Latest research

Etteplan - Soft market presents a buying opportunity

14.06.2024 - 8.30 | Company report

Endomines - Trending in the right direction

28.05.2024 - 08.40 | Company report

The company’s fundamentals are moving in the right direction while the gold market remains hot. We revise our TP to EUR 6.5 and upgrade our rating to HOLD.

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A Finnish mining company with diversified project portfolio
Endomines is a mining company active in exploration, development and mining of gold deposits in Finland and in the United States. The company’s current strategic focus is on the Finnish operations where it produces gold concentrate in its processing facility in Pampalo and conducts exploration both in Pampalo and other parts of the Karelian Gold Line. Endomines is currently promoting its non-core US deposits located in Montana and Idaho through a partnership model, in addition, we consider divestments likely if the company finds a willing buyer.

Production and resources growing, strong market supports
Endomines’ production grew 49% y/y to 12,790 ounces in 2023. With the change in mining method for Pampalo UG mine and opening of Hosko, the company aims to increase gold production further by 15-35% in 2024 compared to last year. In addition to production, Endomines has been able to increase its resources in the Karelian Gold Line. Endomines currently has a total ore reserves of 32,200 ounces in Pampalo and resources of over 310,000 ounces in the Karelian Gold Line. The company aims towards one-million-ounce gold mineralization in the Karelian gold line with various potential exploration areas for example in the Southern part of the gold line. While production and resources are trending up, the gold market remains hot trading at historically high levels. With the strong gold market and expected growth in production, we now estimate net sales of EUR 31.4m and EBIT of EUR 6.5m in 2024E. 

HOLD (SELL) with a TP of EUR 6.5 (5.6)
The company’s share price has declined slightly since we downgraded our rating ahead of the H2 2023 report. Since then, the gold market has strengthened considerably, and the company’s fundamentals have moved in the right direction. We continue to base our valuation on the lower range of our SOTP-model. We increase our TP to EUR 6.5 and rating to HOLD.

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Alisa Bank - Boost in earnings ahead

22.05.2024 - 09.15 | Company update

Alisa Bank completed the combination with PURO Finance and issued a guidance for 2024. Our views are largely unchanged; earnings are set to improve going forward while loan book growth remains a challenge.

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Completed the combination with PURO Finance
Alisa Bank completed the combination with the Finnish Fintech company PURO Finance and issued approx. 58.9m new shares as consideration (40% of new total outstanding). The company also issued a guidance for 2024. If synergies from the combination are realized, total income is expected to increase y/y and PTP (excl. one-offs) to be 0.5m-1.5m in 2024 and 0.5m-1.5m negative in H1/2024. The target for the total capital ratio is 16 percent. 

Growth limited but earnings set to improve
Based on our preliminary estimates for the combined entity, the only larger change relates to the one-offs related to the combination, with our preliminary estimate for PTP (excl. one-offs) in 2024 within the guidance range (Evli 2024e PTP incl. one-offs EUR -0.5m). We expect PTP to improve to EUR 2.6m, driven mainly by PURO Finance and the synergies from the change to Alisa Bank’s cheaper source of financing. We have also further lowered our expectations for loan book growth, offset by an expected increase in the share of higher margin lending. The capital structure is expected to remain a limiting factor, with the expected improvements in profitability in 2025 bringing some relief, but faster growth still requires additional measures to strengthen the capital structure. 

HOLD with a target price of EUR 0.20 
The combination with PURO Finance is in our view a step in the right direction for Alisa Bank. There is, however, only so much that can be achieved by the primary earnings growth driver of transitioning towards higher margin lending, without notable loan book growth to benefit from the scalability of the operating model. Without further growth, we expect mid-term ROE potential to remain in the upper single digits. We retain our target price of EUR 0.20 and HOLD-rating.

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Exel Composites - Building up for volume growth

21.05.2024 - 09.45 | Company update

Exel decided on the terms of its rights offering, which should enable strategy implementation after a challenging period of missing volumes in the past 18 months or so.

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Some EUR 13.6m of net proceeds used for capex and opex

Exel disclosed the terms for its EUR 21.8m rights offering, which the company decided on to repay EUR 6.5m in debt but also to ensure sufficient working capital and accelerate growth plans (e.g. a factory in India). Institutions representing some 8% of the shares have undertaken to subscribe, and although this doesn’t yet guarantee the offering’s success it’s more likely than not to be completed. There will be up to 94.8m new shares as each right entitles to subscribe for 8 at a price of EUR 0.23 per share. Net proceeds of at least EUR 20m would confirm a bank loan refinancing of EUR 52.4m. The rights can be traded until the first week of June, when the subscription period also ends.

No changes to our operative earnings estimates for now

We believe Q2 will remain soft, but H2 should see more meaningful gains as volumes recover after the recent downturn. H2 comparison figures are so soft that there’s bound to be improvement. Growth in large-volume industries like wind power (especially in India), transportation as well as buildings and infrastructure should be the most important earnings driver in the coming years; margins have never been a problem for Exel, so earnings are to follow volumes also in the future. We estimate 25-30% y/y top line growth for H2’24, which seems realistic considering the latest trends in orders; revenue would then be roughly at the same level as in H1’23 (already a soft period).

FY ’24 multiples high as earnings are only now recovering

Exel is valued slightly above 8x EV/EBIT on our FY ’25 estimates, which isn’t too high a multiple particularly in the light of long-term potential, however valuation doesn’t leave that much upside in the short-term as the 23x multiple (on our FY ’24 estimates) already reflects expectations of significant earnings recovery in H2’24 after a still challenging H1. We estimate 7% EBIT margin for next year, which would be in line with the average seen in 2019-22 (and after Exel’s recent cost measures) while still well short of the above 10% long-term target. We hence view valuation neutral. Our updated TP is EUR 0.40; we retain HOLD rating.

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Consti - Short-term headwinds mask the potential

20.05.2024 - 08.40 | Company report

Consti’s backlog for 2024 coupled with a robust balance sheet protects it from short-term market turbulence while the long-term case backed by fundamental market trends remains intact. We retain BUY-rating with a TP of EUR 12.0.

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Market leader in renovation with a wide service offering
Consti is a construction service company focused on renovation construction and building technology contracting and services. Consti is the largest Finnish renovation construction company with net sales of EUR 321m in 2023. Consti focuses on the Finnish growth centers and majority of total revenue comes from the Helsinki metropolitan area. Consti serves a wide range of customers, both private and public. While it is the market leader in housing company renovations, due to its size and expertise, it can also conduct larger multi-year projects that many of its smaller renovation focused peers are not able to manage. 

Revised strategy targets sales of roughly EUR 400m in 2027
Consti was able to solidify its profitability to a good level during the latest strategy period from 2021 to 2023. With the Q4 2023 report, Consti announced its updated strategy for the strategy period from 2024 to 2027 which builds on the success of the predecessor. Consti aims to have four equally strong business areas with total net sales amounting to roughly EUR 400m at the end of the strategy period. This is achieved by growing faster than the market in both the construction and building technology markets. Consti’s long-term target for profitability stays unchanged at the 5% EBIT margin. We have made only slight estimate adjustments. Our estimates remain below the company’s targets, reaching the net sales target would require a sales CAGR of almost 6% p.a., which is notably higher than the expected market growth, especially given the estimated weaker 2024E.

Undervalued and overlooked
Consti is currently priced at 7-5x EV/EBIT and 10-8x P/E, trading at a discount to both its peer group and the company’s own historic multiple levels. Backing the undemanding valuation, the company’s stock offers an over 6% dividend yield at the current price level based on our estimates going forward. We retain our rating at BUY with a TP of EUR 12.0.

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Marimekko - Good start despite challenging conditions

16.05.2024 - 08.40 | Company update

Marimekko’s Q1 figures exceeded our estimates driven by the timing of non-recurring wholesale promotional deliveries and surprisingly resilient domestic retail sales.

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Timing helped domestic wholesale, retail showed resilience
Driven by stronger than expected net sales development in Finland, Marimekko’s net sales grew by 7% to EUR 37.7m, (35.4/35.6m Evli/cons.) clearly surpassing our estimates. The estimate beat was driven by both the timing of non-recurring wholesale promotional deliveries in Finland and growth in domestic retail. On the international side, the rate of growth was in line with our estimates as APAC kept delivering strong growth. While APAC was stronger, smaller geographies, namely Scandinavia and EMEA, missed our net sales estimate. With strong volume development and improved gross margin due to increased licensing income and lower discounts, Marimekko’s comparable EBIT climbed to EUR 5.2m (3.3/3.5m Evli/cons.).

Earnings growth to pick up in 2025E
Marimekko kept its market outlook for Finland unchanged and expects that net sales will be approximately at the level of previous year. We have adjusted our estimates accordingly and now expect weaker sales for H2 driven by lower wholesale sales. For APAC, we increase estimate for net sales for 2024E slightly as Q1 came in stronger than we expected. We continue to estimate slight gross margin improvement for FY while we model higher OPEX when compared to last year driven by investments in growth and cost inflation. We now estimate revenue of EUR 181.6m and EBIT of EUR 33.4m for FY 2024. We continue to expect higher net sales (+8%) and EBIT (+12%) growth for 2025E as we model pick-up in domestic growth driven by expected improved market conditions and continued growth in APAC.

HOLD with a TP of EUR 13.0 (prev. EUR 12.0)
Marimekko trades at 22-19x P/E and 16-14x EV/EBIT on our 2024-2025E estimates. Valuation is starting to look slightly elevated as the company trades at a premium to our Premium and Luxury Goods peer groups (avg. for the aggregate). On the other hand, the company trades in line with its historic multiple levels and the current price presents a roughly 20% discount to fair value derived from our DCF. 

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Aspo - CMD notes

15.05.2024 - 09.25 | Company update

Aspo’s CMD elaborated on major investment plans as both ESL and Telko will expand their operations also in the future.

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Handysize specs still open, but the market looks attractive

ESL plans to invest more than EUR 150m in a handful of new Handysize vessels, which would add a lot to capacity yet should easily achieve high utilization assuming the addressable market around the Bothnian Bay roughly doubles (many large industrial investments have already been confirmed in Northern Sweden and at least some will also take place in Finland) while competing fleet capacity within the relevant ice-classed segments could decline by 20% due to ageing. The exact investment specifications are still open, but ESL has in the past decade averaged 12-13% ROCE while it has further diversified its portfolio and recently sold the two Supramax vessels. The 12 green coasters will by themselves add EUR 15m in EBITDA potential in the coming years.

Telko targets 10% M&A CAGR, plus another 4-5% organic

Telko’s margins have varied due to recent years’ inflationary and deflationary periods as well as the exit from Russia, yet ROCE remained in the double-digits even when EBITA margin declined some 300bps below the target. The market now lets earnings improve on an organic basis (assuming stable prices), in addition to which the two latest acquisitions will add EUR 7m in earnings; Telko is unlikely to grow 30% through M&A every year, but it could still repeat the respective 6x and 8-10x EV/EBIT multiples in the future as there remain opportunities to acquire smaller players thanks to e.g. succession issues and tighter regulation. Two-thirds of the EUR 350-400m investments are to be financed by OCF, which still leaves more than EUR 100m to be filled through debt (equity may also be used as seen in the recent ESL minority stake and Telko’s potential M&A earn-out cases, plus vessel pooling).

Multiples low in the light of ESL’s EUR 300m EV valuation

Aspo’s segments are not particularly complex, however all three have seen varying earnings levels in recent years and have also undertaken various value-creation measures. Recent comparison figures have thus been muddled, but in our view all the segments should improve going forward. Aspo is valued some 10x EV/EBIT on our FY ’24 estimates, and we continue to expect EUR 12-13m EBIT gain for next year. We retain our EUR 7.0 TP and BUY rating.

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Marimekko - Strong start to the year

15.05.2024 - 08.50 | Earnings Flash

Marimekko’s Q1 results came in stronger than expected driven partly by the timing of non-recurring wholesale deliveries in Finland that boosted net sales.

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  • Group result: driven by strong wholesale development in Finland, Q1 net sales grew by 7% to EUR 37.7m (35.4/35.6m Evli/cons.). The domestic wholesale sales grew strongly while the retail sales also fared better than expected. Growth in the international markets was largely in line with what we expected. Adj. EBIT amounted to EUR 5.2m (3.3/3.5m Evli/cons.), reflecting a margin of 13.8%. Profitability was supported by higher volumes and stronger than expected gross margin, on the other hand, increased fixed costs weakened profitability. EPS came in at EUR 0.10 (0.06/0.06 Evli/cons.).
  • Finland: topline grew 8% to EUR 19.4m (Evli est. EUR 16.9m) supported by strong wholesale sales which grew 18% y/y driven by the timing of non-recurring wholesale deliveries. In addition to wholesale, retail sales grew 2% y/y, which also surpassed our estimate.
  • Int’l: Marimekko’s international sales grew 6% y/y while we had expected growth of little over 7%. APAC continued to be strong as expected while EMEA was clearly weaker in terms of volumes than we had estimated.
  • Marimekko continues to expect that the sales in Finland will be roughly at the level of last year in 2024. While Q1 was strong for domestic wholesale sales, the company expects that the wholesale sales will be significantly lower for the full year when compared to last year.
  • Outlook for international sales remains unchanged as Marimekko estimates that the sales will grow in 2024. The aim is to open approximately 10-15 new Marimekko stores and shop-in-shops, and most of the planned openings will be in Asia.

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Administer - Good start in terms of profitability

10.05.2024 - 09.30 | Company update

Administer’s profitability in Q1 improved more than expected, and our 2024E EBITDA estimate is up by some 10%. We raise our TP to EUR 3.0 (2.6), BUY-rating intact.

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EBITDA up 56% y/y in Q1
Administer reported Q1 net sales and EBITDA of EUR 19.0m and 1.7m respectively. Revenue declined by 3.1% y/y, driven by the 14.8% sales decline of Econia due to among other things the weakened economic activity and industrial strikes. Net sales in the other business areas was flat or grew slightly. EBITDA in turn improved by 56% thanks to the profitability programme initiated last year. On our corresponding H1/24 estimates (EUR 39.0m and 2.6m) the net sales development was fairly as expected while the profitability development was upbeat, as Q2 profitability should be closer to Q1 levels, noting the weakness in Q2/23 figures due to collective agreement related one-off installments. 

2024E EBITDA estimate up by some 10%
We have raised our 2024E EBITDA estimate by close to 10% and our EBITDA-margin as such to 8.1%, above the guidance range midpoint of 7.5%, while our net sales estimate remains fairly unchanged, closer to the lower end of the guidance. We assess that the larger part of the impact of the profitability programme was visible in Q1 and further larger profitability jumps to rely on an improved economic situation and sales growth. We remain cautious in terms of growth given that the near-term Group potential appears to rely on the recovery of Econia, expecting on average lower single-digit growth for the remaining quarters. According to management, Econia’s sales is expected to grow during Q2 and Q3 compared with Q1. 

BUY with a target price of EUR 3.0 (2.6)
With quite some uncertainty heading into 2024, Q1 was in some sense a sigh of relief, as profitability improvements came through better than expected and challenges with growth appear mostly contained to Econia. We adjust our TP to EUR 3.0 (2.6), valuing Administer at ~15x 2024e P/E, BUY-rating intact. 

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Etteplan - Market turn is getting closer

10.05.2024 - 08.20 | Company update

Etteplan was able to improve its profitability during the first quarter as was expected. While the current weaker market conditions present challenges in the short term, there are signs of an improved market.

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Moving in the right direction in a challenging environment
Net sales in Q1 were EUR 97.1m (Evli est. EUR 98.6m, EUR 95.0m in Q1/23), revenue increased 2.3% y/y, only slightly below our estimate. EBIT amounted to EUR 6.7m (Evli est. EUR 7.3m, EUR 6.3m in Q1/23), at a margin of 6.9%. While the EBIT missed our estimates slightly, the direction was as expected. Engineering Solutions service area missed our estimates as the company’s organic sales declined more than we estimated coupled with operational efficiency issues in Germany. Unsurprisingly the demand situation in the defense industry, the energy industry and electrification remained at a high level during the first quarter while other areas still showed weak demand. 

Market is showing some signs of improvement
On the positive side, the company is starting to see the first signs of improved investment activity in the European markets. The investments typically start with product development, affecting the company’s Software and Embedded and to some extent Engineering Solutions service areas. We expect that the more customer delivery volume dependent Technical Communication Solutions continues to be affected by the weaker demand more than S&E and ES during the H2 and therefore profitability is expected to stay below the service area’s potential during 2024. After adjusting our model to incorporate Q1 figures and some minor estimate changes for the coming quarters, we now expect net sales of EUR 385m and EBIT of EUR 30m for 2024E, both remaining below the guidance middle (guidance unchanged at net sales EUR 375-415 and EBIT EUR 28-34m).

HOLD with a TP of EUR 14.5 (prev. EUR 14.0)
Etteplan trades roughly at par when compared to its peers. In our view, a slight premium is warranted due to its above-average margins and capital efficiency. Despite slight negative estimate adjustments for 2024-2025E, the projected market turn enables us to emphasize 2025E figures in our valuation. We retain our rating at HOLD while adjusting our TP to EUR 14.5. 

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Etteplan - Fairly well in line with estimates

08.05.2024 - 13.40 | Earnings Flash

Etteplan's Q1 results were largely as expected, with slight earnings miss vs. our estimates driven by lower profitability for Engineering Solutions service area.

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•    Net sales in Q1 were EUR 97.1m (Evli est. EUR 98.6m, EUR 95.0m in Q1/23), revenue increased 2.3% y/y, only slightly below our estimate.
•    EBIT in Q1 amounted to EUR 6.7m (Evli est. EUR 7.3m, EUR 6.3m in Q1/23), at a margin of 7.0%. 
•    EPS in Q1 amounted to EUR 0.16 (Evli est. EUR 0.18, EUR 0.17 in Q1/23).
•    Net sales in Engineering Solutions in Q1 were EUR 52.3m (Evli est. EUR 54m), EBITA in Q1 amounted to EUR 4.7m (Evli est. EUR 5.3m). Engineering Solutions was the main driver behind the slightly weaker profitability than we had estimated. According to Etteplan, the service areas demand slowed particularly in Finland and Germany. In addition, the company had some operational efficiency issues in Germany that affected the profitability.
•    Net sales in Software and Embedded Solutions in Q1 were EUR 26.3m (Evli est. EUR 25.5m), EBITA amounted to EUR 2.4m (Evli est. EUR 2.0m). 
•    Net sales in Technical Communication Solutions in Q1 were EUR 18.5m (Evli est. EUR 18.8m), EBITA amounted to EUR 1.4m (Evli est. EUR 1.5m). 
•    The demand situation continued challenging during the first quarter as expected yet the company has seen the first signs of market improvement in Europe and expects the demand situation to improve to a good level during the rest of the year.

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Suominen - Looking for more margin expansion

08.05.2024 - 09.30 | Company update

Suominen’s earnings recovery continues, although still at a somewhat slower pace than we had previously estimated.

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Earnings improved, but not as much as was expected

Suominen’s EUR 113.6m Q1 revenue was as estimated as volumes improved, but the EUR 8.1m gross profit didn’t meet our EUR 9.6m estimate while comparable EBITDA was EUR 4.5m vs the EUR 6.6m/6.0m Evli/cons. estimates. The result was somewhat softer than the company itself expected, and the Finnish political strikes also had a negative impact on EBITDA (although less than EUR 0.5m) as there were some additional operating cost elements. Europe meanwhile performed better than we estimated as Italian and Spanish plants produced some of the volumes which Finland couldn’t. Sales margins improved while nonwovens prices declined in the wake of lower raw materials prices.

We estimate EUR 12m EBITDA gain for the year

Sales margins should hold also in the short-term, despite higher raw materials prices going forward and the common lag in pricing mechanisms, as new sustainable products represent a significant share of sales mix; we believe sales margins should have upside again in H2’24 even if Q2 may be a bit more challenging quarter from this perspective. H2 volumes are often higher than in H1 as the autumn months provide some seasonal demand tailwinds. The EUR 10m Bethune investment will add sustainable capacity in H1’25 and should have a relatively short payback period as Suominen has developed a comprehensive portfolio of such products. Market outlook is quite flat and continued recovery relies on Suominen’s own initiatives. In our view all the factors at work suggest Suominen’s earnings recovery will continue throughout the year, however we make some downward revisions to our margin estimates due to the softness seen in Q1 figures.

Valuation continues to demand patience at least until H2

Suominen is valued 20x EV/EBIT on our FY ’24 estimates as earnings continue to recover from the very low comparison period. We estimate the company to reach above EUR 20m EBIT next year, assuming gross margin reaches 10% by the end of this year. On that basis Suominen would be valued some 8x EV/EBIT on our FY ’25 estimates, which isn’t too high but the valuation demands patience. We retain our EUR 2.5 TP and HOLD rating.

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Administer - Profitability programme showing results

08.05.2024 - 09.15 | Earnings Flash

Administer’s Q1 net sales declined by 3.1% y/y, driven by a 14.8% decline in Econia’s net sales. EBITDA improved by some 56% y/y to EUR 1.7m. Overall the report appears more on the positive side, as the impact of the profitability programme is taking effect.

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  • Net sales in Q1 amounted to EUR 19.0m (EUR 19.6m in Q1/23). Net sales in Q1 declined 3.1% y/y. The decline was mainly attributable to Econia, whose revenue declined by 14.8% driven by the overall economic weakness and the industrial strikes, as well as seasonal fluctuation. Q1 was Administer first quarterly report and comparison period figures had not been posted ahead of the results. On our H1/24 estimate and actual Q1 figures, implied Q2 growth is 5%. We see potential, slight downward pressure, although Econia’s growth is expected to pick up in Q2.
  • EBITDA and EBITA in Q1 were EUR 1.7m (Q1/23: EUR 1.1m) and EUR 1.3m (Q1/23: EUR 0.7m) respectively. The EBITDA-margin improved to 9.1% compared with 5.7% in Q1/23. For H1/24, we had estimated an EBITDA improvement of 66%, with Q1 up 56% y/y the figure appears fairly in line with expectations but with potential for improvement. Profitability was aided by the profitability programme initiated in 2023.
  • During H1 Administer carried out one acquisition, that of the accounting business of Pohjanmaan Laskenta Oy. 
  • Guidance for 2024 (reiterated): Net sales is estimated to be EUR 76-81m and EBITDA-margin to be 6-9%.

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Aspo - EBIT to rise above EUR 40m next year

08.05.2024 - 09.10 | Company update

Aspo’s Q1 EBIT was soft relative to estimates, yet markets have now mostly stabilized; all three segments can improve organically but also with the help of recent investments.

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ESL’s performance held up well despite many challenges

Aspo’s EUR 4.8m comparable Q1 EBIT fell short of the EUR 5.9m/6.3m Evli/cons estimates as there were EUR 3.7m in extra Q1 costs mostly due to the conditions ESL faced. ESL’s EUR 2.7m comparable EBIT hence would have remained quite flat y/y if there would not have been political strikes and extraordinarily icy winter conditions around the Bothnian Bay. The relatively strong underlying performance suggests ESL’s EBIT could improve by some EUR 5m already this year despite the headwinds (of which Q2 still faces EUR 0.5m). Telko was a bit soft relative to estimates, but its markets have stabilized and acquisitions will add a lot of potential towards next year. In our view all three segments now face relatively stable market conditions going forward.

