Raute - Stable earnings for now
Wood Processing’s strong Q1 prompted Raute to upgrade FY’25 earnings guidance. Q1 orders however still weren’t great, and it remains to be seen how much further new orders might be delayed in the prevailing environment.
Only small estimate revisions beyond Wood Processing’s Q1
Raute upgraded its FY’25 earnings guidance midpoint by 15% as Q1 proved better than expected thanks to Wood Processing. We raise our Q1 adj. EBITDA estimate by some EUR 1.5m to EUR 5.9m, driven by Wood Processing. We expect all segments to show earnings gains this year; in our view Analyzers’ EBITDA should improve the most in absolute as well as relative terms due to low comparison figures, and the 18% margin we estimate would still be modest compared to the 25% levels it has historically posted. We now estimate Wood Processing FY’25 EBITDA to gain EUR 1m y/y as comparison figures for H1 are low; H2 on the other hand might already see softening, but we expect the segment’s EBITDA to stay around 8.5% over the year.
Earnings growth might not continue next year
Raute says Q1 new order intake was low, which we believe could mean below EUR 30m. The trade war and tariffs might not have very big direct effects on Raute, but the uncertainty they create will not help any new capital investment decisions. We thus make some cuts to our revenue estimates for the coming years, attributable to Wood Processing; we estimate the segment’s top line to decline 4% already this year, and it is likely to continue to fall at a steeper rate next year unless new orders pick up in the coming quarters. The segment’s EBITDA margin could however stay at around 8% if its annual revenue doesn’t fall significantly short of EUR 125m. Raute’s EBITDA should then stay comfortably above EUR 20m as long as that remains the case.
Multiples remain attractive even if growth doesn’t continue
Wood Processing generates more than 50% of Raute EBITDA, so further earnings growth will be challenging to achieve unless new orders pick up. The market has had its challenges for a while now; new orders may still not pick up enough in the coming quarters to drive growth for next year, but Raute remains valued only at about 4.5x EV/EBIT on our FY’25 estimates. In our view upside potential thus remains large enough even if earnings only flatline in the base case, while additional large projects as well as smaller order pick-up would drive more significant gains. Our TP is now EUR 19.0 (16.0) as we retain our BUY rating.