In its Capital Markets Day, Vaisala presented its revised strategy and financial targets for 2021-2024. Revenue growth and EBIT-margin targets were raised to 7% (5%) and 15% (12%) respectively.
In its Capital Markets Day, Vaisala presented its revised strategy and financial targets for 2021-2024. Revenue growth and EBIT-margin targets were raised to 7% (5%) and 15% (12%) respectively.
Continuity by increasing growth ambition
According to the company’s management Vaisala’s strategy has so far been successful and thus the renewed strategy saw no significant changes. What is new in the strategy, is the increased ambition to grow and scale the businesses. The company will continue investing in R&D, maintain a leading position in flagship markets, grow in growth markets and generate new business in emerging markets. The company’s management noted some factors to create synergies between BUs and scale the business such as: units using common software and hardware modules and platforms in their products, continuously developing the company’s production system, and improvement of processes, tools, and competences.
Targets are set relatively high
During 2021-2024, Vaisala aims for an average annual revenue growth rate of 7% (prev. 5%). The profitability target is to achieve a 15% EBIT-margin (prev.12%) during the strategy period. During 2015-2020 Vaisala has achieved an annual growth rate of ~3% and achieved an EBIT-margin of ~10% on average. The new target is set relatively high, which reflects a higher ambition level. The company’s management highlighted that increases in revenue will scale and improve the EBIT-margin. According to the company’s management, the target growth rate doesn’t include inorganic growth, and thus our focus is on organic performance of IM and W&E’s capabilities to generate new businesses such as renewable energy and air quality. In fact, IM has grown relatively well in past few years and there is potential in W&E’s new emerging markets and applications, such as renewed energy and Data/Software as a service (DaaS/SaaS). We see the targets to be achievable should the company continue to perform well in its flagship markets and growing and generating new growth/emerging markets.
HOLD with a TP EUR 38.0 (36.0)
We increased our estimates for FY 2022 and 23 and expect the company to grow 7.7% and 6.8% respectively. We expect the EBIT-margin to gradually improve towards the long-term target level and estimate a 13.9% EBIT-margin in FY 2023 driven by scalability and revenue growth in both business units. Vaisala’s valuation is quite stretched compared to peers. We still accept a premium to Vaisala’s valuation due to the company’s technology leadership, good market position, and increased growth and profitability outlooks. We retain our HOLD recommendation and increase our target price to EUR 38.0 (36.0).
Exel’s margins take a hit this year, but we see Exel’s favorable positioning will remain intact and next year’s results should more than make up for the interim dip.
The negative factors have been discussed earlier
Exel issued a negative profit warning yesterday. The company’s earlier outlook guided revenue as well as adj. EBIT to increase, whereas the updated guidance says revenue is to increase significantly while adj. EBIT is to decrease. We don’t view the revenue update a major surprise but the FY ‘21 profitability downgrade is negative news. According to Exel raw material availability has weakened, and both material as well as logistics costs have increased. Exel also says certain high volume carbon fiber Wind power customer applications have generated low margins during their ramp-up phase. These negative factors were discussed already over the spring and summer, but we expected margin improvement in H2 after some softness seen in Q2.
We expect profitability back to high levels in FY ‘22
We already expected strong top line growth for this year and thus we revise our estimate only a bit, from EUR 124.9m to EUR 125.8m. Our previous adj. EBIT estimate for FY ’21 was EUR 10.8m, which we now revise down to EUR 8.9m. We estimate 17% y/y revenue growth for Q3 (Exel grew 23% y/y in Q2). We now expect EUR 1.9m in Q3 adj. EBIT (prev. EUR 2.7m), a bit below the EUR 2.0m comparison figure. We therefore estimate Q3 EBIT margin to have softened to 6.3%. We now expect 6.8% margin for Q4, in other words EUR 2.1m EBIT (prev. EUR 3.2m). In our view Exel’s composites pricing will adjust to higher raw materials prices going forward and hence the company should be able to make up for the interim profitability drop next year when the raw materials and logistics markets have normalized.
We still consider valuation not very demanding
Our FY ’22 revenue estimate is EUR 139.0m (prev. EUR 137.4m), while we revise our EBIT estimate down to EUR 12.4m (prev. EUR 13.5m). The 8.9% EBIT margin estimate is in line with the figure seen last year while our corresponding top line estimate is 28% above the EUR 108.6m in FY ’20 revenue. Exel is valued 9x EV/EBITDA and 15x EV/EBIT on our FY ’21 estimates. These levels are not that low but turn attractive at ca. 7x and 10x on our FY ‘22 estimates. Our new TP is EUR 10.0 (11.5); retain BUY rating.
Scanfil hosted its first-ever CMD yesterday, during which the company elaborated on customer service and internal processes. Long-term financial targets were left unchanged.
The focus was on Scanfil’s positioning and latest trends
The CMD added color on Scanfil’s comprehensive manufacturing service model and value chain positioning. Scanfil’s service has over the years evolved to cover the entire life cycle for many high-mix low-volume industrial electronics products. Scanfil’s own processes now appear well harmonized across the factory network. Scanfil can take care of the final product’s delivery to end-use location, as highlighted in the case of TOMRA’s reverse vending machines and grocery stores. Established OEM customers amount to 85% of accounts (95% of revenue) while start-ups make up the rest. Each factory has its own P&L and Scanfil monitors their strategic position as well as financial performance. The divested plant in Hangzhou was performing well in financial terms but no more seemed a great fit strategy-wise, whereas in the Hamburg closure case the reverse was true. According to Scanfil the Connectivity segment should have the highest relative growth potential, not a big surprise considering it is still by far the smallest of the five. Semiconductor sourcing challenges seem set to last at least until 2022 and affect accounts across all the segments. Scanfil doesn’t see any internal bottlenecks an issue; business has mostly managed to stay on course thanks to extended planning and demand forecasts.
Organic growth potential is strong for the coming years
Scanfil recently announced the EUR 6m planned investment in Suzhou to double the current plant’s production capacity. We consider this an efficient way to address organic growth opportunities driven by Chinese demand. Scanfil has also added new staff in China and the US to help capitalize on local sales potential. We continue to expect ca. 7% organic CAGR going forward, a strong figure in the EMS context.
The overall valuation context has not changed
Scanfil left its long-term financial targets intact for now and we make no changes to our estimates. Valuation hasn’t changed much since the last update; Scanfil trades around 8.5-9.0x EV/EBITDA and 11-12x EV/EBIT on our FY ’21-22 estimates. We retain our EUR 9.0 TP and HOLD rating.
Fellow Finance’s H1 revenue fell short of our expectations as a result of the business financing driven growth. We expect a return to growth in H2 but have lowered our 2022-2023 growth expectations by some ~10%. We adjust our TP to EUR 3.8 (4.0) and retain our BUY-rating.
Loan mix driven revenue decline in H1
Fellow Finance reported somewhat twofold H1 results. With the loan mix having shifted more towards business financing and the relative fee income to loan volume lower than anticipated revenue was below our estimates, declining 5.3% y/y to EUR 5.5m (Evli EUR 6.2m), despite the 31% y/y growth in intermediated loan volume. EBIT of EUR 0.5m was still in line with our estimate (Evli EUR 0.5m) as a result of reduced costs from lower broker fees and credit losses from Lainaamo as well as a downsizing of Fellow Finance’s own balance sheet stock. Costs did see some additional burden from growth investments, with new and up-coming product launches and slight growth in personnel.
Set to return to growth but pace still somewhat lackluster
We have slightly lowered our 2021 estimates, now expecting revenue of EUR 11.7m (prev. 13.1m) and EBIT of EUR 1.0m (EUR 1.4m) and lowered our 2022-2023 revenue estimates by ~10%. We expect double-digit growth in H2 but for costs increases due to growth investments and the announced combination agreement to keep bottom-line figures at similar levels as in H1. We expect intermediated loan volumes to rebound to 2019 levels but a lower revenue level with the growth in business financing. The easing of temporary regulations domestically and abroad provides support for continued growth in fee income in the near-term, while interest income should see declines with the downsizing of the balance sheet lending.
BUY-rating with a target price of EUR 3.8 (4.0)
In light of our slightly lowered estimates, mainly on the growth side, we adjust our target price to EUR 3.8 (4.0). With the new growth initiatives and loan volume rebounds Fellow Finance is set for a return to growth. We retain our BUY-rating.
Fellow Finance’s H1/21 results fell short from our estimates on the growth side, with revenue of EUR 5.5m (Evli EUR 6.2m), driven by the loan mix due to growth in lower margin business financing. EBIT amounted to EUR 0.5m (Evli EUR 0.5m). The guidance for 2021 remains intact, expecting growth in 2021 but for the result to remain slightly unprofitable due to growth investments.
Netum grew faster than expected in H1 but otherwise showed little other surprises. Deal flow and growth in headcount provide good support for continued clear double-digit growth. We retain our HOLD-rating and adjust our target price to EUR 4.6 (4.4).
Growth surpassed expectations, no larger surprises
Netum reported its H1 results, which all in all were slightly better than expected. Revenue grew organically at a good pace of 21.7% to EUR 10.4m (Evli EUR 9.8m). The comparable EBITA grew to EUR 1.6m (Evli EUR 1.5m). The comp. EBITA-margin declined slightly y/y to 15.4% (H1/20: 17.2%), which can be largely explained by significant new recruitments. The company’s IPO had a negative impact of EUR 0.9m on earnings figures and the comparable EPS was at EUR 0.12 (H1/20: 0.15).
Growth prospects looking good
Netum has been very successful in new recruitments and the personnel grew by nearly 50% y/y to 171. As such the company has been able to manage profitability well given the quite minor dip in relative profitability. The deal flow has been good, including several significant long-term contracts, which with the success in recruitments should support growth remaining well in the double-digits in the near-term. The for Netum strategically important cyber security business was made a separate business area at the start of the year and has according to the company performed well, which in terms of relative growth has been a driver in our growth estimates. We have made minor, relatively insignificant upwards adjustments to our near- to mid-term estimates. Our 2021 estimates for net sales and comp. EBITA of EUR 21.6m and EUR 3.4m remain quite near the top of the company’s guidance of 2021 net sales and comp. EBITA of EUR 20-22m and EUR 3.1-3.5m respectively.
HOLD with a target price of EUR 4.6 (4.4)
In light of our minor estimates revisions and the good first half of 2021 we adjust our target price to EUR 4.6 (4.4). Our target price values Netum at approx. 20x 2021 adj. P/E (excl. IPO expenses and goodwill amortization). We retain our HOLD-rating.
Netum’s H1 was slightly above our expectations. Net sales grew 21.7% organically to EUR 10.4m (Evli EUR 9.8m) while the comparable EBITA amounted to EUR 1.6m (Evli EUR 1.5m). Netum reiterated its 2021 guidance, expecting net sales and comparable EBITA in 2021 to amount to EUR 20-22m and EUR 3.1-3.5m respectively.
Endomines’ Q2 was focused on production start-up and with delays at Friday serious production figures will have to wait until 2022. We adjust our target price to SEK 2.8 (2.9) with our rating now HOLD (BUY).
Working on production start-up
Endomines reported its Q2 results. With Friday still under care and maintenance during Q2, Endomines as expected did not produce any new gold concentrate and no revenue. Costs were higher than anticipated as the ramp-up of operations progressed and with significant D&A, relating largely to the Friday mine, Q2 EBIT of SEK -76.9m was clearly below our expectation of SEK -20.0m. Endomines continued its efforts to bring the Friday-mine back into production, having invested one million USD on upgrading the Orogrande Processing facility and enhancing the production capacity of the mine. Endomines has also begun n exploration surface drilling program for the Montana gold assets, a fundamental part of Endomines’ long-term value creation potential.
Seeing Friday + Pampalo production of ~20k oz in 2023
Endomines updated its mid-term goals for the Friday and Pampalo assets, expecting annual gold production of 7,800-9,000 oz and 10,000-11,500 oz respectively, at full production. Full production for Friday is expected by Q4 2021/Q1 2022 and Q2/Q3 2022 for Pampalo. The new Friday estimate is slightly softer than the previous 9,000 oz initial production target but future capacity expansion could still be viable. We have now also included estimates for Pampalo, expecting production to rise to some 20k oz in 2023 as both sites should have reached target capacity by then. With further near-term delays in the start-up of the mill at Friday (expected in late August) the 2021 production estimate was lowered to 1,500 oz (prev. 3,000-4,000 oz), which given pre-Q2 news was not completely surprising.
HOLD (BUY) with a target price of SEK 2.8 (2.9)
We have made some adjustments to our SOTP-model, based on which we adjust our target price to SEK 2.8 (2.9). With the recent share price increases we lower our rating to HOLD (BUY).
Marimekko’s Q2 figures came in above estimates. The company is still only laying out the foundation for sustained international expansion, and we believe this underpins earnings growth potential for years to come.
EBIT margin potential will not fully materialize this year
Finland’s 61% y/y growth drove Q2 top line to EUR 32.7m, up 40% and above the EUR 29.3m/29.3m Evli/cons. estimates (last year’s store closures softened the comparison period). Both Finnish Retail and Wholesale advanced a lot while International, up 20% y/y, was mainly driven by Wholesale. Home wares continued to sell well and in our opinion the offering’s breadth is one point that testifies to Marimekko’s strengths. Q2 EBIT was EUR 5.5m vs the EUR 2.9m/4.0m Evli/cons. estimates; we find the positive surprise relative to our estimates stemmed from the EUR 2.4m gross profit beat. Digital and omnichannel customer experience projects will add to costs in H2 and Marimekko’s guidance moderates estimates for the rest of the year.
We see there is a long earnings runway ahead
Collaborations like the Adidas one show how the strategy works as the Marimekko brand is enjoying a rejuvenation period. We understand the Adidas deal generated ca. EUR 1m in revenue and profits in Q1; we expect license revenue will remain below EUR 3m this year, but the brand benefits extend beyond direct financial gains. Marimekko doesn’t have that much more growth potential in Finland but is still very modest in the global fashion & apparel context; upside potential remains considerable and from this perspective the long-term 10%+ CAGR target doesn’t seem very challenging. Marimekko began to gather pace towards long-term ambitions a few years before the pandemic and has already been able to post above 15% EBIT margins. In our view the company should be able to sustain long-term profitability at least a few percentage points above the stated target level.
Valuation remains reasonable considering the potential
Marimekko’s earnings-based multiples, roughly in the 19-25x EV/EBIT range on our FY ’21-23 estimates, have continued to climb and are now near those of luxury goods peers. Multiples are also high relative to their own historical levels, but we view this justified since the company’s profile now stands on a whole new level. Our new TP is EUR 84 (63); we retain our BUY rating.
Due to some delays and changes the production guidance for 2021 was lowered to around 1,500 oz (prev. 3,000-4,000 oz). Production is set to start again in Q3 after a 12-month halt.
Cibus’ strategy proceeds according to plan and further Nordic expansion seems inevitable. We find Cibus’ premium justified, while gains beyond the current point seem unlikely without additional property market revaluations. Our TP is now SEK 205 (195); our rating is HOLD (SELL).
Portfolio performance was again very close to estimates
Cibus’ portfolio continued to perform as expected and there were very little changes to key metrics. Q2 net rental income amounted to EUR 18.5m, the same as our and consensus’ estimates. Administration expenses were EUR 1.8m, as we estimated, and included EUR 0.4m in one-offs (for the most part related to the Nasdaq Stockholm transition). Net financial costs were EUR 5.9m, a bit higher than our EUR 5.4m estimate.
We view Cibus the premier Nordic grocery property owner
The Nasdaq Stockholm switch has, among other developments, rendered Cibus’ shares more liquid and attractive for acquisitions. We consider Cibus the leading owner for Nordic daily-goods properties and thus the company is in a great position to gain further property mass within selected markets. We would expect Cibus to expand to either Norway or Denmark (or both) next year at the latest. This would be straightforward in the sense that the Nordic markets are all quite similar. Meanwhile acquisitions within Finland and Sweden should continue and Cibus has already announced more than EUR 130m in add-ons this year. Cibus was able to purchase these at a 6% yield. Cibus sees the price level remains stable for now and expects to make many more small deals in addition to possible larger portfolio acquisitions, for which it can tap equity and debt.
We find valuation full barring further property revaluations
In our opinion a premium to book is justified, but we consider Cibus’ 1.25x EV/GAV already significant, and at least any additional big gains would seem hard from these levels. We view Cibus’ shares pretty much fully valued, but we note the Nordic property sector’s revaluation could continue to drive further gains also for Cibus’ shares. Cibus already has a competitive organization for managing the leading Nordic grocery property portfolio, however we find Cibus’ valuation has in the past followed other Nordic property portfolios’ yields very closely. Our TP is now SEK 205 (195) and our new rating is HOLD (SELL).
Marimekko’s Q2 results came in above our and consensus’ estimates. Top line was driven by 61% growth in Finland and gross margin was also some 120bps above our estimate. Marimekko thus reached high absolute and relative profitability. The company however left its guidance intact, which moderates H2 estimates.
Cibus’ property portfolio performance once again matched estimates as net rental income amounted to EUR 18.5m in Q2. Administration costs were as we expected, while net financial costs were slightly higher than expected.
Cibus reports Q2 results on Wed, Aug 18. We make estimate revisions to include the already closed deals. We view Cibus as the leading ownership structure for Nordic grocery properties, but we consider valuation too steep. Our TP is now SEK 195 (175) and our rating is SELL (HOLD).
Very busy deal-making in Q2
Cibus has announced, after the release of Q1 report, a total of EUR 124m in acquisitions. The total comprises 88 properties and so the average lot is small even by Cibus’ standards. Only some EUR 32m of these were closed so that they had time to generate rental income during Q2 (we estimate the contribution to have been EUR 0.2m), and an additional EUR 20m will add to Q3 numbers. We assume Cibus has been able to purchase all the EUR 124m at a 6% yield and so estimate together they will add some EUR 7.4m to next year’s net rental income. We expect Cibus’ Q2 admin costs to have been elevated, at EUR 1.8m, due to the busy deal-making. We thus see Q2 operating income at EUR 16.7m.
Cibus is a great home for small grocery store properties
The latest announced large acquisition, valued at EUR 72m (or 5% of Cibus’ GAV), is set to close in Q4 and involves an equity issue of 2m shares to the seller, AB Sagax; we are yet to include this portfolio in our estimates (Cibus has already issued a EUR 30m hybrid bond). The AB Sagax deal comprises 72 small grocery stores across Finland. The average asset is less than 600sqm in size and all but one feature Kesko as the tenant. Cibus’ typical Kesko property has been a 3,000sqm supermarket store, but Cibus is also a natural owner for such smaller properties.
A high price to pay for public market liquidity
Cibus’ valuation has been driven up, in our opinion, to a large extent in the wake of other Nordic property companies. Cibus’ 4% yield is still competitive relative to the 3.25% level seen around the wider property sector, but in our view Cibus’ current 1.3x EV/GAV and 1.9x P/NAV multiples limit further upside potential. The Nordic grocery property market’s potential revaluation could begin to lift book value, however we view Cibus’ 4% yield simply too tight and ahead of the underlying market as long as the company is still able to acquire additional assets at a 6% yield. Our SEK 195 (175) TP values Cibus at some 1.2x EV/GAV and 1.6x P/NAV. Our rating is now SELL (HOLD).
Gofore continued to grow profitably and despite some minor bumps on the road EBITA was quite as expected at EUR 6.8m (Evli EUR 7.0m). We continue to expect above 30% in 2021. We retain our HOLD-rating and target price of EUR 21.
Continued profitable growth in H1
Gofore reported its H1 results, continuing on a track of profitable growth. Revenue grew 38 % to EUR 51.7m driven mainly by inorganic growth, as organic growth fell short of the around 10% long-term target. Gofore’s EBITA and adj. EBITA in H1 amounted to EUR 6.8m and EUR 6.9m respectively, rather in line with our estimates (Evli EUR 7.0m/7.2m). Billing rates were slightly weaker mid-H1 due to the transition between agreement periods with one of Gofore’s largest customers but improved towards the end of the first half of the year. Gofore also experienced an increase in personnel turnover during H1. Profitability in H1 was still at a good level although below the 15% EBITA margin target.
Some uncertainty from increased personnel turnover
We have made smaller downward revisions to our 2021 profitability estimates while our revenue estimate remains quite intact at over 30% y/y growth driven mainly by inorganic growth. Some uncertainty is present from the sector-wide increase in personnel turnover, as the wariness of switching jobs during the pandemic has started to decrease. Gofore is in our view still well positioned in the labour-market as an employer. Although an increase in turnover may be unavoidable, Gofore should still fare well in new recruitments in the rather challenging environment. Short-term this may still cause some pressure on growth and margins.
HOLD-rating with a target price of EUR 21
In our view the H1 report didn’t really change much in Gofore’s investment case and the noted increase in employee turnover is something we currently don’t view as a major risk but will keep an eye on. We reiterate our target price of EUR 21 and retain our HOLD-rating.
Suominen’s earnings will now correct to a lower level from their recent peak. We believe, despite the setback and increased uncertainty, that Suominen’s value chain positioning is still good, and decent margins will remain.
US delivery volumes will take a big hit in H2’21
Q2 revenue fell 7% y/y to EUR 114m and missed the estimates, which were at EUR 120m. In our view the softness was due to Americas; the US supply chain has lately been saturated with wipes as the local retailers sourced as much product as possible, including unbranded wipes which then didn’t move forward from the shelves and thus blocked volumes for many brand wipes. Suominen’s US brand name customers were pushing for max delivery volumes as late as May and June, and by the end of Q2 stocks began to pile up. Suominen says the logjam hasn’t for the most part spread beyond the US; LatAm has continued to develop as before while there has been some jamming in Europe. In our view the 14.7% GM was an encouraging sign, considering the metric also benefits from high volumes, as revenue was soft compared to estimates. Suominen thus reached EUR 15.3m in Q2 EBITDA, compared to the EUR 14.8m/13.5m Evli/cons. estimates.
We believe GM will remain near 13% going forward
Suominen’s nonwovens pricing is now to a large extent locked into mechanisms and so we believe gross margin will remain at a decent level going forward, at around 13% or so. We estimate Q3 revenue to decline by 17% y/y as we see Americas down by 24%. We expect gross margin to decline to 12%, which translates to EUR 9.5m in EBITDA. We expect some stabilization already in Q4, but we revise our FY ’22 revenue estimate down to EUR 431m (prev. EUR 473m) and that for EBITDA to EUR 48.5m (prev. EUR 56.0m). It is now clear earnings have peaked and Suominen may not reach EUR 15m quarterly EBITDA for a while. We however believe Suominen can achieve above EUR 10m quarterly EBITDA again soon enough.
The sell-off already neutralized earnings multiples
Suominen’s earnings multiples were low already before the profit warning, at about 6x EV/EBITDA and 9x EV/EBIT. We find the net effect of the sell-off and our earnings downgrade has been a marginal increase in multiples. We consider these levels very reasonable. Our TP is now EUR 6 (6.8). We retain our BUY rating.
Enersense’s Q2 was much as expected. Margins are already decent, and we see plenty of scope for long-term gains.
Q2 figures did not reveal many surprises
Enersense’s Q2 revenue amounted to EUR 61.6m, compared to our EUR 57.5m estimate. We find the top line beat was for the most part due to International Operations (EUR 14.8m vs our EUR 11.5m estimate) as the other three segments were all close to our estimates. The positive surprise was in our view due to strong development in the Baltics, but France also contributed. Connectivity faced challenging winter conditions in Q2, but the segment’s revenue was nonetheless a bit above our estimate. There are no meaningful comparison figures due to the Empower acquisition, however Q2 profitability was as we expected. Adj. EBITDA came in at EUR 4.8m vs our EUR 4.7m estimate, while adj. EBIT was EUR 2.8m vs our EUR 2.6m estimate.
We make limited updates to our estimates
Empower integration proceeds according to plan and add-on acquisitions are possible already near-term. Enersense reiterated its current guidance and sees EUR 215-245m in revenue while adj. EBITDA should be in the EUR 17-20m range (adj. EBIT EUR 8-11m). We have made only minor revisions to our estimates and expect Enersense to land near the upper end of the guidance range. Enersense has a long-term EBITDA margin target of 10% (by 2025); we see the company is headed close to 8% already this year and 8.5% doesn’t seem that challenging to achieve in the year following. We continue to expect 4.6% organic growth in FY ’22, meaning Enersense should reach at least EUR 21m in EBITDA and EUR 12m in EBIT then.
Organic performance and low multiples underpin upside
Enersense is valued 5x EV/EBITDA and 9x EV/EBIT on our FY ’22 estimates. We find the earnings multiples imply a sizeable discount relative to peers while Enersense’s organic growth outlook and profitability are, in our view, in line with the general sector estimates. Our EBITDA margin estimates are also on the conservative side compared to Enersense’s 10% target and we expect only some 3.5% organic CAGR for the coming years, whereas Enersense’s own EUR 300m long-term organic top line target implies a CAGR many percentage points above our estimates. We retain our EUR 13 TP and BUY rating.
Pihlajalinna’s Q2 served a small positive surprise relative to estimates. We are confident operating margin and multiple expansion potential enable solid long-term upside.
Small earnings beat as profitability continued to improve
Pihlajalinna’s Q2 revenue grew 24% to EUR 142.5m, compared to the EUR 140.7m/139.4m Evli/cons. estimates. There were no major surprises in terms of customer group revenues; we find the small revenue beat was due to the public sector. Private customer revenue recovered 44% from last year’s dip, but appointments remained 24% below 2019 levels, while within corporate customers visits were already close to pre-pandemic levels. Higher costs continued to limit outsourcing’s profitability y/y, but there was improvement q/q. Q2 operating margin excluding outsourcing improved by almost 700bps y/y. The combination of higher volumes and COVID-19 services drove profitability, but there’s still potential for further gains, depending on the type of service, even on current volume levels. Pihlajalinna reached EUR 6.5m adj. EBIT vs the EUR 5.6m/6.2m Evli/cons. estimates. The company retained its guidance.
We make only minor revisions to our estimates
Oral care is one practice area where profitability can be improved even without any increase in capacity utilization rates. COVID-19 services will remain high in Q3, while there’s some associated cost uncertainty. Overall clinical seasonality patterns should remain intact, but the current virus situation probably limits standard services’ volume potential for now. We now estimate FY ’21 growth at about 13% and adj. EBIT at EUR 31.9m.
Significant long-term upside potential is on the horizon
The Pohjola acquisition adds capacity and improves Pihlajalinna’s ability to compete with the two larger Finnish rivals. The focus will initially be on private customers, but public sector growth is also likely long-term. The target had by itself too limited scale to be profitable. Pihlajalinna will return with more details on the deal, but in our view the target seems a good fit and synergies should materialize already next year. Pihlajalinna remains valued 8x EV/EBITDA and 16x EV/EBIT on our FY ’21 estimates. These are below peers’, and Pihlajalinna also has more margin expansion potential considering its relatively modest profitability. Our new TP is EUR 13.5 (13.2); we retain our BUY rating.
Enersense’s Q2 report didn’t offer many surprises. Enersense’s operations and strategy seem to proceed pretty much according to plan.
Suominen’s Q2 margins remained strong, but focus is now on the color Suominen provides on demand slowdown and inventory build-up in North America. The issue prompted the company to revise down its FY ’21 profitability outlook just ahead of the report.
Gofore’s EBITA/adj. EBITA of EUR 6.8m/6.9m in H1 were rather in line with expectations (Evli 7.0m/7.2m). Revenue grew 38.3% to EUR 51.7m in H1 (pre-announced). Revenue and adj. EBITA in 2021 are expected to grow compared with 2020.
Solteq grew faster than expected in Q2, with Solteq Digital returning to clear growth. The outlook is now looking even better with the pick-up in demand in Solteq Digital and we expect good performance across the board. We raise our TP to EUR 8.0 (7.2), BUY-rating intact.
Rapid growth in Q2, Solteq Digital surprised positively
Solteq reported Q2 figures above our estimates. Revenue growth was clearly faster than expected, with growth of 23% to EUR 18.5m (Evli EUR 17.1m). Solteq Software as expected continued at a very rapid growth pace of 43%, while to our surprise Solteq Digital moved to double-digit growth, aided by good demand in retail, after having posted lower growth figures for the past year. The adj. EBIT was quite in line with our estimates at EUR 2.5m (Evli EUR 2.3m). Our overestimation of Solteq Software’s profitability was compensated by the over 15% EBIT-margin (target >8%) in Solteq Digital supported by the growth in the quarter.
Poised for double digit growth and margins in 2021
We have slightly raised our 2021 estimates for revenue and EBIT to EUR 71.4m (prev. 68.3m) and EUR 9.6m (prev. 9.2m). We expect Solteq Software to continue to grow very rapidly supported by the backlog of Utilities project deliveries. With the large projects sizes the recurring revenue should start to show more strongly in 2022 and we estimate only minor EBITDA-margin improvement in 2021. We expect the good demand in Solteq Digital to continue to show throughout the year and for the growth also to be reflected positively in the segment’s profitability. Positive signs were also seen in the commercialization of the Solteq Robotics solutions through a few pilot projects, with the pandemic having slowed down development in the near past.
BUY-rating with a target price of EUR 8.0 (7.2)
On our minor estimates revisions and overall good progress we raise our target price to EUR 8.0 (7.2). Valuation of ~17x 2022 P/E is not particularly challenging given the growth and profitability. We retain our BUY-rating.
Pihlajalinna’s revenue and profitability continued to improve and were slightly above estimates. The company reiterates its existing guidance.
Etteplan’s Q2 results were quite in line with expectations. Growth is set to return to double digits this year and Etteplan is taking steps to keep the momentum going. Etteplan also raised its 2021 revenue guidance on the positive H1 development to EUR 295-315m (285-305m).
Q2 quite in line with expectations
Etteplan reported its Q2 results, which overall were quite in line with expectations. Revenue grew 19% y/y to EU 75.0m (EUR 73.7m/73.6m Evli/cons.). EBIT amounted to EUR 6.7m (EUR 6.5m/7.3m Evli/cons.). Good operational efficiency kept the group EBITA-margin above the target 10% level at 10.4% (Evli 10.2%). On our estimates the stronger performers of the quarter were the Technical Documentation Solutions and Software and Embedded Solutions service areas, which both surpassed expectations on growth and profitability. Customer order intake has continued favourably and although the pandemic still causes uncertainty, Etteplan raised its revenue guidance range to EUR 295-315m (prev. EUR 285-305m), with the EUR 25-28m EBIT guidance range intact.
Preparing for continued growth
We have made only minor revisions to our estimates. For 2021 we have slightly raised our expectations for the Technical Documentation Solutions and Software and Embedded Solutions service areas in light of the good traction in Q2. We now expect revenue of EUR 299.8m (prev. 294.9m) and EBIT of EUR 26.3m. The number of employees has increased by over 200 since the end of 2020 to 3,491 and recruitment is actively on-going, which together with other growth ambitions will cause some cost inflation on H2 but also support organic growth going forward given a continued healthier demand situation. Double-digit growth also in 2022 is most certainly within grasp but will require continued M&A activity.
HOLD-rating with a target price of EUR 17.5
We have made no significant changes to our estimates and retain our HOLD-rating and target price of EUR 17.5. Our TP values Etteplan at ~20x 2022e P/E.
Aspo’s Q2 group-level EBIT was known before the report. We make minor upward revisions to our estimates, and we see Aspo on a firm track towards full profitability potential.
H1’21 results display a solid foundation to build on
Aspo’s Q2 revenue grew 24% y/y to EUR 142.9m vs the EUR 133.6m/134.5m Evli/cons. estimates. ESL’s top line was up 40% y/y; the EUR 5.4m EBIT was a bit above our estimate as utilization and rates continued to improve throughout the fleet. That said, there should be more potential as efficiency obstacles like port congestion, varying loading demand, virus measures and high dockings limited Q2 profitability. We expect ESL’s EBIT to decline by EUR 0.9m q/q in Q3 as dockings will be roughly double of those seen in Q2. We believe ESL’s EBIT has now reached a firm foundation since cargo volumes were still not abnormally high (some 8% lower than in Q2’19 but up 19% y/y). Meanwhile the Baltic Dry Index has reached multi-year highs and we believe the Supramax vessels’ freight rates are now stabilizing. Telko’s revenue topped our estimate and the 7.7% EBIT margin also marked another record. Strategy work at Leipurin continues but Q2 figures remained soft compared to our estimates. We understand admin costs were a bit elevated e.g. due to the CEO recruitment; Aspo’s long-time CEO Mr Aki Ojanen is retiring and the successor, Mr Rolf Jansson, will begin his work next week.
The EUR 30-36m EBIT guidance moderates H2’21 estimates
We wouldn’t be very surprised to see Aspo top the current EBIT guidance range set for this year. There’s still some uncertainty regarding Q4 results, but we believe ESL’s contribution will then help Aspo reach another record quarterly EBIT. We make minor revisions to our estimates; we remain at the upper end of the FY ‘21 range while we now estimate FY ’22 EBIT at EUR 39.7m (prev. EUR 38.9m). Telko may find it hard to achieve further margin gains (in our view some softness is to be expected), but growth could help sustain high absolute profitability going forward.
Progression and cash flow generation back up valuation
Aspo is valued around 8x EV/EBITDA and 14x EV/EBIT on our FY ’21 estimates. We don’t view these levels challenging considering the profitability potential that is not yet quite fully realized. Our TP is now EUR 12.5 (11.5); we retain our BUY rating.
Solteq’s Q2 was slightly above expectations, with revenue at EUR 18.5m (Evli EUR 17.1m) and adj. EBIT at EUR 2.5m (Evli EUR 2.3m). Guidance intact: group revenue in 2021 is expected to grow clearly and the operating profit to improve clearly.
Etteplan's net sales in Q2 amounted to EUR 75.0m, in line with our and consensus estimates (EUR 73.7m/73.6m Evli/cons.). EBIT was also quite in line with our estimates and slightly below consensus, at EUR 6.7m (EUR 6.5m/7.3m Evli/cons.). Guidance specified: Etteplan expects revenue to amount to EUR 295-315m (prev. EUR 285-305m) and operating profit (EBIT) to amount to EUR 25-28m.
Aspo released preliminary information regarding Q2 results already last week and so the Q2 report was no news event in terms of group-level EBIT. Telko’s profitability was higher than we expected.
Pihlajalinna reports Q2 results on Fri, Aug 13. Our FY ’21 estimates remain intact, but we note the latest announced acquisition which is set to be closed by the end of this year.
COVID-19 testing probably plays a big role also in Q3
Q1 top line grew 5% y/y, driven by public sector and corporate customers. COVID-19 testing contributed a major share of the revenue increase within the two groups. Meanwhile private customer revenue fell by 10% y/y, although COVID-19 testing had a small positive contribution there as well. COVID-19 testing added a total of EUR 8.2m in revenue, while overall net revenue growth was EUR 6.9m. We expect the tests to have played a similar important role in Q2 as the acute situation restrains other volumes. Finnish vaccination coverage was negligible in Q1 but improved a lot in Q2; testing levels might otherwise begin to fade in Q3 were it not for the fact that the virus situation has once again turned for the worse over the summer. We believe the testing business does not in any case reach abnormal margins and thus the back and forth with other services should have a neutral effect on Pihlajalinna’s profitability going forward.
On track towards higher profitability levels
The Q2 comparison figures are very low because the onset of the pandemic cut non-urgent healthcare demand a year ago. We estimate Q2 revenue to be up 23% y/y as there has been a rebound in private and corporate customer volumes. We expect EBIT to have gained by EUR 5.0m y/y to EUR 5.6m. For FY ’21 we estimate 12% y/y growth and some EUR 10m gain in EBIT.
Low multiples and profitability levels imply solid potential
Pihlajalinna is again active in M&A since the bid by Mehiläinen was curbed. The latest target is Pohjola Sairaala, for which Pihlajalinna pays EUR 32m in cash. The acquisition will add some EUR 60m in revenue next year and so the 0.5x EV/S valuation looks modest relative to Pihlajalinna’s 0.9x multiple. The target has been lately generating negative EBITDA and Pihlajalinna will provide more color on its development in the coming months. Pihlajalinna is valued 8x EV/EBITDA and 17x EV/EBIT on our FY ’21 estimates. The company has plenty more profitability potential and thus the multiples should decrease to 6.5x and 13x already next year. Both earnings multiples and margin levels are clearly below those of peers. We retain our EUR 13.2 TP and BUY rating.
Etteplan reports Q2 results on August 11th and we expect notable improvement from the weak comparison period. Etteplan has continued its growth strategy, acquiring three smaller companies since Q1. We adjust our TP to EUR 17.5 (16.0) on elevated peer multiples, HOLD-rating intact.
Expect clear improvement from weak comparison period
Etteplan reports its Q2 results on August 11th. Q1 results were still somewhat mixed, with group revenue turning back to slight growth but organic growth still negative at 4%. Relative profitability was well above comparison period levels, with cost cutting measures made due to the pandemic having a notable impact. As Q2/20 was the first quarter to bear the brunt of the impact of the pandemic we expect clearly higher growth figures in Q2/21 from the weak comparison period. We expect revenue to grow some 17% to EUR 73.7m, of which we expect some 6% inorganic growth. We expect EBITA to remain above the 10% target level at 10.2%.
Several smaller acquisitions to continue growth strategy
Etteplan has made two acquisitions during Q2, software development company Skyrise.tech and technical documentation specialist F.I.T. Fahrzeug Ingenieurtechnik GmbH, and Adina Solutions after the review period, specialized in planning and implementation of technical documentation of software. The revenue impact on group level in 2021 should be rather marginal but we have made minor tweaks to our estimates to account for the acquisitions. We now expect 2021 revenue of EUR 294.9m and EBIT of EUR 26.3m, quite in the middle of company guidance (revenue EUR 285-305m and EBIT EUR 25-28m). We expect relative profitability to improve y/y in H1 but to revert back to comparison period levels in H2 as previously implemented cost savings measured are eased.
HOLD-rating with a target price of EUR 17.5 (16.0)
Etteplan’s valuation has risen clearly since our previous update, now trading well above historical levels. Peer multiples have also increased quite a bit and we raise our TP to EUR 17.5 (16.0), valuing Etteplan at ~20x 2022e P/E and retain our HOLD-rating.
Scanfil’s Q2 top line was close to estimates while EBIT didn’t quite reach expected levels. We make only minor estimate revisions. Our rating is now HOLD (BUY).
Some softness in Q2 EBIT margin, but nothing major to flag
Q2 revenue, incl. transitory invoicing, grew 11% y/y to EUR 173m. The figure was EUR 166m excl. the component-related items and can be compared to the EUR 165m/169m Evli/cons. estimates. Automation & Safety top line remained flat while both Advanced Consumer Applications and Energy & Cleantech grew by more than 30%. Advanced Consumer Applications had account ramp-ups and high demand persisted for familiar favorably positioned customers. Energy & Cleantech performed strong even without big ramp-ups as the customers’ markets expand, and we believe Scanfil has gained share within attractive accounts like TOMRA. Component availability challenges remain, but the shortage situation didn’t have any big negative effect on Q2 performance; the situation may now be improving or at least isn’t worsening. The EUR 10.6m Q2 EBIT was a tad soft compared to the EUR 10.9m/11.1m Evli/cons. estimates. In our view the Hamburg plant closure costs explain a large part of the shortfall.
Our FY ’21 estimates remain close to the guidance midpoint
We make only very small revisions to our estimates. In our view cost inflation is not an issue for Scanfil, while component availability is for now a challenge for pretty much all EMS companies. Scanfil will host its first ever CMD in September and we wouldn’t be surprised to see an upgrade to the current organic growth target. We now see Scanfil is headed for the EUR 700m figure a year in advance. Scanfil can top the 7% EBIT margin target at least on a quarterly level, but we would view any upgrade to this target ambitious because growth in the EMS business often doesn’t scale that much in terms of relative profitability. This is one of the major factors that limit valuation.
We view current valuation picture neutral
Scanfil is now valued ca. 9x EV/EBITDA and 12x EV/EBIT on our FY ’21 estimates. We believe growth continues to drive absolute earnings up in the coming years and so the multiples should be down to around 8x and 11x already next year. The valuation represents a premium relative to peers, but in our opinion is warranted. We retain our EUR 9.0 TP; rating now HOLD (BUY).
CapMan reported higher than expected profitability figures due to solid investment returns. Operating profit remains well on track towards a whole new level. We raise our TP to EUR 3.4 (3.1) with our BUY-rating intact.
Q2 operating profit beat driven by investment returns
CapMan reported better than expected Q2 results mainly due to higher than anticipated operating profit in the Investment business. Revenue was in line with expectations at EUR 11.9m (EUR 11.7m/11.8m Evli/Cons.), growing some 36% y/y. Growth in the Management company business and Services business (excl. Scala) was clearly in the double digits during the first half of the year. The operating profit amounted to EUR 11.3m, clearly beating expectations (EUR 9.4m/7.5m Evli/cons.). Compared with our expectations the clear positive was the Investment business operating profit (EUR 9.4m/5.9m Act./Evli). On the other hand personnel expenses increased clearly more than expected, and Management company business operating profit was lower than expected (EUR 2.4m/3.1m Act./Evli) despite higher revenue (EUR 9.9m/9.1m Act./Evli).
Operating profit pushing towards new levels
Q2 brought further good news in AUM growth, up 1.2bn y/y to EUR 4.3bn driven mainly by Real estate, supporting continued healthy revenue growth in coming years. We expect some EUR 45-50m in operating profit in the coming years, with Investment business returns expected to decline somewhat from the anticipated strong 2021 but operating profit increases in the other segments to largely make up for the expected decrease. We have made some smaller changes to our 2021 estimates to account for cost inflation and higher investment returns, expecting an operating profit of EUR 48.5m and a clear increase in EPS from the weak comparison period to EUR 0.24 (0.03).
BUY-rating with a target price of EUR 3.4 (3.1)
Valuation upside is supported by peer multiples and the dividend yield, with the solid financial performance and financial position potentially enabling faster dividend growth in coming years. We raise our target price to EUR 3.4 (3.1), BUY-rating intact.
Scanfil’s Q2 didn’t offer many surprises. Top line was close to expectations while there was a small shortfall in operating margin relative to estimates.
Scanfil Q2 revenue was EUR 172.9m, compared to the EUR 165.3m/168.6m Evli/consensus estimates. Top line grew by 11% y/y and included EUR 7.4m of transitory separately agreed, low margin customer invoicing. This was related to the ongoing component shortage situation and excluding these items revenue grew by 6.4% y/y to EUR 165.5m.
Advanced Consumer Applications’ revenue amounted to EUR 53.4m vs our EUR 47.7m estimate. Meanwhile Energy & Cleantech was EUR 44.8m, compared to our EUR 40.9m estimate. Automation & Safety top line stood at EUR 36.8m vs our EUR 39.5m estimate.
Q2 EBIT stood at EUR 10.6m vs the EUR 10.9m/11.1m Evli/consensus estimates. EBIT margin was 6.1% vs our 6.6% estimate. According to Scanfil the production transfer and planned closure of the Hamburg factory, which will happen by the end of September, generated additional costs.
Scanfil guides EUR 630-680m revenue and EUR 41-46m adjusted operating profit for FY ’21 (issued on Jun 11). Especially semiconductor availability continues to create uncertainty around the outlook.
Aspo specified guidance and told Q2 EBIT was headstrong. In our view the latest update dispels any remaining doubts about ESL’s and Telko’s financial performance.
Aspo now guides EUR 30-36m in FY ’21 EBIT
The guidance range midpoint is a positive surprise compared to the EUR 31.2m/30.9m Evli/cons. estimates before the release, not by that much but the guidance appears on the conservative side considering Aspo achieved EUR 9.6m in Q2 EBIT. This record quarterly EBIT topped the EUR 7.1m/7.0m Evli/cons. estimates by a mile and in our opinion Aspo seems poised towards the upper end of the new guidance range. Steel and forest industry customers in particular drive high cargo volumes for ESL. We also believe Telko has once again reached an above 7% EBIT margin; there might still be some long-term downward pressure on such a high profitability level, but nonetheless the prolonged strong performance makes the long-term 6% target seem a bit modest.
Both ESL and Telko are hitting long-term margin targets
We estimate EUR 35.7m in FY ’21 EBIT. We see H2 EBIT at EUR 18.2m and so only a bit above the EUR 17.5m H1 figure. H2 EBIT has tended to be meaningfully higher than that for H1, and perhaps Telko’s recent high profitability faces some headwinds going forward. ESL’s dockings this summer will dent Q3 EBIT, but Q4 is shaping up to be another record and in our view the carrier’s Q4 EBIT could touch EUR 6m. We estimate ESL to reach its 12% long-term EBIT target this year, thus see ESL FY ’21 EBIT at EUR 20.1m (prev. EUR 18.3m) and estimate another EUR 1.5m gain next year. We expect Telko to reach EUR 18.4m (prev. EUR 16.2m) in FY ’21 EBIT. Telko may find it hard to improve from such levels, at least in terms of margin expansion, as it has already reached the 6% long-term EBIT margin target level.
Stable performance and cash flow turn valuation attractive
Aspo could reach EUR 40m annual EBIT in a few years. We expect EBIT to gain some further EUR 3m next year. Going forward we see relatively stable performance for ESL and Telko, while it remains to be seen how much Leipurin can improve. Aspo is valued ca. 7x EV/EBITDA and 13x EV/EBIT on our FY ’21 estimates; we see further earnings growth and deleveraging, thanks to cash flow generation, helping the multiples lower in the years to come. Our TP is now EUR 11.5 (10.5), retain our BUY rating.
CapMan's net sales in Q2 amounted to EUR 11.9m, in line with our estimates and consensus (EUR 11.7m/11.8m Evli/cons.). EBIT amounted to EUR 11.4m, above our estimates and above consensus estimates (EUR 9.4m/7.5m Evli/cons.). Capital under management grew strongly to EUR 4.3bn, up 1.2bn y/y.
DT’s Q2 results were quite in line with our expectations. Growth is picking up, with double-digit growth seen in all BU’s during H2, which should push H2 profitability close to the 15% target level. We raise our TP to EUR 32.5 (30.0) and retain our HOLD-rating.
Group results quite in line with our expectations
Detection Technology reported its Q2 results, which were broadly in line with our expectations. Net sales grew 11.5% to EUR 23.5m (EUR 23.8m Evli/cons.). SBU net sales were still in decline but less so than in Q1 and security sales started to grow in late Q2. DT has seen good traction in order intake from its customers, in particular in security CT applications. Quarterly fluctuations saw IBU sales growth turned negative, but the overall market remained stable. MBU continued its strong growth supported by the demand situation in healthcare infrastructure and CT equipment. EBIT In Q2 amounted to EUR 3.0m (EUR 3.0m/3.3m Evli/cons.).
Double-digit growth seen in all BU’s in H2
DT’s business outlook has improved, and double-digit growth is expected in all BU’s in H2. IBU and MBU are expected to grow double-digit in Q3 while SBU is seen to take a turn towards growth in Q3 but demand uncertainty remains at elevated levels. On group level we have made minor upward tweaks to our estimates, expecting growth of 26% in H2. We are somewhat cautious to H2 profitability given the situation with component availability, but still expect improvements due to the higher sales and estimate a H2 EBIT-margin of 14.3%. DT is nearing its 15% target level and a stronger than estimated sales growth could rather easily push margins above the target during the latter half of the year.
HOLD with a target price of EUR 32.5 (30.0)
With the minor estimates revisions and improved H2 outlook and visibility we raise our target price to EUR 32.5 (30.0), valuing DT at 35x 2022 P/E. Valuation is not cheap but DT still exhibits a nice amount of potential in EPS growth considering target and pre-COVID profitability levels. Our rating remains HOLD.
Suominen reports Q2 results on Fri, Aug 13. We make only small adjustments to our estimates and continue to view valuation not too demanding.
There’s downward pressure from the late profitability peak
Suominen’s Q1 marked a record high profitability despite raw materials and logistics challenges. Raw materials prices began to spike in Q1, but inventories and nonwovens pricing dynamics meant the negative effect was not yet large. Raw materials prices however continued to surge in Q2, and we now expect Suominen’s Q2 gross margin to have declined by 350bps q/q to 14%. We estimate Q2 revenue at EUR 120m, down by 2% y/y, and EBITDA at EUR 14.8m. Raw materials prices have shown some cooling signs over the summer and we continue to expect gross margin to settle around 13.5% going forward.
Additional investments appear forthcoming
Suominen’s business has received a pandemic boost, but high demand seems to persist. The company has also sharpened its own operational performance. Suominen recently issued a EUR 50m bond to be used for general corporate purposes. In our opinion the company had more than ample liquidity already before the transaction, and thus we see the extended financing hinting at growth plans. Suominen may be planning organic investments, but M&A is not off the table and we believe new geographies, in particular Asia, are now on the radar screen.
We still see some upside to current valuation multiples
Glatfelter, which in our view is the most relevant listed Suominen peer, has just announced the acquisition of Jacob Holm for an EV of USD 308m. Glatfelter estimates Jacob Holm’s Jun-21 LTM EBITDA of USD 45m includes pandemic demand benefit to the tune of USD 10-15m and expects to realize some USD 20m in annual cost synergies within 24 months of closing. These figures suggest, in the most optimistic scenario where the pandemic benefits persist and synergies are fully realized, an EV/EBITDA as low as 4.7x. If the benefits vanish the synergized multiple settles between 5.6x and 6.2x. Suominen is now valued around 6x EV/EBITDA and 9x EV/EBIT on our estimates; these levels are somewhat below those of Glatfelter and other peers. In our opinion Suominen’s valuation still appears conservative. Our new TP is EUR 6.8 (6.5) per share; we retain our BUY rating.
DT’s Q2 result was broadly in line with our estimates. The net sales grew 11.5% on a group level to EUR 23.5m (EUR 23.8m/23.8m Evli/cons.). The operating profit grew to EUR 3.0m (EUR 3.0m/3.3m Evli/cons.). DT’s business outlook for the end of the year has improved, and the company expects double-digit growth in all business units in H2.
Talenom reported Q2 figures quite in line with expectations. With the on-going solid momentum, we have raised our 2022-2023 sales growth estimates, expecting continued solid double-digit growth. We adjust our target price to EUR 15.0 (13.3) and retain our HOLD-rating.
No major surprises in Q2 figures
Talenom reported its Q2 results, which were quite in line with expectations. Revenue grew 29.6% to EUR 21.4m (EUR 21.0m Evli/cons.). Of the growth during H1/21 around two-thirds were inorganic and the rest organic growth. The operating profit improved 15% y/y to EUR 4.1m but was slightly below expectations EUR 4.3m/4.4m Evli/cons.). Guidance remains intact, with net sales expected to amount to EUR 80-84m and operating profit to amount to EUR 14-16m. During the review period Talenom announced its expansion to Spain through the acquisition of accounting firm Avail Services SL and continued to grow through acquisitions in Finland and Sweden.
Growth prospects looking as good as ever
Growth in Q2 continued strong and a positive remark was the continued sign of improvement in organic growth, with new customer acquisitions having recovered to pre-pandemic levels. Talenom has also seen good traction in the new small customer concepts, which we expect to pick up further once all steps have been taken to enable acceleration of growth. Our 2021 estimates remain mostly intact, but we have raised our 2022 and 2023 revenue estimates by 8% and 13% respectively, expecting continued inorganic growth and improved organic growth supported by accelerated new customer sales and sales from consulting work. We expect revenue of EUR 82.4m and EBIT of EUR 15.0m respectively (co’s guidance 80-84m and 14-16m).
HOLD-rating with a target price of EUR 15.0 (13.3)
With the solid momentum in sales growth, we raise our target price to EUR 15.0 (EUR 13.3) and retain our HOLD-rating. Valuation remains a challenge, with 2022e P/E of ~52x, but a case like Talenom is hard to come by and the outlook in terms of profitable growth remains clearly positive.
Talenom's net sales in Q2 grew 29.6% to EUR 21.4m, in line with our and consensus estimates (EUR 21.0m Evli/cons.). EBIT amounted to EUR 4.1m, slightly below our and consensus estimates (EUR 4.3m/4.4m Evli/cons.).
Detection technology will report is Q2 results on August 3rd. Q1 started off rather slow and expectations are for growth to pick up in the coming quarters. We expect the trend of net sales decline to be reversed in Q2 and sales to grow 12.8% y/y. We retain our target price of EUR 30.0 and HOLD-rating.
Q1 started off rather slow
Detection Technology will report its Q2 results next Tuesday on August 3rd. In Q1 net sales in MBU and IBU saw double-digit growth y/y while SBU saw net sales decline with the continued challenging situation in the security market. MBU showed good momentum in sales growth driven by investments in healthcare infrastructure and increased demand for CT applications. Group net sales overall declined 8.0% y/y. Relative profitability increased y/y to a 7.5% operating margin (Q1/20: 5.9%) but remained clearly below pre-COVID levels.
Growth seen to pick up in coming quarters
Detection Technology noted in Q1 that although the beginning of the year was slow, the worst challenges are seen to have been left behind and growth is expected to pick up again during 2021. MBU is seen to grow more in Q2 and H2 than in Q1 while IBU should turn to growth during H2. SBU is seen to head for growth in late Q2 and grow in H2 but demand is characterized by uncertainty. We estimate group net sales of EUR 23.8m for a growth of 12.8% y/y. We expect growth to be driven by MBU (35.4% y/y) and a clearly smaller y/y growth decline in SBU (-10.1% y/y). We expect group operating margins to remain quite on par with previous year levels.
