We Initiate Coverage on Rational With a Narrow Moat; Overcooked Valuation Fully Incorporates Quality

We initiate coverage on Rational AG with a EUR 540 fair value estimate, narrow moat, and exemplary capital allocation rating. Rational’s focused strategy on innovating and manufacturing combi-steamers for professional kitchens has led to a dominant market share and high returns on invested capital due to superior product differentiation. A largely untapped addressable market offers a lengthy runway to convert users of traditional kitchen appliances to multi-functional combi-steamers that offer customers a lower cost of total ownership by reducing labor, energy, and raw material costs. The group’s quality and outlook are fully reflected in the current share price, which we view as overvalued. We believe investors are also attracted to Rational’s 70% dividend payout ratio.