Pihlajalinna - High hopes for H2

Pihlajalinna - High hopes for H2 Equity Research Read full report here → Pihlajalinna’s Q1 result outpaced the expectations. Revenue increased by ~5% and adj. EBIT by ~59% y/y. We have slightly increased our 21E estimates and keep our rating “BUY” with TP of EUR 13.2 (13.0).

Q1 earnings outpaced expectations

Pihlajalinna’s Q1 result outpaced the expectations. Revenue increased by 5.2% y/y to EUR 140m which was in line with the Factset consensus estimates but above our EUR 137m. Revenue was once again supported by COVID-19 testing (revenue increase of EUR 8.2m). Testing volumes increased by 65% q/q. On the other hand, customer volumes of private clinics remained in a lower level. Revenue of corporate customer group increased by ~12% y/y while revenue of private customers was down by ~10% y/y. Revenue of public sector customer group increased by ~8% y/y. Adj. EBITDA amounted EUR 15.2m vs. EUR 14.4m/14.7m Evli/cons. and adj. EBIT was EUR 6.7m vs. EUR 5.6m/6.1m Evli/cons. EPS improved clearly to EUR 0.20 (Q1’20: EUR 0.06) vs. EUR 0.15/0.17 Evli/cons.

High hopes for H2’21

Pihlajalinna’s margin improvement in the private sector is right on track. The company has successfully renewed its sales strategy, and this was shown in Q1 figures. In the public sector, Pihlajalinna transitioned from the outsourcing market to the service sales market, in which the impact of the planned SOTE reform is low. The virus situation worsened towards the end of the first quarter and nearly all Pihlajalinna’s fitness centers were closed during April which will continue to hamper private customer segment in Q2. The situation has since improved and the vaccination coverage is gradually increasing. We expect the situation to normalize during H2’21 and the pent-up demand starting to release in late summer.

“BUY” with TP of EUR 13.2 (13.0)

Pihlajalinna reiterated its 2021 guidance and expects revenue and adj. EBIT to increase clearly compared to 2020. We have increased our 21E adj. EBIT expectation by ~7%. We expect 2021E revenue to grow by ~12% y/y and adj. EBIT of EUR 30.7m (5.4% margin). In 22E-23E, we expect adj EBIT margins of 5.6%. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.8x and 13.5x which is ~15-20% discount compared to the peers. We keep “BUY” with TP of EUR 13.2 (13.0).

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