HOLD with a target price of EUR 30.0
We have made no changes to our estimates ahead of Q2. Valuation is quite elevated, with 2022E P/E of ~36x, and growth recovery is still coupled with uncertainty. Potential is however still large, with good market growth expectations. We retain our HOLD-rating with a target price of EUR 30.0.
Eltel’s margins continued to gain in Q2 y/y. The report had no big surprises; Eltel makes progress according to plan. We make some downward revisions to our revenue estimates while we are a bit more positive on margins.
The 2.1% operative EBITA margin met our estimate
Q2 revenue declined by 14% y/y to EUR 210m, vs the EUR 228m/223m Evli/cons. estimates. Other business made up 9% of top line, while Communication still drove growth in Finland. Revenue declined in all other countries, and Swedish EBITA didn’t improve as the comparison period had a positive EUR 0.9m one-off item. The pandemic delayed Norwegian fiber activity, and together with tough winter produced some softness in local results. Meanwhile Denmark saw a positive EUR 0.8m one-off in profitability. Q2 EBIT landed at EUR 4.3m vs the EUR 4.4m/4.1m Evli/cons. estimates. Operative EBITA margin was 2.1% vs our 2.0% estimate. Q3 tends to be the most profitable quarter and we see the respective ‘21 margin at 4.1%, up 110bps y/y. We estimate FY ’21 EBITA margin improving by 130bps to 2.5%.
FI & NO drive short-term, SE & DK hold long-term promise
We moderate our Norwegian estimates a bit but still see the business similarly important for near-term results as Finland. Denmark is for now the smallest of the four but already achieves good margins and probably has the best long-term growth prospects. In our view traffic lighting presents a solid source of business for all four (Finnish street lighting in particular). Finland, Norway and Denmark also offer fiber opportunities, while in Sweden that market is more challenging. There’s scope for M&A, but we believe it probably takes many quarters before anything materializes. We expect Sweden to weigh figures at least in Q3. Eltel is however making progress there, and we see group-level growth turning positive in Q4 thanks to Finnish and Norwegian strength. We estimate Eltel’s Q3 growth to remain negative.
Current valuation leaves solid upside potential
Eltel is valued ca. 7.5x EV/EBITDA and 16x EV/EBIT on our FY ’22 estimates. We see the respective FY ‘23 multiples at 6.5x and 13x. These are somewhat neutral levels compared to peers, but we continue to view valuation attractive as Eltel advances towards its long-term 5% EBITA margin target (we estimate 3.9% for FY ’23). We retain our SEK 29.5 TP and BUY rating.
Eltel’s Q2 produced a sixth consecutive annual improvement in operative EBITA and the result was close to estimates. Eltel maintains its previous guidance and expects similar development for the rest of the year.
Fellow Finance signed a combination agreement with Evli Bank to merge with Evli’s banking services, intended to be carried out during H1/2022. In the more near-term, Fellow Finance has seen a healthy rebound in loan volumes during H1/2021, looking to get back on a growth trajectory.
Signed combination agreement to create “Fellow Bank”
Fellow Finance and Evli Bank signed a combination agreement, by which Evli Bank will demerge through a partial demerger and Fellow Finance will merge with the company that will carry on Evli Bank’s banking services and form “Fellow Bank”. A main idea behind the merger is to combine Evli’s banking and risk management expertise with Fellow Finance’s expertise in lending and assessment of creditworthiness. The combination would in our view create clear synergies and provide a sturdier foundation but with the shift to balance-sheet lending Fellow Finance’s original idea of a scalable lending platform would be less valid. The arrangement is intended to be carried out during the first half of 2022.
Good loan volume growth during H1
H1 has seen loan volumes rebound quite nicely, with the monthly average during H1 at around EUR 15m compared with EUR 11m during H2/20, and most recent months nearing all-time high. We have raised our 2021 estimate to EUR 201m (prev. EUR 160m). The growth should not translate as well into revenue given the growth being driven by lower-margin business lending, but we still expect growth of 18.6% from the weak comparison period. The business lending driven growth should also not burden costs as much, but earnings are still expected to remain low due to growth investments.
BUY with a target price of EUR 4.0 (3.8)
The combination agreement could value Fellow Bank at EUR 50.8m (FF 25.2m, Evli banking serv. 13.9m and 11.7m added capital through share issue), and with at least EUR 30m equity would give a max 1.7x P/B. We will treat Fellow Finance as is for now. On our revised estimates we raise our target price to EUR 4.0 (3.8) and retain our BUY-rating.
Raute’s Q2 profitability was still weak, but in our opinion the mix of stabilizing costs and very high order book are bound to drive steep earnings growth going forward.
Demand is improving somewhat faster than we expected
The EUR 35.5m in Q2 revenue was close to our EUR 36.0m estimate and had a favorable tilt towards services (EUR 16.3m vs our EUR 12.0m estimate), but EBIT nonetheless remained EUR -1.0m (vs our EUR 1.6m estimate). Employee costs grew by EUR 2.8m y/y and EUR 1.0m q/q, while other operating expenses grew by EUR 1.8m y/y and EUR 0.9m q/q (due to e.g. a proprietary marketing event). The EUR 65m order intake surpassed our estimate by EUR 10m. The higher-than-expected order intake stemmed, in geographic terms, across the board and so there were no major individual surprises. Both project deliveries and technology services orders topped our estimates. Modernizations drove services orders again to a high EUR 18m figure. Demand is overall improving a bit faster than we expected, order book is already a lofty EUR 129m and we expect it to swell further during the remainder of this year. The book is also now less dependent on large projects than it used to be just a while ago.
Traditional important markets now drive results
Raute’s guidance remains unchanged. Employee costs should stabilize going forward and we also believe other expenses have now peaked. The big order book will thus begin to drive higher profitability. Raute sees potential supply chain challenges in H2, but in our view components and logistics issues are not a major long-term topic in the context of Raute considering the company’s strong value chain position. We make only small estimate revisions. We see Raute reaching EUR 163m in FY ‘22 revenue with a 6.5% EBIT margin, whereas we previously estimated a 7% margin, and further potential from there on.
Valuation is not stretched given the long-term potential
We continue to expect steep earnings climb for FY ’22. We make a small moderation in our profitability estimates, on which Raute now trades some 8x EV/EBITDA and 10x EV/EBIT; we see the FY ‘23 multiples contracting to about 7x and 9x. In our view these are attractive levels considering Raute’s leading position in advanced markets as well as long-term emerging markets opportunities. We retain our EUR 26.5 TP and BUY rating.
Consti reported rather good Q2 results on an adj. basis, with both growth and underlying profitability slightly better than expected. The solid order intake also bodes well for continued growth during the latter half of the year. We raise our target price to EUR 14.5 (13.0) and upgrade our rating to BUY (HOLD).
Q2 better than expected on adj. basis
Consti reported overall slightly better than expected Q2 results. Revenue grew 2.3% y/y (5.9% excl. IAC) to EUR 70.9m (EUR 68.5m/69.2m Evli/cons.). The operating profit and adj. operating profit amounted to EUR -0.5m (EUR -0.4m/-0.7m Evli/cons.) and EUR 2.9m (EUR 2.6m Evli) respectively. The operating profit included EUR 3.5m of IAC’s relating to the Hotel St. George project arbitration proceedings, which should no longer materially affect costs during H2. The order backlog was back to growth, up 11.5% y/y to EUR 236.2m, supported by a solid order intake of EUR 98.5m.
Growth picking up
We have made minor upward revisions to our estimates, now expecting 2021 revenue of EUR 286.4m (prev. EUR 278.0m) and operating profit of EUR 5.9m (prev. 5.7m). The growth exceeded our expectations in Q2 and with the solid order intake Consti is poised to continue the growth during the latter half of the year. The increases in building material costs could potentially affect costs during H2 and we for now assume a very minor impact as prices have been going recently. With the new construction venture having gotten off to a good start with the recently signed deals we expect continued growth of some 3% p.a. during 2022-2023 with relatively stable margins on adjusted basis.
BUY (HOLD) with a target price of EUR 14.5 (13.0)
With the signs of pick-up in growth and slightly better than estimated underlying profitability (excl. IAC’s) we raise our target price to EUR 14.5 (13.0) and upgrade our rating to BUY (HOLD). Our TP values Consti at a quite reasonable 14.7x 2022 P/E.
Vaisala reported its Q2 results which came with little surprises as preliminary figures had been given, although the underlying profitability did exceed expectations. We have made some upwards revisions to our estimates and adjust our target price to EUR 36.0 (35.0) with our HOLD-rating intact.
Solid growth driven by Industrial Measurements
Vaisala reported its Q2 results, which with the preliminary figures given ahead of the quarter did not come as a larger surprise. Revenue growth was at a solid 20% and the operating result also improved clearly y/y to EUR 10.9m (Q2/20: EUR 7.9m). Both BU’s posted double-digit growth figures, with IM growth at 31% and W&E at 14%. Orders received grew 25% to EUR 120.1m and the order backlog as a result was up 14% to EUR 165.3m. Vaisala updated its guidance ahead of Q2, expecting revenue of EUR 400-420m and EBIT of EUR 40-50m. Vaisala will hold its Capital Markets Day on September 21st.
Underlying profitability better than expected
We have raised our estimates slightly, now expecting revenue of EUR 418.4m (prev. EUR 409.9m) and an operating result of EUR 48.2m (prev. EUR 45.0m). Vaisala’s Q2 result included an additional of EUR 2.2m relating to an update of the valuation of contingent considerations and the underlying profitability as such was clearly better than the reported operating result figures. The availability and cost of components was highlighted as a potential concern for H2, which we have reflected also in our estimates. Should the impact turn out to be small or negligible, the current guidance would appear to be rather conservative.
HOLD with a target price of EUR 36.0 (35.0)
On our revised estimates we adjust our target price to EUR 36.0 (35.0) and retain our HOLD-rating. Vaisala’s performance in Q2 was solid, but the already stretched valuation (30.3x 2022 P/E) and uncertainty relating to component cost and availability is something to consider.
Vaisala had given preliminary figures ahead of Q2 and as such contained no surprises on group level. Orders received and revenue grew well in both BU’s, but more strongly in Industrial Measurements. Faster than expected recovery from the pandemic had a positive effect on demand, in particular in APAC and Europe.
Raute’s Q2 order intake grew even more than we expected, while profitability remained weak.
Consti's net sales in Q2 amounted to EUR 70.9m, in line with our and consensus estimates (EUR 68.5m/69.2m Evli/cons.). EBIT amounted to EUR -0.5m, in line with our and consensus estimates (EUR -0.4m/-0.7m Evli/cons.). The order backlog was up 11.5% to EUR 236.5m. Excluding one-offs the report was in our view rather upbeat, in particular on order intake.
Innofactor’s Q2 results were well in line with expectations. We have made essentially no changes to our estimates and continue to expect modest growth and notable profitability improvement. We retain our BUY-rating and target price of EUR 2.2.
Q2 well in line with our expectations
Innofactor reported its Q2 results, which were well in line with our expectations. Revenue grew 3.2% y/y, 7.6% organically, to EUR 17.3m (Evli 17.3m). Revenue growth turned positive again in all countries. EBITDA and EBIT amounted to EUR 2.1m (Evli 2.2m) and EUR 1.3m (Evli EUR 1.4m) respectively, with all other countries except Sweden showing positive figures. The order backlog continued to grow nicely, up 28% y/y to EUR 72.7m. Innofactor reiterated its guidance, expecting revenue and EBITDA to increase compared to 2020. Innofactor made an early repayment of loans for EUR 2.7m, improving the equity ratio and net gearing to 49.9% and 30.5% respectively, while still leaving the cash position on par with 2020 year-end figures. All in all, the Q2 report was quite neutral and held little significant new information.
No notable changes to our estimates
We have made essentially no changes to our estimates. We expect revenue in 2021 to grow 3.4% EUR 68.4m and EBIT (excl. PPA and Prime divestment) to improve to EUR 6.0m (2020: EUR 4.4m). We expect slight pick-up in growth during H2 accounting for the impact of COVID-19 on 2020 comparison figures supported by the solid order backlog. Positive signs in the other Nordic countries speak for a potential pick-up in the growth pace, with growth recently having been driven to a larger extent by Finland.
BUY with a target price of EUR 2.2
With no essential changes to our estimates or view on Innofactor as an investment case we retain our BUY-rating and target price of EUR 2.2. Our target price values Innofactor at a slight discount to peers on adj. multiples, which we still consider fair given the lower growth pace.
Innofactor’s Q2 results were as expected. Net sales amounted to EUR 17.3m (Evli EUR 17.3m), while EBITDA amounted to EUR 2.1m (Evli EUR 2.2m). The order backlog continued to grow well, up 28% y/y to EUR 72.7m.
SRV’s Q2 results were fairly in line with expectations and held little new information. Progress is being made slowly but steadily and the company is quite well on track to regain decent profitability levels. We retain our BUY-rating and target price of EUR 0.8.
No surprises in Q2
SRV reported Q2 results that were fairly well in line with expectations. Revenue declined some 18% y/y to EUR 218.0m (EUR 232.1m/243.0m Evli/cons.) mainly due to lower business construction revenue. The operating profit was fairly good, at EUR 6.3m (EUR 5.8m/5.0m Evli/cons.), and the operative operating profit stood at EUR 5.7m (Evli 5.8m). The order backlog was down 21% y/y at EUR 1,048m. The guidance for 2021 of EUR 900-1,050m in revenue and operative operating profit of EUR 16-26m remains intact. The second quarter was rather limited in new information content, one highlight being the completed financing arrangements that clearly improved the maturity structure.
Estimates largely intact, potential minor headwind in H2
We have made some smaller adjustments to our 2021 estimates, now expecting revenue of EUR 907.2m (prev. 904.3m) and operating profit of EUR 22.1m (23.9m). Revenue in H2 is expected to improve clearly on H1 with for instance the completion of the second Kalasatama tower, Loisto, but relative profitability is expected to be weaker due to lower margins in key projects. Elevated building material costs and availability could cause some headwind in the latter half of 2021 but so far, the impact does not appear to be material. Start-ups of developer-contracted housing units continued on a slight positive trend, with the financing arrangements opening up potential for accelerated pace given sufficient demand.
BUY with a target price of EUR 0.8
Q2 was quite neutral and did not affect our view of SRV as an investment and SRV’s potential is being unlocked, although slowly. We retain our target price of EUR 0.8 and BUY-rating.
Vaisala reports its Q2 results on July 23rd. Preliminary figures show a solid second quarter and our attention will be drawn toward the rest of the year and comments regarding the impact of component availability/costs.
Exel Q2 margins were close to what we expected, while the growth extension turns us overall more positive. In our view the company isn’t that far from 10% annual EBIT margins.
Q2 margins declined pretty much as expected
Sales mix (tilt to carbon fibers) as well as volumes continued to improve and Q2 top line grew by 23% y/y. The EUR 33.5m figure surpassed our EUR 30.4m estimate despite certain quarterly softness in Wind power, which in our view testifies to Exel’s extended wide positive development. Buildings and infrastructure, a highlight customer industry, was driven by the conductor core application and reached EUR 8.7m top line (vs our EUR 5.9m estimate). Q2 gross margin declined by almost 400bps y/y and 200bps q/q to 56.3%, which wasn’t a surprise per Exel’s comments in connection with the Q1 report. Higher raw materials costs and certain growth category products’ ramp-up had a negative margin impact, but Exel’s 7.3% adj. EBIT margin was in fact a bit above our 7.2% estimate. The resulting EUR 2.5m adj. EBIT topped our EUR 2.2m estimate thanks to the high revenue. Exel retained its previous FY ‘21 guidance.
Prolonged high growth further lifts profitability potential
Order intake didn’t show any signs of cooling and leaped by 90% y/y. The Q2 comparison figure was soft, but nevertheless the latest EUR 43.5m figure gained another 4% q/q and can be compared to the EUR 30m quarterly levels that used to be common. We now expect Exel to reach 15% growth this year. In our view H2 growth is bound to top 10% and thus we estimate H2 EBIT margins to increase by ca. 100bps y/y. We still expect Exel’s composites pricing to adjust for higher raw materials costs and see annual EBIT margin reach close to 10% already next year. It’s a bit early to say much about FY ’22, but the recent order intake levels suggest Exel might then grow another 10% or so. We therefore see EBIT gaining almost another EUR 3m.
We now estimate EUR 13.5m FY ’22 EBIT (prev. EUR 12.7m)
Exel’s valuation has turned, in our view, more attractive now that recent strong growth outlook has been extended. Exel is now valued ca. 9x EV/EBITDA and 14x EV/EBIT on our FY ‘21 estimates. These are still somewhat high in the historical context, but we expect them to contract to around 7.5x and 11x in one year’s time. Our TP is now EUR 11.5 (11.0), new rating BUY (HOLD).
SRV's net sales in Q2 amounted to EUR 218.0m, below our and consensus estimates (EUR 232.1m/241.0m Evli/cons.). EBIT amounted to EUR 6.3m, above our and consensus estimates (EUR 5.8m/5.0m Evli/cons.).
Consti reports its Q2 results on July 23rd. The Q2 figures will be burdened by the outcome of the Hotel St. George renovation project arbitration proceedings but operational performance should remain steady. The venture into new building construction has gotten off to a good start with the signing of a larger office construction project.
Arbitration proceedings outcome to burden Q2 results
Consti will report its Q2 results on July 23rd. Profitability figures are expected to be rather grim due to the unfavourable outcome of the arbitration proceedings relating to the Hotel St. George renovation project but apart from that no larger deviations should be expected. The impact of the arbitration proceedings on the operating result should be some EUR 3.0m and we expect an operating result of EUR -0.4m. The impact is partly reflected also in revenue, due to which we expect a slight decline in revenue y/y to EUR 68.5m (Q2/20: EUR 69.3m). Excluding the impact our estimates reflect slight improvement in both revenue and operating result.
Promising start to new construction venture
Apart from the news regarding the arbitration proceedings, the other notable news during the quarter was the announcement of Consti’s first significant new building construction project. The project, consisting of two new office buildings, is valued at approx. EUR 30m. New building construction was implemented as part of Consti’s revised strategy, with the aim for 10-15% of revenue to come from such projects in 2023, and the signing of a deal of such size provides a solid foundation for achieving the target. With Consti having implemented steps to improve profitability, our sights have been turned toward the unfavourable revenue development, and revenue from new construction could well be a driver in Consti’s investment case.
HOLD-rating with a target price of EUR 13.0
We have made no adjustments to our estimates ahead of the Q2 report. We retain our HOLD-rating and target price of EUR 13.0. Our target price values Consti at approx. 16.6x 2021 P/E (excl. arbitration proceedings items).
Exel Composites’ Q2 report was throughout better than we expected. Absolute profitability remained higher than we estimated as top line development was once again very strong. Relative profitability was close to what we expected, while order intake reached a new high.
Verkkokauppa.com’s Q2 marked a sixth consecutive earnings improvement. In our opinion the company remains well positioned to improve plenty more long-term.
Earnings a small positive surprise, retains FY ’21 guidance
Verkkokauppa.com’s Q2 revenue increased by 6% y/y to EUR 131m, compared to the EUR 130m/130m Evli/cons. estimates. Growth was driven by wide positive development as traditional product categories like computers and cameras sold well but evolving categories such as sports and home & lighting were also popular. Online sales grew at a 15% y/y pace while B2B sales were up by 38% and thus made up 22% of total revenue. Overall top line, excluding export sales, advanced some 160bps faster than the market and in our view highlights the strength of the Verkkokauppa.com brand. The 17.2% gross margin topped our 16.8% estimate, and the resulting EUR 0.6m difference in gross profit helped the EUR 5.1m Q2 adj. EBIT beat our EUR 4.6m estimate (same as the consensus) and reach a record high.
We believe strong positioning will deliver further results
Verkkokauppa.com has performed strong and steady for a while. Export sales have been the only soft area, due to the pandemic, and according to the company will probably not bounce back sharp this year. The company has recently built inventories to buffer up for the busy autumn season and important Q4. Verkkokauppa.com retains a strong position in the Finnish B2C channel but has also gained traction in B2B, where volumes stem from many SME customers. The EUR 4m small-item logistics investment is relatively small and will only have a negligible operative impact in H2’21 when inventories have to be moved to accommodate the Jätkäsaari construction phase. We make small revisions to our estimates and expect Verkkokauppa.com to achieve 8% growth and 4.1% EBIT margin this year. We also make some upward revisions to our long-term estimates.
Overall valuation picture is still attractive
In our opinion Verkkokauppa.com’s valuation remains attractive considering the steady performance and long-term potential. We see solid high single-digit CAGR performance for the coming years and potential for positive surprises. We continue to view current valuation picture overall very reasonable against this backdrop. We retain our EUR 10.8 TP and BUY rating.
Finnair’s Q2 report didn’t contain major news, considering the big picture. We revise our volume estimates down, however additional cost savings support our EBIT estimates.
No big surprises, but Q3 profitability will not much improve
Finnair’s Q2 revenue amounted to EUR 112m, below the EUR 142m/145m Evli/cons. estimates. Passenger, ancillary and cargo revenues were all soft compared to our estimates, but travel is resuming as passenger revenue topped that for cargo in June. Working capital situation is beginning to improve due to growing bookings and Finnair expects monthly OCF to turn positive by the end of this year. The situation, however, remains challenging from profitability perspective. Finnair’s Q2 adj. EBIT was EUR -151m, compared to the EUR -144m/-144m Evli/cons. estimates. Finnair sees similar losses for Q3 as well. We revise our Q3 adj. EBIT estimate to EUR -132m (prev. EUR -91m).
Cost savings support profitability amid volume challenges
Finnair turned more cautious regarding the following years’ travel rebound, not a big surprise considering the latest developments. Asian vaccination rates have begun to pick up and important Northeast Asian countries are expected to have fully vaccinated 70% of their population during Q4. Finnair’s passenger volume rebound will lag those of Western short-haul focused carriers, but meaningful recovery should begin to materialize during the next few quarters. We now expect Finnair to reach ca. 90% of FY ’19 business levels (in terms of ASK & RPK) in FY ’23. We revise these estimates down a few percentage points and now expect EUR 2.8bn top line for FY ’23 (prev. EUR 3.0bn). Meanwhile Finnair’s upsized permanent cost savings projection supports our EBIT estimates. In our view the company could achieve healthy EBIT margins already next year and we see potential for 7% profitability in FY ’23. We have made only very small revisions to our absolute profitability estimates.
In our view profitability potential has been fully valued
In our opinion Finnair is set to return to good profitability levels, however this potential has been appreciated for a while. Finnair is valued roughly 15x EV/EBIT on our FY ’22 estimates, not an unreasonable level compared to other airlines but nonetheless fully valued given the persistent level of uncertainty. Our TP is now EUR 0.65 (0.7) and we retain our HOLD rating.
Verkkokauppa.com reported Q2 results that were overall somewhat above estimates. Top line was close to the expected levels, while the strong gross margin helped adj. EBIT to surpass estimates by some EUR 0.5m.
Finnair’s Q2 losses were pretty much as expected. The company estimates Q3 operating loss will also be roughly EUR 150m, in other words comparable to recent quarters.
Raute’s environment has improved faster than we expected, as seen in the recent signing of two large orders. We don’t expect the ongoing year to be that great, but from here on profitability gains appear inevitable. In our view FY ‘22 results could already touch the previous record levels.
EUR 46m in larger disclosed orders set the stage for FY ‘22
Raute has disclosed two new orders over the past couple of months, in total some EUR 46m worth of business for FY ’22. Raute knows both customers well. The EUR 30m Lithuanian LVL mill order will be delivered before the end of Q3’22. The delivery schedule looks much the same for the EUR 16m Russian order. The projects didn’t arrive as a complete surprise since we had already expected meaningful improvement in H2’21 orders, however we now see solid profitability potential for FY ’22 and beyond. We do not expect Q2’21 to have been that great yet, what with EUR 36m in revenue and EUR 1.6m EBIT, but we see profitability can only improve from the recent lows.
We expect about EUR 160m top line for next year
The new orders will not affect Raute’s FY ’21 results. The previous guidance, according to which both top line and operating profit will improve, remains valid. We have made only minor revisions to our FY ’21 profitability estimates. In our opinion annual operating profit will still not be great this year as revenue stays at a somewhat modest level while pandemic restrictions also remain a nuisance. The business is, for now, reliant on a large Russian order and the associated low margin profile limits profitability. We believe, however, that Raute is set to top EUR 10m in EBIT once again next year as the recent negative factors will remain no more. We revise our FY ’22 revenue estimate from EUR 141m to EUR 159m, while our respective EBIT margin estimate increases from 5.6% to 7.0%. We thus see Raute reaching EUR 11m in EBIT, a figure close to that of FY ’17.
Multiples turn attractive with EBIT north of EUR 10m
Our EUR 160m revenue estimate and corresponding 7% EBIT margin imply EBIT in the EUR 11-12m range, which translates to around 7x EV/EBITDA and 9x EV/EBIT multiples for FY ’22-23. We also note Raute reached EUR 15m EBIT in FY ’18, although that level would be difficult to pull off in a steady fashion. Our TP is now EUR 26.5 (21). Our new rating is BUY (HOLD).
Verkkokauppa.com reports Q2 results on Fri, Jul 16. We leave our estimates unchanged ahead of the report and continue to view current valuation levels attractive.
Q1 met expectations, FY ‘21 growth seen around 7-8%
Verkkokauppa.com had a strong Q1. Top line grew by 7% y/y, in line with estimates, and was driven by many product categories. Online sales grew by 33% while B2B sales advanced by 12%. Gross margin amounted to a strong 16.2% (a bit above our 15.9% estimate), driven by good contribution from higher margin categories. The company thus achieved a small profitability beat with its EUR 5.2m adj. EBIT (3.9% margin), compared to the EUR 5.0m/4.8m Evli/cons. estimates. We made only minor revisions to our Q2 estimates following the Q1 report and we leave our estimates unchanged for now. We expect Verkkokauppa.com to post EUR 130m in Q2 revenue (5.5% y/y growth) and EUR 4.6m in EBIT (3.6% margin).
Strategy is ambitious, but initial moves have been laid out
Verkkokauppa.com reiterated its FY ’21 guidance in connection with the Q1 report. The company guides EUR 570-620m top line and EUR 20-26m adj. EBIT. Our EUR 594m revenue estimate touches the midpoint and thus we see the company reaching above 7% growth this year. Our EUR 24m EBIT estimate (4% margin) is a bit above the respective midpoint. The company has also announced a EUR 4m investment in fully automated small item warehouse in Jätkäsaari, Helsinki. In our opinion the plan seems a relatively low risk and efficient way to help organic expansion. We expect Verkkokauppa.com will continue to grow at a high single-digit rate for years to come, however the company’s own very ambitious target is to achieve EUR 1bn top line and 5% EBIT margin by ’25.
12-15x EV/EBIT for FY ’21-23 isn’t high given the potential
Verkkokauppa.com trades ca. 15x EV/EBIT on our FY ’21 estimates. This level represents a 25% discount compared to the Nordic & European online peer group. The 14x EV/EBIT level on our FY ’22 estimates however turns into a 10% peer premium and reflects the fact that we have taken a conservative approach to our long-term estimates. We view the overall valuation picture undemanding given the company’s growth potential. We retain our EUR 10.8 TP and BUY rating.
Finnair reports Q2 results on Jul 15. Capacity is being scaled up while passenger numbers have bottomed out, but there’s a lot of uncertainty with regards to a meaningful recovery. The rebound will arrive in the years to come, however in our view valuation doesn’t leave much upside. Our TP is now EUR 0.7 (0.75); we retain our HOLD rating.
Recovery may materialize somewhat slower than expected
Finnair’s Q2’21 passenger figures show strong recovery relative to the exceptional halt witnessed in Q2’20, but in the big picture the volumes remained very modest. International volumes increased towards the quarter’s end, however they remained at only around 5% of those seen in e.g. Q2’19 (in terms of RPK). Western passenger flows may pick up further in Q3, but strategically important Asian flights will in our view have to wait at least until Q4’21, if not even beyond that. Slow Asian vaccination rates may not matter that much because the delta variant now seems to act as an additional speed bump on the path to recovery. In our view Finnair’s EBIT is likely to remain in the red until the end of this year. It’s unclear how quick the pent-up passenger flight demand will materialize, but airlines are unlikely to return to normal before next year. We don’t expect Finnair to see pre-pandemic EBIT levels before the year 2023.
We make some downgrades to our long-term estimates
Finnair’s Q2 passenger numbers were somewhat below our expectations as the pandemic situation has proved very resilient. Cargo volumes, nonetheless, were higher than we estimated. We thus make only small revisions to our Q2 estimates. We expect EUR 142m in revenue and EUR 144m in operating losses. We revise our long-term estimates down a bit due to the continued uncertainty that stems from the latest pandemic updates. We also note jet fuel spot prices increased another 13% q/q in Q2.
Valuation recognizes Finnair’s long-term potential
In our opinion Finnair continues to hold a solid long-term strategic position as an airline that connects Europe with Northeast Asia. This seems well recognized as current valuation is not cheap. Finnair trades ca. 15x EV/EBIT on our FY ’22 estimates. We believe Finnair’s EBIT has plenty of room to improve beyond that, however the pandemic is unlikely to alter the inherent competitive nature of the airline industry.
Enersense completed its directed share issue and thus raised some EUR 16m in gross proceeds. The company is looking into some growth initiatives that would deploy the capital. These could involve organic growth prospects but in our opinion M&A is also high on the agenda. We have made small adjustments to our estimates. Our TP is now EUR 13 (11) and we retain our BUY rating.
Current markets offer both organic and M&A potential
Enersense already had a healthy balance sheet with a positive net cash position and there wasn’t any acute pressing need to raise additional cash. The company had some EUR 23m in cash at the end of Q1. This suggests there will now be close to EUR 40m in available funds plus possible additional debt facilities. In our opinion such an amount could enable Enersense to acquire targets with around EUR 100m in revenue, considering the relatively low EV/S multiples seen across the relevant sectors. At this point it remains unclear which segment Enersense might be looking to bolster. In our view Enersense has wide M&A opportunities in both Finland and abroad. The Finnish Power market is currently driven by e.g. wind power investments, while 5G will remain a major driver for Connectivity for years to come. Enersense is already a big Finnish player in these two related construction and maintenance markets, and there remain some smaller service suppliers the company might be contemplating to acquire. The Finnish smart industry market, by contrast, represents a much wider opportunity set, not to mention the potential overseas scope.
Long-term financial target amounts to EUR 30m in EBITDA
We make small adjustments to our estimates following the transaction. We understand Empower synergies continue to materialize well and we see the company is on track to reach annual EUR 20m run-rate EBITDA in the near-term, while the long-term target implies EUR 30m.
Valuation remains undemanding relative to potential
Enersense still trades at modest multiples, and the ca. 6x EV/EBITDA and 11x EV/EBIT on our estimates for next year represent meaningful discounts compared to peers. Our new TP is EUR 13 (11) and we retain our BUY rating.
The arbitration proceedings relating to the Hotel St. George project unfortunately came to a for Consti unfavourable conclusion. As a result, Consti lowered its 2021 operating result estimate to EUR 4-8m (EUR 7-11m). Our 2021 estimate is now EUR 5.7m (EUR 8.7m), TP of EUR 13.0 and HOLD-rating intact.
Arbitration proceedings to an end
The arbitration proceedings between Consti’s subsidiary Consti Korjausrakentaminen Oy and Kiinteistö Oy Yrjönkatu 13 relating to the Hotel St. George construction project came to a conclusion. Compensations amounted to EUR 0.7m for the former and EUR 0.9m for the latter, along with penalty interest. The net receivable related to the project in Consti’s balance sheet was approximately EUR 3m at the end of Q1/2021. Costs relating to the arbitral award will be recorded in Consti’s Q2/2021 results. The positive impact on cash flow is approximately EUR 2m. As a result of the arbitral award Consti lowered its operating result estimate range for 2021 to EUR 4-8m from the previous 7-11m.
Operating result estimate for 2021 down by EUR 3m
With the net compensation close to even the impact on the operating result will be around EUR 3m due to the cancellation of receivables in Consti’s balance sheet. The income statement will be partly effected through revenue and partly costs and we have revised our Q2/2021 estimate for revenue and operating result to EUR 68.5m (EUR 70.5m) and EUR -0.4m (EUR 2.6m). Our revisions solely reflect the outcome of the arbitration proceedings, as operational performance appears to have remained in line with expectations. The outcome, although unfortunate, is essentially a one-off item and ultimately did have a positive cash flow impact.
HOLD with a target price of EUR 13.0
We make no adjustments to our target price or rating based on the outcome of the arbitration proceedings due to the one-off nature. Our target price of EUR 13.0 values Consti at 16.6x 2021 P/E (excl. arbitration proceedings items).
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).
Netum is a Finland-based strongly growing and profitable IT services company with over 20 years of experience of demanding IT projects. The company seeks to grow sales to EUR 30m by 2023 (20% p.a. implied) while maintaining an EBITDA margin of above 15%. We initiate coverage with HOLD and a target price of EUR 4.4, valuing Netum at approx. 18.4x 2021e adj. P/E.
Strong track record of profitable growth
Netum has been growing strongly in the past years, through both organic growth and M&A, with a CAGR of 22% in 2016-2020. Strong growth has been coupled with high margins as the average EBITA and EBIT margins between 2016-2020 have been 16.7% and 11.4% respectively. Both growth and profitability have been above the average level of Finnish competitors.
Proceeds from the IPO will be used to accelerate growth
Netum aims to grow rapidly organically and according to its financial targets, the company aims to achieve net sales of EUR 30m in 2023, which corresponds to 20% annual organic growth. In addition to organic growth, the company is actively looking for opportunities for inorganic growth and seeks to grow through selective acquisitions, aided by funds raised in the recently completed IPO. A core part of Netum’s strategy is to continue to achieve a good level or profitability while growing, and the target is to achieve an EBITDA margin of at least 15%.
HOLD with a target price of EUR 4.4
We initiate coverage of Netum with a HOLD-rating and target price of EUR 4.4. The share price rose clearly after the IPO and current valuation multiples are rather in line with the Finnish peers. In our view, Netum’s strong track record of growth, relatively high net sales/employee ratio and above-average profitability could even warrant a premium to our peer group. On the other hand, Netum’s smaller size, competition for skilled employees, concentrated customer base, and intensifying competition are factors to be taken into consideration when looking at valuation.
Marimekko showed its strengths once again and delivered very strong Q1 figures. Development was good internationally but also in Finland. Adj. EBIT was clearly above expectations at EUR 5.6m. We have increased our FY21E-23E estimates and keep our rating “BUY” with TP of EUR 63 (58.2).
Clear estimates beat in Q1
Marimekko delivered a very strong Q1 result. Net sales increased by 17% y/y to EUR 29.1m vs. EUR 27.7m/27.6m Evli/cons. Sales were boosted by good wholesale sales development in APAC region, Finland and Scandinavia as well as increased licensing income in EMEA. Net sales in Finland amounted EUR 14.5m (7% y/y) vs. our EUR 14.0m and international sales were EUR 14.6m (29% y/y) vs. our EUR 13.7m. The continuing pandemic situation continued to hamper customer flows in stores, but retail sales were supported by good growth in online sales. Marimekko’s adj. EBIT was 130-140% above expectations at EUR 5.6m. Profitability was supported by increased net sales, improved relative sales margin and reduced fixed costs. EPS was EUR 0.55 vs. EUR 0.21/0.18 Evli/cons.
Aiming to accelerate international growth
Marimekko has constantly been able to deliver solid results, even during times like this. The company has a strong positioning in Finland, but its brand awareness has increased internationally as well which was shown also in Q1 figures. Marimekko plans to accelerate its long-term international growth in 2021 and to invest especially in digital business, seamless omnichannel customer experience, sustainability and brand awareness. This year, the company turns 70 years old, and this should increase brand visibility even more. Despite the strong performance in Q1, we expect a peak in sales once the vaccination coverage increases and restrictions are being lifted. Even though Marimekko had an excellent start of the year, the company indicated that majority of its net sales and earnings will be generated during H2’21E.
“BUY” with TP of EUR 63 (58.2)
Marimekko expects 2021E adj. EBIT margin to be approx. on a par with last year or higher. Net sales are expected to increase from last year. We expect revenue growth of 12% in 21E and 8% in 22E and adj. EBIT margins of 16.7% and 17.0%. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 19.9x and 17.9x which is 40-50% discount compared to the luxury peers. We keep our rating “BUY” with TP of EUR 63 (58.2).
No major surprises were seen in Endomines Q1 results and operations startup appears to be progressing according to plans. We raise our target price to EUR 2.9 (2.7) and upgrade our rating to BUY (HOLD).
No major surprises in figures
Endomines revenue was as expected insignificant (Act/Evli SEK 0.1m/0.0m), as operations were still at a halt. Costs were somewhat higher than expected and EBITDA of SEK -14.5m lower than our estimate (Evli SEK-11.0m). Focus during the year has so far been on ramp-up of operations and strengthening the organization through key recruitments. To our understanding the startup of operations has proceeded quite according to plans and the issues with the tailings dewatering system at the Orogrande processing facility have reportedly been addressed.
2021 production guidance 3,000-4,000oz
Endomines gave a production guidance for 3,000-4,000oz during 2021, above our previous estimate of 2,869oz. Our revised estimate puts production at 3,061oz, not yet including estimates for Pampalo, which given the likely startup in late 2021 and the low-grade development ore should be quite limited. With the mill at Friday seen to reach full capacity by year end the production figures are expected to pick up clearly in 2022. Cash flow from operations was at SEK -63.0m but around half of it was due to transactions relating to the US Grant and Kearsarge projects. Liquid assets stood at SEK 68.0m. The financing package with LDA Capital (subject to AGM approval) could bring a further EUR 14m, which should cover financing needs until sufficient own cash flows are achieved.
BUY (HOLD) with a TP of SEK 2.9 (2.7)
We have not made larger changes to our estimates or SOTP model apart from the slightly increased production figures for 2021. With the anticipated lower financial risk from the LDA Capital financing package (not yet included in our estimates) and favourable gold price development we adjust our target price to SEK 2.9 (2.7) and upgrade our rating to BUY (HOLD), noting however the significant risks relating to junior gold miners.
Marimekko’s Q1 result was very strong and it clearly outpaced the expectations. Net sales increased by 17% and were EUR 29.1m vs. EUR 27.7m/27.6m Evli/cons. Sales were driven by good wholesale sales development in APAC region, Finland and Scandinavia as well as increased licensing income in EMEA. Adj. EBIT was EUR 5.6m vs. EUR 2.4m/2.3m Evli/cons.
Marimekko upgraded its 21E earnings guidance last week as sales outlook for the full year has improved. The company said that Q1 has been very strong. We have increased our 21E adj. EBIT estimate by ~9% and keep our rating “BUY” with TP of EUR 58.2 (57). Marimekko reports its Q1 result on this week’s Thursday.
Upgraded guidance due to improved sales outlook
Marimekko upgraded its 21E earnings guidance last week. The company now expects 21E adj. EBIT margin to be similar compared to last year (2020: 16.3%) or higher. Sales guidance remains unchanged and the company expects 21E sales to be higher than last year. Based on the earlier guidance given in February, the company expected 21E adj. EBIT margin to be in line with the company’s long-term target of 15%. According to Marimekko, the upgrade is due, in particular, to improved sales outlook for the full year, supported by a very strong Q1’21. Despite the strong figures in Q1, the company still estimates that the major portion of net sales and earnings are generated during H2’21 due to the seasonality of Marimekko’s business.
We have increased our 21E adj. EBIT estimate by ~9%
We would have hoped more detailed information about the improved sales outlook, but we expect to get more color on this during the Q1 result. Earlier, we expected 21E sales growth of 9.5% y/y and adj. EBIT margin of 15.2% (EUR 20.5m). As a result of the guidance upgrade, we have increased our estimates, especially our Q1’21E estimates. We increased our Q1E sales expectation by ~2% and expect sales of EUR 28m while we have more than doubled our adj. EBIT expectation. We now expect Q1’21E adj. EBIT of EUR 2.4m (8.7% margin). We have increased our FY21E adj. EBIT estimate by ~9% and we expect it to be EUR 22.4m (16.5% margin) while we expect sales growth of ~10% y/y.
“BUY” with TP of EUR 58.2 (57)
Marimekko reports its Q1 result on this week’s Thursday, 20th of May. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 19.0x and 17.1x which is ~50% discount compared to the luxury peers. We keep “BUY” with TP of EUR 58.2 (57) ahead the Q1 result.
Cibus’ portfolio continued to perform as expected. Nordic daily-goods properties remain valued at attractive levels, which in our view highlights the underlying assets’ illiquid and idiosyncratic nature. Our new TP is SEK 175 (170).
Q1 was uneventful like so many other quarters
Cibus’ EUR 18.2m Q1 net rental income was in line with our EUR 18.1m estimate. Admin costs were EUR 1.7m (vs our EUR 1.3m estimate) as some EUR 0.1m related to the Nasdaq Stockholm main list transfer added to costs, in addition to certain seasonal variation. Net financial costs were only EUR 4.9m, compared to our EUR 5.4m estimate, as there was a EUR 0.5m FX gain. Net operating income, at EUR 11.6m, was therefore a bit above our EUR 11.4m estimate. Q1 was not unlike all other Cibus quarters despite the pandemic and somewhat extraordinary economic developments. Cibus also didn’t close new acquisitions in Q1.
Relatively few buyers help maintain the markets cool
Cibus has made a couple of small acquisitions after Q1. The four properties (three ICA and one Tokmanni) amounted to a total purchase price of EUR 8.7m. We assume a 6% yield and thus update our estimates accordingly. We understand Cibus’ acquisition pipeline remains plentiful beyond these few small deals. Cibus will have no problem financing even larger portfolio acquisitions as credit is available through various channels and equity can be accessed with a directed share issue (an exercise completed twice last year) or by a hybrid bond. Cibus also continues to act with restraint and is wary of paying a lot more than the levels it has gotten used to in the past few years.
1.2x EV/GAV begins to beg some underlying asset inflation
There has been no marked heating in the Nordic daily-goods property markets; the Swedish market shows some modest yield compression while Finland has remained much the same. We wouldn’t be surprised to see some acceleration in yield compression over the year, but in our view Cibus’ valuation already reflects such expectations to an extent. Cibus is valued almost 1.2x EV/GAV and 1.5x P/NAV, and in our opinion the levels don’t leave further upside even though Cibus’ absolute yield remains competitive relative to other listed Nordic properties. We update our TP to SEK 175 (170) as Swedish yield compression still provides additional minor support for Cibus’ valuation.
Cibus’ Q1 was quiet in terms of completed acquisitions but preparations continued for the Nasdaq Stockholm main list move as well as the long pipeline of potential property purchases. Meanwhile Cibus’ property portfolio performed according to expectations.
On Thursday, Enersense announced the transition to IFRS reporting and new guidance. Enersense expects net sales to amount to EUR 215-245m, adj. EBITDA of EUR 17-20m, and adj. EBIT of EUR 8-11m in 2021. We have updated our estimates in accordance with IFRS reporting and retain our TP of EUR 11 and BUY-rating.
Staff Leasing segment will be discontinued
Enersense announced the transition to IFRS reporting and published consolidated financial statements for 2020 and 2019. With the transition, the company updated its guidance and expects net sales to amount to EUR 215-245m, adj. EBITDA of EUR 17-20m, and adj. EBIT of EUR 8-11m in 2021. Enersense also announced that it has agreed to sell the entire share capital of its subsidiary Värväämö Oy to Citywork Oy. Staff Leasing segment will be discontinued and it will be reported as part of Smart Industry. Thus, the company will report its revenue in the future based on four segments; Power, Smart Industry, Connectivity, and International Operations.
We expect net sales of EUR 235.1m, adj. EBITDA of EUR 18.8m and adj. EBIT of EUR 10.4m in 2021E
We have adjusted our estimates with the transition to IFRS. Due to the divestment of Värväämö, we have decreased our net sales estimate for 2021E to EUR 235.1 million (prev. EUR 242m). Our growth estimates of 4.6% and 3.9% for 2022E-23E are unchanged. In 2021E, we expect adj. EBITDA of EUR 18.8m (8% margin) and adj. EBIT of EUR 10.4m (4.4% margin), respectively. We note that Enersense has not provided IFRS figures for Q1/21 and Q1/21 figures below are our estimates.
No changes to our recommendation
Based on our updated estimates, we have not made changes to our recommendation. We retain our TP of EUR 11 and BUY-rating.
Pihlajalinna - High hopes for H2 Equity Research Read full report here → Pihlajalinna’s Q1 result outpaced the expectations. Revenue increased by ~5% and adj. EBIT by ~59% y/y. We have slightly increased our 21E estimates and keep our rating “BUY” with TP of EUR 13.2 (13.0).
Q1 earnings outpaced expectations
Pihlajalinna’s Q1 result outpaced the expectations. Revenue increased by 5.2% y/y to EUR 140m which was in line with the Factset consensus estimates but above our EUR 137m. Revenue was once again supported by COVID-19 testing (revenue increase of EUR 8.2m). Testing volumes increased by 65% q/q. On the other hand, customer volumes of private clinics remained in a lower level. Revenue of corporate customer group increased by ~12% y/y while revenue of private customers was down by ~10% y/y. Revenue of public sector customer group increased by ~8% y/y. Adj. EBITDA amounted EUR 15.2m vs. EUR 14.4m/14.7m Evli/cons. and adj. EBIT was EUR 6.7m vs. EUR 5.6m/6.1m Evli/cons. EPS improved clearly to EUR 0.20 (Q1’20: EUR 0.06) vs. EUR 0.15/0.17 Evli/cons.
High hopes for H2’21
Pihlajalinna’s margin improvement in the private sector is right on track. The company has successfully renewed its sales strategy, and this was shown in Q1 figures. In the public sector, Pihlajalinna transitioned from the outsourcing market to the service sales market, in which the impact of the planned SOTE reform is low. The virus situation worsened towards the end of the first quarter and nearly all Pihlajalinna’s fitness centers were closed during April which will continue to hamper private customer segment in Q2. The situation has since improved and the vaccination coverage is gradually increasing. We expect the situation to normalize during H2’21 and the pent-up demand starting to release in late summer.
“BUY” with TP of EUR 13.2 (13.0)
Pihlajalinna reiterated its 2021 guidance and expects revenue and adj. EBIT to increase clearly compared to 2020. We have increased our 21E adj. EBIT expectation by ~7%. We expect 2021E revenue to grow by ~12% y/y and adj. EBIT of EUR 30.7m (5.4% margin). In 22E-23E, we expect adj EBIT margins of 5.6%. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.8x and 13.5x which is ~15-20% discount compared to the peers. We keep “BUY” with TP of EUR 13.2 (13.0).
Pihlajalinna’s Q1 figures beat our estimates. Q1 revenue amounted EUR 140m (+5.2%) vs. EUR 137m/140m Evli/cons, while adj. EBIT landed at EUR 6.7m vs. EUR 5.6m/6.1m Evli/cons estimates. COVID-19 testing volumes continued to grow during Q1 but customer volumes of private clinics are still lagging behind.
ESL and Telko extended recent quarters’ strong figures. In our view Aspo now warrants more long-term valuation perspective. Our TP is EUR 10.5 (9.5), rating BUY (HOLD).
Aspo already reached 6% long-term EBIT target in Q1
Aspo’s EUR 132m Q1 revenue was in line with estimates while the EUR 7.9m EBIT represented a record high and topped the EUR 6.8m/6.2m Evli/cons. estimates. In our view the positive surprise was for the most part due to ESL, but Telko also once again reached a record high EBIT. ESL managed a record Q1 EBIT despite the cold winter, which caused challenges especially for the smaller vessels. Cargo volumes remained flat y/y while shipping freight rates increased for smaller and larger vessels alike. Supply challenges in plastics and chemicals limited Telko’s revenue prospects but contributed to sharp price increases and so helped profitability (in addition to mix improvement). The pandemic continued to limit foodservice as well as machinery potential and thus Leipurin’s profitability remained muted.
Vague guidance for now but long-term potential remains
The vague guidance is warranted by the chaotic conditions in the raw materials and logistics markets. Historically H2 has been the more profitable part of the year but now the effect may be more muted. ESL’s demand continues to look good for the summer months while high docking levels will have a negative effect on Q2 and Q3 EBIT. We expect Telko to reach a 6% EBIT margin going forward (vs the 7.4% Q1 EBIT margin) as the environment begins to normalize. We are now more confident towards ESL’s and Telko’s long-term profitability levels and see how Aspo’s EUR 7.9m Q1 EBIT hints at some EUR 35m annual potential.
ESL’s peer multiples now undervalue the niche carrier
In our view Aspo’s SOTP valuation doesn’t fully reflect ESL’s FV as the dry bulk carrier has a special value chain position compared to a typical peer. In Telko’s case the situation is more nuanced as the peers are large global players. It’s nonetheless clear Telko’s FV has risen a lot in the past few years. Leipurin also has plenty of yet to be realized potential. We saw ESL’s EV at ca. EUR 300m before the pandemic and view that figure still relevant. Meanwhile Telko’s EV has increased from some EUR 150-175m to above EUR 200m. We see Aspo’s EV now at around EUR 500m. Our TP is now EUR 10.5 (9.5), our new rating is BUY (HOLD).
Etteplan reported better than expected Q1 figures and raised its sales and EBIT guidance. The market situation has continued to develop favourably and Etteplan is seen to move towards a new normal during the latter half of the year. We adjust our TP to EUR 16.0 (13.9) and upgrade our rating to HOLD (SELL).
Better than expected start to the year
Etteplan reported better than expected Q1 figures. Revenue grew slightly y/y to EUR 73.0m (EUR 71.1m/71.3m Evli/cons.) but decreased 4% organically. EBIT amounted to EUR 6.6m, above our and consensus estimates (EUR 5.4m/5.5m Evli/cons.), with the EBITA-% at 10.5% (co’s fin. target 10%). Demand across Etteplan’s markets continued to develop favourably, with China unaffected by the pandemic and hours sold up 121% y/y from the weak comparison period. With the strong start to the year and confidence in continued improvement in the market situation throughout the year Etteplan also raised its guidance for 2021, expecting revenue of EUR 285-305m (280m-300m) and EBIT of EUR 25-28m (23-26m).
Moving towards a new normal
We have slightly raised our 2021 sales estimate to EUR 292.6m and our EBIT estimate by approx. 7% to EUR 26.1m, mainly due to the stronger than expected Q1. Margins in the past two quarters have been exceptionally good due to the strict cost control and with operations shifting back towards a new normal cost will be on the rise and we as such expect weaker margins y/y in H2. Organic growth is still somewhat of a concern but with market conditions improving and the company actively recruiting as well as having increased usage of subcontracting, the already begun more positive trend should pick up.
HOLD (SELL) with a target price of EUR 16.0 (13.9)
Looking at the solid start of the year we have been too bearish on Etteplan and the development of the overall market situation. This being said, we still see limits in valuation upside with Etteplan already trading rather clearly above peers. We adjust our target price to EUR 16.0 (13.9) and upgrade to HOLD (SELL).
Etteplan's net sales in Q1 amounted to EUR 73.0m, in line with our estimates and consensus (EUR 71.1m/71.3m Evli/cons.). EBIT amounted to EUR 6.6m, above our estimates and above consensus estimates (EUR 5.4m/5.5m Evli/cons.). Guidance specified: Etteplan expects revenue to amount to EUR 285-305m (280-300m) and operating profit (EBIT) to amount to EUR 25-28m (23-26m).
Aspo’s Q1 profitability was a clear positive surprise relative to estimates. EBIT reached a record high and both ESL and Telko topped our expectations.
Enersense reported a better-than-expected Q1 result and 9% increase in the order backlog compared to the end of Q4/20. The company also announced that it has concluded negotiations on a new financing package. We have made upward revisions to our estimates and raise our TP to EUR 11 (9.7), BUY-rating intact.
Orders increased especially in Power and the Baltics
Enersense’s Q1 net sales and profitability beat our expectations. Net sales amounted to EUR 52.4m (Evli EUR 44.5m) and adj. EBITDA was EUR 1.7m (Evli EUR 0.5m). Order backlog increased by 9% from EUR 292m at the end of 2020 to EUR 319m at the end of Q1. Orders increased especially in the Power segment and the Baltics. Enersense also announced that it has concluded negotiations on a new financing package, which will be used to develop operations and manage working capital.
Our revised estimates are at the upper end of the guidance
Q1 is typically a challenging quarter for Enersense due to the weather conditions, and revenue and profitability are expected to increase towards the end of the year. The order backlog continued to grow rapidly in Q1 and according to the management, the market outlook is very positive as demand is expected to remain strong especially in Power and Smart Industry. Supported by increased orders and good outlook, we have raised our 2021E net sales estimate to EUR 242m (prev. EUR 230m). We have also made upward revisions to 2022-23E sales estimates, and forecast 4.6% and 3.9% growth, respectively. We expect adj. EBITDA to increase from EUR 8.9m to EUR 14.4m in 2021E. Both our net sales and adj. EBITDA estimates are at the upper end of guidance for 2021 (net sales: EUR 215-245m, adj. EBITDA: EUR 12-15m).