Aspo’s EBIT has multiple strong drivers towards next year

EBIT now improves organically but also thanks to the green coasters and acquisitions by Telko. Telko’s two targets should add more than EUR 7m to EBIT by next year (without any synergies penciled in); we estimate Telko’s FY ’25 EBIT to gain EUR 6.8m. We estimate ESL FY ’24 comparable EBIT at EUR 23m, still a rather low figure as H1’24 bears some EUR 4m in extra burden; we see EBIT could improve by some EUR 4-5m next year (even when the Supramaxes will no longer be there to contribute ca. EUR 2-3m) as the new green coasters can be profitably employed for e.g. the cargoes of Metsä Group and Outokumpu. We estimate the latest investments and M&A will help (in addition to organic improvement) FY ’25 to gain EUR 12-13m as all three segments have solid potential for further gains. The organic development of Leipurin has recently added pace, and the latest Kebelco acquisition could help EBIT improve by at least another EUR 1m.

Valuation quite modest considering the earnings potential

We estimate FY ’24 comparable EBIT at EUR 34m, on which Aspo now trades some 10x, while we expect the figure to reach EUR 46m next year. On those estimates Aspo trades 7x EV/EBIT, which isn’t a demanding level especially when many segmental peers are valued well above 10x. We retain our EUR 7.0 TP and BUY rating.

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Marimekko - Flat sales expected for Q1

08.05.2024 - 09.00 | Preview

Marimekko reports its Q1/24 figures 15th of May. We expect flat sales year-on-year and slightly lower EBIT as we model higher OPEX driven by increased fixed costs and overall cost inflation.

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Domestic market remains challenging for 2024E …
Marimekko continues to face challenging market conditions in the domestic market as the Finnish consumer confidence has stayed at a relatively low level. Consumer spending in Finland is estimated to grow in 2024E yet the growth is still largely led by spending on services. Based on estimates by ETLA Economic Research, the consumer spending for categories important for Marimekko, semi-durable and durable goods, is expected to stay level on real terms (durable goods) and to grow by 0.2% y/y (semi-durable goods). While the spending on semi and durable goods is expected to be flattish in 2024E, the spending is estimated to increase more rapidly in 2025E with 1.6% y/y real growth on semi-durable goods and 3.2% on durable goods. 

… therefore, growth relies on international markets
We continue to estimate growth from APAC for the entire FY 2024. In addition to projected growth from new openings, we expect continued like-for-like growth for Marimekko’s store fleet. In addition to APAC, we expect growth also in the other international markets for FY. In Finland, we expect sales decline for H1 while for the whole year, we expect flattish sales development. For the first quarter, we estimate net sales to be roughly in line with Q1/23. In terms of profitability, we expect the gross margin to have stayed roughly at the level of last year during the first quarter. We expect higher OPEX for Q1 driven by increased fixed costs and general cost inflation. We maintain our Q1 forecasts at EUR 35.4m in net sales and EUR 3.3m in EBIT.

HOLD with a TP of EUR 12.0 (EUR 11.5)
While our estimates remain unchanged for 2024E, we adjust TP back to EUR 12.0 (prev. EUR 11.5) driven by higher multiples for the Luxury goods peer group and slight positive estimate adjustments for 2025E and beyond. Our TP values Marimekko at 14-12x 2024-2025E EV/EBIT, in line with the median EV/EBIT for the Premium and Luxury Goods peer groups combined. 

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Suominen - Improvement pace still quite slow

07.05.2024 - 10.00 | Earnings Flash

Suominen’s Q1 earnings gained y/y, however the improvement pace was slower than we estimated as EBITDA did not improve q/q. Gross profit came in EUR 1.5m lower than we estimated while comparable EBITDA fell short by some EUR 2m.

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  • Suominen Q1 revenue decreased by 3% y/y to EUR 113.6m, compared to the EUR 113.5m/113.3m Evli/consensus estimates. Americas was EUR 70.0m vs our EUR 73.5m estimate, while Europe amounted to EUR 43.5m vs our EUR 40.0m estimate. Sales volumes increased especially in EMEA. Sales margins also improved while sales prices decreased following lower raw materials prices. 
  • Gross profit was EUR 8.1m vs our EUR 9.6m estimate. Gross margin amounted to 7.2%, compared to our 8.5% estimate. Gradual improvements are expected in production performance and line efficiencies. Suominen also adds to its sustainable products capabilities by enhancing and upgrading one production line in Bethune, SC, which is to cost some EUR 10m and be ready in H1’25. 
  • Comparable EBITDA landed at EUR 4.5m vs the EUR 6.6m/6.0m Evli/consensus estimates, whereas comparable EBIT was EUR -0.1m vs the EUR 2.1m/1.8m Evli/consensus estimates. 
  • Suominen guides comparable FY ‘24 EBITDA will increase y/y (EUR 15.8m previous year). 

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Aspo - Challenging Q1 conditions hit EBIT

07.05.2024 - 08.30 | Earnings Flash

Aspo’s Q1 results were burdened by political strikes in Finland especially in the case of ESL, which also had to operate in exceptionally icy conditions. Aspo’s guidance continues to suggest EBIT improves particularly after the summer.

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  • Aspo Q1 revenue from continuing operations was EUR 132.7m, compared to the EUR 132.7m/134.7m Evli/consensus estimates. Comparable EBIT amounted to EUR 4.8m vs the EUR 5.9m/6.3m Evli/consensus estimates. 
  • ESL Q1 revenue was EUR 49.9m, compared to the EUR 47.1m/47.7m Evli/consensus estimates. Comparable EBIT landed at EUR 2.7m vs the EUR 3.7m/3.5m Evli/consensus estimates. Political strikes had a negative impact on profitability, in addition to an exceptionally cold January in Northern Scandinavia (combined effect estimated to have been some EUR 3.5m in Q1). Strikes are estimated to affect Q2 by around EUR 0.5m. Steel industry demand is expected to remain at a good level and gradually to pick up in forest industry.  
  • Telko’s revenue came in at EUR 50.2m vs the EUR 52.3m/53.6m Evli/consensus estimates, whereas EBIT was EUR 2.2m vs the EUR 2.8m/2.7m Evli/consensus estimates. Political strikes had a negative impact of about EUR 0.1m in Q1 (similar effect is seen for Q2). Market is expected to develop stable going forward. 
  • Leipurin top line amounted to EUR 32.6m, compared to the EUR 33.3m/34.2m Evli/consensus estimates, while EBIT was EUR 1.1m vs the EUR 1.1m/1.2m Evli/consensus estimates. Political strikes had a negative impact of about EUR 0.1m in Q1 (similar effect is seen for Q2). Market is expected to be slightly deflationary with modest volume growth. 
  • Aspo guides comparable FY ‘24 EBIT to exceed EUR 30m (unchanged). 

Open report

CapMan - Positive fundraising development

06.05.2024 - 09.45 | Company update

CapMan’s Q1 clearly beat our estimates driven by carried interest and positive fair value changes, but the highlight was still the successful fundraising in Infra II and Growth III.

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Clear earnings beat driven by carried interest and FV changes
CapMan reported Q1 results well above our estimates. Turnover in Q1 amounted to EUR 18.4m (EUR 14.8m/15.1m Evli/Cons.), growing some 22% y/y. The operating profit amounted to EUR 7.3m (EUR 1.2m/3.4m Evli/Cons.). The difference to our estimates is largely attributable to carried interest (EUR 3.5m/0.3m act./Evli) and positive fair value changes (EUR 2.3m/-1.0m act./Evli). IAC in Q1 amounted to some EUR 1.3m. Other underlying figures did not deviate substantially from our estimates. AUM was up to EUR 5.7bn (Q1/23: 5.0bn), with the growth attributable solely to Natural Capital funds following the Dasos acquisition.

Successful fundraising provides further support for 2024
An in our view key highlight was the successful final closes of the Infra II (EUR 375m) and Growth III (EUR 130m) funds. Although largely in our estimates, we see this as a positive given the more challenging fund-raising market along with Infra II closing at double the size of the first fund. Along with the Dasos acquisition, these will provide good growth to fee-based profitability in 2024. The absolute earnings impact of Dasos will be much clearer in 2025 given the inclusion in March and acquisition-related expenses. We expect AUM growth to be on the slower side during mid-2024, relying upon open-ended funds, before the first closing of NRE IV (target 2024), where fundraising has started. With the good start to 2024, we see potential for CapMan to progress toward an average quarterly operating profit of +EUR 10m, should the near-term carry potential materialize, while also highlighting the good progress made in fee-based profitability. 

BUY with a target price of EUR 2.4 (2.2)
CapMan’s valuation in our view continues to remain fairly attractive, with the share of fee-based profitability set to grow. We note the continued market softness, but the newly raised funds provide added confidence. We raise  our TP to EUR 2.4 (2.2). 

Open report

Vaisala - Accelerating towards the year-end

06.05.2024 - 09.30 | Company update

Vaisala’s Q1/24 was soft as expected yet delivered slight earnings beat vs. our estimate. We expect an upward earnings trend towards the end of the FY for the company.

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First quarter was nearly as soft as expected

Vaisala’s Q1 net sales were in line with the preliminary figures at EUR 112.1m. The sales decline was driven by the industrial actions in Finland and simultaneous ramp-up of the new ERP system as previously communicated by Vaisala. On the positive side, W&E’s gross margin developed more favorably than expected with improved business mix. In addition, the company was able to scale its OPEX in accordance with the lower volumes. Driven by these measures, Vaisala’s EBIT came in at EUR 7.1 (Evli est. EUR 5.3m/Cons. est. EUR 3.2m), beating our estimates slightly. The company’s order book finished up at a record level of EUR 190.4m while order intake decreased 7% as a result of continued subdued market.

 

Estimating improvement for the remainder of the FY 24

Vaisala’s order book remains at a solid level despite the decline in order intake. According to Vaisala, roughly 75% of the order book is scheduled to be delivered in 2024, during recent years, the share has hovered around 75-80%. While the W&E’s profitability developed more favorably than we estimated, we expect higher project sales from Q2/24 onwards to mitigate larger short-term margin gains going forward. We continue to forecast revenue growth for the remainder of the FY driven by W&E’s strong backlog and IM’s softer comparison period, especially for H2. We have made only slight estimate adjustments as Q1 figures were largely in line with our estimates. We now estimate revenue of EUR 546m (prev. EUR 542m) and EBIT of EUR 70m (prev. EUR 68m), both slightly below the guidance middle.

 

BUY with a TP of EUR 40.0

Vaisala is currently priced at a roughly 5-20% discount when compared to peers on our 2024E estimates. In line with this, our DCF points towards a discount of roughly 10% to fair value. With only slight estimate changes, we keep our TP at EUR 40.0 with our rating at BUY.

Open report

Raute - Earnings on a solid upward trend

06.05.2024 - 09.05 | Company update

Raute’s Q1 showed how Wood Processing is to return to black after a string of challenging years. Services is to maintain its steady performance, while Analyzers remains at the core of Raute’s offering.

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Wood Processing and Services improved y/y and q/q

Raute’s Q1 revenue grew 21% y/y to EUR 44.7m, above our EUR 42.1m estimate due to Wood Processing and Services while Analyzers fell short. Wood Processing EBITDA improved EUR 0.1m y/y; the comparison figure was boosted by the release of provisions due to the wind-down of Russian operations, but the gain was EUR 1.3m q/q despite the political strikes in Finland. Development costs were lower q/q, yet Wood Processing revenue should trend up over the year and we estimate its annual EBITDA at above EUR 5m. We estimate Services to deliver roughly the same this year, whereas we see Analyzers revenue down 10% after 38% growth the previous year; Analyzers came in below our estimate as there were revenue timing issues as well as project delays. The low volume left Analyzers EBITDA slightly negative, yet Raute’s EUR 3.0m comp. EBITDA topped our EUR 2.6m estimate.

All three segments are well-positioned to grow also next year

Q1 showed encouraging performance despite a few challenges, which in our view solidifies long-term earnings outlook as many of the issues were of temporary nature. There doesn’t seem to have been big changes in market outlook as activity for large strategic investments remains quite robust while soft end-demand limits appetite for smaller orders. Raute’s competitive positioning remains favorable both in the short and long term as evidenced by the latest five larger projects but also its Services offering (efficiency improvement contracts). Small equipment order outlook is also unlikely to get much softer than it now is.

Valuation modest as EBITDA has strong drivers beyond FY ‘24

Raute is valued around 6.5x EV/EBIT on our FY ’24 estimates, which we view very modest as there’s likely to be plenty of potential for further improvement beyond that. We estimate Wood Processing revenue to grow by almost 50% this year, yet current order book should support additional growth also next year. We estimate top line to grow by 7% then and earnings to gain by more than EUR 3m in FY ’25. We retain our EUR 13.0 TP and BUY rating.

Open report

Vaisala - Soft as expected

03.05.2024 - 09.30 | Earnings Flash

Vaisala’s Q1 net sales were in line with the previously given preliminary sales figures at EUR 112m, profitability was slightly higher than expected, yet EBIT margin declined to 6.4% (10.1% Q1/23).

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  • Q1 group result: Orders declined 7% y/y while the order book stood at EUR 190.4m, growing 16% compared to last year. Group net sales decreased by 15% to EUR 112.1m, in line with the preliminary sales figures given in April. Gross margin declined to 54.2% (56.1% Q1/23) driven by lower volumes which typically have an effect on Vaisala’s gross margin. EBIT amounted to EUR 7.1m (5.3/3.2m Evli/cons.), reflecting a margin of 6.4%. The EBIT decrease was mainly driven by lower sales and the gross margin development as OPEX were at a lower level than in the previous year. The slight EBIT beat vs. our estimates was driven by lower-than-expected OPEX levels.
  • Industrial measurements (IM): Orders decreased by 14% (FX -12%) y/y and order book declined to EUR 36.5m (-5%). Net sales decreased by 24% y/y to EUR 48.0m (FX -24%). Net sales decreased very strongly in life science, industrial instruments and liquid measurements markets. On the other hand, net sales in the power and energy market segment grew y/y. IM profitability suffered from lower volumes as gross margin decreased to 58.4% (Q1/23 62.6%) and EBIT to EUR 6.5m with a margin of 13.5% (Q1/23 EUR 15.0m, 23.8%).
  • Weather and Environment (W&E): Orders received decreased by 1% (FX 0%) y/y while order book was up by 23% y/y. W&E’s net sales decreased by 7% (FX -6%) to EUR 64.1m. Timing of the project deliveries was the main reason for the sales decline. Net sales decreased in all markets except for the renewable energy market segment where sales were at the previous year’s level. Gross margin improved to 51% (Q1/23 50.2%) driven by more favorable sales mix.
  • Outlook 2024 (unchanged): Net sales EUR 530-570m and EBIT EUR 63-78m

Open report

Raute - Improved results despite headwinds

03.05.2024 - 09.30 | Earnings Flash

Raute’s Q1 results were a bit better than we estimated despite certain operational issues caused by political strikes in Finland as well as somewhat unfavorable sales mix due to a low Analyzers revenue.

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  • Raute Q1 revenue grew by 21.4% y/y to EUR 44.7m, compared to our EUR 42.1m estimate. Wood Processing amounted to EUR 32.0m vs our EUR 29.2m estimate whereas Services was EUR 9.8m, compared to our EUR 8.2m estimate. Analyzers landed at EUR 2.9m vs our EUR 4.7m estimate. The 30% y/y fall in Analyzers revenue was partly due to timing of revenue recognition as well as some delays in certain project deliveries. There were no particular big surprises within Wood Processing and Services as political strikes’ impact was mitigated.
  • Comparable EBITDA was EUR 3.0m, compared to our EUR 2.6m estimate. EBIT came in at EUR 1.5m vs our EUR 1.2m estimate. Political strikes had some negative impact on profitability. Wood Processing comparable EBITDA was EUR 1.2m, clearly above our EUR 0.6m estimate. Services’ profitability was also twice what we estimated, while Analyzers fell behind as its result was slightly negative.
  • Q1 order intake amounted to EUR 36m vs our EUR 49m estimate as smaller orders remained quite low. Market uncertainty has continued, affecting demand for new production lines and modernizations.
  • Order book was EUR 259m at the end of Q1 (EUR 121m a year ago).
  • Raute guides FY ’24 revenue to be between EUR 170-195m and comparable EBITDA between EUR 10-14m (unchanged).

Open report

CapMan - Good figures across the board

03.05.2024 - 09.00 | Earnings Flash

CapMan's turnover in Q1 amounted to EUR 18.4m, above our estimates and consensus (EUR 14.8m/15.1m Evli/cons.). EBIT also above expectations, at EUR 7.3m (EUR 1.2m/3.4m Evli/cons.), largely attributable to larger than estimated carried interest and positive fair value changes.

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  • Turnover in Q1 was EUR 18.4m (EUR 15.1m in Q1/23), above our estimates and consensus (EUR 14.8m/15.1m Evli/Cons.). Growth in Q1 amounted to 22% y/y.
  • Operating profit in Q1 amounted to EUR 7.3m (EUR 0.5m in Q1/23), above our estimates and consensus (EUR 1.2m/3.4m) Evli/cons. The difference to our estimates is largely attributable to larger than estimated carried interest and positive fair value changes.
  • EPS in Q1 amounted to EUR 0.015 (EUR 0.00 in Q1/23), above our estimates and consensus (EUR 0.00/0.00 Evli/cons.).
  • Turnover in the Management Company business in Q1 was EUR 15.4m vs. EUR 11.8m Evli. Operating profit in Q1 amounted to EUR 6.3m vs. EUR 2.3m Evli. The difference was mainly due to carried interest (EUR 3.5m/0.3m act./Evli)
  • Revenue in the Investment business in Q1 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q1 amounted to EUR 2.1m vs. EUR -1.2m Evli. 
  • Revenue in the Service business in Q1 was EUR 2.9m vs. EUR 3.0m Evli. Operating profit in Q1 amounted to EUR 1.7m vs. EUR 1.7m Evli. 
  • Capital under management by the end of Q1 was EUR 5.7bn (Q1/23: EUR 5.0bn). Real estate funds: EUR 2.9bn, Private Equity & Credit funds: EUR 1.0bn, Natural Capital funds: 0.7bn, Infra funds: EUR 0.6bn, and Wealth Management: EUR 0.5bn.

Open report

Solteq - Potential overshadowed by uncertainty

02.05.2024 - 09.45 | Company update

Solteq’s Q1 was weaker than expected and further cost savings are sought. The near-term uncertainties continue to mount and for now overshadow the turnaround potential.

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Q1 on the weaker side, comp. net sales declined 3.8% y/y
Solteq reported slightly weaker than expected Q1 results, driven largely by the lower than expected net sales in the Utilities segment. Comparable net sales declined by 3.8% y/y to EUR 13.6m (Evli EUR 14.2m) and the adj. EBIT amounted to EUR -0.2m (Evli EUR 0.2m). Net sales in Utilities declined by 7.5% y/y, to our understanding affected by fluctuations in the timing of project billables, while we had expected modest growth. With the cost base more or less in line with our estimates, the segment’s adj. EBIT fell short of our estimates by EUR 0.5m and was EUR -0.7m. 

Further cost savings measures to improve profitability
Solteq announced the initiation of an efficiency and cost-savings program to improve profitability in the Retail and Commerce segment’s Commerce & Data business unit and Group Administration. The annual savings are expected to be around EUR 3.5m. Our 2024E profitability estimates on an annual basis are close to unchanged given the anticipated costs relating to the cost savings measures and savings impact on H2 along with the weaker than expected Q1. Our coming year estimates are at large not notably changed. We had anticipated a need to adapt the cost base following the divestment in R&C in 2023, although not to such an extent and manner as now announced. The cost savings in R&C are offset in our estimates by slightly dimmed growth expectations, which in terms of profitability is particularly visible in the Utilities segment. 

HOLD with a target price of EUR 0.70 (0.85)
Solteq’s long-term potential remains overshadowed by the near-term risks relating to the turnaround and financing risks, with its bond maturing on Oct 1st. The cost savings measures, although improving profitability, adds to potential turbulence in the company. Valution remains attractive if the turnaround succeeds, but the obstacles ahead for now overshadow that potential. 

Open report

Loihde - Well on the earnings growth track

02.05.2024 - 09.15 | Company update

Loihde’s 2024 started of quite well and beat our expectations. We continue to expect lower single-digit growth and a clear improvement in profitability in 2024.

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Sales growth driven earnings beat in Q1
Loihde reported Q1 results that beat our estimates. Net sales amounted to EUR 33.0m (Evli EUR 31.8m), growing some 6% y/y. We had anticipated a slower start to the year given the softness in demand seen during the previous year. Relative growth was supported by the weaker comparison period and growth in Security Solutions and Cyber and Cloud & Connect. Digital Services and Data & AI saw sales decline y/y. The cost base remained flat y/y, corresponding to our estimates. The higher than estimated growth resulted in profitability beating our estimates, with adj. EBITDA at EUR 1.6m (Evli EUR 0.5m). 

Lower single-digit growth and clear margin improvement 
According to management the growth pace during the remainder of the year is not expected to remain at levels seen in Q1. Our estimates for Q2-Q4 were in the lower single-digits and remain unchanged. Our estimates changes are solely due to the estimates beat in Q1, with our 2024E net sales and EBITDA now at EUR 137.6m (136.4m) and EUR 10.5m (9.6m). We anticipate growth driven and inflationary pressure on the cost base in H2, assuming improvements in the demand situation and as such a pick-up in growth in 2025. Our assumptions are on the cautionary side, as Loihde has managed rather well in its cost control, aided also by the operating model on the IT services side, and a more flat y/y development could still bring some 10-20% upside to our current EBITDA estimate. 

HOLD with a target price of EUR 11.8 (11.5, ex-div).
With our growth and profitability estimates up, we adjust our target price to EUR 11.8 (prev. 11.5) ex-div (EUR 1.00 per share, record date 10.5.2024e). Valuation remains challenging, with P/E on our estimates above 20x 2024-2025e, and notable upside would require a bigger leap towards the 2027 adj-EBITDA% target of 15%. 

Open report

Etteplan - Looking to improve

02.05.2024 - 09.00 | Preview

Etteplan publishes its Q1 results on 8th of May. We expect year-on-year revenue growth boosted by acquisitions while profitability improvement is driven mainly by a softer comparison period affected by NRIs.

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Market has remained slow for Etteplan’s clients

The machinery and metal industry, which is vital for Etteplan, faced difficulties throughout 2023. Based on data from Technology Industries of Finland, the Finnish machinery and metal industry order backlog stood 16% lower at the end of 2023 when compared to 2022. The consensus forecasts point towards slower growth in 2024E for selected publicly listed blue chip customers of Etteplan. The growth forecasts have been revised downwards during the beginning of the year as some of the companies have reported modest Q1 results. On a positive note, the ECB is still expected to cut rates in June. Etteplan expects the rate cuts to boost investments and improve the demand situation.

