Cavotec
Cavotec - Transformation plan complete, raised targets (ABG Sundal Collier)
2020-02-21 07:44
Lower order intake, but 8% adj. EBIT margin YTD
Raised margin targets (10% before 2022)
26% adj. EBIT CAGR ‘19e-‘21e pre-Q4, 12x EBIT ‘20e
Q4 overviewCavotec’s turnaround phase is now complete. Order intake decreased by 14% (14% organically) and arrived at EUR 38m (-20% vs. ABGSCe 48m). Sales were EUR 48m (-5% vs. ABGSCe 50m), a decrease of 2% (2% organically). As we’ve seen in the previous quarters, Cavotec continues to enjoy good momentum for its MoorMaster, shore power and cable reels systems within Ports & Maritime, while project delays and slower industrial demand was behind the order decline in Airports & Industry. The company has now surpassed its previous adj. EBIT margin target of 7% within one year of announcement, and arrived at 8% for the full-year. Looking ahead, the company will now have to start generating growth if they are to conform with their 5% sales growth target from 2020 and onwards. Further, we note that cash conversion has improved substantially compared to a few years ago. Service revenue accounted for 20% of sales during the quarter.
Raised margin targets imply optimism
Cavotec also announced that it raises its profitability targets, and now targets a 10% adj. EBIT margin within two years (ABGSCe 10.3% in 2021), and 12% margins within four years. Since the turnaround phase is now more or less complete, continued margin improvements will be dependent on achieving good leverage from sales growth. On our pre-Q4 estimates, we forecast a 26% adj. EBIT CAGR ‘19e-‘21e.
Final thoughts
We believe the Q4 report reflects the positive momentum that Cargotec has shown during the entirety of 2019 as well as when looking ahead. The company’s product offering is set to benefit from environmental tailwinds and the continued electrification of industrial applications. The stock is up 27% in the last three months, compared to the Carnegie Smallcap index at 14%. On our pre-Q4 estimates, the stock is trading at 12x EBIT ‘20e.There is a conference call at 10.00 CET, d
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