Cavotec - Small near-term demand changes expected
Q4 report on Friday, 26 February at 07:00 CET Small est. changes in absolute terms for ’20e-‘21e Ready for earnings growth post-pandemic Near-term visibility to remain clouded due to COVID-19 We expect Q4 sales of EUR 38m, -18% y-o-y organically and +1% q-o-q, as we believe that the ongoing pandemic continues to have a negative impact on customers’ decision-making. This combined with slightly higher costs from growth investments into port electrification leads us to expect an adj. EBIT loss of EUR -1m (+6m, 12% margins, in Q4’19) for the quarter.
Looking ahead, we note that the company continues to improve its internal operations, focus on pursing high-margin orders while having a personnel base that is c. 25% lower compared to Q2’17 (before the transformation began). For 2021, we expect management to convey a qualitative view of good long-term demand prospects, but with near-term visibility still clouded from the pandemic.
2022 earnings scenario intact, growing in the right places We lower our underlying sales estimates by 3-1% for ‘21e-‘22e (+2% from FX) due to a slightly lower demand recovery in Ports & Maritime. As a result, we lower our adj. EBIT assumptions by EUR 2-1m (38-6%) over the same time period.
However, our confidence in structurally higher margins ahead remains in place, as we believe that the share of high-margin solutions (e. g. the MoorMaster shore power applications and services) have gone from c.
20% of group in 2014 to c. 35% in 2019. We therefore expect Cavotec to reach a 9.
5% adj. EBIT margin in 2021e (8% in 2019), and c. 11% in 2022e, due to growth in high-margin segments.
12-9x EV/EBIT ‘21e-‘22e, 14% adj. EBIT CAGR ’19-‘22e We argue that the Cavotec of today is not the same internally troubled company as it was a few years ago. The company is set to benefit from structural growth opportunities, expanding margins on improved leverage with a net cash position supportive of inorganic growth opportunities.
On our estimates, the stock.
