We expect Cavotec to deliver Q3 sales of EUR 40m (-5% y-o-y) and order intake of EUR 40m (38m). We expect the company's initiatives from its change programme to continue to support a rise in profitability. On EBIT, we forecast EUR 2m (+18.5% y-o-y) for a margin of 5% (4%). However, we expect margins to be slightly lower q-o-q, partly due to the positive impact of several high-margin orders in Ports & Maritime in Q2. Finally, we expect the continued focus on working capital to support cash flow and estimate FCF lease adj. of EUR 4.2m (3.5m).
Waiting for momentum in Industry segment
We only make small changes to '24e-'26e sales and EBIT. The Ports & Maritime division has seen profitability improvements in recent quarters as a result of Cavotec's strategic initiatives. In addition, the company's backlog should now have normalised, particularly within the Ports & Maritime division, and we expect Cavotec to slowly step on the growth pedal. However, the development in the Industry segment has taken longer to materialise. Management sees continued improvement in the division with a clear focus on order intake, customer focus and operational efficiency. We expect Industry's order intake and margins to gradually improve as a result of the company's initiatives, with noticeable results from '25e, which in turn we expect will yield EBITDA margins of >10%.
Long-term potential in the company intact
The share is trading at 18x-9x EV/EBIT '24e-'26e, and 36x-13x P/E. We continue to find the longer-term potential in shore power and industrial electrification appealing. We believe Cavotec has the potential to reach >10% EBIT margins from '27e, provided management is successful with the transformation.
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