Cavotec
Cavotec - Time for the next chapter (ABG Sundal Collier)

2020-02-21 15:44
2019: flat sales growth but 8% adj. EBIT margin
10% margin target could be reached by end of this year
11x EBIT ‘20e on 21% adj. EBIT CAGR ’19-‘22e
Turnaround complete, now is the time for growth
Cavotec wrapped up 2019 in a similar manner as it has performed throughout the year. Q4 sales declined 2% y-o-y (ABGSCe +3%) and resulted in a flat top-line for FY’19. Profitability continued to progress well, with adj. EBIT arriving at EUR 5.6m in Q4 (+33% vs. ABGSCe 4.2m) for a margin of 11.8%. FY’19 margins consequently reached 8.0%, compared to 1.9% in FY’18. Q4’19 marked the end of Cavotec’s successful turnaround, and 2020 will now see a focus on achieving the 5% annual organic sales growth target. The CEO was optimistic about demand into the beginning of 2020, and also that the raised margin targets (10% within two years, 12% within four years) were well within reach. Given the improving operating leverage on our 5% sales growth (organic), we believe that the 10% margin target could be reached as early as this year. Another encouraging factor was that service now accounted for 20% of FY’19 sales, compared to less than 10% in FY’18.

Adj. EBIT up 11-6% for ‘20e-‘21e on margin optimism
We raise our adj. EBIT estimates by 11-6% for ‘20e-‘21e due to a stronger finish to 2019 as well as bolstered confidence in Cavotec’s ability to gain strong operating leverage from future sales. The company seems to have improved discipline on cost and project execution, while cash conversion also looks set to improve. For ’19-‘22e, we forecast 6% organic sales CAGR and a 21% adj. EBIT CAGR.

Primed to capitalise on industrial electrification
We believe that Cavotec has several reasons to be optimistic about future demand for its solutions. We are seeing increasing electrification in the ports and maritime business, and there is strong global demand for the refurbishment and expansion of airport terminals. Cavotec is trading at 11x EV/EBIT ‘20e on high expected earnings growth, and we expect the co
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Cavotec - I dag

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