 

Expecting y/y EBIT improvement in Q1

Etteplan has continued to make bolt-on acquisitions to support its growth strategy. In 2023, the company acquired two companies operating in Software and Embedded and Engineering Solutions business areas. At the start of 2024, Etteplan acquired STRONGIT ApS which is a Danish Software and Embedded company. While we expect modest organic net sales development for Q1, the acquisitions made during 2023 and early 2024 are expected to provide y/y growth for Q1/24. In terms of profitability, we expect improvement over the first quarter of 2023 as the comparison period was affected negatively by NRIs. We have not made major estimate changes for Q1 2024, we expect net sales of EUR 99m and EBIT of EUR 7.3m. For FY 2024, we are slightly below the financial guidance middle point for both net sales (guidance EUR 375m-415m, Evli est. EUR 387m) and EBIT (EUR 28-34m, Evli est. EUR 30.5m).

 

Valuation remains neutral

Etteplan is currently valued at 8-7x EV/EBITDA and 13-11x adj. P/E on our estimates for 2024-2025E. The current valuation is in line with the peer group, the company’s historic multiple levels and the multiples seen in recent industry transactions. We keep our TP at EUR 14.0 with HOLD-rating intact.

Open report

Loihde - Growth and profitability improvement

30.04.2024 - 09.25 | Earnings Flash

Loihde’s Q1 was a pleasant surprise, as we had expected a softer start to the year. The adj. EBITDA improved clearly y/y and beat our estimate, at EUR 1.6m (Evli 0.5m). Net sales also grew nicely by 6% to EUR 33.0m (Evli EUR 31.8m).

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  • Group results: Loihde’s net sales were slightly below our expectations. Net sales grew by 6% y/y to EUR 33.0m (Evli: 31.8m). The growth was a pleasant surprise, with Security Solutions and Cyber, Cloud & Connect growing noticeably y/y. Adj. EBITDA beat our estimates and amounted to EUR 1.6m (Evli: 0.5m), reflecting a margin of 4.9% and improving clearly y/y (Q1/23: EUR -0.1m)
  • According to Loihde the year started as planned, with EBITDA improving significantly y/y. The company saw good growth in continuous services, while the demand for digital development services remained weaker. 
  • Billing rates remained low in Digital Services and Data & AI. Both business areas saw clearly decreased revenue y/y, which weakened the company’s profitability and Loihde continued to implement efficiency measures. 
  • 2024 guidance (reiterated): Group revenue is expected to be on par with the previous year or grow. The Group’s adjusted EBITDA is estimated to improve compared to 2023, when it was EUR 7.6m.
  • Our pre-Q1 2024E adj. EBITDA estimate was at EUR 9.6m. We see slight upwards pressure to our estimate. H1 is typically softer and the difference to our estimates increases the confidence in the company’s guidance, with less need for improvement in H2.  

Open report

Suominen - Earnings to recover over the year

30.04.2024 - 09.05 | Preview

Suominen reports Q1 results on May 7. We see earnings recovering throughout this year towards a normal level.

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Low comparison figures, earnings to gain over this year

Suominen’s Q4 showed some encouraging signs as revenue in Europe declined less than estimated, while gross margin continued to improve q/q, however the EUR 5.3m EBITDA remained soft and missed estimates. Both revenue and EBITDA have room to improve this year given that the comparison figures are low due to both soft volumes as well as declining nonwovens sales prices. We believe Suominen’s volumes and prices will gain in FY ’24; the former should benefit from normalization in the US as the supply chain glut dissolves, while the latter will be driven higher by increasing raw material prices. We estimate Q1 EBITDA at EUR 6.6m, in other words an increase of EUR 4m y/y and EUR 1.3m q/q; the level is still low compared to the above EUR 10m quarterly figure we believe Suominen should eventually be able to achieve.

Towards 10% gross margin and 9% EBITDA margin

We estimate H1’24 revenue to have developed basically flat y/y, despite some further volume gains, as Suominen’s sales prices still faced some y/y headwinds even if raw materials prices have recently trended up a bit (we estimate Suominen’s raw materials prices to have gained roughly 5% q/q in Q1, slightly slower than in Q4). We estimate moderate gains in sales prices and a further recovery in volumes to result in 9% y/y higher H2 revenue, which should help Suominen to around 10% gross margins by then. This would result in some 9% EBITDA margin going towards next year. That level may still fall short of the performance which Suominen would like to achieve in the long-term, and Suominen has been focusing on commercial and operational excellence measures.

9% EBITDA margin would still be relatively low

Suominen is valued around 12x EV/EBIT on our FY ’24 estimates, which we view a bit high but justified assuming earnings improve over the course of the year. The multiple is about 7x on our FY ’25 estimates, assuming Suominen reaches 10% gross margin towards the end of this year. We don’t view current valuation too high as our FY ’25 estimates should still leave upside going forward, however full earnings recovery takes time. We view valuation neutral as we retain our EUR 2.5 TP and HOLD rating.

Open report

Solteq - Softer start to the year 

30.04.2024 - 08.30 | Earnings Flash

Solteq’s Q1 results were slightly weaker than expected and revenue declined slightly y/y in comparable terms. Revenue was at EUR 13.6m (Evli EUR 14.2m) and adj. EBIT at EUR -0.2m (Evli EUR 0.2m). Solteq announced the initiation of a cost savings program concerning parts of the Retail & Commerce segment.

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  • Net sales in Q1 were EUR 13.6m (EUR 16.9m in Q1/23), slightly below our estimates (Evli EUR 14.2m). Revenue declined 19.7% y/y in Q1 and 3.8% in comparable terms.
  • The operating profit and adj. operating profit in Q1 amounted to EUR -0.2m respectively (EUR -0.1m/-0.7m in Q1/23), slightly below our estimates (Evli EUR 0.2m). 
  • Solteq’s Q4 was impacted by write-offs of activated product development costs amounting to EUR 7.5m and other charges relating to the change negotiations. The comparable operating result was EUR 0.4m better than the comparison period. 
  • Retail and commerce: revenue in Q1 amounted to EUR 10.4m (Q1/23: EUR 13.4m) vs. Evli EUR 10.6m. Revenue declined by 21.1% driven by divestments but also minor comparable revenue decline. The adj. EBIT was EUR 0.4m (Q1/23: EUR 0.8m) vs. Evli EUR 0.4m. 
  • Utilities: Revenue in Q1 amounted to EUR 3.2m (Q1/23: EUR 3.5m) vs. Evli EUR 3.6m. The adj. EBIT was EUR -0.7m (Q1/23: EUR -1.5m) vs. Evli EUR -0.2m. 
  • Guidance for 2024 (reiterated): Solteq expects the comparable revenue (2023: EUR 54.2m) to grow and the operating result to be positive. 
  • Solteq announced the initiation of an efficiency and cost-savings program to improve profitability in the Retail and Commerce segment’s Commerce & Data business unit and Group Administration, seeking annual savings of approx. EUR 3.5m.

Open report

Detection Technology - Security strength adds to earnings

26.04.2024 - 09.30 | Company update

DT’s Q1 didn’t contain many surprises other than MBU being weaker and SBU stronger than expected. We estimate EBITA margin to be headed above 15% as growth continues.

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Favorable mix and cost control lifted EBITA margin to 10%

DT’s Q1 revenue came in at EUR 22.7m, in line with the EUR 22.6m/22.5m Evli/cons. estimates. MBU landed some EUR 1m below our estimate while SBU topped our expectations by a similar amount, which led to a more favorable mix and so DT’s EUR 2.3m EBITA exceeded our EUR 1.6m estimate as fixed costs also remained under control. SBU is in our view poised to become the largest segment already this year, which should help DT to above 13% EBITA margin quite soon. The report didn’t contain many surprises other than the fact that MBU was weaker than expected while SBU was stronger. The differences between the growth outlooks of the two are to narrow a lot towards the end of the year as MBU is seen to resume growth in Q3, however Q2 will still be soft for the segment.

MBU still challenging, SBU has strong tailwinds

We expect MBU to resume mid-single-digit growth in H2, whereas SBU and IBU should be positioned to reach roughly twice that rate. The aviation security market in Europe and India (where DT has initiatives to scale up) continues to enjoy tailwinds as high travel demand persists even after the pent-up phase post pandemic. We estimate DT to grow around 7% this year despite the fact that we see MBU down by 6%; MBU’s return to mid-single-digit growth should accelerate DT to some 9% growth next year even though SBU and IBU are likely to see slightly lower rates then. We estimate DT to achieve 13.5% EBITA margin in FY ’24, which could improve by another 200bps or so in FY ’25 thanks to higher revenue and even more favorable mix. There’s still uncertainty around the Chinese MBU market’s recovery, but SBU’s strength means DT should see at least above 5% growth in the medium term.

Multiples are low assuming growth and margin expansion

DT is still valued at 14x EV/EBIT on our FY ’24 estimates, some 30% discount relative to peers, and continued growth would help earnings gain by another EUR 4m in FY ’25; the corresponding 10x EV/EBIT multiple represents an even larger 40% peer discount. We retain our EUR 17.0 TP and BUY rating.

Open report

Exel Composites - Positioning for volume recovery

26.04.2024 - 09.05 | Company update

Exel’s Q1 results remained quite weak, although q/q improvement continued. Exel has been finding efficiency gains and positioning itself for a recovery in volumes. We expect EBIT to climb back to black soon, but more significant gains may not arrive before H2.

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Demand likely to have bottomed out, H2 to see gains

Exel Q1 revenue fell 19% y/y to EUR 23.4m, compared to our EUR 24.9m estimate, as Europe declined by 29%. Declines were seen quite evenly across Exel’s customer industries. Certain issues like the political strikes in Finland as well as the Red Sea crisis caused some logistical challenges while order intake continued to increase y/y and q/q. We believe the worst is over as many indicators suggest different types of industrial demand have bottomed out, however Q2 may still be a bit soft and we estimate its revenue to decrease by another 3% y/y yet see EBIT improve slightly y/y to EUR 0.3m. H2 comparison figures are low enough so that Exel could achieve some 25-30% revenue recovery then, which would bring annual growth to 6%.

Rights offering to accelerate strategy implementation

Energy and Transportation have many secular growth drivers thanks to investments in green transition, electrification, and public transportation, while Buildings and infrastructure also has additional prospects. Exel disclosed its plans to raise EUR 23m in equity through a rights offering. The proceeds’ use is less driven by deleveraging needs than we would have expected as only EUR 6.5m is to be used for debt repayments; the remaining portion is to be split roughly equally between growth investments (a factory in India), factory network optimization and working capital needs.

Volume recovery and efficiency gains to bring EUR 8m EBIT

We estimate FY ’24 EBIT at EUR 2.9m, still low due to a soft H1. We estimate H2 recovery to lift EBIT margin close to 7% by the year’s end and so further high single-digit growth next year could help FY ’25 EBIT close to EUR 8m, which would be in line with historical averages while Exel has already achieved production efficiency gains. Current valuation plus the money raised through the issue mean EBIT recovery is expected, and we estimate the new capitalization implies ca. 8x EV/EBIT on our FY ’25 estimates. Our new TP is EUR 1.8 (2.2) as we retain our HOLD rating.

Open report

Dovre - Renewables construction picks up

26.04.2024 - 08.45 | Company update

Dovre Q1 EBIT, excluding the write-off, was a bit below our estimate but we raise our Renewable Energy estimates for the rest of the year. Our FY ’25 estimates are almost intact.

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We make relatively small changes to our estimates

Dovre Q1 revenue declined 8% y/y to EUR 42.3m, below our EUR 45.6m estimate mostly due to Renewable Energy. The EUR -4.9m EBIT included the EUR 5.8m write-down due to a single project; without it Renewable Energy EBIT was relatively close to our estimate, but Project Personnel’s EUR 0.3m EBIT miss meant total came in a bit lower than we estimated. We upgrade our EBIT estimates for the rest of the year by EUR 1.3m, in line with guidance; our estimate changes for Project Personnel and Consulting are small; the gains are due to Renewable Energy.

EBIT should stay around EUR 8m without write-downs

Dovre has restructured within Project Personnel and Consulting (in Norway and Finland) to safeguard earnings. Meanwhile Northern Sweden has many confirmed green industrial investments to be built in the coming years, and although the region already has very competitive energy prices based on plentiful renewables there should still be demand as the plans to develop the region extend until at least the end of this decade. The Finnish side of the Bothnian Bay has somewhat similar story but, unlike on the Swedish side, it’s still unclear how much more energy demand there will be in the coming years as the region lags in terms of new industrial manufacturing plants. In our view Suvic’s recent expansion into solar farms makes sense from this perspective due to the more incremental nature of the business.

Earnings multiples remain low assuming flat underlying EBIT

We estimate FY ’25 EBIT to remain flat, excluding the EUR 5.8m one-off, and our respective estimate is almost unchanged at EUR 8.2m assuming a moderate 200bps pick-up in growth to slightly below 4%. We assume all three segments to grow at mid-single-digits next year. We don’t expect large earnings gains in the short-term but note our FY ’25 estimates are undemanding in the light of the segments’ long-term potential. Dovre is valued some 5.5x EV/EBIT (excluding 49% of Suvic EBIT) on our FY ’25 estimates and on this basis peer multiples would suggest an FV closer to EUR 0.60. Our new TP is EUR 0.50 (0.65) as we retain our BUY rating.

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SRV - Moving in the right direction

26.04.2024 - 08.40 | Company update

Non-residential volumes supported the profitability in Q1/24 as we had expected. Non-residential will remain in the driver’s seat especially for 2024E while we estimate residential to start contributing slowly during 2025E.

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Profitability improved in Q1 y/y as expected

Revenue in Q1 was EUR 167.0m (EUR 138.3m in Q1/23), above our estimate of EUR 152.0m. Revenue grew 20.7% y/y. The revenue growth was stronger than expected in business construction where the revenue grew 37% while we estimated growth of 23% y/y. Housing construction revenue was at a very low level of EUR 10.9m as expected. With the higher total volumes, SRV’s EBIT increased to EUR 1.3m, trailing only slightly our estimate of EUR 1.5m. While the market remains challenging in the residential side, the company believes that it will be possible to start up selected development or developer-contracted projects in the latter part of the year.

 

Non-residential will remain in the driver’s seat

As we have commented earlier, the company’s current non-residential backlog supports its volumes through 2024. SRV also has a substantial amount of won contracts and projects under preliminary contracts that have not yet been recognized in the company’s backlog (EUR 933m 3/24 vs. EUR 715m 12/23). Profitability wise, the margins will remain modest in 2024 driven by the project mix. SRV had no developer-contracted housing units under construction during the first quarter and therefore we expect that the company’s developer-contracted housing sales will comprise of the current unsold units during 2024-2025E. We have made only slight adjustments to our estimates for 2024E. We now estimate revenue of EUR 714m (prev. EUR 685) with operative EBIT of EUR 13.1 (prev. EUR 13.3m). For 2025E we have increased our estimates for other than developer-contracted residential sales.

 

HOLD with a TP of EUR 4.3 (prev. EUR 4.1)

SRV’s Q1 was a step in the right direction. While the non-residential sales keep the margins modest for 2024E, the volumes provide a bridge into 2025E where we expect that housing sales (other than developer contracted) start to contribute slowly into the figures.

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Consti - Onwards in a tough market

26.04.2024 - 07.30 | Company update

Consti’s Q1 net sales beat our estimates slightly while operative profitability missed by only a small margin. Order intake was on the softer side, yet backlog remains robust.

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Q1 profitability only slightly weaker than expected

Net sales in Q1 were EUR 65.5m (EUR 68.9m in Q1/23), slightly above our estimates (EUR 64.5m). Sales declined 4.9% y/y. Operating profit in Q1 amounted to EUR 0.2m (EUR 0.7m in Q1/23), below our estimates (EUR 0.5m) at a margin of 0.3% (1.0%). The main driver behind the EBIT miss compared to our estimate was non-operative as the result was burdened by amortization of purchase price allocations from the previous year’s acquisition. On EBITDA terms, the miss was nearly non-existent as we expected EBITDA of EUR 1.4m vs. actual of EUR 1.3m. Order intake fell 38% y/y as Consti was not able to sign any larger orders during the quarter. The company’s backlog fell slightly with the weaker order intake yet remained at a strong level of EUR 244.4m (EUR 253.8m Q1/23).

 

We continue to expect slight sales decline for 2024E

With Q1/24 figures largely as expected, we have made only slight estimate adjustments going forward. According to the company, a larger share of the end of March backlog will be recognized during the remainder of the FY when compared to last year. Consti’s current backlog supports its net sales for the remainder of the year while we expect the company’s disciplined tendering activities coupled with intensified competition to affect project sales negatively. We now estimate revenue of EUR 318.0m (prev. EUR 315.5m) and EBIT of EUR 10.7m (prev. EUR 10.8m) for FY 2024E. For Q2, we estimate net sales growth as some projects in the Building Technology business area did not contribute to Q1 sales as the company expected and we estimate that these projects will start to contribute during the second quarter.

 

BUY with a TP of EUR 12.0 (prev. EUR 13.0)

Seasonally slow Q1 brought no major news, and the fundamentals remain intact. Consti is priced at 9-8x P/E and 7-5x EV/EBIT on our 24-25E estimates. While the market presents some challenges, we still see the valuation undemanding.

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Detection Technology - EBITA topped estimates

25.04.2024 - 10.30 | Earnings Flash

DT’s Q1 earnings were clearly above estimates even though revenue was basically as expected. MBU revenue fell more than expected, while SBU grew a lot more than was estimated. SBU outlook continues to be strong, and while MBU weakness will still limit Q2 growth DT should see revenue increase in H2.

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  • DT Q1 revenue decreased by 0.2% y/y to EUR 22.7m, compared to the EUR 22.6m/22.5m Evli/consensus estimates. Adjusted EBITA landed at EUR 2.3m vs our EUR 1.6m estimate.
  • Medical (MBU) revenue fell by 20.9% y/y to EUR 9.5m vs our EUR 10.6m estimate. Sales fell more than expected. MBU demand is expected to be muted also in Q2 while a positive turn is expected at the beginning of Q3.
  • Security (SBU) grew by 31.5% y/y to EUR 9.6m, compared to our EUR 8.4m estimate. Europe and India grew strong, driven by CT applications for the aviation market. Demand was also solid for line scanner applications. Medium term market growth rate is seen to be around 8%.
  • Industrial (IBU) grew by 5.3% y/y to EUR 3.6m vs our EUR 3.7m estimate. Demand recovered towards the end of Q1 as the food sector showed positive signs of recovery. Destocking nevertheless caused sales to remain below target.
  • DT expects its revenue to remain stable in Q2 y/y and turn to growth in Q3. SBU and IBU are to see double-digit growth in Q2 while MBU is to decrease. Improved productivity, sales mix, and growth in sales continue to lift results.

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Exel Composites - Results still softer than expected

25.04.2024 - 10.00 | Earnings Flash

Exel’s Q1 results landed below estimates. Demand shows some signs of improvement, but H1’24 results will remain quite soft. Exel retains its previous guidance as H2 should be better. The company also plans to issue up to EUR 23m of new shares.

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  • Exel Q1 revenue decreased by 18.9% y/y to EUR 23.4m vs our EUR 24.9m estimate. The decline was largely attributable to Europe (down 29.4% y/y) while North America increased by 15.8%.
  • Exel reports revenue for a new customer industry structure; all the five industries were down y/y.
  • Adjusted EBIT was EUR -0.6m, compared to the EUR 0.7m/0.8m Evli/consensus estimates. Efforts to manage working capital and costs continued and will continue through this year. Further room to improve efficiency exists.
  • Order intake came in at EUR 28.6m in Q4 and grew by 9% y/y (21% q/q). Order backlog has increased 32% compared to last year. Demand is however still expected to be somewhat soft in H1’24 while Exel continues to have free production capacity.
  • Exel guides revenue to increase and adjusted EBIT to increase significantly in 2024 compared to 2023 (unchanged).
  • Exel plans to issue up to some EUR 23m of shares in a rights offering to strengthen capital structure and accelerate its strategy implementation.

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SRV - Gradual improvement in a tough market

25.04.2024 - 09.30 | Earnings Flash

SRV's net sales in Q1 amounted to EUR 167.0m, above our estimate of EUR 152.0m. EBIT was slightly softer than estimated yet improved y/y as expected.

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  • Revenue in Q1 was EUR 167.0m (EUR 138.3m in Q1/23), above our estimate of EUR 152.0m. Revenue grew 20.7% y/y.
  • The operative operating profit in Q1 amounted to EUR 1.3m, only slightly below our estimate of EUR 1.5m.
  • SRV’s signed new agreements worth EUR 136.4m (EUR 149.9m in Q1/23).
  • The order backlog in Q1 was EUR 1020.4m (EUR 871.0m in Q1/23), up by 17% y/y.
  • Business construction revenue in Q1 was EUR 156.1m, (EUR 140.0m Evli estimate) up 37.0 % y/y. While we expected strong growth, the non-residential volumes came in even stronger than expected.
  • Housing construction revenue in Q1 was EUR 10.9m (EUR 12.0m. Evli estimate). SRV recognized only 3 residential units as income which was expected.
  • While the market remains challenging in the residential side, the company believes that it will be possible to start up selected development or developer-contracted projects in the latter part of the year
  • SRV outlook 2024 (unchanged): Full-year consolidated revenue for 2024 is expected to grow compared to 2023 (revenue in 2023: EUR 610.0 million). Operative operating profit is expected to improve on 2023 (operative operating profit in 2023: EUR 1.1 million).

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Dovre - Underlying EBIT close to estimates

25.04.2024 - 09.30 | Earnings Flash

Dovre Q1 results included a write-down of EUR 5.8m related to a single renewable energy project. Beyond that the results were largely in line with our estimates, although slightly lower.

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  • Dovre Q1 revenue decreased by 7.6% y/y to EUR 42.3m, compared to our EUR 45.6m estimate. Project Personnel came in at EUR 25.2m vs our EUR 22.3m estimate, whereas Consulting amounted to EUR 3.6m vs our EUR 4.5m estimate. Renewable Energy was EUR 13.5m, compared to our EUR 18.8m estimate.
  • EBITDA landed at EUR -4.6m vs our EUR 1.6m estimate while EBIT was EUR -4.9m vs our EUR 1.4m estimate. Project Personnel EBIT was EUR 0.7m, compared to our EUR 1.0m estimate, while Consulting amounted to EUR 0.3m vs our EUR 0.4m estimate. Renewable Energy EBIT was EUR -5.7m vs our EUR 0.3m estimate; the underlying segment profitability was thus largely in line with our estimate when excluding the EUR 5.8m one-off write-down of a single renewable energy project.
  • Dovre guides FY ’24 revenue to be in the range of EUR 185-210m and EBIT in the range of EUR 2-4m (including a significant one-time write-down of approximately EUR 6m due to a single renewable project in Q1). Renewable Energy revenue and EBIT are expected to clearly exceed the comparison period of 2023 in the remainder of 2024. Project Personnel and Consulting FY ‘24 revenue and EBIT are expected to decline compared to FY ’23 due to the completion of a major project in Canada and somewhat slower activity in the Norwegian public sector.

