Raute - Strong results, more potential left
Raute’s Q2 figures were mostly impressive even if smaller order flow remains one source of uncertainty.
EUR 5.4m Q2 EBITDA clearly above our EUR 3.5m estimate
Raute’s Q2 revenue nearly doubled y/y to EUR 57.1m, compared to our EUR 46.4m estimate, as Wood Processing grew 141% due to the mill-sized orders received last year. Wood Processing already achieved a high 7.4% EBITDA margin and thus improved by EUR 5m y/y (almost EUR 2m above our estimate). Services also performed better than we estimated while Analyzers remained soft as there weren’t many new orders; we believe Analyzers will improve towards next year as large deliveries continue and the segment remains a key part of offering. The guidance suggests Q2 may represent the year’s high in terms of earnings as Wood Processing H2 EBITDA might remain flat relative to H1.
Raute already has new references beyond plywood and LVL
Analyzers posted an EBITDA margin of 5% in H1, compared to its high double-digit potential, and we believe it should again contribute to earnings growth next year. We estimate Wood Processing EBITDA to improve only marginally next year as its top line might no longer grow unless new orders begin to improve soon. Services growth has been impressive considering the lack of Russia, and we expect the segment to develop flat next year. North American outlook remains good despite another soft quarter in terms of new orders, and European small order activity is still the biggest challenge. It’s yet early to say whether Raute can grow also in FY ’25, but new customers in new product markets such as CLT should significantly expand Raute’s long-term potential.
Earnings multiples are low also in the short-term
We see Raute reaching the upper end of its guidance range; the EUR 16.7m comparable EBITDA we estimate would be only an 8% margin, compared to the 12% long-term target. We don’t estimate further growth for FY ’25 as Wood Processing is likely to reach EUR 150m top line already this year. A pick-up in smaller orders could yet however improve earnings gains outlook as it would drive further Wood Processing margins and help Analyzers grow. We don’t view the below 7x EV/EBIT valuation on our FY ’24 estimates as demanding since Raute has plenty of potential left beyond this year. We retain our EUR 15.0 TP and BUY rating.