BUY with a target price of EUR 11 (9.7)
On our estimates for 2022E, Enersense is trading at EV/EBITDA of 5.6x and adj. P/E of 10.8x, which translate into discount of 23-30% to our peer group median. Better-than-expected results in Q1, renegotiated short-term financing and continued growth in the order backlog increase our confidence in the investment case, and we raise our TP to EUR 11 (9.7), BUY-rating intact. Our TP values Enersense at EV/EBITDA of 6.3x and adj. P/E of 12.3x for 2022E, which are still at 13-21% discount to peer group, reflecting Enersense’s currently lower profitability profile. If Enersense manages to increase net sales and improve margins in line with the midterm financial targets, we see further upside potential in valuation.
Enersense’s Q1 net sales and profitability beat our expectations. Net sales amounted to EUR 52.4m (Evli EUR 44.5m) and adj. EBITDA was EUR 1.7m (Evli EUR 0.5m). Enersense also announced that it has concluded negotiations on a new financing package.
Fellow Finance’s intermediated loan volumes have picked up nicely in past months, supported by improved availability of financing and less aggressive competition. We now expect growth of 18.1% in 2021. We raise our target price to EUR 3.8 (2.8) and upgrade to BUY (HOLD).
Favourable loan volume development
Fellow Finance has been seeing intermediated loan volumes developing favourably since the second half of 2020, with the growth pace having picked up clearly in recent months. The average monthly volumes in March-April were up close to 100% compared to the volume seen during the early stages of the pandemic. The increase in volumes has to our understanding been largely due to an increased availability of financing and an increase in institutional investor volumes. Within consumer loans the competition also appears to have eased and the competitiveness of Fellow Finance’s offering improved as the more aggressive competitors have taken less aggressive approaches.
Growth seen to pick up to double digits
We have raised our 2021 intermediated loan volume estimate to EUR 186m (prev. 160m), for a 40% y/y growth, and our sales growth estimate to 18.1% (prev. 7.5%). Our profitability estimates remain mostly intact, with the company having estimated for growth projects to keep net earnings slightly negative, which is looking to materialize for instance through the expansion to credit card solutions in cooperation with Enfuce.
BUY (HOLD) with a target price of EUR 3.8 (2.8)
Current valuation puts the intermediation business 2021e EV/Sales at ~1.3x (assuming Lainaamo at BV). Near-term earnings multiples are challenging but with growth picking up, shifting the 2023 targets (sales ~EUR 23m and 15% EBIT-margin) more within grasp, we still see a higher valuation being justified. We raise our target price to EUR 3.8 (prev. 2.8) and upgrade our rating to BUY (HOLD).
Exel’s record Q1 orders surprised. In our view the next quarters’ orders determine how much forward-look the multiples warrant. Our TP is EUR 11, now rate HOLD (BUY).
The EUR 42m order intake sets a new benchmark level
Exel’s Q1 revenue grew 11% y/y to EUR 31m and was a bit above our EUR 30m estimate. Customer industries performed close to our expectations while Asia-Pacific contributed most of the growth. Adj. EBIT was EUR 2.5m vs our EUR 2.4m estimate. Strong demand was to be expected, yet the EUR 42m order intake (up 22% y/y from a high comparison figure) is a record and can be compared to the EUR 30m level Exel has averaged in the recent past. The orders stemmed from many industries and no large orders drove the intake. Operations ran almost as usual despite the pandemic, raw materials, and logistics issues. Exel managed to balance its raw material pool across the eight plants.
Organic CAGR outlook now closer to 10% than 5%
Exel already saw some raw materials inflation affecting Q1 margins. We expect a more pronounced negative effect in Q2 (we now estimate 7.2% Q2 EBIT vs our prev. 10.4% estimate), but also see EBIT margins bounce back to ca. 9-10% levels in H2. Exel has been able to pass raw materials inflation forward before and this is to be expected again considering the value chain position. Profitability slope remains attractive especially if the Q1 order levels continue to persist over the summer. We don’t consider the EUR 42m figure just a fluke and even if Exel may not quite reach such high orders in the coming quarters we nevertheless see the company is now positioned for high single-digit organic CAGR for years to come. In our view Exel might well reach double-digit top line growth this year and we see such growth rates driving long-term EBIT margins meaningfully above 10%.
Earnings multiples have already rerated for a valid reason
Exel is valued ca. 9.5x EV/EBITDA and 15x EV/EBIT on our FY ’21 estimates. The multiples are a bit high compared to the historical respective averages of 8x and 13x but in our view warranted by the current growth prospects. Top line growth continues to drive profitability and the multiples are some 8.5x and 12x on our FY ’22 estimates. In our opinion the next few quarters’ orders will determine how much forward into the future the multiples may lean. We retain our EUR 11 TP, rating now HOLD (BUY).
Consti reported Q1 results slightly below our estimates, with EBIT below our estimates driven by legal costs relating to the St. George arbitration proceedings. We continue to expect minor growth and margin improvement in 2021. We retain our HOLD-rating and target price of EUR 13.0.
Legal costs clearly affected profitability
Consti reported Q1 results that were slightly below our estimates. Revenue grew slightly to EUR 59.3m (EUR 60.2m/60.2m Evli/cons.) while EBIT fell y/y to EUR 0.1m (EUR 0.5m/0.6m Evli/cons.). EBIT was affected by legal costs relating to the St. George arbitration proceedings of EUR 0.4m (0.1m), without which relative profitability would have been close to previous year levels. The coronavirus pandemic also had an impact, with more worksite interruptions despite a lower number of cases. Consti had a positive start to the year in terms of order intake, with new orders of EUR 69.8m in the quarter, although the order backlog was still down slightly y/y.
Expect minor growth and margin improvement
Apart from adjustments due to the lower than expected Q1 figures, we make no changes to our estimates. The demand situation in general does not appear to have shown clear improvements yet and was at a reasonable level in Q1. Consti still sees that a higher share of the order backlog will be recognized during the on-going financial year compared to the same time last year and as such we continue to expect minor growth of 1.9%. We expect slight improvement in relative profitability and a 2021 EBIT of EUR 8.7m.
HOLD with a target price of EUR 13.0
The Q1 report did not in any material way affect our view of Consti in the near-term. Valuation in our view continues to appear fair given current limited growth prospects and valuation upside drivers. With our estimates largely intact we retain our HOLD-rating and target price of EUR 13.0.
Pihlajalinna reports its Q1 report on next week’s Friday, 7th of May. Despite the worsened COVID-19 situation during Q1, we expect fairly good quarterly figures. We keep our rating “BUY” with TP of EUR 13.
We expect revenue to increase by 3%
We expect Pihlajalinna to report relatively good Q1 result, with sales growth of 3% y/y (EUR 137m). We expect the COVID-19 testing is once again boosting sales. However, as the virus situation worsened towards the end of Q1 and new restrictions came into force, we expect private demand is still in lower levels than normally. As we saw at the end of last year, the company’s efficiency improvement actions have paid off and we expect Q1’21E profitability to improve from Q1’20. We foresee Q1 adj. EBIT of EUR 5.6m, resulting in adj. EBIT margin of 4.1% (Q1’20: 3.2%).
Market drivers offer new opportunities
Pihlajalinna held its CMD in late March where it highlighted its strategic priorities for the upcoming years as the market is changing in many ways. The company aims to continue to strengthen its already strong partnership with the public side and to engage in close cooperation with the future wellbeing services counties. In addition, Pihlajalinna will make renewals to its private services with new service concepts and digital innovation. Further, the company will continue to strengthen digitalization. The market drivers have remained unchanged (aging population, digital solutions, individuals’ interest in their own health etc.) offering many new opportunities to Pihlajalinna.
“BUY” with TP of EUR 13
We have included the acquisition of Työterveys Virta to our estimates from Q2’21E onwards. We expect 21E sales growth of ~11% (EUR 564m) and adj. EBIT of 28.8m (5.1% margin). We expect Pihlajalinna’s profitability to improve further in 22E-23E and adj. EBIT margin of 5.6% in both years. With our estimates, the company trades with 21E-22E EV/EBIT multiple of 17.8x and 13.4x which is 8-20% discount compared to the peers. We keep our rating “BUY” with TP of EUR 13.
CapMan reported better than expected Q1 results. Q1 EBIT was clearly above our estimates driven by investment returns. We have raised our 2021 EBIT estimate to EUR 46.8m (prev. 38.2m). Improvement is being seen across the board but 2021 earnings look to be driven less by recurring profits and more by investment returns and carry. We raise our TP to EUR 3.1 (2.7) and upgrade to BUY (HOLD).
Estimates beat on profitability figures
CapMan posted better than expected Q1 results. Revenue was slightly below expectations at EUR 11.3m (EUR 12.5m/11.9m Evli/cons.) but the EBIT of EUR 10.1m clearly beat expectations (EUR 7.8m/7.6m Evli/cons.). The EBIT beat was driven by higher that expected fair value changes (EUR 8.2m/3.5m Act./Evli) while the Management Company business EBIT was lower than expected (EUR2.5m/3.9m Act./Evli). Capital under management stood at EUR 3.9bn, up 20% y/y. The Buyout XI fund held a final close at EUR 190m, with a new Real Estate product of for CapMan significant size in the pipeline.
Expect clear earnings improvement in 2021
CapMan’s development continues to look bright after the challenges faced in the previous year. In terms of absolute profits, the Investment business has in the near past been the clear driver, but good progress can be seen more or less across the board. The performance of the own funds has during the start of the year surpassed the collective return target. We have raised our 2021 operating profit estimate to EUR 46.8m (prev. 38.2m), noting that some two-thirds consists of the more unpredictable investment returns and carried interest.
BUY (HOLD) with a target price of EUR 3.1 (2.7)
Following adjustments to our estimates we raise our target price to EUR 3.1. Compared with the Finnish peers the 2021e P/E is certainly not challenging, but on our estimates a high share of the profit is from more uncertain sources and thus remain somewhat on the cautious side.
Exel’s Q1 report was close to our expectations in terms of top line and profitability. Order intake was very high. Exel also highlights the risk that global raw materials challenges may hurt short-term profitability.
Vaisala’s Q1 result beat our and consensus expectations thanks to a better than expected and solid performance in both BU’s. The improved market environment and strong order book attributed to net sales growth and profitability improved thanks to higher sales and lower OPEX level due to Covid-19. We have increased our estimates for 2021-23E to reflect the expected market improvement. Based on our renewed estimates and improved outlook, we raise our target price to €33 (prev. €32), our rating is now HOLD (prev. SELL).
Strong start to the year
Vaisala’s Q1 result beat our and consensus expectations thanks to solid performance in both BU’s. Q1 net sales increased by 5% to 92 MEUR (86.5 Evli / 85.7 cons). Q1 EBIT came in at 8.1 MEUR (5.9 Evli / 5.0 cons), resulting in 8,8% EBIT-margin (Q1’20: 5.2 MEUR, 6% EBIT-margin). Orders received grew by 18% to 106.1 MEUR (Q1’20: 88.7 MEUR). As a result of strong order intake, order book was record high at 155.4 MEUR (Q1’20: 141.6 MEUR). IM continued its strong performance; net sales grew 12% to 39.7 MEUR (39.5 MEUR Evli). IM EBIT was 9.4 MEUR (8.9 MEUR Evli), resulting in 23,8% EBIT-margin (Q1’20: 21,4%). IM net sales growth was strong in life science and power industry market segments and good in industrial instruments, but net sales declined in liquid measurements. IM’s order intake growth was 22% coming from all market segments and boosted by the economic recovery in China. W&E net sales increased by 1% to 52.2 MEUR (47 MEUR Evli). W&E EBIT was -0.9 MEUR (-2.6 MEUR Evli). W&E net sales grew in renewable energy, ground transportation, and meteorology market segments, but decreased in aviation, where market is still weak due to Covid-19. W&E’s orders received grew nicely by 15%. W&E orders received increased in renewable energy and ground transportation market segments, whereas meteorology market segment was flat, and aviation decreased compared to previous year.
Outlook updated, more positive outlook upgrades likely to follow
As a result of strong start to the year, Vaisala raised the lower limits of its business outlook for 2021; net sales are expected to be between 380–400 MEUR and EBIT between of 35–45 MEUR (earlier net sales 370-400 and EBIT 30-45). The outlook update did not come as a surprise given the strong orders received and order book end of last year. We see further positive guidance improvements likely given the strong order intake and order book, improving market environment, and deliveries proceeding well.
Target price €33 (prev. €32) with HOLD rating
We have increased our net sales and EBIT estimates for 2021-23E to reflect the expected market improvement. In 2021E, we expect +4,6 net sales growth driven by +7% growth in IM, while we expect W&E growth to be around 3%. We expect EBIT of 44.6 MEUR (11,2 % margin), driven by good performance in IM. Both our net sales and EBIT estimates are at guidance upper range. For 2022-23E we expect similar net sales growth and Vaisala to achieve above 12% EBIT margins as IM continues strong and W&E’s profitability improves. On our renewed estimates, Vaisala is still trading at clear premiums compared to our peer group and we continue to see valuation stretched given Vaisala’s weaker financial performance compared to peer group. Based on our renewed estimates and improved outlook, we raise our target price to €33 (prev. €32), our rating is now HOLD (prev. SELL). Our TP values Vaisala at 22-23E EV/EBIT multiples of 22x and 21x which is above the peer group, reflecting Vaisala’s technology leadership position, strong sustainability profile, healthy dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.
Raute’s environment is improving a bit faster than we expected, but FY ’21 profitability will still not be great. Valuation reflects earnings gains for many years to come. In our view further upside appears elusive for now.
New capacity projects are yet to materialize
Raute’s Q1 order intake was EUR 30m, a 20% y/y increase and way above our EUR 22m estimate. There were no big orders. Project deliveries’ EUR 11m figure was close to what we expected while the EUR 19m in services orders beat our EUR 12m estimate due to high North American modernization orders. Pent-up US demand drove the figure and thus we see cautious extrapolation is in order, but mills’ utilization rates are improving worldwide. Raute sees European demand to be at a normal level. Russian order intake was muted in Q1 while demand potential remains in place. Q1 revenue amounted to EUR 25m vs our EUR 34m estimate. Raute foresaw Q1’s relative slowness. Pandemic restrictions also remain a nuisance. The low top line also meant EBIT was EUR -2.5m, compared to our EUR 1.6m estimate.
Orders are picking up, albeit from low levels
Raute also highlighted potential component shortages, however the company is addressing the challenge and in our view the issue is not that meaningful given Raute’s long-term story and overall competitive positioning. We make some revisions to our estimates, however the overall valuation picture remains unaltered. It’s clear Raute’s business is now picking up from the recent lows and the favorable order intake development also begins to support FY ’22, for which we now expect ca. 5% growth. It nevertheless seems the approximately EUR 160m revenue figure (of which some EUR 100m projects and EUR 60m services) that helped Raute to achieve above EUR 10m EBIT in the past remains many years in the future.
In our view valuation still doesn’t leave meaningful upside
The pick-up in orders turns us more confident towards next year. We expect Raute to reach only some EUR 2m in EBIT this year, compared to the potential that is many times the number. We estimate the figure to rise close to EUR 8m next year, however Raute is already trading about 9x EV/EBITDA and 13x EV/EBIT on those estimates. Full long-term earnings potential in our view remains too many years away. Our TP is EUR 21, retain HOLD.
Consti's net sales in Q1 amounted to EUR 59.3m, in line with our and consensus estimates (EUR 60.2m/60.2m Evli/cons.). EBIT amounted to EUR 0.1m, below our and consensus estimates (EUR 0.5m/0.6m Evli/cons.). 2021 operating profit guidance of EUR 7-11m intact.
Solteq posted solid Q1 figures, clearly above our estimates. We have made clear upward revisions to our estimates with on better than expected growth and profitability. We adjust our target price to EUR 7.2 (4.5), BUY-rating intact.
Clear earnings beat across the board
Solteq reported solid Q1 figures, clearly beating our estimates. Net sales grew 10.9% to EUR 17.4m (Evli 16.5m) and EBIT improved to EUR 2.2m (Evli EUR 0.9m). A clear highlight for the first quarter was the mainly organic 43.1% growth of Solteq Software, aided by deliveries of the orders received within the Utilities business. The profitability figures of Solteq Digital were surprisingly good, with EBIT doubling compared to the comparison period, to our understanding mainly driven by high utilization rates and streamlining of operations. Solteq upgraded its profitability guidance ahead of Q1, now also expecting the operating profit to grow clearly (prev. grow). This was not too surprising, as we had already in conjunction with Q4 questioned the guidance softness.
Estimates raised quite a bit
We have clearly raised our estimates after the solid first quarter figures. We now expect revenue growth of 13.0% (prev. 8.9%), driven mainly by Solteq Software and customer deliveries in the Utilities business. We expect pick-up in growth of Solteq Digital in the latter half of the year, as easing of the pandemic should increase demand in some of the harder hit sectors. We have also raised our EBIT estimate to EUR 9.2m (prev. 6.7m). We see limited margin upside potential going forward in the less scalable Solteq Digital segment while Solteq Software still has a lot more potential once the recurring revenue from the deliveries now being made start ramping up.
BUY with a target price of EUR 7.2 (4.5)
Solteq has seen a rather hefty share price rally in the past year, being up over 400%. On our revised estimates valuation for the “new” Solteq still does not appear overly challenging. We raise our target price to EUR 7.2 (4.5), valuing Solteq at 24x 2021 P/E and retain our BUY-rating.
SRV’s Q1 revenue was slightly below expectations but profitability beat our estimates. The continued positive margin development is essential while we remain rather dubious about construction volumes during 2021. We raise our target price to EUR 0.80 (0.64), BUY-rating intact.
Revenue slightly below estimates but good profitability
SRV’s Q1 results were somewhat in line with expectations, as although revenue came in a bit short at EUR 187.1m (EUR 205.7m/196.0m Evli/Cons.), EBIT amounted to a rather solid EUR 5.2m (EUR 4.4m/3.2m Evli/cons.). The order backlog stood at EUR 1,061m (Q1/20: EUR 1,362m). Order intake was quite weak at EUR 85.4m but on a positive note these included new developer contracted housing units, with start-ups picking up again after the break during Q1-Q3/2020. The most positive news in our view was the continued improvement in the Construction segments EBIT-margins (Q1/21: 3.7%, Q1/20: 3.0%) and the already earlier announced approx. EUR 730m Laakso Joint Hospital alliance project, to which SRV was chosen to develop and build (not yet final).
Favourable margin development, volumes a slight concern
With the lower than expected revenue and rather meager order development we have lowered our 2021 sales estimates near the lower bound of the EUR 900-1,050m sales guidance. Although SRV anticipates improved order intake in Q2 along with the increase in completion of developer contracted housing units later on in 2021 a more conservative approach still appears warranted. On the current profitability track and even if revenue were to decline clearly the upper bound of the profitability guidance is well within reach assuming no major surprises in the Investments-segment.
BUY with a target price of EUR 0.80 (0.64)
Although construction volumes are a slight concern going forward, the main thing for SRV is that margins have continued to develop positively and even better than we had expected. We raise our target price to EUR 0.80 (0.64), BUY-rating intact.
Raute’s Q1 remained low in terms of revenue and profitability but order intake grew by some 20% y/y due to mid-size production line and modernization orders.
Vaisala’s Q1 result beat our and consensus expectations. Both Bu’s performed better than expected thanks to good market environment. As a result of strong start to the year, Vaisala raises lower limit of its business outlook for 2021: net sales will be in the range of 380–400 MEUR and EBIT in the range of 35–45 MEUR (earlier was net sales 370-400 and EBIT 30-45). Outlook update did not come as a surprise and our 2021e estimates were already within new guidance.
Eltel’s Q1 results fell short of our expectations. Q1 is typically a weaker quarter due to seasonality and we expect net sales and profitability to increase towards the end of the year. We retain our BUY-rating but adjust TP to SEK 29.5 (30).
Profitability improved y/y despite the decline in net sales
Eltel reported a Q1 result that was below our expectations. Net sales decreased by 23.1% to EUR 182m (Evli EUR 209.9m), while operative EBITA improved y/y from EUR -2.1m to EUR -0.7m (Evli EUR 1.0m). Net sales continued to decline due to the divestments made last year (EUR -15m), lower activity and postponements among customers as a result of COVID-19 and harsh winter conditions. Q1 was good in Finland (+3.2%), while last year’s loss of a major agreement affected the volumes in Sweden and the ramp-up phase of the Telenor frame agreement was reflected in lower sales in Norway. Good resource and production planning, increased efficiency and better project management supported profitability, while the effect of divestments was EUR -0.9m.
Sales and EBITA are expected to grow towards the end of the year
Eltel’s business is subject to seasonality and Q1 is typically a weaker quarter. Net sales and profitability are expected to increase towards the end of the year and according to management, the order backlog looks good, especially in Finland and Norway. Based on the report, we have cut our net sales estimate for 2021E from EUR 916.8m to EUR 890.6m. We see the targeted growth rate of 2-4% in the Nordics achievable from 2022 onwards. In 2022-23E, we forecast net sales to grow by 1.7% and 2.0%. Currently, the focus is on profitability and Eltel has managed to increase its operative EBITA (y/y) for five consecutive quarters. We expect Eltel to continue its efforts to improve operational efficiency and in line with the guidance, we forecast operative EBITA margin to grow from 1.2% in 2020 to 2.4% (prev. 2.6%) in 2021E.
BUY with a target price of SEK 29.5 (30)
Despite lower-than-expected Q1 results, there have been no changes in the big picture. Eltel has continued its transformation journey with a focus on improving operational efficiency, profitability, financial position, and restructuring of non-performing businesses, which will be negatively reflected in this year’s sales. On our updated estimates for 2022-23E, Eltel is trading at EV/EBITDA of 7.9x and 7.0x, which translate into discount of 4-10% to our peer group median. On our revised estimates, we adjust our target price to SEK 29.5 (30) and retain our BUY-rating, which still values Eltel slightly below peers, reflecting Eltel’s lower profitability profile and as we look for more signs of further transformation progress.
SRV's net sales in Q1 amounted to EUR 187.1m, below our estimates and slightly below consensus (EUR 205.7m/196.0m Evli/cons.). EBIT amounted to EUR 5.2m, above our and consensus estimates (EUR 4.4m/3.2m Evli/cons.).
Suominen reached very high margins once again. We expect margins to settle in H2’21 and continue to view earnings multiples attractive on such stabilized levels.
Suominen once again topped previous profitability records
Suominen’s EUR 115.3m Q1 revenue was close to expectations while the EUR 18.5m EBITDA topped the EUR 15.3m/15.2m Evli/cons. estimates. Gross margin hit a record due to high volumes and improved production as well as raw materials efficiency. Favorable sales mix helped pricing levels to improve a bit y/y. There were some raw materials and logistics challenges, especially in the US, which had a negative impact on production. The Texan winter disrupted oil-based raw materials’ supply, but in our view the effect on overall results wasn’t that big. Suominen carries some raw materials inventories, which in part explains why the raw materials price spike didn’t yet have any notable negative effect on profitability.
Suominen has increased its mechanism pricing exposure
The pandemic led to a wipes demand bump on both sides of the Atlantic; although the US is ahead of Europe in vaccination rates the higher demand shows very little signs of abatement. The raw materials inflation picture also looks similar on both continents. Suominen increased its share of mechanism pricing clauses already last year to protect itself against raw materials price inflation. These measures, coupled with strong wiping demand and improved sales mix, enhance our confidence regarding H2’21 gross margin, which we now expect to settle around 13-14%. Suominen expects to complete the three announced investments in H2’21. Two of these will add capabilities to existing lines while one restarts and modernizes an idle line and so adds capacity.
We expect gross margin to settle around 13-14% in H2’21
Suominen is set to reach EUR 60m EBITDA this year even when raw materials inflation begins to erode margins. This year is also proving extraordinary in its own way as the raw material and logistics markets have been outright chaotic. In our view H2’21 results should show stable gross margin levels. We estimate ca. 14% GM for H2’21 that translates to some 12% EBITDA and 7.5% EBIT margins. We expect Suominen to reach such figures in FY ’22. Suominen is valued below 6x EV/EBITDA on our FY ’21-22 estimates. We retain our EUR 6.5 TP as well as our BUY rating.
CapMan's net sales in Q1 amounted to EUR 11.3m, below our and consensus estimates (EUR 12.5m/11.9m Evli/cons.). EBIT amounted to EUR 10.1m, clearly above our estimates and above consensus estimates (EUR 7.8m/7.6m Evli/cons.).
Solteq’s Q1 was clearly above expectations, with revenue at EUR 17.4m (Evli EUR 16.5m) and comp. EBIT at EUR 2.2m (Evli EUR 0.9m). Solteq raised its guidance ahead of Q1, expecting that Group revenue in 2021 will grow clearly and that the operating profit will improve clearly.
Etteplan reports Q1 results on May 5th. We expect a relatively decent start to the year and our focus will be less on current figures and more on demand development and future growth drivers. We retain our target price of EUR 13.6 and SELL-rating.
Expect a decent start to the year
Etteplan reports Q1 results on May 5th. 2020 was a challenging year for Etteplan due to the Coronavirus pandemic, with the organic decrease in revenue at 8.3%. Due to rapid and efficient cost savings measures Etteplan was still able to maintain solid profitability, with the EBITA-margin at 10.1% (2019: 9.9%). To our understanding the customer demand during the beginning of the year has continued to move in the right direction, with customer companies having adapted to operating under the current environment. We have made no changes to our estimates ahead of the Q1 results, expecting revenue of EUR 71.1m and EBITA of EUR 6.4m.
Demand situation and growth drivers’ key themes
Going into 2021 key themes will be the development of customer demand and pick up in Etteplan’s internal growth initiatives, with quite some work left to reach the target of EUR over 500m in revenue in 2024. As earlier mentioned, customer demand has been developing positively and has for instance been at a good level in China, while demand in other countries could still see notable improvement. We expect growth of 11.2% in 2021, aided largely by the Tegema and TekPartner acquisitions. Our organic growth assumptions remain rather modest and an improvement in the demand situation could warrant higher estimates. We expect the EBITA-margin to remain near previous year levels at 9.9% (2020: 10.1%).
SELL with a target price of EUR 13.6
We have made no changes to our estimates and retain our target price of EUR 13.6 and SELL-rating. Etteplan currently trades above peers and with the prevailing uncertainty due to the pandemic and growth pick-up we find the >21x 2021 P/E multiples hard to justify.
Suominen’s Q1 profitability remained very strong and the quarter was actually better, in terms of EBITDA and EBIT, than the previous record seen in Q3’20. Suominen retains its full-year outlook.
Innofactor reported Q1 results well in line with our estimates. We expect sales growth to pick up during the year in comparable terms supported by the healthy order backlog and expect to see continued margin improvement. We retain our BUY-rating and TP of EUR 2.2.
Q1 well in line with our estimates
Innofactor reported Q1 results that were well in line with our expectations. Revenue grew 3.8% to EUR 17.8m (Evli EUR 17.9m) while EBITDA amounted to EUR 4.7m (Evli EUR 4.8m). EBITDA included the EUR 2.6m one-off relating to the Prime business divestment and the adj. EBITDA of EUR 2.1m showed growth of 7.3% y/y. The order backlog in Q1 was at a record level of EUR 68.9m (+27.4% y/y), aided by the biggest individual deal in Innofactor’s history signed with the Finnish Tax Administration. The report overall did not hold any material negative news in our view. Management comments on the impacts of the COVID-19 pandemic and sales development outside Finland, were sales have been more challenging, were modestly upbeat.
No notable changes to our estimates
Our estimates remain essentially intact apart from minor adjustments due to lower than estimated acquisition amortizations in Q1. We expect sales in 2021 to grow 3.4% y/y (comparable growth 6.3%) to EUR 68.4m and EBITDA (excl. Prime div.) to amount to EUR 8.7m. In relation to the past years performance our growth assumptions appear unmerited and the company still has quite a lot to prove in terms of growth. With the record-high order backlog and management comments on the impacts of the pandemic and sales development outside Finland, pick-up in sales growth should certainly be within grasp.
BUY with a target price of EUR 2.2
With no major changes to our estimates or the investment case we retain our target price of EUR 2.2 and BUY-rating. Our TP values Innofactor slightly below peers, which we see justified given its track-record in previous years.
There were no surprises with Finnair’s Q1 result. The company expects Q2 comparable operating loss to be similar compared to the previous quarters and gradual recovery to start from late summer. Finnair also increased its cost savings target to EUR 170m. We keep “HOLD” with TP of EUR 0.75.
Restrictions continued to hamper Q1 figures
Finnair’s Q1 result was relatively similar compared to the previous quarters. Tight travel restrictions remained, and Finnair operated with limited network and frequencies in January-March (approx. 75 daily passenger flights). Revenue decreased by ~80% y/y to EUR 114m vs. EUR 96m/103m Evli/consensus. Once again, revenue was supported by strong cargo demand (cargo revenue represented ~54% of total revenue). ASK was down by ~88% y/y and PLF was 25.5% (-47.1pp). Adj. EBIT amounted EUR -143m and was slightly better than expectations (EUR -155m/-159m Evli/cons.).
Increased cost savings target
Previously, Finnair was targeting permanent costs savings of EUR 140m by 2022 (compared to 2019 levels) but as the savings program is proceeding well the company increased the target to approx. EUR 170m. This is good news as it is extremely important to be well positioned in the post COVID-19 world. Despite the blurry outlook regarding the recovery of air travel, there are positive signs in the market as the vaccination coverage is gradually increasing. Finnair starts to accept vaccination certificates from mid-May onwards and will be adding destinations and frequencies towards the summer. In summer, the company’s plan is to operate over 60 destinations. However, we note that it is important that European countries lift travel restrictions at a same pace but also that traveling from non-EU countries becomes easier.
“HOLD” with TP of EUR 0.75
Due to the week visibility, Finnair did not provide a full year guidance but expects Q2’21E comparable operating loss to be similar compared to the previous four quarters. The company expects gradual recovery to start in late summer. As the company has additional funding available if needed (e.g. hybrid loan from the State of Finland) we expect the company is rather well positioned once the market reopens. We expect 21E revenue of EUR ~1287m and adj. EBIT of EUR -372m. Profitability should quickly improve once the recovery starts due to the cost savings. We keep our rating “HOLD” with TP of EUR 0.75.
Eltel’s Q1 results were below our expectations. Net sales amounted to EUR 182m (Evli 209.9m). Operative EBITA improved y/y to EUR -0.7m (EUR -2.1m in Q1/20) but was also below our expectations. (Evli EUR 1.0m)
DT believes that worst challenges in SBU are behind and security will head toward growth starting in Q2. As the security market is slowly starting to recover and demand in medical market remains strong, we remain positive towards the investment case given both the market drivers as well as DT’s strategy and execution capabilities. Based on increased confidence in security market recovery and strong outlook in medical, we raise our target price to €30 (prev. €28.5) but maintain HOLD recommendation.
A slow start to the year
DT’s Q1 result was broadly in line regarding net sales, but EBIT clearly missed ours and consensus expectations, although EBIT improved somewhat y/y. Q1 net sales amounted to EUR 18.3m (-8% y/y) vs. EUR 19.2m/19.2m Evli/consensus estimates. Q1 EBIT was EUR 1.4m (7,5% margin) vs. EUR 2.2m/1.94m Evli/cons. R&D costs amounted to EUR 2.4m or 13% of net sales (Q1’20: 2,6m, 13%). SBU net sales decreased -37,7% to EUR 5.8m vs. EUR 6.0m Evli estimate. Decrease was mainly due to COVID-19 situation continuing to affect the security market. IBU net sales increased +11% to EUR 2.4m vs. EUR 2.7m Evli estimate. MBU net sales increased +20% to EUR 10.1m which was broadly in line with our estimate of EUR 10.5m. Growth was driven by continued good demand for medical CT applications, especially in China.
Strong medical to continue, security also starting to recover
The increased investments in healthcare infrastructure and demand for CT applications have kept momentum for MBU strong. As a result, DT expects MBU sales to grow over 20% in Q2 and H2. DT is also seeing early positive signals in the security market after a difficult year. DT believes that worst challenges in SBU are behind and security will head toward growth starting in Q2 and continue to grow in H2. IBU sales is expected to be at the same level as in the comparison period in Q2 but to grow in H2. In total, DT expects total net sales to grow double-digit in Q2 and in H2 of 2021 driven mainly by the strong medical demand.
Target price of €30 (prev. €28.5), HOLD rating
Our estimates are broadly unchanged after the report. As the security market is slowly starting to recover and demand in medical market remains strong, we remain positive towards the investment case given both the market drivers as well as DT’s strategy and execution capabilities. We expect both net sales and EBIT growth to recover in 2021E, but accurately predicting the slope of the recovery is challenging. We expect 2021E to be a year of recovery, and DT to resume above 15% margins from 2022E onwards. Based on increased confidence in security market recovery and strong outlook in medical, we raise our target price to €30 (prev. €28.5) but maintain HOLD recommendation.
Consti will report Q1 results on April 30th. Our attention is drawn towards any comments on demand development. Following share price increase we downgrade to HOLD (BUY), target price of EUR 13.0 intact.
Looking for signs of growth
Consti will report Q1 results on April 30th. Consti posted stable profitability figures throughout 2020 after challenges in previous years and with the pandemic focus has shifted towards order intake and growth. The order backlog development has been on a slightly declining throughout 2020, while order intake development was essentially flat. With the housing company General Meeting season kicking off any comments thereto could give some indication of demand development within housing companies. In terms of top and bottom line figures Q1 is typically the seasonally slowest quarter and we expect sales of EUR 60.2m and EBIT of EUR 0.5m.
Expect slight growth and profitability improvement in 2021
Consti has not given a sales guidance for 2021 while the guidance for EBIT is at EUR 7-11, a wider range due to still present COVID-19 uncertainties. Consti indicated in conjunction with Q4 that the activity level going forward is expected to be higher compared with the same period a year ago despite no clear growth in the order backlog. Our estimates assume only a rather minor growth of 2.3%, quite in line with historic pre-COVID market growth. Focus has in the past been on organizational improvements and profitability, but we expect Consti to increasingly adding attention towards sales growth. In terms of profitability we expect a slight improvement in EBIT-margins, 20bps y/y, to 3.2%.
HOLD (BUY) with a target price of EUR 13.0
Consti’s valuation is currently rather in line with peers although still lower compared to building installations and services peers. Consti is a solid case in terms of cash conversion but on current growth outlook valuation appears quite fair. We have not made changes to our estimates and retain our target price of EUR 13.0. With Consti’s share price up slightly over 10% since our previous update we downgrade to HOLD (BUY).
Finnair’s Q1 result was similar compared to the previous quarters. Q1’21 adj. EBIT was EUR -143m vs. our expectation of EUR -155m and consensus of EUR -159m. Revenue decreased by ~80% y/y and was EUR 114m vs. our expectation of EUR 96m and consensus of EUR 103m.
DT’s Q1 result was broadly in line regarding net sales, but EBIT clearly missed ours and consensus expectations, although EBIT improved somewhat y/y. Most importantly, DT is seeing early positive signals in the security market. DT believes that worst challenges in SBU are behind and company will head toward growth starting in Q2 of 2021. DT expects total net sales to grow double-digit in Q2 and in H2 of 2021 driven mainly by the strong medical demand.
Innofactor’s Q1 results were in line with our expectations. Net sales amounted to EUR 17.8m (Evli EUR 17.9m), while EBITDA amounted to EUR 4.7m (Evli EUR 4.8m). EBITDA included a one-off of approx. EUR 2.6m related to the Prime business divestment.
Talenom is more strongly seeking to supplement its organic growth strategy with inorganic growth, supported by the favourable market conditions. Near-term margin upside appears limited due to the increased M&A activity, but margins are set to remain healthy. We retain our HOLD-rating and adjust our target price to EUR 13.3 (12.0).
Organic growth supplemented by acquisitions
Talenom has in the past years focused clearly on organic growth and achieved double-digit growth figures in doing so. With favourable conditions for acquisitions Talenom is now clearly seeking to supplement the organic growth, which has slowed down slightly due to the pandemic, with inorganic growth. With the acquisitions made so far during 2021 we expect growth of 25.2% y/y and a sales CAGR of 16% during 2020-2023E, not including any likely new acquisitions.
Healthy margins but M&A limits near-term upside
Talenom has invested heavily in improving the efficiency of its bookkeeping production line. Through digitalization and automation of bookkeeping tasks and processes the company has been able to better allocate personnel resources, resulting in sizeable improvements in margins. We expect further development to be limited in the near-term due to the increased M&A activity, with the typically lower margins of acquirees and integration costs burdening profitability. Likely future efficiency improvements and thus profitability should also be of smaller magnitude, with a larger share of actions already taken.
HOLD with a target price of EUR 13.3 (12.0)
We retain our HOLD-rating and adjust our target price to EUR 13.3 (12.0). Our target price values Talenom at 50x 2021E P/E. Valuation is certainly not on the cheaper side but the multi-year track of rapid growth and profitability improvement along with the very defensive nature of the business and pick-up in M&A activity in our view justify the high valuation.
Talenom's net sales in Q1 grew 17.0% to EUR 20.3m, in line with our and consensus estimates (EUR 19.9m/20.3m Evli/cons.). EBIT amounted to EUR 4.4m, in line with our and consensus estimates (EUR 4.4m/4.3m Evli/cons.).
Verkkokauppa.com’s Q1 result was as expected. Strategy implementation has started well, and the outlook remains bright. We have made only small adjustments to our estimates and keep our rating “BUY” with TP of EUR 10.80 (10.5).
Q1 result in line with expectations
Verkkokauppa.com delivered a solid Q1 result which was in line with expectations. Q1 revenue increased by 7% y/y to EUR 134m (vs. EUR 135m/134m Evli/cons.). Growth was good especially in major domestic appliances, small domestic appliances, office & supplies, gaming & entertainment and sports. Online sales (excl. export) increased by 33%, representing 64% of total sales. Further, sales to B2B customers increased by 12%. Export continued to be in a lower level due to the travel restrictions (6% of sales). Gross profit totaled EUR 21.7m (16.2% margin) vs. our EUR 21.4m (15.9% margin). Gross margin was driven by increased share of higher margin categories in total sales. Adj. EBIT amounted EUR 5.2m (3.9% margin) vs. our EUR 5.0m (3.7% margin) and consensus of EUR 4.8m (3.6% margin).
Everything is right on track
The market has continued to be favorable for Verkkokauppa.com as the COVID-19 situation has prolonged and consumer behavior is changing (shift to online). In early 2021, the company published its refined, rather ambitious strategy for 2021-2025. The company targets a giant leap in revenue while improving profitability. As a part of the strategy, the company will invest in the logistics automation of the warehouse located in Jätkäsaari. The first stage of the investment is to build a fully automated small item warehouse and the building process will start this summer and is expected to be completed in early 2022. The total investment is expected to be completed by the end of 2022 and the estimated capex is approx. EUR 4m.
“BUY” with TP of EUR 10.80 (10.5)
Verkkokauppa.com reiterated its guidance and expects revenue of EUR 570m-620m and adj. EBIT of EUR 20m-26m in 2021. We have made only minor adjustments to our estimates after the result and expect 21E revenue of EUR 594m and adj. EBIT of EUR 24.0m (4% margin). Implementation of the strategy has started well, and the outlook remains positive. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.8x and 15.8x which is 15% discount compared to the Nordic & European online peers in 21E and 16% premium in 22E. We keep “BUY” with TP of EUR 10.80 (10.5).
Scanfil’s Q1 featured very few surprises. The company remains well-positioned and many customer megatrends continue to drive demand in the short as well as long term perspective. Our TP is now EUR 8.5 (8), rating HOLD (BUY).
All five segments have developed positive since Q3’20
Scanfil’s EUR 163m Q1 revenue was above the EUR 152m/151m Evli/cons. estimates even when excluding the discontinued trade in Hangzhou. Organic growth was 7% y/y when excluding the discontinued business. Scanfil renewed its segment structure as the previous Industrial segment had become too diverse. Advanced Consumer Applications and Energy & Cleantech, the two largest segments, both grew rapid. The former’s demand stemmed e.g. from elevators (as well as new customers) while the latter was driven by e.g. reverse vending machines. The other three segments have also continued to develop well since Q3’20, demand overall improved throughout Q1 and March was especially strong and profitable. Scanfil posted EUR 10.0m in Q1 EBIT, in line with the EUR 10.5m/10.0m Evli/cons. estimates.
Strategy and day-to-day execution continue to work
In our view Scanfil is headed for the upper end of its FY ’21 revenue guidance range. Demand outlook supports Scanfil’s long-term organic growth target and implies 5-6% CAGR in the years ahead. The accounts are unlikely to build up inventories, rather there seems to be solid demand that stems from many megatrends. Component bottlenecks are possible but so far these haven’t had a negative impact on Scanfil. The company takes proactive measures to better anticipate demand and so secure relevant components early on. Scanfil also reports no gross margin pressure and remains able to pass price inflation forward to customers. M&A options remain relevant in the long-term.
In our view further upside is not found in the short-term
Scanfil is valued ca. 9x EV/EBITDA and 12x EV/EBIT on our FY ‘21 estimates. In terms of EBITDA the share trades at a peer premium while the EBIT multiples are in line. Scanfil is thus valued at a small premium and we see this well justified. Scanfil’s and peers’ multiples have alike rerated recently. EMS companies used to be valued very low, and in our view the current higher multiples are warranted at least in Scanfil’s case. We view Scanfil’s valuation now neutral. Our new TP is EUR 8.5 (8) and rating HOLD (BUY).
Innofactor is set to post solid Q1/21 figures with the one-off from the Prime business divestment. With a solid cash position and ambitious long-term growth targets we expect to start seeing measures to boost growth. We retain our BUY-rating with a target price of EUR 2.2 (1.75).
Q1 boosted by divestment one-off
Innofactor will publish its Q1 results on April 27th. Innofactor earlier announced that it had agreed to sell its resource management software solution business, Innofactor Prime, to Total Specific Solutions. The transaction is to have a positive impact of approx. EUR 2.6m on Q1/21 EBITDA and a negative impact of approx. EUR 2.0m on 2021 sales. As such, Innofactor should report exceptionally strong EBITDA in Q1/21, with our estimate at EUR 4.8m. We expect sales to continue on the modest growth trend seen in late 2020 and expect sales to grow 4.4% to EUR 17.9m. Growth is supported by the positive development of the order backlog, which at the end of 2020 was up some 21% y/y.
Expecting to see measures to boost growth
With the divestment of Innofactor Prime we have lowered our 2021 sales estimates and slightly lowered our profitability figures (excl. Prime div.). We now expect sales of EUR 68.4m (2020: 66.2m) and EBITDA (excl. Prime div.) of EUR 8.9m (2020: EUR 7.2m). Innofactor expects net sales and EBITDA in 2021 to grow compared with 2020. Innofactor’s cash position was at a healthy level already at the end of 2020, now further strengthened by the proceeds from the Prime divestment, and it is likely only a matter of time until acquisitions start picking up again to speed up growth.
BUY with a target price of EUR 2.2 (1.75)
Innofactor’s share price has now recovered from the dip in previous years and valuation is no longer quite as cheap. Compared to peers, valuation is still not too stretched. We expect to start seeing measures to boost growth further, which would further warrant higher multiples. We adjust our TP to EUR 2.2 (1.75) and retain our BUY-rating.
Scanfil’s Q1 was a clear positive surprise in terms of revenue. Profitability was more in line with expectations. Scanfil did not revise its guidance but updated the segment structure.
Verkkokauppa.com’s Q1 result was in line with expectations. Q1’21 revenue grew by 7% y/y and was EUR 134m vs. Evli EUR 135m and consensus of EUR 134m. Adj. EBIT was EUR 5.2m vs. EUR 5.0m/4.8m Evli/consensus. EPS was EUR 0.09 vs. EUR 0.08 Evli and consensus. Verkkokauppa.com reiterated its guidance.
Finnair reports its Q1 result on next week’s Tuesday, 27th of April. We expect Q1’21E to be relatively similar compared to the previous quarters. We keep our rating “HOLD” with TP of EUR 0.75 (0.60).
Quiet quarter, as expected
In Q1, Finnair carried 259k passengers which is 90% decline compared to Q1’20. Average Seat Kilometers (ASK) decreased by 87.6% y/y and Revenue Passenger Kilometers (RPK) decreased by 95.6% y/y. Passenger Load Factor (PLF) declined by 47.1%-points y/y and was 25.5%. The pandemic situation worsened during the first quarter of the year and strict travel restrictions remained. We expect Q1E revenue of EUR 96m (-83% y/y) and adj. EBIT of EUR -155m.
Towards better times
Even though the coronavirus situation has continued severe in the beginning of the year, there is light at the end of the tunnel as the vaccination pace has slowly improved. However, it is still unclear when traveling can start to normalize and how to make it safe. Possible vaccination certificates could be a crucial solution to this as it is important that European countries, including Finland lift travel restrictions at the same pace. Currently, it is estimated that majority of Finnish people have been received the first vaccine dose by the late summer thus air travel is expected to remain in a low level also during April-June. Therefore, we have cut our Q2’21E estimates. Our H2’21E and 22E-23E estimates are largely unchanged at this point.
“HOLD” with TP of EUR 0.75 (0.60)
The hybrid loan by the State of Finland to Finnair (max. of EUR 400m) was approved by the EU Commission in March. Approx. EUR 350m of the loan can be used by Finnair if its cash or equity position drop below specific limits. The remaining approx. EUR 50m share needs the Commission’s approval at a later stage. The interest rate of the hybrid loan has not been specified. We expect the recovery of air travel to begin in H2’21 but highlight that there are still significant uncertainties due to the changing pandemic situation. We expect 21E revenue to increase by 72% y/y and adj. EBIT of EUR -336m. We keep our rating “HOLD” with TP of EUR 0.75 (0.60) ahead the Q1 result.
Raute reports Q1 results on Thu, Apr 29. We haven’t made changes to our estimates. We continue to expect gradual improvement in Raute’s operating environment. We retain our EUR 21 TP. Our rating is now HOLD (SELL).
The improvement gradient remains unclear
Recent news flow has been very encouraging across many sectors, and we believe the improving conditions also apply to Raute at least to some extent. This assumption is by no means a stretch given how meagre levels project deliveries’ small order intake reached in H2’20. Raute’s business environment is bound to improve this year. There is even a relevant chance for an order boom in the coming years, given the fact that Raute’s customers’ (plywood and LVL mills) demand is mostly driven by the construction industry. We however continue to estimate Q1’21 to have been relatively muted, albeit with some definite improvement in small project orders relative to the few previous quiet quarters.
Pickup may prove fast, but we see this year as another gap
We leave our previous estimates unchanged. We estimate smaller equipment orders to have been EUR 10m in Q1’21. The figure implies improvement on the EUR 3m Q4’20 number that excludes the EUR 55m Russian mill order but remains below the EUR 14m seen in Q1’20. We expect order book to have remained at a decent EUR 82m level and revenue to have amounted to a likewise good EUR 34m. These relatively strong figures reflect reliance on big Russian projects in an otherwise still weak demand environment. We also expect Raute to climb back to black this year in terms of EBIT and see the Q1 figure at EUR 1.6m. Raute’s global competitive position means plenty more potential in the long-term perspective, but we believe FY ’21 results will still be somewhat modest in the historical context.
In our view valuation now lands within a neutral range
The current context might warrant some stretch in valuation multiples considering the potential for a rapid improvement in orders, not to mention Raute’s strong competitive positioning. We nevertheless do not see upside on the current ca. 8-10x EV/EBITDA and 12-16x EV/EBIT multiples on our estimates for FY ’21-22. We retain our EUR 21 TP. Our rating is now HOLD (SELL).
Suominen reports Q1 results on Wed, Apr 28. We leave our operative estimates unchanged ahead of the report and retain our EUR 6.5 TP and BUY rating.
Demand remains strong but costs are also rising
Suominen’s FY ’21 outlook, issued in February, guides flat comparable EBITDA development y/y. We didn’t find this guidance surprising and revised our FY ’21 EBITDA estimate up only a tad from EUR 55.3m to EUR 56.5m (Suominen posted EUR 60.9m in FY ’20 EBITDA). The guidance however contained a disclaimer with respect to the present uncertainty in the raw materials and cargo markets. Suominen had assumed pricier raw materials going forward, but the recent ca. 20% quarterly level gains seen in inputs such as pulp, polyester and polypropylene may have been larger than the company expected. It’s also unclear how e.g. the Suez Canal blockage might have disrupted the relevant supply chains.
We expect gross margin declines over the year
The recent raw materials price gains exert clear negative pressure on Suominen’s gross margin for their part, but on the other hand the company should still be able to defend its own nonwovens pricing to some extent. The pricing dynamics will also register with a certain lag. We leave our operative estimates unchanged ahead of the Q1 report. We continue to expect gradual decrease in gross margin throughout the year. We estimate Q1’21 gross margin at 14.5% and arrive at EUR 15.3m EBITDA with our revenue and operative cost assumptions. Suominen recently announced the sale of its minority stake in Amerplast, a plastic packaging business, and the transaction will have a positive EUR 3.7m impact on financial items. The sale is not all that meaningful in the big picture given the fact that Suominen divested the majority share already in 2014 to focus on nonwovens. It will however further strengthen the already strong balance sheet.
Cautious earnings multiples following the record year
Suominen remains valued at modest multiples of around 6x EV/EBITDA and 10x EV/EBIT on our estimates for this year. We continue to see upside on these levels as Suominen’s earnings are stabilizing and cash flow generation is strong. We retain our EUR 6.5 TP and BUY rating.
Detection Technology will report its Q1 result next Tuesday, April 27th, at 9:00 EET. As usual, we look forward to hearing the latest developments and outlook regarding the security, industrial and medical imaging markets. We expect DT to return to net sales and EBIT growth path this year, with the help of continued good performance in MBU and a recovery in SBU. We maintain our previous target price of €28.5 ahead of the earnings report, our recommendation is now HOLD (prev. BUY).
Light in the end of the SBU tunnel
In its Q4 report, DT was cautiously optimistic that SBU growth is turning a corner. SBU sales will still decrease in Q1 y/y, but start growing in Q2, although demand is still uncertain, as for example China’s critical infrastructure and rail transport recovery projects have progressed slowly. MBU sales are expected to grow double digit in H1/2021. DT’s total net sales are expected to decrease in Q1 and grow in H1 of 2021. We expect Q1 net sales to decline 4% to 19.2 MEUR (19.1 MEUR cons) and Q1 EBIT of 2.2 MEUR (1.9 MEUR cons).
SBU split into two separate segments: SBU and IBU (Industrial Solutions Business Unit)
DT announced in conjunction with its Q4 result that it is splitting SBU into two separate business units to better boost both BU’s development. The new SBU focuses solely on security application sales, while the newly launched Industrial Solutions Business Unit (IBU) focuses on the industrial segment. In 2020, IBU accounted for EUR 11.6m (27%) of SBU sales and 14% of total sales. As a result of the new segment, MBU currently represents the biggest segment with approximately 50% of sales thanks to strong momentum in MBU and pandemic headwinds in SBU. Industrial market is categorized as higher margin, but smaller volumes, a more fragmented customer base, and a variety of end applications. DT has said it aims to complement its industrial portfolio with software and algorithms. DT expects IBU sales to grow in H1. We have incorporated the new segment data with 2020 comparison figures into our models.
We maintain our previous target price of €28.5
Based on the new segment data, we have slightly calibrated our estimates upwards, but overall picture looks the same. We expect both net sales and EBIT growth to recover in 2021e with the help of continued good performance in MBU and a recovery in SBU. We maintain our previous target price of €28.5 ahead of the earnings report, our recommendation is now HOLD (prev. BUY).
Gofore’s Q1 showed slight weakness y/y due to working day differences and lower billing rates due to changes in a customer’s deliveries, but overall progress remains good. With the recent share price rally, we lower our rating to HOLD (BUY), with a TP of EUR 21.0.
Slight weakness in relative profitability
Gofore reported Q1/21 net sales of EUR 25.2m (Evli EUR 23.5m), for a growth rate of 34.1% y/y, and adj. EBITA of EUR 3.5m (Evli 3.7m). The relative profitability was slightly lower than expected and lower than in the comparison period, with an adj. EBITA-% of 13.9% (Q1/20: 16.8%). This was due to the lower number of working days and changes in project deliveries relating to Gofore’s largest customer, which led to a lower than expected billing rate. On a general level, apart from the slightly weaker relative profitability, the Q1 report did not contain any noteworthy negatives, and customer demand appears to have continued to be at a healthy level.
Growth pace still set to continue strong
We expect net sales of EUR 103.2m and an adj. EBITA of EUR 14.3m in 2021, a y/y sales and adj. EBITA growth of 32.4% and 31.0% respectively. According to Gofore’s guidance the net sales and adj. EBITA are expected to grow in 2021 compared to 2020. Growth is mainly driven by the Qentinel Finland acquisition in September 2020 and the CCEA + Celkee acquisition in March 2021. Furthermore, we expect for Gofore to continue on its track of good organic growth and aided by a good order intake achieve double-digit organic growth figures. With the slight weakness in relative profitability in Q1 and potential further weakness in Q2 from the project delivery changes of Gofore’s largest customer we expect full-year margins to decrease slightly compared with 2020.
HOLD (BUY) with a TP or EUR 21.0
Gofore’s share price has rallied some 20% since our previous update in March. With our estimates and the investment case overall intact we retain our target price of EUR 21.0. With valuation pushing clearly above 30x 2021 P/E and ahead of peers we downgrade our rating to HOLD (BUY).
Verkkokauppa.com reports its Q1 result on this week’s Friday, 23rd of April. We have made small estimate adjustments and expect Q1 sales to grow by 7.5% y/y to EUR 135m. We expect adj. EBIT of EUR 5m. We retain our rating “BUY” with TP of EUR 10.5 (9.5).