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Consti - Order intake on the softer side

25.04.2024 - 09.00 | Earnings Flash

Consti's net sales in Q1 amounted to EUR 65.5m, only slightly higher than our estimate (Evli est. EUR 64.5m.), with decline of 4.9% y/y. EBIT amounted to EUR 0.2m, weaker than our estimates (Evli est. EUR 0.5m).

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  • Net sales in Q1 were EUR 65.5m (EUR 68.9m in Q1/23), slightly above our estimates (EUR 64.5m). Sales declined 4.9% y/y.
  • As we estimated, Public Sector and Building Technology business areas kept delivering growth while the larger Housing Companies and Corporations business areas declined further
  • Operating profit in Q1 amounted to EUR 0.2m (EUR 0.7m in Q1/23), below our estimates (EUR 0.5m) at a margin of 0.3% (1.0%). We assume that the EBIT miss is mostly related to project mix changes y/y.
  • EPS in Q1 amounted to EUR -0.00 (EUR 0.04 in Q1/23), also below our estimates (EUR 0.03)
  • The order backlog at the end of Q1 was EUR 244.4m (EUR 253.8m in Q1/23), down 3.7% y/y. Order intake was EUR 36.3m in Q1 (Q1/23: EUR 58.6m).
  • The order intake figure was a clear letdown as the competition remained intense coupled with the company’s disciplined tendering activities.
  • Free cash flow amounted to EUR -0.5m (Q1/23: EUR -1.0m).
  • Guidance for 2024 (unchanged): Operating result for 2024 will be in the range of EUR 9–12 million

Open report

Scanfil - Stable margins, growth to resume

24.04.2024 - 18.55 | Company update

Scanfil’s Q1 revenue fell more than estimated, which also caused EBIT to drop below estimates, however operating margin remained quite high while demand outlook is already showing signs of stabilization.

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EBIT margin remained high despite the decline in revenue

Scanfil’s Q1 revenue fell 11.5% y/y to EUR 198.9m, vs the EUR 212.5m/210.2m Evli/cons. estimates, since Industrial and Medtech & Life Science both fell by some 15% y/y due to destocking as well as account demand changes. Energy & Cleantech decreased 3.3% because of lower demand for energy savings solutions, where there was too optimistic demand last year, but the segment still grew by 11.3% excluding such products; we estimate it to be the only segment to add top line this year as comparison figures remain high especially in Q2. Scanfil’s EUR 12.7m EBIT was a bit soft relative to the EUR 13.9m/14.0m Evli/cons. estimates as revenue fell more than estimated, however the margin remained strong at 6.8% excluding layoff costs and FX changes.

Margins stable, volumes to grow again towards next year

Scanfil improves operational efficiency to safeguard profitability even in a more challenging market. We estimate Scanfil H2 revenue to grow 1.5% y/y since the comparison period is no more that challenging, while we expect FY ’25 to see 5% growth as Energy & Cleantech and Medtech & Life Science have many large and favorably positioned accounts driving higher volumes (we expect prices to remain quite stable). In our view there aren’t many significant differences in growth outlook across geographies, although Asia is slightly more dynamic than Western markets (especially in Medtech & Life Science). We estimate EBIT to decline by EUR 1.5m this year but expect it to gain some EUR 3m next year as EBIT margin has basically stabilized around 7%.

Valuation not demanding in the light of margins and mix

Scanfil is valued below 9x EV/EBIT, a discount of some 15% relative to peers, which we consider a low level given that Scanfil has demonstrated how it can achieve relatively high margins also in more challenging environments. In our view the company’s consistently high margins and attractive account mix would justify higher multiples even if earnings growth outlook is currently a bit muted. We retain our EUR 9.0 TP and BUY rating.

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Finnair - Earnings trend up over the summer

24.04.2024 - 09.05 | Company update

Finnair’s Q1 revenue was a bit soft relative to estimates, however earnings were as estimated thanks to cost discipline. We believe FY ’24 results should stay quite high due to increased capacity and PLFs, however yields may no longer have room to gain despite a busy summer season.

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Q1 performance was decent considering the conditions

Finnair’s Q1 revenue declined 2% y/y to EUR 682m, slightly below the EUR 710m/698m Evli/cons. estimates. Passenger revenue came in some EUR 35m below our estimate due to lower-than-estimated unit yields on Asian and European routes, whereas Finnish winter conditions as well as two political strikes (in addition to strikes in other countries such as Germany) had an impact on bottom line. Considering these headwinds the EUR -11.6m adj. EBIT, compared to the EUR -12.9m/-8.3m Evli/cons. estimates, reflected a very decent operative performance while operating costs were kept under control.

We still see marginal EBIT gains over the rest of the year

Finnair adjusted its capacity guidance down a bit, but in our view the change wasn’t very big. Capacity increases by more efficient use of assets and so costs should remain in check. The focus is on commercial excellence measures and finding the optimal balance between PLFs and unit yields; Q1 yields were a bit softer than we expected, but Finnair achieved lower costs than we estimated. We estimate PLFs have room to improve by further 100-200bps over the summer as comparison figures weren’t yet that high, however unit yields face more challenging comparisons this summer as ticket prices increased by double-digit rates last year; we estimate yields to be down by a few percentage points y/y over the summer.

Earnings multiples are not too high relative to peers

We estimate Finnair’s FY ’24 revenue to grow 4% this year, a conservative estimate relative to the ca. 9% growth seen for the peer group, while we see adj. EBIT basically flat at EUR 187m. Finnair is valued slightly above 8x EV/EBIT on our FY ’24 estimates; in our view EBIT could have touched EUR 200m this year without the extraordinary conditions seen in Q1 and thus there should be room for an additional EUR 10-20m annual improvement assuming the market stays around its current rather stable balance. We retain our EUR 3.5 TP and BUY rating.

Open report

Scanfil - Results were somewhat soft

24.04.2024 - 08.30 | Earnings Flash

Scanfil’s Q1 results were expected to be soft relative to the comparison period but still came in somewhat lower than estimated. Scanfil retains its outlook according to which market demand picks up again in H2. Meanwhile the company has focused on some efficiency measures.

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  • Scanfil’s Q1 revenue declined by 11.5% y/y to EUR 198.9m vs the EUR 212.5m/210.2m Evli/consensus estimates. Top line decreased by 8.6% when excluding spot market purchases. Energy & Cleantch decreased 3.3% y/y but was up 11.3% excluding energy saving solutions. Industrial as well as Medtech & Life Science fell by similar 15% y/y rates due to destocking and demand changes. Market demand was lower relative to the comparison period and Scanfil focused on improving operational efficiency and inventories were reduced by EUR 10m.
  • EBIT landed at EUR 12.7m, compared to the EUR 13.9m/14.0m Evli/consensus estimates. Operating margin was 6.4% (6.8% excluding layoff costs and FX changes).
  • Scanfil guides FY ’24 revenue in the range of EUR 820-900m and adjusted EBIT of EUR 57-65m (unchanged). H1 market outlook remains sluggish, however activity is expected to pick up again in H2.

Open report

Innofactor - Holding firm in challenging market

24.04.2024 - 07.30 | Company update

Innofactor’s Q1 was in line with expectations. We continued to expect modest growth in sales and EBITDA while eyeing improvements in new sales.

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Q1 in line with expectations
Innofactor reported Q1 results that were well in line with our estimates. Net sales grew 4.8% to EUR 21.2m (21.0m) while EBITDA amounted to EUR 2.6m (Evli EUR 2.6m). EBITDA was positive only in Finland and Norway. The order backlog continued to decline, down by 9.8% y/y to EUR 68.8m. Innofactor reiterated its guidance, expecting net sales and EBITDA to increase compared with 2023. The sales growth slowed down in Q1 as a result of the challenging market situation, with new sales continuing to be a challenge and billing rates also falling below company expectations. 

Looking at continued modest improvement
We have made essentially no changes to our estimates, expecting sales growth of 4.4% and an increase in EBITDA of 7% to EUR 9.8m in 2024. The continued challenges related to new sales and order backlog decline pose a concern and the Q1 comments didn’t give signals of notable improvement in the very near-term. Our assumptions rely on an improved situation during H2. Actions to be taken related to the use of subcontracting and personnel reductions in Sweden provide some additional support for maintaining current levels of profitability, with billings rates expected to remain on the weaker side. We expect similar, modest growth levels to continue in 2025. The current market situation is not ideal when looking at margin potential going forward, but assuming a pick-up in demand in 2024, especially in the higher margin solutions areas such as Digital solutions, we continue to see potential for some improvement. 

BUY with a target price of EUR 1.6 (1.5)
Innofactor again showed an ability to defend its margin levels in the challenging market. The market outlook remains rather weak, but signs are slowly pointing more towards an improvement than further deterioration. The valuation also continues to remain attractive (2024e P/E~9.5x).

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Finnair - EBIT landed right next to estimates

23.04.2024 - 09.30 | Earnings Flash

Finnair’s Q1 earnings were in line with estimates even though top line came in a bit lower than estimated. The report doesn’t seem to contain many surprises, although Finnair appears slightly more cautious towards capacity increases (and hence revenue) than before.

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  • Finnair’s Q1 revenue decreased by 1.9% y/y to EUR 681.5m vs the EUR 709.8m/698.2m Evli/consensus estimates. Passenger revenue decreased by 2.5% y/y to EUR 539.3m. Political strikes in Finland had a negative effect on revenue. Yields remained strong despite a slight y/y decrease.
  • Comparable EBIT amounted to EUR -11.6m, compared to the EUR -12.9m/-8.3m Evli/consensus estimates. Operating expenses remained unchanged y/y due to strict cost control and lower fuel prices even though capacity increased.
  • Fuel costs were EUR 210m vs our EUR 212m estimate, whereas staff costs amounted to EUR 130m vs our EUR 138m estimate. All other OPEX+D&A were EUR 386m, compared to our EUR 399m estimate.
  • Cost per Available Seat Kilometer was 7.77 eurocents vs our estimate of 8.10 eurocents.
  • Finnair updates its guidance and now plans to increase its total capacity (ASK) by some 10% this year, including the agreed wet leases. Growth mainly focuses on Asia and Europe, and revenue is expected to grow at a slower pace than capacity in 2024. Finnair previously planned to increase capacity by more than 10% while revenue was expected to grow at a somewhat slower pace than capacity. Finnair provides full-year comparable EBIT guidance in connection with the Q2 report in July. Summer season sales look good while winter season trips have been booked well in advance.

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Innofactor - In line with our expectations

23.04.2024 - 09.30 | Earnings Flash

Innofactor’s Q1 results were well in line with our expectations. Net sales were up ~5% y/y to EUR 21.2m (Evli EUR 21.0m) while EBITDA amounted to EUR 2.6m (Evli EUR 2.6m). Guidance for 2024 reiterated: Innofactor’s net sales and EBITDA are expected to increase compared with 2023.

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  • Net sales in Q1 amounted to EUR 21.2m (EUR 20.2m in Q1/23), in line with our estimates (Evli EUR 21.0m). Net sales in Q1 grew 4.8%.
  • EBITDA in Q1 was EUR 2.6m (EUR 2.5m in Q1/23), in line with our estimates (Evli EUR 2.6m), at a margin of 12.3%. 
  • Operating profit in Q1 amounted to EUR 1.m (EUR 1.8m in Q1/23, slightly below our estimates (Evli EUR 1.8m), at a margin of 8.7%. 
  • EBITDA was positive in Finland and Norway in Q1 but negative in the other countries. 
  • Innofactor saw challenges in new sales during the quarter due to the challenging market situation but was successful in sales to existing customers. Billing rates fell below expected levels due to the demand situation. Innofactor is expected to reduce the amount of personnel in Sweden by around 20% during Q2 due to continued profitability challenges. 
  • Order backlog at EUR 68.8m, down 9.8% y/y. 
  • Guidance for 2024 (reiterated): Innofactor’s net sales is expected to increase from 2023 (EUR 80.3m) and EBITDA is expected to increase from 2023 (EUR 9.1m).

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SRV - Growth rests on non-residential volumes

18.04.2024 - 08.40 | Preview

SRV publishes its Q1/24 figures on Thursday 25th of April. We expect growth driven by non-residential construction while higher margin residential volumes remain low.

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Residential construction outlook remains bleak for 2024
According to the Confederation of Finnish Construction Industries RT, the Finnish residential construction volumes will continue declining in 2024 by 22%. The continued decline is backed by residential building permit and start data by Statistics Finland which have both continued in freefall during 2023. Driven by the current market environment, SRV has no developer contracted projects under construction and only a relatively small number of contracted units and units sold to investors under construction. On the positive side, SRV had less than a hundred units of completed and unsold developer contracted units at the end of 2023. During Q1, SRV agreed to two new sizeable residential projects which will be implemented as competitive and negotiated contracts. While positive for residential volumes, contracts have lower project margin potential and on the other hand, lower risks when compared to own developer contracted projects and projects sold to investors.

Non-residential construction sustains volumes
While residential construction will not support the company’s volumes in 2024, we estimate SRV’s strong non-residential backlog to support group wide revenue growth for the FY. Whilst we estimate revenue growth, the relatively lower margin non-residential construction will keep the profitability modest. For Q1/24, we now estimate revenue of EUR 152m (prev. EUR 159m, Q1/23 EUR 138.3m) with operative EBIT of EUR 1.5m (prev. EUR 2.6m, Q1/23 EUR -2.0m). Despite the lower margin sales mix, we expect increased volumes, profitability improvement initiatives and lower material costs to improve operative EBIT y/y. 

HOLD with a TP of EUR 4.1
After slight adjustments to our estimates, valuation remains elevated on our 2024E estimates. Following the recent share price surge, we consider the largest mid-term potential diminished especially given the low visibility into 2025E and beyond. 

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Consti - Slower start to the year expected

18.04.2024 - 08.00 | Preview

Consti reports its Q1/24 results on 25th of April. We expect continued sales decline during the seasonally slow Q1 as a result of the strong comparison period Q1/23 and lower order intake during H2/23.

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Focus is on orders and backlog during seasonally slow Q1 
Consti’s Q1 typically represents roughly one fifth of total annual sales and only 5% of EBIT due to seasonality. Our interest in the Q1 report lies in order intake and backlog development in addition to possible comments on the market development. The Confederation of Finnish Construction Industries RT expects continued decline for renovation construction volumes during 2024 in its latest report. The volume decline is expected to slow down from last year as renovation volumes are estimated to decline by 1% while in 2023 volumes declined by 4%. 

Minor downward estimate revisions
Consti’s order intake fell roughly 22% short of the comparison period during H2/2023, while for FY 2023, order intake declined 1.3% y/y. In absolute terms, Consti expects that a larger part of 12/2023 backlog will be recognized during 2024 when compared to last year. On the other hand, in relative terms, the current backlog is more evenly distributed to following years when compared to 12/2022 backlog. We expect the revenue decline seen during Q4/23 to have continued during the first quarter. We now estimate net sales of EUR 64.5m (prev. EUR 66.4m) for Q1 with EBIT of EUR 0.5m (prev. EUR 0.5m). For FY 2024, we estimate net sales of EUR 315.5m with a sales decline of 1.6% y/y. Driven by the decline in net sales, we estimate EBIT of EUR 10.8m (EUR 12.3m 2023) with a margin of 3.4% (3.9% 2023). 

Current valuation offers a margin of safety 
Despite the expectation of a slower year ahead, we find Consti’s current pricing conservative. Consti trades at a discount of roughly 30% based on 24-25E P/E and EV/EBIT when compared to its main construction and building technology and service peers. Even with the guidance range low, EBIT of EUR 9m, the current pricing would offer a substantial discount to peers and the company’s historic multiple levels. 

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Raute - Wood Processing earnings improve

17.04.2024 - 09.00 | Preview

Raute reports Q1 results on May 3. We estimate earnings to improve over the course of the year, driven by the order book.

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Q1 earnings still a bit soft yet will trend up over the year

Raute recently added another larger EUR 20m Latvian order, which speaks for the company’s strong positioning in Europe. The Finnish political strikes seen in Q1 are likely to have affected operations at least to some extent, but we still expect Q1 revenue to have grown by 14% y/y to EUR 42m as the comparison period had only EUR 24m in Wood Processing revenue (whereas we estimate, in line with guidance, FY ’24 Wood Processing revenue to top EUR 130m). Wood Processing Q1’24 figures would still nonetheless have been relatively modest even without the strikes as we estimate Raute’s order book of some EUR 270m (of which five larger orders made up EUR 237m) takes until around H2’24 to turn in more significant amounts of the large projects’ revenue.

We estimate EUR 12.7m comparable EBITDA for the year

We estimate Q1 comparable EBITDA at EUR 2.6m, in other words slightly down from the EUR 2.8m comparison figure as development costs still limit Wood Processing earnings. Political strikes were known to happen in Finland, but their scope was a surprise and so Q1 figures are likely to have remained a bit modest. Raute issued its FY ’24 guidance before the latest Latvian order was signed; some of the project will be delivered already this year and hence could support Raute close to the upper ends of the EUR 170-195m revenue and EUR 10-14m comparable EBITDA ranges. We would in any case estimate Raute’s revenue to top EUR 200m in FY ’25, if not already this year, as Wood Processing has its order book to deliver. We estimate EBITDA to decline by some EUR 1m for both Services and Analyzers while we see Wood Processing up by EUR 5m as its revenue should gain by about EUR 40m this year.

We estimate FY ‘25 comparable EBITDA to gain some EUR 4m

Given that Raute has secured a very high order book in a market that’s still soft in Europe we expect growth to extend at least until next year as changes to small order demand are more likely to be positive than negative. We estimate FY ’25 revenue to grow by 10% and EBITDA by another EUR 4m. Raute’s below 7x EV/EBIT multiple, on our FY ’24 estimates, is thus quite modest. We retain our EUR 13.0 TP and BUY rating.

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Detection Technology - Growth translates to earnings gains

16.04.2024 - 09.15 | Preview

DT reports Q1 results on Apr 25. Q1 may have been a bit muted, but growth is likely to pick up pace over the year. We see significant earnings upside for this year and next.

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SBU’s growth trend should extend for another two years

DT saw FY ’23 profitability gain by more than EUR 3m as the double-digit growth of SBU drove higher top line while costs remained under control. We expect FY ’24 to look not that different relative to previous year as SBU will still be lifted especially by airport CT investments (the trend should last until 2026). MBU, however, only remained flat last year and we expect H1’24 to be challenging for the segment as the Chinese anti-corruption campaign continues and price competition stays stiff. We believe the MBU headwind will not allow DT’s top line to grow much in H1’24 even when SBU still grows at a double-digit rate while the outlook for IBU starts to look better as destocking should soon be over (although the food industry’s relatively quiet activity levels mean Q1 will remain rather muted on an organic basis).

Q1 may be rather flat, but growth should continue from Q2

We estimate Q1 adj. EBITA to have improved only slightly y/y to EUR 1.6m, however we expect earnings growth to steepen over the course of the year assuming SBU’s double-digit rate persists while both MBU and IBU start to pick up. We estimate FY ‘24 MBU revenue to decline 2%, but the 15% growth we see for both SBU and IBU should help DT to a high single-digit growth this year. We thus expect adj. EBITA to gain by EUR 5m, which implies a margin of 13%. SBU may have grown to be the largest segment by the end of next year, which should also improve product mix and margins. DT would hence have further earnings upside next year when all three segments may show meaningful growth.

Attractive upside as EBITA margin can gain some 500bps

We estimate DT’s growth to accelerate towards FY ’25 since the drivers of SBU remain solid whereas MBU and IBU have room to improve as demand normalizes. The 9% growth we estimate for next year could lift EBITA margin above 15%, which would mean another EUR 4m earnings gain. DT is valued no more than 14x EV/EBIT on our FY ’24 estimates, a discount of 30% relative to peers. The multiple is only some 10x for FY ‘25; we see significant long-term upside as we retain our EUR 17.0 TP and BUY rating.

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Vaisala - Some catching up to do

12.04.2024 - 08.20 | Preview

Vaisala published preliminary net sales figures for Q1/24, missing our estimates with roughly 15% y/y sales decline. While one-time events and market conditions create short-term pressure, the long-term case remains attractive. The first quarter results will be published 3rd of May.

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Q1 was negatively affected by one-time events

Vaisala published preliminary net sales of Q1/24 yesterday, missing our estimate by a substantial margin. The company’s preliminary net sales were EUR 112m (Evli est. EUR 128m), down roughly 15% y/y from EUR 132m Q1/23. Due to lower sales, EBIT is expected to be significantly lower when compared to Q1/23. The reasons for the decline were already known and communicated by the management in connection with the Q4/23 report and pre-silent comments. The industrial actions in Finland and implementation of the new ERP were the main drivers behind the declined sales. While we expected a soft first quarter due to the beforementioned reasons, with a net sales decline of roughly 3%, the negative effects from these one-time events were more substantial than estimated.

 

Guidance demands growth for the remainder of the FY

While the Q1 preliminary net sales indicate a decline of roughly 15%, Vaisala reiterated its FY24 outlook where it estimates that net sales will be in the range of EUR 530–570m and EBIT in the range of EUR 63–78m. With the preliminary net sales for Q1, the outlook range implies y/y revenue growth of roughly 2-12% for the remaining nine months of FY. With the preliminary net sales updated to our model in addition to other estimate changes, we now estimate net sales of EUR 542m and EBIT of EUR 68m for FY 2024. Our estimates imply roughly 5% growth for the remaining nine months supported by W&E’s backlog and softer comparison for IM during H2. Q1 is now estimated to be exceptionally weak also in terms of profitability driven by the net sales miss and further OPEX investments.

 

BUY with a TP of EUR 40 (prev. EUR 41)

Based on our updated estimates for 2024-2025, Vaisala trades at roughly 17-14x adj. EV/EBIT, this represents a discount of approximately 12% when compared to the peer group. Supporting this, our DCF indicates an upside of roughly 10%.

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Alisa Bank - An interesting opportunity

11.04.2024 - 09.25 | Company update

Alisa Bank announced a planned combination with fintech company PURO Finance. The transaction appears appealing through synergies and earnings potential, while providing growth potential amid capital structure challenges.

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Seeking to combine with fintech company PURO Finance
PURO Finance is a fintech company specialized in invoice financing, with total income of approx. EUR 3.1m and PTP of EUR 0.6m in 2023. The company’s business is based on self-developed technology, with its financing services offered under several brands. The combination will be carried out through a share exchange, after which Alisa Bank’s current shareholders will own approx. 60% of the company. The combination is aimed to be completed during May 2024, conditional upon EGM approval and other customary preconditions. 

Lucrative earnings improvement potential
The transaction in our view is appealing primarily through synergies and as such earnings improvement, in light of which the share exchange percentages seem fair for both parties. The clearly most tangible and significant part of the synergies arise from an estimated approx. EUR 1.3m saving in interest expenses through replacing PURO’s debt capital with Alisa Bank’s predominantly deposit based financing. On our standalone estimates, along with PURO’s own profitability, 2025e PTP would potentially double up. The profitability improvement would clearly reduce the need for further capital structure strengthening, which has been a challenge for Alisa Bank, through the earnings-based improvement to CET. Focus is also set to shift towards SME funding, in particular the more profitable invoice funding, with consumer lending volumes set to be secondary and dependent upon capital adequacy targets.

