Raute - Order book to bottom out soon
Raute reports Q3 results on Oct 30. Earnings are likely to peak at least temporarily this year, but multiples also don’t imply big expectations for new orders. A turning point in the order backlog decline trend could yet drive upside soon.
Wood Processing earnings are peaking this year
Raute has already achieved very impressive results in terms of operating margins, especially thanks to Wood Processing. These results were delivered on the back of the five larger equipment orders the company received around two years ago, while new order intake has been quite weak most of the time for more than a year now. Raute’s FY’24 EBITDA margin of 10% wasn’t bad, and this year the company is likely to hit about 13% even if H2 already sees some weakening. The lack of recent orders implies Raute’s FY’26 top line could fall at a double-digit rate as Wood Processing might decline by roughly a fifth. We estimate Q3 revenue at EUR 48.8m, up 5% y/y, while we see comparable EBITDA down by EUR 0.5m y/y to EUR 5.8m.
European orders have been weak, but should stabilize soon
Wood Processing is unlikely to reach 14% EBITDA margins again very soon since its order book is declining, but in our view a level of roughly 10% could still be attainable next year assuming some recovery in new smaller equipment orders will be seen over H2’25. We continue to expect Raute’s FY’26 EBITDA to decline by some EUR 5m due to Wood Processing, while Services and Analyzers should still be in position for incremental gains. Raute’s quarterly new order intake averaged only EUR 14m in H1’25; we expect pent-up demand to have helped the Q3 figure to EUR 31m, which wouldn’t still be a particularly high figure on an annual basis. Europe should drive order recovery soon as it has seen such low levels for quite a long time now.
Multiples imply very cautious expectations
Raute is valued only around 4x EV/EBIT on our FY’25-26 estimates; in our view there doesn’t necessarily have to be any very big positive order intake surprise for share price gains since expectations already appear so low. We estimate FY’26 EBITDA will be down to about EUR 20m, or below 12% margin. In our view H2’25 new orders are almost certainly going to improve by at least some amount relative to the very quiet H1, and while we still estimate order backlog to decline over H2 the trend could already turn before the year ends. Our new TP is EUR 17.0 (18.0) as we retain BUY rating.