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Talenom - Issued positive profit warning

Talenom raised its guidance for FY2018 EBIT, expecting EBIT to be in the range of EUR 8.2-8.7m. The raised guidance is mainly due to increased operational efficiency through technological improvements and to our understanding also due to some postponement of investments in the company’s internationalization plans. We retain our HOLD-rating with a target price of EUR 19.2 (18.5).

Guidance for 2018 EBIT raised

Talenom raised its guidance for FY2018 EBIT, expecting EBIT to be in the range of EUR 8.2-8.7m (prev. EUR 7.4-8.0m). The sales guidance remains intact, with sales growth expected to clearly exceed previous year levels. The improved profitability outlook is mainly due to increased operational efficiency through technological improvements. To our understanding some investments relating to the company’s internationalization plans were postponed, which we expect in part to have contributed to the raised guidance. Our revised 2018 EBIT estimate is at EUR 8.4m.

Remain cautious to margin improvement

We continue to remain cautious to margin improvement in the near term. Talenom still has room to improve margins through enhanced operational efficiency. We continue to expect Talenom to establish a presence outside Finland next year, most likely in Sweden, which would put some pressure on margins through up-front personnel costs.

HOLD with a target price of EUR 19.2 (18.5)

We retain our HOLD rating with a target price of EUR 19.2(18.5). On our estimates and target price Talenom trades at a target P/E and EV/EBIT for 2019E of 19.4x and 16.3x, levels that we have previously consider reasonable.

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