Raute - Earnings on a solid upward trend

Raute’s Q1 showed how Wood Processing is to return to black after a string of challenging years. Services is to maintain its steady performance, while Analyzers remains at the core of Raute’s offering.

Wood Processing and Services improved y/y and q/q

Raute’s Q1 revenue grew 21% y/y to EUR 44.7m, above our EUR 42.1m estimate due to Wood Processing and Services while Analyzers fell short. Wood Processing EBITDA improved EUR 0.1m y/y; the comparison figure was boosted by the release of provisions due to the wind-down of Russian operations, but the gain was EUR 1.3m q/q despite the political strikes in Finland. Development costs were lower q/q, yet Wood Processing revenue should trend up over the year and we estimate its annual EBITDA at above EUR 5m. We estimate Services to deliver roughly the same this year, whereas we see Analyzers revenue down 10% after 38% growth the previous year; Analyzers came in below our estimate as there were revenue timing issues as well as project delays. The low volume left Analyzers EBITDA slightly negative, yet Raute’s EUR 3.0m comp. EBITDA topped our EUR 2.6m estimate.

All three segments are well-positioned to grow also next year

Q1 showed encouraging performance despite a few challenges, which in our view solidifies long-term earnings outlook as many of the issues were of temporary nature. There doesn’t seem to have been big changes in market outlook as activity for large strategic investments remains quite robust while soft end-demand limits appetite for smaller orders. Raute’s competitive positioning remains favorable both in the short and long term as evidenced by the latest five larger projects but also its Services offering (efficiency improvement contracts). Small equipment order outlook is also unlikely to get much softer than it now is.

Valuation modest as EBITDA has strong drivers beyond FY ‘24

Raute is valued around 6.5x EV/EBIT on our FY ’24 estimates, which we view very modest as there’s likely to be plenty of potential for further improvement beyond that. We estimate Wood Processing revenue to grow by almost 50% this year, yet current order book should support additional growth also next year. We estimate top line to grow by 7% then and earnings to gain by more than EUR 3m in FY ’25. We retain our EUR 13.0 TP and BUY rating.

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