Cavotec: Steady grind bearing fruit - ABG

Positive margin, sales and cash flow trend continues
'24e-'25e EBIT up 11-4%; 53% CAGR '23-'26e
12-5x EBIT '24e-'26e, 3-10% FCF yields


Fourth straight quarter of rising margins

Cavotec's increased focus on operational efficiency, alongside less drag from orders with worse pricing, continued to drive a positive trend in margins. Sales continued to grow at a solid pace (17% organically, vs. ABGSCe +5%), and we expect growth to remain strong at 13-9% H1'24. Although the backlog was down 16% y-o-y and 9% q-o-q (-2% vs. ABGSCe) due to a normalisation in order patterns and increased focus on project selection, the coverage accompanied by solid demand should be enough to support continued high organic growth. However, the main highlight was the 7.6% EBIT margin (ABGSCe 5.6%, loss in Q4'22, 4.1% Q3'23), the fourth quarter in a row of rising margins, and the good cash flow (FCF ~80% of EBIT, 1.3x ND/EBITDA R12m). We expect the gradual margin improvement to continue given volume growth, better pricing and improved internal efficiency, and drive >100% EBIT growth in H1'24, even though seasonality should result in lower margins in H1'24 (4-5%) vs. Q4'23.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/cavotec/Equity-research/2024/2/cavotec---steady-grind-bearing-fruit/