We expect sales growth of 7.5% in Q1
We expect Verkkokauppa.com to report strong Q1 figures on Friday. The coronavirus situation remained severe during the first quarter and due to the restrictions people have stayed more at home. This should continue to support online sales, benefiting Verkkokauppa.com. Additionally, most of Finland had a proper winter which we expect to boost sales of sport and outdoor equipment. Lower level of wholesale sales should also have a positive impact on gross margin. We have slightly increased our H1’21E estimates ahead the Q1 result. We expect Q1’21E sales to grow by 7.5% y/y to EUR 135m (cons. EUR 134m) while we expect adj. EBIT of EUR 5.0m (cons. EUR 4.8m).
Domestic purchases are expected to remain high during ‘21
The coronavirus situation has prolonged and even though the Finnish population is currently being vaccinated the pace is slow and it will take a while to get back to normal life. We expect the situation to normalize towards the end of the year, but we expect that for instance traveling abroad will remain in a low level throughout 2021. Thus, consumption will continue to be more focused on domestic purchases, supporting 2021 sales. The company introduced its refined strategy for 2021-2025 earlier this year and it targets to reach sales of EUR 1bn and EBIT margin of 5% by the end of 2025. We expect the company’s good momentum to continue with 21E-23E sales growth of 6-7% and adj. EBIT margin of ~4%. We however highlight that the competition is likely to continue tight after the pandemic thus profitable growth doesn’t come easy.
We keep our rating “BUY” with TP of EUR 10.5 (9.5)
We expect 21E sales to grow by ~7% to EUR 594m (cons. EUR 592m) and adj. EBIT of EUR 23.6m (cons. EUR 23m). On our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.8x and 15.6x, which is 17% discount compared to the online-focused Nordic and European peers in 21E and 11% premium in 22E. We keep our rating “BUY” with TP of EUR 10.5 (9.5).
Talenom acquired Balance-Team Oy, a specialist in financial management for associations, and raised its 2021 sales guidance to EUR 80-84m (prev. EUR 78-82m). We now expect growth of 24.6% in 2021. We retain our HOLD-rating with a target price of EUR 12.0 (11.5).
Acquired Balance-Team Oy and raises sales guidance
Talenom expands its operations in Finland by acquiring Helsinki-based Balance-Team Oy, a specialist in financial management for associations. The acquisition will make Talenom a leading provider of financial management services for nonprofit organisations in Finland. The sales and EBITDA in 2020 of the transferring operations were EUR 2.7m and EUR 1.0m respectively. The share capital of the transferring operations was transferred to Talenom on April 15th. The transaction price is EUR 5.3m, implying an approx. price of 5.0x EV/EBITDA on 2020 figures, to be paid 50/50 in cash and shares. Due to the acquisition Talenom raises its sales guidance for 2021 from EUR 78-82m to EUR 80-84m. The EBIT guidance (EUR 14-16m) remains intact.
Rapid growth in 2021 with our estimate at 24.6%
The guidance revisions did not come as a major surprise given the guidance being raised already in March due to acquisitions, while the EBIT guidance quite as expected remains intact. The pace of acquisitions has been rapid so far during H1 and a further guidance revision is not completely unlikely if the pace continues. We have adjusted our 2021 sales estimate to EUR 81.2m, implying a growth of 24.6%, with our EUR 15.3m EBIT estimate intact. Talenom reports Q1 results on April 26th, with our sales and EBIT estimates at EUR 19.9m and EUR 4.4m respectively.
HOLD with a target price of EUR 12.0 (11.5)
In light of the accelerating growth pace we adjust our target price to EUR 12.0 (11.5) and retain our HOLD-rating. Our target price values Talenom at approx. 45x 2021 P/E, which we see as justifiable given the stability of the business and the rapid profitable growth.
Exel continued to perform despite the pandemic. In our view the company remains positioned for strong organic growth in the years to come. The strategic priorities now work solid. Our TP is EUR 11 (10); retain BUY rating.
The strategic priorities have already delivered results
In our view Exel Composites is a competitively positioned player in the materials value chain and operates in a niche that has a strong long-term growth outlook. The company manufactures composites for demanding industrial applications. Strategy execution paid off in 2019-20 as adjusted operating profit almost doubled to EUR 9.7m in FY ’20 from the level seen in FY ’18. The excellent financial performance was due to a pick-up in organic growth as well as successful cost reduction measures, both of which helped the company to scale the relatively high fixed cost base. Exel seems to have found an advantageous positioning within the Wind power customer industry but also in areas like Buildings and infrastructure, among many others.
Growth outlook continues to support profitability gains
Exel posted a 5% organic top line growth last year despite the pandemic. Wind power was a big driver but there were other notable positives such as Machinery and electrical. Transportation and Telecommunications were the only two customer industries, out of the seven, with revenue declines. The pandemic may still hurt Transportation demand this year but in our view the area has good long-term outlook. Telecommunications is the one industry with a bit muted outlook but even there the situation may improve with the rollout of 5G. Exel guides increasing revenue and adjusted EBIT for this year. We estimate 7% growth and an additional EUR 1m EBIT gain. We view Exel positioned for ca. 5-6% CAGR in the years to come.
We see more room for earnings-based multiple expansion
Exel has been historically valued around 8x EV/EBITDA and 0.9x EV/S. The current valuation is ca. 8.5x EV/EBITDA on our estimates for this year, in other words not that high in the historical context even though the shares have appreciated a lot. Profitability gains have justified the rally. The valuation is now historically rich in terms of EV/S, but we also find this justified since the strategy is poised to deliver more in the years to come. Our TP is now EUR 11 (10) per share. We retain our BUY rating.
Pihlajalinna held its CMD yesterday, 30th of March. The focus of the event was on the company’s strategic priorities and the future of the social and healthcare market. Financial targets remained unchanged. Thus, there were no changes in the big picture. We keep our rating “BUY” with TP of EUR 13.0 (12.0).
New opportunities in both, public and private side
Pihlajalinna highlighted its strategic priorities for the upcoming years as the market is changing in many ways (SOTE-reform, aging population etc.). The company aims to strengthen its already strong partnership with the public side and to engage in close cooperation with the future wellbeing services counties. In addition, Pihlajalinna will make renewals to its private services with new service concepts and digital innovation. Further, the company will continue to strengthen digitalization. The company has already had a strong focus on this and the importance of developing new digital solutions has only increased during the pandemic. The long-term financial targets (EBIT margin of over 7% and net debt/EBITDA under 3x) remained unchanged.
Big picture is unchanged
The main market drivers are unchanged as the Finnish population is rabidly aging which increases social and healthcare expenditures. Digitalization offers new opportunities and can improve efficiency. In addition, individuals’ interest in their own health is increasing which creates new opportunities in the preventive social and health care. The company seemed to be relatively positive about the future wellbeing services counties and cooperation opportunities stemming from these. However, Pihlajalinna has also strengthened its positioning e.g. in the occupational healthcare market and has widened its cooperation with insurance companies which reinforces our view that the company can grow in both, public and private side. Expanding the service network should also provide support for future partnerships.
“BUY” with TP of EUR 13 (12)
We have kept our estimates intact and expect 21E revenue growth of ~10% and adj. EBIT of EUR 27.3m (adj. EBIT margin of 4.9%). In 22E and 23E, we expect revenue growth of 5% and 3%. We expect profitability improvement to continue and expect adj. EBIT margin of 5.4% in 22E and 5.6% in 23E. With our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.3x and 13.8x which is 14% discount compared to the peers. We keep our rating “BUY” with new TP of EUR 13 (12).
Eltel has signed an agreement to divest its German High Voltage business to ENACO, a German service provider in the energy sector. Eltel classified its German High Voltage business as assets held for sale at the end of 2020 and the revaluation had EUR -5.7 million impact on Group EBIT in Q4/2020. The transaction is estimated to have negative cash flow effect of EUR 3.8 million. Eltel will as part of the divestment engage ENACO as a subcontractor for the completion of certain projects, which are expected to be completed during 2021 and 2022. The divestment is subject to customary approvals, and the transaction is expected to close during Q2/2021.
The divestment is in line with Eltel’s strategy and strengthens Eltel’s focus on the Nordic countries in which it has a market-leading position and the business model is more stable and repetitive. In 2020, Eltel’s German High Voltage business had about 75 employees and net sales of about EUR 10 million. After the divestments of the High Voltage and Communication business (in Q2/2020), Eltel has only the Smart Grids business left in Germany, which accounted for a smaller share of German net sales in 2020.
The divestment is relatively small and therefore has no effect on our current forecasts. In our estimates, we have already forecast the net sales of other business to decrease by EUR 26.9 million and we expect the share of other business to be ~10% of group net sales in 2021E. We maintain our TP of SEK 30 with BUY.
Talenom announced the acquisition of two accounting firms in Sweden and raised its net sales guidance to EUR 78-82m (prev. EUR 75-80m). We retain our HOLD-rating and target price of EUR 11.5.
Two acquisitions in Sweden, net sales guidance raised
Talenom continues to expand in Sweden by acquiring accounting firms Crescendo AB and Progredo AB and raised its net sales guidance for 2021. The acquired businesses had combined net sales of EUR 2.3m in 2020 and operating profit of EUR 0.3m. With the acquisitions Talenom expands to two new municipalities in Sweden, Östersund and Åre. As a result of the acquisitions Talenom raised its net sales guidance to EUR 78-82m (prev. 75-80m). The acquired businesses will be transferred to Talenom on April 1st, 2021. The acquisitions will not increase operating profit in the short term due to integration costs and the depreciation of the transaction and the operating profit guidance remains intact at EUR 14-16m. The purchase price at maximum corresponds to 1.1x and 8.0x net sales and EBIT respectively.
Minor increase to sales estimates
We have raised our 2021 net sales estimate to EUR 78.9m (prev. 76.7m) due to the acquisition and an overall minor increase in net sales expectations, with our operating profit estimate intact at EUR 15.3m. With the net sales guidance being revised this early on in the year, potential further acquisitions could likely prompt further revisions later on during the year, although the impact on earnings would likely not be as significant. The increased growth through the acquisitions, however, provide an additional base for continued organic growth and ramp up of operations in Sweden in the coming years.
HOLD-rating and target price of EUR 11.5
With only rather minor revisions to our estimate revisions we retain our target price of EUR 11.5 and HOLD-rating. Our target price values Talenom at approx. 43.5x 2021e P/E.
We initiate coverage of Enersense with a BUY rating and a TP of EUR 9.7. Enersense’s turnaround in profitability progressed well in 2020 and, in our view, the valuation looks moderate considering Enersense’s increased and healthier order backlog as well as potential synergies of the Empower acquisition.
2020 was a big year for Enersense
Enersense International Oyj is a service provider of emission-free energy solutions in the industry, energy, telecommunication, and construction sectors. In 2020, Enersense’s business changed significantly. Enersense acquired Empower, thus expanding its business from recruiting and resource management services to a solution provider for the Smart industry, Power, and Connectivity markets. Enersense also managed to improve its EBITDA from EUR -0.8m in 2019 to EUR 7.2m in 2020. The focus in 2021 is on improving profitability, growing in domestic and selected international markets, and continuing the integration of the Empower acquisition.
Our estimates for 2021E are at the midpoint of the guidance
In 2021E, we expect Enersense’s net sales to grow strongly as Empower’s figures are included in net sales for the full year. The order backlog has increased significantly from EUR 130m in August 2020 to EUR 300m at the end of 2020 and we expect this strong order inflow to support Enersense in reaching net sales of EUR 230m. In 2022-23E, we forecast the group revenue to grow by 3.2% and 3.0%, respectively. We estimate adj. EBITDA to increase from EUR 8.9m (6.2% margin) to EUR 13.5m (5.9% margin) in 2021E driven by the consolidation of Empower’s full-year figures, a healthier project portfolio, and streamlining of operations. We expect the synergies of the Empower integration to be more visible in Enersense’s profitability from 2022 onwards and EBITDA margin to increase to 6.5% in 2022E and 6.8% in 2023E.
BUY with a target price of EUR 9.7
In our view, the valuation looks moderate considering Enersense’s increased and healthier order backlog as well as potential synergies of the Empower acquisition. On our estimates for 2022E, Enersense is trading at EV/EBITDA of 5.5x and adj. P/E of 10.7x, which translate into discount of 21-28% to our peer group median. We initiate coverage with a BUY-rating and a target price of EUR 9.7. Our TP values Enersense at EV/EBITDA of 6.1x and adj. P/E of 11.8x for 2022E, which are still at 13-21% discount to peer group, reflecting Enersense’s lower profitability profile and as we look for more signs of further margin improvement and faster organic growth. If Enersense manages to increase net sales and improve margins in line with the midterm financial targets, there is further upside potential in valuation.
Gofore’s H2 results showed little signs of weakness and with the more recent acquisitions the growth pace is set to continue well into double-digit figures. We upgrade our rating to BUY (HOLD) with a target price of EUR 21.0 (16.0).
Strong organic growth in 2020 despite pandemic
Gofore reported H2 revenue of EUR 40.6m (pre-announced) and EBITA and adj. EBITA figures of EUR 5.0m/5.1m respectively (Evli EUR 4.8m/5.5m). The BoD proposes a dividend distribution of EUR 0.24 per share (Evli EUR 0.25). In 2021 Gofore expects that its revenue and adj. EBITA in 2021 will grow compared to 2020. Despite the pandemic, Gofore posted solid organic growth figures of 15.5% for the full-year 2020 and total growth of 21.7%.
Rapid growth to continue
Gofore completed the acquisition of change execution consulting specialist CCEA and its fully owned subsidiary Celkee, expected to have a revenue impact of approx. EUR 6m in 2021. With the newest acquisition and the Qentinel Finland acquisition in the latter half of 2020 as well as expectations of around 10% organic growth we now expect revenue growth of 28% in 2021, rapidly closing in on over EUR 100m annual sales. We expect adj. EBITA margins to remain relatively flat near the 15% adj. EBITA-% target, with the low scalability of the business model providing little further upside. Gofore had a healthy cash position of EUR 21m at the end of 2020, supporting potential further acquisitions. Overall demand appears to have remained at good levels after the initial dip in the early stages of the pandemic and the outlook remains favourable.
BUY (HOLD) with a target price of EUR 21.0 (16.0)
On our revised estimates we adjust our target price EUR 21.0 (16.0), valuing Gofore at approx. 30x 2021 P/E, and raise our rating to BUY (HOLD). Compared to peers, near-term valuation is quite stretched, but the solid performance and expectations of rapid growth along with further M&A potential certainly merits a higher valuation.
Gofore’s EBITA/adj. EBITA of EUR 5.0m/5.1m in H2 were somewhat in line with expectations (Evli 4.8m/5.5m). Revenue grew 32.5% to EUR 40.6m in H2 (pre-announced). Revenue and adj. EBITA in 2021 are expected to grow compared with 2020. Gofore’s BoD proposes a dividend of EUR 0.24 per share (Evli EUR 0.25).
Cibus’ Q4 report didn’t serve surprises. Our view on Cibus remains to a large extent unchanged, however we update our TP to SEK 170 (165) to reflect minor yield compression in the Swedish market. We retain our HOLD rating.
Transfer to the Nasdaq Stockholm main list happens in H1
Cibus’ EUR 16.7m Q4 net rental income was in line with our EUR 16.6m estimate. Administration expenses amounted to EUR 1.8m vs our EUR 1.5m estimate (there were non-recurring costs to the tune of EUR 0.5m). The planned switching to the Nasdaq Stockholm main list, to be completed in H1’21, as well as costs for conducting an inventory of fittings and equipment in the Swedish portfolio elevated administration expenses temporarily. Operating income was therefore EUR 14.8m vs our EUR 15.1m estimate. Net financial costs amounted to EUR 5.5m, compared to our EUR 5.2m estimate. There was a negative EUR 0.5m charge due to currency exchange rates. Net operating income then amounted to EUR 9.3m while we expected EUR 9.9m.
Still plenty of smaller property deals in the pipeline
Portfolio net rental income performance remains stable. Cibus has some small-scale plans to develop e.g. parking lots attached to the properties. The company also says it has plans for some adjacent residential developments in the Swedish portfolio. We understand these would entail only limited balance sheet risks. Cibus sees the Finnish market values stable and slight yield compression in the Swedish market. Last year was a banner for Cibus in terms of acquisition volume. The EUR 386m spree however doesn’t eat from this year’s target; Cibus is confident about completing another EUR 50-100m of add-ons in 2021.
There is upside if the underlying market yields compress
Cibus remains valued at 1.12x EV/GAV and 1.35x P/NAV. We view this premium level appropriate as Cibus still delivers high yields in comparison to other listed Nordic property portfolios. In our opinion the Nordic grocery and daily-goods store property space has some additional yield compression potential, considering the attractive 6% valuation levels where Cibus has been lately able to transact even relatively large (above EUR 100m) portfolios. We update our TP to SEK 170 (165) in anticipation of modest Swedish yield compression. We retain our HOLD rating.
Solteq reported slightly better than expected Q4 results. The solid performance is set to continue, and we see clear potential for a doubling of EPS in the coming years. We retain our BUY-rating with a target price of EUR 4.5.
Q4 slightly above expectations
Solteq reported slightly better than expected Q4 results. Revenue amounted to EUR 16.4m (Evli EUR 16.1m) and comp. EBIT to EUR 2.0m (Evli EUR 1.7m). Comp. growth amounted to 9.3%. The BoD proposed a dividend distribution of EUR 0.15 per share (Evli EUR 0.06). To our understanding the high payout ratio is due to no dividend payment in 2019, as such corresponding to an accrued two-year distribution, and we do not expect as high relative payout in the future.
2021 outlook favourable
In 2021 Solteq expects Group revenue to grow clearly and operating profit to improve. The profitability guidance sounds soft but with the on-going pandemic and the related uncertainties the guidance is understandably more cautious this early on in the year. We expect sales growth of 8.9% (prev. 3.7%) and an approx. 14% improvement in comp. EBIT to EUR 6.6m (prev. 5.5m). Growth and profitability is on our estimates largely attributable to Solteq Software, in particular due to project implementations and thereafter following accrual of recurring revenue from the Utilities-sector orders received in 2020. We see clear potential for a doubling of EPS during 2021-2022 compared with 2020, noting that 2020 was affected to some extent by non-recurring financial expenses.
BUY with a target price of EUR 4.5 (1.9)
Solteq’s share price has over doubled since our previous update. Compared with the Nordic software peers, valuation is still not very challenging. With Solteq Software on our revised estimates contributing more clearly to growth and earnings along with overall higher earnings estimates higher multiples are certainly justifiable. We raise our TP to EUR 4.5 (1.9), valuing Solteq at approx. 23x 2021 P/E, BUY-rating intact.
We initiate coverage of Eltel with BUY rating and a TP of SEK 30. We see that Eltel has the potential to succeed in its turnaround and, as such, we expect Eltel’s profitability to improve in the coming years and net sales to turn to growth in H2/2021. In our view, the margin improvement potential is not fully reflected in the current share price.
Eltel is in the midst of its turnaround journey
Eltel is the leading Nordic field service provider for critical power and communication networks. Eltel’s development since the IPO in 2015 did not meet expectations, and following a strategic review in 2017, Eltel has focused on its core businesses, Power and Communication in the Nordics, and the company is currently in the midst of a turnaround journey. The focus is on improving profitability, restructuring non-performing businesses, and strengthening its financial position, with first signs of operational improvement already visible.
We expect the recovery in margins to continue
In 2021E, we expect that net sales will decrease by 2.3% to EUR 916.8 million due to the focus on improving profitability and restructuring non-performing businesses. We expect net sales to turn to growth in H2/2021 and we see the targeted growth rate of 2-4% in the Nordics achievable from 2022 onwards. In 2022-23E, we forecast net sales to grow by 1.6% and 1.9% driven by growing 5G demand in the Nordics, as well as new frame agreements and contract expansions. Eltel has continued to take measures to improve operational efficiency and its exposure to risky and unprofitable projects has reduced over the past couple of years. In line with the guidance, we forecast operative EBITA margin to grow from 1.2% in 2020 to 2.6% in 2021E. Despite the right actions, we are more cautious in our profitability estimates compared to Eltel’s 5% EBITA margin target by 2023 and expect operative EBITA margins to be 3.3% and 3.8% in 2022-23E.
BUY with a target price of SEK 30
Eltel is currently moving in the right direction thanks to a healthier balance sheet, better quality of the order book with a focus on stable Nordic countries and a reduced risk-level of projects. On our estimates for 2022-23E, Eltel is trading at EV/EBITDA of 7.7x and 7.0x, which translate into discount of 11-14% to our peer group median. In our view, Eltel has potential to improve its profitability and the margin improvement potential is not fully reflected in the current share price. We initiate coverage of Eltel with a BUY-rating and a TP of SEK 30. Our TP values Eltel at EV/EBITDA of 8.3x and 7.6x for 2022-23E, which are still slightly (~7%) discount compared to our peer group, reflecting Eltel’s lower profitability profile and as we look for more signs of further transformation progress.
Cibus’ Q4 report was unsurprising, although administration and financial expenses were slightly higher than we estimated.
Solteq’s Q4 was slightly above expectations, with revenue at EUR 16.4m (Evli EUR 16.1m) and comp. EBIT at EUR 2.0m (Evli EUR 1.7m). Solteq expects that Group revenue in 2021 will grow clearly and for the operating profit to improve. Dividend proposal EUR 0.15 (Evli EUR 0.06).
Tokmanni - The era of discount retailing Equity Research Read full report here → Tokmanni’s 2010-2020 revenue CAGR was 5.4%. At the end of 2020, Tokmanni had 192 stores across the country and it is the largest general discount retailer in Finland. We expect 21E revenue growth of 1.5% and adj. EBIT margin of 9%. We keep our rating “BUY” with TP of EUR 20.
Largest general discount retailer in Finland
Tokmanni is the largest general discount retailer in Finland. Tokmanni’s revenue CAGR in 2010-2020 was 5.4%. Tokmanni reached its targeted EUR 1bn in sales in 2020 with further store network expansion and strong LFL growth. Revenue grew by 13.6%. The company also reached its adj. EBIT margin target of ~9% (9.3%) last year. The company had 192 stores across Finland at the end of 2020 and 98.8% of Tokmanni’s revenue came from physical stores.
2020 was a record year
2020 was exceptional year due to the coronavirus and the company clearly benefited from the changed environment and consumer behavior as LFL revenue increased by 12.3%. It is also noteworthy that the company has been able to attract new customers with broad product assortment and affordable prices as the share of new customers was 20% in 2020. The company targets to increase its retail selling space annually by 12,000m2 which means approx. 5 new stores per year. Additionally, Tokmanni’s long-term target is to achieve low single digit LFL revenue growth. The company will set its refined strategic targets in connection with the CMD which takes place in March.
“BUY” with TP of EUR 20
We expect 21E revenue to increase by 1.5% to EUR 1089m. In 22E-23E we expect revenue to grow by 3.5% and 3.4%, respectively. We expect 21E adj. EBIT to be on a par with last year and adj. EBIT margin of 9%. In 22E, we expect adj. EBIT margin of 9.2% and in 23E, 9.3%. We approach Tokmanni’s valuation through our scenario analysis and valuation multiples. Our scenario analysis consists of three scenarios: base case, optimistic and pessimistic. The scenario analysis yields a fair value of EUR 20. On our estimates, Tokmanni trades with 21E-22E EV/EBIT multiple of 13.8x and 12.9x, which is 6-7% discount compared to the Nordic non-grocery peers and 17-18% discount compared to the int. discount peers. We keep our rating “BUY” with TP of EUR 20.
Fellow Finance reported H2 results in line with our expectations. Growth is expected in 2021, with investments into growth and new products seen to keep net earnings negative. We retain our HOLD-rating and target price of EUR 2.8.
H2 results in line with expectations
Fellow Finance reported H2 results quite in line with our expectations. Revenue amounted to EUR 5.3m (Evli EUR 5.5m) and adj. EBIT to EUR 0.7m (Evli EUR 0.7m). Adj. EPS amounted to EUR -0.02 (Evli EUR -0.01). Commission fees declined 44% y/y while interest income increased 16%. Facilitated loan volumes declined some 30% y/y. The BoD as expected proposes that no dividend be paid for FY2020. Fellow Finance expects revenue growth in 2021 compared with 2020 and to remain slightly unprofitable on net earnings level due to investments into new products and growth.
Supportive factors for growth in place
We expect growth of 7.5% in 2021 and adj. EBIT and adj. EPS of EUR 0.9m and EUR -0.04 respectively. We expect growth to be supported by a good traction in business financing, invoice funding in particular, and easing of temporary regulations on consumer financing in key markets. Investor sentiment also appears better compared with mid-2020 and new co-operation agreements such as the recently announced co-operation with Dynamic Credit also aid loan funding concerns. The new strategic initiatives within payment and e-commerce financing will also aid growth but the impact on 2021 will likely not yet be significant.
HOLD-rating and target price of EUR 2.8
We have made some larger downward revisions to our near-term estimates based on the new guidance. Without clearer signs of Fellow Finance moving towards its targets of around EUR 23m revenue and 15% EBIT-margin in 2023 we currently do not see clear upside potential to valuation. We retain our HOLD-rating and target price of EUR 2.8.
Cibus reports Q4 results on Feb 25. We update our estimates to include the latest purchase. We see no big picture changes; we retain our SEK 165 TP, rating HOLD.
Cibus’ GAV grew by 43% last year
2020 was an extraordinary year for Cibus only in the sense that the company was very busy with acquisitions. Cibus acquired about EUR 375m worth of properties in Finland and Sweden, financed in part by two equity issues that raised a combined EUR 125m. The first large Swedish portfolio acquisition was completed in March just before the pandemic lockdown. Cibus completed another large Finnish portfolio acquisition in December, and we update our estimates accordingly before the Q4 report. The latest deal adds some EUR 7m in annual net rental income capacity but will only contribute around EUR 0.3m in Q4. Cibus’ quarterly administration expenses are budgeted at EUR 1.1m; we estimate the Q4 figure a bit higher at EUR 1.5m due to the acquisition. We thus see operating income at EUR 15.1m. There should be no major extraordinary financial expenses and so our bottom-line Q4 estimate, before taxes, is EUR 9.9m.
Some more acquisitions are to be expected
The pandemic has had very limited impact on Cibus. Portfolio performance is unchanged. Cibus still has a long pipeline and is likely to add another EUR 50-100m of assets through smaller transactions this year. Cibus will probably expand to either Norway or Denmark (or both) in the coming years. The expansion is somewhat unlikely to happen this year as Cibus would prefer to inspect the properties on location. Vaccination progress now suggests travel remains difficult until at least the end of the year. Meanwhile Cibus has plenty of prospects in Finland and Sweden. The recent EUR 116m in Finnish additions imply 6% net rental yield. The figure represents some 100bps extra on Cibus’ similar metric, meaning add-ons are attractive. These relatively low valuations however limit Cibus’ shares current upside potential.
We continue to view valuation neutral
Cibus is valued at 1.13x EV/GAV and 1.37x P/NAV. The premium on book value is warranted considering Cibus’ still attractive ca. 4.75% yield, compared to the below 4% yield seen in the wider Nordic property sector. We continue to consider Cibus’ current valuation neutral. We retain our SEK 165 TP and HOLD rating.
Fellow Finance’s H2/2020 results were quite in line with expectations, with revenue of EUR 5.3m (Evli EUR 5.5m) and an adj. EBIT of EUR 0.7m (Evli EUR 0.7m). Fellow Finance expects growth in 2021 but for the result to remain slightly unprofitable due to growth investments. The BoD proposes that no dividend be paid for FY2020 (Evli EUR 0.00).
Pihlajalinna’s Q4 result and dividend proposal outpaced the expectations. We have increased our 21E estimates and expect revenue growth of 10% and adj. EBIT margin of 4.9%. We upgrade to “BUY” (“HOLD”) with TP of EUR 12 (10.5).
Positive surprise with Q4 result
Pihlajalinna’s Q4 result outpaced the expectations. Revenue increased by 2.6% y/y to EUR 137.2m (135.2m/135.5m Evli/cons). Revenue growth was driven by increased COVID-19 testing volumes which increased by 67% compared to the previous quarter. At the same time, customer volumes in private clinics locations were 10% lower compared to the comparison period. Adj. EBIT improved by ~31% to EUR 7.3m (5.3m/4.8m Evli/cons). 2020 dividend proposal of EUR 0.20 beat also clearly the expectations (0.12/0.09 Evli/cons).
Revenue streams from several sources
Pihlajalinna’s measures taken towards improved profitability have worked and we expect the company is able to increase its profitability further. Pihlajalinna has growth opportunities in several markets and the company has strengthened its positioning e.g. in the occupational healthcare market (e.g. Työterveys Virta). The company has expanded its operations in the public side as the services of Selkämeren Terveys Oy began in the beginning of the year. The Huhtasuo health center outsourcing started in December. Additionally, Pihlajalinna won a significant proportion of a competitive bidding process for the outpatient clinic, surgery, and inpatient services of the Northern Ostrobothnia Hospital District in early 2021.
“BUY” (“HOLD”) with TP of EUR 12 (10.5)
Pihlajalinna expects 2021 revenue to increase clearly and adj. EBIT to improve clearly compared to 2020. The company will introduce its updated strategy soon and we expect to get more color on that in connection with the CMD which takes place in late March. We expect 21E revenue growth of ~10% (EUR 559m) and adj. EBIT margin of 4.9% (EUR 27.3m). On our estimates, the company trades with 21E-22E EV/EBIT multiple of 15.6x and 13.2x which translates into 12-13% discount compared to the peers. We upgrade to “BUY” (“HOLD”) with TP of EUR 12 (10.5).
Next Games H2 results were overall rather neutral, with the highlight being the continued good publishing operations profitability. The new games appear to be well on the way but larger scale ramp-up will likely have to wait until H2/2021. We retain our SELL-rating with a target price of EUR 1.8 (1.6).
Rather neutral H2, good publishing operations profitability
Next Games H2 revenue was EUR 12.8m (Evli 13.6m) and adj. EBIT EUR -0.2m (Evli 0.5m). Apart from an overly optimistic view on the contribution of the new projects on our part the H2 figures were quite as expected, with the gross bookings of the NML and Our World games in line with our expectations. NML continued on a rather steady trajectory while Our World metrics continued on a declining trend. Publishing operations EBITDA was at a good level of EUR 3.0m (Evli EUR 3.4m) and FY2020 publishing operations EBITDA-% was at a commendable 24%.
New games key factor in 2021
Next Games expects revenue in 2021 to amount to over EUR 40m and for EBITDA to remain positive. Based on the comments for the plans to scale the new games (Blade Runner Rogue, Stranger Things: Puzzle Tales) we see that in our former estimates our scaling assumptions may have been too optimistic. The Blade Runner Rogue game is set for launch in its main market the US in Q1. The Stanger Things game was launched in certain markets in December 2020 and is set for certain feature updates before larger scale up. We have adjusted our 2021 revenue estimate to EUR 44.2m (prev. 50.5m) and EBITDA estimate to EUR 2.1m (1.7m). We expect larger ramp-up in scaling of games during H2.
SELL with a target price of EUR 1.8 (1.6)
Next Games remains a growth company, with yet little proof of growth on group level in previous years. Success of new games is crucial, both for growth and improvements in cash flows, with the proportionately high share of R&D affecting profitability and cash position. On our new estimates and with increases in peer multiples we raise our TP to EUR 1.8 (1.6), SELL-rating intact.
Vaisala’s Q4 missed expectations, but overall Vaisala managed to perform well in 2020 despite the pandemic affecting especially W&E. IM’s performance was once again strong, even in difficult environment. Vaisala’s guidance for 2021 was cautious, despite Vaisala seeing market starting to gradually recover and new orders picking up nicely. Based on the report, we’ve lowered our 2021-23E estimates and continue to see valuation expensive, thus we maintain our TP of 32€ and SELL rating.
Q4 orders received picked up nicely in both BU’s
Vaisala’s Q4 result missed ours and consensus expectations, but strong order intake growth for both BU’s surprised positively and order book remains at good level. Q4 net sales decreased by -10% to 106.9 MEUR (109.5 Evli /108 cons). Q4 EBIT came in at 12.2 MEUR (14 Evli / 13.6 cons), resulting in 11,4% EBIT-margin (Q4’19: 17.7 MEUR, 15% EBIT-margin). Orders received grew +8% to 111.9 MEUR vs. 103.3 MEUR last year. Orders received grew +7% in W&E and +11% in IM. Order book was 137.8 MEUR vs. 139 MEUR in Q4’19. W&E fell short of our expectations; net sales decreased by -16% to 67 MEUR vs. 73.5 MEUR our expectation. W&E EBIT was 5.2 MEUR (7.3 MEUR Evli), resulting in 7,8% EBIT-margin (Q4’19: 14,7%). After a few weaker quarters, IM continued its strong performance, beating our estimates; net sales grew 10% to 39.9 MEUR vs. 36 MEUR our expectation. IM EBIT was 8.3 MEUR (6.8 MEUR Evli), resulting in 20,8% EBIT-margin (Q4’19: 15,1%). Dividend proposal is 0.61 (0.63 Evli / 0.63 cons).
Despite solid performance and expected market recovery, outlook remained cautious
Looking at 2020, Vaisala managed to perform well despite the pandemic affecting especially W&E and creating uncertainties regarding deliveries. IM’s performance was once again strong, even in difficult environment. While W&E 2020 net sales and EBIT declined -10% and -17,5% respectively (on high comparison figures), IM 2020 net sales and EBIT grew 1% and 22%. In addition, IM is currently seeing strong growth led by pharmaceutical customer segment which includes COVID-19 vaccine suppliers. Despite continued uncertainties due to the pandemic, Vaisala sees market gradually recovering in 2021, except for meteorology market in developing countries. Vaisala issued 2021 guidance expecting net sales between 370–400 MEUR and EBIT between 30–45 MEUR. Pre-Q4, both we and consensus 2021E expectations were above the EBIT guidance. The outlook was a disappointment, given the decent performance last year, new orders picking up, lower opex level and expected market recovery.
With the rather successful completion of the rights issue, raising some SEK 214m, Endomines is now looking to restart production, with first significant production likely to be seen in H2. We retain our HOLD-rating with a target price of SEK 2.7 (2.9).
Earnings clearly short of estimates
Endomines as expected did not report any significant revenue in Q4 (SEK 0.7m/0.5m act.*/Evli), as Friday has been under care and maintenance. EBIT fell clearly short of our estimates (SEK -99.0m/SEK -16.9m act.*/Evli) due to payments for claims of the US Grant project and write-downs of assets performed at the year-end. As expected, no dividend distribution was proposed. *Figures not reported, derived from Q1-Q3 and 2020 figures.
Production to ramp-up in H2
Endomines did not give a production guidance for 2021, aiming to give a guidance in connection with the Q1 release. Deepening of the Pampalo is expected to start mid-H1 while the goal is to have the first gold production by the end of the year. Production start at Friday will be somewhat dependent on how long the spring thaw will last but Endomines expects to be able to ramp-up production by early summer. Endomines completed its rights issue in January, raising approx. SEK 214m, which is a much-needed support to the previously very tight liquidity situation. Although the proceeds fell short of the target, the outcome is in our view still quite decent given the pressed financial situation the company has been facing. The Coronavirus pandemic is still causing some stir in supply chains but should not have any major short-term impact given the time the company has had to prepare for restarting production at Friday.
HOLD with a target price of SEK 2.7 (2.9)
We have made changes to our estimates, with the outcome of the rights issue vs. the assumed full subscription causing the largest changes to our SOTP model, along with the slight pressure to gold prices in Q1. We adjust our target price to SEK 2.7 (2.9) with our HOLD-rating intact.
Marimekko’s Q4 result met the expectations with revenue growth of 8% y/y. Adj. EBIT improved by ~90%. The outlook remains good despite the uncertainties related to the pandemic. We keep our rating “BUY” with TP of EUR 57 (50).
Q4 result met the expectations
Marimekko’s Q4 result was somewhat in line with the expectations. Revenue increased by 8% y/y to EUR 37m (38m/38m Evli/cons.). Revenue was driven by good wholesale sales development in Finland, EMEA and Scandinavia. Customer numbers in stores declined as the pandemic situation worsened towards the end of the year. This impacted negatively on retail sales. On the other hand, retail sales were supported by strong growth in online sales. Adj. EBIT amounted EUR 5.8 (+90% y/y) vs. 5.0m/4.7m Evli/consensus. Profitability was boosted by increased sales and decreased fixed costs but at the same time, gross margin declined, resulting from increased online sales. 2020 dividend proposal is EUR 1.0 (1.2/1.1 Evli/cons.).
The outlook remains bright
Fashion industry has faced enormous losses due to the pandemic but despite the situation, the management of Marimekko has shown good capabilities of being able to adjust to the current environment. This reinforces our view of the company’s ability to grow profitably in the future as well. Marimekko is also benefiting from the changed consumer behavior where sustainability plays a big role. Marimekko expects sales in Finland and APAC-region to grow in 2021. Domestic wholesale sales will be boosted by nonrecurring promotional deliveries and a vast majority of those will take place in H2’21. Marimekko expects to open ~5-10 new stores and shop-in-shops in 2021 of which most openings will be in Asia.
“BUY” with TP of EUR 57 (50)
The ongoing pandemic situation is still impacting on Marimekko’s sales and we expect the situation to normalize in H2E. Marimekko expects 21E sales to increase from 2020 and adj. EBIT margin to be on a par with the long-term target of 15%. We have slightly increased our estimates and expect 21E sales of EUR 135m (+10% y/y) and adj. EBIT of EUR 20.5m (15.2% margin). On our estimates, the company trades with 21E-22E EV/EBIT multiple of 20.1x and 16.9x which is 50-70% premium compared to the premium peers. We see the premium acceptable due to the strong revenue and profitability development. We keep our rating “BUY” with TP of EUR 57 (50).
Exel beat estimates; we see the share is still not expensive all considered. Our TP is now EUR 10.0 (7.25), rating BUY.
Broad positive development continued
Exel recorded EUR 27.5m in Q4 revenue, up 4% y/y. The figure was a bit above the EUR 27.2m/26.5m Evli/cons. estimates. Wind power’s order timings meant the segment’s EUR 6.6m top line, down 6% y/y, didn’t meet our EUR 8.9m estimate. Relative strength in other segments nevertheless helped to make up. Buildings and infrastructure developed especially strong and Exel continues to see potential in the segment due to e.g. cable core rods. The segment’s EUR 7.0m Q4 revenue (up 22% y/y) was way above our EUR 5.1m estimate. Favorable mix and further efficiency gains helped Exel to EUR 2.7m EBIT in Q4 vs the EUR 2.2m/1.8m Evli/cons. estimates. Operating margin was thus again in line with the above 10% long-term target. Order intake also grew by 6% y/y, which indicates brisk start for the year and is notable considering the high comparison figure.
We estimate EBIT at EUR 10.7m this year
Exel is positioned for 5-6% top line growth in the coming years. There are now other segments rising with Wind power. Wind however remains important and we see no reason why it wouldn’t contribute growth also this year. Global wind capacity grows by big numbers and we expect the Exel segment to post double-digit growth also in FY ’21 (up 19% in FY ’20). The Austrian plant is up and ready to serve European accounts across many segments, perhaps with a tilt towards Machinery and electrical, a segment we understand has relatively high gross margins. Exel already achieved high operating margin last year, and we estimate good potential for further gains. Since the EUR 8.5m Austrian investment has now been completed we see a solid organic growth outlook with relatively low EUR 5m annual capex levels. We make only small adjustments to our estimates.
Valuation is still not demanding all things considered
Exel is valued at ca. 8x EV/EBITDA and 12x EV/EBIT on our FY ’21 estimates. In our opinion Exel is making solid progress towards long-term targets; we see the company reaching an annual 10% EBIT margin already in FY ‘22. This achievement would help the respective earnings multiples to decrease to around 7x and 10x levels next year. Our TP is now EUR 10.0 (7.25), retain BUY rating.
Scanfil’s Q4 didn’t serve any major surprises, but the overall picture turned even more encouraging. Our new TP is EUR 8.0 (6.5). Our rating is now BUY (HOLD).
Q4 figures as well as FY ’21 guidance in line with estimates
Scanfil Q4 revenue, flat y/y at EUR 154m, met the estimates. The Communication segment’s top line remained a bit soft. This wasn’t big news as the Hangzhou divestment and low base station product sales were known. The pick-up in Consumer Applications’ demand was a positive surprise given that the segment had been underperforming already before the pandemic. Energy & Automation posted a respectable 18% organic growth. Industrial and Medtec & Life Science performed close to estimates. We view these two the most stable segments and positioned for ca. 5% growth in the coming years (it should be noted Medtec & Life Science hasn’t gained any meaningful demand due to the pandemic). Scanfil thus posted EUR 10.4m Q4 EBIT, compared to the EUR 10.0m/9.9m Evli/cons. estimates.
Both guidance and comments are encouraging
We revise our estimates up a bit as the guidance implies demand holds even in an environment best described as extraordinary. Our previous EUR 617m FY ’21 revenue estimate was close to the EUR 620m midpoint; we revise the figure up to EUR 625m. We continue to expect the same EBIT margin as before and so our EBIT estimate only increases from EUR 41.6m to EUR 42.2m. This is not a big quantitative difference, but the report adds confidence. Scanfil says outlook is perhaps a bit better now than a few months ago, in addition to which gross margin improved slightly in Q4. It thus seems unlikely the guidance will fail, particularly considering Scanfil’s history. The company’s balance sheet is ready for M&A, although any deal is not imminent. Relatively low capex needs also help the overall valuation picture, even if the share price has gained a lot in recent months.
Performance and outlook warrant higher valuation
In our opinion Scanfil’s extended track record and robust outlook justify higher multiples. Our updated EUR 8.0 (6.5) TP values Scanfil at about 8.5x EV/EBITDA and 12x EV/EBIT on our estimates for this year. Earnings growth would help to decrease the multiples to respective 8x and 10.5x levels next year. Our TP is now EUR 8.0 (6.5). Our new rating is BUY (HOLD).
Next Games' net sales in H2 amounted to EUR 12.8m, slightly below our estimate (EUR 13.6m Evli). The adj. EBIT was below our expectations at EUR -0.2m (EUR 0.5m Evli). Publishing operations profitability improved to EUR 3.0m (Evli EUR 3.4m) compared with EUR 1.5m in H2/19.
Pihlajalinna’s Q4 result outpaced the expectations. Q4 revenue amounted EUR 137.2m (+2.6%) vs. EUR 135.3m/135.5m Evli/cons, while adj. EBIT landed at EUR 7.3m vs. EUR 5.3m/4.8m Evli/cons estimates. Dividend proposal is EUR 0.20 vs. EUR 0.12/0.09 Evli/cons. 2021 revenue is expected to increase clearly and adj. EBIT is expected to improve clearly compared to 2020.
Finnair - Waiting for better times Equity Research Read full report here → Finnair’s Q4 figures were ugly, as expected. As the pandemic situation prolongs, we expect slow recovery to start during the summer but better improvement is expected to start in late 2021. We keep our rating “HOLD” with TP of EUR 0.60.
Revenue declined by 87% y/y
Once again, Finnair reported ugly quarterly figures, as the coronavirus situation is not showing any signs of abating. Strict travel restrictions remained, and there was an overall lack of demand during Oct-Dec. Finnair’s Q4 revenue decreased by 87% y/y to EUR 102m (94m/101m Evli/cons.). Adj EBIT was EUR -163m (-172m/-167m Evli/cons.). Q4 ASK decreased by 89% and PLF was 29.2% (-49.8pp). No dividend is distributed for 2020.
Recovery expected to start during the summer
According to the company, the comparable operating loss in Q1 will be of a similar magnitude as in Q2-Q4’20. The company continues to fly with limited network during Q1 and estimates that the travel begins to recover from summer 2021 onwards as the vaccination coverage increases and countries start lifting travel restrictions. However, the visibility remains weak and therefore the company is not giving revenue guidance for 2021. The company expects that traffic will recover to 2019 levels in 2023 (measured in ASKs). We expect Finnair is well positioned once the recovery starts and the profitability should improve notably due to the permanent cost savings target of EUR 140m from the beginning of 2022 (compared to 2019).
“HOLD” with TP of EUR 0.60
The State of Finland and Finnair are preparing an unsecured hybrid loan of up to EUR 400m which is expected to be finalized during the first quarter of 2021. As the company still has available funding, we are not concerned even if the pandemic situation continues throughout the summer. We expect H1’21E to remain extremely weak but slightly better recovery is expected to start in Q3E. We expect 2021E revenue of EUR 1545m and adj. EBIT of EUR -312m. We highlight that there are still significant uncertainties with our estimates. We keep our rating “HOLD” with TP of EUR 0.60.
Innofactor reported solid Q4 figures, adjusted for one-offs, and proposed the first dividend distribution in company history. We expect a pick-up in growth and continued margin improvement in 2021. We retain our BUY-rating with a target price of EUR 1.75 (1.45).
One-offs hampered otherwise solid figures
Innofactor reported in our view solid Q4 earnings. Although EBITDA was below our estimates at EUR 1.6m (Evli EUR 2.1m), a one-off of approx. EUR 1.0m relating to a final write-down and cost item of a customer project in Sweden was included, without which EBITDA would have clearly exceeded expectations. Net sales were also slightly above our estimates at EUR 18.3m (Evli EUR 17.6m), showing modest growth of 4.7% y/y. A dividend distribution of EUR 0.04 per share was proposed (Evli EUR 0.03), with authorization being sought for a further potential extra dividend of max 0.04 per share, which if granted and utilized in full would translate to a dividend yield of 5.6%.
Growth and improved profitability expected
Innofactor followed its usual line of guidance, expecting net sales and EBITDA to increase in 2021 compared with 2020. We expect sales growth of 6.4% and EBITDA-margins to improve to 13.1% (2020: 10.8%). With the good order backlog and a balance sheet supportive of acquisitions growth could pick up more clearly, but uncertainty, especially given the on-going pandemic, is still at higher levels and as such we are still wary of assuming higher growth figures. Innofactor is still quite some way from its 20% growth and EBITDA-% target but the targets do not appear to be quite as out of grasp as earlier.
BUY-rating with a target price of EUR 1.75 (1.45)
On our revised estimates we raise our target price to EUR 1.75 (1.45), valuing Innofactor at ~14x 2021 PPA adj. P/E, with our BUY-rating intact. Further upside potential compared to peer multiples still exists, but we consider further evidence of growth pick-up and earnings improvement mandated to justify a higher valuation.
Revenue in Q4 was as expected very limited, with Friday in care and maintenance. Profitability figures were burdened by US Grant payments and write-downs.
The pandemic continued to hamper Finnair operations during Q4. Finnair’s Q4’20 adj. EBIT was EUR -163m vs. our expectation of EUR -172m and consensus of EUR -167m. Revenue decreased by ~87% y/y and was EUR 102m vs. our expectation of EUR 94m and consensus of EUR 101m.
Innofactor’s Q4 results were on an adj. basis above our expectations. Net sales amounted to EUR 18.3m (Evli EUR 17.6m), while EBITDA amounted to EUR 1.6m (Evli EUR 2.1m). EBITDA included one-offs of EUR 1.0m and adj. figures were better than expected. Dividend proposal EUR 0.04 per share (Evli EUR 0.03). Net sales and EBITDA in 2021 are estimated to increase compared to 2020.
Exel Composites’ Q4 top line was slightly above estimates, but the strong profitability was a clear positive surprise. The overall impression is very solid.
Marimekko’s Q4 result was somewhat in line with expectations. Net sales were EUR 37m (8% y/y) vs. EUR 38m/38m Evli/cons. Adj. EBIT was EUR 5.8m vs. EUR 5.0m/4.7m Evli/cons. 2020 dividend proposal is EUR 1.0 vs. EUR 1.20/1.10 Evli/cons.
Scanfil capped 2020 strong and we didn’t find notable negatives from the Q4 report. Scanfil enters this year with confidence and the guidance is in line with the long-term organic growth targets.
Pihlajalinna reports its Q4 result on this week’s Friday, 19th of February. We have made only small adjustments to our estimates and keep our rating “HOLD” with TP of EUR 10.5 (9.5).
Expecting ~1% revenue growth in Q4
Despite the COVID-19 situation worsened towards the end of the year we expect a fairly good Q4 result. We expect Pihlajalinna’s Q4E revenue to grow by ~1% y/y to EUR 135m (cons. EUR 136m), supported by increased volumes of COVID-19 testing. On the other hand, as the virus situation has prolonged, we expect the demand of private services (e.g. fitness centers) is still lagging behind. We expect adj. EBIT of EUR 5.3m (cons. EUR 4.9m). We expect 20E dividend of EUR 0.12 (cons. EUR 0.09).
The virus is still hampering private services
The outlook of many private services e.g. fitness centers remains weak as the pandemic shows no signs of abating and the vaccinations haven’t started as quickly as first anticipated due to the delays in the vaccine supply. On the other hand, we expect the COVID-19 testing to continue strong, supporting revenue. The company started negotiations for the purchase of all shares in Työterveys Virta at the end of 2020 which gives Pihlajalinna almost 30 % share of the occupational healthcare market in the Oulu region. Revenue of Työterveys Virta in 2019 was approx. EUR 13.6m. The Due Diligence review has been completed, and the procurement has now advanced to the contract phase and approval of bills of sale. The total price of the shares with cash reserve is EUR 17.6m (meaning EV/Sales multiple of 1.3x). The acquisition is not yet included to our estimates.
“HOLD” with TP of EUR 10.50 (9.5)
We expect FY20E revenue of EUR 507m (-2.3% y/y) and adj. EBIT of EUR 18.8m. On our estimates, the company trades with 20E-21E EV/EBIT multiple of 23.3x and 15.9x. Which is 1-12% discount compared to the peers. We keep our rating “HOLD” with TP of EUR 10.5 (9.5).
Verkkokauppa.com delivered a strong Q4 result which was in line with expectations. The company introduced its refined strategy for 2021-2025 and targets EUR 1bn of sales and EBIT margin of 5% by the end of 2025. We keep our rating “BUY” with TP of EUR 9.5 (8.3).
Solid Q4 result
Verkkokauppa.com’s Q4 result was strong, as expected. Revenue grew by 10% y/y to EUR 176m (171m/170m Evli/cons.). Revenue was boosted by good growth in mid-sized categories (especially MDA and sport equipment). Gross margin (15.1% y/y vs. our 14.6%) was driven by strong performance of mid-sized, higher margin categories. Adj. EBIT amounted EUR 6.2m (6.6m/6.3m Evli/cons.). 2020 dividend proposal of EUR 0.45 (0.23 plus additional dividend of 0.22) was clearly above expectations (0.23 Evli & cons.).
Targeting sales of EUR 1bn by the end of 2025
The company introduced its refined strategy for 2021-2025 and highlighted five pillars on what the growth will be built. These pillars are: excellent customer experience & strong brand, efficient fulfilment, superior technology backbone, extensive assortment and cost competitiveness. The company targets to reach sales of EUR 1bn and EBIT margin 5%. Growth is sought e.g. through core product categories and new categories with attractive margin potential, especially online. Further, the company aims to double its B2B and private label business by 2025. Also, new business and M&A opportunities are on the table. However, the growth will mainly be organic and stem from the transition from brick-and-mortar to e-commerce. The company is also investing to its warehouse in Jätkäsaari. The automation investment program (capex of EUR ~4m) is expected to be completed by the end of 2022. The investment supports further growth and creates cost efficiencies, boosting profitability development.
“BUY” with TP of EUR 9.5 (8.3)
The company expects 21E sales of EUR 570m-620m and adj. EBIT of EUR 20m-26m. Improved brand image, high customer satisfaction and investments into growth and more efficient operations reinforce our view of the company’s ability to grow profitably. We have increased our 21E-22E sales expectations by 4-7% and expect 21E sales of EUR 592m. Our adj. EBIT expectation is EUR 22m. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.0x and 14.2x, which translates into a discount compared to the peers. We keep our rating “BUY” with TP of EUR 9.5 (8.3).
Tokmanni’s Q4 result outpaced the expectations. The company was also able to reach its adj. EBIT margin target of 9% and sales target of EUR 1bn in 2020. New strategic targets are introduced in March. We keep our rating “BUY” with TP of EUR 20 (18.4).
Result outpaced the expectations
Tokmanni reported extremely strong Q4 figures. Revenue increased by 14.6% y/y to EUR 327m (vs. 315m Evli & cons.). LFL growth was 13.4% y/y. Sales development was at good level in all product categories. Online sales grew by 134% y/y and accounted for 1.4% of total revenue. Adj. gross profit amounted EUR 120m (36.8% margin) vs. EUR 110m Evli & consensus. Adj. EBIT totaled EUR 45m (38m/37m Evli/cons.). Dividend proposal was also clearly above expectations as it was EUR 0.85 per share vs. EUR 0.78 our view and EUR 0.74 consensus.
Financial targets met – new ones to come
Tokmanni’s target was to reach adj. EBIT margin of 9% which was exceeded last year. The company also exceeded sales of EUR 1bn. Tokmanni will introduce its revised strategic targets in connection with the CMD which takes place in March. We see that there is still gross margin improvement potential as the company aims constantly to increase the share of direct import and private labels. This boosts profitability development. We expect further growth in online sales, though the share is still expected to remain relatively low compared to the total sales (online sales grew by 124% in 2020). The company’s low price image combined with broad product assortment has paid off and the company has been able attract new customers. The share of new customers was 20% in 2020. Tokmanni has also launched a review on the possibilities of expanding the logistics center in Mäntsälä and we hope to get more color on that later during the year.