HOLD with a target price of EUR 0.20
On our preliminary estimates, the mid-term valuation upside for the combined company appears slightly more favourable. The loan book growth potential, however, remains uncertain given the expected limited immediate impact to CET 1(%).  

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Finnair - Summer is coming

08.04.2024 - 09.15 | Preview

Finnair reports Q1 results on Apr 23. Q1 is always seasonally soft and so the summer months are to deliver most of the EBIT, this time probably even more so than last year.

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Asian volumes can still recover slightly

Finnair’s Q4 results didn’t quite meet estimates as unit yields were somewhat softer than expected, but profitability didn’t miss estimates that much considering the normal seasonal variability patterns in EBIT. Q1 RPK, however, only remained flat y/y while PLF declined by some 300bps. Finnair’s Q1’23 EBIT was slightly positive, but we now estimate the Q1’24 figure to have been negative at EUR -13m. Q1 is seasonally the weakest and this time there were also political strikes. Focus thus again rests on the summer season. Finnair’s volume growth has in recent months relied on the recovery in Asian traffic, although even there Q1 RPK only grew by 4% y/y. Finnair will not guide FY ’24 EBIT before July, yet we continue to believe the summer season has enough going for it so that EBIT should not decline y/y (while volumes and revenue grow at mid-to-high single digits).

The European summer season is full of stadium-size events

Finnair said it expects growth to stem mostly from Asia and Europe going forward. In our view Finnair is positioned for double-digit volume growth over the summer months as Europe has a very busy event summer in terms of stadium-filling sports and live music productions. Meanwhile both unit yields and jet fuel prices seem now to be flatlining, which we believe should help some further marginal bottom line improvement. Our estimates beyond Q1 stay largely intact, and so we expect Finnair’s FY ’24 EBIT to reach EUR 190m.

Valuation implies quite moderate expectations

We estimate Finnair’s revenue to grow 6% this year, in line with peers. Most airlines, like Finnair, saw significant EBIT improvement already last year and so there may not be that much potential left for further gains; a typical airline is however still expected to see EBIT margin improve by ca. 100bps, whereas we estimate a minor decline for Finnair. Finnair is valued around 8x EV/EBIT on our FY ’24 estimates, not much above the peer median. We continue to view the valuation modest as our earnings estimates are relatively conservative. Our TP is EUR 3.5 as we retain our BUY rating.

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Duell - Revving up the engine for summer

05.04.2024 - 08.50 | Company update

Duell’s H1/24 showed promising signs while uncertainties still remain ahead of the important H2. With positive adjustments to our estimates, the long-term case is intact.

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Q2 growth came in stronger than we expected

Duell’s Q2 net sales grew 10.2% y/y to EUR 28.2m (EUR 25.5m in Q2/23, EUR 25.9m Evli est.). The better-than-expected growth in Rest of Europe was driven by the TranAm acquisition and organic growth in Central Europe, especially in Germany. While the higher logistics costs had a negative effect on the company’s gross margin as we expected, the higher net sales increased adj. EBITA to EUR 1.4m, above our estimate of EUR 0.8m. The non-adjusted figures were weakened by the completed RI, the fees associated were in line with previously communicated which include fee of EUR 0.9m for the subscription guarantor. All in all, Duell’s cost base developed largely as estimated during Q2. With the RI completed during the quarter and lower NWC, the company’s net debt decreased over 50% y/y to EUR 29.9m.

 

Cautiously optimist for the second half of the fiscal year

Duell’s Q3 (March-May) is typically the company’s strongest quarter in terms of volumes and profitability. We have adjusted our estimates for net sales upwards as we expect growth in Central Europe to continue. In the Nordics, we continue to forecast organic sales decline for Q3 while for Q4 we expect slight growth driven mainly by the softer comparison period. In terms of profitability, we estimate higher logistics costs to continue to affect Duell’s gross margin. On the other hand, the company’s profitability improvement initiatives are expected to bear fruit. As a result of higher net sales growth and further self-help, we have increased our estimates for H2. For FY 2024, we now estimate net sales of EUR 125.7m (prev. EUR 120.9m) and adj. EBITA of EUR 6.8m (EUR 5.9m).

 

Long-term case remains intact

Based on our updated estimates for FY 2024-2025, the company is still priced at conservative multiples of 7-5x adj. EV/EBITA and 11-6x adj. P/E. While the long-term upside is high, uncertainties regarding the end-market demand remain and Duell’s leverage is still relatively elevated. We keep our TP at EUR 0.04 with BUY-rating intact.

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Duell - Self-help story continues in tough market

04.04.2024 - 09.10 | Earnings Flash

Duell’s Q2 net sales came in at EUR 28.2m, above our estimate of EUR 25.9m, driven by the TranAm acquisition. With the higher-than-expected sales and further self-help, adj. EBITA was also higher than estimated at EUR 1.4 (Evli est. EUR 0.8m).

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  • Duell’s Q2 net sales grew 10.2% y/y to EUR 28.2m (EUR 25.5m in Q2/23, EUR 25.9m Evli).
  • Net sales in the Nordics amounted to EUR 15.7m (EUR 16.3m in Q2/23, EUR 15.3m Evli), in Rest of Europe net sales stood at EUR 12.5m (EUR 9.2m in Q2/23, EUR 10.6m Evli).
  • While we expected TranAm to support sales development and increased our estimates in connection with our result preview report, the growth in Rest of Europe was still more rapid than expected.
  • EBITA in Q2 amounted to EUR 1.4m (EUR 1.0m in Q2/23, EUR 0.8m Evli).
  • Additional transport costs due to Red Sea shipping challenges had a negative effect on the gross margin as expected. Duell’s gross margin decreased from 26.5% in Q2/23 to 25.2% in Q2/24. Despite the decrease in gross margin, the margins improved driven by the company’s profitability improvement project.
  • Net debt at the end of Q2 stood at EUR 29.9m, down y/y from EUR 62.8m at the end of Q2/23. The lower net debt was the result of the completed rights issue and lower net working capital.
  • Outlook for FY 2024 (unchanged): Net sales guidance not given due to weakened market predictability. Duell will continue its profitability improvement programme and enhance the net working capital position in financial year 2024. Duell estimates adjusted EBITA to improve from previous year’s level.

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Duell - Opportunity amid uncertainty

02.04.2024 - 08.50 | Preview

Duell publishes its Q2/24 results on Thursday 4th of April. We expect modest revenue growth driven by the TranAm acquisition despite a sluggish Nordic market. Valuation has become attractive, while uncertainties remain high.

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Still some seasonal slowness before the summer season

The company’s net sales beat our estimates in the seasonally slow Q1 as the growth outside Nordics was even more rapid than expected. Duell’s Q2 is still considered as part of the company’s winter season and therefore the volumes are expected to remain lower when compared to the summer season/H2 of the fiscal year. In addition, we see no immediate improvement in the European powersports aftermarket. Consumer confidence across the Nordics and Europe is still at a low level yet continuing to recover from the lows seen during 2022/2023. Furthermore, based on the comments from market participants, continued weaker demand is expected especially for the beginning of 2024.

 

Expecting improved market towards the end of the FY

We still expect organic sales to have declined as the company’s end markets remained slow during Q2. Despite the slow market, we have increased our net sales estimate slightly for the quarter as we expect the TranAm acquisition to continue to deliver inorganic growth for Q2. In addition, we expect lower negative effect from FX. We now estimate net sales of EUR 25.9m with 1.6% y/y growth. We predict an adj. EBITA of EUR 0.8m, considering margin pressure from logistics costs, offset by the company's cost-saving actions. For the rest of the FY 2024, we anticipate organic net sales to start growing during the second half of the FY. While we expect growth, we have adjusted our gross margin estimate for H2 slightly downwards.

 

Valuation has turned attractive, yet uncertainties exist

With our estimates for 24-25E, Duell is priced at 8-6x adj. EV/EBITA and 11-9x adj. P/E. The current pricing presents a notable discount when compared to the European and global peers. Additionally, it presents a significant discount to the value derived from our DCF analysis. We retain our TP at EUR 0.04 while upgrading our rating to BUY (HOLD). While the current pricing presents an opportunity, we note that the company’s debt level is still elevated, and the market remains unpredictable.

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Administer - Work to be done

08.03.2024 - 09.45 | Company update

Administer’s H2 was fairly in line with expectations. 2024 looks to remain on the softer side while the new financial targets suggest expectations for a clear turnaround in profitability in the coming years.

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H2 fairly in line with expectations
Administer reported H2 figures which were fairly in line with our expectations. Revenue grew 27% y/y to EUR 36.6m (Evli EUR 37.1m), clearly boosted by the acquisition of Econia. EBITDA amounted to EUR 1.3m (Evli EUR 1.1m). The guidance for 2024 is on the softer side, with revenue estimated to be EUR 76-81m (growth ~0-7% y/y) and the EBITDA-margin to be 6-9%, with the guidance mid-point below our pre-H2 estimates. Administer’s BoD as expected proposed that no dividend be paid.

Turnaround but pace a worry
We have lowered our 2024 revenue and EBITDA-% estimates slightly to EUR 77.1m (80.4m) and 7.4% (7.9%), with our coming year estimates also lowered due to a perceived slowness in the potential scaling of growth and profitability. The strategy update was more on the “nice to know” side but the coming transition to quarterly reporting and as such increased transparency was welcome. The new financial targets, to be achieved by 2026 (revenue EUR 100m and 15% EBITDA-%), are clearly more reasonable. On our estimates the required growth during 2025-2026 (~14% p.a.) is doable but tough. Recent years’ organic growth track and challenging market situation provides limited support and the strained financial situation (covenants not fulfilled, net debt/EBITDA ~4x) and low share price limit’s inorganic growth potential. In terms of profitability we continue to see good potential to reach over 10% EBITDA-% in the coming years but the H2 result presentation in our view did not provide a clear vision for how to double the margin by 2026 (based on 2024 guidance mid-point). 

BUY with a target price of EUR 2.6 (3.0)
On our revised estimates we lower our TP to EUR 2.6 (3.0) and retain our BUY-rating. Despite near-term challenges, the case remains attractive on valuation levels and turnaround potential. 

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Administer - No major suprises

06.03.2024 - 09.30 | Earnings Flash

Administer’s H2 figures were fairly in line with our expectations. Revenue amounted to EUR 36.6m (Evli EUR 37.1m), with growth of 27.0%. EBITDA amounted to EUR 1.3m (Evli EUR 1.1m). Administer updated its strategy, targeting revenue of EUR 100m and a 15% EBITDA-margin by 2026.

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  • Net sales in H2 amounted to EUR 36.6m (EUR 28.9m in H2/22), fairly in line with our estimates (Evli EUR 37.1m). Net sales in H2 grew 27.0% y/y. Growth was mainly inorganic.
  • EBITDA and EBITA in H2 were EUR 1.3m (H2/22: EUR 2.7m) and EUR 0.3m (H2/22: EUR 2.1m) respectively, fairly in line with our estimates (Evli EUR 1.1m/0.2m). Profitability was burdened by one-off costs relating to the cost savings programme and certain amortizations.
  • Operating profit in H2 amounted to EUR -1.7m (EUR 0.6m in H2/22), in line with our estimates (Evli EUR -1.9m).
  • Administer updated its strategy for 2024-2026, seeking to reach a revenue of EUR 100m (~10% p.a. on average) and an EBITDA-margin of 15% (2023: 3.8%), with the latter much more reasonable compared with the former target of 24% by 2024. The new targets are in our view quite reasonable, under normal circumstances Administer should reasonably be able to generate and EBITDA-margin of >10% and the growth should be achievable with continued M&A activity.
  • Guidance for 2024: Net sales is estimated to be EUR 76-81m and EBITDA-margin to be 6-9%, with our estimates (EUR 80.4m and 7.9%) within the upper half of the range.
  • Dividend proposal: Administer’s BoD proposes that no dividend be paid for FY 2023 (Evli EUR 0.00)

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Scanfil - CMD notes

06.03.2024 - 09.20 | Company update

Scanfil’s organic growth has been impressive in the recent past, and although a breather is likely in the short-term its long-term potential remains solid due to the account base.

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From five segments to three in order to better drive sales

Scanfil made small updates to its financial targets, but in our view the formation of the new Industrial segment (by combining three existing ones) was the biggest news from an operational POV as it clarifies sales focus. The segment still has a relatively attractive organic CAGR potential of 6%, although not quite as high as the 7-8% CAGRs seen for Energy & Cleantech and Medtech & Life Science. Many Scanfil accounts are favorably positioned for growth thanks to various demand drivers, in addition to which trends like supply chain regionalization continue to drive growth.

Main markets to grow at around 6-8% CAGR in FY ’23-28

The new EBIT target of 7-8% was much expected, however we view the 10% long-term CAGR target ambitious (at least on an organic basis) since the EMS business is characterized by account stickiness; it’s not easy to win additional market share, so organic growth mostly stems from the existing accounts’ volumes. Scanfil previously targeted 5-7% organic CAGR, which we viewed to be well in line with many of its accounts’ profiles and growth targets. A CAGR of 10% is likely to require at least some M&A, and while Scanfil’s balance sheet is strong enough to facilitate deals many peers are also performing well. Valuations may not thus in general be very low, however the market is fragmented and so there are bound to be some opportunities where the targets would fit Scanfil’s portfolio and could also be developed further.

We make no estimate changes at this point

Scanfil remains more profitable than a typical peer, however the margin gap has narrowed in recent years as the sector’s performance has improved. Even though Scanfil’s EBIT margin hasn’t increased that much its EBIT has risen to above EUR 60m from around EUR 35-40m a few years ago. EBIT may not rise much above EUR 60m in the short-term but continued growth could still add another EUR 20-30m to it in the next five years or so even with rather modest margin gains. Meanwhile Scanfil remains valued below 9x EV/EBIT, compared to the levels of around 10x for many peers. We retain our EUR 9.0 TP and BUY rating.

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Loihde - Cautiously heading into 2024

04.03.2024 - 09.30 | Company update

Loihde’s Q4 came with no larger P&L surprises. Expectations for 2024 are slightly more conservative than we previously estimated but margin improvement potential remains on the weaker comparison figures.

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Q4 quite in line with expectations
Loihde’s net sales came in line with our expectations, with net sales growing by 3% to EUR 37.3m (Evli: 37.3m). The growth was driven by Security Solutions, up 5% y/y to EUR 26.7m (Evli: 26.8m), while net sales in Digital Development declined by 2% to EUR 10.4m (Evli EUR 10.6m). The adj. EBITDA came in below our expectations, at EUR 3.8m (Evli: EUR 4.4m), largely driven by an EUR 0.4m write-down of receivables. The guidance was in our view arguably on the softer side, with revenue expected to be on par with 2023 or grow and the adjusted EBITDA to improve from 2023. The BoD proposes a dividend of EUR 1.0 per share (Evli EUR 0.15), in our view likely the last exceptionally high dividend compared with financial performance.

Fairly modest expectations for 2024
With the guidance and market situation providing limited signs of growth, along with growth in the cost base in comparable terms due to wage inflation, the expectations for 2024 appear moderate at best. We still expect a notable improvement in profitability due to weaker comparison figures and slight growth (2024e: 2.8%) but our 2024e EBITDA-margin estimate of 7% still lags clearly behind the long-term target of 15% (by 2027). While H1 will likely remain somewhat on the softer side, we assess that with a more likely improvement in the demand situation, as opposed to further degradation, as well as internal strategic work and shift in operating models, growth should be more favourable during H2.  

HOLD with a target price of EUR 11.5 (ex-div)
Although upside potential remains quite considerable on the long-term targets, with the elevated current multiples and assessed improvement pace valuation in our view remains on relatively fair levels. We adjust our TP to EUR 11.5 (ex-div, prev. EUR 12.3) and retain our HOLD-rating.  

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Loihde - Guidance on the softer side

01.03.2024 - 09.20 | Earnings Flash

Loihde’s Q4 results were in line with our estimates on topline figures, with growth of 3% while the adj. EBITDA came in below our estimates at 3.8m (Evli EUR 4.4.). Group revenue is expected to be flat or grow in 2024 and adj. EBITDA to improve.

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  • Group results: Loihde’s net sales came in line with our expectations. Net sales grew by 3% to EUR 37.3m (Evli: 37.3m). The growth as expected came from SeSo. Profitability continued to improve but the adj. EBITDA came in below our expectations, at EUR 3.8m (Evli: EUR 4.4m), reflecting a rather healthy margin of 10.1%. 
  • Security Solutions (SeSo): Net sales came in in line with our expectations and grew by 5% to EUR 26.7m (Evli: 26.8m). Q4 was as typical seasonally stronger, with customers pushing to complete project before the year-end and Loihde performed well in several customer and offering segments. Two important framework agreements were signed towards the end of the year, valued in total at over EUR 10m.
  • Digital Development (DiDe): Net sales declined by 2% to EUR 10.4m and came in roughly in line with our estimates (Evli: EUR 10.6m). The decline was due to continued demand challenges in bespoke software development in particular, stemming from market uncertainty. No significant improvement towards the better is seen in early 2024. The market situation in data and analytics services remains slightly more positive.
  • 2024 guidance: Group revenue is expected to be on par with 2023 or grow (Evli +6.6% y/y). The Group’s adjusted EBITDA is estimated to improve from 2023 (Evli +EUR 3m y/y).
  • Dividend proposal: Loihde’s BoD proposes a dividend of EUR 1.0 per share (Evli EUR 0.15).

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Scanfil - Growth to add earnings in H2

26.02.2024 - 09.25 | Company update

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

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

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

H1 faces stiff comparison figures, but H2 has more potential

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

Earnings remain high and multiples are relatively low

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

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Dovre - Stabilizing results across segments

23.02.2024 - 09.10 | Company update

Dovre Q4 results topped our estimates due to Project Personnel. We expect the segment to soften a bit this year, while Consulting and Renewable Energy have easier time to improve due to new orders and soft comparison periods.

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Project Personnel supported profitability last year

Dovre’s Q4 revenue grew 5.6% y/y to EUR 50.8m, compared to our EUR 45.2m estimate, as Project Personnel continued to grow 27% y/y. The segment also helped Dovre’s EUR 1.5m EBIT above our EUR 1.2m estimate, and its results were high throughout last year. The 4.5% EBIT achieved wasn’t yet exceptionally high as we see a margin of 5% to be a relevant long-term target, however a decrease in demand may soften its EBIT a bit this year. PP has achieved a CAGR of 20% in the past few years; we estimate its revenue to decline by 5% in FY ’24. Meanwhile Renewable Energy remains the segment with uncertain near-term results as the Finnish wind power construction market is still quite challenging.

Consulting and Renewable Energy to gain this year

Suvic has recently signed contracts to build wind and solar farms in Sweden and Finland, respectively, worth ca. EUR 90m over the next two years or so, while Consulting has signed additional public project quality assurance contracts in Norway. We had previously estimated Project Personnel’s FY ’24 EBIT at EUR 4.5m, and we make only small revisions as our new estimate is EUR 4.4m. We estimate Dovre FY ’24 EBIT to be flattish as our estimate remains at EUR 7.3m. For Project Personnel we estimate an EBIT decline of EUR 0.5m, whereas we see upside potential for Consulting as the 10% EBIT margin recorded last year was relatively soft. Renewable Energy has plenty of scope for earnings gains, especially in the long-term, while EBIT should at least stabilize this year due to the volume attributable to the new Swedish and Finnish orders.

Valuation doesn’t demand much earnings growth

Dovre is valued 7x EV/EBIT (excl. 49% of Renewable Energy EBIT) on our FY ’24 estimates, whereas segmental peers are trading around 11-13x now that their multiples have increased in the past few months. The valuation is thus by no means challenging as we estimate flat EBIT at a margin of 3.5%, from which level plenty of upside exists as we estimate Dovre’s long-term potential to be closer to 5%. We retain our EUR 0.65 TP and BUY rating.

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Scanfil - EBIT slightly missed estimates

23.02.2024 - 08.30 | Earnings Flash

Scanfil’s Q4 top line developed flat as expected, while the EUR 13.4m EBIT missed estimates as there were more than EUR 1m in one-off costs. Scanfil’s FY ’24 guidance stands quite well in line with estimates, so estimate changes are likely to be small.

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  • Scanfil Q4 revenue declined by 0.7% y/y to EUR 220.8m, compared to the EUR 219.8m/220.4m Evli/consensus estimates. Growth excluding spot-market purchases was 4.9%.
  • Advanced Consumer Applications landed at EUR 52.5m vs our EUR 44.5m estimate, while Energy & Cleantech was EUR 74.7m vs our EUR 65.6m estimate. Automation & Safety was EUR 44.5m, compared to our EUR 52.9m estimate.
  • EBIT came in at EUR 13.4m vs the EUR 15.7m/14.9m Evli/consensus estimates. Operating margin was 6.1%. Scanfil implemented efficiency improvements, which will generate EUR 1.7m in annual savings; excluding one-off costs for efficiency improvement, customer settlement, spot-market purchases and other material invoicing EBIT margin was 6.7%.
  • Scanfil guides FY ’24 revenue in the range of EUR 820-900m and adjusted EBIT of EUR 57-65m, compared to the respective EUR 909.5m/890.8m and EUR 63.7m/60.6m Evli/consensus estimates.
  • The BoD proposes a dividend per share of EUR 0.23 to be distributed for FY ’23, compared to the EUR 0.23/0.23 Evli/consensus estimates.

Open report

Dovre - Q4 figures topped our estimates

22.02.2024 - 18.30 | Earnings Flash

Dovre’s Q4 results came in above our estimates thanks to Project Personnel, while Consulting and Renewable Energy performed largely as we expected. The performance of Project Personnel means its comparison figures are rather high for the current year, whereas Consulting and Renewable Energy should have more room to improve.

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  • Dovre Q4 revenue increased by 5.6% y/y to EUR 50.8m vs our EUR 45.2m estimate. Project Personnel amounted to EUR 29.3m, compared to our EUR 23.2m estimate, while Consulting was EUR 3.9m vs our EUR 4.2m estimate. Renewable Energy landed at EUR 17.6m, compared to our EUR 17.8m estimate.
  • EBITDA was EUR 1.8m vs our EUR 1.4m estimate, whereas EBIT came in at EUR 1.5m vs our EUR 1.2m estimate. Project Personnel EBIT was EUR 1.1m, compared to our EUR 0.9m estimate, while Consulting amounted to EUR 0.4m vs our EUR 0.4m estimate. Renewable Energy EBIT was EUR 0.2m vs our EUR 0.2m estimate.
  • Dovre will provide its FY ’24 guidance at the latest along with Q1 results as Suvic’s sales cycle for the year is not yet complete. Project Personnel segment could see a decrease in demand following a record year.
  • The BoD proposes a dividend per share of EUR 0.01 to be distributed for FY ’23, compared to our EUR 0.01 estimate. An extra EUR 0.01 is payable by the decision of BoD at the latest on Oct 31, 2024.

Open report

Exel Composites - A lot of room to improve

19.02.2024 - 09.15 | Company update

Exel’s Q4 figures remained very low as account activity is only now bottoming out after a challenging period due to weakening end-market demand and customer destocking.

