Raute - Earnings multiples remain low
Raute’s Q3 figures were encouraging, and even if FY’26 EBITDA would decline more than we estimate the earnings multiples are still low enough to leave margin for upside.
Wood Processing drove another very strong report
Raute’s EUR 43.7m Q3 revenue was EUR 5m below our estimate, due to all the segments, but Wood Processing reached a new record-high 15% EBITDA despite the relatively low revenue; the high profitability lifted Raute’s EUR 6.5m comparable EBITDA above our EUR 5.8m estimate even when Services was a bit soft. The project margins of Wood Processing have developed perhaps surprisingly strong, but there’s nothing extraordinary happening which couldn’t be repeated also in the future. We acknowledge Services has demanding comparison figures since it grew almost 30% last year, and this time it also lacked demand for certain upgrade investments, but it should continue to develop stable next year and generate around 15% EBITDA margin. The EUR 38m order intake was a positive surprise, but Raute would need similar or even higher orders in the coming quarters given the already rather long decline in order book.
Orders are recovering, and they are also needed soon
Larger mill-sized new orders have been lacking for a while now, so we believe there’s a decent chance Raute will book another such project in the coming quarters as the environment seems to be gradually stabilizing. In our view Raute is not yet completely out of the woods when it comes to next year’s volume outlook even if European demand in particular is improving; we still expect FY’26 revenue to decline by a double-digit rate due to Wood Processing and hence an EBITDA headwind of some EUR 5m. Raute has taken cost measures which this year’s high figures don’t yet reflect, so next year’s EBITDA is likely to remain at least decent even if it will be hard to continue on the path of earnings growth.
Multiples leave margin for upside even in a soft scenario
We make only small estimate revisions as we still expect Wood Processing FY’26 revenue to decline by roughly 20% and then estimate its EBITDA margin at 11%. The corresponding EUR 20m EBITDA implies Raute is valued about 4.5x EV/EBIT on our FY’26 estimates, which should still be low enough to leave margin even if next year’s earnings would decline more than we estimate. We retain our EUR 17.0 TP and BUY rating.