• Q1 report due Wednesday 15 May at 07:00 CEST
• Q1e: sales EUR 44.2m, up 12% y-o-y; EBIT margin of 3.9% (0.8%)
• We expect positive margins, sales and cash flow trends to continue

Q1e, continued margin progress

We expect Q1 sales of EUR 44.2m, up 12% y-o-y, as the growth rate normalises following elevated levels in the past two years (R12m +24% org.). We estimate EBIT of EUR 1.7m (0.3m) for a margin of 3.9%, which we expect to convert to net income of EUR 0.67m (-1.3m). This implies EPS of EUR 0.01 (-0.01) and FCF (lease adj.) of EUR 4m (-3m). We expect Q1 to show continued improved profitability and positive margin trends driven by solid demand and less drag from orders with worse pricing.

Estimate changes and outlook

We make no significant estimate changes to '24e-'26e sales and EBIT and remain positive in terms of outlook. For '24e-'26e, we expect sales and EBIT to grow 12-8% and 82-23%, respectively. The new management's focus on improving operational efficiency gave noticeable results in 2023, as the company showed better profitability, positive margin trends and a good cash flow trend (ND/EBITDA lease adj. 1.3x now). We forecast continued margin improvements, volume growth and improved internal efficiency. We expect this to drive EBIT margins to 7-10% for '24e-'26e from 4% in '23. The key margin driver has been the Ports & Maritime division (EBITDA margin of 12.6% v.s. 7.8% in '23), but we expect the Industry segment to make progress and gradually normalise as supply constraints ease. In 2023 management also increased its focus on service offerings, and the effects can already be seen.

Long-term potential in the company

The share is currently trading at 13x-6x EV/EBIT '24e-'26e, and 20x-9x P/E '24e-'26e, i.e. ~10-30% below the peer median. We continue to find the long-term operational potential in Cavotec attractive and expect regulatory drivers in industrial electrification and shore power to benefit the company.