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Q4 results were poor, but demand appears to have bottomed

Exel’s Q4 revenue fell 29% y/y to EUR 22.1m vs our EUR 26.8m estimate. Wind power continued weak relative to our estimate, while all other customer industries except Transportation still declined by double-digit rates. The declines occurred through all the major geographic regions. The EUR -1.3m adj. EBIT was clearly below our EUR 0.7m estimate, however cash flow remained positive. Exel’s positive FY ‘24 guidance wasn’t any surprise given the very low comparison figures and so the only question remains just how steeply both top line and earnings recover this year. We believe Q1’24 earnings will already gain a bit although revenue is likely to remain rather subdued. In any case Exel is unlikely to see adequate levels of EBIT before H2 unless customer activity picks up faster than expected during the spring months.

New operating model and strategy measures to deliver

January order intake was encouraging, but Q1 is unlikely to be a great quarter as customer activity appears to be only bottoming out. We therefore believe it will take until H2’24 before Exel can achieve a quarterly EBIT of some EUR 1.5m, which would still be a rather modest level in the company’s context. Wind power recovery pace remains a bit uncertain for now, while Transportation grows due to demand attributable to electric busses and trains. Defense has scope to grow, whereas Buildings and infrastructure may be starting to recover (albeit from a low level). Exel starts to break figures according to its new structure from Q1 onwards: the volume-focused Industrial Solutions BU, driven by wind power orders, is to grow faster than the other unit which focuses on tailored solutions in multiple industries.

Multiples reflect some expectations of improvement

Exel is valued 10.5x EV/EBIT on our FY ’24 estimates, which is not a particularly low level. We estimate EUR 5.1m FY ‘24 EBIT, a level still very modest relative to potential. The multiple would decrease to around 6x assuming a quarterly EBIT of around EUR 2m, in other words a normal historical level. Our new TP is EUR 2.2 (2.7) as we retain our HOLD rating.

Open report

Aspo - Demand and performance stabilize

19.02.2024 - 08.55 | Company update

Aspo’s Q4 showed some positive trends while EBIT remained quite low. H1’24 EBIT is only beginning to improve, but ESL has a lot of improvement potential already this year.

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Still rather soft EBIT, yet improvement is to be expected

Aspo Q4 revenue landed at EUR 132m vs the EUR 143m/137m Evli/cons. estimates as ESL’s top line was in line with our estimate while Telko and Leipurin fell short, however all three came in below our estimates in terms of EBIT. ESL’s profitability continued to recover although the EUR 5m EBIT was still low for Q4. Forest and energy industries saw low volumes while weather conditions were challenging, in addition to which labor actions already had an impact. Telko saw relatively stable prices but many customer industries had low demand, while the EBIT of Leipurin was negatively affected by lower prices and inventory write-offs. The EUR 6.8m adj. EBIT thus fell short of the EUR 9.5m/8.2m Evli/cons. estimates.

Demand stabilizing while growth projects proceed

Q1 will be difficult for ESL as winter conditions have been very severe, while Finnish industrial strikes are another challenge. Steel and forest industries are to drive ESL’s volumes this year, yet they start from rather different places as the former has been stable while the latter’s volumes are only now recovering. The green coasters will also begin to contribute this year, however for now they represent only a marginal share of capacity. The Red Sea crisis may have a positive effect on Telko’s prices, which would support EBIT, while it’s likely to help spot market freight rates and further lift Supramax earnings (which are however to be divested some time). Telko is now better positioned for M&A as ESL’s investments have found one source of financing through a minority stake sale.

Valuation not stretched as EBIT should gain also next year

Aspo is valued above 9x EV/EBIT on our FY ’24 estimates, which isn’t a stretched multiple as H1’24 profitability will still be subdued. We estimate ESL’s EBIT to improve by EUR 6m this year, which would by itself be enough to justify the guidance. Meanwhile we estimate Telko’s EBIT to gain by EUR 3m and hence see Aspo’s FY ’24 EBIT at EUR 35.0m. We believe EBIT has more room to gain also next year when H1 should no longer be as soft. We retain our EUR 7.0 TP and BUY rating.

Open report

Exel Composites - Figures remained weak

16.02.2024 - 09.30 | Earnings Flash

Exel’s Q4 results continued to be very low mostly across the board. Cash flow, however, remained on the positive side and Exel can expect improving results this year, although last year sets the comparison figures low.

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  • Exel Q4 revenue declined by 28.8% y/y to EUR 22.1m, compared to our EUR 26.8m estimate. All the major geographic regions declined. Top line grew 7.5% from the previous quarter. Customers in main markets continued their careful management of inventories and new orders.
  • Wind power amounted to EUR 1.7m vs our EUR 4.8m estimate, while Buildings and infrastructure was EUR 6.1m vs our EUR 7.0m estimate. Machinery and electrical landed at EUR 3.8m, compared to our EUR 4.6m estimate. Transportation was the only customer industry to see growth as it increased by 40.3% y/y to EUR 4.7m vs our EUR 2.9m estimate.
  • Adjusted EBIT came in at EUR -1.3m vs our EUR 0.7m estimate. Quarterly cash flow from operating activities was EUR 0.8m as Exel continued to manage working capital and costs.
  • Order intake amounted to EUR 23.6m in Q4 as it decreased by 8.0% y/y. Opening backlog for the year is higher than it was a year ago.
  • Exel guides revenue to increase and adjusted EBIT to increase significantly in FY ’24 compared to the previous year.
  • The BoD proposes no dividend per share to be distributed for FY ’23, compared to the EUR 0.00/0.00 Evli/consensus estimates.

Open report

Alisa Bank - For now a waiting game

16.02.2024 - 09.15 | Company update

Alisa Bank’s H2 results were quite in line with our estimates. All eyes our now on if and when the company is able to strengthen its equity capital to enable growth.

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H2 corresponded quite well to our estimates
Alisa Bank reported results that were quite well in line with our estimates. Total income during H2/23 amounted to EUR 8.3m (Evli EUR 8.2m) and PTP to EUR -0.1m (Evli EUR 0.1m). Net interest income amounted to EUR 7.3m (Evli EUR 7.2m) and net fee and commission income to EUR 0.9m (Evli EUR 1.0m). Total OPEX amounted to EUR 5.7m (Evli EUR 5.7m). and impairment of receivables to EUR -2.8m Evli EUR -2.4m). Alisa Bank expects its total income, should the actions to strengthen the company’s equity capital during H1 be achieved, to increase in 2024 compared with 2023 while the results before one-offs and taxes is expected to be slightly loss-making in H1/2024. 

Awaiting news on strengthening of equity capital
Alisa Bank’s future development remains heavily reliant upon raising additional capital. Management comments suggest relative confidence in this being achieved during H1/2024. This would enable the much needed growth especially in consumer lending. The cost base is currently in quite good shape and in our view more likely to increase to support growth ambitions. The addition of the new savings account products in Germany and Netherlands in late 2023 appear to have been quite successful, with the deposit base having grown to EUR 388m after the reporting period (2023: EUR 269m). With the current loan portfolio level (2023: EUR 168.5m) allowing around break-even earnings, the next step would be to grow the loan portfolio past EUR 200m to start to benefit from the company’s scalability, which could be achievable in 2024 should the company’s capital raising needs be met. 

HOLD (SELL) with a target price of EUR 0.2
With the share price decline since our last update, we upgrade our rating to HOLD and retain our TP of EUR 0.2.  Uncertainty remains high due to dependance upon  strengthening the equity capital.

Open report

Aspo - Still soft, but improving

16.02.2024 - 08.30 | Earnings Flash

Aspo’s Q4 figures came in soft relative to estimates as all three segments missed profitability estimates.

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  • Aspo Q4 revenue from continuing operations amounted to EUR 132.2m vs the EUR 142.9m/137.3m Evli/consensus estimates. Adjusted EBIT was EUR 6.8m, compared to the EUR 9.5m/8.2m Evli/consensus estimates. 
  • ESL Q4 revenue was EUR 49.3m vs the EUR 49.7m/49.4m Evli/consensus estimates, while comparable EBIT landed at EUR 5.0m vs the EUR 6.7m/5.3m Evli/consensus estimates. Especially forest industry activity was low while energy industry shipments were affected by the previous year’s exceptional situation involving security of supply and safety stocking measures. Performance is expected to improve this year. 
  • Telko’s top line came in at EUR 49.0m, compared to the EUR 55.5m/52.7m Evli/consensus estimates, meanwhile EBIT was EUR 2.3m vs the EUR 3.2m/3.0m Evli/consensus estimates. Prices remained relatively stable compared to the previous quarter. Demand is expected to remain slightly soft especially in H1’24. 
  • Leipurin revenue was EUR 33.9m vs the EUR 37.7m/34.0m Evli/consensus estimates. Comparable EBIT was EUR 0.8m, compared to the EUR 1.3m/1.3m Evli/consensus estimates. Profitability was negatively impacted by price adjustments and inventory write-offs. Product mix has improved. 
  • The BoD proposes a maximum dividend per share of EUR 0.47 to be distributed for FY ’23, compared to the EUR 0.47/0.47 Evli/consensus estimates, so that EUR 0.24 is to be distributed in the spring and EUR 0.23 on a later date if aligned with the growth strategy.
  • Aspo guides FY ‘24 comparable EBIT to exceed EUR 30m (EUR 26.5m in FY ’23).

Open report

Solteq - Leaving behind a year to forget

16.02.2024 - 07.30 | Company update

Solteq’s Q4 was as expected weak, earnings improvement in Utilities a positive. We expect improvement across the board in 2024 driven by cost savings measures taken in Utilities.

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A quarter of cleaning up in-house figures
Solteq reported slightly weaker than expected Q4 figures. Net sales amounted to EUR 14.2m (Evli EUR 14.6m), in comparable terms at previous year levels. Net sales in Retail & Commerce were a slight disappointment, showing a minor y/y decline, while Utilities showed slight growth. The operating profit and adj. operating profit amounted to EUR -9.1m/-1.0m respectively (Evli EUR -7.1m/-0.8m), with the difference in the former mostly due to additional write-offs along with those previously communicated. Solteq expects the comparable revenue to grow in 2024 and the operating result to be positive. Solteq’s BoD proposes that no dividend be paid for FY2023 (Evli EUR 0.00).

Expecting improvements across the board
With the cost savings measures implemented in Utilities, the impact of which was partly visible already in Q4 (comparable EBIT + ~EUR 0.6m y/y), Solteq’s profitability is set to improve significantly in 2024, with our EBIT estimate at EUR 2.1m. A key factor for 2024 and Solteq’s investment case lies in Utilies’ ability to capitalize on the favourable market conditions. With the product-related challenges tackled and a key customer delivery nearing completion, we expect new sales to start to pick up during H1 and growth to accelerate during H2. Near-term growth is supported by potential in Finland while longer-term growth needs to be sought abroad. The market conditions remain shaky for Retail & Commerce but we remain optimistic about growth in 2024 given the assumed easing of macroeconomic uncertainties. 

HOLD with a target price of EUR 0.85
Despite expected clear EBIT improvements, earnings should remain weak due to financial expenses. The 2024e P/E as such remains unappealing, but much less so on 2025e should the company get closer to its financial targets. With the turnaround uncertainty we retain our TP of EUR 0.85 and HOLD rating.

Open report

Endomines - Promising signs from Pampalo

16.02.2024 - 07.00 | Company update

H2 2023 net sales and EBIT missed our estimates, yet profitability was better than expected excl. NRIs. Despite the promising signs from the Karelian Gold Line overall, the current pricing remains elevated.

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Pampalo’s profitability was better than expected excl. NRIs

Revenue in H2 amounted to EUR 9.0m, slightly lower than we had expected (EUR 9.7m). Despite production figures published prior, the payability of gold concentrate was lower than we estimated due to the production method change in Pampalo, in addition, some of the produced gold was left to inventory at the end of the FY. EBITDA in H2 was at EUR -1.0 m (-2.9m H2 2022), lower than our estimate of EUR 0.4m. EBITDA included roughly EUR 2.0m negative effect from production method change in mine and preparatory work for Hosko. NRIs ignored, the EBITDA would have been around EUR 1m, which was higher than our estimate. In the Karelian Gold Line, Endomines was able to increase Korvilansuo resources by 307% and Kuittila by 114% in 2023. In 2024, the plan is to expand Kuittila’s mineralization further by 300-400%. Endomines will treat the Muurinsuo-Korvilansuo-Kuittila area as one entity called Southern Gold Line.

 

Production to grow at a slightly slower pace than estimated

Endomines aims to grow its production 15-35% y/y in 2024, in addition, it expects financial result to improve from 2023. The new production outlook is lower than we had estimated. We lower our production estimate to 15 701 ounces (prev. 17 613 ounces). The first half of the year is slower in our estimates as we expect lower production, especially in Q1 as production from Hosko was launched only in February and the production method change was completed in Pampalo. With the new production estimate, our group EBITDA estimate is at EUR 4.6m for FY 2024 (prev. EUR 5.1m).

 

SELL with a TP of EUR 5.6

Our SOTP-based valuation range is EUR 5.6-7.6 per share. SOTP was positively affected by the increase in resources for Southern Gold Line, yet the lower production estimate for 2024E and higher net debt affected the model negatively. We continue to base our TP at the lower end of the range driven by the uncertainties.

Open report

Marimekko - Domestic market presents challenges

16.02.2024 - 06.30 | Company update

Marimekko’s Q4 figures missed our estimates for net sales and adj. EBIT. While the performance was a slight letdown, we expect profitable growth to continue, although at a slightly slower pace as the domestic market presents challenges.

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Lower than estimated domestic sales drove the earnings miss

Marimekko delivered Q4 figures that were lower than estimated for both net sales and EBIT. Net sales grew by 5% to EUR 50.6m in Q4 (52.9/53.6m Evli/cons.). Clear disappointment on the net sales side was domestic wholesale, which missed our estimates by a large margin. On the other hand, APAC kept delivering growth as we had estimated. Adj. EBIT amounted to EUR 8.3m (9.0/8.7m Evli/cons.), reflecting a margin of 16.4% while we had estimated adj. EBIT margin of 17.1%. The lower profitability was largely driven by the volume miss due to operational leverage.

 

Two-sided development of Q4 expected to continue in 2024

 

Marimekko expects its net sales to grow in 2024 while adj. EBIT margin is estimated to be 16-19%. The two main drivers for Marimekko, Finland and APAC developed in different directions during Q4, we estimate this to continue to 2024. In 2024, Marimekko aims to open 10-15 new stores and shop-in-shops, and most of the planned openings will be in Asia. Due to the difficult market environment, net sales in Finland are expected to be approximately at the level of 2023. We previously estimated growth of 1.7% y/y in Finland for 2024, with our updated estimates, we drop our growth estimate to 0.7%. For APAC, we have also dropped our growth estimate slightly yet still estimate healthy growth of 12.3% y/y. After the adjustments, our net sales estimate is now at EUR 181.9m (prev. EUR 188.3m). With slower growth and higher fixed costs, we estimate EUR 33.0m adj. EBIT for 2024 (prev. EUR 35.3m) with a margin of 18.2%.

 

HOLD with a TP of EUR 11.5 (12.0)

Based on our updated estimates for 24-25E, Marimekko is priced at roughly 14-13x EV/EBIT and 19-17x P/E. The pricing is roughly at par compared to our premium and luxury goods peer groups which trade at 14-13x EV/EBIT and 18-17x P/E (avg. between the peer groups).

Open report

Raute - Earnings gain despite uncertainties

15.02.2024 - 19.10 | Company update

Raute’s Q4 profitability didn’t meet our estimates as Wood Processing still lacked volume while development costs were also at an elevated level.

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Wood Processing soft while Services & Analyzers performed

Raute Q4 revenue decreased 1% y/y to EUR 45.2m, vs our EUR 44.0m estimate, as Wood Processing fell 13% y/y due to the lack of Russia, which still contributed during the comparison period’s wind-down. Services and Analyzers meanwhile clearly topped our estimates (the former’s sales were driven by delayed deliveries while the latter had a favorable mix), but development projects elevated costs so that Wood Processing EBITDA declined EUR 1m y/y. The EUR 2.7m comparable EBITDA was thus soft relative to our EUR 3.2m estimate, but there were no material surprises as the trends seen in Q3 (and before that) continued in Q4. Raute’s profitability continues to improve from the EUR 9.3m comparable EBITDA seen last year, however small order demand uncertainty remains an issue while the growth strategy projects and ERP investments still burden earnings albeit not as much as last year.

Some earnings uncertainty due to Wood Processing

We estimate Wood Processing to reach 4% EBITDA margin this year, which shouldn’t be too challenging to achieve although e.g. Finnish industrial strikes may cause some complications, while Services and Analyzers are to continue at double-digit levels. We estimate Raute FY ’24 comparable EBITDA at EUR 13.2m: the 7.4% margin is still quite modest relative to potential as some development costs remain while the uncertain European small order outlook justifies caution with respect to Wood Processing performance. Yet the order backlog supports workload also beyond this year and work continues so that Raute can address e.g. the solid wood product segment (including CLT). The new offering doesn’t require much R&D; Raute mostly has the needed capabilities, although it could add certain elements through M&A.

Valuation hasn’t set the bar very high

Uncertainties limit visibility on earnings gain pace, but the bar isn’t high as Raute is valued 5.5x EV/EBIT on our FY ’24 estimates. Wood Processing has been loss-making for a while due to the lack of volume, but in our view a low-to-mid single-digit margin should be within reach. We retain our EUR 13 TP and BUY rating.

Open report

Endomines - Production guidance lower than expected

15.02.2024 - 13.00 | Earnings Flash

Endomines H2 figures were negatively impacted by the production method change in Pampalo and preparatory work in Hosko. Excluding the effect, profitability was above our estimates. The production guidance for 2024 was weaker than expected.

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  • Revenue in H2 amounted to EUR 9.0m, slightly lower than we had expected.
  • EBITDA in H2 was at EUR -1.0 m (-2.9m H2 2022), lower than our estimate of EUR 0.4m. EBITDA included roughly EUR 2.0m negative effect from production method change in mine and preparatory work for Hosko. Excluding the effect, the EBITDA would have been approximately EUR 1m.
  • EBIT in H1 amounted to EUR -2.2m, lower than our estimate of EUR -0.8m.
  • EBITDA from Pampalo production was at EUR 0.9m, up from EUR 0.4m during the second half of 2022. Excluding the EUR 2m negative effect, Pampalo’s profitability was slightly higher than we anticipated.
  • EBITDA from the company’s other functions (Karelian gold line operations, USA operations and common functions) was at EUR -1.9m (EUR -2.1m Evli est.).
  • Endomines will continue negotiations regarding the company’s US assets in 2024 and the goal is to find a solution as soon as possible.
  • With the new exploration results from Kuittila and Korvilansuo, the company will treat the Muurinsuo-Korvilansuo-Kuittila area as one entity called Southern Gold Line. Endomines was able to increase Korvilansuo resources by 307% and Kuittila by 114% in 2023.
  • 2024 outlook: Gold production will increase by 15-35% from 2023 (roughly 14 700 – 17 300 ounces, our current estimate at 17 600 ounces) and financial result is expected to improve from 2023.

Open report

Alisa Bank - Quite well in line with expectations

15.02.2024 - 09.40 | Earnings Flash

Alisa Bank’s H2 profitability was slightly below our expectations, with PTP at EUR -0.1m (Evli EUR 0.1m). H2 overall was quite well in line with our expectations on income and OPEX.

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  • Total income during H2/23 amounted to EUR 8.3m (Evli EUR 8.2m). Net interest income amounted to EUR 7.3m (Evli EUR 7.2m) and net fee and commission income to EUR 0.9m (Evli EUR 1.0m). 
  • During 2023 the credit base for corporate financing in corporate financing increased by 31% y/y, while the credit base in consumer customers remained at previous year levels. 
  • The loan portfolio (before expected credit losses) at the end of H2 amounted to EUR 172.9m (163.8m) and the deposit base amounted to EUR 268.9m (246.8m). After the reporting period Alisa Bank’s deposit base grew to EUR 388m.
  • The pre-tax profit during H2 amounted to EUR -0.1m (Evli EUR 0.1m). Total OPEX amounted to EUR 5.7m (Evli EUR 5.7m). The main deviation came from the impairment of receivables (EUR -2.8m/-2.4m act./Evli). 
  • Earnings per share amounted to EUR 0.00 compared with our estimate of EUR 0.00.
  • CET1 and the CET1 ratio amounted to EUR 17.7m and 12.0% and total capital ratio to 15.2% 
  • The cost / income ratio amounted to 68%.
  • Outlook for 2024: The bank’s total income, should the actions to strengthen the company’s equity capital during H1 be achieved, is expected to increase in 2024 compared with 2023. The result for H1/2024 before one-offs and taxes is expected to be slightly loss-making.
  • Dividend proposal: Alisa Bank’s BoD proposes that no dividend be paid for FY 2023 (Evli EUR 0.00)

Open report

Raute - Wood Processing dragged EBITDA

15.02.2024 - 09.30 | Earnings Flash

Raute’s Q4 figures were slightly mixed relative to our estimates as Services and Analyzers performed better than we expected while Wood Processing EBITDA declined by EUR 1m due to growth strategy development projects. Raute’s revenue landed above our estimate whereas profitability fell short.

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  • Raute Q4 revenue decreased by 1.1% y/y to EUR 45.2m vs our EUR 44.0m estimate. Wood Processing landed at EUR 29.1m, compared to our EUR 30.8m estimate, while Services was EUR 10.3m vs our EUR 8.9m estimate. Analyzers came in at EUR 5.8m, compared to our EUR 4.3m estimate.
  • Comparable EBITDA amounted to EUR 2.7m vs our EUR 3.2m estimate, while EBIT was EUR 0.7m vs our EUR 1.8m estimate. Wood Processing profitability was slightly below expectations as costs were elevated due to growth strategy development projects. Wood Processing comparable EBITDA declined by EUR 1m y/y while Services improved by EUR 0.8m and Analyzers by EUR 0.2m. Spare parts demand was moderate while there was increased demand for other services.
  • Q4 order intake was EUR 118m, compared to our EUR 123m estimate.
  • Order book was EUR 266m at the end of Q4 (EUR 84m a year ago).
  • Raute guides FY ’24 revenue in the range of EUR 170-195m and comparable EBITDA of EUR 10-14m, which are in line with our estimates.
  • The BoD proposes a dividend per share of EUR 0.10 to be distributed for FY ’23, compared to our EUR 0.20 estimate.

Open report

Solteq - Slight comparable EBIT improvement

15.02.2024 - 09.15 | Earnings Flash

Solteq’s Q4 results were as expected weak and slightly below our estimates. Revenue was at EUR 14.2m (Evli EUR 14.6m) and adj. EBIT at EUR -1.0m (Evli EUR -0.8m). Solteq expects the comparable revenue in 2024 to grow compared with 2023 and the operating profit to be positive.

