Orders and market activity picking up, positive on outlook

Backlog to support ‘22e-’23 sales; EBIT down 5-3%

Cleantech; 18% adj. EBIT CAGR ’19-‘23e, 10-7x EBIT

Strong backlog and improving ‘NC’ margins, lower sales
We are encouraged to see that Cavotec enjoyed a broad-based market improvement in Q2, especially within demand for port electrification. In addition, the CEO believed that the hesitancy seen among customers last year has subsided. The order backlog grew 8% y-o-y and 14% q-o-q to EUR 106m (+10% vs. ABGSCe), with particularly strong growth in “New” Cavotec (businesses excl. Airports). This means that the backlog is back to pre-pandemic levels, which should support sales growth in H2’21. Although lower-than-normal backlog conversion resulted in a 13% organic sales decline (ABGSCe 0%), we expect this to normalise in Q3’21. Finally, New Cavotec’s (‘NC’) EBIT margins (adjusted for growth investments) expanded from 3.6% to 5.2%, despite lower sales.

Improving market supports confidence in future growth
We lower our sales and EBIT estimates by 5% and 27% (from EUR 12m to 9m) for FY’21, respectively, primarily due to the Q2 report. However, we raise our sales numbers by 2-1% for FY’22e-‘23e on the back of the stronger-than-expected order backlog, and lower EBIT by 5-3% to factor in the front-end loaded profile of the EUR 20m growth investments. For ’19-‘23e, we forecast a 7% organic sales CAGR and an 18% adj. EBIT CAGR (including Airports). We continue to believe that the strong growth from Cavotec’s environmental solutions should support an EBIT margin of 10-12% in FY’22e-‘23e, which is in line with the company’s targets.

Turnaround complete, exit of Airports, strong P&M growth
We reiterate our view that Cavotec continues to make sound strategic decisions through: 1) a successful turnaround in 2017-2019, 2) the impending EUR ~40m (ABGSCe) Aiports divestment and 3) preparing for structural demand for port electrification and automation within its Ports & Maritime division
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