Cavotec - Profitable growth ambitions reiterated
Feedback from ABGSC Investor Day… …presented by CFO Glenn Withers Potential for 14% margins in NC, 11-8x EV/EBIT ‘22e Focus on where the highest growth potential is Today, we hosted a presentation with Cavotec’s CFO Glenn Withers at our ABGSC Investor Day. The overarching theme was the same that was communicated in connection to Cavotec’s Q1 report. First, the company is confident in the divestment of its Airports division (had EUR 43m in sales 2020) during this year. Second, Mr.
Withers reiterated his optimism in the long-term drivers for shore power (regulatory driven), automated mooring (a market of 4,000 berths vs. the current installed base of 100 systems), electrified port applications and automated charging. In addition, the company aims to extend its scope of supply within shore power.
However, Cavotec is clear in its intention not to venture into becoming a large EPC provider. Finally, Mr. Withers noted that c.
25% (EUR 5m) of the EUR 20m growth investment programme (total over five years) would impact the P&L during 2021. In the longer term, Cavotec aims to recruit 320 new employees, of which primarily engineers. Potential for New Cavotec (NC) to surpass 14% EBIT margins Although we expect parts of these investments to kick in before a significant upturn in demand, we believe that the future profitability potential is still significant.
New Cavotec had EUR 115m in sales 2020 (vs. prior peak of ~180m 2014), and we expect this to reach 200m 2023e. On EBIT, New Cavotec had a margin of 3.
0% in 2020 (vs. 10. 5% Q2-Q4’19).
Assuming no improvement in raw material efficiency (46% of sales 2019), an additional EUR 23m in other opex until 2023e would still imply an EBIT margin of c. 14%, above the company’s LT target of 12%. Implied EV/EBIT range post Airport sale of 11-8x 2022e On our current estimates, where we include Airports until its divestment, we forecast a 19% adj.
EBIT CAGR ’19-‘23e. If we isolate New Cavotec and adjust the EV for a sale of Air.