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  • Net sales in Q4 were EUR 14.2m (EUR 16.9m in Q4/22), slightly below our estimates (Evli EUR 14.6m). Revenue declined 15.6% y/y in Q4. In comparable terms revenue was at previous year levels.
  • The operating profit and adj. operating profit in Q4 amounted to EUR -1.0m/-9.1m respectively (EUR –1.2m/-1.0m in Q4/22), below our estimates (Evli EUR -7.1m/-0.8m). 
  • Solteq’s Q4 was impacted by write-offs of activated product development costs amounting to EUR 7.5m and other charges relating to the change negotiations. The comparable operating result was EUR 0.4m better than the comparison period. 
  • Retail and commerce: revenue in Q4 amounted to EUR 10.5m (Q4/22: EUR 13.3m) vs. Evli EUR 11.0m. Revenue declined by 21.1% driven by divestments but also minor comparable revenue decline. The adj. EBIT was EUR -0.2m (Q4/22: EUR 0.1m) vs. Evli EUR 0.7m. 
  • Utilities: Revenue in Q4 amounted to EUR 3.8m (Q4/22: EUR 3.6m) vs. Evli EUR 3.6m. The adj. EBIT was EUR -0.8m (Q4/22: EUR -1.0m) vs. Evli EUR -1.5m. 
  • Guidance for 2024: Solteq expects the comparable revenue to grow and the operating result to be positive. The comparable revenue was EUR 54.2m in 2023.
  • Dividend proposal: Solteq’s BoD proposes that no dividend be paid for FY 2023 (Evli EUR 0.00).

Open report

Marimekko - Another solid year in the books

15.02.2024 - 09.00 | Earnings Flash

Marimekko’s Q4 net sales and adj. EBIT missed our estimates slightly yet the story continued to develop favorably with strong intl. growth and solid margins.

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  • Group result: driven by strong wholesale development especially in APAC and NA, Q4 net sales grew by 5% to EUR 50.6m (52.9/53.6m Evli/cons.), slightly lower than out estimates. Domestic retail was surprisingly strong with growth of 3% y/y, on the other hand domestic wholesale missed our estimates as the sales declined by 2%. Gross margin came in lower than expected as on the other hand, it was supported by higher licensing income and lower transport cots as expected while higher discounts affected it negatively. Adj. EBIT amounted to EUR 8.3m (9.0/8.7m Evli/cons.), reflecting a margin of 16.4%. Adj. EPS came in at EUR 0.15 (0.18/0.17 Evli/cons.).
  • Finland: topline grew 2% to EUR 30.5m (Evli est. EUR 31.9m) supported by retail sales while wholesale sales decreased 2%.
  • Int’l: growth was strong at 10% y/y yet slightly below our estimate. Growth was supported by wholesale especially in APAC and NA.
  • 24 market outlook: Sales in Finland in 2024 are impacted by the weak general economy and low consumer confidence as well as the development of purchasing power and behavior. Despite the weak market situation, net sales in Finland are expected to be approximately at the level of the previous year. International sales are estimated to grow in 2024. Marimekko aims to open roughly 10-15 new Marimekko stores and shop-in-shops, most of the planned openings will be in Asia (19 openings in 23, of which 17 in Asia).
  • 24 guidance: Net sales to grow and adj. EBIT margin between 16-19%.

Open report

Finnair - Further growth supports earnings

15.02.2024 - 08.45 | Company update

Finnair’s Q4 figures were slightly soft relative to estimates, however there were no big surprises. Capacity and demand continue to grow this year, which still lifts earnings a bit even if there’s no more such clear volume surge to bank on.

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A very slight earnings miss, but no major cost surprises

Finnair’s EUR 727m Q4 revenue didn’t quite meet the EUR 749m/745m Evli/cons. estimates as passenger revenue fell almost EUR 30m short of our estimate due to a relative softness in unit yields. Fuel costs were lower than we estimated while other operating expenses were higher, but the overall cost structure was close to what we expected. The EUR 22.5m adj. EBIT thus landed relatively close to the EUR 26.4m/28.3m Evli/cons. estimates. Finnair continues to pay close attention to load factors and unit yields as passenger volumes have mostly stabilized after the recent surge driven by pent-up demand.

Around 10% capacity growth in line with sector estimates

Demand and supply growth now appear quite even going forward, and Finnair’s capacity guidance for FY ’24 is roughly in line with estimates provided by IATA; all markets continue to contribute growth, but Asia still has most potential. Yields are already high and can be expected to remain stable assuming no major changes in fuel prices. We estimate 7% revenue growth for this year, which is in line with Finnair’s comments and peer group estimates. The EUR 184m adj. EBIT seen last year is already a high benchmark, but in our view profitability has room for marginal improvement this year as growth continues widely while previously achieved cost measures mostly hold. Last year’s quarters do not yet pose exceptionally high comparison figures, so further gains could be seen throughout the year, but the FY ’24 EBIT will still be largely earned over the summer season.

EBIT multiple not too high compared to peers

Finnair is valued a bit below 8x EV/EBIT on our FY ’24 estimates. The multiple is line with peers, whereas we estimate 10bps EBIT margin improvement while the expectations for peers are significantly higher; our estimated EUR 18m y/y EBIT improvement stems from additional revenue growth as we expect costs to remain stable relative to volume. We don’t thus consider Finnair’s valuation demanding. We retain our EUR 0.04 TP and BUY rating.

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Vaisala - W&E remains in the driver’s seat

15.02.2024 - 07.50 | Company update

Vaisala’s Q4 EBIT missed our estimates mainly due to weaker than expected gross margin development. With the strong order book, W&E is expected to continue to perform in 2024 while IM waits for the market to pick up in H2.

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Price competition and lower volumes led to GM pressure

Vaisala’s net sales increased by 4% in Q4 to EUR 147.4m, slightly above our estimates (143.6/142.7m Evli/cons.). W&E’s growth was strong as the net sales grew 10% y/y (14% excl. FX). IM’s sales decline was slightly steeper than expected. On the flip side, the company’s profitability missed our estimates as EBIT amounted to EUR 16.3m (17.5/17.7m Evli/cons.), reflecting a margin of 11.0%. While the negative effect from spot purchases was practically non-existent for both segments as expected, price competition and lower volumes affected the gross margin more than we estimated, especially for IM.

 

W&E’s outlook brighter, while IM navigates tough market

W&E’s orders received grew 35% y/y to EUR 87.7m aided by the EUR 20m airport surface observation system order in Kuwait. IM’s orders declined 8% y/y to EUR 59.4m as the important life science market segment’s orders declined especially strongly. Vaisala estimates that its FY24 net sales will be EUR 530-570m and EBIT 63-78m. We have revised our estimate for FY24 net sales to EUR 553.7m (prev. EUR 551.8m) while for EBIT, we decreased our estimate some 6% to EUR 71.7m (prev. EUR 76.1m). The Q1 is now expected to be soft driven by continued weak IM demand, impact from implementation of ERP system and industrial actions in Finland. Revenue growth is expected to be led by W&E backed by the solid order backlog. On the other hand, we estimate that there will be some softness in the margins due to the expected sales mix for W&E. For IM, we estimate growth to pick up slightly in H2 as the comparison periods get softer, the visibility to turn around in demand remains low.

 

BUY with a TP of EUR 41

Based on our updated estimates for 2024-2025, Vaisala trades at roughly 17-15x adj. EV/EBIT, this represents a discount of 11-15% when compared to the peer group. With slightly higher peer group multiples and long-term case intact, we retain our TP at EUR 41.0 and rating at BUY.

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Vaisala - Solid growth and orders, soft profitability

14.02.2024 - 09.40 | Earnings Flash

Vaisala’s Q4 EBIT missed our estimates at EUR 16.3m (EUR 17.5m Evli). On the other hand, W&E growth and orders were strong.

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  • Q4 group result: Orders received were strong and increased by 14% y/y while order book stood at EUR 172.5m (+12%). Group net sales increased by 4% to EUR 147.4m, slightly above our estimates (143.6/142.7m Evli/cons.). As expected, W&E sales were stronger, yet the growth was still stronger than we expected. Gross margin improved to a strong level of 54.3% (53.5% Q4/22) driven by smaller impact from spot component purchases. EBIT amounted to EUR 16.3m (17.5/17.7m Evli/cons.), reflecting a margin of 11.0%. EBIT improvement was mainly driven by the gross margin development.
  • Industrial measurements (IM): Orders decreased by 8% (FX -8%) y/y and order book declined to EUR 35.2m (-16%). Net sales decreased by 4% y/y to EUR 57.6m (FX 1%), below our estimates (Evli: 58.4m). Net sales decreased very strongly in life science and were at previous year’s level in industrial instruments market segments and liquid measurements market. On the other hand, net sales in power and energy market segment grew very strongly. IM profitability was clear letdown as even though the segment had no additional costs related to component spot purchases (-4.3% Q4/22), the gross margin improved only 1% y/y due to lower volume and price pressure in China.
  • Weather and Environment (W&E): Orders received increased by 35% (FX 37%) y/y and order book was up by 22% y/y. W&E’s net sales grew by 10% (FX 14%) to EUR 89.8m, above our estimates (Evli: 85.2m). Net sales grew in all market segments, very strongly in aviation market segment and strongly in renewable energy market segment. Similarly to IM, improved gross margin due to lower amount of component spot purchases drove EBIT margin to 8.3% (2.2%).
  • Outlook 2024: Net sales EUR 530-570m and EBIT EUR 63-78m

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Finnair - Q4 landed pretty close to estimates

14.02.2024 - 09.30 | Earnings Flash

Finnair’s Q4 results came in much as estimated, although slightly below estimates. Top line growth continued at 5.8% y/y, but the EUR 727m revenue missed estimates by roughly EUR 20m and hence the EUR 22.5m EBIT was also some EUR 5m lower than estimated. Finnair’s capacity will grow more than 10% in FY ’24, however revenue growth will not quite keep up with the pace.

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  • Finnair’s Q4 revenue grew by 5.8% y/y to EUR 727.2m, compared to the EUR 749.4m/744.9m Evli/consensus. Passenger revenue increased 7.0% y/y to EUR 573.1m.
  • Comparable EBIT landed at EUR 22.5m vs the EUR 26.4m/28.3m Evli/consensus estimates.
  • Fuel costs amounted to EUR 222m vs our EUR 249m estimate while staff costs were EUR 124m, compared to our EUR 120m estimate. All other OPEX+D&A were EUR 390m, compared to our EUR 368m estimate.
  • Cost per Available Seat Kilometer was 7.79 eurocents vs our estimate of 7.99 eurocents.
  • Finnair plans to increase its total capacity by more than 10% this year, including the agreed wet leases, Asia and Europe being the focus areas. Finnair expects its revenue to grow somewhat slower than capacity in FY ’24. Finnair provides FY ’24 EBIT guidance in connection with the Q2 report in July.
  • The BoD proposes no dividend to be distributed for FY ’23, as was expected.

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Solteq - Cautious optimism amid uncertainty

13.02.2024 - 09.50 | Preview

Solteq reports Q4 on February 15th. Our key points of interest relate to the market and growth outlook, while Q4 bottom-line are of lesser interest due to the impact of cost savings and write-offs.

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Q4 of lesser interest, focus on near-term outlook
Solteq reports its Q4 results on February 15th. Bottom-line figures are expected to be clearly negative due to write-offs made to product development investments after a change in practice in activating costs. We expect the adj. EBIT to be negative, at EUR -0.8m, as the cost savings from previously taken measures will not yet be clearly visible, along with some operative softness. We expect a net sales decline of -13.6% to EUR 14.6m due to the divestment in 2023, which on our estimates should translate into lower single-digit organic growth. With the weaker financial performance and the company’s outstanding bond (nominal value EUR 23m) maturing in October, we expect no dividends to be paid. On our estimates, we expect the guidance for 2024 to reflect a decline in net sales (organic growth) and positive EBIT. Our operative estimates remain intact ahead of Q4.

Expecting profitability turnaround in 2024
2024 is expected to be a turnaround year for Solteq especially in terms of profitability. With the cost savings measures taken in 2023, the company expects annual savings of EUR 3.8m, the majority of which should show in 2024. The growth outlook is still somewhat shaky, but we remain carefully optimistic for both segments. Growth in Retail & Commerce has been affected by the market weakness and we expect this to continue but ease going into 2024. The outlook for Utilities based on market conditions remains favourable, but with the product-related challenges faced in 2023 and cost savings measures taken, we anticipate a slower start to 2024. 

HOLD with a target price of EUR 0.85
With our coming year estimates intact, we retain our target price of EUR 0.85 and HOLD-rating. Valuation is on the higher side on our 2024e estimates and near-term uncertainty elevated, while the long-term outlook remains favourable. 

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Endomines - Valuation running ahead of things

13.02.2024 - 09.10 | Preview

Endomines will release its H2 2023 figures on February 15th. Our interest in the report lies in Pampalo's profitability, progress and plans for Karelian Gold Line exploration, and update on the US assets. Despite the story developing fairly in line with plans, the valuation has become elevated.

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2023 progress was mostly aligned with the strategy and goals

The company’s strategy focuses on four key areas: Pampalo production, exploration in the Karelian Gold Line, ESG and US assets promoted through a partnership model. In 2023, Pampalo’s production grew according to the company’s plan and resources grew in the Karelian Gold Line. The main negative in 2023 was that the company wasn’t able to conclude the negotiations regarding the US assets. We also anticipate to hear results from the 2023 drilling program for Karelian Gold Line (Kuittila), and more details on the exploration plans and timeline for 2024.

 

Aiming to boost volumes in 2024

With the preliminary production figures published for 2023, the main interest operationally is on the cash cost level of the Pampalo mine. We currently estimate EBITDA of EUR 0.8m for FY 2023 (Pampalo EBITDA EUR 4.9m). The y/y profit improvement is driven mainly by higher volumes and gold spot price, in addition, costs in the US are lower. One of the company’s medium-term goals is to reach annual gold production of 20,000 ounces at Pampalo by the end of 2024. In early February, Endomines released that it has started production in Hosko. Our current estimate for production in 2024E is at 17,613 ounces, of which roughly 15% is from the Hosko deposit. Profitability wise, we estimate Pampalo EBITDA of EUR 8.9m and group EBITDA of EUR 5.1m for 2024E.

 

Valuation turns expensive

With an increase to our long-term gold price estimate and adjustments to our models, we revise our TP to EUR 5.6 (prev. EUR 4.7) while downgrading our rating to SELL (HOLD) as the stock has rallied roughly 40% since our last update. Our SOTP based valuation range is currently EUR 5.6-7.9 per share. We continue to base our TP at the lower end of the range driven by the uncertainties.

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Innofactor - Growth pace uncertainty

09.02.2024 - 09.30 | Company update

Innofactor’s Q4 was in line with expectations. Continued uncertainty reduces visibility going into 2024 but good potential remains. We adjust our TP to EUR 1.5 (1.4), BUY-rating intact.

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Q4 well in line with our expectations
Innofactor reported Q4 results, which were well in line with our estimates. Net sales amounted to EUR 21.9m (Evli EUR 22.1m), growing 6.8% y/y. EBITDA amounted to EUR 2.9m (Evli 2.9m), at a margin of 13.1%. The order backlog stood at EUR 71.6m, down 5.6% y/y, with parts of the backlog transferred to the framework agreement backlog (2023: EUR 29.8m). Innofactor’s BoD proposed a distribution of EUR 0.07 per share (Evli EUR 0.07) and Innofactor expectedly rolled over the previous guidance to FY2024, expecting net sales and EBITDA to grow compared with the previous year.

Some uncertainty but good potential heading into 2024
Innofactor’s Q4 came with no larger surprises. The challenges posed by price competition are expected to continue going into 2024, although the weighted average prices of new agreements have increased slightly y/y. With the uncertainty going into the year we for now estimate slower growth, expecting a 4.4% y/y increase in 2024, with further positive signs relating to new sales needed during H1. Innofactor started reporting key figures for its solutions areas, with Information and Case Management solutions (including the Dynasty solutions) having been the driver for growth and profitability in 2023. With market saturation in Finland, a successful rollout in other Nordic countries could provide notable earnings upside. All in all, we consider Innofactor’s position as rather favourable at the moment despite market headwinds. 

BUY with a target price of EUR 1.5 (1.4)
We retain our BUY-rating with a target price of EUR 1.5 (1.4), valuing Innofactor at ~11x 2024e P/E. Should the caution regarding early 2024 brought by market uncertainty be unwarranted, valuation levels close to that of the peer median would in our view be justified.

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Raute - Backlog underpins earnings growth

09.02.2024 - 09.30 | Preview

Raute reports Q4 on Feb 15. FY ’23 order intake topped EUR 300m, which positions Raute for significant earnings growth at least this year and next despite some uncertainties.

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Wood Processing to grow at high double-digits in FY ’24-25

Raute continued to advance according to its strategy last year while its markets showed somewhat polarized trends. Demand in North America, a market driven by smaller orders, remained strong whereas European smaller orders were missing while there were three larger orders (plus the EUR 50m order to Uruguay): the EUR 29m Latvian, EUR 45m French and EUR 93m Finnish orders will be delivered largely over the course of FY ’24-25, which should lift Wood Processing revenue close to EUR 150m in the coming years and thus Raute’s top line to around EUR 200m. Raute has also achieved EUR 4-5m in annual cost savings, but the relative lack of workload for FY ’23 has likely left Q4 EBITDA margin still at a modest level of 7%; we estimate Q4 adj. EBITDA at EUR 3.2m.

We estimate 17% group revenue CAGR for FY ’24-25

Raute’s FY ‘23 order intake reached well above EUR 300m, and we estimate small orders (besides the four larger ones totaling EUR 217m) to have made EUR 104m of that sum. The small order volume remains a source of uncertainty, but the changes to its outlook are more likely to be positive than negative from here on as the EUR 38m European small order volume we estimate for FY ’23 is unlikely to fall further. Raute’s earnings are bound to increase over the coming years as workload seems more than adequate. The backlog’s mix adds some uncertainty as larger projects may have their challenges while margins are often not as high as for small orders, yet we believe e.g. the EUR 93m Finnish LVL order should earn healthy margins. A pick-up in European small orders could accelerate the earnings curve some more; we estimate 7.5% EBITDA margin for FY ’24, from which Raute would still have a lot of room to improve towards a double-digit margin.

High single-digit EBITDA margin likely achieved rather soon

Raute is valued 6.5x EV/EBIT on our FY ’24 estimates, in our opinion an undemanding level as there’s further earnings gain potential beyond this year. The multiple is below 5x for next year when we estimate Raute to achieve an EBITDA margin of 8.5%. Our new TP is EUR 13 (12) as we retain our BUY rating.

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Etteplan - Back to profitable growth track

09.02.2024 - 08.20 | Company update

The outlook for 2024 looks brighter after the tough 2023. We estimate profitable growth fueled by market recovery in H2, inorganic growth, and continued self-help.

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Technical Communication Solutions improved after soft Q3

Etteplan’s Q4 2023 brought no real surprises on the group level as they were approximately in line with the preliminary figures. Net sales in Q4 came in at EUR 95.2m, revenue grew 4.6% y/y, yet increased 6.5% at comparable FX rates. EBIT in Q4 amounted to EUR 8.2m (EUR 8.4m in Q4/22), at a margin of 8.6%. At segment level, the company’s Technical Communication Solutions was a positive surprise as the measures to improve profitability after the soft Q3 brought EBITA margin to 9.4% (7.7% Q4/22). Software and Embedded was slightly weak due to the high number of sick leaves and larger-than-expected number of holidays affected the segment more than the others.

 

Profitable growth in 2024 aided by acquisitions

We have made some slight adjustments to our estimates for 2024E based on the outlook and comments by the management. We expect organic growth to be slow during the first half of the year as we predict no sudden change in the market environment. On the other hand, we estimate a slight pick-up in organic growth towards the end of the year driven by the expected lower interest rate environment and softer comparison period. In addition to organic growth, we expect growth to be supported by the companies acquired in 2023 and early 2024. In terms of profitability, we estimate EBIT of EUR 30.7m for FY 2024 with EBIT margin of 8.0% (2023: 7.6% excl. NRIs). Engineering Solutions should show a small improvement, while Software and Embedded and Technical Communication Solutions should see a significant y/y improvement due to the corrective actions that Etteplan took for the service areas in 2023.

 

HOLD with a TP at EUR 14.0 (prev. EUR 13.0)

On 2024E EV/EBITDA basis, Etteplan trades at a premium of 6% compared to its peers, and on adj. EV/EBITA and P/E basis, it trades roughly level to peers. In our view, a slight premium is warranted due to its above-average margins and capital efficiency. With the slightly higher estimates and peer multiples for 2024E we raise our TP to EUR 14.0 with rating kept at HOLD.

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Etteplan - Before the dawn the darkest hour

08.02.2024 - 13.40 | Earnings Flash

Etteplan's Q4 results were as expected, following the preliminary numbers released with January's profit warning. Etteplan targets growth and improved profitability in 2024 following a tough 2023.

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  • Net sales in Q4 were EUR 95.2m (EUR 91.0m in Q4/22), revenue increased 4.6% y/y, yet increased 6.5% at comparable FX rates.
  • EBIT in Q4 amounted to EUR 8.2m (EUR 8.4m in Q4/22), at a margin of 8.6%. EBIT was affected by the weakening of the demand situation, the high number of sick leaves at the end of the year and the larger-than-expected number of holidays taken at Christmas time.
  • EPS in Q4 amounted to EUR 0.24 (EUR 0.30 in Q4/22).
  • Net sales in Engineering Solutions in Q4 were EUR 54.6m, EBITA in Q4 amounted to EUR 5.9m.
  • Net sales in Software and Embedded Solutions in Q4 were EUR 22.6m, EBITA amounted to EUR 2.2m.
  • Net sales in Technical Communication Solutions in Q4 were EUR 17.8m, EBITA in Q4 amounted to EUR 1.7m. Etteplan’s measures to improve the segment’s profitability from Q3 clearly paid off as the profitability was already at a moderate level for the segment.
  • Guidance for 2024: Revenue in 2024 is estimated to be EUR 375-415 (2023: 360.0) million, and operating profit (EBIT) in 2024 is estimated to be EUR 28-34 (2023: EUR 25.5 million).
  • Our current estimates for 2024: revenue of EUR 380.5m and EBIT of EUR 30.2m, within the guidance range, yet slightly lower than the guidance middle point.
  • Financial targets for 2023-2024 were changed for international growth and profitability, now Etteplan aims to have at least 55% coming from outside Finland in 2024 (prev. 50%) and EBITA over 10% of revenue (prev. 10% EBITA margin)

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Innofactor - Year-end quite as expected

08.02.2024 - 09.40 | Earnings Flash

Innofactor’s Q4 results were rather good and quite as expected. Net sales were up ~7% y/y to EUR 21.9m (Evli EUR 2.1m). EBITDA was in line with our expectations at EUR 2.9m (Evli EUR 2.9m). Guidance for 2024: Innofactor’s net sales and EBITDA are expected to increase compared with 2023. Dividend proposal EUR 0.07 per share (Evli EUR 0.07)

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  • Net sales in Q4 amounted to EUR 21.9m (EUR 20.5m in Q4/22), in line with our estimates (Evli EUR 22.1m). Net sales in Q4 grew 6.8%, of which all was organic growth. Net sales increased in Finland and in Norway in local currency.
  • EBITDA in Q4 was EUR 2.9m (EUR 2.6m in Q4/22, in line with our estimates (Evli EUR 2.9m), at a margin of 13.1%. 
  • Operating profit in Q4 amounted to EUR 1.9m (EUR 1.8m in Q4/22, slightly below our estimates (Evli EUR 2.1m), at a margin of 8.8%. 
  • EBITDA was positive in Finland in Q4 but negative in the other countries. Price competition in Q4 remained tough, although the weighted average price of new agreements increased slightly y/y.
  • Order backlog at EUR 71.6m, down 5.6% y/y. Part of the order backlog was transferred to the framework agreement backlog, which had a value of EUR 29.8m at the end of 2023 (2022: EUR18.9m)
  • Guidance for 2024): Innofactor’s net sales is expected to increase from 2023 (EUR 80.3m) and EBITDA is expected to increase from 2023 (EUR 9.1m).
  • Innofactor’s BoD proposes a dividend of EUR 0.07 per share (Evli EUR 0.07)

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Finnair - High earnings to be sustained

08.02.2024 - 09.30 | Preview

Finnair reports Q4 on Feb 14. In our view this year’s summer season will again lift earnings as volumes have more room to grow while jet fuel prices have recently declined a bit.

