Pihlajalinna - Expecting fairly good Q1 figures

We expect revenue to increase by 3%

We expect Pihlajalinna to report relatively good Q1 result, with sales growth of 3% y/y (EUR 137m). We expect the COVID-19 testing is once again boosting sales. However, as the virus situation worsened towards the end of Q1 and new restrictions came into force, we expect private demand is still in lower levels than normally. As we saw at the end of last year, the company’s efficiency improvement actions have paid off and we expect Q1’21E profitability to improve from Q1’20. We foresee Q1 adj. EBIT of EUR 5.6m, resulting in adj. EBIT margin of 4.1% (Q1’20: 3.2%).

Market drivers offer new opportunities

Pihlajalinna held its CMD in late March where it highlighted its strategic priorities for the upcoming years as the market is changing in many ways. The company aims to continue 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 market drivers have remained unchanged (aging population, digital solutions, individuals’ interest in their own health etc.) offering many new opportunities to Pihlajalinna.

“BUY” with TP of EUR 13

We have included the acquisition of Työterveys Virta to our estimates from Q2’21E onwards. We expect 21E sales growth of ~11% (EUR 564m) and adj. EBIT of 28.8m (5.1% margin). We expect Pihlajalinna’s profitability to improve further in 22E-23E and adj. EBIT margin of 5.6% in both years. With our estimates, the company trades with 21E-22E EV/EBIT multiple of 17.8x and 13.4x which is 8-20% discount compared to the peers. We keep our rating “BUY” with TP of EUR 13.