Scanfil - Organic growth justifies multiples

Scanfil upped guidance as demand remains strong and component supply risks haven’t materialized. The upgrade isn’t a big surprise, but in our view supports the long-term story. Our new TP is EUR 9.0 (8.5), rating now BUY (HOLD).

Not a big surprise, but hints at extended strong demand

Scanfil upgraded its FY ’21 guidance. The revision wasn’t a big surprise since in our view Scanfil already seemed, following the Q1 report, bound towards the upper end of its then current guidance range. The revenue midpoint increases by 5.6% with the upgrade. Our old EUR 630m revenue estimate lands at the lower bound of the new EUR 630-680m range. We revise our estimate up by 2.5% to EUR 646m. Our old EUR 41.7m adj. EBIT estimate can be seen in the context of the new EUR 41-46m range. Our new estimate is EUR 43.2m. In our opinion the new outlook’s key meaning is in the fact that it lends long-term estimates even more relevance. Our absolute EBIT estimates for FY ’22-23 increase by only ca. EUR 1m, but in our view Scanfil’s outlook now warrants some additional expansion in multiples.

We see organic CAGR outlook has moved to 7% from 5%

Scanfil’s long-term organic growth target, which implies ca. 5% CAGR by the end of FY ’23, has gained relevance ever since last fall. Scanfil has an unblemished operational track record, its segments’ outlooks are either good or great, and macro tailwinds continue to push many industrial sectors. From this perspective Scanfil should have no trouble reaching EUR 700m top line in FY ’23. The updated FY ’21 guidance range’s midpoint implies 10% growth for this year. We consider this a bumper year for Scanfil and the situation is not unlike that for many other companies operating within the industrial manufacturing value chain. We would not extrapolate such growth rates very long into the future, but nonetheless the general outlook suggests Scanfil is positioned for around 7% CAGR in the years to come.

In our view some further multiple expansion is justified

Scanfil’s 8.5x EV/EBITDA and 11.5x EV/EBIT multiples, on our FY ’21 estimates, are high in the historical context, but growth outlook warrants looking further into the future. The multiples decrease to ca. 8x and 10.5x already next year. In our view Scanfil’s performance and positioning also warrant a peer premium. Our new TP is EUR 9.0 (8.5), rating now BUY (HOLD).

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