Orders seem to remain strong within Ports and Airports

EBIT -33% ’20e on Q1 shutdown and market slowdown

6x EBIT ‘21e, net cash ‘20e, 19% adj. EBIT CAGR ’19-‘22

Shutdown of Italian facility to hurt Q1 deliveries
As a result of the government-mandated factory shutdown in Italy following the COVID-19 outbreak, Cavotec expects Q1 revenues to decline 15-20% due to back-end loaded Ports & Maritime (P&M) equipment being deferred to a later point in time. We believe further downside risk would occur if the factory remains closed well into May. All remaining production units are fully operational, according to the company, and we are encouraged to hear that no order weakness has yet been reported. On the contrary, the company expects a growing order backlog due to ‘strong market interest’. Although we find it difficult to see Cavotec coming through the impending slowdown unscathed, we take comfort in seeing that the company continues to win orders within growing niches.

10% margin target to be reached next year instead
We lower our sales assumptions by 12-5% for ‘20e-‘21e (-5% FX) in order to account for the COVID-19 outbreak’s impact mainly on Cavotec’s industrial customers. Both customers within P&M and Airports seem to continue placing orders, and the airport customers in the US should see strengthened liquidity from funding received by the stimulus package(s). We therefore lower our adj. EBIT by 34% (c. 20% Q1-related) for ‘20e due to the Q1 delay, slower markets and negative FX. We note that Cavotec should still see tailwinds from 2019 on the cost side. We now expect the 10% margin target to be reached next year instead of in 2020 as we previously had estimated. For ’19-‘22e, we forecast a 19% adj. EBIT CAGR and 6% organic sales CAGR.

Still a pure-play on long-term industrial ESG drivers
We believe Cavotec should be able to manage the upcoming slowdown well due to continued strong demand (within industrial electrification) and the already completed substantial turnaround. Cav
...

info@introduce.se (Introduce.se)

ABG Sundal Collier - Introduce.se