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Raute - Earnings to remain quite stable

Raute reports Q4 results on Feb 13. FY’24 already showed strong results, while low valuation limits downside potential.

Earnings growth to have continued y/y, but not q/q, in Q4

Raute’s Q3 was stronger than expected due to Wood Processing; the segment’s 11.5% EBITDA was very high partly due to seasonally lower costs and high share of modernization deliveries. The segment’s EUR 32m revenue however wasn’t yet very high and so we believe its EBITDA will remain above EUR 3m also in Q4. Services’ strong performance is likely to continue, while Analyzers should have potential to improve going forward as there has been a lack of small equipment orders for quite some time. We estimate Wood Processing has continued to grow 35% y/y while Services may no more grow at a double-digit rate due to high comparison figures. Analyzers may still have remained a bit soft, however we estimate Raute to post 21% y/y revenue growth and a comparable EBITDA of EUR 5.5m in Q4.

 

Services and Analyzers can grow this year

Services and Analyzers should grow also in FY’25, the former maybe marginally and the latter significantly, while Wood Processing faces a high comparison period since many of the large projects produced significant revenue already last year. The 5 larger orders, worth a total of EUR 235m, Raute received in the past two years are substantial in the context of the total Raute addressable market and hence it will not be easy to find additional Wood Processing growth without new large orders and/or recovery in smaller order flow. We believe there’s still potential for new large orders in countries like Poland (plywood & LVL), while it should only be a question of time when small orders pick up. We estimate Raute FY’25 results to remain stable as we see revenue down 4% and EBITDA decline by ca. EUR 1m. 

 

Low earnings multiples limit downside potential

We believe Raute’s FY’25 results will soften a bit from the already high comparison period, but there should still be enough market demand drivers so that a prolonged earnings decline is unlikely. Raute’s valuation should in any case be low enough, as it trades only slightly above 4x EV/EBIT on our FY’24-25 estimates, so that downside potential is quite limited relative to upside. We retain our EUR 15.0 TP as our rating is BUY according to the updated rating methodology (see p. 3).

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