“BUY” with TP of EUR 20 (18.4)
Tokmanni expects slight growth in revenue in 2021. Adj. EBIT is expected to be at the same level as in the previous year. We have increased our 21E sales expectation by ~4% and expect sales of EUR 1089m (+1.5% y/y). We expect adj. EBIT of EUR 99m (9.1% margin). On our estimates the company trades with 21E-22E EV/EBIT multiple of 13.7x and 12.8x which is 7-8% discount compared to the Nordic non-grocery peers. We keep our rating “BUY” with TP of EUR 20 (18.4).
Raute’s Q4 was uneventful compared to preceding ones, not counting the large Russian order. Raute seems to be doing correct things from a strategic perspective, but we view the multiples simply too high given the current weak market environment. Our TP is EUR 21 (20), retain SELL.
Still no marked improvement in smaller project orders
Raute’s EUR 39m Q4 revenue was known before. The EUR 0.8m EBIT didn’t meet our EUR 2.0m estimate as the mix was tilted more towards projects than we expected. Inventory write-downs and pandemic restrictions were further headwinds. Order intake was EUR 70m (vs our EUR 74m estimate). Small project deliveries were booked only to the tune of EUR 3m (vs our EUR 7m estimate), excluding the EUR 55m Russian order. The figure can be compared to the EUR 2m seen in Q3’20 and EUR 4m in Q4’19. Technology services orders were EUR 12m as we expected, down by 8% y/y but improvement from the previous pandemic lows.
Results will improve in FY ‘21, we estimate EBIT at EUR 6m
Raute’s FY ’20 EBIT was negative due to low top line, unfavorable mix (low services share but also the fact that projects were tilted towards a large low-margin order), pandemic restrictions and high R&D investments. Revenue will be higher this year and services outlook is improving. The most acute phase of the pandemic has been passed and restrictions should fade away towards the end of the year, but FY ’21 EBIT potential remains limited due to the continued reliance on a large Russian order. The focus on R&D also remains. Raute’s strong Russian traction and the strategic focus on developing more competitive technology for emerging markets are long-term positives, but in the short-term perspective profitability outlook is still muted relative to the recent years’ avg. EUR 11m EBIT. European mill orders are also unlikely to reach the levels of recent high years.
Potential exists, but we view the multiples too steep
In our opinion Raute’s valuation still requires patience as there has not been, so far, any concrete sign of smaller orders picking up. Raute is now valued ca. 10x EV/EBITDA and 16x EV/EBIT on our FY ’21 estimates. The multiples could decrease to around 8x and 11x in the coming years. The outlook might well improve fast, but right now this doesn’t seem to be the case. Our new TP is EUR 21 (20). We retain our SELL rating.
Raute’s Q4 EBIT didn’t meet our estimate and order intake was also a bit soft, excluding the big new Russian project. In our view significant improvement in business conditions still waits.
Etteplan reported better than expected profitability figures in Q4. The guidance for 2021 is in line with our expectations and we make no larger changes to our estimates. Uncertainty in demand pick-up is still present and we expect a sluggish start to 2021. We retain our SELL-rating and target price of EUR 13.6.
Better than expected profitability in Q4
Etteplan reported solid profitability figures in Q4, with EBIT at EUR 7.1m (EUR 6.5m/6.6m Evli/cons.) and EBIT (excl. NRI’s) of EUR 7.4m. Revenue was slightly below expectations, at EUR 70.3m (EUR 71.8m Evli/cons.). Etteplan proposes a dividend distribution of EUR 0.34 per share (EUR 0.33 Evli/cons.). Positive news on the rollout of Coronavirus vaccines aided demand in Q4. In 2021 Etteplan expects revenue to amount to EUR 280-300m and EBIT to amount to EUR 23-26m.
Demand pick-up uncertainty but acquisitions boost growth
We have made only minor revisions post-Q4, with our estimates still near the mid-point of the guidance range (revenue EUR 288.9m and EBIT EUR 24.5m). Growth is aided by the Tegeman and TekPartner acquisitions and we expect double-digit growth. 2021 should start of somewhat sluggish but we expect demand to pick up going into mid-2021. Cost expansion after the strict cost discipline in 2020 and recruitments in 2021 should limit margin upside and we expect to see margins similar to 2020. The outlook for 2021 is looking brighter but we still see uncertainty in organic growth capabilities. Lockdowns and restrictions are continuing to impact the overall economy and the first half of the year in that regard appears challenging, but we are carefully optimistic going forward.
SELL with a target price of EUR 13.6
With no larger changes to our estimates we retain our target price of EUR 13.6 and SELL-rating. Our target price values Etteplan at 18x 2021 P/E, which we consider justified given the still present uncertainty.
Tokmanni’s Q4 revenue increased by 14.6 % y/y (LFL growth of 13.4%) and was EUR 327m vs. EUR 315m/315m Evli/cons. Tokmanni’s adj. EBIT was EUR 45m vs. EUR 38m/37m Evli/cons. Dividend proposal was EUR 0.85 vs. EUR 0.78/0.74 Evli/cons. The company expects slight growth in revenue in 2021. Adj. EBIT is expected to be on the same level as last year.
ESL helped Aspo Q4 EBIT top estimates. Both ESL and Telko now perform, but we see valuation already appreciates this fact. Our TP is now EUR 9.5 (8.75), rating HOLD (BUY).
ESL and Telko have now performed around target levels
Aspo’s EUR 133.5m Q4 revenue was in line with estimates (EUR 129.3m/132.9m Evli/cons.) while the EUR 7.6m EBIT was a positive surprise relative to the EUR 7.0m/7.1m Evli/cons. estimates. The EBIT beat was driven by ESL. The Q4 improvement in ESL’s operating environment didn’t come as a surprise, but in our opinion the EUR 4.8m Q4 EBIT was significantly better than expected (we estimated EUR 3.2m) considering the EUR -0.1m Q3 figure and the fact that top line and cargo volumes were still down from a year ago. ESL’s EBIT was indeed up from the EUR 4.4m comparative figure thanks to cost savings measures. Telko continued to perform close to expectations and posted a strong 6.2% operating margin. Meanwhile Leipurin EBIT declined to EUR 0.2m from the EUR 1.1m comparison figure.
Aspo didn’t issue numerical EBIT guidance range for FY ‘21
ESL’s strong Q4 profitability (already close to the 12% long-term margin target) is encouraging as there’s now sound evidence Aspo’s two main cylinders are firing and can perform close to their long-term target levels. In our view the recent performance levels indicate ESL and Telko should by themselves help Aspo reach EUR 30m EBIT this year. Aspo however didn’t give any numerical EBIT guidance range. According to the guidance EBIT will be higher this year, and as such the statement isn’t very informative. In our view ESL’s EBIT will improve a lot this year but is probably not going to reach EUR 20m yet. We revise our FY ’21 EBIT estimate for ESL only from EUR 16.3m to EUR 16.4m as environmental equipment installations mean there’ll be more lay-ups than usual. We expect Telko FY ’21 EBIT to grow by 9%.
We consider current valuation to land within a neutral area
We revise our Aspo FY ’21 EBIT estimate up only a bit to EUR 29.7m. This means ca. EUR 10m annual gain and in terms of EBITDA 25% y/y growth. In our opinion Aspo’s valuation, at least in terms of SOTP, already reflects significant earnings growth for this year. There’s likely to be more potential beyond ’21, however we don’t see these gains should be fully valued right now. Our new TP is EUR 9.5 (8.75) per share, rating HOLD (BUY).
Verkkokauppa.com’s Q4’20 revenue grew by 10% y/y and was EUR 176m vs. Evli EUR 171m and consensus of EUR 170m. Adj. EBIT was EUR 6.2m vs. EUR 6.6m/6.3m Evli/cons. Dividend proposal was EUR 0.45 (incl. additional dividend of EUR 0.22) vs. EUR 0.23/0.23 Evli/cons.
Finnair reports its Q4 result on next week’s Thursday, 18th of February. We expect Q4E revenue to decline by 88% y/y to EUR 94m and adj. EBIT of EUR -172m. We retain “HOLD” and TP of EUR 0.60 ahead the result.
Expecting Q4E revenue to decline by 88% y/y
In Oct-Dec, Finnair carried 278k passengers which is 92% decline compared to Q4’19. Average Seat Kilometers (ASK) decreased by 89% y/y and Revenue Passenger Kilometers (RPK) decreased by 96% y/y. Passenger Load Factor (PLF) declined by 49.8%-points y/y and was 29.2%. The pandemic situation worsened towards the end of the year and strict travel restrictions remained. We expect Q4E revenue of EUR 94m (-88% y/y) and adj. EBIT of EUR -172m.
New virus variants increasing fears
During Q4, Finnair finalized a sale and leaseback arrangement for one of its A350 aircrafts. The immediate positive cash effect is in excess of EUR 100m. The total positive net impact of the amendments to the terms of Finnair pension fund as well as pilots’ early retirement is EUR 133m on Q4 operating result (not affecting comparable operating result). According to the company, the comparable operating loss in Q4 will be similar to Q2-Q3’20. Despite the vaccine optimism the catastrophic situation threatens to continue at least throughout H1’2021 and deepen distress in the aviation sector as new virus variants are increasing fears and there are delays in the vaccine supply for Europe. Therefore, we have cut our H1’21E estimates and expect better improvement to start in the latter half of the year.
“HOLD” with TP of EUR 0.60
We expect FY20E revenue of EUR 821m (-74% y/y) and adj. EBIT of EUR -604m. We expect the situation to improve during 21E, but better improvement is seen later in 22E. However, there are still significant uncertainties with our estimates as visibility remains extremely weak. We keep our rating “HOLD” with TP of EUR 0.60 intact ahead the Q4 result.
Etteplan's net sales in Q4 amounted to EUR 70.3m, slightly below our and consensus estimates (EUR 71.8m/71.8m Evli/cons.). EBIT amounted to EUR 7.1m, above our and consensus estimates (EUR 6.5m/6.6m Evli/cons.). Etteplan proposes a dividend of EUR 0.34 per share (EUR 0.33/0.33 Evli/Cons.).
Aspo’s Q4 EBIT topped estimates thanks to ESL’s strong profitability. It is clear EBIT is set to improve this year, however Aspo did not disclose numerical EBIT guidance range.
Vaisala’s R&D leadership focused strategy and bolt-on acquisitions have paid off well during the last years. Dark clouds are currently hanging over W&E, but thanks to its strong financial position, and growing share of more profitable IM sales, we see Vaisala on track to targeted above 5% growth and above 12% EBIT margins. However, we continue seeing Vaisala’s valuation too expensive given the expected financial performance. We maintain our target price of 32€ and our SELL recommendation.
Maneuvering pass a challenging 2020
Vaisala has managed to maneuver pass the corona pandemic rather unscathed. Due to lowered operating expenses caused by the pandemic and good order book & deliveries, performance has been good in both BU’s. Currently, W&E is weighed down by the weakened outlook for aviation and lack of larger infra projects, especially in developed countries. IM on the other hand, is expected to be less affected by COVID going forward.
Profitable growth with R&D leadership strategy
Looking at the coming years, we see Vaisala’s targeted above 5% sales growth and >12% margins achievable despite current gloomy outlook for aviation. We expect the growing share of more profitable IM sales to continue supporting Vaisala’s growth and operating margin. In 2021E-22E, we estimate Vaisala’ net sales to grow by 4.5% and 5.3%, and EBIT margins of 12.2% and 12.6% respectively. We expect W&E market to begin to gradually recover in 2021E-22E with an annual growth rate of approximately 3% and W&E’s EBIT margins to gradually improve towards 7% in 2022E. For IM, we expect 2021E-22E continued profitable growth at 7% and 9.6% annual growth rates, respectively. We expect IM’s EBIT margins to stay above 20% in 2021-22E.
Maintain SELL as valuation is expensive
Vaisala’s share price has rallied in last few years and is currently around all time high levels. The share price rally is also visible in Vaisala’s valuation multiples, which have increased strongly since around mid-2019, resulting in a clear sustained valuation premium of 20-60% during this period. As peer group multiples have rerated as of late, Vaisala’s EV/EBIT and P/E valuation premium is now around 20-30% on our 2021-22E estimates. Despite recent surge in valuation multiples, we see valuation too expensive given Vaisala’s weaker growth rates and margins compared to our technology peer group. Thus, we maintain our target price of 32€ and our SELL recommendation. Our target price values Vaisala at 21-22e EV/EBIT multiples of 23x and 21x which is above peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.
Talenom’s Q4 was rather well in line with our expectations and with our 2021 estimates corresponding well with the guidance our estimates remain largely intact. Preparations for continued growth remain on the agenda. Our target price remains unchanged at EUR 11.5, our rating is now HOLD (SELL).
Q4 report rather well in line with expectations
Talenom’s Q4 report all in all was rather well in line with our expectations. Net sales amounted to EUR 16.5m (Evli EUR 16.8m) and operating profit to EUR 2.4m (Evli EUR 2.6m). The BoD proposes a dividend distribution of EUR 0.15 per share (Evli EUR 0.15). In 2021 the company expects net sales to amount to EUR 75-80m and operating profit to amount to EUR 14-16m (Evli prev. est. EUR 77.3m and EUR 15.5m respectively). Further acquisitions during 2021 could still see net sales grow past the guidance range, while the typically lower profitability of acquisition objects should limit earnings growth potential.
Preparations and build up for future growth
We have made only minor revisions to our estimates. The year 2021 will to quite some extent be a year of preparing and building up the new growth avenues. Organic growth figures should still be somewhat weaker, but the company sees potential for sales efforts in 2021 to pave the way for better figures in 2022. The small customer concept rollout has progressed quite as planned and the launch in Sweden during 2021 also remains on schedule. We see a limited impact of the new concept on sales in 2021. No new relevant information on the plans to further expand internationally was given.
HOLD (SELL) with a target price of EUR 11.5
Our estimates at large remain intact post-Q4 and we make no adjustment to our target price of EUR 11.5. Our TP values Talenom at approx. 43x 2021 P/E. After the minor share price correction our rating is now HOLD (SELL).
We expect Etteplan to report solid Q4 figures and propose a dividend distribution of EUR 0.33 per share. With the acquisition of TekPartner we now expect double-digit growth in 2021. With valuation now at levels that we find hard to justify, we lower our rating to SELL (HOLD) with a target price of EUR 13.6 (12.4)
Solid fourth quarter expected
Etteplan reports Q4 results on February 11th. We expect Etteplan to report solid figures, with the guidance update given in December implying better figures than in the comparison period. Our Q4 net sales and EBIT estimates are at EUR 71.8m and 6.5m respectively. The fourth quarter development is seen to have been aided by a pick-up in customer investment activity following positive news on Coronavirus vaccine rollout. We expect Etteplan to propose a dividend distribution of EUR 0.33 per share.
Expecting return to double-digit growth
We have made adjustments to our estimates after the acquisition of TekPartner and expansion to Denmark. TekPartner’s revenue in 2019 amounted to approx. EUR 8m. We now expect growth of 11.2% in 2021. Growth is supported by the Tegeman and TekPartner acquisitions. The 2021 guidance will be of key interest. We would expect to see a guidance reflecting clear growth in revenue and possibly also EBIT, although with the uncertainties a more careful approach may be taken this early on in 2021. We have assumed relatively flat margin development in 2021, expecting the strict cost savings measures in 2020 to be phased out during the year and growth and internal project investments to pick up.
SELL (HOLD) with a target price of EUR 13.6 (12.4)
Etteplan’s share price has picked up clearly, now trading quite clearly above peers. Although we could find justification for valuation above that of peers, we have a hard time justifying current absolute valuation levels given the still present uncertainty. We adjust our target price to EUR 13.6 (12.4) on our revised estimates but downgrade our rating to SELL (HOLD).
Verkkokauppa.com reports its Q4 result on Friday, 12th of February. We have slightly increased our Q4E estimates ahead the result and keep our rating “BUY” with new TP of EUR 8.3 (6.5).
Expecting sales growth of 7% in Oct-Dec
Year 2020 has so far been an excellent year for Verkkokauppa.com and it has benefited from the changed environment and customer behavior (rapid shift into online). The final quarter is normally the most important one for Verkkokauppa.com in terms of both, sales and profitability and we expect the company to reach strong figures in Oct-Dec, driven by campaigns and Christmas. We have increased our Q4E sales expectation by ~1% and our adj. EBIT expectation by ~6%. We expect Q4E sales of EUR 171m (+7% y/y) and adj. EBIT of EUR 6.6m (+47% y/y). We expect 20E dividend of EUR 0.23.
Well positioned for the future
Last year was eventful not only due to the COVID-19 and its impacts on the consumer behavior but also due to Amazon which launched its operations in Sweden at the latter half of the year. In our view, the impacts of the launch on Finland were negligible but it is clear that the presence of the online giant will increase in Finland in the long run. Online sales have grown significantly which has benefited Verkkokauppa.com but the company has also taken right actions towards better profitability which reinforces our view that the company is able reach profitable growth even after the pandemic.
“BUY” with TP of EUR 8.3 (6.5)
We expect 20E sales of EUR 549m (+9% y/y) and adj. EBIT of EUR 20.8m (3.8% margin). Thus, our expectations are at the higher end of the given guidance (sales of EUR 525-550m and adj. EBIT of EUR 17-21m). On our estimates, the company trades with 20E-21E EV/EBIT multiple of 14.5x and 15.2x which translates into 40-50% discount compared to the peers. We keep our rating “BUY” with TP of EUR 8.3 (6.5).
Talenom's net sales in Q4 grew 10.4% to EUR 16.5m, in line with our and consensus estimates (EUR 16.8m Evli/cons.). EBIT amounted to EUR 2.4m, slightly below our and consensus estimates (EUR 2.6m Evli/cons.). Net sales for 2021 are expected to amount to EUR 75-80m and operating profit to EUR 14-16m.
Consti reported slightly better than expected Q4 results. We continue to expect minor sales growth in 2021 and improvement in operating margins. We adjust our target price to EUR 13.0 (12.0), BUY-rating intact.
Q4 slightly above expectations
Consti reported slightly better than expected Q4 results. Net sales amounted to EUR 78.1m (EUR 71.6m/71.1m Evli/cons.), with sales decline slowing down clearly compared to previous quarters and Q4 net sales down only 0.2% y/y. EBIT amounted to EUR 3.0m (EUR 2.7m Evli/cons.). A dividend distribution of EUR 0.40 per share is proposed (EUR 0.35 Evli/cons.). The order backlog was now down only 4.3% y/y, at EUR 177.9m, after a relatively decent Q4 order intake of EUR 54.3m.
Expecting margin improvement and minor growth
Consti expects an operating profit of EUR 7-11m in 2021, with our estimate unchanged at EUR 9.1m. Activity is seen to increase slightly y/y in 2021 and our net sales estimate is up some 3% to 281m, expecting minor growth of 2.3%. COVID-19 induced uncertainty is still at elevated levels, thus also the wider guidance range. Consti updated its strategy for 2021-2023, with clear focus on the customer focused organization. Perhaps most unexpected was the ambition to expand operations to new construction projects. This approach however appears to be more of a complementary offering to serve existing customers and the share of new construction projects could be seen to be some 10-15% of net sales at the end of the strategy period. In our view Consti now appears to be seeking to take more initiative after having focused on organizational changes and profitability improvement.
BUY with a target price of EUR 13.0 (12.0)
Consti’s valuation has continued to approach that of peers but is still not too stretched and with the good development and solid cash generation we see continued upside potential. We adjust our target price to EUR 13.0 (12.0), valuing Consti at 8.8x 2021 EV/EBITDA, our BUY-rating remains intact.
SRV’s Q4 results were quite in line with our expectations. 2021 guidance is slightly softer than anticipated but the wide range leaves room for solid figures in 2021. We have made minor downwards revisions to our estimates but good order intake during H1/2021 could swing our expectations more towards the upper half of the guidance range.
Results quite in line with expectations
SRV’s Q4 results were rather well in line with our estimates. Net sales in Q4 amounted to EUR 292.5m, quite in line with our and consensus estimates (EUR 294.1m/299.6m Evli/cons.). EBIT amounted to EUR -8.0m, slightly below our and consensus estimates (EUR -6.6m/-6.9m Evli/cons.). Although full-year EBIT was quite weak due to the booked negative changes in the value of investments in Q4, 2020 operating cash flow was at a commendable EUR 46.3m. SRV as expected proposed that no dividend be distributed for 2020.
Guidance slightly soft but room for solid figures in 2021
In SRV’s outlook for 2021 revenue is expected to amount to EUR 900-1,050m and operative operating profit to EUR 16-26m. Our earlier estimates (EUR 999m and EUR 23.8m) were slightly above the mid-point of the guidance range. The guidance is somewhat soft, but the upper points of the range still leaves room for a solid 2021. We have made minor downward revisions to our estimates, as we are not fully convinced on sales development given the order backlog and order intake. Solid order intake during H1/21 could still swing expectations more strongly towards the upper half of the guidance range. We now expect revenue of EUR 962.1m and operative operating profit of EUR 22.0m.
BUY-rating with a target price of EUR 0.64
SRV’s Q4 results and the outlook for 2021 all in all were quite as expected and although earnings remained quite weak more importantly cash flows were at good levels. We reiterate our target price of EUR 0.64 and BUY-rating.
Suominen’s Q4 figures were close to what we expected, but the report turned our overall view a bit more positive. Our TP is now EUR 6.5 (6.0) and we retain our BUY rating.
Q4 was a strong ending for an extraordinary record year
Suominen’s Q4 revenue grew by 18% y/y to EUR 111m (vs our EUR 106m estimate). Europe grew by 37%, albeit from a very low base. Americas still managed to grow a decent 7%. The 15.6% GM was a tad above our 15.0% estimate. SGA were slightly above our estimate and certain non-recurring expenses, such as bad debts, weighed the bottom line a bit. The EUR 8.5m EBIT thus didn’t top our EUR 8.7m estimate. Suominen sees nonwovens demand will remain on a high level. In our view the 12% y/y revenue growth for FY ’20 makes further gains hard to achieve in FY ’21. We expect Suominen to post flat top line this year.
In our opinion outlook and comments were encouraging
Suominen expects FY ’21 EBITDA to remain in line with FY ’20 (EUR 61m). We view this outlook to be close to what we estimated prior the report. We revise our FY ’21 EBITDA estimate up only a bit, from EUR 55m to EUR 57m. The revision is not big in quantitative terms, yet we see the outlook improves confidence with respect to this year’s results. In our opinion there was a small risk Suominen might have guided declining FY ’21 EBITDA. There remains considerable gross margin uncertainty as raw material and transportation costs appear bound to trend upward, but all in all we view Suominen’s comments to indicate the nonwovens pricing environment is still relatively strong. In other words, gross margin is unlikely to plunge.
We view current valuation attractive on stabilizing earnings
Suominen trades 6x EV/EBITDA and 10x EV/EBIT on our FY ’21 estimates. Recent developments mean a high level of uncertainty persists around profitability margins going forward, however we are now more confident on earnings stabilization. Performance has improved with regards to plant-level efficiency, although the pandemic boost makes it hard to quantify how much these own measures have impacted figures. Suominen has announced certain small investments to upgrade some of its existing production lines, and we see the company is now in a strong position for possible larger investments, be they organic or inorganic. Our new TP is EUR 6.5 (6.0). We retain our BUY rating.
Tokmanni reports its Q4 result on next week’s Friday, 12th of Feb. Despite the weakened COVID-19 situation, we expect a strong quarter. We have increased our Q4E estimates and keep our rating “BUY” with TP of EUR 18.4.
Expecting sales growth of ~10%
Despite the weakened COVID-19 situation and new regional restrictions, we expect Tokmanni to reach strong figures in Q4E, driven by campaigns and Christmas sales as well as new store openings. We have increased our Q4’20E sales expectation by ~5% and our adj. EBIT expectation by ~10%. We expect Oct-Dec sales to grow by 10.4% y/y to EUR 314.5m and adj. EBIT of EUR 38m (margin of 12.1%). We expect 20E dividend of EUR 0.78 per share.
The final quarter is driven by campaigns and Christmas
The household consumption has been focused on domestic purchases during the pandemic which has benefited Tokmanni throughout the year. Even though the virus situation weakened towards the end of the year and fears of the new virus variants rose we expect only limited impacts on customer flows. As consumers have continued to spend more time at home, we expect the demand of e.g. leisure, sport, and home products has been strong. The company’s increasing online presence should also boost sales during campaigns such as Black Friday. We don’t expect similar discount sales as seen in Q3 with apparel sales which should support gross margin.
“BUY” with TP of EUR 18.4 intact
We expect FY20E sales of EUR 1061m (12.4% y/y) and adj. EBIT of EUR 92.9m. We haven’t made significant changes to our 21E-22E estimates. On our estimates, the company trades with 20E-21E EV/EBIT multiple of 14.4x and 14.3x, which is similar compared to the Nordic non-grocery peers and ~20% discount compared to the int. discount peers. We keep our rating “BUY” with TP of EUR 18.4 intact ahead the Q4 result.
Consti's net sales in Q4 amounted to EUR 78.1m, above our estimates and consensus estimates (EUR 71.6m/71.1m Evli/cons.). EBIT amounted to EUR 3.0m, slightly above our and consensus estimates (EUR 2.7m/2.7m Evli/cons.). Dividend proposal EUR 0.40 per share (0.35 Evli/cons.). 2021 EBIT guidance EUR 7-11m.
CapMan posted strong and clearly better than expected Q4 results, ending the slightly challenging year on a clear positive note. In our view most importantly management fees increased clearly, providing good support for fee-based profitability in 2021. We have raised our 2021-2022E EBIT estimates by some 20%.
Strong fourth quarter beating our expectations
CapMan’s Q4 results were strong and clearly better than expected. Revenue amounted to EUR 13.4m (Evli/cons. EUR 10.6m/10.7m) and the operating profit to EUR 9.7m (Evli/cons. 4.4m/5.1m). The earnings beat was mainly attributable to higher than expected fair value changes (act./Evli EUR 7.0m/3.4m). More importantly and frankly also quite surprisingly management fees also grew clearly from previous quarters. Management fees grew to EUR 9.7m (Evli EUR 7.5m) and the Management Company business EBIT as such beat our expectations (act./Evli EUR 3.6m/2.0m). CapMan expectedly proposed a dividend distribution of EUR 0.14 per share, to be paid in two instalments.
2021-2022E EBIT estimates raised by some 20%
We have made larger revisions to our estimates and raised our 2021-2022E EBIT estimates by some 20%. We have clearly raised our estimates for management fees, with clear momentum being gained, and as such also fee-based profitability. Our investment business return estimates remain somewhat conservative given the solid Q4 returns (without larger exits), as we are not yet convinced of a clear level shift. We still assume that carried interest will be earned during 2021E, although COVID-19 has had a dent on the progress and timing is still highly uncertain. On Group level in 2021 we expect CapMan to post much stronger results than in 2020 with across the board improvements. Our 2021 EBIT estimate is at EUR 38.2m (2019: EUR 12.3m).
HOLD with a target price of EUR 2.70 (2.40)
Based on our estimates revisions we adjust our target price to EUR 2.70 (2.40). Current valuation still leaves some upside potential, but we still see some need for more evidence on higher earnings levels. We retain our HOLD-rating.
Suominen’s Q4 EBIT landed very near our estimate, but all considered the report was perhaps a bit better than we expected.
CapMan's net sales in Q4 amounted to EUR 13.4m, above our consensus estimates (EUR 10.6m/10.7m Evli/cons.). EBIT amounted to EUR 9.7m, above our and consensus estimates (EUR 4.4m/5.1m Evli/cons.). Dividend proposal: CapMan proposes a dividend of EUR 0.14 per share (EUR 0.14/0.14 Evli/Cons.).
SRV's net sales in Q4 amounted to EUR 292.5m, quite in line with our and consensus estimates (EUR 294.1m/299.6m Evli/cons.). EBIT amounted to EUR -8.0m, slightly below our and consensus estimates (EUR -6.6m/-6.9m Evli/cons.).
Talenom’s Q4 results should not contain any major surprises and our sights are set on information on 2021 expectations. Recent acquisitions support continued growth in 2021, with our growth estimate at 18%.
Good finish to year expected
Talenom will report Q4 results on February 8th. We expect revenue of EUR 16.8m (Q4/19: 14.9m) and EBIT of EUR 2.6m (Q4/19: 1.5m). Our respective FY2020 estimates are EUR 65.5m and EUR 13.1m, with co’s guidance at EUR 64-68m and 12-14m respectively. With the predictability in revenue streams and the CMD held in November we do not expect any major surprises and the guidance for 2021 will be of most interest. We expect Talenom to propose a dividend distribution of EUR 0.15 per share (2019 EUR 0.125 adj.).
Acquisitions providing growth boost for 2021
Talenom announced the acquisitions of two accounting firms in Sweden earlier on in Q4 and of acquisitions in Finland in February. The total combined net sales of these acquisitions amounted to roughly EUR 4.5m, providing a good start for growth in 2021. We had already assumed a pickup in inorganic growth and have made only minor adjustments to our estimates. We expect revenue growth of 18.0% in 2021, driven to a larger extent by acquisitions. Talenom has noted that organic growth domestically has been more challenging, and the current environment and digitalization needs offer opportunities for growing inorganically.
SELL (HOLD) with a target price of EUR 11.5 (10.2)
Talenom’s share price has increased some 16% since our previous update and on our estimates now trades at 2021 P/E of close to 50x. Talenom has a solid multiyear track of rapid profitable growth, but with some uncertainty in the somewhat different growth approach and organic growth slowdown we find the current valuation hard to justify. We adjust our target price to EUR 11.5 (10.2), valuing Talenom at 43x and 38x 2021E and 2022E P/E respectively and downgrade our rating to SELL (HOLD).
Consti will report Q4 results on February 5th. We expect the steady development seen during earlier quarters to continue and a first good year in a while after previous year challenges. On our estimates Consti is set to double its EBIT-margin in 2020 compared to 2019. We also expect dividend distribution to pick up to EUR 0.35 per share (2019: EUR 0.16).
Expect a good finish to a year of improvement
Consti will report Q4 results on February 5th. We do not expect any major deviations from the steady progress during earlier quarters in 2020 and expect Q4 EBIT of EUR 2.7m. Consti has for FY2020 estimated that its operating result will improve compared to 2019, which was achieved already by Q3. The second wave of the coronavirus pandemic has had an impact on the construction industry during Q4, with reports of temporary worksite shutdowns due to virus exposures. To our understanding Consti has not been significantly affected, with some very minor additional costs having been incurred already from earlier on in the year.
Cash generation supporting increased dividend distribution
We expect that Consti will propose a dividend of EUR 0.35 per share (2019: EUR 0.16), now being well back on track on profitability and cash generation after challenges faced in previous years. The cash flow during 1-9/2020 was an exceptionally solid EUR 14.7m (1-9/2019: EUR -1.1m). The outlook for 2021 remains somewhat weakened by demand uncertainty in particular among corporate customers and we expect only limited growth. Room for some margin improvement still exists, with supplier pricing power having impacted on the construction industry during recent boom years.
BUY with a target price of EUR 12.0 (10.0)
We have not made any revisions to our estimates ahead of Q4. Valuation compared to construction and building installations and services company peers is still not challenging. With peer multiples also up since our previous update we adjust our target price to EUR 12.0 (EUR 10.0) with our BUY-rating intact.
DT’s Q4 report was broadly in line with expectations. After a challenging year, especially for the security segment, a gradual improvement is expected. Although it’s difficult to estimate the slope of the recovery, improvement is still ahead, and we see DT back on the road towards +10% growth and above 15% margins. Based on the increased confidence in improving security demand coupled with DT’s potential for better growth and profitability metrics than our peer group, we raise our TP to 28.5 euros (prev. 26.5€) with BUY recommendation (prev. HOLD).
A decent Q4 and 2020 given challenging market situation
DT’s Q4 figures were broadly in line with expectations. Q4 net sales amounted to EUR 19.9m (-20,4% y/y) vs. EUR 22.2m/22.2m Evli/consensus estimates. Q4 EBIT was EUR 2.3m (11,8% margin) vs. EUR 2.7m/2.75m Evli/cons. R&D costs amounted to EUR 2.2m or 11,2% of net sales (Q4’19: 2.6m, 10,6%). SBU net sales were EUR 9.0m vs. EUR 11.3m Evli estimate. SBU sales declined -45,5% y/y, mainly due the COVID-19 pandemic affecting security investments and challenging comparison figures. MBU net sales were EUR 10.9m which was in line with our estimate of EUR 10.9m. Dividend proposal is 0.28 (0.28/0.25 Evli/cons), which is at upper end of distribution policy of 30-60%.
Cautiously optimistic outlook
After a challenging year, especially for SBU, DT is cautiously optimistic that the worst for SBU is soon behind. Demand in the security market is expected to head for growth in Q2 of 2021 at the earliest. SBU sales will decrease in Q1 y/y, but will start to grow in Q2, although demand is still subject to uncertainty. DT sees growth in industrial sales and double-digit growth in MBU sales in H1 of 2021. Total net sales are expected to decrease in Q1 and grow in H1 of 2021. DT sees predictability of the company's target markets still lower than usual due to the extraordinary uncertainty caused by the pandemic. As of Q1/21, DT will report three business segments; MBU, SBU and new Industrial Solutions Business Unit (IBU), which previously was part of SBU. Industrial sales accounted for over EUR 10m (25%) of SBU sales in 2020. Industrial market is categorized as higher margin, but smaller volumes, more fragmented customer base, and a variety of end applications.
BUY with target price 28.5 euros (prev. 26.5€)
We have made slight calibrations to our estimates based on the report. We continue to expect DT to return to sales and profit growth path this year. We estimate 2021e net sales growth of 12,4 % and an EBIT of EUR 12.4m (13,5% margin), as SBU will start contributing to growth from Q2/21 onwards. Although it’s difficult to estimate the slope of the recovery, improvement is still ahead, and we see DT back on the road towards +10% growth and above 15% margins. On our 2022e estimates, DT is trading at 20.6x EV/EBIT, in line with peer group. Despite valuation being in line with peer group, we’re willing to take a more proactive stance based on the increased confidence in improving security demand coupled with DT’s potential for better growth and profitability metrics than peer group. We raise our TP to 28.5 euros (prev. 26.5€ with BUY recommendation (prev. HOLD).
DT sees growth in IBU sales and double-digit growth in MBU sales in H1 of 2021. Demand in the security market is expected to head for growth in Q2 of 2021 at the earliest. SBU sales will decrease in Q1 year-on-year, but will start to grow in Q2, although demand is still subject to uncertainty. Total net sales are expected to decrease in Q1 and grow in H1 of 2021. DT sees predictability of the company's target markets still lower than usual due to the extraordinary uncertainty caused by the pandemic.
We expect CapMan to report rather good Q4 results, with our previous slight concerns of investment returns having been alleviated since Q3. We expect CapMan to propose a dividend distribution of EUR 0.14 per share, implying a dividend yield of 5.6% (1.2.2021 closing price).
Expecting a rather good last quarter
CapMan will report Q4 results on February 4th. Post-Q3 we saw slight concerns in fair value changes of investments mainly in real estate due to the revaluation time frames. These concerns now do not appear to be substantial and we have as such raised our Q4/2020 estimates for the Investment Business. The lack of significant success fees and carried interest will limit the earnings but with a lower share of bonuses in personnel expenses (vs. Q4/2019) CapMan should still post rather good earnings figures. We have adjusted our EBIT estimate to EUR 4.4m (prev. 2.9m) mainly due to the raised fair value change estimate.
Continued DPS growth expected
We expect CapMan to propose a dividend of EUR 0.14 per share, in line with the target of paying an annually increasing dividend (2019: EUR 0.13 per share). With the financing decisions made during Q4 the liquidity situation will remain healthy despite the weaker earnings this year. We expect earnings figures to improve clearly in 2021 driven by higher fee-based profitability from the growth in AUM, higher investment returns after the weak 2020 and growth in the services business. We expect 2021E EBIT of EUR 32.0m compared with EUR 7.0m 2020E.
HOLD (BUY) with a target price of EUR 2.40 (2.20)
Current valuation is after the share price increase since on our previous update (+~28%) on our estimates somewhat higher than that implied by our SOTP-model and peer multiples, but the anticipated dividend yield is still clearly supportive. Following our estimates and multiples adjustments we raise our target price to EUR 2.40 (EUR 2.20) but downgrade our rating to HOLD (BUY).
Given the previously specified outlook the Q4 profitability is largely known, with the Investments segment overshadowing good construction progress. The Q4 report should bring a lot to the table, especially in regards of previous communication of restoring profitability back to 2017 levels, clearly above the 2020 guidance.
Good construction development burdened by investments
SRV will report Q4 results on February 4th. SRV specified its guidance earlier on, expecting the operative operating profit for 2020 to be in the range of EUR 3-6m. The Q4 results will be affected by changes in the value of the Investment segment’s balance sheet items for a total negative impact of EUR 12m. Although the negative impact casts a shadow on the good operative operating profit development during earlier quarters these items should to our understanding be non-cash, and the guidance still implies continued healthy construction margin development. Our estimate for the Construction segment’s operative operating profit margin in 2020 is at 2.9% (2019: 0.7%) and Group operative operating profit estimate at EUR 6.0m.
Expectations of a better year in 2021
We do not expect a dividend distribution for FY2020. Although the company’s cash flows have improved clearly through divestments and financial measures taken, the company still has a rather strained balance sheet given current operating cash flows. The guidance for 2021 will be of key interest, as SRV has previously communicated intentions to restore the operative operating profit in 2021 to levels seen in 2017 (EUR 27.0m). SRV will also release its updated strategy and financial targets in conjunction with the Q4 results.
BUY with a target price of EUR 0.64
Apart from the changes to the Investments segment’s balance sheet item changes, our estimates remain intact. We retain our BUY-rating and target price of EUR 0.64.
Suominen reports Q4 results on Feb 4. Our Q4 estimates are intact but we make small revisions due to changes in EUR/USD. In our view Suominen can achieve flat top line in FY ‘21 while profitability faces headwinds after an extraordinary year. We retain our EUR 6 TP and BUY rating.
We expect gross margin to decline somewhat from now on
We estimate Americas and Europe to have continued to grow by 9% and 18% y/y respectively in Q4. These rates are very similar to the ones seen in Q3. We expect Q4 gross margin to have declined from the very high 17.1% Q3 figure to 15%, and thus estimate EBITDA down by EUR 4m q/q. USD has weakened by ca. 3% relative to EUR in the past three months and we update our estimates to incorporate the approximately EUR 10m headwind this represents to FY ’21 Americas revenue. We consequently estimate EBITDA down by about EUR 6m in FY ’21 due to pressure on gross margin. We would be surprised if Suominen guides profitability development to be better than flat.
Wipes demand is strong while input prices are recovering
Raw materials prices found their lows in Q4; there wasn’t yet any major spike. Prices have continued to climb so far this year, and this raises uncertainty regarding Suominen’s H1’21 gross margins. There was already negative nonwovens pricing pressure in Q4’20, following the weak H1’20 raw materials prices with a lag. In a more ordinary environment such developments would represent a clear hit on Suominen’s gross margin, however we see there’s still a chance these adverse forces will be somewhat muted by the current extraordinary wipes demand situation. Double-digit top line y/y growth is on the cards for Q4’20 and Q1’21, but beyond that the respective comparison periods turn challenging. We expect only flattish development beyond Q1’21.
Earnings multiples are still very reasonable
Last year has left the bar very high. We estimate Suominen to have recorded more than EUR 60m in FY ‘20 EBITDA and some EUR 40m in EBIT. We don’t see the company reaching such figures again any time soon, yet we expect EBITDA and EBIT to stabilize around ca. EUR 55m and EUR 35m during the next few years. On these estimates Suominen now trades around 6x EV/EBITDA and 10x EV/EBIT, a level which we continue to view attractive. We retain our EUR 6 TP and BUY rating.
Detection Technology will report its Q4 next Tuesday, February 2nd, at 9:00 EET. We look forward to hearing the latest developments and outlook regarding the security and medical imaging markets, especially now with the backdrop of global vaccine optimism and Chinese economic recovery. We expect DT to return to net sales and EBIT growth path this year, and based on the increased confidence in market improvement, we raise our target price to €26.5 (prev. €22) but maintain HOLD recommendation.
A challenging year coming to an end
We expect Q4 net sales of 22.2 MEUR (22.2 MEUR cons) and EBIT of 2.7 MEUR (2,75 MEUR cons), meaning a decline of -11% and -16% respectively compared to last year. 2020 has been challenging with the pandemic negatively affecting DT’s Security Business Unit, which represents roughly 60% of total net sales. With our estimates, DT’s FY20 net sales are down -18% to 84 MEUR and EBIT is down -46% to 9.1 MEUR (10,8% EBIT margin). As a result, we expect DT to distribute 0.28 dividend compared to 0.38 last year. Our dividend estimate is at upper end of DT’s dividend distribution policy of 30-60%. Dividend could prove to be smaller, but we see this as immaterial as DT in our view is more a growth case than a dividend case.
Global vaccine optimism and China brightening outlook
The key take from the upcoming Q4 result will be hearing management’s view on the security and medical imaging markets. DT stated in its Q3 report that it expects SBU sales to decrease in Q4, but to start improving in H1/21 driven by Chinese demand. China’s economy has recovered swiftly from the pandemic with Chinese’s GDP reaching pre-COVID levels at end of last year. China’s GDP accelerated 6,5% y/y in Q4 (Q3: 4,9% y/y), which is the fastest pace in last two years. The recovery in China coupled with the improved outlook for the battered aviation segment thanks to vaccine optimism, should provide DT with good grounds to improve on. MBU is expected to continue growing, albeit more slowly than in 2020.
HOLD with new target price of €26.50 (prev. €22)
We expect DT to return to both revenue and EBIT growth in 2021 but estimating the pace of recovery remains challenging due to low visibility. We have not made any changes to our estimates before the Q4 report, but based on the increased confidence in market improvement, we raise our target price to 26.5 euros (prev. 22 euros) reflecting both growth and earnings improvement potential, at or above our peer group. Our target price values DT at 21-22E EV/EBIT of 27x and 19x respectively, in line with our peer group as we look for more signs of security market recovery.
Raute has good potential to perform strong in the coming years, however in our opinion valuation is now stretched too high. Our TP is now EUR 20 (18), rating SELL (HOLD).
We make some upward revisions to our estimates
Raute said it expects FY ’20 revenue to amount to some EUR 115m. This implies Q4’20 top line at approximately EUR 39m. Raute previously expected the FY ’20 figure to decrease y/y, and now the update guides a clear decrease. We don’t view the update as substantial negative news and the preliminary ca. EUR 39m Q4’20 revenue figure is in fact somewhat above our previous EUR 33m estimate. We now estimate Q4 project deliveries revenue at EUR 26m (up 8% y/y) and that for technology services at EUR 13m (down 14% y/y). Raute didn’t update profitability guidance. We previously estimated EUR 1.7m in Q4 EBIT and we revise the estimate up a bit to EUR 2.0m.
FY ’21 EBIT yet unlikely to reach the highs seen in the past
We now expect Q4 order intake at EUR 19m when excluding the large EUR 55m Russian project. We estimate the smaller project deliveries orders at EUR 7m, a figure which is clearly above the very low benchmark figures. We expect technology services order intake at EUR 12m, in other words slightly down y/y but meaningful improvement q/q. The past few reports have painted an overall muted business picture, however there is a decent chance the outlook is already improving. We nevertheless think the recent share price gains have made near-term multiples too dear as the overall uncertainty level remains very much elevated.
In our view recent gains make downside relatively likely
We expect Raute’s top line to grow meaningfully, by ca. 15% y/y, in FY ’21. We make small revisions to our FY ’21 EBIT estimate, and now see the figure at EUR 6.4m (previously EUR 6.0m). This would still be far from the ca. EUR 11m EBIT that Raute averaged annually in 2016-19. Significant earnings potential remains for the coming years, but in our opinion the share has appreciated too steep considering all the uncertainty. We don’t see upside on the current 8x EV/EBITDA and 13x EV/EBIT multiples on our FY ’21 estimates. The valuation doesn’t look that expensive relative to long-term potential and in terms of the respective FY ’22 7.5x and 10x multiples, but we think this potential remains too far in the future. Our new TP is EUR 20 (18), rating SELL (HOLD).
Gofore held its Capital Markets Day on January 14th, which for us acted mainly as a confidence boost, as updated financial targets and strategy had been communicated earlier. The company remains well on its track of profitable and rapid growth, with little obstacles to be seen. We retain our HOLD-rating and target price of EUR 16.0.
CMD mostly a confidence booster for us
Gofore held its Capital Markets Day on January 14th. With the company having updated its strategy and long-term financial targets earlier, new information in that regard was limited. From a financial perspective, focus in our view was rather clearly on the commitment to continued rapid and profitable organic and inorganic growth, with an increased focus on international operations and the usage of subcontracting. The CMD increased our confidence in Gofore’s international growth capabilities, which arguably has been one of the company’s more challenging areas, as well as Gofore’s overall delivery capabilities.
Growth target well in sight
Gofore also published its December net sales figures, with full-year net sales at EUR 78.0m, slightly beating our EUR 77.3m estimate. We have made slight adjustments to our estimates but no major changes overall. Based on the inorganic growth from the Qentinel Finland acquisition along with an organic uplift we expect growth of 18.5% in 2021, with any potential acquisitions quite easily being able to push growth over the 20% target. We expect relatively flat margin development going forward given the already excellent levels and limited scalability.
HOLD with a target price of EUR 16.0
Current valuation remains clearly above peers, which to a larger extent is warranted given the solid growth and profitability, which in the long-term could provide upside potential, while near-term potential remains rather limited. Our target price of EUR 16.0 implies a 2021 P/E of 27.0x. We retain our HOLD-rating.
Endomines currently holds sizeable assets in the United States, looking to increase gold production to 40k oz p.a. within four years. Existing infrastructure and the high gold price provide support for pick-up in production volumes but given the track record in recent years the company still has quite a lot to prove.
Previous years have not gone quite as planned
Endomines established operations in the United States in 2018, after having been active only in Finland throughout the majority of the 2010’s. The past years have seen focus being on bringing the first asset, Friday, to production. The company has been met with challenges along the way, relating both to technical and financial challenges, but production commenced at the site in 2020. Continued technical challenges and a tight liquidity situation, however, forced the company to put the site under care and maintenance towards during the latter half of 2020.
Seeking 40k oz p.a. production within four years
Endomines is seeking to bolster its financial position to be able to restart production. With the high gold prices, plans have also been made for restarting production at Pampalo in Finland, as production was halted due to the then unfavourable gold price levels. Financial challenges have unfortunately been an inherent feature in the past years, as the company has not been able to create reliable cash flows. Now with assets that can be rapidly brought to production due to existing infrastructure and the favourable gold price levels Endomines is looking to improve production figures, targeting a production of 40k oz p.a. within four years. With the recent year track-record, however, the company in our view still has quite a lot to prove.
HOLD with a target price of SEK 2.9 (3.5)
We lower our target price to SEK 2.9 (3.5) following adjustments to our assumptions with the information provided regarding the rights issue and production plans. We retain our HOLD-rating.
We remain confident towards Scanfil’s long-term value chain positioning, however in our opinion recent share price gains have largely neutralized valuation. Our new TP is EUR 6.5 (6.25) and our rating is now HOLD (BUY).
The performance amid the pandemic testifies to strengths
Scanfil’s business has remained robust to macroeconomic shocks throughout its 40+ year history. ‘20 is another testament to this resilience as the pandemic hasn’t considerably affected Scanfil’s performance. The company has had to make only very small revisions to FY ’20 guidance; the latest revenue and EBIT outlook figures are down by respective 2% and 5% compared to the initial figures issued before the pandemic broke out. We now expect Scanfil to achieve some 3% top line growth for FY ’20; the increase is due to the 2019 HASEC acquisition. Profitability has remained strong. The Energy & Automation, Industrial and Medtec & Life Science segments have extended their good figures, while Communication and Consumer Applications have been softer. Consumer Applications’ revenue is down by ca. EUR 40m since FY ’18, however we view the segment still has good long-term outlook. We aren’t estimating rapid rebound for the segment yet see Scanfil should be able to post a 4% organic CAGR in the coming years thanks to its three largest ones.
We expect stellar performance to continue
We see Scanfil remains in top shape overall and is probably one of the best performing decent-sized contract electronics manufacturers globally. In our opinion Scanfil is unlikely to encounter profitability issues going forward and long-term organic growth outlook still appears good despite the pandemic. The company is also in a strong position to do more M&A and we are confident any potential deal, small or large, is likely to further improve Scanfil’s competitiveness.
Multiple expansion was overdue, yet visibility is limited
Scanfil’s share has appreciated significantly, and in our view some multiple expansion was long overdue given the company’s strong track record. Scanfil now trades in the range of 7-8x EV/EBITDA on our estimates for ’20-21, a level we don’t consider that challenging, but also view to be enough to curb meaningful additional gains for now since revenue visibility is limited even in the best of times. Our TP is EUR 6.5 (6.25), rating HOLD (BUY).
Etteplan raised its revenue and EBIT guidance for 2020, as investment demand has been picking up on the positive news on Coronavirus vaccines, with the fourth quarter set to show solid figures. We have raised our 2020-2022 EBIT estimates by some 6-9%. We retain our HOLD-rating with a target price of EUR 12.4 (9.3)
2020 revenue and EBIT guidance raised
Etteplan issued a positive profit warning, raising its revenue and EBIT guidance. Revenue in 2020 is now expected to be at same levels as in the previous year (prev. decrease slightly or same levels as previous year) and operating profit to decrease slightly or be at previous year levels (prev. decrease clearly). According to Etteplan the positive news on Coronavirus vaccines has had a favourable impact on investments and as such aided revenue during the last quarter of the year. The impact has been seen across the board but in particular within software and digitalization related solutions.
Moving in a better direction
The revised guidance implies solid results in the fourth quarter and is a clear confidence boost after the demand weakness in previous quarters. We have raised our 2020-2022 EBIT estimates by some 6-9%. We still remain somewhat cautious to revenue growth, as demand pick-up visibility is still rather limited, expecting a growth of 6.9% in 2021. We could certainly see potential for growth returning to double-digit figures if demand activity continues to improve. The Tegeman acquisition will also provide an inorganic boost to growth in 2021 and continued M&A activity is likely, although hard to predict.
HOLD with a target price of EUR 12.4 (9.3)
On our estimates Etteplan trades quite in line with historic valuation and on peer median multiples. The positive news has certainly raised our confidence levels but with the still present uncertainty higher valuation for now appears unwarranted. We adjust our TP to EUR 12.4 (9.3), valuing Etteplan at 18x 2021e P/E, and retain our HOLD-rating.
Gofore announced its updated strategy and new long-term financial targets, seeking over 20% annual growth and a 15% adj. EBITA-margin. With continued good signs of rapid profitable growth and recent solid order intake we adjust our TP to EUR 16.0 (12.1) and retain our HOLD-rating.
Seeking above 20% long-term growth
Gofore announced its updated strategy and gave and gave new long-term financial targets. Gofore will continue to seek to grow profitably both domestically and internationally while creating a positive impact on the society, customers and employees. Approximately half of the growth in the coming years is targeted through acquisitions and the aim for the international business is to achieve a similar growth pace as the Group. The long-term aim is to achieve above 20% annual net sales growth. The target for profitability is an adjusted EBITA-margin of 15%. Gofore also announced that it aims to transfer to the Nasdaq Helsinki Main Market during the first quarter of 2021.
Very promising signs from recent order intake
The new growth target is clearly above our previous expectations, with the organic growth having become more challenging in previous years for the market as a whole. Gofore has also grown to a size at which maintaining the relative growth pace should become more challenging. The order intake during the last quarter of 2020 has however been extremely promising, with the potential value of new orders corresponding to around 2019 net sales. Gofore is also in a solid position to continue inorganic growth, with a clear net cash position also after the Qentinel Finland acquisition. We have raised our growth estimates, expecting ~17% annual growth during 2021-2022 (prev. ~12%), and made adjustments with the transition to IFRS.
HOLD with a target price of EUR 16.0 (12.1)
On current multiples valuation is certainly not cheap, but with notable signs of continued rapid and profitable growth there is certainly merit in staying on for the ride. We adjust our TP to EUR 16.0 (12.1) and retain our HOLD-rating.
Marimekko issued a positive profit warning yesterday. The company expects 2020E net sales to be approx. at the same level or slightly lower compared to 2019. Adj. EBIT is expected to be higher compared to last year. We have increased our estimates and keep our rating “BUY” with TP of EUR 50 (44).
New guidance due to better than expected sales trend
Marimekko raised its 2020E guidance in particular due to better than expected trend and improved outlook in the retail sales in Finland. The company now expects 20E net sales to be approx. at the same level or slightly lower compared to last year (2019: EUR 125m). Adj. EBIT is expected to be higher compared to the previous year (2019: EUR 17.1m). Previously, Marimekko expected 20E net sales to be lower compared to the previous year and adj. EBIT to be approx. at the same level or lower compared to last year. We expected 20E sales to decline by 3.5% y/y to EUR 121m and adj. EBIT of EUR 17.3m.
