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Pihlajalinna - Revenue supported by COVID-19 testing

Pihlajalinna reports its Q4 result on this week’s Friday, 19th of February. We have made only small adjustments to our estimates and keep our rating “HOLD” with TP of EUR 10.5 (9.5).

Expecting ~1% revenue growth in Q4

Despite the COVID-19 situation worsened towards the end of the year we expect a fairly good Q4 result. We expect Pihlajalinna’s Q4E revenue to grow by ~1% y/y to EUR 135m (cons. EUR 136m), supported by increased volumes of COVID-19 testing. On the other hand, as the virus situation has prolonged, we expect the demand of private services (e.g. fitness centers) is still lagging behind. We expect adj. EBIT of EUR 5.3m (cons. EUR 4.9m). We expect 20E dividend of EUR 0.12 (cons. EUR 0.09).

The virus is still hampering private services

The outlook of many private services e.g. fitness centers remains weak as the pandemic shows no signs of abating and the vaccinations haven’t started as quickly as first anticipated due to the delays in the vaccine supply. On the other hand, we expect the COVID-19 testing to continue strong, supporting revenue. The company started negotiations for the purchase of all shares in Työterveys Virta at the end of 2020 which gives Pihlajalinna almost 30 % share of the occupational healthcare market in the Oulu region. Revenue of Työterveys Virta in 2019 was approx. EUR 13.6m. The Due Diligence review has been completed, and the procurement has now advanced to the contract phase and approval of bills of sale. The total price of the shares with cash reserve is EUR 17.6m (meaning EV/Sales multiple of 1.3x). The acquisition is not yet included to our estimates.

“HOLD” with TP of EUR 10.50 (9.5)

We expect FY20E revenue of EUR 507m (-2.3% y/y) and adj. EBIT of EUR 18.8m. On our estimates, the company trades with 20E-21E EV/EBIT multiple of 23.3x and 15.9x. Which is 1-12% discount compared to the peers. We keep our rating “HOLD” with TP of EUR 10.5 (9.5).

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