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Cavotec
Cavotec - Saving the environment, one port at a time (ABG Sundal Collier)
2020-06-22 23:00
Cavotec’s solutions attain substantial emissions savings
High margin potential from niche market leadership
17% adj. EBIT CAGR ’19-’22e, net cash, 8x EBIT ’21e
The numbers speak for themselves…Cavotec is a global niche leader within the electrification and automation of industrial applications. After reviewing academic research, we find that the company’s solutions can significantly reduce port and airport emissions. Using shore-side electricity, fuel consumption and emissions could come down by 50-80% while the use of Cavotec’s automated mooring system can reduce emissions by as much as 97%.
…and Cavotec is ready to capitalise on structural demand
What we find positive is that there are regulatory tailwinds supporting tangible demand for these solutions, while awareness of the potential productivity improvements has also increased. For example, we believe that the European shore-power market alone could increase 15x by 2025, while the company estimates the addressable market for its mooring system to potentially be worth more than EUR 1bn.
A combination of higher growth, margins and ROCE
We argue that the Cavotec of today is not the same internally troubled company as it was a few years ago. The turnaround initiated in 2017 has been successfully completed, achieving all targeted action points, and the financial position is strong. We estimate a net cash (excl. IFRS 16) position by YE’20, and see Bure recently increasing its ownership stake from 28% to 36% as a sign of confidence in the company’s future development. Looking ahead, we estimate that accretive growth from its Ports & Maritime division, solid service contribution (20% of sales) and a leaner cost base will drive a 5% organic sales CAGR and a 17% adj. EBIT CAGR for ’19-‘22e. If Cavotec reaches its financial targets, we believe that the share could reach >30 SEK vs. today’s level of SEK 18. However, if the targets fail to materialise, we see a scenario where the share could reach SEK 14. Key risks to our estimat
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