Raute - Earnings stay high, multiples low
Raute has already achieved high results, and they could be even higher in a more favorable market environment.
High Q4 orders and flattish guidance for the year
Raute saw Q4 revenue grew 25% y/y to EUR 56.5m vs our EUR 54.8m estimate as Wood Processing and Services came in higher than we estimated while Analyzers fell a bit short. Services had high costs due to e.g. digitalization initiatives, while Wood Processing did slightly better than we expected. Raute’s EUR 5.1m EBITDA was thus somewhat short of our EUR 5.5m estimate, however the EUR 50m order intake clearly beat our EUR 21m estimate. High Services orders helped, but there were also at least some equipment orders which had been postponed previously. The high small order level was due to Europe and Latin America, while North American orders still didn’t reflect the region’s demand potential. Raute may see flat revenue and earnings this year despite the still uncertain market environment, which in our view is reassuring at this point.
We estimate flat earnings development for this year
Product mix should be more favorable going forward as Wood Processing is likely to decline while Services and Analyzers have better potential to hold up or gain. We believe Americas supports results this year in terms of small orders, while European order intake could also improve particularly if larger orders again materialize. In any case Raute already achieved a respectable level of earnings, which should remain stable even in a continued uncertain market. The roughly EUR 200m revenue and 10% EBITDA margin level we are estimating for this year and next could be driven higher by the potentially improving outlook later in 2025; meanwhile Raute’s performance and balance sheet are strong enough so that it can do share buybacks.
Growth may be hard to find for now, but valuation is low too
Raute is valued about 4.5x EV/EBIT on our FY’25 estimates, which isn’t a demanding level as the company has more potential to grow once the market uncertainties fade. In our view it’s not easy to reach the targeted EUR 250m revenue and 12% EBITDA margin by 2028 without a significant pick-up in smaller equipment orders as Raute has already delivered large parts of the recent big projects, but low valuation doesn’t reflect many expectations. Our TP is EUR 16.0 (15.0) as we retain BUY rating.