Palfinger confirmed at HOLD, TP EUR 24.5 - Trading conditions should gradually recover
2Q saw the peak impact from the Covid-19 related lockdowns and plunging economic activity, although the quarter actually turned out less weak than assumed. While presumably not yet fully out of the woods, it nevertheless appears that trading conditions for Palfinger should gradually approach stabilisation, especially in the groups most profitable region Europe. At the same time, the management is vocal that visibility regarding the short-term order intake dynamics is muted and it is not yet clear how sustainable the sequentially much improved June dynamics will be. The support from government-subsidised short-time work schemes was a major cost relief in 2Q but will come down strongly in 3Q as most of Palfingers operations are approaching normality. Higher capacity utilisation and savings in other areas should safeguard 2H EBIT not too far below the 1H figure. Bottom line, our previous estimates proved clearly too cautious and thus we have raised them materially. As a consequence, we increase the target price to EUR 24.5 from EUR 21 and maintain the HOLD recommendation. At this stage we do not yet become buyers as in our view the stock already discounts quite a rebound momentum into FY 21e and already trades at around its normalised ROCE level, which on our estimates will be reached only in FY 22e.Palfinger provides lifting solutions for use on commercial vehicles and in the maritime field. Co. is engaged in providing loader cranes, timber and recycling cranes, marine cranes, wind cranes and hooklifts service. In addition, Co. is engaged in providing tail lifts and high-tech railway systems. Co. offers its products and services primarily to construction industry, transport logistics, public authorities, waste disposal, forestry and agriculture and railway infrastructure. In the marine business, Co. sells worldwide, primarily to customers in deep sea navigation and in the oil and gas industry. Co.'s brand is LIFETIME EXCELLENCE.
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