Appealing to consumers despite the uncertain times
The profit warning didn’t come as a total surprise as the company has constantly been able to appeal to consumers, even despite the uncertain times. The company indicated that most of the earnings for H2’20E were generated during Q3. The net sales accrual in H2E is expected to be more balanced between the third and the final quarter. We expect the campaign season has boosted especially Marimekko’s domestic sales. In addition, the Christmas season is ongoing, and the household consumption is more focused on domestic purchases this year. We expect this to have a positive impact on Marimekko’s domestic sales and expect good demand especially in home décor products. However, there are still uncertainties related to the pandemic situation and the customer flows in retail stores. It is also essential to maintain the operational reliability of the distribution centers and logistics.
“BUY” with TP of 50 (44)
We have increased our 20E sales expectation by ~3% and our adj. EBIT expectation by ~12%. We now expect 20E sales of EUR 124.4m (-0.8% y/y) and adj. EBIT of EUR 19.4m. On our estimates, the company trades with 20E-21E EV/EBIT multiples of 18.7x and 18.0x which is a clear discount compared to the luxury peers. We keep our rating “BUY” with TP of EUR 50 (44).
Aspo revised FY ’20 guidance, which prompts us to update estimates particularly for ESL and Telko. Our TP is now EUR 8.75 (8) per share, BUY rating remains intact.
We raise our total Q4’20 EBIT estimate by EUR 2.9m
Aspo states especially steel and energy industry cargo volumes have developed strong and so ESL has performed better than expected before. The upgrade is thus not due to e.g. additional cost savings but driven by improving business conditions. Aspo previously guided EUR 14-16m in FY ’20 EBIT and the revised range is EUR 18-20m. The positive outlook revision was not such a big surprise since the previous guidance seemed to us quite cautious with respect to Telko’s development. We now estimate ESL to post EUR 3.2m in Q4 EBIT (prev. EUR 1.7m) and Telko to improve slightly further to EUR 4.3m (prev. EUR 2.8m). The new range suggests Aspo will achieve about EUR 7m in Q4 EBIT, which implies the company is well on track towards more than EUR 30m annually in the coming years.
The upgrade is incrementally positive for our overall view
Only last year Aspo’s profitability development appeared to rely mostly on ESL. There was potential in Telko that always waited for its materialization. Earlier this year the roles reversed in a way when Telko delivered very strong Q2 and Q3 results while ESL was clearly suffering the pandemic’s adverse effects. It has now become more apparent that ESL has not been left nursing any permanent wounds. Given ESL’s intact prospects and Telko’s gains Aspo’s overall development towards long-term financial targets can even be considered positive in 2020 (despite that FY ’20 EBIT will likely decline a bit y/y). EBIT thus seems bound towards the EUR 30m ballpark in the coming years, compared to the EUR 20m level before the pandemic.
Current valuation still leaves good upside potential
The recently reaffirmed long-term financial targets now look maybe more relevant than ever. There’s strong potential in all three segments, however 2020 also raises macroeconomic uncertainty and thus the operational upside prospects should still be valued somewhat cautiously. In our opinion Aspo’s equity value per share could easily top EUR 10 in the future if ESL and Telko continue to perform well next year. Our new TP is EUR 8.75 (8) and we retain our BUY rating.
Fellow Finance held a strategy event, with sights set on launching new payment and e-commerce products in 2021, for both SMEs and consumers. International operations are being focused on current markets, with new openings unlikely. We retain our HOLD-rating and TP of EUR 2.8.
New product launches expected in 2021
Fellow Finance held a strategy event on December 8th. Focus is being set on new payment and e-commerce products for SMEs and consumers, which include credit cards and invoice payment services. With the challenging consumer lending environment and potential extension of the temporary cap on consumer credit interest rates (credit cards excluded) the services could offer more recurring and higher margin fees. The rollouts of the new products are planned for 2021. The company has also restricted its international expansion plans, now focusing on selected existing international markets and new openings in the coming years are unlikely.
Rapid growth still expected
Fellow Finance set its 2023 financial targets, seeking EUR 23m in revenue, of which a significant share from business finance and international markets, and an EBIT-margin of 15%. In 2020 the company expects revenue of approx. EUR 11m and earnings to be negative (H2/2020 close to zero). Our revenue estimates remain largely intact while our 2020 EBIT estimate is up by EUR 0.5m and our 2021-2023 EBIT-margin estimates down by 2-6pp.
HOLD with a target price of EUR 2.8
Although we have lowered our mid-term profitability estimates, the new initiatives appear rather appealing and raise our confidence in Fellow Finance’s ability to navigate the challenging consumer lending environment. Performance in business lending has also been better than anticipated, and loan volumes are picking up nicely. We retain our HOLD-rating and TP of EUR 2.8.
Marimekko is a Finnish design and lifestyle company founded in 1951. The company’s largest market area is Finland followed by the APAC region. As we expect further earnings improvement potential via profitable, global growth, we keep our rating “BUY” with TP of EUR 44 (43).
A Finnish design and lifestyle company
Marimekko, founded in 1951 is a Finnish design and lifestyle company. The company is known for its unique colors and prints. The company’s product portfolio includes high-quality clothing, bags and accessories as well as home décor items ranging from textiles to tableware. The company aims to gain profitable growth via broader target audience. The company has approx. 150 stores across the world. Marimekko’s revenue CAGR in 2013-2019 was ~4.9 percent.
20E hampered by the pandemic but outlook remains good
Year 2020 started well but the Covid-19 quickly spread across the world and Marimekko was forced to close its retail stores temporarily in Finland as well as in other market areas. Despite of the challenging times, Marimekko performed relatively well during the lockdown. The company has benefited of having different product segments (i.e. consumers have spent more time at home which has increased the demand of home décor products while fashion sales have dropped). We expect Marimekko’s sales to decline by ~4 percent y/y in 20E. Given the circumstances, we consider this fairly good performance. We expect adj. EBIT to be on a par with last year, totaling EUR 17.3m. We expect revenue to grow by ~8 percent in 21E and ~6 percent in 22E. We expect Marimekko is set to reach its EBIT margin target of 15 percent by 22E.
“BUY” with TP of EUR 44 (43)
We value Marimekko by using valuation multiples. On our estimates, the company trades with 20E P/E multiple of 24.8x and EV/EBIT multiple of 17.9x. Hence the company trades with a discount compared to the premium and luxury peers. Correspondingly, the company trades with 21E P/E multiple of 20.7x and EV/EBIT multiple of 15.6x, which translates into a clear discount compared to the luxury peers. We keep our rating “BUY” with TP of EUR 44 (43).
Endomines Q3 figures were weaker than expected, as a tight funding situation forced the company to put operations at Friday into care and maintenance. The company is now seeking to bolster up its financial position through a series of measures, seeking SEK 281m through a rights issue for ramp-up at Friday and for other projects. We adjust our TP to SEK 3.5 (5.5), rating now HOLD (SELL)
Friday operations put under care and maintenance
Endomines reported weaker than expected Q3 results, as the operations at Friday were put under care and maintenance due to a very tight financial situation. Ramp-up at Friday was previously delayed by problems with the tailings dewatering system and although solving the problems would not have been a large investment, the limited cash flows and very tight cash position (Q3/20: SEK 12.0m) forced the company to take more drastic measures. Q3 revenue and EBITDA of SEK 1.9m and SEK -23.1m were as such clearly below our estimates (Evli SEK 11.1m and -15.6m respectively).
Taking measures to improve financial position
Endomines announced intentions to initiate a SEK 281m rights issue, at a subscription price of SEK 2.5 per share, along with possible directed share issues of near SEK 75m to cover guarantee undertakings and bridge financing claim set-offs. With some 60 percent of the rights issue covered by subscription undertakings and guarantee commitments Endomines should in our view be able to secure enough funding to restart operations at Friday and potentially also Pampalo if the gold price remains at >1,800 USD/oz levels. We estimate a six to eight month delay in ramp-up of Friday due to the funding challenges.
HOLD (SELL) with a TP of EUR 3.5 (5.5)
With the estimated impact of the rights issue on share amounts and net debt we adjust our TP to SEK 3.5 (5.5), assuming that the rights issue is subscribed in full. The gold price remains at beneficial levels and is continuing to see upwards pressure despite minor short-term declines. We raise our rating to HOLD (SELL).
Aspo reaffirmed its long-term financial targets for FY ’23. The CMD didn’t disclose any drastic news but we are slightly more positive than before regarding the earnings rebound. Our TP is now EUR 8.00 (7.25), retain BUY rating.
ESL’s long-term 12% EBIT margin potential is still there
While the dry bulk cargo market has been hit by the pandemic ESL has not lost market share. Large vessel operations have been especially challenging due to a lack of cargo demand, however smaller vessel types, such as those of AtoB@C, have performed better. ESL in fact reports the business has won market share in e.g. wood-based products shipments. The fleet can also serve e.g. the Baltic wind power industry in the effort to scale up renewable energy production in the area. In the long-term the Arctic area (incl. Russia) holds strong cargo volume potential for larger vessels. Such vessels’ cargo volumes began to increase in late Q3. ESL’s capacity is now fully in use. In our opinion dry bulk cargo markets are already on track to normalize in tandem with many industrial sectors even if the pandemic is yet to fade away from more everyday life. ESL also says it has achieved admin costs reductions that are not just one-offs in nature.
Telko already achieved long-term margin targets
Telko’s recent working capital management and pricing control measures have already produced significant results in cash conversion cycle, and there remains some more room for improvement relative to certain benchmarks. Telko now has established the lubricants business besides the plastics and chemicals ones. We believe lubricants is an area that can deliver more good results in the long-term as the business is still quite small relative to plastics and chemicals. We see Telko’s reinforced core is now better positioned to capture profitable volumes. Telko has indeed already managed to top the 6% EBIT margin target during the last two quarters. Leipurin however is yet to deliver gains towards its 5% EBIT margin target.
Significant EBIT improvement appears possible next year
Although the long-term financial target confirmation is good news as such focus nevertheless remains on more short-term profitability development. Our TP is now EUR 8.00 (7.25); we retain our BUY rating since profitability continues to improve and SOTP valuation supports further upside potential.
Endomines announced that the operations at Friday have been put under care and maintenance due to funding challenges and has resolved on a rights issue of SEK 281m.
Next Games held its CMD on November 25th, releasing what in our view are very ambitious financial targets. The CMD confirmed continued commitment to publishing IP based games and a more sound and calculated approach to scaling games. The revised guidance for 2020 brought some good news for profitability expectations.
Ambitious mid-term financial targets
Next Games held its Capital Markets Day on November 25th. The most surprising content was the mid-term (our interpretation 3-5 years) financial targets of achieving annual revenue of EUR 250m and EBITDA and EBIT-margins of over 23% and 18% respectively. Given current financial performance we consider these targets very ambitious. The Stranger Things -game is set to launch in selected markets during the end of the year and Blade Runner Rogue during Q1/2021. Growth expectations are clearly set on the former, while the latter is quite as expected looking to be more of a niche game.
Guidance revised, positive news on profitability
Next Games also revised its guidance for 2020, now expecting revenue of EUR 26-28m and to be EBITDA positive. The revenue guidance is below our previous estimate (EUR 30.7m) but the profitability expectation was a positive surprise. We had assumed a slightly larger contribution of new games and also expect that Our World is continuing to face challenges. We adjust our 2020 revenue and EBITDA estimates to EUR 28m and EUR 1.1m respectively. We expect growth of 80% in 2021 driven primarily by the Stranger Things -game but note that visibility is extremely limited.
SELL with a target price of EUR 1.6 (1.2)
On our estimates Next Games trades at a clear discount to peers on 2021-2022 EV/sales multiples. Risks are however substantial, as 62% of our estimated 2021 revenue stems from not yet published games. On the positive profitability news and increased confidence in a more careful and sustainable scaling approach we raise our TP to EUR 1.6 (1.2), SELL-rating intact.
Aviation industry has faced the worse ever crisis in 2020 due to the COVID-19. Finnair has been forced to scale down its traffic and the ramp-up is expected to start next summer. We expect heavy losses in 20E but also in H1/21E. We keep our rating “HOLD” with TP of EUR 0.60 (0.38).
Strategy focuses on the traffic between Asia and Europe
Finnair’s strategy focuses on the growing traffic between Asia and Europe. The strategy is based on the geographic location of the Helsinki hub: the shortest route from (North-East) Asia to Europe goes over Helsinki. Additionally, the distance between Helsinki and most Asian destinations is such that Finnair is able serve most routes in 24h rotations, which enables high utilization rate of planes and reduces the need for additional crew. The most direct route to Asia is enabled by having Russian overflight rights. Flights through the Siberian corridor from Asia to Europe via Helsinki save ca. 2h on flight time compared to one-stop flights via European hubs and ca. 4h compared to routes via the Middle East.
COVID-19 caused the worst ever crisis
The aviation industry faced the worst ever crisis in 2020 as the COVID-19 pandemic spread from China across the world in early 2020. Global lockdowns and travel restrictions forced also Finnair to scale down its traffic. Finnair estimates that the passenger numbers will recover in 2-3 years. The company continues to operate with a significantly limited network also in Q1/21E and the ramp-up is expected to start in the summer 2021. However, the visibility is extremely weak not only due to the pandemic situation itself but due to different travel restrictions. The company expects 20E revenue and capacity (ASK) to decrease more than 70%.
“HOLD” with TP of EUR 0.60 (0.38)
We expect Finnair’s 20E ASK to decline by 72% y/y and revenue to decrease by 73% y/y while comparable operating loss is expected to be EUR 602m. We expect significant losses also during H1/21E. We expect air travel to recover relatively well in 2022E but passenger numbers are still expected to remain below 2019 levels. Due to Finnair’s targeted annual cost savings of EUR 140m from 2022 onwards, we expect good profitability development after the crisis. Finnair’s share price recently took off due to the optimistic vaccine news. The news are promising but we note that there are no effective vaccines in the global distribution yet. We retain “HOLD” with TP of EUR 0.60 (0.38).
Gofore has a proven track-record of profitable growth, having grown and seeking to grow faster than its target market. Supported by M&A activity and high public sector exposure, growth is in our view set to continue in the double-digits, with margins not looking to be under any major threat. We adjust our target price to EUR 12.1 (8.6) and retain our HOLD-rating.
Seeking above target market growth
Gofore is one of the fastest-growing yet profitable public IT-services companies in Finland, seeking to profile itself more towards a digitalization consultancy company. Gofore aims to grow faster than the target market, new digitalization services, while at the same time seeking to generate an EBITA-margin of 15%. Gofore has a solid track-record, having achieved a net sales CAGR of 47.5% between 2014-2019, while adj. EBITA-margins have remained well in double-digit figures. Relative organic growth has slowed down from recent peak years, but M&A activity supports continued double-digit growth.
Continued good growth and profitability outlook
Aided by the acquisition of Qentinel Finland we expect Gofore to grow 14.5% in 2021. The uncertainty brought by the coronavirus pandemic poses some risks to customer activity, but the high share of revenue from public sector clients has so far mitigated a lot of the potential impact, as private sector demand has during the year been more affected. Apart from a potential impact of the recent increased share of subcontracting, we do not see significant risks to margins going forward and expect a 13.8% average adj. EBITA-margin during 2020E-2022E, slightly below the target 15%.
HOLD with a target price of EUR 12.1 (8.6)
We value Gofore at 17.5x 2021 adj. P/E (excludes goodwill amortization), implying a 26% premium to our peer group and a 34% premium to the finnish peers. We adjust our target price to EUR 12.1 (8.6) and retain our HOLD-rating.
Cibus’ Q3 was uneventful. We make small revisions to our estimates, our TP is now SEK 165 (160), rating HOLD (BUY).
No major property acquisitions were completed in Q3
Cibus reported EUR 17.0m in Q3 rental income (vs our EUR 17.5m estimate) and EUR 16.6m in net rental income (vs our EUR 16.2m estimate). Operating income was EUR 14.9m and slightly lower than our EUR 15.3m estimate as Swedish management costs were reclassified from property expenses to administration costs. The management agreement with Sirius has been terminated and Q4 will be clean in terms of cost structure. Q3 net financial costs were EUR 5.4m i.e. somewhat higher than our EUR 5.0m estimate due to an EUR 0.6m cost attributable to bond and bank loan fees. Cibus’ annual net rental income capacity was updated only a bit and we revise our estimates accordingly.
The long-term strategy is proceeding as planned
Cibus’ organization is developing as planned and the company sees some potential to generate more income from the existing asset base through additional services like car washes and parking lots. Cibus continues to focus on the Finnish and Swedish markets for now, however entry to other Nordic markets remains likely in the long-term. Cibus also upped the annual acquisition target from EUR 50m to EUR 50-100m. Q3 was quiet in terms of new acquisitions, yet Cibus remains well on track on the deal front this year after acquiring some EUR 70m in Finnish properties besides the more extraordinary EUR 180m Swedish market entry. Cibus reports very little changes in the daily-goods property markets’ transaction dynamics, with deal flow and valuations basically unchanged throughout the pandemic.
We see current valuation landing within a fair spot
While Cibus still trades at an attractive yield relative to other Nordic public properties we however see the shares’ upside potential limited by the daily-goods property market’s flat valuations. In other words, further meaningful Cibus yield compression would need to be backed by a pricing pick-up in the private markets. Cibus is valued 1.12x EV/GAV and 1.35x P/NAV, hence additional gains would stretch the valuation premium rather large. Considering the relatively high 4.75% yield and the premium to book and private markets valuations we view Cibus’ valuation now fair. Our TP is SEK 165 (160), rating HOLD (BUY).
Cibus Nordic’s property portfolio continued to perform well in Q3 as net rental income exceeded our estimate, however administration and financial costs were higher than we expected.
Talenom’s CMD provided an all-around update with limited new information given the announcements in Q3. The core business continues to perform well, and further automation of the accounting production line is sought, while domestic growth is increasingly driven by acquisitions.
Largely business as usual
Talenom held its Capital Markets Day on November 11th. Having already announced the new small customer concept and potential plans to expand in Europe in conjunction with the Q3 report the CMD in our view offered rather limited new information, mainly adding some more details to the aforementioned matters. Focus is being set on further increasing the degree of automation in the accounting production line, with a target of over 90% in 2023, currently slightly over 70%. The performance of the core business remains solid and customer acquisition is holding up quite well given the circumstances. Talenom is domestically clearly adding emphasis on inorganic growth, with the digitalization challenges faced by small accounting firms providing opportunities for acquisitions.
New growth avenues with the long-term in mind
Talenom gave some insight into its approach for a potential expansion in Europe and has clearly given it some serious thought. The plans are clearly intended for continued growth in the long-term and any notable revenue during 2021-2022 would most likely be due to acquisitions in a similar manner to the Swedish market entry. The TiliJaska small customer concept is expected to leave beta and add on bank services in Finland during February-March 2021 and enter beta in Sweden in mid-2021. The interest for the system has to our understanding so far clearly exceeded expectations.
HOLD with a target price of EUR 10.2
We have not made revisions to our estimates based on the CMD. We expect 2020 revenue and EBIT of EUR 65.5m and 13.1m respectively (co’s guidance EUR 64-68m and EUR 12-14m respectively). We retain our HOLD-rating and target price of EUR 10.2.
Pihlajalinna’s Q3 result was in line with our expectations. Revenue increased by 1% y/y to EUR 124m. Adj. EBIT was EUR 8.7m. Guidance for 20E was not given due to the uncertainties caused by the pandemic. We keep our rating “HOLD” with TP of EUR 9.5 intact.
Result in line with our expectations
Pihlajalinna’s Q3 result was in line with our expectations. Revenue increased by 1% y/y to EUR 123.9m vs. EUR 125.0m/122.2m Evli/cons. Revenue was boosted by the COVID-19 testing which increased revenue by EUR 3.4m. The recovery of the private demand has been weaker than what we anticipated. Among private customers, the demand for private clinic services declined by 6% and for dental care services by 8%. The fitness centers have lost ~6000 member customers due to the coronavirus restrictions. Adj. EBITDA was EUR 17.2m vs EUR 17.3m/16.0m Evli/cons and adj. EBIT totaled EUR 8.7m vs. EUR 8.4m/7.2m Evli/cons.
Private demand hampered by the prolonging virus situation
Even though the pent-up demand has started to release, the private demand is still lagging behind. We expect the demand to continue to normalize during the final quarter, but the prolonging pandemic situation is still likely to have a negative impact on demand. Especially the outlook of fitness centers remains weaker due to the restrictions. At the same time, the COVID-19 testing has grown significantly which should benefit Pihlajalinna in the future as well. The company is targeting to strengthen its occupational healthcare services and has started negotiations for the purchase of all shares in Työterveys Virta. The transaction would give Pihlajalinna almost 30% share of the occupational healthcare market in the Oulu region and it would be strategically very important for the company.
“HOLD” with TP of EUR 9.5 intact
The FCCA has proposed the market court to prohibit the merger between Mehiläinen and Pihlajalinna. The tender offer will run until 20th of Nov. We have therefore returned to see Pihlajalinna as an independent service provider also in the future. We have slightly decreased our estimates and expect 20E revenue of EUR 507m (-2.3% y/y) and adj. EBIT of EUR 18.9m. On our estimates, the company trades at 20E-21E EV/EBITDA multiple of 7.9x and 6.4x, which translates into 17-23% discount compared the peers. We keep our rating “HOLD” and TP of EUR 9.5.
Marimekko’s Q3 result outpaced the expectations as net sales increased by 10% y/y despite of the challenging times. Adj. EBIT increased by ~35% y/y and totaled EUR 10.5m. We have slightly increased our 20E-22E estimates and keep our rating “BUY” with TP of EUR 43 (42).
Strong growth in Q3
Marimekko delivered extremely strong Q3 result despite of the challenging times. Net sales were EUR 38.0m (+10% y/y) vs. EUR 36.0m/35.3m Evli/cons. Sales growth was driven by good development in wholesale sales in Finland and EMEA. In Finland, wholesale sales included nonrecurring promotional deliveries. Also, retail sales included unrecognized sales from Q2 (EUR ~1m). Further, online sales continued to perform well. Marimekko’s Q3 adj. EBIT totaled EUR 10.5m vs. EUR 9.1m/8.4m Evli/cons. Profitability was boosted by good sales growth and decreased fixed costs. Fixed costs were also reduced by subsidies granted in various countries to mitigate the negative business impacts of the COVID-19.
Fighting against the pandemic
Fashion industry has been suffering from the COVID-19 but so far Marimekko has survived relatively well in the turbulence. The company benefits of having different product lines as the growth in home decor products has been strong in Q3 (+44% y/y) which has compensated the drop in sales in fashion and bags & accessories. The final quarter is important for Marimekko as several sales campaigns take place during the quarter. We expect fairly good development in Finland as currently the household consumption is more focused on domestic purchases. However, sales are dependent on the pandemic situation and the trend in customer numbers in retail stores. International sales are also heavily impacted by the development of the pandemic.
“BUY” with TP of EUR 43 (42)
Marimekko expects 20E net sales to be lower than in the previous year. Adj. EBIT is expected to be approx. at the same level or lower than in 2019. We have made small adjustments to our estimates after the result and expect 20E sales of EUR 121m (-3.5% y/y). We expect adj. EBIT to be in line with last year (EUR 17.3m). In 21E, we expect revenue growth of ~8% y/y and profitability to further improve. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 18.4x and 15.9x which is a clear discount compared to the luxury peers. We keep our rating “BUY” with TP of EUR 43 (42).
Pihlajalinna’s Q3 result was broadly in line with our expectations. Q3 revenue amounted to EUR 123.9m vs. EUR 125m/122.2m Evli/cons, while adj. EBIT landed at EUR 8.7m vs. EUR 8.4m/7.2m Evli/cons estimates. EPS was EUR 0.20 vs. our EUR 0.20.
Marimekko’s Q3 result outpaced the expectations. Net sales were EUR 38.0m (10% y/y) vs. EUR 36.0m/35.3m Evli/cons. Adj. EBIT was EUR 10.5m vs. EUR 9.1m/8.4m Evli/cons. Marimekko expects 20E net sales to be lower than in the previous year and comparable operating profit is estimated to be approx. at the same level or lower than in the previous year.
Exel Composites’ Q3 results were overall quite neutral relative to expectations, however we are now more confident top line will continue to grow going forward. Our new TP is EUR 7.25 (6.25) while we retain our BUY rating.
Overall outlook appears strong despite the pandemic
Exel’s EUR 26m Q3 revenue grew by 10% y/y and so topped the flat estimates. The Wind power customer industry supports high volumes and grew by 37% y/y after growing 52% in Q2. We now expect a 27% y/y increase for Q4. Defense is also developing well, and there’s plenty of long-term potential (now only some 5% of LTM revenue). Cable core rods remain one high potential application in the long-term, although the Buildings and infrastructure customer industry continued to develop soft for now due to the pandemic (which also undermined Transportation demand). Exel progressed in areas outside Europe as Asia-Pacific grew by 58% y/y, driven by Wind power.
We are now more confident towards next year
Although top line was strong, Exel had pandemic-related issues in Q3 which affected bottom line and so the company was unable to reach similarly high profitability as in Q2 (which was close to long-term targets). The 7.8% EBIT margin was thus soft relative to our 9.5% estimate. We expect the Q3 US operational efficiency hiccup to pass. Demand has developed positive since Q2 and based on Exel’s comments we are now more confident revenue continues to grow in Q4 and next year alike. The Austrian investment is proceeding as planned and Exel is also ready to readdress its capacity for different end-markets with small capex. We see Exel has good handle on long-term customer account management, arguably the single most important consideration given the business model and strategy.
We see some more upside even with cautious multiples
The share has appreciated a lot lately, now close to the pre-pandemic highs. The strong Q2 profitability development, driven especially by the US unit, and good volumes justify higher multiples for their part. On the other hand, the growing pandemic uncertainty limits multiple potential even if outlook is still positive. Our new EUR 7.25 (6.25) TP values Exel roughly within the 7-8x EV/EBITDA and 11-13x EV/EBIT ranges on our estimates for FY ’20 and ’21. We retain our BUY rating.
Pihlajalinna reports its Q3 result on next Wednesday, 4th of November. As the coronavirus situation is prolonging, we have slightly cut our estimates. We keep our rating “HOLD” with TP of EUR 9.5 (11.0) ahead of the result.
Expecting revenue growth of 1.8% y/y in Q3E
The coronavirus situation eased in the beginning of the summer but in the late summer the infection waves started to increase again, and the situation has gotten worse during the autumn. Therefore, we have slightly cut our estimates. We expect that the pent-up demand has continued to release during Q3 but on the other hand people have spent more time at home and in summer houses which might have an impact on demand. We expect Q3E revenue to grow by 1.8% y/y to EUR 125.0m (prev. estimate of EUR 127.5m) and adj. EBIT of EUR 8.4m (prev. estimate of EUR 9.9m).
Returned to see Pihlajalinna as an independent company
The Finnish Competition and Consumer Authority (FCCA) has proposed the market court to prohibit the merger between Mehiläinen and Pihlajalinna. According to the FCCA, the merger would significantly impede effective competition in the Finnish health services market as there would be only two nationwide healthcare companies (Mehiläinen and Terveystalo) in the market post-merger. Thus, we see that the likelihood of the acquisition being completed has decreased significantly and therefore we have returned to see Pihlajalinna as an independent service provider also in the future. We also note that the political uncertainties in Finland have increased.
“HOLD” with TP of EUR 9.5 (11.0)
We have cut our 20E-21E revenue expectation by ~1% and our adj. EBIT expectation by ~10-11%. We expect 20E revenue to decline by 1.2% y/y (EUR 512m) and adj. EBIT of EUR 19.8m. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 20.3x and 13.2x, which translates into 1-20% discount compared to the peers. We keep our rating “HOLD” with TP of EUR 9.5 (11.0) ahead of the Q3 result.
Exel Composites’ Q3 top line exceeded expectations while operating margin remained at a good level and absolute profitability increased y/y.
Etteplan posted better than expected profitability figures in the challenging circumstances. The uncertainty due to the second wave of the pandemic is causing an increasing lack of visibility. The outlook at least for the first half of 2021 does not appear favourable but we continue to expect growth aided by the recent acquisition.
Earnings beat in challenging quarter
Etteplan posted good profitability figures in the seasonally slower quarter and challenging environment. EBIT amounted to EUR 4.3m, beating expectations (EUR 2.9m/3.1m Evli/cons.). Revenue declined 10.3% y/y (organic decrease 13.3%) to EUR 55.2m (EUR 55.6m/55.3m Evli/cons.). Etteplan also updated its guidance, expecting revenue for the year 2020 to decrease slightly or be at the same level as in the previous year and operating profit (EBIT) to decrease clearly compared to 2019. Demand uncertainty continued and the second wave brought further uncertainty especially after the summer holidays.
Uncertainty on the rise with the second wave
The increased uncertainty brought by the second wave reduces the already low visibility going into 2021. Etteplan has so far fared well given the circumstances, having adopted substantial cost savings measures. Compared with Q2, lockdowns and restrictions are not affecting customer industries to the same extent, but customers are still cautious in making investment decisions. We assume the demand uncertainty to continue to impact on activity at least during the first half of the year. We still expect recovery compared with 2020 and supported by the Tegeman acquisition expect a 6.5% growth in 2021. We expect margins to remain at 2020e levels.
HOLD with a target price of EUR 9.3
Peers’ multiples have been under pressure with the second wave uncertainty and governments seeking to increase restrictions and the fwd. 12m median EV/EBITDA for the selected peer group has dropped by some 9% in the past few days to 8.3x, while Etteplan trades at 7.6x. With the uncertainty possibly still on the rise we retain our HOLD-rating and target price of EUR 9.3.
Tokmanni delivered relatively good Q3 result. Revenue growth of 13% y/y outpaced our and the consensus estimates but adj. EBIT (EUR 24.0m) fell short of expectations due to decline in gross margin. We have made only small adjustments into our estimates and keep our rating ”BUY” with TP of EUR 18.4.
Strong growth in revenue but decrease in adj. gross margin
Tokmanni’s Q3 revenue outpaced the expectations but adj. EBIT was below our and consensus estimates. Revenue grew by ~13% y/y, amounting to EUR 262m (vs. EUR 253m/255m Evli/cons). Growth was good especially in sales of yard and garden furniture, sports and leisure, detergents and home cleaning, paper products and groceries. Apparel sales have faced headwind due to the coronavirus and the company decided to boost apparel sales with discount sales in Q3. This impacted negatively on adj. gross margin which was 34.0% (35.4% in Q3’19). Tokmanni’s Q3 adj. EBIT totaled EUR 24.0m vs. EUR 25.8m/27.3m Evli/cons. Adj. EBIT was weighed down by weakened gross margin but on the other hand, strong revenue growth and strict cost control had a positive impact on profitability.
Towards the most important quarter
Tokmanni has benefited from the uncertain times as low prices and broad product assortment attract consumers. Despite of the current situation, customer numbers have increased in stores (LFL, Jan-Sep’20: +2.8%) and at the same time the size of average basket has increased (LFL, Jan-Sep’20: +8.7%). During Q3, Tokmanni’s online sales increased by ~155%, though the share of online sales is still marginal (~1% of revenue). We expect the growth in online sales to continue during Q4E, driven by the campaign season. The final quarter is the most important for Tokmanni in terms of both, revenue and profitability. In retail, the Christmas season has started earlier than normally this year and Tokmanni is also well prepared for the upcoming season as the Christmas products have arrived and some of those are already in stores.
“BUY” with TP of EUR 18.4 intact
Tokmanni expects strong growth in revenue and LFL revenue in 20E. Adj. EBIT margin is expected to improve from ‘19. We have made only small adjustments into our estimates. We expect 20E revenue to grow by 11% y/y (EUR 1046m) and adj. EBIT of EUR 89m. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 13.0x and 12.4x which translates into ~30% discount compared to the int. discount peers. We keep our rating “BUY” with TP of EUR 18.4.
Aspo’s earnings beat estimates, and even if the guidance doesn’t hint at a particularly rapid q/q Q4 EBIT recovery in our view profitability has already bottomed out. We retain our EUR 7.25 TP and BUY rating.
Telko delivered another earnings surprise in a row
Aspo’s EUR 3.6m Q3 EBIT clearly beat the EUR 1.7m/1.1m Evli/cons estimates. The surprise was largely due to Telko, which extended its Q2 performance by posting a similar EUR 4.2m in EBIT. Yet Telko’s market outlook remains cautious and Aspo’s new guidance in our view manages expectations slightly downwards. The results nevertheless do showcase sound long-term potential. ESL fell to red as expected and Leipurin’s profitability remained subdued. In terms of Q4 results it should be noted that demand for ESL’s larger vessels began to improve in late Q3. We see the implication of the earnings beat and Aspo’s specified guidance to be that Q3 marks out the low point in Aspo’s profitability, however the q/q dip was relatively small and thus Q4 results are unlikely to recover as sharply q/q as we estimated before.
We now see H2 EBIT EUR 1.2m higher than before
With respect to Q4 EBIT we revise our estimates down for ESL (from EUR 2.8m to EUR 1.7m) and Leipurin (from EUR 0.9m to EUR 0.5m) while we now expect Telko to reach EUR 2.8m (prev. EUR 2.3m). In our view Aspo’s guidance seems a bit conservative considering Telko’s recent development (that is unless we are overestimating the q/q profitability recovery rates for ESL and Leipurin). Although the pandemic continues to worsen some more, this spring’s initial shock is now history and supply chains are better prepared. In this sense we see it highly plausible that Aspo’s segments, essentially industrial logistics services providers, can show some meaningful improvement next year as well.
A lot of uncertainty remains but we view upside more likely
We still see Aspo’s valuation attractive in terms of SOTP, however we note especially ESL’s valuation is hard in such extraordinary times when dry bulk carriers are off their normal earnings levels. Aspo’s segments still have plenty to go before reaching their long-term financial targets, but we have grown more confident that this year marks the bottoming out for Aspo’s overall profitability. We thus view upside scenarios more likely than downside ones. We retain our EUR 7.25 TP and BUY rating.
CapMan’s Q3 was slightly below expectations but still overall neutral. Newly raised capital pushed AUM to ATH levels and the outlook for fee-based growth is favourable. Although market uncertainty is on the rise, with the dividend story intact we retain our BUY-rating and TP of EUR 2.2.
Slightly below expectations, AUM at all-time high
CapMan’s Q3 results came in slightly below expectations, with turnover of EUR 8.9m (EUR 9.6m/9.9m Evli/cons.) and EBIT of EUR 4.5m (EUR 5.0m Evli/cons.). The report in our view was all in all rather neutral. Low transaction-based fee volumes still caused weakness in the Services business while the Management Company business saw a boost from recent fundraising projects, albeit not quite as much as we had anticipated. AUM grew to an all-time high mainly through the first closing of the NRE III fund, having raised EUR 313m, with the target of EUR 500m still seen to be reached in the not too distant future. No major carried interest was received, and fair value changes were as expected.
Outlook for fee-based growth still favourable
CapMan’s recurring turnover continued to grow but at a slower pace. With the newly raised funds and on-going fundraising as well as the overall relatively new AUM the outlook for accelerating growth again is promising. The new CapMan Wealth Services model was also launched recently, aiming to further boost fee-based growth. The clear weakness currently continues to be the transaction-based fees, where volumes have declined due to the pandemic and with the recent increased uncertainty the near-term continues to look challenging. Realization of carried interest is still looking more distant and we no longer expect significant carry in 2020.
BUY with a target price of EUR 2.2
The market uncertainty is causing some stir to the near-term development and justifying upside potential in relation to current valuation seems more challenging, but the dividend yield and healthy financial position continue to speak for CapMan. We retain our BUY-rating and target price of EUR 2.2.
Raute’s Q3 results didn’t meet our estimates as the pandemic continued to interfere with business more than we expected. Our new TP is EUR 18 (20), rating still HOLD.
The pandemic continued to hurt top line and order intake
Raute reported EUR 27.9m in Q3 revenue, down by 17% y/y and up 14% q/q, missing our EUR 34.0m estimate. The 4.8% operating margin also fell short of our 6.2% estimate. Although revenue grew q/q order intake nevertheless continued to slide, and the EUR 11m Q3 figure missed our EUR 21m estimate largely because project orders touched a low of EUR 2m, whereas we expected some recovery to EUR 10m. Services orders, at EUR 9m, were also lower than our EUR 11m estimate.
We revise our estimates slightly down
We still wait for signs of acceleration in smaller equipment as well as relatively large-sized modernization orders (the latter are recognized under services). Europe was digesting investments in new production capacity already before the pandemic, and right now it’s quite unclear when actual orders might begin to pick up again. Russia remains an important market and Raute describes local demand still active, however uncertainty continues to plague decision making there as well. It’s still early to talk much about China, although the market seems to be maturing and thus developing favorably from Raute’s point of view. The market is a big opportunity for Raute, however in our opinion the prospect should be valued cautiously. We revise our top line estimate for FY ’21 down to EUR 132m from EUR 139m and EBIT estimate down to EUR 6.0m from EUR 6.6m.
It seems profitability is unlikely to be high next year either
Raute’s competitive positioning remains intact and earnings are bound to gain significantly in the coming years from this year’s low point. However, next year’s profitability outlook still appears quite modest and hence earnings multiples seem to be on the high side of the acceptable range. In our view Raute’s valuation is now full unless there’s imminent recovery in smaller equipment orders and services. Such a pick-up in orders could happen quickly but we are cautious towards this prospect as uncertainty currently shows no signs of fading. Raute is trading at 6.8x EV/EBITDA and 11.4x EV/EBIT on our updated estimates for next year. Our TP is now EUR 18 (20), rating still HOLD.
Solteq reported clearly better profitability figures than we had expected, with comp. EBIT of EUR 1.4m (Evli 0.7m). We expect the good traction to show also in 2021 but remain slightly cautious on growth figures given the uncertainty. We adjust our TP to EUR 1.90 (1.65), BUY-rating intact.
Our profitability estimates clearly beat
Solteq reported Q3 results that were clearly better than we had expected. Revenue grew 8.5% in comparable terms to EUR 13.3m (Evli 13.0m) and the comparable operating profit to EUR 1.4m (Evli 0.7m). Profitability was better than expected in both segments. The pandemic has had some effect on sales but has not impacted the group’s performance as a whole so far. Solteq Software is clearly gaining traction with the order backlog that has been building up, with particular success in gaining new projects in the utilities-sector and positive development is seen during the rest of the year. Solteq Digital has seen continued good demand in core areas the outlook remains rather stable.
Solteq Software gaining traction
The good development in profitability, brought by previously taken measures and sales growth, is showing a positive effect on the company’s cash generation despite the interest expense burden and product development investments. We do not expect Solteq to go completely unscathed through the pandemic and have clearly lower growth expectations for Solteq Digital in 2021 while the good order intake and the build-up of recurring revenue from long-term contracts will support growth in Solteq Software. We also maintain margin estimates for 2021 at similar levels as in 2020 for now given the uncertainty but see potential for improvement in Solteq Software as the share of own products increases. On group level we estimate growth of 3.7% and an EBIT-margin of 8.8% in 2021.
BUY with a target price of EUR 1.90 (1.65)
Current valuation implies a 2020e EV/EBITDA of 6.4x. Even when comparing solely with the Nordic IT-service peers, valuation still appears attractive. We retain our BUY-rating and raise our target price to EUR 1.90 (1.65) following our revised estimates.
SRV’s Q3 results were fairly neutral and most importantly construction profitability was rather good. Supported by construction cost declines, the target of improving the 2021 operative operating profit to 2017 levels appears feasible. We retain our BUY-rating, TP EUR 0.64 (0.66).
Decent results, construction margins held up
SRV reported somewhat two-fold Q3 results. Revenue was below our expectations (EUR 223.6m/234.0m Evli/cons.) despite more developer-contracted housing units being recognized as income than we had expected. Operating profit was below expectations at EUR 1.7m (EUR 2.9m/3.0m Evli/cons.) while the operative operating profit amounted to EUR 7.1m (Evli EUR 2.9m), with the cancellation of a EUR 3.1m provision for expenses that were recognized due to a ruling by a Russian court impacting positively. Relative profitability in the Construction segment held up well and corresponded to our expectations.
Margin improvement supported by cost decline
Visibility is somewhat weakened going into 2021. The housing prices recovered well from the dip in H1/20 and activity has been at healthy levels. The order backlog has been relatively stable in the past four quarters and with the current project portfolio we see potential for minor growth in 2021, expecting a slight sales decline in business construction and growth in housing construction. The sales development is currently however clearly of secondary importance as improvement in profitability to offset the interest expense burden is essential. We expect margins to improve in 2021, as margins in 2020 have been pressed by high construction costs and the situation should ease going forward.
BUY with a target price of EUR 0.64 (0.66)
The uncertainty has particularly affected the shopping centres in Russia and exits continue to appear more distant. The construction outlook remains relatively decent, although demand within certain business construction areas is being affected by the pandemic. We adjust our target price to EUR 0.64 (0.66) with our BUY-rating intact.
Etteplan's net sales in Q3 amounted to EUR 55.2m, in line with our estimates and consensus (EUR 55.6m/55.3m Evli/cons.). EBIT amounted to EUR 4.3m, above our and consensus estimates (EUR 2.9m/3.1m Evli/cons.). Guidance updated: revenue in 2020 is expected to decrease slightly or be at the same level as in 2019 and EBIT to decrease clearly compared to 2019.
Aspo’s Q3 EBIT meaningfully topped expectations as Telko continued to perform strong.
The third quarter wasn’t any better for Finnair and was heavily impacted by strict travel restrictions. Revenue declined by 89% y/y and was EUR 97m while adj. EBIT was EUR -167m. We have further cut our estimates and keep our rating “HOLD” and TP of EUR 0.38 intact.
Strict travel restrictions hampered Finnair’s operations
As expected, Finnair’s Q3 result was heavily weighed down by the coronavirus pandemic and the strict travel restrictions especially in Finland. Therefore, the company had to deviate from the previous plans and to continue to operate with a limited network. Capacity (ASK) was down by 87% compared to last year and PLF was 38.7% (-47.5pp). Revenue decreased by ~89% y/y, amounting to EUR 97m vs. EUR 157m/145m Evli/cons. Adj. EBIT was EUR -167m vs. EUR -191m/-179m Evli/cons. By the end of the quarter, Finnair had paid out over EUR 400m of COVID-19 related refunds (some EUR 40m left).
Winter season is expected to remain dark
Due to the prolonged pandemic situation and strict travel restrictions it is likely that the better recovery of air travel isn’t starting anytime soon. Finnair continues to fly with a limited network during the winter season. The company informed earlier that it is aiming to fly approx. 75 daily flights to ~50 destinations during the winter season (~350 flights per day in ‘19). The ramp-up is estimated to start from summer’21. According to the company, comparable operating loss in Q4 will be of a similar magnitude than in Q2 and Q3. The company also expects both, revenue and capacity (ASK) to decrease more than 70% in 2020 compared to 2019. Further, the company raised its savings target to EUR 140m (prev. EUR 100m) starting from the beginning of 2022 (compared to 2019).
“HOLD” with TP of EUR 0.38
Finnair has a fully undrawn EUR 175m revolving credit facility and a EUR 200m short-term commercial paper program, which was unused at the end of September. In addition, the remaining part of the statutory pension premium loan (EUR 200m) can be drawn if needed. We have cut our 20E-21E estimates and expect revenue in 20E to decline by 73% y/y to EUR 850m and adj. EBIT of EUR -606m. We keep our rating “HOLD” with TP of EUR 0.38.
Raute’s Q3 proved slower than we estimated as both recognized revenue and order intake fell short of our expectations.
SRV's net sales in Q3 amounted to EUR 209.9m, below our and consensus estimates (EUR 223.6m/234.0m Evli/cons.). EBIT amounted to EUR 1.7m, below our and consensus estimates (EUR 2.9m/3.0m Evli/cons.).
Tokmanni’s Q3 revenue increased by ~13% y/y (LFL growth of 11.6%) and was EUR 262m vs. EUR 253m/255m Evli/cons. Tokmanni’s adj. EBIT was EUR 24.0m vs. EUR 25.8m/27.3m Evli/cons. Adj. gross margin was 34.0%. The company expects strong growth in revenue and LFL revenue in 20E. Comparable EBIT margin is expected to improve on the previous year.
CapMan's turnover in Q3 amounted to EUR 8.9m, below our and consensus estimates (EUR 9.6m/9.9m Evli/cons.). Profitability was slightly below expectations and EBIT amounted to EUR 4.5m, (EUR 5.0m Evli/cons.).
Solteq’s revenue in Q3 grew 8.5% in comparable terms to EUR 13.3m (Evli EUR 13.0m). The comparable operating profit clearly beat our expectations at EUR 1.4m (Evli EUR 0.7m). Guidance reiterated: Solteq Group’s comparable operating profit in 2020 is expected to grow significantly.
Consti reported Q3 results well in line with our estimates, with highlights being the continued good profitability and free cash flow. Despite a slightly weaker sentiment the outlook in our view still looks favourable but healthy near-term order intake will be of essence for the next year.
Reported rather good figures, in line with our estimates
Consti reported Q3 results well in line with our estimates. Revenue amounted to EUR 68.2m (Evli EUR 69.6m) and EBIT to EUR 2.5m (Evli 2.5m), at a pretty healthy margin of 3.6%. Order intake amounted to EUR 31.0m and the order backlog as such declined y/y and q/q to EUR 189.4m but still slightly above 2019 year-end levels. The highlight of the report along with the good profitability was the free cash flow, which amounted to EUR 4.6m (Q3/19: EUR -0.4m). With a rolling 12m cash conversion of 174% the net debt (excl. IFRS 16) continued to decline, now at EUR 4.8m (Q3/19: EUR 19.6m).
Coming quarters order intake will steer next year
Management comments for Q4/20 were of a more careful tone given the escalated Coronavirus situation post Q3 but solid performance is nonetheless still expected. The near-term development really depends on demand recovery and order intake development during the coming quarters. Based on the current order backlog activity is seen to be higher next year compared to the same situation in 2019. We have slightly lowered our Q4 estimates for a more conservative approach given order intake uncertainty, now expecting 2020 revenue and EBIT of EUR 268.1m and 8.0m respectively. In 2021 we for now expect only a meager growth of 1.4% and EBIT of EUR 9.1m, with housing company demand recovery a potential key near-term uncertainty up until the housing company General Meeting season next spring.
BUY with a target price of EUR 10.0
Although sentiment appears slightly less positive the order backlog, Consti’s ability to adapt to lower volumes, and the long-term sector outlook along with an attractive valuation remain as beneficial factors. We retain our BUY-rating and TP of EUR 10.0.
The coronavirus pandemic and strict travel restrictions especially in Finland continued to hamper Finnair’s result in Q3. Finnair’s Q3’20 adj. EBIT was EUR -167m vs. our expectation of EUR -191m and consensus of EUR -179m. Revenue decreased by 88.7% y/y and was EUR 97m vs. our expectation of EUR 157m and consensus of EUR 145m.
Vaisala delivered a two-fold Q3 result. Despite W&E’s strong profitability improvement, sales and orders declined and COVID-19 continues to pose significant near-term risks. IM business remains resilient. We keep our estimates broadly unchanged and maintain TP of 32€ with SELL.
Sales mix boosted profitability, orders and sales decreased
Q3 net sales decreased by 11% to 94 MEUR mainly due to the decline in W&E’s project business. Gross margin improved to 57.7% (55.3%) and EBIT to 19.5 MEUR (16.3 MEUR), 20.7% (15.5%) of net sales. W&E’s EBIT improved to 11.1 MEUR (9.7 Evli) and IM’s was 8.6 MEUR (10.3 Evli) According to Vaisala, lower share of less-profitable project business, improved profitability of digital services in W&E and higher share of IM sales boosted margins. Operating expenses also decreased compared to previous year due to less travelling and some non-recurring positive impacts. Orders received decreased overall by 19% as W&E’s order intake was impacted by COVID-19 especially in airports segment and emerging markets. IM’s orders received increased 2% supported by strong order intake in APAC (+19%).
Our estimates broadly unchanged
Vaisala reiterated its 2020 outlook issued last week, as expected, estimating FY20 net sales to be 370-390 MEUR and EBIT to be 40-48 MEUR. Based on the report, we keep our estimates broadly unchanged. We expect 20e sales to decline 5.3% to 382.1 MEUR and EBIT to increase to 46.7 MEUR. W&E outlook is weighed by the weakened outlook for aviation and restrictions will cause delays in project deliveries. Thus, we expect W&E 20e sales to decrease by 7.3% to 242.1 MEUR and EBIT to decrease to 16.7 MEUR. We expect IM to remain relatively resilient with 20e sales down 1.7% to 140 MEUR and EBIT increasing to 30.1 MEUR. In 21e, we expect IM sales to continue growing (+7%), while W&E is expected to recover only slightly (+3%) due to uncertainties and decreased order intake.
Valuation still challenging
On our estimates, Vaisala is still trading at clear premiums compared to our peer group and we see valuation stretched given the weaker financial performance compared to peer group. Based on the report, we retain our TP of 32€ and SELL rating. Our TP values Vaisala at 21-22e EV/EBIT multiples of 22.9x and 20.7x which are above the peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.
Consti's net sales in Q3 declined 16.7% to EUR 68.2m, in line with our estimates and slightly below consensus (EUR 69.6m/72.1m Evli/cons.). EBIT amounted to EUR 2.5m, in line with our estimates and slightly below consensus (EUR 2.5m/2.7m Evli/cons.). Free cash flow at EUR 4.6m (Q3/19: EUR -0.4m).
Scanfil’s top line didn’t meet our estimate but profitability remained strong. We retain our EUR 6.25 TP, rating BUY.
Some top line softness but in our view nothing dramatic
Scanfil posted EUR 141.6m in Q3 revenue, down 7% y/y. The figure didn’t meet our EUR 156.2m estimate largely due to the Communication and Industrial segments. Communication revenue fell by 28% q/q mostly as a result of low demand for network elements. The segment also supplies other types of products and we expect revenues to stabilize in Q4. Consumer Applications’ top line remained low as expected, slightly up by q/q but down by 23% y/y. There are signs the segment’s demand is bottoming out and we expect more improvement for Q4. Energy & Automation and Medtec & Life Science performed close to expectations, but Industrial managed only EUR 44.7m (vs our EUR 50.5m estimate) and was down by 9% y/y. Industrial softness wasn’t attributable to any single customer and was pronounced in July and August. Demand nevertheless improved in September. In absolute profitability terms Scanfil’s EUR 9.9m Q3 adj. EBIT didn’t quite reach our EUR 10.5m estimate, however the quarter still delivered a strong 7% operating margin.
Guidance implies meaningful q/q improvement for Q4
The low-end of the updated FY ’20 guidance implies 5% q/q Q4 revenue increase, while the high-end implies 19% growth. We make only small updates to our Q4 estimates, and now expect EUR 154m in Q4 revenue (prev. EUR 158m), down by 1% y/y and up by 8% q/q. We now expect Q4 EBIT at EUR 10.0m (prev. EUR 11.1m). Scanfil’s overall positioning within the value chain and relative to competition remains unchanged. The company has a balance sheet ready to facilitate acquisitions should a fitting opportunity arise. There’s a lot of uncertainty but we note Scanfil’s customers tend to be well-positioned OEMs who compete against each other directly only to a very limited extent.
Valuation is still very reasonable
Scanfil is valued at about 6.3x EV/EBITDA on our FY ’20 estimates. Scanfil’s organic strategic growth target for ’23 implies some 5% CAGR for the coming years. Although the target was decided on before the pandemic, we still view it quite relevant considering the customer portfolio and performance so far this year despite the uncertainty. Our TP remains EUR 6.25 and our rating BUY.
Innofactor reported good results in the quarter expected to be most hit by negative impact of the pandemic. The outlook for 2021 remains positive but we have yet to see signs of the next clear steps of growth pick-up and margin improvement. Valuation still remains attractive and we adjust our TP to EUR 1.45 (1.35) and retain our BUY-rating.
Good results in the by COVID-19 impact weakened quarter
Innofactor reported slightly better Q3 results than we had expected in the due to the coronavirus pandemic more challenging quarter. Net sales grew 0.3% y/y to EUR 14.0m (Evli 13.8m), with the negative impacts of the pandemic lowering sales per employee by 1.6%. EBITDA amounted to EUR 1.6m (Evli EUR 1.3m), with slightly negative figures in the other Nordic countries due to lower sales. The negative impacts of the pandemic were in line with company expectations. Weaker demand has mainly been seen among commercial customers. The order backlog amounted to EUR 58.2m, up 9.4% y/y.
Awaiting signs of faster growth and earnings improvement
Innofactor expects net sales and EBITDA in 2020 to increase from 2019, with our estimates now at EUR 65.5m (2019: EUR 64.2m) and EUR 7.7m (2019: EUR 5.1m) respectively, with the latter estimate up slightly post Q3 following better than expected relative profitability. The outlook for 2021 remains positive but we still expect only a modest growth of 4.0% and minor EBITDA-% improvement (11.7% ->12.0%). Challenges continue to relate mainly to performance in the other Nordic countries and any notable signs of improvement are yet to be seen. M&A activity continues to appear likely in the coming years, with the company committed to its 20% annual growth and 20% EBITDA-% target, but it is too early to account for such.
BUY with a target price of EUR 1.45 (1.35)
On peer multiples Innofactor continues to trade at a clear discount. We also expect Innofactor to initiate dividend payments in 2020. Non-cash items (mainly PPA) affecting earnings will still keep dividend yields rather low (2020e: 2.3%). We raise our TP to EUR 1.45 (1.35) and retain our BUY-rating.
