marginally to EUR 17.0m. We see Q4 EBIT at EUR 3.0m (EUR 3.4m a year ago); this would make Q4 the strongest quarter of the year in terms of profitability, as Raute suggested before.

Our TP of EUR 25 per share and HOLD rating are unchanged

We don’t expect Raute to report meaningful changes to current market environment i.e. the sentiment is still characterized by uncertainty. We expect Raute to guide flat revenue and EBIT for FY ’20; we see Raute’s profitability improving slightly this year as the company is in a relatively good position thanks to the EUR 58m order. Still, Raute’s conservative guidance policy is unlikely to reflect this. We view valuation (6.5x EV/EBITDA and 8.5x EV/EBIT ‘20e) neutral given the market softness. We believe the BoD will propose a dividend of EUR 1.40 per share.