Cavotec: Strong backlog supports return to profitability - ABG

Annualised orders approaching ~EUR 200m
Return to profitability in H2’22e
’24e EBIT 4x above ’22e, 26% org. sales CAGR ’22e-‘24e

Cavotec continues to capitalise on strong market demand
Order momentum for Cavotec remained strong in Q1, as the backlog (excl. discontinued Airports) grew 91% y-o-y and 26% q-o-q, to EUR 125m (+9% vs. ABGSCe 114m). We believe this further supports the fact that end-market demand is strong, and that Cavotec has a competitive position within shore power and automated mooring. We estimate that run-rate orders are now approaching ~EUR 200m, vs. our 2022e-2023e sales estimates of EUR 140m and 188m, respectively. Q1 sales (EUR 27m, +7% vs. ABGSCe) were held back by the timing of the backlog and lockdowns in China, and we expect sales to remain flat in Q2 due to the same reasons. However, we expect backlog conversion to kick in from Q3’22e and drive a notable improvement in sales. Thus, we forecast a 2022e EBIT margin of 5% as Cavotec returns to profitability in H2’22e. In addition, the new CEO, David Pagels, will assume his role in May 2022. Finally, we find it positive that Cavotec has reached an agreement with its banks to allow for temporarily higher leverage in the near term until the proceeds from the Airports exit are received (mid-2022e).

We expect 2024e EBIT to increase 4x vs. 2022e levels
We leave our sales estimates largely intact, as we expect Cavotec to recoup deferred sales in Q2 in H2’22e. In addition, we raise ‘22e-‘24e EBIT margins by 90-10bps from a lower than expected loss in Q1. For ‘22e-‘24e, we expect strong order momentum to drive a 26% organic sales CAGR, which in combination with an EBIT margin uplift from 5.0% to 13.1% should yield a 2024e EBIT 4x above 2022e levels.

Entering the final phase of the turnaround
Although external headwinds remain from lockdowns in China and supply constraints, we believe that the restructured Cavotec will begin to deliver profitable growth in H2’22e. We estimate that it is trading at 20-4x EV/EBI ...
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