Suominen again topped expectations. We update our estimates, our TP is now EUR 6.0 (5.5) and rating still BUY.
Another extension to a steep upward profitability trend
Suominen recorded EUR 115.4m in Q3 revenue, up by 12% y/y and down by 6% q/q, meeting our EUR 114.0m estimate. FX had a negative EUR 5.6m impact. Europe remained very strong (up by 17% y/y), and at EUR 43.5m topped our EUR 41.0m estimate. Americas grew by 9% y/y and at EUR 71.9m was close to our EUR 73.0m estimate. Suominen delivered high volumes and margins despite maintenance breaks, which will also take place in Q4. While the results were near our estimates in terms of top line, margins were again a positive surprise. Suominen achieved a 17.1% gross margin, gaining more on the 16.0% in Q2 and clearly higher than our 15% estimate. Low raw materials prices in general continue to exert pressure on nonwovens pricing, however the pricing clauses work with a lag and Suominen was also able to defend its pricing to some extent. Suominen has been very successfully achieving production cost efficiencies and says the variable cost optimization program continued to yield results on all sites. The company managed strong with SGA, R&D and other expenses as well since the total item was only EUR 6.8m, compared to our EUR 7.3m estimate. Suominen’s EUR 12.9m Q3 EBIT thus clearly beat our EUR 9.8m estimate.
We expect Q4 earnings to decline by some EUR 4m q/q
Although the company continues to perform strong not only due to a favorable environment but also thanks to in-house measures, we expect results to decline q/q in Q4. We now expect Q4 gross margin at 15% and continue to see some further pressure down next year. Raw materials prices have remained low for quite some time and hence are unlikely to support additional boost in profitability. On the positive side wipes demand should remain high for an extended time period.
Multiples attractive despite margin pressure going forward
Suominen is now valued ca. 5.5x EV/EBITDA on our estimates for this year. Going forward, we see additional earnings gain hard next year. In our opinion somewhat low earnings multiples are warranted given the extraordinary environment, but we nevertheless continue to view the overall valuation picture attractive. Our TP is now EUR 6.0 (5.5) and rating remains BUY.
Detection Technology’s Q3 report was below expectations as SBU continues to struggle under the pandemic. Despite low visibility and the uncertainty related to aviation, we see security market weakness as temporary and do not see DT’s competitive position, strategy or longer-term drivers compromised. Therefore, we see DT well positioned to perform again once security market normalizes. Despite our estimates cut, we maintain our target price of 22 euros and HOLD rating.
Clear miss due to worse than expected SBU performance
DT’s Q3 result missed our and consensus expectations as SBU continued to struggle due to the ongoing pandemic, which is postponing investments in security market, especially airports. DT’s Q3 net sales were EUR 20.6m (-23.4% y/y) vs. EUR 24m/23.5m Evli/consensus estimates. SBU sales declined -43% to EUR 10.6m (EUR 13.5m our expectation) due to COVID-19 affecting the demand for security X-ray devices. MBU sales increased +20% to EUR 10.1m (EUR 10.5m our expectation) due to continued strong demand in medical CT imaging. DT’s Q3 EBIT came in at EUR 2.6m (12,6% margin) vs. our estimates of EUR 4m (EUR 3.4m cons).
DT cautiously optimistic that worse is behind it
The COVID-19 pandemic is negatively affecting the demand for X-ray devices in all DT’s target markets, apart from medical CT imaging. Apart from domestic air transport in China, global air transport has failed to recover, which has led to exceptionally low demand in aviation. In addition, extensive restrictions on mass gatherings has negatively affected demand in security applications. DT expects SBU sales to decrease in Q4, but to start improving in H1/21 driven by Chinese demand. DT expects MBU sales to grow in Q4 and to continue to grow in Q1 of 2021, albeit more slowly than in 2020.
Maintain HOLD with target price 22 euros
Based on the report, we have cut our sales and EBIT estimates for the coming years. On our renewed lowered estimates, DT is now trading at premiums to our peer group, but we note that there is high uncertainty in our estimates and multiples can quickly change when security market recovery starts. It’s difficult to estimate how long the challenging situation regarding aviation will continue and at what point SBU will start recovering. We do not however see DT’s competitive position, strategy or longer-term drivers compromised, and therefore DT should be well positioned to perform again once security market normalizes. Until we see some signs of security market stabilizing, we remain cautious. We maintain our target price of 22 euros and HOLD rating.
Vaisala’s Q3 did not provide bigger surprises as the company updated its business look for 2020 and published preliminary Q3 net sales and EBIT figures last week. Vaisala’s Q3 net sales decreased by 11% to 94.0 MEUR. Q3 reported EBIT was 19.5 MEUR.
Suominen’s Q3 figures continued to defy our expectations as marginal profitability increased further q/q despite being already exceptionally high in Q2.
Innofactor’s Q3 results were slightly above our expectations and figures were fairly good given the expected COVID-19 related weakness in the quarter. The net sales amounted to EUR 14.0m (Evli EUR 13.8m), while EBITDA amounted to EUR 1.6m (Evli EUR 1.3m). Guidance remains intact. The impact of the pandemic on Q3 was in line with company expectations.
DT’s Q3 result clearly missed our and consensus expectations due to worse than expected performance in SBU. DT’s Q3 net sales were EUR 20.6m (-23.4% y/y) vs. EUR 24m/23.5m Evli/consensus estimates. SBU sales declined -43% to EUR 10.6m (EUR 13.5m our expectation) and MBU sales increased +20% to EUR 10.1m (EUR 10.5m our expectation). DT’s Q3 EBIT came in at EUR 2.6m vs. our estimates of EUR 4m (EUR 3.4m cons). On the positive, DT says it is cautiously optimistic that the worst may already be behind it.
Scanfil reported Q3 revenue slightly on the soft side, however the overall picture seems to remain pretty much unchanged with demand and profitability as previously expected.
Etteplan reports Q3 results on October 29th. We expect weakish figures in the seasonally slower quarter, as the impact on demand of the COVID-19 induced uncertainty should also show clearly. We estimate a sales decline of 9.6% in the quarter and an EBIT-margin of 5.3%. We adjust our target price to EUR 9.3 (8.7) and retain our HOLD-rating.
Seasonal slowness and COVID-19 impact
Etteplan’s Q2 results were a clear positive in the challenging environment and timely measures taken helped in keeping up profitability. The organic decline in revenue was 11.3%. During Q3 the market environment overall saw improvement compared with the restrictions during Q2 but with the third quarter being seasonally slower and a trickle-down effect of the demand weakness in Q2 we expect weakish figures. With the capacity reduction due to temporary layoffs to our understanding somewhat similar to that of Q2 we expect a similar organic revenue decline, expecting revenue of EUR 55.6m (Q3/19: EUR 61.5m). Despite good cost control, we still expect the lower revenue to have an impact on profitability and estimate an adj. EBIT of EUR 2.9m (Q3/19: EUR 4.9m), at a margin of 5.3%.
2020E: sales decline 1.7% and EBIT of EUR 18.4m
Etteplan reissued a guidance in Q2, expecting 2020 revenue to decrease slightly or be at 2019 levels and EBIT to decrease compared with 2019. We currently estimate a sales decline of 1.7% in 2020 and EBIT of EUR 18.4m (2019: EUR 22.8m). The situation with the coronavirus pandemic has turned to the worse again with the second wave and we will be keeping our eyes on comments on the potential effect on demand development.
HOLD with a target price of EUR 9.3 (8.7)
We have made only minor tweaks to our estimates ahead of the Q3 results. With the slightly improved sentiment after Q2 and peer multiple appreciation we adjust our target price to EUR 9.3 (EUR 8.7), valuing Etteplan at 7.5x 2020 EV/EBITDA, and retain our HOLD-rating.
Talenom reported solid Q3 figures despite slight sales weakness. Attention was drawn to the new small customer concept, with the for us surprising addition of banking services. Although still in its infancy, the concept in our view appears promising.
Solid profitability, slight COVID-19 sales weakness
Talenom reported solid Q3 results. Revenue was slightly weaker than expected, at EUR 14.8m (Evli/cons. EUR 15.3m/15.2m), as the pandemic has a slight impact on transaction volumes. Cost control however aided profitability and the EBIT of EUR 3.1m beat expectations (Evli/cons. EUR 2.6m/2.8m). The financial figures were clearly of lesser interest in the earnings report as focus lied on the new small customer concept.
Seeking to cater previously underserved customer segment
Talenom launched a new small customer concept, the TiliJaska service, a free accounting system, as well as Talenom Light Entrepreneur, designed for the smallest, previously by Talenom underserved customers. Costs for the system arise with usage after a certain threshold. The product is intended to broaden the service offering and attracting growing enterprises to Talenom’s bookkeeping services but also to be a profitable product in itself. The product will be in beta until the end of the year and is also planned to be launched next year in Sweden. A potentially very interesting and unexpected new angle was the addition of banking services. In our view the service, or essentially the idea of in the long-run potentially creating a much broader service platform, view has clear potential. Talenom also mentioned that it is looking into other markets in Europe, but we see it as too early to make any assumptions regarding such expansion.
HOLD with a TP of EUR 10.2 (8.5)
Talenom’s valuation continues to be stretched but with the interesting new sales growth potential and more light to be shed on the new services in the upcoming Capital Markets Day (November 11th), we can justify to stay along for the ride. We adjust our TP to EUR 10.2 (8.5), valuing Talenom at a 2020 P/E of 45x, and retain our HOLD-rating.
Talenom's net sales grew 10.0% in Q3 to EUR 14.8m, slightly below our and consensus estimates (EUR 15.3/15.2m Evli/cons.). EBIT amounted to EUR 3.1m, above our and consensus estimates (EUR 2.6m/2.8m Evli/cons.). Guidance remains intact, net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m.
Once again, Verkkokauppa.com delivered a strong result as revenue increased by ~7% y/y (EUR 129m) while adj. EBIT totaled EUR 5.6m. We have slightly increased our estimates and keep our rating “BUY” with TP of EUR 6.5 (6.3).
Revenue increased by 7% y/y
Verkkokauppa.com’s good momentum continued throughout Q3, driven by strong consumer web sales. Growth was particularly good in mid-sized and evolving categories (MDA, BBQ, sports as well as office & supplies). Revenue increased by ~7% y/y amounting to EUR 129m (vs. our EUR 126m). Gross margin developed favorably as well due to the sales mix, strong consumer sales as well as lower level of wholesale sales but also due to operational improvements. The company’s adj. EBIT was EUR 5.6m (vs. our 5.3m) in Q3.
The current environment supports further growth
Online migration has continued strong throughout the year partly due to the COVID-19 and as the virus situation seems to be prolonging, we expect the same trend to continue. Even though the company is known for its strong presence in the consumer electronics market in Finland, the growth has been strong in other product categories as well boosting the company’s sales and profitability development. This also benefits the company’s growth in the future since the consumer electronics market is extremely competed and price driven. The final quarter is normally the most important for Verkkokauppa.com and it is driven by campaigns (e.g. Cyber Monday and Black Friday) and the Christmas season. We expect the good momentum to continue also in Q4E. Due to the travel restrictions, wholesale sales should remain in a lower level also in Q4E, having a positive impact on margins.
“BUY” with TP of EUR 6.5 (6.3)
We have slightly increased our estimates and expect 20E revenue of EUR 546m and adj. EBIT of EUR 20.4m. Hence, our estimates are at the higher end of the given guidance (revenue between EUR 525-550m and adj. EBIT between EUR 17-21m). On our estimates the company trades at 20E-21E EV/EBIT multiple of 10.7x and 11.0x, which translates into ~50% discount compared to the peers. We keep our rating “BUY” with TP of EUR 6.5 (6.3).
Fellow Finance is a highly scalable international marketplace lending platform. Recent challenges due to increased competition, adverse regulatory decisions and the Coronavirus pandemic caused a setback to the company’s solid growth and profitability track and is now on a slightly challenging turnaround undertaking.
Good track record, challenging year behind...
Fellow Finance is an international marketplace lending platform connecting investors and lenders and facilitates both consumer and business lending. Operations have in the past years been expanded abroad, with operations now in six countries. The company has been able to achieve a good track record on growth and profitability but has since the latter half of 2019 been met with challenges due to regulation, increased competition and volume declines due to the Coronavirus pandemic. As a result of a decline in facilitated loan volumes sales have decreased and profitability has suffered.
... but long-term potential remains
The business environment still remains challenging in the near-term, especially with the temporary cap on interest rates on certain consumer credit. Potential for disruptive growth in the addressable market and the scalability of the platform still continues to offer ample opportunities in the long-term but with the challenges being faced there is still work to be done. With the improving investor demand after a dip in volumes due to the pandemic we expect the negative sales trend to be reversed and profitability to improve as a result in 2021.
HOLD with a target price of EUR 2.8 (2.5)
We base our valuation on peer multiples and derive a fair value of EUR 2.78 using a 2021 P/sales multiple of 1.3x, at a discount to the consumer finance companies given differences and faced challenges and above the somewhat chronically underperforming lending platform peers. We adjust our target price to EUR 2.8 (2.5) and retain our HOLD-rating.
Detection Technology will report Q3 earnings next Tuesday, October 27th, at 9:00 EET. As usual, we look forward to hearing the latest developments and outlook regarding the security and medical imaging markets. We maintain our target price of 22 euros ahead of the report, our recommendation is HOLD (prev. BUY).
Expecting declining sales, but a better quarter than last
We expect Q3 net sales of 24 MEUR (23,5 MEUR cons) and EBIT of 4 MEUR (3,4 MEUR cons), meaning a decline of around -11% and -20% respectively compared to last year. Despite decline, we expect Q3 to be clearly better than Q2. The reason behind net sales decline is the lower demand in SBU due to the COVID-19 pandemic affecting the demand for security X-ray devices, especially in aviation segment. We expect SBU net sales to decline -27% to 13,5 MEUR. MBU is compensating for the decline in SBU, as demand for medical CT imaging is currently strong due to the pandemic. We expect MBU net sales to grow 26% on slightly weak comparison figures to 10,5 MEUR. We expect DT’s Q3 EBIT to be 4 MEUR (17% EBIT margin), which is -20% lower y/y (high comparison figure), but clearly better than in Q2 (2,6 MEUR).
Looking for signs of recovery in SBU amidst low visibility
DT has stated that it expects lower demand in the security segment to continue in Q3 and SBU sales to decrease in 2020. DT however sees SBU sales starting to improve towards end of the year. DT estimated in its Q2 report that airport CT standard equipment upgrades in Europe and U.S. will be postponed at least 12 months. Regarding China, it remains unclear when similar Chinese airport standardization will start and if any security infrastructure related government recovery measures will take place. MBU sales growth is expected to continue in H2 driven by the demand in CT applications.
Situation regarding aviation main uncertainty
The situation regarding aviation remains the biggest near-term uncertainty for DT as SBU represents roughly 2/3 of net sales and we’ve estimated aviation to contribute roughly half of SBU net sales. We have not made any changes to our estimates, thus we maintain our target price of 22 euros ahead of the report, our recommendation is HOLD (prev. BUY).
Verkkokauppa.com’s Q3’20 revenue grew by 7.3% y/y and was EUR 129m vs. Evli EUR 126m and consensus of EUR 127m. Adj. EBIT was EUR 5.6m vs. EUR 5.3m/5.3m Evli/cons. 2020 guidance: the company expects revenue to be 525-550 million euros and comparable operating profit to be 17-21 million euros.
Vaisala updated yesterday its business outlook for 2020 and published preliminary net sales and operating result for Q3. With the better than expected profitability development, we raise our TP to 32€ (29), but due to continued share price rally our rating is now SELL (HOLD).
Sales expected to be 370-390 MEUR and EBIT 40-48 MEUR
Vaisala narrowed net sales estimate and increased EBIT estimate, and now expects 2020 sales to be between 370–390 MEUR and EBIT to be between 40–48 MEUR (prev. sales 370-405 MEUR and EBIT 34-46 MEUR). Vaisala also provided preliminary figures for January–September 2020. Preliminary net sales were 273 MEUR (277.2 MEUR Evli) and EBIT was 33 MEUR (25.6 MEUR Evli).
EBIT clearly better than expected despite the decline in sales
Pandemic has affected negatively especially airports customer segment and emerging markets, and W&E has been missing larger project orders. Some project deliveries have also been delayed due to restrictions related to COVID-19. IM’s industrial instruments and liquid measurements products has not met growth targets due to volatile market situation during Q2 and Q3. On the other hand, Vaisala’s profitability has developed clearly better than expected in Q3 (EBIT 19.9 MEUR vs. 12.6 MEUR Evli). According to Vaisala, W&E’s digital services and IM’s product and service businesses improved their gross margins. In addition, the decline in operating expenses caused by the prolonged pandemic, has improved EBIT more than expected.
Valuation remains stretched
Based on the update, we have cut our sales estimates and increased EBIT estimates for 2020e. We expect 2020e net sales to decline 5.2% to 382.5 MEUR and EBIT to increase to 46.6 MEUR. We have also revised EBIT estimates slightly upwards for 2021e. Despite the margin improvement, COVID-19 continues to pose significant near-term uncertainties. Vaisala’s share price rally has continued and, on our estimates, Vaisala is trading at clear premiums compared to our peer group and we see valuation stretched given the weaker financial performance compared to peer group. We look forward to hearing more about the drivers of margin development in connection with Q3 report next Tuesday. With the better than expected profitability development we raise our TP to 32€ (29), but downgrade to SELL (HOLD).
Suominen reports Q3 results on Tue, Oct 27. Our estimates, EUR 5.5 target price and BUY rating all remain intact.
No clear reason to expect softening wipes demand for now
In our opinion outlook is solid even after an exceptionally strong Q2, when revenues in Americas and Europe grew y/y by 19% and 16%. Fatigue and possibly growing indifference towards hygienic considerations could limit wipes growth at a certain near future point, however many reports suggest this unlikely to happen at least during the next few quarters. According to a New York Times article some consumers in the US prize canisters of Clorox disinfecting wipes as kinds of trophies since the item remains such a rare sight on store shelves. Many companies have formed partnerships with Clorox to reassure employees and customers that surfaces can be kept disinfected. Clorox saw wipes demand grow by 500% in a few months and inventory usually enough for 1-2 months gone in 1-2 weeks. Clorox was able to up production and plans to add more early next year. This is just one brand-specific example from the downstream part of the supply chain, but we believe it’s still relevant for upstream nonwovens suppliers. The US is also a key market for Suominen since the Americas BA contributes ca. 65% of revenue. Although European consumers may not be as keen wipers as their American counterparts, we believe the recent pandemic acceleration continues to lift volumes on both sides of the Atlantic.
There are no changes to inform estimate revisions
We view Suominen well-positioned to post double digit y/y growth rates during the next couple of quarters. With regards to H2’20 top line figures we see the uncertainty associated mostly with the scheduled maintenance breaks at several Suominen plants and to what extent exactly these will negatively affect production and delivery volumes. Raw materials prices have continued to develop flat and hence we still expect gross margin to decline from 16% in Q2 to 15% in Q3. There has also been basically no change to FX rates lately and so our EUR 114m revenue and EUR 9.8m EBIT estimates for Q3 remain intact.
We consider the conservative multiples attractive
Suominen continues to trade well below 6x EV/EBITDA on our estimates, compared to a historical average of 6.5x. We find this an attractive level and so retain our EUR 5.5 TP and BUY rating.
Raute reports Q3 results on Thu, Oct 29. Many issues point how order levels and profitability might have bottomed out, yet we continue to view valuation neutral. We retain our EUR 20 per share target price and HOLD rating.
A very large Russian order raises confidence on next year
While Q3 order intake likely remained at a subdued level Raute disclosed on Oct 16 the signing of a complete plywood mill project delivery. The EUR 55m Russian greenfield is worth close to the record EUR 58m Segezha order now on delivery. Raute begins delivering the new order next year and the mill is set to start production in ‘22. Even though the order is very large such a project delivery announcement is not that surprising given Raute’s Russian plywood mill track record. As usual with such big projects, Raute’s margin potential is likely quite limited. The order raises our confidence on next year’s workload. We now expect FY ’21 revenue at EUR 139m (prev. EUR 127m). With regards to FY ’21 EBIT we now estimate EUR 6.6m (prev. EUR 7.4m).
Long-term potential remains strong, short-term still hazy
While the pandemic has negatively affected Raute’s business it’s worth bearing in mind the investment cycle was cooling already well before this year. Although the pandemic and related uncertainty now only seem to prolong themselves by the day, we nevertheless view the prospect of wider plywood and LVL sector investment upturn entirely plausible. We see a reasonable chance Raute’s order intake will bottom out during H2’20. Another positive is the high likelihood of Raute emerging from the pandemic even stronger relative to competition. On the negative side is the extended short-term pressure on profitability. While it is clear this year’s valuation multiples should be overlooked, next year could still fall meaningfully short of long-term potential. In our opinion Raute does not face long-term profitability challenges, but on the other hand the sector’s cyclical nature means long-term outlook should be valued cautiously.
We expect improvement, but multiples aren’t yet attractive
Now that a big project has been secured, we focus on smaller scale equipment orders and services in the Q3 report. Raute is currently trading some 7x EV/EBITDA and 11x EV/EBIT on our estimates for next year. We view these multiples quite neutral in the current context. We retain our EUR 20 TP and HOLD rating.
Finnair will report its Q3 result on next week’s Wednesday, 28th of October. We have cut our 20E-21E estimates. We keep our rating “HOLD” with TP of EUR 0.38 (EUR 0.50) ahead of Q3 result.
Q3’20 ASK decreased by 87% y/y
In Jul-Sep, Finnair carried 454k passengers which is 89% decline compared to Q3’19. Finnair’s Q3 Available Seat Kilometers (ASK) decreased by 87% y/y but compared to Q2’20, ASK increased by ~380%. Revenue Passenger Kilometers (RPK) decreased by 94% y/y. Passenger load factor in Q3, was 38.7% (-47.5pp compared to Q3’19). Due to the strict travel restrictions and new infection waves, the company was not able to operate as many flights as it first anticipated. We expect Q3E revenue of EUR 157m and adj. EBIT of EUR -191m.
Aiming to fly ~75 daily flights during the winter season
The coronavirus has not shown signs of abating during the autumn and the travel restrictions have remained relatively tight, impacting negatively on demand. The company has been forced to adjust its traffic plans for several times and due to the current situation, the company now expects to operate approx. 75 flights per day from Nov’20 to Mar’21 (in 2019, ~350 daily flights) and will increase its destinations for summer 2021. During Q3, the company finalized a sale and leaseback arrangement for its A350 aircraft delivered in February this year. This had an immediate EUR ~100m positive cash effect. The company also issued a new EUR 200m hybrid bond (fixed interest rate of 10.250% p.a.).
“HOLD” with TP of EUR 0.38 (0.50)
We have further cut our 20E-21E estimates. We expect 20E revenue of EUR 1062m and comparable operating loss of EUR 609m. We expect the better recovery to start during ’21 spring but we highlight that the outlook is still very blurry. We keep our rating “HOLD” with TP of EUR 0.38 (0.50).
The FCCA has proposed the market court to prohibit the merger between Mehiläinen and Pihlajalinna. We now see the likelihood of the transaction being completed significantly lower. The political landscape is also changing. We keep our rating “HOLD” with new TP of EUR 11.0 (16.0).
FCCA proposes to prohibit the merger
The Finnish Competition and Consumer Authority (FCCA) has proposed the market court to prohibit the merger between Mehiläinen and Pihlajalinna. According to the FCCA, the merger would significantly impede effective competition in the Finnish health services market as there would be only two nationwide healthcare companies (Mehiläinen and Terveystalo) in the market post-merger. Hence, the Finnish healthcare market would become even more concentrated post-merger and the merger would create competition concerns and the proposed remedies are not sufficient to address the identified competition concerns (Mehiläinen submitted two remedies proposals). According to the FCCA, the merger is also likely to lead to price increases. The combined market share of the companies would have been ~7% of the total healthcare and social services market. The market court has to issue its decision within three months (latest on 29th of December).
The probability of the acquisition being completed has dropped
The result of the investigation came as a surprise to the parties involved and to us as well. It is possible that the FCCA’s methodology to assess the market size has varied from the methodology used by the companies (e.g. public vs. private sector). Anyhow, we see that the likelihood of the acquisition being completed has decreased significantly thus we return to see Pihlajalinna as an independent service provider also in the future. During the process, Pihlajalinna has continued to develop its business as usual. The company has for instance developed its digital services and other medical services. Additionally, the company has a strong background of cooperating with municipalities. Due to the economic difficulties, the public sector has seeked more efficient ways to produce effective services (e.g. by outsourcings) which has benefited the private sector. The political interests have however shifted more towards the public side meaning that the landscape has become more negative towards private social and healthcare service providers.
“HOLD” with TP of EUR 11.0
We have not made changes to our estimates but we see that the probability of transaction being completed is significantly lower. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 19.5x and 12.9x which translates into 15-30% discount compared to the peers. We keep our rating “HOLD” with a new TP of EUR 11.0 (16.0).
Verkkokauppa.com issued a positive profit warning and expects 20E revenue of EUR 525-550m and adj. EBIT of EUR 17-21m. We have slightly increased our estimates and keep our rating “BUY” and TP of EUR 6.3 intact.
Guidance upgrade due to better than expected development
Verkkokauppa.com issued a positive profit warning and upgraded its 2020 guidance. The upgrade is due to a better than expected development during Q3 and improved outlook for the remainder of the year. The company now estimates that the revenue in 2020 is in a scale of EUR 525-550m while adj. EBIT is EUR 17-21m (prev. revenue of EUR 520-545m and adj. EBIT of EUR 13-18m). This is the company’s second positive profit warning within a short period of time as the previous one was given in July.
Consumers still on the move
According to the company, sales and the consumer demand have continued stronger than expected throughout Q3. Against the expectations, the strong demand in many of the key product categories (e.g. consumer electronics) in Q2 has not resulted in a weakened demand in these categories in Q3. It is however likely that the growth in the consumer electronics market hasn’t continued as strong but rather that Verkkokauppa.com has been able win market shares. The management indicated that the demand has continued strong also in other smaller product categories. We expect the lower margin wholesale sales to remain relatively low throughout the year, boosting gross margin development. If the same momentum continues, Verkkokauppa.com’s campaign season in Q4 is likely to be very strong. However, there are still significant uncertainties due to the COVID-19 situation.
“BUY” with TP of EUR 6.3
We have only slightly increased our 20E revenue expectation (EUR 543m) while increasing our adj. EBIT expectation by ~11% (EUR 19.8m). On our estimates, the company trades at 20E-21E EV/EBIT multiple of 10.1x and 10.4x, which translates into a 60-70% discount compared to the peers. We keep our rating “BUY” with TP of EUR 6.3 intact.
Our estimates and EUR 5.5 TP are intact; retain BUY rating.
Fundamentals now materially firmer in short and long term
Suominen’s turnaround materialized in a very swift fashion this past spring. Figures were considerably soft as late as Q4’19 when top line slipped in both business areas, especially so in Europe. Americas grew again in Q1’20 but Europe still declined some 11% y/y. While overall Q1 was already a positive surprise in terms of profitability, revenue nevertheless continued to develop flat y/y. Then Suominen proceeded to issue two positive profit warnings during a span of two months in spring and early summer. However strong indication of improving performance this was, our estimates could not exactly keep up with the pace and hence Q2 figures trounced our expectations. Although the groundwork for solid improvement had been laying back there for some time (thanks to e.g. sustainable product introductions), it seems basically all the factors happened to align favorably during the spring. Both Americas and Europe posted revenue increases in the high teens, which also helped production efficiency. Investments in US production assets were ready to pay off. Product mix improved some more while nonwovens prices did not decline quite as much as those of raw materials.
Success in sustainable products helps to reach targets
The notable pre-pandemic challenges have vanished. Strong wipes demand means nonwovens supply-demand balance now tilts much more favorably from a manufacturer’s point of view, at least in the short-term. Despite this we expect some softening in Suominen’s H2 figures as nonwovens prices tend to follow raw materials prices closely, in addition to which several Suominen plants will go through scheduled maintenance breaks. The Q2 records place the bar high for next year, but in our view Suominen’s long-term financial targets look credible. Success in sustainable products (in Suominen’s case increasing share of wood-based fibers) could well defend margins also in the long-term, although the innovations’ profitability remains to be tested in a scenario where significant new capacity enters the market.
We see upside relative to historical earnings multiples
We continue to view Suominen’s below 6x EV/EBITDA multiples attractive. Our TP is EUR 5.5 and we retain our BUY rating.
Marimekko announced a guidance for 2020E and expects net sales to be lower compared to last year and adj. EBIT to be approx. at the same level or lower than last year. Due to the improved outlook we have increased our estimates. We upgrade to “BUY” (“HOLD”) with new TP of EUR 42.0 (32.0).
Guidance for 20E announced
Marimekko withdrew its earlier 20E guidance in March, solely due to the estimated impacts of the COVID-19. The company stated during its Q2 result that the coronavirus will have a significant negative impact on sales and profitability in 20E. Now the company has announced a guidance for 20E and expects net sales to be lower than in the previous year (EUR 125.4m) and adj. EBIT to be approx. at the same level or lower than in the previous year (EUR 17.1m).
Better than expected trend in sales
According to Marimekko, the improved outlook is mainly due to better than expected trend of Finnish retail sales during the summer and improved outlook of wholesale sales but also due to better fixed cost savings during the rest of 20E. The company however highlights that there are still significant uncertainties caused by the COVID-19. The travel restrictions remained tight throughout the summer thus it is likely that the money normally spent on traveling has now been put into other things. Additionally, during the pandemic, the trend of domesticity has increased among Finnish consumers which should also have a positive impact on domestic sales. According to the company, major portion of its net sales and earnings for H2E will be generated during Q3E.
Upgraded to “BUY” (“HOLD”) with TP of EUR 42.0 (32.0)
We have increased our 20E sales expectation by ~2% and our 20E adj. EBIT estimate by ~21%. In our view, Marimekko’s mid-term outlook is good despite of the challenging times. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 18.6x and 16.4x which translates into a clear discount (~50%) compared to the luxury peers and at 20E-21E P/E multiple of 25.0x and 21.6x – also a clear discount compared to the luxury peers. We upgrade to “BUY” (“HOLD”) with TP of EUR 42.0 (32.0).
Aspo reissued guidance for this year. In our view the main takeaway is that improvement will be visible in Q4 figures, albeit there’s still long way to reach the targets set for ’23. Our TP is EUR 7.25 (6.00), rating BUY (HOLD).
Q4 will mark the beginning of profitability rebound
Aspo now guides FY ’20 EBIT to be in the EUR 12-16m range, compared to EUR 21.1m last year. Aspo says Telko’s (including Kauko) development has proved a positive surprise while Leipurin has been able to defend its profitability despite exceptional circumstances. Aspo expects the combined EBIT for Telko and Leipurin segments will be higher this year than in ‘19 (the combined figure amounted to EUR 11.0m last year). Meanwhile Aspo estimates ESL will post a negative result for Q3 but expects Q4 to be clearly profitable as e.g. steel industry production shutdowns end and cargo volumes will begin to grow.
Q4 results will still be significantly below target levels
The new range’s EUR 14.0m midpoint is lower than our previous EUR 15.3m estimate, the difference being mostly due to ESL’s expected negative Q3 result (which we previously estimated at EUR 0.4m). We now expect ESL to post EUR -0.2m in Q3 EBIT. We leave our FY ’20 estimates intact for other segments, and so we now expect Aspo to post EUR 14.6m EBIT this year. In our view the guidance reissue is positive news for Aspo shareholders in terms of informational content as it hints at relatively brisk profitability rebound in Q4. On the other hand, Q4 EBIT, which we now estimate at EUR 4.8m, will still be far from Aspo’s full potential. According to the long-term targets published at last fall’s CMD, Aspo aims for 6% EBIT margin in ‘23 (vs our 3.9% estimate for Q4). ESL’s targets imply EUR 24m in annual EBIT, or some EUR 6m on a quarterly level (vs our EUR 2.8m estimate for Q4). Telko and Leipurin will likewise still be generating EBIT margins clearly below their respective 6% and 5% targets.
Uncertainty remains, but we see surprises tilting to upside
The guidance pushes away some uncertainty, yet it was previously known this year will fall significantly below long-term potential. Next year’s profit gradient is the key question; the main upside driver is found in positive surprises for ‘21. Although it’s early to wait such news, we see valuation attractive already in terms of SOTP. Our TP is EUR 7.25 (6.00), rating BUY (HOLD).
Verkkokauppa.com’s growth story has continued over the years and the company’s revenue CAGR in 2010-2019 was 12.6 percent. Now the company has started to put more emphasize on profitability. We keep our rating “BUY” with TP of EUR 6.3.
Focusing on profitable growth
Verkkokauppa.com’s revenue CAGR in 2010-2019 was 12.6 percent. The growth has been mainly supported by competitive pricing, strong online positioning and new product categories. The competition in the consumer electronics market has continued fierce and price driven. The company’s efficient and scalable cost base driven by small physical footprint enables competitive pricing and strong reliance against competition. The company has a strong net cash position which enables investments in growth. The company has started to put more emphasis on profitability of which the first evidences have already been seen.
Better profitability improvement via gross margin increase
Verkkokauppa.com’s future growth is depended on the online migration. According to the company, online sales represent some 12-13 percent of the total Finnish retail market. The company’s extremely good performance in H1’20 has been partly driven by the COVID-19, as sales grew by 11 percent and adj. EBIT grew by over 240 percent. It is challenging to estimate how permanent the market changes will be. However, increased online demand benefits e-commerce players such as Verkkokauppa.com. At the same time, risks related to the overall economic outlook and declining purchasing power have increased. Due to the low and scalable cost base we expect the company’s profitability to improve together with revenue growth. However, we see that better profitability improvement stems from higher gross margin levels.
“BUY” with TP of EUR 6.3 intact
We have slightly increased our estimates and expect sales in 20E-21E to grow by ~7 percent and ~4 percent, respectively. We also expect profitability to improve and adj. EBIT margin of 3.2-3.3 percent in 20E-21E. We value Verkkokauppa.com by using our scenario analysis which indicates a fair value of EUR 6.3. On our estimates, Verkkokauppa.com trades at 20E-21E EV/EBIT multiple of 10.9x and 10.7x, which translates into ~60 percent discount compared to the peers. 20E-21E EV/Sales multiple is ~30 percent below peers. We keep our rating “BUY” with TP of EUR 6.3.
Suominen hosted a virtual CMD yesterday. Although there were no major updates the event nevertheless added some color on recent trends. Our TP remains EUR 5.5, rating BUY.
Volumes are up globally due to cleaning and disinfection
The pandemic has lifted volumes in all markets and Suominen expects elevated demand to persist at least for the next few months. Permanently higher demand is likely within cleaning and disinfection products. Suominen estimates it has an above 15% wiping market share in Europe and is thus the leading player. All segments have enjoyed strong demand, household wiping especially so. Americas’ development has been similar and stores in the US still often have trouble shelving enough household cleaning products. Nielsen Homescan estimates 79% of US households now consider disinfecting wipes a staple item (vs 50% prior to the outbreak). Certain interesting consumer behavior anecdotes were discussed e.g. how Uber riders can now check before boarding whether the ride will feature Clorox disinfecting wipes. Luckily the new assets in Bethune and Green Bay were ready to meet surging demand. Indeed, the plant in Bethune was able to finally reach performance targets. In general, Suominen aims to grow with its current major customers and we see the company well-positioned to capture above market growth (thanks to competitive product portfolio), according to the long-term financial targets updated previously this year. Margins should stay relatively high in the short-term and Suominen might even be able to defend its nonwovens pricing, despite lower raw materials prices, as high wiping demand continues to persist together with the pandemic.
Our estimates remain unchanged for now
The CMD did not lead us to revise our estimates at this point. We expect some softening in gross margin and thus in EBITDA following the exceptionally strong Q2 (Suominen posted a 14.7% EBITDA margin, compared to the above 12% long-term target).
Further improvement not very easy but multiples are low
2020 will be a new record year for Suominen in terms of financial performance and in our view further gain in EBITDA next year can prove tricky. However, we continue to view current valuation attractive (EV/EBITDA is ca. 5.5x on our estimates for this year and next). We retain our EUR 5.5 TP and BUY rating.
Next Games reported better results than we had expected and clearly better profitability, which effectively halted cash burn. The Stranger Things and Blade Runner Rogue games are set for scaled launch in the year-end or later and growth prospects in 2021 remain largely unchanged.
Profitability clearly above expectations
Next Games reported better H1 results than we had expected. Revenue amounted to EUR 14.4m (Evli 13.8m) and the adj. operating profit to EUR 0.1m (Evli -2.4m). NML performed above our expectations due to ARPDAU improvements while Our World gross bookings continued to decline as DAU figures fell clearly, although the ARPDAU continued to improve. Our World was affected by COVID-19 restrictions on movement. With the improved profitability operating cash flow turned positive and the cash position excluding debt repayment remained effectively unchanged from the end of 2019.
Scaled new game launches set for the year-end
Next Games has clearly reevaluated its publishing strategy since the launch of Our World and new games will be brought to market and scaled over a longer time period. With Stranger Things expected to be launched in Q4/20 and Blade Runner Rogue still seeing major updates the impact of new games on 2020 revenue will likely be very limited and Next Games quite expectedly dropped its revenue guidance. Publishing operations EBITDA is expected to grow clearly in 2020 following lower marketing costs. 2021 figures are highly dependent on the new games to be launched and visibility as such is extremely low. With a larger share of employees working on live games profitability should improve but marketing costs should still limit near-term profitability potential.
SELL with a target price of EUR 1.2 (0.9)
The improved profitability and resulting halt to cash burn provide needed support for the company’s financial position. With the uncertainty from the dependency on new games, valuation in our view is still not justifiable. We adjust our target price to EUR 1.2 (0.9) and retain our SELL-rating.
Fellow Finance’s H1 figures were somewhat below our expectations and EBIT barely fell in the red. Volume recovery prospects in 2020 appear rather meager and growth ambitions should pick up during H2 to put things back on track in 2021. We retain our HOLD-rating and TP of EUR 2.5.
EBIT barely in the red
Fellow Finance reported H1 figures somewhat below our expectations. Revenue amounted to EUR 5.8m (Evli 6.3m), declining 20% y/y, and EBIT to EUR -0.1m (Evli 0.3m). Facilitated loan volumes and commissions income declined around 37% y/y respectively, while increases in interest yield income mitigated some of the revenue impact. The uncertainty caused by the coronavirus was clearly visible in loan volumes after March, dropping average volume levels to approx. EUR 9m per month during 4-6/2020 compared with approx. EUR 14.5m during 1-3/2020.
2020 to be a challenging year
Investor’s demand has according to Fellow Finance seen recovery in recent months. The temporary regulation on maximum interest rates on consumer loans in Finland, valid during 1.7-31.12.2020, should have a negligible impact on volumes as Fellow Finance is compensating investors with the difference to the actual interest rate but will result in some additional costs during H2. We currently expect loan volumes to rebound to an EUR 11m per month average level in Q4. Although possible, with the current more challenging environment we do not see Fellow Finance achieving the pre-corona volume levels during 2020. We still expect notable improvements in 2021, assuming an ease in temporary regulations and renewed focus on growth drivers.
HOLD with a target price of EUR 2.5
Our estimates have been slightly lowered post-H1 given the below expectations figures and continued dim outlook for volume recovery. Near-term multiples on our estimates remain unattractive but longer-term growth potential still remains. We retain our HOLD-rating and target price of EUR 2.5.
Endomines commenced gold concentrate sales at its Friday mine but COVID-19 related challenges have pushed back ramp up to design capacity further. The attractive gold price level unfortunately remains overshadowed by cash burn and lack of more permanent financing solutions. We retain our SELL-rating with a target price of SEK 5.5.
Sales commenced but head grades still low
Endomines Q2 results were slightly below our estimates, with revenue of SEK 7.5m (Evli 9.0m), EBITDA of SEK -17.5m (Evli -20.6m) and EBIT of SEK -27.7m (Evli -24.5m). The first concentrate sales at the Friday mine were made, but with pre-production development material being milled head grades were low and with the still low capacity revenue was not yet significant. COVID-19 related challenges to supply chains and recruitment have further pushed back the ramp up timetable of the processing facility and design capacity will unlikely be reached in 2020.
Friday ramp-up delayed due to COVID-19
We have clearly lowered our 2020 estimates post-Q2 following the ramp-up delays and update on the stockpiled pre-production development material. We expect 80% of design capacity to have been reached in Q4 and atypical head grades throughout the year due to stockpiled development material. We now expect revenue of SEK 41.0m (prev. 77.1m) and EBITDA of SEK -68.9m (prev. -38.3m). Endomines reported that plans are being made for a possible re-opening of Pampalo given the current gold price, which in our view could provide a production boost somewhere towards H1/21 if initiated.
SELL with a target price of SEK 5.5
Despite production and sales having recommenced, the unfortunate side of the Q2 report was the cash burn rate, with liquid assets again largely depleted and some exploration activities having been put on hold. Gold price levels are clearly attractive but with the expected cash burn rate during H2/20 and so far lack of more permanent financing solutions risks are still substantial. We retain our TP of SEK 5.5 and SELL-rating.
Next Games' net sales in H1 amounted to EUR 14.4m, slightly above our estimate (EUR 13.8m Evli). Gross bookings amounted to EUR 14.2m (Evli EUR 13.8m). The adj. EBIT was clearly better than expected at EUR 0.1m (EUR -2.4m Evli).
Fellow Finance’s H1/2020 results were somewhat weaker than expected, with revenue of EUR 5.8m (Evli EUR 6.3m) and an adj. EBIT of EUR -0.1m (Evli EUR 0.3m). The adj. EPS was below our estimates at EUR -0.10 (Evli EUR -0.05). Coronavirus uncertainty and temporary regulations affected facilitated loan volumes, down 36.8% in H1/20 compared with H1/19.
Endomines’ gold production amounted to 326.1oz. Head grades were at a low level of 2.9g/t due to the milling of pre-production development material. Near design capacity at Friday is now sought to be reached in Q4, with the COVID-19 pandemic having caused delays. Q2 revenue amounted to SEK 7.5m (Evli 9.0m) and EBITDA to SEK -17.5m (Evli -20.6m).
Next Games reports H1 results on August 28th. We expect the COVID-19 restrictions to have supported gaming in general but had an adverse impact on the location based Our World game. The limited news on games in development raises some concerns for the 2020 outlook.
Expect to see two-fold impact of the pandemic
Next Games will report H1 results on August 28th. We expect the outbreak of the coronavirus pandemic to have had a two-fold effect on current live games. The imposed restrictions on movement and self-isolation should have had an adverse effect on the location based Our World game and Next Games did launch the Free Roam feature to mitigate some of the impact. No Man’s Land should have continued to perform seemingly well, with the restrictions to certain activities having freed up more time for other activities such as gaming. We expect revenue of EUR 13.8m, a decline of 28% from the stronger comparison period, and an adj. EBIT of EUR -2.4m, with positive publishing operations profitability.
Limited news flow on games in development
News flow on games in development has been essentially non-existent post H2/2019. Blade Runner Rogue is running on app stores, but retention issues previously saw the game being moved back to production phase. The Stranger Things -game was in early access earlier on but no further news has been given. The pandemic should not have significantly affected development progress, with employees having rapidly shifted to remote working. Next Games expects modest revenue growth in 2020 assuming one or two games are published in 2020. We see some risks in achieving the outlook given the news flow and expect the H1 report to shed some much-needed light on the progress.
SELL (HOLD) with a target price of EUR 0.9 (0.84)
Valuation continues to be clearly below peers as is profitability. The restrictions due to the pandemic will have aided the gaming sector and peer multiples have in the past months been on the rise. We adjust our TP to EUR 0.9 (0.84) but lower our rating to SELL (HOLD).
Cibus’ portfolio remains unaffected by the pandemic and additional acquisitions are imminent despite already busy H1’20. Our TP is now SEK 160 (150) per share, rating BUY.
Certain exceptional transactions burdened Q2 bottom line
Cibus was largely immune to the pandemic (shared certain small Finnish tenants’ troubles to the tune of EUR 0.2m). Property figures were as expected with rental income at EUR 16.4m vs our EUR 16.2m estimate. Property expenses remained in check and so net rental income amounted to EUR 15.1m i.e. same as our estimate. Administration costs were elevated by some EUR 0.5m due to bond transactions as well as the restructuring of Finnish books. The EUR 13.6m in operating income thus fell short of our EUR 14.2m estimate. Net financial costs were driven high, to EUR 5.8m, by a one-off EUR 2.9m item attributable to bond redemption premiums and arrangement fees. Net operating income was thus EUR 7.8m vs our EUR 9.9m estimate.
Both existing portfolio and prospects basically unchanged
The daily-goods property market remains stable and the pandemic hasn’t discernibly altered deal flow. This means Cibus is in a strong position to add to its property mass through smaller portfolio acquisitions and thus scale the current organization. Yields are still attractive as Cibus can buy assets at some 100-150bps pick-up relative to its own book valuation. In addition to the EUR 180m Swedish entry, Cibus is well ahead of its annual EUR 50m acquisition target since Finnish purchases total over EUR 70m YTD. With EUR 85m in cash and long-term financing in place further additions might well happen in H2’20. Cibus is also instituting additional shareholder-friendly effects in the near term, namely the transitioning to monthly dividend payments as well as switching to the Nasdaq Stockholm main list.
We see scope for further valuation rerating
In our opinion some tightening in valuation relative to the wider Nordic property sector is warranted since the pandemic has very limited direct bearing on Cibus. The situation is different for the bulk of commercial real estate e.g. offices. Cibus’ yield spread relative to other listed Nordic entities has indeed tightened a bit recently, however in our view there’s still room to go with Cibus yielding ca. 5% vs some 4% for a typical Nordic portfolio. Our TP is now SEK 160 (150) per share. We retain our BUY rating.
Cibus’ portfolio continued to perform according to expectations while transactions and financing activities drove central administration expenses and especially net financial costs exceptionally high.
Pihlajalinna’s Q2 result was close to expectations. Revenue decreased by 11.6% y/y and was EUR 114.7m while adj. EBIT totaled EUR 0.6m. The tender offer by Mehiläinen is being under review of the FCCA and if approved, the process is expected to be completed during Q3. We keep our rating “HOLD” with TP of EUR 16.0.
The pandemic hampered especially non-urgent healthcare
Pihlajalinna’s April-June revenue of EUR 114.7m (-11.6% y/y) was slightly above our expectation of EUR 112.1m. Adj. EBITDA was EUR 9.0m vs. our EUR 9.1m and adj. EBIT was EUR 0.6m vs. our EUR 0.2m. Complete outsourcings and other fixed priced invoicing supported the company throughout Q2 (profitability of these remains relatively stable despite of the demand situation). The situation didn’t also have significant impacts on the demand of housing services for elderly, recruitment services, public surgical operations or fertility treatments. Customer flows and demand decreased especially in private clinics and dental clinics. Revenue of Forever-fitness centers declined by over 80 percent y/y, resulting from the temporarily closure of the centers.
Releasing pent-up demand
According to the company, the biggest drop in demand is now behind and as the pent-up demand has started to release, the customer flows in private clinics, occupational healthcare services and dental care services have recovered relatively well and the demand is closer to a normal situation. As the restrictions impacted the most on the demand of non-urgent healthcare services, there are bottlenecks in the treatment queues especially on the public side. This could potentially further increase the customer flows of the private sector. However, the increasing number of new coronavirus infections is indicating a new wave, which increases uncertainties and makes the visibility of H2 blurry.
“HOLD” with TP of EUR 16.0
The tender offer by Mehiläinen is currently being under review of the FCCA (phase two investigation). The deadline for the investigation is 27th of August (plus possible extension period). Based on the current information, if the tender offer is approved, the process is expected to be completed during Q3. We have only made minor adjustment to our estimates after the Q2 result. We expect 20E revenue of EUR 517m (-0.3% y/y) and adj. EBIT of EUR 22.3m. We keep our TP at the tender offer price of EUR 16.0 and retain our rating “HOLD”.
Gofore’s H1 report did not provide any larger surprises. With net sales pre-announced at EUR 37.4m adj. EBITA of EUR 5.8m was quite in line with our estimates (Evli EUR 5.5m). The large share of public sector clients (73.5% of H1 net sales) is proving beneficial under these circumstances and the direct impact of COVID-19 has been rather limited. We retain our HOLD-rating with a TP of EUR 8.6 (8.4).
No surprises in the H1 results
Gofore’s H1 results brought no larger surprises, as net sales had been pre-announced at 37.4m the adj. EBITA was quite in line with our estimates at EUR 5.8m (Evli 5.5m). Relative profitability was as expected weaker in the second quarter compared to the first quarter but saw no major direct negative impact of the coronavirus pandemic. Demand in the public sector clientele, representing 73.5% of net sales in H1, saw demand remaining steady while the private sector clientele saw some delays in development work and cancellations of projects.
Acquisition seals growth prospects
Our estimates remain largely intact as our marginally lowered expectations for H2 are offset by the slight profitability beat in H1. We expect 2020 net sales of EUR 75.1m (co’s guidance EUR 70-76m) and an adj. EBITA of EUR 10.0m. Our profitability estimates are more on the cautionary side given H1 profitability but in our view reflects the company guidance and P&L changes from the Qentinel Finland acquisition. In our estimates for net sales in the second half of the year we currently expect similar organic growth as in H1 along with the expected EUR 4m M&A impact. In 2021 we see Gofore set for solid earnings growth with help of the large inorganic growth.
HOLD with a target price of EUR 8.6 (8.4)
With only minor estimates revisions post-H1 we fine-tune our target price to EUR 8.6 (8.4), valuing Gofore at ~17.0x 2020e adj. P/E. Demand uncertainty is at elevated levels due to the pandemic but resilience has so far been provided by the large share of public sector clients. Our HOLD-rating remains intact.
Considering the circumstances, Marimekko delivered relatively good Q2 result. Net sales decreased by 20% y/y and amounted EUR 23.3m vs. EUR 18.3m/19.8m Evli/cons. Adj. EBIT clearly beat expectations and was EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. We keep our rating “HOLD” with TP of EUR 32 (24)
Relatively good result, considering the circumstances
Marimekko’s Q2 net sales were down by 20% y/y and totaled EUR 23.3m (EUR 18.3m/19.8m Evli/cons). Especially retail sales in Finland, Scandinavia and North America faced headwind amid the pandemic but also wholesale sales in the APAC region declined. At the same time, licensing income in the APAC region boosted sales. Adj. EBIT clearly beat estimates and was EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. Profitability was weighed down by lower net sales and declined relative sales margin (sales margin was negatively impacted by increased logistics costs and bigger discounts). In the early stage of the pandemic situation, the company implemented cost saving measures resulting in decreased fixed costs in Q2. Guidance for 20E was not given.
Sales and earnings depending on the pandemic situation
Even though the Q2 result beat the expectations, the uncertainties hover over the H2’20. Despite of the strong online sales growth (more precise information not disclosed), it is vital especially for the retail stores to remain open. In the case of new infection waves, we expect the customers to become even more price sensitive and cautious with their purchases, impacting negatively on sales. This could also have an impact on the partners’ behavior. However, we expect the mentality of “support your local” among the Finnish consumers to continue, supporting domestic sales together with nonrecurring promotional deliveries of which majority will take place in H2’20E. Marimekko is also planning to reorganize its operations and initiates cooperation negotiations. The aim is to seek annual cost savings of approx. EUR 1.5m.
“HOLD” with TP of EUR 32.0 (24.0)
After the Q2 result we have increased our 20E revenue estimate by ~6% (EUR 116m) and our adj. EBIT estimate by ~27% (EUR 13.7m). We have also slightly increased our 21E-22E estimates. However, we note that there are significant uncertainties not only with our 20E estimates but also with our 21E estimates. On our estimates, Marimekko trades at 20E-21E EV/EBIT multiple of 18.1x and 13.5x, which translates into a clear discount compared to the luxury peers. We keep our rating “HOLD” with TP of EUR 32.0 (24.0).
Gofore’s adj. EBITA in H1 was slightly better than we had expected, at EUR 5.8m (Evli 5.5m). Revenue amounted to EUR 37.4m (pre-announced). Little direct impact of the coronavirus pandemic on the public sector client segment so far, private sector more affected.
Solteq reported clearly better than expected profitability figures following cost reductions, with comp. EBIT at EUR 1.5m (Evli 0.5m). Possible demand thinness remains a concern but with the lower cost base we raise our 2021-22 comp. EBIT estimates by some 30% on average. We adjust our TP to EUR 1.65 (1.15) and our rating to BUY (HOLD).
Profitability clearly beat our estimates
Solteq reported solid Q2 results and profitability was clearly better than we had expected. Revenue grew 7.8% in comparable terms to EUR 15.1m (Evli EUR 14.6m) with both segments contributing nearly equally. The comp. EBIT amounted to EUR 1.5m, clearly above our estimates (Evli EUR 0.5m). The earnings improvement was attributable to previously taken streamlining actions and to some extent reduced travel expenses due to COVID-19. Solteq also reinstated a guidance for 2020, expecting comp. EBIT to grow significantly. The operating cash flow was also strong, at EUR 5.3m in H1 (2019: EUR 4.1m).
