Scanfil - Expecting further pickup in H2’19

Scanfil didn’t meet our revenue estimate but nevertheless managed to beat in terms of EBIT. Overall Q2 was rather undramatic, yet we note that volumes need to continue to improve during H2’19 if the company is to deliver on FY guidance. We retain our EUR 4.75 TP and our BUY rating.

Scanfil expects improved customer demand during H2’19

Scanfil posted EUR 143m in Q2 revenue (vs our EUR 158m estimate), thus adding 10% q/q but losing 6% y/y. Revenues were quite evenly spread between the five segments. The y/y revenue decline was mostly attributable to the Consumer Applications segment, which decreased by 29% (a major product will fold due to low demand), however the Communication segment (e.g. base stations) was also soft, declining by 18%. Despite soft Q2 revenue Scanfil managed to top our EUR 10.0m EBIT estimate. The reported EUR 10.3m figure (7.2% EBIT margin vs our 6.3% estimate) testifies to plant network efficiency (strong EBIT margin with a normal product mix). Scanfil notably has a strong record in cost control.

Scanfil writes down Hamburg, closes the HASEC acquisition

Scanfil’s Hamburg unit has underperformed and so the company impaired the plant’s goodwill. The line is now fully impaired (the write-off was EUR 3.6m), but the company still works to expand the unit’s customer base and volumes. Scanfil also closed the HASEC deal near the end of Q2 (the German unit contributed EUR 1.5m to Q2 revenue). Scanfil expects HASEC to contribute EUR 20m in revenue and EUR 1m in EBIT during H2’19. We now expect EUR 321m in H2’19 revenue (EUR 301m) and EUR 22m in H2’19 EBIT (EUR 20m). Scanfil’s updated guidance for FY 2019 is EUR 580-610m in revenue and EUR 39-42m in EBIT (previously EUR 560-610m and EUR 36-41m).

Minor estimate changes as the thesis remains unchanged

Scanfil’s H1’19 was on the slow side (largely due to Q1) in revenue terms, meaning volumes need to improve further in H2’19 if the FY ’19 guidance is to be met. The main risk is on the volume side; in our view Scanfil will have no problem reaching the EBIT target if the revenue goal is met. Scanfil still trades ca. 15-20% below its historical averages. We value Scanfil according to these multiples and thus hold our EUR 4.75 TP and BUY rating.

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