Scanfil - Further acceleration in H2 growth

Scanfil made a minor guidance update and by implication organic growth rate will reach well into the double digits this year. We upgrade our FY ’21 growth estimate by 4% and expect the positive momentum to spill over to next year as well. We retain our EUR 9 TP; our new rating is BUY (HOLD).

FY ’21 revenue guidance midpoint increases by 5%

Scanfil issued a small guidance update. The new range is EUR 670-710m in FY ’21 revenue and EUR 41-44m in adj. EBIT, while the previous guidance was respectively EUR 630-680m and EUR 41-46m. Most important recent trends, namely strong customer demand and climbing component prices, have persisted. Scanfil continues to flag the supply chain risk related to semiconductor availability and the guidance update is not in our view that big news. Our previous estimates for this year were EUR 658m in revenue and EUR 43m in adj. EBIT. Our updated revenue estimate stands at EUR 681m; we make no changes to our absolute FY ‘21 adj. EBIT estimates.

Strong growth supports absolute profitability estimates

Scanfil H1’21 growth amounted to 12% y/y; we previously estimated H2’21 y/y growth at above 8% and now expect more than 16%. We reckon the positive surprise extends beyond this year and we have updated our FY ’22 growth estimate to 7.0% (prev. 5.8%). The improved growth outlook supports our absolute profitability estimates for the coming years to the tune of EUR 1-2m. The updated outlook also means the EUR 700m organic revenue target for FY ’23 is now pretty much irrelevant as the company might well break through that threshold already this year. We expect Scanfil to communicate a new long-term target at some near future date, however we don’t expect the company to make any revisions to its long-term 7% EBIT margin target.

In our view valuation has now turned more attractive

Scanfil’s share price has slipped a bit since the previous update while growth outlook has improved an additional notch. On our updated estimates for FY ’21-22 Scanfil is now valued 8.0-8.6x EV/EBITDA and 10.3-11.8x EV/EBIT. The multiples remain slightly above those of a typical peer, but we continue to view the premium warranted. We retain our EUR 9 TP; our rating is now BUY (HOLD).

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