Rational Unable to Offset Cost Inflation Despite Record Revenue in Q2; Shares Slightly Overvalued

Narrow-moat Rational increased second-quarter revenue by 10% to EUR 232 million, a record for the group, despite deliveries continuing to be affected by a shortage of key components, which has led to orders growing at a faster pace than revenue. Price increases implemented in April will only have an impact on subsequent orders; thus the company has been unable to offset raw material inflation, resulting in a 6.8% decline in EBIT during the second quarter. We anticipate a slight improvement from the 20.3% EBIT margin achieved during the first half for the remainder of the year as price increases on new orders are realized. Management kept guidance for the full year unchanged. We reiterate our EUR 540 fair value estimate and view the shares as slightly overvalued at current levels.