Raute - Orders translate into earnings
Raute reports Q2 results on Aug 8, after upgrading its FY ’24 guidance recently thanks to a very high order backlog.
Earnings gains due to Wood Processing and Services
Raute upgraded guidance so that the revenue and EBITDA ranges’ midpoints rose by respective 8% and 25%. Our earlier estimates were near the upper end of the previous range and would’ve still fallen within the current range, however we raise our revenue estimate by EUR 5m and those for earnings by EUR 2m. We estimate FY ’24 comparable EBITDA at just below EUR 16m; we see stable performance for Services while Wood Processing EBITDA could increase by EUR 6m y/y as we expect its revenue to grow by some 50% this year. We estimate Analyzers’ FY ‘24 earnings to decrease EUR 1.5m due to a soft H1 but expect improvement again from H2. We don’t make big estimate changes for the coming years as Raute hasn’t announced larger orders in the past couple of months. Raute is set to grow more than 30% this year due to Wood Processing; Raute’s order book may stay above EUR 200m by the end of the year and so FY ’25 has potential for additional growth especially if the flow of smaller orders soon bottoms out.
Earnings to improve over the course of the year
We expect Q2 order intake to have amounted to EUR 30m thanks to continued North American strength. Smaller European orders have been the biggest question for a while, and although their level may remain soft in the short-term at least further declines are unlikely. Raute’s Q2 comparison figures are very soft and hence the only question is how much improvement will already be seen. We estimate revenue to have grown 58% y/y and comparable EBITDA to have gained by almost EUR 3m to EUR 3.5m, yet the absolute figures should still improve towards next year even if comparison figures are higher for H2.
Multiples undemanding as potential is realized
Our EUR 15.6m comparable EBITDA estimate is a bit above the guidance midpoint. We see scope for further earnings gain of some EUR 1-2m next year due to Analyzers while Wood Processing should also have additional potential. Raute is thus valued below 7x EV/EBIT on our FY ’24 estimates, which remains a low level given the current earnings trajectory. Our new TP is EUR 15.0 (13.0) as we retain BUY rating.