Translation: Original published in Finnish on 03/31/2025 at 08:19 am EEST

We reiterate our Accumulate recommendation and EUR 13.0 target price for Canatu. Canatu's long-term potential remains unchanged and is one step closer, although growth this year may be modest due to timing issues in the reactor business. We remain cautiously optimistic about the stock, relying on the attractive long-term growth outlook, although the high valuation and potentially stalling growth may offer even better buying opportunities this year.

Reactor deliveries visible as strong growth as expected

Canatu reported strong growth figures for 2024 (revenue 22.0 MEUR, +62%) driven by the semiconductor industry (19.8 MEUR, +77%), although revenue was slightly below our forecast due to the automotive industry (2.3 MEUR, -7%). Adjusted EBIT (2024: -4.8 MEUR) was, however, a notch more in the red than we expected when the gross margin (62.5% vs. 70.9%) fell compared to our expectations due to the first reactor deliveries. Connecting to customers' systems and processes initially caused additional costs, which are not expected in connection with subsequent deliveries. In addition, the company has learned a lot from the first deliveries, which will provide efficiency benefits for upcoming projects.

Growth outlook for this year remains unclear

Canatu did not yet provide guidance for 2025, but according to the company, 2025 revenue will focus on H2 due to potential new reactor orders. As expected, the semiconductor industry will account for the largest share of this year's revenue, but based on the company's comments, the magnitude and timing of revenue appear to be largely dependent on customer decisions. For the first two reactors, customers still need to complete the approval tests before volume production of pellicle membranes can start. After the approval tests, customers still go through a four-stage process to ensure that their production line is ready for mass production. Then, the process proceeds gradually from pilot/risk production to mass production. All of this takes time, in light of which the first reactors are unlikely to be in full mass production with customers this year, although approval tests are expected to be completed this year. Canatu also expects that any further reactor orders from existing customers will likely depend on the successful completion of the final approval tests of the first two reactors and related equipment. Canatu is engaged in sales discussions with other potential reactor customers, and we believe the company could announce the delivery of one or two more new reactors later this year. Based on the outlook comments, we clearly lowered our short-term estimates and now expect nearly stable revenue (22.8 MEUR) this year. The company estimates that its long-term potential in all business areas has remained unchanged, and we also believe this. Thus, we still predict that the company will meet the targets set for 2027 (revenue >100 MEUR, adj. EBIT >30%) at a slightly slower pace in 2028.

We continue to be cautiously optimism about the stock

The pricing of Canatu's valuation (2025e EV/S of 13.5x-15.5x) reflects expectations of strong scalable growth. With the company’s investment profile and growth prospects, we believe a high valuation is justified, although uncertainty about short-term growth has increased. However, the company's reactor business is progressing in the right direction, which creates a basis for strong earnings growth in the coming years. We note that the current valuation still leaves no room for essential dents in the story, and growth that may temporarily stall this year can also put pressure on the stock. Through scenarios modeling growth and profitability at different rates, we have estimated a wide value range of some EUR 6-21 for Canatu, which partly reflects the risks and opportunities associated with the company.