Q4 marked the end of a strong order year for New Cavotec (NC, implicit order intake of ~EUR 160m, book-to-bill of ~1.4x). Thus, we find it encouraging that end-market demand (shore power, industrial electrification, vacuum mooring) continues to improve. However, deliveries are held back by supply constraints and COVID-19 lockdowns in China (EUR 4m in sales will be deferred from Q1’22e into Q2’22e). Thus, NC reported Q4’21 sales of EUR 31m (+4% vs. ABGSCe), +4% y-o-y organically and an EBIT loss of EUR 1.7m (ABGSCe +0.8m). Management remained confident in a notable pick-up in deliveries in H2’22e, and we expect NC to be profitable in Q3’22e. Finally, Airports is set to be divested in the summer. We expect a net cash boost of EUR 6.5m, which along with a strong backlog should lower the financial risk if there is a covenant breach due to the low near-term earnings.
New Cavotec sales + transformation to drive margin uplift
We believe that the deferred sales, timing of the backlog and continued growth investments will lead to an earnings profile entirely skewed towards H2’22e (EBIT of EUR -5m Q1’22e, ~0m Q2’22e, ~11m H2’22e) as sales begin to grow >20% y-o-y organically in Q3’22e. For 2022e, we forecast NC sales of EUR 141m (+3% vs. 2019) and an underlying EBIT margin (excl. growth investments and ‘stranded’ corporate cost) of 9.5% (9.1% in 2019). The Q4’21 backlog covers 70% of our 2022e sales. Our negative revisions primarily stem from the exit of Airports but also from lower NC sales (down 3-4% ‘22e-‘23e) and margins due to cost inflation.
Strong cleantech demand with good backlog coverage
We estimate that Cavotec is trading at 23-4x EV/EBIT ‘22e-‘24e on 25% organic sales CAGR ‘22e-‘24e as margins expand from 4.0% to 12.9% (~5x increase in EBIT) due to continued ...
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