Cavotec: Backlog clean-up drives higher margins - ABG

Better margins and FCF, lower sales and orders
'23e/'24e/'25e EBIT down 4/6/2%; 4.1-9.1% margins '23e-'24e
19-7x EBIT '23e-'24e, 16% org. sales CAGR '22-'25e


Profitability over growth

Cavotec's margins continued to improve both y-o-y and q-o-q, to 4.1% (ABGSCe 3.8%), while sales were flat y-o-y (ABGSCe +16%), as margin pressure from the backlog faded. We believe this pressure is mostly gone and should yield even higher margins in Q4 (8.2%), also due to seasonally higher deliveries (6% sales growth y-o-y in Q4, up ~20% q-o-q). Although the backlog declined 'only' 3% q-o-q (ABGSCe -6%), we had expected both higher orders and deliveries, and believe a combination of hesitant customer activity and Cavotec's focus on taking profitable projects could hold back future sales somewhat. Finally, FCF was strong at ~EUR 3m (neg. ~6m YTD), vs. an EBIT of ~EUR 2m, and should continue to improve in future quarters.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/cavotec/Equity-research/2023/11/cavotec---backlog-clean-up-drives-higher-margins/