Canatu: Buying opportunities for patient investors

Translation: Original published in Finnish on 6/16/2025 at 7:00 am EEST.

We raise our recommendation for Canatu to Buy (was Accumulate) and revise our target price to EUR 12.0 (was EUR 13.0). Canatu's share price has fallen by about 22% since our update following the company's financial statements (March 31). At the time, we stated that the unclear growth outlook for 2025 combined with the high valuation could offer even better buying opportunities, and now they are available. The share's valuation still reflects significant growth expectations, but relative to Canatu's long-term potential, we think the current enterprise value of just over 200 MEUR is attractive. With our current forecasts, we expect the company to achieve the targets set for 2027 (revenue >100 MEUR, adj. EBIT >30%) slightly slower, in 2028. The valuation (EV/EBIT 6x-7x) would then fall to a very low level.

From the news stream of the last few months, things are happening

In recent months, the news flow from Canatu has supported the company's steps in the right direction, although it would still be essential to hear about new reactor orders for the current year. In April, Canatu signed a co-development agreement worth several million euros with DENSO, with which the companies will accelerate development in the automotive industry. In May, Canatu announced that it has started mass production and deliveries of sensors designed to protect electronic devices to a global technology company. Although the size of the customer relationship is small at the beginning, the defense industry could become a new significant sector for the company in the long run, which in turn indicates the suitability of Canatu's carbon nanotube technology for several different fields. For this reason, the company launched the Carbon Age project at the end of March, which aims to involve more than 40 partners to develop new solutions based on Canatu's technology. In addition, in June, Canatu announced an order of approximately 1-2 MEUR for inspection equipment from an existing customer in the semiconductor sector.

Uncertainty over the growth outlook for the current year

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 (and any potential follow-up orders), customers still need to complete the approval tests for the entire production process before volume production of pellicle films can begin. After that, Canatu will also start to recognize continuous revenue from these. In our understanding, the tests have progressed well, but there is little clear visibility on their completion.

Long-term potential remains attractive at current price

Canatu's valuation (2025e EV/S 9.7x-10.7x) still reflects expectations of strong scalable growth. In our view, the company's investment profile and growth track record justify a high valuation, even if growth may be weak this year. However, the company's reactor business is progressing in the right direction, which creates a basis for strong earnings growth in the coming years. In the big picture, the market for Canatu's EUV pellicles is still emerging as ASML gradually delivers more of its latest EUV lithography equipment to its customers in the coming years. In our view, Canatu's competitive position still looks strong, and the company is well positioned to take its share of this rapidly growing market. If the company comes close to achieving its targets, the share's valuation (2028e EV/EBIT 6x-7x) will be very low and the expected return would be very strong. However, the potentially temporarily stalling growth this year may keep the share under pressure until the growth outlook begins to clear. However, for a patient investor, we already see the situation as a good buying opportunity.