Coming year profitability estimates up by quite a bit
We have made larger estimates revisions post Q2, now expecting 2020 revenue of EUR 60.2m (prev 58.9m) and comp. EBIT of EUR 4.8m (prev. 2.4m). We have also raised our 2021-2022 comp. EBIT estimates by some 30% on average. The impact of the coronavirus has so far been limited and sales growth has been good during H1 following good earlier order intake. Our main concerns going forward relate to possible thinness in demand and as such expect lower relative growth figures. Solteq has seen good demand in for instance the energy sector, while areas more affected by the pandemic, such as the travel, restaurant and maritime sectors, saw lower sales in Q2.
BUY (HOLD) with a TP of EUR 1.65 (1.15)
Solteq has been burdened by high leverage and as such low earnings, which to a large extent will be reversed by the improved profitability and improved cash flows will reduce financial risk. With our revised estimates we adjust our TP to EUR 1.65 (1.15), implying a 2020e P/E of 16.5x. We adjust our rating to BUY (HOLD).
Pihlajalinna’s Q2 result was somewhat in line with our expectations. Q2 revenue amounted to EUR 114.7m vs. EUR 112.1m/119.1m Evli/cons, while adj. EBIT landed at EUR 0.6m vs. EUR 0.2m/1.8m Evli/cons estimates. EPS was EUR -0.03 vs. our EUR -0.03.
Aspo Q2 was stronger than expected thanks to Telko, but the report and comments painted a cautious short-term picture. Our TP remains EUR 6.0, retain HOLD rating.
Some beacons of light but still surrounded by thick fog
ESL’s top line declined by 23% y/y and at EUR 32.9m was clearly below our EUR 40.1m estimate. Q2 EBIT, at EUR 0.6m, thus didn’t meet our EUR 1.6m estimate. Steel industry cargo volumes fell steep and energy industry activity wasn’t much better. Smaller vessels continued to perform quite well but many larger ones operated in weak spot markets. ESL managed to shave fixed costs by EUR 0.9m and Aspo says cost measures will be fully realized in Q3, however Q3 outlook is not bright as steel industry volumes will be low with rebound now expected for Q4. Meanwhile Telko posted EUR 4.2m EBIT (vs our EUR 1.1m estimate), a strong show given that revenue declined by 26% y/y to EUR 59.5m (vs our EUR 63.1m estimate). Telko’s performance is clearly on an improving trend thanks to efforts addressing e.g. working capital efficiency. It however seems Q2 EBIT margin was exceptionally high and current outlook is challenging especially in Ukraine and Russia. Leipurin Q2 revenue fell by 17% y/y and the EUR 0.3m EBIT didn’t meet our EUR 0.6m estimate as certain machinery deliveries bound for Russia were postponed to H2.
We cut estimates due to cautious market comments
Aspo’s H1 figures already reflected the pandemic shock yet Q3 remains challenging especially for ESL. We now expect ESL EBIT at EUR 0.4m and EUR 2.9m respectively for Q3 and Q4. In our view Aspo’s unofficial soft guidance for Telko FY ’20 (flat y/y absolute profitability i.e. some EUR 8m) seems a bit conservative given the EUR 6.6m accumulated already in H1. We expect Telko Q3 EBIT at EUR 2.3m. We cut our H2 EBIT estimate all in all by EUR 4.0m to EUR 7.2m, reflecting Aspo’s cautious comments.
Strong rebound remains a possibility yet not imminent
It’s clear this year will be quite soft figurewise with ESL only beginning to rebound in Q4. There’s thus clear upside relative to long-term estimates, yet in our view given the prolonged pandemic uncertainty it takes a lot of conviction to rely on that outlook. In terms of SOTP there’s potential with respect to the ’19 and ’20 average, however that approach relies on Telko’s FY ’20 improvement. Our TP remains EUR 6, rating HOLD.
Marimekko’s Q2 result beat the consensus expectations. Net sales were EUR 23.3m (-20% y/y) vs. EUR 18.3m/19.8m Evli/cons. Adj. EBIT was clearly above estimates at EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. Marimekko expects the coronavirus to have a significant negative impact on net sales and profitability in 2020. Guidance for ’20E was not given at this point.
Suominen’s Q2 was way above our estimates. The major question now is where gross margin settles as the dance between nonwovens and raw materials prices plays out. We have upgraded our estimates, our new TP is EUR 5.50 (4.75) and we retain our BUY rating as multiples remain low.
Q2 performance was in our view exceptionally strong
Suominen posted EUR 122.2m in Q2 revenue (up 18% y/y and compared to our EUR 115.0m estimate), a record high despite lower nonwovens prices (reflecting soft raw materials) as volumes grew considerably due to high wiping demand. Both Americas and Europe did brisk volumes and posted revenues respectively at EUR 77.2m (up 19% y/y) and EUR 45.0m (up 16% y/y). Gross margin also increased almost another 400bps q/q to 16.0%. We note this is a record figure (vs e.g. 14.7% GM back in Q3’14) and likely not sustainable long-term. Record revenue and gross margin led to EUR 19.5m gross profit vs our EUR 14.4m estimate. SG&A and R&D remained flat at EUR 7.8m and thus the EUR 12.4m EBIT trounced our EUR 6.8m estimate.
We expect some softening in gross margin going forward
Suominen’s H1 was unexpectedly strong as improving product mix, production efficiency and low raw materials prices led to big margin gains. The pandemic also helped business as demand for wipes increased and Suominen was able to meet the challenge. However, production volumes will be lower in H2 due to scheduled maintenance stoppages at several plants. We nevertheless continue to see the demand and volume outlook strong since the pandemic is unlikely to fade away soon. With respect to profitability we expect the gross margin to have topped out. We don’t expect significant downward correction in the short-term as nonwovens and raw materials prices are in practice highly correlated. Given the current price data we expect Q3 gross margin at 15% and Q3 EBIT thus at EUR 9.8m.
Multiples still quite reasonable on our updated estimates
Suominen also announced an EUR 8m investment in Cressa, Italy. The production line upgrade will enhance capacity and seems a straightforward measure to address growing demand. All in all, we see further upside potential despite sharp rerating this year. On our updated estimates Suominen now trades slightly below 6x EV/EBITDA FY ’20. Our new TP is EUR 5.50 (4.75), rating BUY.
Solteq’s revenue in Q2 grew 7.8% in comparable terms to EUR 15.1m (Evli EUR 14.6m). The comparable operating profit clearly beat our expectations at EUR 1.5m (Evli EUR 0.5m) aided by cost savings from actions taken to improve operational efficiency. Guidance reinstated: Solteq Group’s comparable operating profit in 2020 is expected to grow significantly.
Aspo clearly beat estimates in terms of profitability, managing to post flat EBIT despite a significant drop in revenue as Telko’s profitability proved a huge positive surprise.
Suominen’s Q2 results wiped the table clean with our estimates.
Ettplan’s timely actions to reduce costs saw EBIT remaining strong, at EUR 5.4m (Evli/cons. EUR 3.2m/3.8m) despite the organic revenue decrease of 11.3%. Challenges will continue in coming quarters but the hit from the pandemic so far appears smaller than we had feared.
Timely cost reduction actions kept profitability strong
Etteplan reported Q2 results that were above expectations given the challenging circumstances. Revenue was in line with expectations at EUR 62.9m (EUR 63.3m/63.3m Evli/cons.), decreasing 2.2% y/y and organically 11.3% y/y. EBIT was clearly better than expected, at EUR 5.4m (Evli/cons. EUR 3.2m/3.8m). Profitability was aided by timely actions made to reduce operating costs. With operating costs declining faster than cash flow from sales, Etteplan posted an exceptionally strong operating cash flow of EUR 18.0m (Q2/19: 8.8m). The uncertainty in customer demand remains but we interpret comments by the company pointing to expectations of some recovery in the second half of the year. Etteplan reinstituted a guidance for 2020, expecting sales to light decrease slightly or remain at 2019 levels and EBIT to decrease compared to 2019.
The hit to 2020 figures not as bad as feared based on H1
With the higher than anticipated reduction in operating expenses we adjust our 2020 EBIT estimate to EUR 18.1m (prev. 14.3m), while keeping our revenue estimates largely intact. We expect 2020 revenue of EUR 258.3m for an estimated organic decline of some 7%. Our estimates assume similar capacity decreases due to temporary layoffs in Q3 as Q2 and roughly half the decrease in Q4. Visibility into the coming years is weak but we expect to see Etteplan returning to growth in 2021, as although a second wave of the pandemic may cause challenges, lessons learned during the first wave should result in a lesser strain on both Etteplan and customers.
HOLD with a target price of EUR 8.7 (8.3)
Based on our revised estimates we adjust our target price to EUR 8.7 (8.3), for a 2020e P/E of ~16x, which we currently consider fair given the elevated uncertainty. We retain our HOLD-rating.
Etteplan's net sales in Q2 amounted to EUR 62.9m, in line with our estimates and consensus (EUR 63.3m/63.3m Evli/cons.). EBIT amounted to EUR 5.4m, above our consensus estimates (EUR 3.2m/3.8m Evli/cons.). Etteplan expects 2020 revenue to decrease slightly or be at the same level as in 2019 and EBIT to decrease compared to 2019.
Gofore acquired software testing automation specialist Qentinel Finland Oy, with some 100 employees, and specified its 2020 guidance. We now expect 2020 sales growth of 17.2% and the adj. EBITA to improve to EUR 9.8m (2019: 8.0m). We adjust our TP to EUR 8.4 (7.8), HOLD-rating intact.
Acquisition and guidance revision
Gofore announced the acquisition of Qentinel Finland Oy, a specialist in software testing automation with roughly 100 employees and 2019 sales and EBIT of EUR 12.0m and EUR 1.7m respectively. The debt-free purchase price is EUR 8.9m and an additional purchase price has been agreed upon, expected to be EUR 1-2m, with the deal estimated to be closed September 1st. EV/EBIT multiples of ~7.0x on 2019 figures and upper range of the purchase price appear rather attractive given the high profitability, with our peer group on 2020 estimates at a median on 14.6x. Gofore specified its 2020 guidance in conjunction with the acquisition announcement, with sales expected to be in the range of EUR 70-76m (prev. grow from 2019) and adj. EBITA to grow compared with 2019. The sales impact of the acquisition on 2020 figures is estimated at EUR 4m.
Expecting good H1 figures, acquisition boosting growth
Gofore reports H1 results on August 14th. H1 sales have been pre-announced at EUR 37.4m, with the monthly figures in our view having shown little impact of the pandemic. We see slightly weaker adj. EBITA-margins in H1 compared with the solid 17.3% Q1 margins but still expect a commendable 14.7% adj. EBITA-%. We expect full-year sales and adj. EBITA of EUR 75.1m and 9.8m respectively. The acquisition should keep growth in the double-digits in 2021 assuming a continued limited COVID-19 impact.
HOLD with a target price of EUR 8.4 (7.8)
Following revisions to our estimates based on the acquisition and guidance revision we adjust our target price to EUR 8.4 (7.8), valuing Gofore at 16.5x 2020E adj. P/E, with our HOLD-rating intact.
Pihlajalinna reports its Q2’20E result on this week’s Friday, 14th of August. We expect the COVID-19 and the movement restrictions have continued to hamper Pihlajalinna’s business especially in April but the situation should have started to normalize. The tender offer by Mehiläinen is still being under review of the FCCA. We keep our rating “HOLD” and TP of EUR 16.0 intact.
Expecting weak demand in non-urgent healthcare
Pihlajalinna’s operations were heavily impacted by the emergency laws that came into force in mid-March. We expect to see the most negative impacts in April as especially the demand of non-urgent healthcare and oral healthcare started rapidly to decrease in late March. The management indicated earlier in H1 that the complete outsourcings and other fixed-priced invoicing have supported the company during the unexceptional times as the profitability of these kinds of contracts normally remains stable, even during times of lower demand. The demand of housing services for the elderly and recruitment services should also remain relatively stable.
Still waiting for the FCCA’s decision
We expect the customer flows have started slowly to recover. However, we expect to see better improvement later in H2’E as the pent-up demand of social services and non-urgent healthcare should normalize after the restrictions were lifted. The visibility of H2E remains blurry and the demand is depended on the pandemic situation. The tender offer by Mehiläinen is still being under review of the FCCA and the second phase investigation should be ready by the end of August. If approved, the process is expected to be completed during Q3’20E.
"HOLD” with TP of EUR 16.0
We have only made minor adjustments to our estimates. We expect Q2’20E revenue of EUR 112.1m (-13.6% y/y) and adj. EBIT of EUR 0.2m (EUR 2.1m in Q2’19). We expect 20E revenue of EUR 517m (-0.3% y/y) and adj. EBIT of EUR 22.3m (6.7% y/y). We keep our rating “HOLD” and TP of EUR 16.0 intact.
Scanfil’s Q2 clearly beat our estimates. The company’s active plant network management should help secure good profitability in the coming years even if the pandemic will eventually begin to hurt business more. Our TP is now EUR 6.25 (5.25); we reiterate our BUY rating.
Communication and Energy & Automation up organically
Scanfil Q2 revenue was EUR 156m (up 9% y/y and of which two-thirds due to HASEC i.e. mostly Industrial). Communication posted a 49% revenue surge. Business jumped due to 5G networks but also e.g. camera surveillance systems. Energy & Automation grew by 15% as many accounts drove growth. Industrial top line grew by 17% mainly due to HASEC, yet also organically with e.g. KONE elevators. Medtec & Life Science was flat. Consumer Applications demand fell as the pandemic altered consumer behavior. The segment supplies e.g. TOMRA reverse vending machines and Scanfil says many accounts cut business sharply in Q2, leading to 26% y/y drop in revenue. Scanfil is however seeing signs of stabilizing demand for the segment. The EUR 10.2m in Q2 EBIT (vs our EUR 8.7m estimate) was more than satisfactory as Scanfil estimates the pandemic’s effects’ net cost was EUR 0.8m in H1. The pandemic notably elevated freight and safety costs. On the other hand, Scanfil also received state subsidies in compensation for shortened working hours.
Fundamentally strong thanks to active plant management
We make minor estimate changes, mostly reflecting latest segment updates. We see FY ’20 EBIT at EUR 40.4m. While FY guidance is likely to hold it’s early to say much about next year. However, Scanfil’s Hamburg plant closure will further help profitability going forward. Scanfil expects the decision to yield EUR 2.5m in annual cost savings since two other nearby plants are in a better position to serve the current Hamburg accounts. Scanfil also prunes its Chinese operations, having sold the Hangzhou plant (sheet metal mechanics) and thus focusing on Suzhou (electronics manufacturing and demanding integration).
In our opinion higher multiples are justified
The pandemic could begin to hurt volumes even if so far Scanfil’s overall levels have not been impacted. Scanfil however remains valued at attractive levels, ca. 6.5x EV/EBITDA and 9.0x EV/EBIT on our FY ’20 estimates. Our new TP is EUR 6.25 (5.25), rating BUY.
Etteplan reports Q2 results on August 11th. The coronavirus pandemic will have had a detrimental impact on results, but we see a rapid adaption to have limited some of the earnings impact. We expect an organic revenue decline of ~9% and EBITA of EUR 4.1m. We retain our HOLD-rating with a TP of EUR 8.3 (8.0).
Weaker Q2 but rapid adaption should limit some downside
Etteplan will report Q2 results on August 11th. Earnings uncertainty is clearly elevated due to the coronavirus pandemic, with Q1 challenges having been mainly limited to operations in China. Etteplan adapted rapidly to the situation through temporary layoffs and reducing its cost base which together with the order backlog should according to our estimates still yield a fairly decent profitability given the circumstances. We expect revenue of EUR 63.3m, representing a perceived organic growth decline of approx. 9%, and group EBITA to decline to EUR 4.1m (Q2/19: EUR 6.5m). With the loan agreements made earlier we do not see any significant risk to Etteplan’s financial position.
Uncertainty remains elevated in 2020
The development in 2020 remains shrouded by uncertainty due to the pandemic but we currently expect the biggest dent to be seen in Q3 and Q4 to also remain weaker. The Engineering Solutions service area will have some challenging times ahead while Software and Embedded Solutions should be rather resilient due to digitalization demand. Reported new order values in Q2 for some key customers indicate a double-digit decline y/y, with expectations of demand picking up towards the end of the year. Etteplan’s customer base is relatively diverse and thankfully for instance automotive and aviation, which have been hit hard by the pandemic, account for only a small share of revenue.
HOLD with a target price of EUR 8.3 (8.0)
We have made minor upwards adjustments to our 2020 estimates following an in our view somewhat improved sentiment post-Q1 and revisions based on updates on temporary layoffs. We adjust our target price to EUR 8.3 (8.0) and retain our HOLD-rating.
Scanfil’s Q2 clearly exceeded expectations. Revenue grew by 9% y/y and slightly more than a third of the increase was organic, the rest being attributable to the HASEC acquisition (mainly recognized in the Industrial segment).
CapMan’s Q2 results were better than expected on bottom-line figures. AUM growth is seen to pick up with the establishment of the NRE III (target EUR 500m) and Growth II funds (target EUR 85m). We have revised our 2020 EBIT estimate to EUR 9.4m (prev. 1.2m), with the solid 2021 earnings prospects intact.
EBIT beat from higher investment returns
CapMan’s delivered an upbeat Q2 earnings report. Q2 EBIT of EUR 4.1m beat our expectations (Evli EUR 2.6m) following a clear recovery in investment returns. Revenue amounted to EUR 8.7m, short of our expectations (Evli EUR 10.4m) due to continued weaker Services business sales and somewhat soft management fees given no new fund closings. AUM (EUR 3.2bn) continued to stall at near previous quarter levels. AUM is seen to grow during H2 following the establishment of the NRE III and Growth II funds, which combined could bring in near EUR 600m in equity commitments. Investor demand for the new funds has according to CapMan been strong.
Solid 2021 earnings prospects despite weak 2020
We continue to expect 2020 to be somewhat of a gap-year due to the weak start but have raised our EBIT estimate to EUR 9.4m (prev. EUR 1.2m) mainly due to higher expectations for investment returns. We expect a clear increase in fee-based profitability in 2021 due to an increase in management fees from fundraising during H2/20. Investment returns are also set to pick up clearly after the challenging 2020. CapMan will re-organize its Service business (no changes to CaPS) and Scala’s private placement business will be discontinued, but the earnings impact is not seen to be notable. All in all, we see a clear improvement in 2021 and expect an EBIT of EUR 33.7m.
BUY with a target price of EUR 2.20 (1.95)
The Q2 report in our view served to prove that CapMan remains on a healthy track despite the elevated uncertainty of Q1 and with the solid earnings outlook 2021E P/E of ~11x is not particularly challenging. We retain our BUY-rating with a TP of EUR 2.20 (1.95).
Suominen reports Q2 results on Wed, Aug 12. We have slightly lowered our revenue estimates due to a currency headwind, while on the other hand we now expect gross margin to have improved modestly q/q also in Q2. Our new TP is EUR 4.75 (4.25), and thus we reiterate our BUY rating.
Raw materials prices imply gross margin should hold high
Suominen posted a big gross margin jump in Q1 as the figure gained almost 400bps q/q to 12.1%. Improved product mix and production efficiency as well as low raw materials prices fueled the rise. Moreover, Suominen upgraded FY ’20 outlook in June by changing the wording from clear to significant improvement in comparable EBIT. The update had only a minor impact on our estimates since we changed our FY ’20 EBIT estimate from EUR 23.1m to EUR 24.0m. Perhaps more important was the fact that Suominen removed the previous disclaimer according to which estimating the result for H2 was hard due to the pandemic. It seems Suominen’s strategy is proceeding according to plan and financial performance is on a solid upward trend thanks to strong outlook for value-add end-uses such as household and workplace wipes. With respect to raw materials prices Suominen is unlikely to suffer cost inflation pressure for a while. We see the outlook for pulp prices muted, while the same is only true at best for oil-based inputs polyester and polypropylene. In fact, raw materials prices have developed so soft Suominen faces some negative pressure on nonwovens pricing. We expect gross margin further improved modestly to 12.5% in Q2, and see the figure settling on this level in the short-term.
Recent dollar weakness a (small) negative for top line
The dollar has lately declined by some 5% against the euro, the implication being a negative translation impact on US revenue. We update our estimates to reflect the headwind, which we estimate at some EUR 10m on an annual level. The overall result of our update is that we now estimate Q2 EBIT at EUR 6.8m (previously EUR 6.2m). We now see FY ’20 EBIT at EUR 24.4m.
Multiples are low while figures are on a solid trend up
Suominen trades some 6x EV/EBITDA on our estimates for this year while the multiple for next year is about 5.5x. We view these multiples attractive now that profitability is on a steep improvement path. Our TP is now EUR 4.75 (4.25), remain BUY.
CapMan's net sales in Q2 amounted to EUR 8.7m, below our and consensus estimates (EUR 10.4m/10.6m Evli/cons.). Profitability was better than expected due to larger fair value changes and EBIT amounted to EUR 4.1m, above our estimates and above consensus estimates (EUR 2.6m/2.5m Evli/cons.).
Detection Technology delivered a decent Q2 operating result despite the significant drop in net sales due to the ongoing corona pandemic. Medical business is going strong, but challenging situation in aviation segment weighs on SBU and visibility into how long situation will continue is poor. Although 2020E will be challenging, we see that DT is well positioned to weather out the storm and its competitive position with its new products remains good. We maintain our target price of 22 euros and BUY recommendation.
Decent quarter considering circumstances
Given the ongoing pandemic affecting especially DT’s security business, DT delivered a decent and broadly in-line Q2 operating result despite a quite significant drop in net sales. Q2 net sales amounted to EUR 21.1m (-23.2% y/y) vs. EUR 25m/25.3m Evli/consensus estimates. Q2 EBIT was EUR 2.6m (12.3% margin) vs. EUR 1.9m/3.0m Evli/cons. R&D costs amounted to EUR 2.7m or 12.7% of net sales (Q2’19: 2.9m, 10.7%). SBU had net sales of EUR 11.2m vs. EUR 15.2m Evli estimate. SBU sales declined -42.1% y/y, mainly due the COVID-19 pandemic affecting the demand for security X-ray devices. MBU delivered net sales of EUR 9.9m which was in line with our estimate of EUR 9.8m. Net sales of MBU increased by +22.5% y/y due to continued strong demand in medical CT imaging.
Short term visibility poor with aviation segment weighing on SBU
DT continues to expect lower demand in the security segment to continue in Q3 and SBU sales to decrease in 2020. DT however sees SBU sales starting to improve towards end of the year. DT estimates airport CT standard equipment upgrades in Europe and U.S. to be postponed at least 12 months. Regarding China, it remains unclear when similar Chinese airport standardization will start and if any security infrastructure related government recovery measures will take place. The situation regarding aviation remains the biggest near-term uncertainty for DT. We estimate aviation to contribute roughly half of SBU net sales. That said, -42% drop in SBU Q2 net sales is a relatively good performance given that aviation grinded almost completely to a halt in Q2. MBU sales growth is expected to continue in H2, although product mix is likely to shift from basic CT devices to more high-end devices, which should support MBU margins further.
Maintain BUY recommendation with TP of 22 euros
Based on the report, we have trimmed our 2020E sales and EBIT estimates by 7% and 4% respectively. We expect SBU sales to decline -23,5% from last year’s highs and MBU to grow +18%, resulting in 2020E net sales to decline -10% and EBIT of 12.5 MEUR. We have increased our sales growth estimates for 2021-22E to account for postponement of CT standardization related upgrades. On our revised estimates, DT is trading at 19.8x and 13.6x EV/EBIT multiples for 20-21E, some 10-20% below our peer group now that peer multiples have rerated since DT’s Q1 report. Although 2020E will be challenging, we see that DT is well positioned to weather out the storm and its competitive position with its new products remains good. Therefore, we continue to see DT as an attractive investment story given the strong longer-term drivers, especially in China, as well as DT’s compelling strategy and execution capabilities. We maintain our target price of 22 euros and BUY recommendation. Our target price implies EV/EBIT multiple of 16.4x on our 21E estimates, which is still ~7% below peer group.
DT’s Q2 net sales were EUR 21.1m (-23.2% y/y) vs. EUR 25m/25.3m Evli/consensus estimates. SBU sales declined -42.1% to EUR 11.2m (EUR 15.2m our expectation) and MBU sales increased +22.5% to EUR 9.9m (EUR 9.8m our expectation). DT’s Q2 EBIT came in at EUR 2.6m vs. our estimates of EUR 1.9m (EUR 3.0m cons). DT continues to expect SBU sales to decrease and MBU sales to increase in 2020.
Talenom’s Q2 results fell slightly shy of expectations, with the coronavirus pandemic having had some impact on transaction-based invoicing volumes, but relative profitability remained solid. Talenom’s potential remains unchanged, which has been reflected in its share price and valuation is becoming rather stretched. We retain our HOLD-rating with a target price of EUR 8.5 (7.0).
Minor impact from COVID-19 but profitability still strong
Talenom’s Q2 results fell slightly shy of expectations, with revenue of EUR 16.5m (EUR 17.2m Evli/cons.), affected by a decrease in transaction-based invoicing in for instance payroll services due to customer layoffs. EBIT amounted to EUR 3.6m (EUR 3.7m Evli/cons.) and relative profitability remained on par with expectations, with an EBIT-margin of 21.8%. The new small customer concept is expected to be released later on in the year and long-term potential expectations appear to be high. The impacts of the coronavirus overall have been quite in line with company expectations.
Continued growth and profitability improvement in 2020
Talenom’s guidance for 2020 (net sales EUR 64-68m, EBIT 12-EUR 14m) remains intact and should in our view not be in jeopardy unless a clearly unfavourable development in transaction-based invoicing volumes is seen during H2. We expect net sales of EUR 66.3m and EBIT of EUR 12.4m. Growth potential remains intact, with emphasis seen to be shifting towards M&A and Sweden as well as smaller customers as regional coverage in Finland limits growth. We assume a relative lower profitability of potential acquisitions to limit some margin upside in the coming years.
HOLD with a target price of EUR 8.5 (7.0)
Talenom’s share price has risen to record-high levels, with the stability of the business providing benefits under current market uncertainty and valuation levels are becoming harder to justify. We raise our target price to EUR 8.5 (7.0), valuing Talenom at ~40x 2020E P/E, which we still consider reasonable given growth potential and the defensive nature. Our rating remains HOLD.
Talenom's net sales in Q2 amounted to EUR 16.5m, slightly below our and consensus estimates (EUR 17.2m Evli/cons.). EBIT amounted to EUR 3.6m, in line with our and consensus estimates (EUR 3.7m Evli/cons.). Guidance remains intact, net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m.
Tokmanni had a successful Q2 as sales grew by 19.2% y/y to EUR 286m. Adj. EBIT amounted to EUR 30.6m (~64% y/y). The good momentum is expected to continue throughout 20E. We keep our rating “BUY” with TP of EUR 18.4 (16.4).
Benefiting from the lockdown
Tokmanni continued its solid growth in Q2 with sales totaling EUR 286m, growth of 19.2% y/y (LFL growth of 17.5% y/y). This also beat the revenue growth of department store and hypermarket chains (10.7%, FGTA). Revenue was driven by attractive pricing and growth was strong especially in leisure, gardening, home improvement products and food products, reflecting the situation where people are spending more time at home. At the same time, the demand in clothing was weaker. Tokmanni’s adj. gross margin was 34.5% (35.2% in Q2’19) vs. our 34.1%. The drop was due to cheaper prices and unusual structure of sales. Adj. EBIT totaled EUR 30.6m vs. EUR 30.9m/28.5m Evli/cons.
The success story expected to continue in H2E
Supported by the broad product assortment, attractive pricing and a wide store network, Tokmanni benefited from the situation where people are spending more time at home. On the other hand, the sales structure has been different compared to the normal conditions and the weaker share of Tokmanni’s private labels weighed down adj. gross margin. As the situation is now recovering and people are likely to return back to the offices we expect somewhat normalizing growth in H2E. We expect the sales structure to move closer to normal which supports margin development. The cost control has been successful and this is expected to continue. Tokmanni has also taken precautions to secure its most important season, Christmas (import from China has a key role) and some products are already being shipped to Finland, which is earlier than normally. The company reduced its investments during Q2 but these will continue relatively normally in H2E. Capex in 20E is expected to be EUR ~15m.
“BUY” with TP of EUR 18.4 (16.4)
Tokmanni expects strong growth in revenue and LFL revenue in 20E. Adj. EBIT margin is expected to increase from 2019. We have further increased our estimates and we expect 20E sales growth of 9.5% y/y (EUR 1034m) and adj. EBIT margin of 8.8% (EUR 90.6m). On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 14.7x and 14.0x, which translates into 22-25% discount compared to the int. discount peers. We keep our rating “BUY” with TP of EUR 18.4 (16.4).
Detection Technology will report Q2 earnings next Tuesday, August 4th at 9:00 EEST. DT’s share price has been lagging the market due to its exposure to aviation segment, but we see the overall investment case intact. We maintain our target price of 22 euros and BUY recommendation ahead of the Q2 result.
Expecting declining sales and operating profit due to weakened demand in SBU
We expect Q2 net sales to decrease -9% to 25 MEUR (25,3 MEUR cons.) due to lower SBU sales affected by the pandemic. For Q2, we estimate SBU declining -21,6% as demand in security applications is lower due to COVID-19. We expect MBU growing 21% with the help of increased demand in medical CT solutions. Due to lower net sales, our Q2 EBIT estimate is 1,9 MEUR (3,0 MEUR cons), which is down -60% compared to 4,8 MEUR last year.
Focus on market outlook and situation in China
Our focus in the Q2 result will be on management’s comments on the outlook for both security and medical imaging markets, as well as hearing the latest developments in China. DT has indicated that it expects healthy demand in MBU for Q2 and H2, whereas SBU sales are expected to decrease in Q2 and FY20. Looking at other industries, we note that Chinese market has been first to recover after the pandemic resided. That said, there is still a lot of uncertainty related to aviation, which is a crucial part of DT’s security business, accounting for roughly 2/3 of DT’s net sales. DT saw positive signs in demand for medical CT solutions at the end of Q1 (after a slowdown around end of 2019), stemming from CT imaging being used to detect pulmonary changes caused by the COVID-19 virus, as well as diagnosis and treatment of patients.
DT’s share price has been lagging the market, we see investment case intact
DT’s share price is YTD -23% vs. -5% HEX25, and since mid-March +26% vs. +41% HEX25. We see this relating to SBU’s exposure to aviation segment. Although 2020e will be challenging, we see DT well positioned to weather out the storm and its competitive position with its new products remaining good, thus investment case is intact. We maintain our target price of 22 euros and BUY recommendation ahead of the Q2 result.
Innofactor posted solid Q2 profitability figures, with EBITDA at EUR 2.1m (Evli 1.1m) for a 12.3% EBITDA-margin. We assume a slightly weaker H2 due to the coronavirus pandemic, but progress made supports the long-term case. Our 2020-2022 EBITDA estimates are up some 20% post-Q2. We raise our TP to EUR 1.35 (0.95) with our BUY-rating intact.
Delivered a positive earnings surprise
Innofactor delivered a pleasant surprise in second quarter profitability figures, with EBITDA of EUR 2.1m clearly topping our estimates (Evli EUR 1.1m). Net sales grew 0.6% y/y to EUR 16.8m (Evli 16.6m). Net sales in the other Nordic countries developed somewhat unfavourably due to the coronavirus pandemic, resulting in negative EBITDA figures for their part, while Finland continued strong. The impact of the pandemic was still not as large as the company had anticipated. The order backlog continued y/y and q/q growth, up to EUR 56.9m (Q2/19: 44.2m).
Profitability development on a solid track
We have raised our 2020E EBITDA estimate to EUR 7.2m (prev. EUR 5.9m) and our 2021-2022E estimates by ~20%. We expect some margin decline in H2 compared to H1 due to the pandemic given slower sales development, although cost base reductions due to travel restrictions should ease some of the pressure. Our sales growth assumptions in 2021-2022 remain modest (avg. 3.5% p.a.) given the company target (~20% p.a.), with limited signs of more rapid pick-up in growth. Innofactor acquired the remaining ~55% of shares in Arc Technology and with the improved cash flows we expect likely further M&A activity to boost growth.
BUY with a target price of EUR 1.35 (0.95)
Innofactor’s share price has rallied some 40% since our previous update in May but on our revised estimates and peer multiples we still see upside in valuation. On our revised estimates we adjust our target price to EUR 1.35 (0.95), for an implied 2020 EV/EBITDA of 8.7x and retain our BUY-rating.
Tokmanni’s Q2 revenue increased by 19.2% (LFL growth of 17.5%) and was EUR 286m. Tokmanni’s adj. EBIT was EUR 30.6m vs. EUR 30.9m/28.5m Evli/cons. Adj. gross margin was 34.5%. The company expects strong growth in revenue and LFL revenue in 20E. Comparable EBIT margin is expected to improve on the previous year.
Innofactor’s Q2 results were above our expectations and profitability remained at a good level. The net sales in Q2 amounted to EUR 16.8m (Evli EUR 16.6m), while EBITDA amounted to EUR 2.1m (Evli EUR 1.1m). Guidance remains intact. The impact of the coronavirus pandemic was limited but EBITDA in Sweden, Norway and Denmark fell in the red due to lowered sales.
Finnair’s April-June revenue decreased by 91% y/y (EUR 69m) while adj. EBIT totaled EUR -174m. Flights are slowly recovering in Europe and Asia but the costs related to the ramp-up will increase H2E comparable operating loss. We keep our rating “HOLD” with TP of EUR 0.50 (0.60).
Heavy losses during Q2
Finnair’s Q2 result was weak as expected. April-June passenger numbers were down by ~98% y/y. Revenue declined by ~91% y/y and was EUR 69m vs. EUR 54m/49m Evli/consensus. Adj. EBIT was EUR -174m vs. EUR -177m/-179m Evli/consensus. ASK decreased by ~97% y/y and PLF was 33.1% (-49.4pp). Finnair’s revenue in the second quarter was greatly supported by the cargo business, which generated more than 70% of the revenue. The company reiterated its previous guidance (20E revenue will decline significantly compared to the previous year and the comparable operating loss will be significant). Revenue guidance for Q3E was not given. However, the comparable operating loss in Q3E will be of a similar magnitude than in Q2, due to clearly reduced capacity and costs related to the ramp-up.
The historically gloomy quarter is now behind and Finnair is slowly recovering its flights as travel restrictions in many European and Asian countries are gradually being lifted. In July, the company operates approx. 25% of its normal amount of flights. The estimated level in September is approx. 50%. The current traffic plan might change based on the pandemic situation and changes in the country specific restrictions. Finnair’s cargo business has increased its importance during this time and especially on Asian long-haul routes, the profitability is supported by the cargo business thus the good development of freight supports the launch of passenger flights. The company has been able to improve its cash position due to the rights offering proceeds of approx. EUR 500m (wasn’t fully booked by the end of June) and EUR 200m instalment of the EUR 600m statutory pension premium loan which was drawn in June.
“HOLD” with TP of EUR 0.50 (0.60)
Based on the new information we have further cut our estimates. We expect 20E revenue of EUR 1497m and adj. EBIT of EUR -503m. We highlight that the visibility remains very weak and there are significant uncertainties also with our 21E-22E estimates. We keep our rating “HOLD” with TP of EUR 0.50 (0.60).
Consti’s Q2 operating profit of EUR 2.4m was better than expected (Evli/cons. 1.8m/1.4m) and free cash flow and financial position improved clearly. The coronavirus pandemic has and will have some impact on demand in 2020 but the long-term demand situation remains favourable and the company now appears to be in good shape after recent year challenges. We upgrade our rating to BUY (HOLD) with a target price of EUR 10.0 (7.4).
Q2 profitability better than expected
Consti’s Q2 results were better than expected, as although the revenue of EUR 69.3m came in around expectations (Evli/cons. 68.5m/70.3m), the operating profit of EUR 2.4m clearly exceeded expectations (Evli/cons. EUR 1.8m/1.4m). The order intake in the quarter was also favourable, with new orders of EUR 66.8m, and the order backlog continued on a slight upwards trend since the end of 2019. Free cash flow in the quarter (EUR 8.1m) was exceptionally strong, boosting the rolling 12-month cash conversion ratio to 133.5%. As a result, net debt excl. IFRS 16 improved to EUR 8.3m (2019: 15.3m).
Company in good shape after previous year challenges
Consti’s Q2 report was clearly positive and following measures taken during the past years and management comments the company now appears to be in good shape. We expect sales to continue to decline y/y in H2 due to stricter bidding discipline but for profitability to continue to improve as a result of the healthier order backlog. The coronavirus pandemic has and will in our view have a slight impact on the demand situation during the year, but long-term demand drivers remain intact.
BUY (HOLD) with a target price of EUR 10.0 (7.4)
We have raised our 2020 EBIT estimate by 10% and slightly raised our 2021-2022 profitability estimates. With the higher profitability as well as cash flow and net debt improvements, possible near-term risks from the coronavirus pandemic and St. George arbitration proceedings are reduced. We raise our target price to EUR 10.0 (7.4) and upgrade our rating to BUY (HOLD).
Verkkokauppa.com benefited from the lockdown and was able to increase its Q2 sales by ~14% y/y. At the same time profitability development was strong as adj. EBIT totaled EUR 4.8m (EUR 0.2m in Q2’19). We keep our rating “BUY” with TP of EUR 6.3 (6.2).
Strong growth in both, revenue and profitability
E-commerce took a big leap during H1 as consumers moved online quickly once the movement restrictions came into force. This boosted Verkkokauppa.com’s Q2 result. Sales were up by ~14% y/y (EUR 123m), outpacing the consumer electronics market growth of ~9% (GfK). Adj. EBIT totaled EUR 4.8m (Q2’19: EUR 0.2m) and was driven by improved gross margin (17.4% vs. our 16.4%). The improvement in gross margin was due to the sales mix, improvements in category management and declining wholesale sales. The preliminary Q2 figures were already given in connection with the positive profit warning issued last week thus there were no surprises with the result. The company expects 20E revenue of EUR 520-545m and adj. EBIT of EUR 13-18m.
Expecting normalizing demand in H2
It is clear that Verkkokauppa.com has benefited from the epidemic situation. The company has a low cost base which is supported by small physical footprint and that has been a major advantage during this time. Category management has been successful and as the demand of consumer electronics has increased, the competition hasn’t probably been as price-driven as normally. On the other hand, we expect that the strong growth in demand of consumer electronics during H1 will be shown as weaker sales growth and profitability development in H2E. Thus, we see this only as a momentary market change. In addition, consumers are likely to become more price aware, especially ahead of the campaign season in Q4 which will add pressure on margins.
“BUY” with TP of EUR 6.3 (6.2)
We have kept our estimates largely intact and expect 20E revenue of EUR 535m and adj. EBIT of EUR 17.1m. Thus, our estimates are at the higher end of the given guidance. On our estimates, Verkkokauppa.com trades at 20E-21E EV/sales multiple of 0.4x, ~17% below its online-focused Nordic & European peers. We keep our rating “BUY” with TP of EUR 6.3 (6.2).
Finnair’s Q2’20 adj. EBIT was EUR -174m vs. our expectation of EUR -177m and consensus of EUR -179m. Revenue decreased by 91% and was EUR 69m vs. our expectation of EUR 54m and consensus of EUR 49m.
Verkkokauppa.com’s Q2’20 result was extremely strong. The report did not offer surprises as the company issued a positive profit warning and released preliminary information on April-June figures earlier this week. Revenue grew by 14.1% and was EUR 123m. Gross profit was EUR 21.4m (17.4% margin) vs. our EUR 20.2m (16.4% margin). Adj. EBIT was EUR 4.8m (3.9% margin). 2020E guidance: The company expects revenue to be EUR 520-545m and comparable operating profit to be EUR 13-18m.
Raute reported Q2 results below our expectations. We turn slightly more cautious as uncertainty remains quite elevated. Our TP is now EUR 20 (21), rating HOLD (BUY).
Uncertainty is high as many regions grapple with the crisis
Raute posted EUR 24m in Q2 revenue vs our EUR 29m estimate. Services revenue was as expected (EUR 10m) while project deliveries were EUR 5m below our EUR 19m expectation. Russian revenue, at EUR 12m, was EUR 7m lower than we estimated, and the low figure is explained by order book timing with regards to the large EUR 58m Russian order to be delivered mostly this year. Order book timing as well as the pandemic (which complicated installations and services) meant profitability was weak also in Q2 as the company recorded EBIT at EUR -1.0m vs our EUR 1.3m estimate. Order intake, at EUR 13m, was also lower than we expected (EUR 19m) and was due to softness in both machinery and services orders. Order intake declined by half y/y as the pandemic postponed project decisions. Russian orders were lower in Q2 than we expected (EUR 3m vs our EUR 9m estimate). Although no major projects were initiated during the quarter Raute says cancellations are unlikely and many investment decisions could receive green light when the situation stabilizes.
We make minor estimate changes
According to Raute activity levels are still good in Russia and China, and customers are planning some big strategic investment projects but for now there’s no way to reliably estimate a time frame during which the leads might translate to actual orders for Raute. We expect Q2 to prove the slowest quarter for Raute in terms of order intake, but there’s significant uncertainty as to how rapidly order intake might improve in H2.
Long-term strategy intact yet short-term outlook hazy
We continue to view Raute’s prospects beyond this year’s weak results. A significant pick up in order activity would likely follow the operating environment’s inevitable normalization, but this might take some time to be reflected in the order book. We view Raute well positioned to capture large plywood and LVL machinery orders in the coming years once the sector is ready to commit itself to new capacity investments. However, in the current uncertain environment we see the overall valuation picture neutral. Our new TP is EUR 20 (21), rating HOLD (BUY).
Consti's net sales in Q2 amounted to EUR 69.3m, in line with our estimates and consensus (EUR 68.5m/70.3m Evli/cons.). EBIT amounted to EUR 2.4m, above our and consensus estimates (EUR 1.8m/1.4m Evli/cons.). Free cash flow improved to a solid EUR 8.1m (Q2/19: EUR 2.7m).
Raute’s Q2 results were clearly below our expectations with respect to revenue and profitability as well as order intake.
Verkkokauppa.com issued a positive profit warning and gave preliminary information on April-June figures. The company now expects 20E revenue of EUR 520-545m and adj. EBIT of EUR 13-18m. The company’s Q2 result is due on Friday. We keep our rating “BUY” with TP of EUR 6.2.
Strong performance during spring & summer
Verkkokauppa.com issued a positive profit warning as its spring/summer sales and profitability have developed better than first anticipated but also due to the brighter H2’20E outlook. The company now expects 20E revenue of EUR 520-545m (Evli prev. 525m) and comparable operating profit of EUR 13-18m (Evli prev. 14.3m). The company previously expected 20E revenue of EUR 510-530m and comparable operating profit of EUR 12-15m. Verkkokauppa.com also provided preliminary Q2 figures. April-June revenue is approx. EUR 123m, growth of ~14% y/y (Evli 113m/cons. 113m) while adj. EBIT is approx. EUR 4.8m (EUR 0.2m in Q2’19) vs. EUR 1.3m/1.4m Evli/consensus. According to the company, comparable operating profit improved as a result of strong sales and improved gross margin.
Consumers have been active during Q2
Based on the preliminary second quarter figures, it seems that the demand of consumer electronics has continued strong. Due to the increased demand, we expect less price driven competition in the consumer electronics market which impacts positively on gross margin. However, we see this only as a temporary change. Also, good demand in other smaller categories (offering higher margins) supports gross margin development. We now expect Q2E gross margin of 16.4% (14.2% in Q2’19). According to the management, the pandemic might not have as big impact on consumer demand as first anticipated which is also likely to impact on H2’20E.
“BUY” with TP of EUR 6.2
We have increased our estimates as a result of the positive profit warning. We expect sales to grow also in H2’20E, although the growth is expected to normalize from H1’20. We now expect 20E revenue of EUR 535m (6% y/y) and adj. EBIT of EUR 17.1m (51% y/y). On our estimates, the company trades at 20E-21E EV/sales multiple of 0.4x, ~20% below the online focused Nordic & European peers. We keep our rating “BUY” with TP of EUR 6.2.
Vaisala delivered a decent Q2 result, with improved EBIT despite decrease in net sales and orders received. Vaisala maintained its 2020 guidance although market outlook is still weighed down by COVID. Although there are still short-term risks related to the pandemic, we see Vaisala coming out rather unscathed from the pandemic, and therefore we are ready to emphasize more the coming years and Vaisala’s post-COVID performance. Our estimates remain unchanged, and we continue to see Vaisala executing well but valuation is challenging. We maintain HOLD recommendation with target price of 29 euros (prev. 26).
W&E stronger than expected, while IM soft
On a whole, Vaisala’s Q2 result was broadly in line. Q2 net sales decreased -5% to 91,4 MEUR vs. 93,5 MEUR Evli and 94 MEUR consensus. Q2 EBIT improved 9,7% y/y to 7,9 MEUR (8,7% margin) vs. 8,1 MEUR our expectation (cons. 7,9 MEUR). EPS was 0.16 (0.19 Evli, 0.20 consensus). Gross margins held up nicely (54,5% vs. 54,2% last year) despite lower volumes. Orders received decreased -2% to 95,9 MEUR due to weakened order intake in IM and especially in APAC region. Overall, W&E fared slightly better than we expected with Q2 EBIT at 0,7 MEUR (0,2 MEUR Evli) and decent orders received +1% due to strong EMEA. On the other hand, IM was softer than we had expected. IM net sales declined -5% to 33,8 MEUR (37,1 MEUR Evli) and EBIT was 7,1 MEUR (7,9 MEUR Evli), due to lower net sales. IM order intake declined -8% in all regions, especially APAC. According to Vaisala, IM’s high-end humidity and high-end carbon dioxide markets were affected by COVID as customers suspended operations and delayed decision making.
2020 outlook maintained
Vaisala estimates that lost order intake during H1 was roughly 15–25 MEUR and lost net sales was in range of 5–15 MEUR. Looking forward, it’s clear that uncertainties will continue. W&E outlook is weighed by the weakened outlook for aviation and lack of larger infra projects, especially in developed countries. IM is also expected to suffer short term from COVID repercussions. Vaisala maintained its 2020 outlook it issued in April, expecting FY20 net sales of 370–405 MEUR and EBIT of 34–46 MEUR. Our estimates remain broadly unchanged after the report. We believe pulling out of COVID will help IM fare better in H2, and our 20E estimates are at midpoint of guidance. We expect 2020e net sales to decline roughly 4% to 388 MEUR and reported EBIT to decline to 39,5 MEUR. Our 2021-22E estimates remain unchanged and we continue to see Vaisala’s targeted above 5% sales growth achievable and road to >12% margins resuming after pandemic resides.
Valuation remains challenging
On our estimates, Vaisala is still trading at premiums compared to our peer group, and as noted before, we see valuation stretched given Vaisala’s weaker financial performance compared to peer group. Peer group valuation multiples have however risen, and premiums are now more acceptable. Although there are still short-term risks related to the pandemic, we see Vaisala coming out rather unscathed from the pandemic, and therefore we are ready to emphasize more the coming years and Vaisala’s post-COVID performance. We raise our target price to 29€ (prev. 26€) and maintain our HOLD recommendation. Our target price values Vaisala at 21-22e EV/EBIT multiples of 22x and 19x which is above peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.
SRV’s Q2 profitability fell short of our estimates due to one-offs, with revenue and construction profitability slightly better than expected. We have raised our 20-22E EBIT estimates by some 5-10% on a fairly good H1 order intake and higher construction margin expectations. We upgrade our rating to BUY (HOLD) with a target price of EUR 0.66 (0.64).
One-offs affected profitability, good construction margins
SRV’s revenue in Q2 grew 28% y/y to EUR 265.0m for a slight expectations beat (EUR 243.4m/243.0m Evli/cons.). The operative operating profit was at EUR 0.5m (Evli 3.8m), affected by an EUR 3.1m provision for expenses recognized due to a ruling by a Russian court as well as recovery programme costs and costs stemming from impacts of the coronavirus. Construction profitability was good and slightly better than expected, with an operative operating profit margin of 2.8% (Evli 2.6%). The effects of the coronavirus were limited, although some additional costs were incurred, and housing sales were slower during April-May. Shopping centres were also affected and in Russia a large share of stores were and remain closed due to restrictions.
20-22E EBIT estimates raised by some 5-10%
We have post-Q2 raised our 20-22E EBIT estimates by some 5-10%, prompted by a fairly good H1/20 order intake and slightly raised construction margin expectations. The coronavirus pandemic continues to pose a risk, but current recovery prospects in Finland and a higher share of housing units sold to investors in the construction portfolio remain supportive factors.
BUY (HOLD) with a target price of EUR 0.66 (0.64)
Uncertainty of shopping centre exits has increased due to the pandemic and will most likely be delayed, with Pearl Plaza discussions already having been in late stages. On our 21-22E estimates and peer multiples, current valuation levels in our view essentially appear to only assign a value to SRV’s construction operations. We upgrade our rating to BUY (HOLD) with a target price of EUR 0.66 (0.64).
Exel’s Q2 volumes developed as expected while profitability was a big positive surprise. We weigh the strong performance against valuation prudence; caution is warranted since volumes are sensitive even in benign business climates. However, we view the current valuation simply too low. Our TP is EUR 6.25 (5.50), rating BUY.
Top line as expected, profitability a major positive surprise
Exel’s Q2 was as expected in terms of group-level revenue. The figure was EUR 27.2m i.e. in line with the EUR 27.9m/27.2m Evli/cons. estimates and up 3% y/y. Wind power grew by 52% y/y, and the EUR 7.9m figure was clearly above our EUR 6.6m estimate. The increase was driven by Asia-Pacific. All in all, it seems the pandemic has had only a limited impact on Exel’s business so far. Revenues have rolled in as expected and Q2 order intake only fell by 4% y/y, which in our view is a remarkable result considering the business and the current macro context. In this sense the Q2 update was a bit unsurprising relative to the Q1 release. The surge in profitability, however, was unforeseen. Exel achieved EUR 2.9m in adj. EBIT, compared to the EUR 2.0m/2.0m Evli/cons. estimates. The US unit fueled the positive surprise.
Profitability outperformance has been extended
Guidance wasn’t reinstated (Exel guided increased revenue and adj. EBIT earlier this year). In our view the reluctance to issue guidance for now reflects order uncertainties. Deliveries could be hit should the environment rapidly worsen, which is a relevant possibility. Yet in our view Exel is on a clear track to achieve higher earnings, considering the EUR 5.0m in H1’20 adj. EBIT vs the EUR 4.2m in H1’19. The company has topped the expectations we had prior to the pandemic. The earnings report changes our top line estimates very little, but we upgrade our profitability estimates. We previously expected EUR 3.7m in H2’20 adj. EBIT, and now see the figure at EUR 5.1m. For FY ’21 we now estimate the figure at EUR 11.1m (previously EUR 9.5m).
Valuation is undemanding especially compared to peers
Exel has continued to outperform our expectations while the macroeconomic situation does justify some valuation caution. We nevertheless see clear upside to current multiples. Our new TP of EUR 6.25 (5.50) implies ca. 6.5x EV/EBITDA and 10.5x EV/EBIT on our estimates for this year. Our rating remains BUY.
Vaisala’s Q2 EBIT was broadly in line, but pandemic had its toll on both business areas and orders received. Vaisala’s Q2 net sales decreased 5% to 91,4 MEUR vs. 93,5 MEUR our expectation and 94 MEUR consensus. Q2 reported EBIT was 7,9 MEUR (8,7% margin) vs. our expectation of 8,1 MEUR (7,9 MEUR consensus).
Exel Composites reported Q2 revenue in line with expectations while profitability was clearly higher than expected. Higher profitability was mainly due to the US unit’s improved performance. Overall Exel’s performance seems very solid despite the pandemic, however the company does not yet reissue guidance.
Consti will report Q2 results on July 24th. As the direct impacts of the Coronavirus pandemic have been limited, we expect profitability to have remained at a good level and clearly above the weak comparison period. The order backlog will remain of support for the quarter while a thinness in demand may start to show during the latter half of the year. We retain our HOLD-rating and adjust our target price to EUR 7.4 (7.0).
Limited direct pandemic impact to support profitability
Consti continued on a track of improved profitability in Q1 and we do not expect any major deviations from that trend. The direct impacts of the Coronavirus pandemic on the second quarter results are expected to be limited, as on-going worksites have to our understanding been able to operate without significant interruptions. We expect EBIT to improve clearly from the weak comparison period (Q2/2019: EUR 0.1m), which was affected by certain weak-margin projects, to EUR 1.8m in Q2/2020. We expect a revenue of EUR 68.5m, a decline of 15.7% y/y, as a result of the weakened order backlog from more disciplined bidding procedures.
Short-term demand thinness to be expected
Going forward, we expect our main attention to be pointing toward the overall demand situation. Given the timing of the housing company General Meeting season, decision-making for certain renovation projects will have been delayed to the fall or possibly next year. Decisions of corporations will possibly also have been affected while the public sector should have been less affected. The renovation sector fundamentals, however, remain unaffected and the impact should as such be of more temporary nature.
HOLD with a target price of EUR 7.4 (7.0)
Our estimates remain unchanged ahead of the Q2 results. Following lower COVID-19 uncertainty and increases in peer multiples we adjust our target price to EUR 7.4 (7.0) and retain our HOLD-rating.
SRV's net sales in Q2 amounted to EUR 265.0m, above our and consensus estimates (EUR 243.4m/243.0m Evli/cons.). EBIT amounted to EUR 3.3m, below our estimates and above consensus estimates (EUR 3.8m/2.4m Evli/cons.).