Pihlajalinna - CMD notes

Pihlajalinna held its CMD yesterday, 30th of March. The focus of the event was on the company’s strategic priorities and the future of the social and healthcare market. Financial targets remained unchanged. Thus, there were no changes in the big picture. We keep our rating “BUY” with TP of EUR 13.0 (12.0).

New opportunities in both, public and private side

Pihlajalinna highlighted its strategic priorities for the upcoming years as the market is changing in many ways (SOTE-reform, aging population etc.). The company aims to strengthen its already strong partnership with the public side and to engage in close cooperation with the future wellbeing services counties. In addition, Pihlajalinna will make renewals to its private services with new service concepts and digital innovation. Further, the company will continue to strengthen digitalization. The company has already had a strong focus on this and the importance of developing new digital solutions has only increased during the pandemic. The long-term financial targets (EBIT margin of over 7% and net debt/EBITDA under 3x) remained unchanged.

Big picture is unchanged

The main market drivers are unchanged as the Finnish population is rabidly aging which increases social and healthcare expenditures. Digitalization offers new opportunities and can improve efficiency. In addition, individuals’ interest in their own health is increasing which creates new opportunities in the preventive social and health care. The company seemed to be relatively positive about the future wellbeing services counties and cooperation opportunities stemming from these. However, Pihlajalinna has also strengthened its positioning e.g. in the occupational healthcare market and has widened its cooperation with insurance companies which reinforces our view that the company can grow in both, public and private side. Expanding the service network should also provide support for future partnerships.

“BUY” with TP of EUR 13 (12)

We have kept our estimates intact and expect 21E revenue growth of ~10% and adj. EBIT of EUR 27.3m (adj. EBIT margin of 4.9%). In 22E and 23E, we expect revenue growth of 5% and 3%. We expect profitability improvement to continue and expect adj. EBIT margin of 5.4% in 22E and 5.6% in 23E. With our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.3x and 13.8x which is 14% discount compared to the peers. We keep our rating “BUY” with new TP of EUR 13 (12).

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