Raute - Multiples assume very low orders
Raute’s margins impress, while extended low orders pose big earnings headwinds, yet multiples remain very undemanding.
Order backlog still delivered, but new orders almost halted
Raute’s EUR 43.8m Q2 revenue was below our EUR 53.9m estimate mostly due to Wood Processing as its revenue wasn’t recognized as fast as we expected, however the EUR 6.5m comparable EBITDA still matched our EUR 6.7m estimate since Wood Processing again posted an EBITDA margin of 14%. The segment repeated the effectiveness seen already in Q1 even though its order book consists mostly of large mill-sized projects, which have historically had some margin challenges. The very soft EUR 12m new order intake was a clear negative and the extended order book decline poses significant earnings headwinds going towards next year, however Raute’s competitive position should remain strong enough (as reflected by the five mill-sized orders received a couple of years ago) so that the pent-up demand which has been building in Europe for a while now should turn into higher orders going forward.
FY’25 earnings likely closer to the upper end of the range
We make further FY’26 estimate cuts as Wood Processing faces a major volume headwind next year. We estimate FY’26 earnings down by some EUR 5m due to Wood Processing as we see its EBITDA down to EUR 12m, or 10.5% margin (vs 11.8% in Q2’25 TTM and 14.1% in H1’25). The lower volumes will hurt margins, but Raute’s order book is likely to tilt towards smaller equipment orders from now on; Raute’s recent large orders have delivered impressive margins, however it should still be easier to do better with smaller projects. Equipment orders have been further postponed, but there seem to be signs that at least European orders will recover from H2’25 onwards. The eventual rebuilding of Ukraine would likely be a major boost to construction, which would also help Raute’s orders, but Raute’s expectations of European H2 improvement don’t assume any such scenario.
Low multiples even if earnings decline more than estimated
Services and Analyzers should be able to post stable or even improving FY’26 earnings; new Wood Processing orders remain in focus over H2 as their level determines how big of a headwind the segment faces. Raute is valued only about 4.5x EV/EBIT on our FY’26 estimates; the multiple wouldn’t still be too high if earnings declined by another EUR 5m more on top of our estimate. Our new TP is EUR 18.0 (19.0) as we retain BUY rating.