Easing of Supply Constraints Leads to Bumper Q1 for Rational; Shares Fairly Valued

Narrow-moat Rational reported exceptional revenue growth of 34% in first-quarter 2022, the second-highest quarterly revenue in the company’s history. The ability to source electronic components, which have been in short supply, from both its primary and new secondary supplier facilitated the firm's ability to execute on its existing backlog. New order intake of EUR 300 million was strong, representing year-on-year growth of 70%. Order growth has been supported by prebuying in anticipation of Rational’s April price increases, as well as extraordinary high delivery times due to strained supply chains and the group’s large backlog. The order backlog is at a record EUR 380 million, which will support strong revenue growth and visibility for 2022. Management maintained full-year revenue guidance at between 10% and 15%, and slight EBIT margin expansion above 2021, which is consistent with our forecasts. We reiterate our EUR 540 fair value estimate and view shares as fairly valued.