Kalmar Q3'24 preview: Big news unlikely

Translation: Original published in Finnish on 10/30/2024 at 7:20 am EET.

Kalmar will publish its Q4 report on Friday, November 1, at 9:00 am EET. The sentiment in the company's markets seems to have remained positive. We believe it is likely that the current 2024 guidance will be reaffirmed. The valuation of the stock is cheap. 

There was still some pull in the market

The market environment remained favorable in the third quarter. The RWI Container Transport Index averaged +7% year-on-year, and in September Drewry raised its full-year global container volume growth forecast for 2024 from +4.1% to +4.9%.   According to Konecranes, demand for Port Solutions in the third quarter was increasing for straddle carriers and stable for forklifts. For Kalmar, the demand risk is likely to remain concentrated in the metal and forest industries and heavy logistics (construction), but their combined share is under 20% of the company’s revenue.

We expect Kalmar's Q3 order intake to be 414 MEUR (+6% y/y), which is clearly stronger than the consensus (384 MEUR; -2% y/y). We forecast a +7% year-on-year change in equipment orders (consensus: -5% y/y) and +3% y-o-y in service orders (consensus: +5% y/y). We estimate that Kalmar's announced orders for Q3 so far have amounted to 55 MEUR (Q3'23: 63 MEUR), but announcements are often made retroactively. For peers, we estimate that Konecranes' base order intake for Port Solutions grew +38% year-on-year in Q3. The downside risk to our order intake forecast is related to the North American distribution sector demand that caused problems in the second quarter, the possibility of further destocking and the already chronic slowness of customer decision making.  

Our forecast for Kalmar's Q3 revenue change (-16% y/y) is slightly less pessimistic than the consensus (-19% y/y). The difference is larger in equipment sales, where we expect a -19% year-on-year decline versus the -25% of the consensus. The decline in equipment revenue is still due to a drop in order intake in 2023 and Q1'24. The share of services in the group's Q3'24 sales mix is therefore higher than in Q3'23 (32% vs. 28%). The consensus forecast for services as a percentage of Q3 revenue (34%) is higher than ours, which also explains why the consensus adjusted EBIT margin forecast (12.3%) is higher than ours (11.9%). The difference between adjusted and reported EBIT in the table is due to the remaining IPO expenses of -6.7 MEUR in our own forecasts, while the consensus expectation is lower (-4.5 MEUR). In the income statement items below EBIT, our own forecast for net financing expenses (-2.4 MEUR) is slightly higher than the consensus (-2.1 MEUR), but our forecast for the group tax rate (24%) is lower than the consensus (26%).    

Less demanding 2024 guidance to be reiterated

The demand outlook for the rest of 2024 remains reasonable. In its Q3 report, Konecranes reiterated that "global container throughput continues on a high level, and long-term prospects related to global container handling remain good overall”. In addition, Konecranes described its Port Solutions sales pipeline as strong in many product categories. 

Kalmar has not issued a revenue guidance for 2024. Our revenue change forecast for the full year (-18% y/y) is in line with the consensus, and the decrease is based on previous sluggish order intake. However, Kalmar has guided its comparable EBIT margin for the full year 2024 as an independent company to be >11%. We believe that this guidance will be renewed. In 2023 and H1'24, the corresponding margin was 12.4%, so there is good headroom in the guidance. Our comparable EBIT margin estimate for 2024 (11.7%) is clearly below the consensus (12.3%). However, we wanted to be conservative and take into account that there will be a significant drop in revenue in 2024 and that there may have been unexpected costs in operating as an independent company.

Share price not overwhelming

The valuation of Kalmar's stock is cheap. Expected >15% p.a. total return clearly exceeds the required return (approximately 10%) with different multiples. The 2025 EV/EBIT multiple is -11% discounted relative to the median of peers. The upside to the DCF value is just under 40%.