Cavotec: Largest shore power order ever recorded - ABG

10% of our 2022e order backlog, Q1’22 BTB was 1.5x
Deliveries from the backlog key to profitability
‘24e EBIT 4x above ‘22e, 26% org. sales CAGR ‘22e-‘24e

Demand for maritime cleantech continues to improve
Cavotec just announced a multi-year shore power order worth EUR 15.7m from a “major global shipping line”, with deliveries scheduled to start in Q4’22 and to continue throughout 2023-2024. For reference, this would constitute 35% of our implicit order intake for Q2’22e, and 10% of the backlog by YE’22e. We believe that the strong order momentum seen in New Cavotec (excl. Airports) since Q1’21 supports Cavotec’s claim that 1) demand for shore power is structurally growing and 2) the company has a competitive position in this niche. We estimate that run-rate orders are now approaching ~EUR 200m, vs. our 2022e-2023e sales estimates of EUR 140m and 188m, respectively. In addition, we believe the recent order momentum supports Cavotec’s strategic shift towards targeting vessel operators rather than only port operators.

Challenges to remain in Q2, profitability from Q3’22e
We expect sales to remain flat in Q2’22e due to the current lockdown in China as well as timing of deliveries from the backlog, which means that Cavotec will remain loss-making in H1’22e. However, we understand that the backlog conversion will improve considerably in Q3’22e and drive a notable increase in sales. We believe that a quarterly sales level in excess of EUR 40m will be enough to showcase the restructured Cavotec’s potential of achieving double-digit EBIT margins.

Backlog conversion key to increasing investor confidence
Although external headwinds remain from lockdowns in China and supply constraints, we appreciate that Cavotec 1) has restructured its cost base, 2) will exit Airports by mid-2022, 3) was quick to find a CEO replacement and 4) continues to build on a strong backlog. However, we argue that key to gaining confidence in the final phase of Cavotec’s turnaround will be to see Cavotec deliv ...
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