Cavotec: Higher sales and smaller losses than expected - ABG

Backlog +98% y-o-y, sales +20% organically, break-even Airports exit to be finalised this week, ramp-up in H2’22 Positive quarterly performance Chinese operations back to full production end of June

Demand continues to be strong, as Cavotec’s (excl. Airports) order backlog grew 98% y-o-y to EUR 153m (+8% vs. ABGSCe 142m), driven by solid growth in both shore power, automated mooring and industry. Cavotec’s Chinese factory in Shanghai resumed full production by end of June, and supported organic revenue growth of +20% to EUR 32m (+17% vs. ABGSCe 27m) and an EBIT close to break-even (EUR -0.9m, ABGSCe -2.2m). Delayed deliveries still have an impact, and the new CEO David Pagels estimates that Cavotec had ‘delayed’ revenues of EUR 10m by end of Q2, vs. EUR 3m end of Q1. However, Mr Pagels expects deliveries, and lead times, to improve by the end of 2022. Finally, we find it positive that Cavotec will finalise its exit of Airports on 29 July 2022, which supports near-term liquidity prior to the ramp-up.

Ramp-up already in estimates On isolated numbers, the smaller-than-expected loss would raise our 2022e EBIT by ~20%. However, we already factor in a notable ramp-up in profitability (EBIT margins of ~10-15% Q3-Q4) as a result of significantly higher revenues (EUR 38m Q3, EUR 47m Q4). Nevertheless, Q2 numbers should, in our view, support the notion that New Cavotec has indeed structurally improved its cost base and is ready to deliver higher volumes from its rapidly growing backlog.

Final thoughts A reassuring report, and positive to see the Airports exit being finalised in the upcoming days while demand remains strong. The stock is up 9% L1M, vs. the OMXSGI at +7% (-15% YTD, OMXSGI -24%) and is trading at 24x EBIT 2022e, which drops to 8-5x EBIT 2023e-2024e. We would expect a positive initial reaction on the day.

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