Raute - Double-digit margins to stay
Raute’s FY’25 results are likely to prove so strong that earnings will decline next year, but the low valuation is undemanding enough for further likely upside.
Q1 strength driven by a very high Wood Processing margin
Raute’s EUR 51.9m Q1 revenue wasn’t quite as high as our EUR 53.3m estimate due to the equipment side, but the EUR 7.4m comparable EBITDA beat our EUR 5.9m estimate thanks to the 14.5% Wood Processing EBITDA. The margin was impressive especially in the sense that the EUR 37.9m revenue wasn’t even the highest level the segment has seen. There were no one-offs boosting the figure, yet such a margin may not be repeatable again soon as Wood Processing top line is likely to trend down unless new orders pick up this year, and the EUR 15m order intake was clearly lower than we estimated. We revise our FY’26 revenue estimates down due to the low orders but raise our margin estimates thanks to the performance of Wood Processing. Our EBITDA estimate changes are hence quite small.
Double-digit EBITDA margins should remain
We estimate Wood Processing to generate EUR 16m of EBITDA this year, or a margin of 11.5%, a gain of EUR 5m y/y even though we see its FY’25 top line already down by 4%. We cut our FY’26 revenue estimate due to the low order levels, but in our view Wood Processing could still make some EUR 11-12m EBITDA next year assuming revenue of roughly EUR 120m. Services and Analyzers should together be able to make another EUR 9-10m so that Raute EBITDA would stay comfortably above EUR 20m even if earnings might decline then by around EUR 4-5m. In our view Raute FY’26 revenue could decline by about 10%, although the already long period of low smaller equipment orders could also mean there will be some pent-up demand.
Low multiples offer some more upside opportunities
The trade war and tariffs don’t seem to have any direct effect on Raute’s operations, but the situation is postponing market recovery since plywood demand and pricing mostly face headwinds. We estimate Raute FY’25 EBITDA at almost EUR 26m, on which basis the EV/EBIT multiple is some 3.5x. The multiple would increase to above 4x next year as earnings headwinds are likely due to the high comparison figures building up now while the order book is trending down. We nonetheless consider the low multiples very undemanding. We retain our EUR 19.0 TP and BUY rating.