Raute - Proceeding according to strategy

Q2 figures were a bit mixed but overall no large surprises

Raute’s Q2 profitability improved y/y from the very low comparison figures, however the EUR 0.7m adj. EBITDA didn’t meet our EUR 1.8m estimate as softness in Wood Processing and Services demand left the EUR 29.3m revenue short of our EUR 31.4m estimate. Meanwhile Analyzers’ performance was a positive surprise, although it should be noted its margins were to a certain extent exceptionally high. Q2 produced a record-high EUR 112m order intake, driven by two large European orders, and it topped our estimate by EUR 17m largely thanks to North America, where there was also a somewhat exceptionally strong burst of orders. We believe North America is unlikely to reach such high order intake levels going forward, however the local demand outlook remains clearly better than that of Europe.

Many different developments largely as expected

Raute’s Q2 results and comments weren’t overall surprising as construction slowdown reduces softwood plywood demand, whereas outlook remains better for certain types of industrial uses. Europe’s short-term outlook is weaker than that of North America, yet birch plywood demand is high and its supply a bottleneck due to the vanished Russian imports. Raute still has large order potential in Europe, but also in more exotic locations. The uncertainties in Europe are the most significant source of short-term risk (e.g. spare parts demand could be better), however we believe Raute is more likely than not able to specify its guidance upwards some time during H2 especially in terms of profitability (we estimate 5.6% adj. EBITDA margin for FY ’23). Raute achieves its cost savings according to plan, whereas the new ERP system may still cause some minor issues. Raute continues to look for M&A opportunities long-term, but strategy also relies on organic growth helped by own R&D investments.

Valuation remains undemanding relative to potential

We make only marginal estimate revisions following the Q2 report. Raute is valued 5.5x EV/EBIT on our FY ’24 estimates, which we consider an unchallenging level as our respective EUR 8.3m estimate remains quite modest in the light of long-term potential. We retain our EUR 12.0 TP and BUY rating.