Scanfil - A most resilient performer
The performance amid the pandemic testifies to strengths
Scanfil’s business has remained robust to macroeconomic shocks throughout its 40+ year history. ‘20 is another testament to this resilience as the pandemic hasn’t considerably affected Scanfil’s performance. The company has had to make only very small revisions to FY ’20 guidance; the latest revenue and EBIT outlook figures are down by respective 2% and 5% compared to the initial figures issued before the pandemic broke out. We now expect Scanfil to achieve some 3% top line growth for FY ’20; the increase is due to the 2019 HASEC acquisition. Profitability has remained strong. The Energy & Automation, Industrial and Medtec & Life Science segments have extended their good figures, while Communication and Consumer Applications have been softer. Consumer Applications’ revenue is down by ca. EUR 40m since FY ’18, however we view the segment still has good long-term outlook. We aren’t estimating rapid rebound for the segment yet see Scanfil should be able to post a 4% organic CAGR in the coming years thanks to its three largest ones.
We expect stellar performance to continue
We see Scanfil remains in top shape overall and is probably one of the best performing decent-sized contract electronics manufacturers globally. In our opinion Scanfil is unlikely to encounter profitability issues going forward and long-term organic growth outlook still appears good despite the pandemic. The company is also in a strong position to do more M&A and we are confident any potential deal, small or large, is likely to further improve Scanfil’s competitiveness.
Multiple expansion was overdue, yet visibility is limited
Scanfil’s share has appreciated significantly, and in our view some multiple expansion was long overdue given the company’s strong track record. Scanfil now trades in the range of 7-8x EV/EBITDA on our estimates for ’20-21, a level we don’t consider that challenging, but also view to be enough to curb meaningful additional gains for now since revenue visibility is limited even in the best of times. Our TP is EUR 6.5 (6.25), rating HOLD (BUY).