Scanfil - Growth to add earnings in H2

Scanfil’s performance remained strong in Q4 and was largely as expected. H1’24 sees quite high comparison figures, but in our view H2 should again have scope for improvement as Scanfil’s key accounts remain well positioned for growth.

Q4 EBIT slightly soft, FY ’24 guidance basically as expected

Scanfil Q4 revenue declined 0.7% y/y to EUR 221m vs the EUR 220m/220m Evli/cons. estimates, while it grew by 4.9% when adjusting for spot purchases. The EUR 13.4m EBIT was a bit soft vs the EUR 15.7m/14.9m Evli/cons. estimates as there were one-offs due to efficiency measures, however Scanfil’s FY ’24 guidance wasn’t a surprise since basically flat top line and EBIT development was expected after an extended period of double-digit growth and earnings gains to around the targeted 7% EBIT margin.

H1 faces stiff comparison figures, but H2 has more potential

Our estimate changes remain small as the report and comments were mostly as expected. We believe H1 top line will not grow, and estimate EBIT to soften slightly, as the comparison figures are high, yet H2 should see demand pick up; we estimate H1 EBIT to decline by ca. EUR 3m and that of H2 to improve by roughly similar amount so that FY ’24 EBIT would stay flat. Scanfil’s efficiency measures are to yield annual cost savings of EUR 1.7m, and Scanfil’s accounts’ long-term growth outlook remains favorable enough so that the company is comfortable with its recent capacity expansions. Energy & Cleantech especially continues to grow, although clearly not as fast as in the recent past, while Medtech & Life Science is another group with attractive long-term outlook; some destocking can now be seen in Medtech but also in certain other niches case by case, but we expect H2 revenue to grow again as the comparison figures are no more that high.

Earnings remain high and multiples are relatively low

We estimate Scanfil’s FY ’24 top line to decline by 2% as we see volumes remaining flat when excluding spot market purchases. 5% CAGR should still be a very relevant long-term target, but it will probably take at least until H2 to again attain such a level. H2 growth would position Scanfil for further marginal earnings gains; we estimate FY ’25 EBIT to gain by EUR 3m. Scanfil is valued a bit above 8x EV/EBIT on our FY ’24 estimates, which is still relatively low compared to peers. We retain our EUR 9.0 TP and BUY rating.

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