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Summer season to deliver another set of high earnings

Finnair’s Q4 ASK continued to grow 11% y/y, driven by the 22% increase in Asia and where the PLF still improved (although not as much as we expected). Meanwhile European traffic is already a lot closer to a stable level as RPK has grown ca. 5% y/y and the PLF declined a bit. Finnair’s FY ’23 PLF landed at 76.4%, 500-600bps below general sector levels. Finnair’s PLF is likely to stay below the sector average also this year (as it was 100bps lower also in FY ’19), however it should at least remain roughly stable and could even improve a bit as IATA expects the global PLF to gain another 60bps this year. Much again depends on the summer season as the winter months remain seasonally soft, while Q1 this year will also be burdened by the strikes in Finland. We estimate Finnair’s Q4 revenue to have grown 9% y/y and see EBIT at EUR 26m.

Relatively stable development expected from here on

Jet fuel prices declined sharply late last year but have since bounced back a bit. The levels are still some 10% lower than they were in October, and although it’s hard to say where the prices will settle the decrease should nevertheless support this year’s earnings enough to offset the losses seen in Q1. We hence believe Finnair’s FY ’24 EBIT to stay close to EUR 200m. In our view cost inflation will not be a very big issue, rather the major theme continues to be the optimal balance between capacity utilization rates and prices. Yields are unlikely to decline, however they shouldn’t have much potential for additional increases as demand and supply growth appear quite well balanced from now on.

Earnings-based valuation not too demanding

Finnair’s FY ’23 revenue grew roughly in line with peers, and there should be potential for at least further mid-single-digit growth this year. Additional growth positions many airlines for further earnings gains after the pandemic cost-cutting exercises, whereas we estimate only marginal improvement for Finnair. The 7.5x EV/EBIT multiple, on our FY ’24 estimates, is well in line with peers, while in our view a slight premium can be justified. Our EUR 0.04 (0.05) TP values Finnair at 8x EV/EBIT; our new rating is BUY (SELL).

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CapMan - Company update - Sights set on growth

08.02.2024 - 09.15 | Company update

CapMan’s Q4 results were below expectations, with revenue of EUR 14.1m (Evli 15.9m) and EBIT of EUR -4.8m (Evli EUR 5.1m). With on-going fundraising and the acquisition of Dasos, clear growth in AUM is expected in 2024.

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Fair value change driven weaker Q4
CapMan’s Q4 results were below our expectations, with revenue of EUR 14.1m (Evli 15.9m) and EBIT of EUR -4.8m (Evli EUR 5.1m). In terms of EBIT, the Management company and Investment business were clearly below our expectations, with EBIT of EUR 0.5m and EUR -4.5m (Evli EUR 3.5m/1.8m). The difference to the former was largely due to adjustments affecting revenue of around EUR 1m along with reorganization expenses of around EUR 1.5m. The latter saw clearly negative fair value changes due to the development of external funds. The Services business as expected continued on a track of good revenue and profitability development. CapMan’s BoD proposed a distribution of EUR 0.1 per share (Evli EUR 0.09). 

Expectations for solid AUM growth in 2024
After the essentially flat AUM development in 2023, the current fundraising outlook for 2024 is a more welcome one. With new funds such as NRE IV (target EUR 750m) and Growth III (Evli est. >100m) and on-going fundraising in for instance Social Real Estate and Infra II, we expect double-digit gross AUM growth which along with Dasos, not yet in our estimates, could well push AUM to around EUR 6bn in 2024. Although shadowed by market uncertainty, we still expect profitability improvement across the board, mainly from investment returns and carried interest towards the latter half of the year, which were weak in 2023. We have, however, slightly dimmed expectations for the aforementioned due to the market conditions and our 2024 EBIT estimate is down to EUR 28.9m (EUR 37.3m).

BUY with a target price of EUR 2.2 (2.4)
On our lowered earnings estimates we lower our TP to EUR 2.2 (2.4). Valuation remains slightly higher on our 2024 estimates (P/E ~14x), but with the estimated earnings potential in coming years (2025e P/E ~9x) the case remains attractive. 

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Marimekko - Expecting a solid finish to the year

08.02.2024 - 08.50 | Preview

Marimekko reports its Q4 results on 15th of February. We anticipate that higher licensing revenue and increased sales from both domestic and global wholesale have sustained profitable growth.

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Wholesale drives volumes, licensing supports margins

Marimekko executed its strategy according to the plan during Q3 as the company’s growth was strong internationally driven by strong wholesale sales especially in APAC, NA and Scandinavia. With the higher volumes and improved gross margin, the company’s adj. EBIT came in at EUR 13.1m, above our estimate of EUR 12.6m. We have made only cosmetic changes to our estimates ahead of Q4/23 report. We estimate net sales of EUR 52.9m for Q4/23 (EUR 48.4m Q4/22). For Finland, we expect retail to continue to decline while wholesale volumes are supported by the non-recurring promotional deliveries. Our estimates are similar for other Western markets, although we also expect retail growth for North America and EMEA. For APAC, we expect continued growth driven by the loose franchise store openings. In terms of profitability, we estimate EBIT of EUR 9.0m (Q4/22 EUR 6.9m) with a margin of 17.1% (14.3%) driven by increased volumes, higher licensing sales and lower logistics costs.

 

Outlook of key interest as domestic market remains weak

In addition to Q4 figures, our interest lies on the outlook for 2024. For the Asian market, our main interest is on the number of new stores expected to be opened in 2024. The domestic market appears rather weak still as Finnish consumer confidence remained low during Q4 2023 as spending and intentions to make large purchases were low. In addition, data from domestic Christmas sales for fashion products was weak. On a positive note, consumer confidence improved slightly in January.

 

Pricing leans towards the higher end of the valuation range

Based on our estimates for 23-24E, Marimekko is priced at roughly 16-15x EV/EBIT and 22-19x P/E. We base our valuation between the company’s premium and luxury good peer groups which trade at 23-24E avg. EV/EBIT of 15-13x and avg. P/E of 19-18x. While still fair, the valuation is starting to look elevated. We retain our rating at HOLD with a TP of EUR 12.0 (EUR 11.0).

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Suominen - Patient earnings recovery

07.02.2024 - 09.30 | Company update

Suominen’s earnings recovery continues, but the pace seems to be still somewhat slower than we previously estimated.

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Earnings trend up, but from a low base and not very fast

Suominen’s EUR 114.9m Q4 revenue was above the EUR 112.0m/112.0m Evli/cons. estimates as Europe declined less than expected. Volumes continued to recover after and amid a still challenging environment when supply has remained plentiful relative to demand. European volume outlook has improved a bit while the situation is still more favorable in the US, however even there the market and competitive situation is not actually providing tailwinds. Suominen can’t count on the market lifting its performance but needs to focus on commercial and operational excellence measures going forward. Gross margin showed some further improvement q/q, but at 7.3% stayed soft relative to our 9.0% estimate and hence the EUR 5.3m EBITDA also missed the EUR 7.7m/7.0m Evli/cons. estimates.

We make some further earnings estimate cuts for the year

Volumes should continue to trend upwards in H1’24 while sales margins have more room to improve, albeit somewhat marginally in our view, and together the two factors will support further recovery in gross margins. We thus expect these gradual developments to push Suominen’s gross margin around 10% by H2’24. General macro trends may not help Suominen this year, however neither should external events cause too much trouble as logistics are quite robust to e.g. the Red Sea crisis due to a localized supply base. Suominen’s earnings recovery continues, but the comparison period is low especially for H1 while it’s still unclear how steep the curve might be over the course of this year. We trim our profitability estimates for FY ’24 by another EUR 4m. We estimate the earnings gain pace to be roughly EUR 1-2m over each quarter in FY ’24.

Valuation not yet too high, yet requires some patience

Suominen is valued 12x EV/EBIT on our FY ’24 estimates, which in our view lands at the upper end of the neutral range in the light of the current cycle position. The EUR 36m EBITDA we estimate for the year leaves further upside potential and thus valuation isn’t yet too high considering potential in the longer-term perspective. Our TP is EUR 2.5 (2.7) as we retain our HOLD rating.

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CapMan - EBIT weakness driven by FV changes

07.02.2024 - 09.15 | Earnings Flash

CapMan's net sales in Q4 amounted to EUR 14.1m, below our estimates and below consensus (EUR 15.9m/18.7m Evli/cons.). EBIT also below expectations, at EUR -4.8m (EUR 5.1m/7.3m Evli/cons.). Dividend proposal: CapMan proposes a dividend of EUR 0.10 per share (EUR 0.09/0.09 Evli/Cons.).

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  • Revenue in Q4 was EUR 14.1m (EUR 19.7m in Q4/22), below our estimates and consensus estimates (EUR 15.9m/18.7m Evli/Cons.). Growth in Q4 amounted to -29% y/y.
  • Operating profit in Q4 amounted to EUR -4.8m (EUR 7.5m in Q4/22), below our estimates and consensus estimates (EUR 5.1m/7.3m Evli/cons.
  • EPS in Q4 amounted to EUR -0.04 (EUR 0.03 in Q4/22), below our estimates and consensus estimates (EUR 0.02/0.03 Evli/cons.).
  • Revenue in Management Company business in Q4 was EUR 11.0m vs. EUR 12.7m Evli. Operating profit in Q4 amounted to EUR 0.5m vs. EUR 3.5m Evli. 
  • Revenue in Investment business in Q4 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q4 amounted to EUR -4.5m vs. EUR -0.4m Evli. 
  • Revenue in Services business in Q4 was EUR 2.8m vs. EUR 2.9m Evli. Operating profit in Q4 amounted to EUR 1.6m vs. EUR 1.7m Evli. 
  • Dividend proposal: CapMan proposes a dividend of EUR 0.10 per share (EUR 0.09/0.09 Evli/Cons.).
  • Capital under management by the end of Q4 was EUR 5.0bn (Q4/22: EUR 5.04bn). Real estate funds: EUR 2.93bn, private equity & credit funds: EUR 1.02bn, infra funds: EUR 0.56bn, and other funds: EUR 0.49bn.
  • Guidance for 2024: CapMan expects assets under management and fee profit to grow in 2024 (excl. possible IAC).

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Vaisala - Decent quarter expected in a soft market

07.02.2024 - 08.50 | Preview

Vaisala will report Q4 earnings on February 14th. We expect solid performance in W&E while IM continues to face challenges due to weak demand in some key verticals.

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W&E driving growth and profitability, for now

Vaisala’s net sales missed our estimates slightly for Q3 while the margins were stronger than we anticipated. The margins were supported by the company’s OPEX discipline and reduced spot component purchases. The market situation has stayed relatively unchanged from Q3 as IM faces subdued demand driven by weak industrial activity globally in Q4. With slight negative adjustment to our net sales estimate for IM, we estimate revenue of EUR 58.4m for Q4/23, down 3% y/y. For W&E, we keep our net sales estimate for Q4/23 at EUR 85.2m resulting in group wide net sales of EUR 143.6m for Q4 (prev. EUR 145.1m) and for FY 2023 EUR 536.6m (prev. EUR 538.1m). We estimate EBIT of EUR 17.5m with a margin of 12.2% for Q4 and EUR 67.9m for FY 2023. The margin improvement is mainly driven by improved gross margin.

 

Market remains challenging for IM

In addition to Q4 figures, our interest lies in the comments and outlook for 2024. In the Q3 report, the company commented that markets for high-end industrial instruments and life science have somewhat declined and Vaisala doesn’t expect recovery in Q4. The Eurozone industrial confidence has not improved during Q4/23 or start of 2024, on the other hand, the Chinese industrial production showed some signs of improvement during Q4. For 2024E, we make slight changes to our estimates as we expect continued growth, albeit at a slower pace driven by W&E as we expect softness in IM volumes to continue during H1. The FX headwind is estimated to decrease as the year progresses. Profitability wise, we estimate slight improvement driven by cost discipline and no further negative effects from spot purchases expected in 2024.

 

BUY with a TP of EUR 41

Vaisala trades at roughly 17-15x adj. EV/EBIT on our 23-24E estimates. Based on 23-24E adj. EV/EBIT, the current pricing represents a discount of roughly 10-15% when compared to our peer group. Additionally, Vaisala trades at a discount to its historic multiple levels and value derived from our DCF. We retain our rating at BUY yet increase our TP to EUR 41 (prev. EUR 37).

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Suominen - Still quite soft even if improving

06.02.2024 - 10.00 | Earnings Flash

Suominen’s Q4 was expected to show some further recovery in earnings, but its pace still turned out to be quite slow as revenue landed a bit above estimates while the EUR 5.3m EBITDA missed estimates by some EUR 2m. Suominen’s earnings will continue to improve this year, however the comparison figures are not challenging.

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  • Suominen’s Q4 revenue fell by 14% y/y to EUR 114.9m vs the EUR 112.0m/112.0m Evli/consensus estimates. Americas amounted to EUR 72.3m, compared to our EUR 73.0m estimate, while Europe was EUR 42.6m vs our EUR 39.0m estimate. Sales volumes increased slightly relative to the comparison period, while sales prices decreased clearly due to the lower raw material prices. Currencies had a negative sales impact of EUR 3.5m.
  • Gross profit landed at EUR 8.4m, compared to our EUR 10.1m estimate. Gross margin was therefore 7.4% vs our 9.0% estimate. Actions to improve operational efficiency in plants continue.
  • Comparable EBITDA came in at EUR 5.3m vs the EUR 7.7m/7.0m Evli/consensus estimates. Comparable EBIT was EUR 0.7m, compared to the EUR 2.7m/2.4m Evli/consensus estimates. Sales margins improved y/y.
  • Suominen guides improving comparable EBITDA for FY ’24 (EUR 15.8m in FY ’23). Suominen sees some positive signals from the market and customers.
  • The BoD proposes a dividend per share of EUR 0.10 to be distributed for FY ’23, compared to the EUR 0.10/0.08 Evli/consensus estimates.

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Consti - Market presents some challenges

05.02.2024 - 08.30 | Company update

Consti’s Q4 figures missed our estimates mainly due to lower volumes than expected. The company expects EBIT of EUR 9-12m for 2024, the range is rather conservative in our view and reflects the low visibility to market development.

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Our volume estimates were too high for Q4

Net sales in Q4 were EUR 86.1m (EUR 93.3m in Q4/22), below our estimates (EUR 96.1m). Sales declined 7.7% y/y. We expected growth to slow down from the high levels of Q3 while still growing as Q4 has typically been the strongest quarter revenue-wise. Our estimates proved to be way too optimistic as especially Corporations business area saw significantly higher decline in revenue than we estimated. This was partly explained by the project profile as some of the projects were front heavy and recurred more revenue in Q3 than during Q4. With the volume miss, EBIT amounted to EUR 3.9m (EUR 4.8m in Q4/22), below our estimates (EUR 4.8m) at a margin of 4.5% (Q4/22 5.2%).

 

Guidance range seems rather conservative

Consti estimates that its operating result for 2024 will be in the range of EUR 9–12 million. Our previous estimate for 2024 EBIT was EUR 13.3m as we expected net sales to grow 3.3% y/y to EUR 342m. We update our 2024 net sales estimate to EUR 317.5m, with a revenue decline of 1% y/y. With the lower net sales, our estimate for 2024 EBIT is at EUR 10.8m with a margin of 3.4%. The majority of Consti’s work for 2024 is secured by the strong backlog yet positive surprises in net sales during the year could result in positive adjustments to the guidance range. On the other hand, we see it quite unlikely that the lower end would be missed without particular problems in single projects or notably declined project sales within the financial year.

 

Valuation still attractive despite a minor bump in the road

Based on our estimates for 2024E Consti is priced at 8x EV/EBIT and 11x P/E, with a roughly 5-20% discount to Nordic construction and building technology peers. Even with the guidance range bottom of EUR 9m of EBIT, the EV/EBIT would set to roughly 9x which still presents a discount to the peers and would be roughly in line with the historic multiple levels. We retain our TP at EUR 13.0 with rating at BUY.

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Detection Technology - Growth to drive margin expansion

02.02.2024 - 09.30 | Company update

DT’s Q4 results topped estimates as costs remained under control while SBU continued to drive growth. MBU outlook is still challenging in the short-term, but valuation isn’t too demanding assuming MBU returns to growth later in FY ‘24.

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Earnings beat estimates, Chinese MBU market remains soft

DT’s Q4 revenue was up 11% y/y to EUR 31.3m vs the EUR 30.4m/30.6m Evli/cons. estimates, driven by SBU while the Americas and APAC regions both grew. Americas grew 57% y/y as aviation demand continued to recover, and India was able to offset the softness in China. All three units gained and sales mix was more favorable y/y. The EUR 4.6m EBITA topped our EUR 4.2m estimate as staff costs were lower than estimated. DT expects only stable H1 revenue as Chinese markets remain challenging; MBU is to decline whereas SBU and IBU should grow at double-digits.

MBU shouldn’t find it too hard to return to some 5% CAGR

Destocking still impacted IBU, but the unit’s organic outlook has stabilized whereas the Haobo (DTS) acquisition supports growth within TFT flat panel detectors. DTS will also require capex, which should increase to around EUR 4-5m this year. Fixed costs are to remain roughly flat in FY ’24 while gross margin improves. DT has also been able to get its net working capital position under control and hence growth from here on supports cash flow. H1 growth is likely to remain quite modest at low single-digits as the MBU market in China continues to drag, but SBU and IBU are positioned to post double-digit growth in H1 as well as H2. Aviation demand will still be the major growth driver throughout this year, whereas H2 should again see double-digit growth as the Chinese MBU market stabilizes. This would already lift DT to perform in line with its 15% profitability target. Valuation isn’t therefore very challenging so long as MBU returns to around 5% annual growth.

14x EV/EBIT not too demanding as 5-10% CAGR resumes

We trim our growth estimate for the year, while our relative profitability estimates increase a bit. We still estimate EUR 6m EBITA improvement for FY ’24; valuation has gained to 14x EV/EBIT on our FY ’24 estimates, which we don’t yet view too demanding as it continues to represent a discount to peers while there’s additional upside potential to DT’s FY ‘25 earnings due to the MBU business. Our new TP is EUR 17 (16) as we retain our BUY rating.

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Consti - Weaker finish to the year than expected 

02.02.2024 - 08.30 | Earnings Flash

Consti's net sales in Q4 amounted to EUR 86.1m, below our estimates (Evli est. EUR 96.1m.), with decline of 7.7% y/y. EBIT amounted to EUR 3.9m, also weaker than our estimates (Evli est. EUR 4.8m).

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  • Net sales in Q4 were EUR 86.1m (EUR 93.3m in Q4/22), below our estimates (EUR 96.1m). Sales declined 7.7% y/y.
  • Public Sector was the only business area that grew in Q4, supported by ongoing school projects. Low order intake in the third quarter affected sales more than we had estimated.
  • Operating profit in Q4 amounted to EUR 3.9m (EUR 4.8m in Q4/22), below our estimates (EUR 4.8m) at a margin of 4.5% (5.2%). The EBIT miss is mostly related to lower-than-expected volumes.
  • EPS in Q4 amounted to EUR 0.37 (EUR 0.49 in Q4/22), also below our estimates (EUR 0.46)
  • The order backlog at the end of Q4 was EUR 270.0m (EUR 246.7m in Q4/22), up by 9.5% y/y. Order intake was EUR 91.6m in Q4 (Q4/22: EUR 109.1m).
  • Free cash flow amounted to EUR 2.8m (Q4/22: EUR 10.4m).
  • Guidance for 2024: Operating result for 2024 will be in the range of EUR 9–12 million, Evli current est. at EUR 13.3m
  • Consti updated its strategy for 2024-2027. The updated strategy is based on achieving growth in construction and building technology by responding to the demand created by the ageing building stock, urbanisation, and climate change.
  • By the end of the strategy period, the aim is to have total net sales of roughly EUR 400m with an operating margin of 5%, EBIT amounting to EUR 20m. We will comment more on the updated strategy in our company update.

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SRV - Waiting for residential volumes to pick up

02.02.2024 - 08.00 | Company update

SRV’s current low risk backlog will support it through the tougher market with hopes for higher margins on hold until the housing construction volumes pick up.

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Sales and operative EBIT missed, backlog kept growing

Revenue in Q4 was EUR 181.8m (EUR 181.2m in Q4/22), below our estimate of EUR 195.6m, with 0.3% y/y growth. With the lower-than-expected volumes, operative operating profit in Q4 amounted to EUR 2.4m, also below our estimate of EUR 5.6m. For FY 2024, SRV expects revenue to grow compared to 2023 (EUR 610.0m 2023) and operative EBIT to improve on 2023 (EUR 1.1m 2023). The company’s order backlog grew for the fifth consecutive quarter to EUR 1049m (EUR 839m Q4/22) driven by business construction backlog growth. As expected, the BoD proposes no dividend to be paid for the FY 2023.

 

Business construction will remain the main driver in 2024

The backlog is extremely heavily tilted towards business construction as it comprises roughly 90% of the current backlog. With no developer contracting start-ups during 2023 and none under construction, we expect no completions for 2024. While we estimate some sales of the current unsold finished developer contracted units, larger sales could provide a positive surprise to our estimates. In addition to developer contracting, the company has only a small amount of residential contracting and investor projects. We lower our estimate for 2024E net sales from EUR 714.8m to EUR 698.5m, as we continue to expect revenue growth from business construction area while housing construction is estimated to decline further. With the low margin yet low risk business construction backlog, we now estimate operative EBIT of EUR 14.6m (prev. EUR 18.1m) for FY 2024 with an operative EBIT margin of 2.1%.

 

HOLD with a TP of EUR 4.1

With our updated estimates for 2024E, SRV is priced at roughly 12.9x P/E and 14.6x EV/EBIT, with a slight premium when compared to the Nordic construction peers. The multiples for 2025E are already at a low level as we estimate a minor pick up in housing construction and therefore margins. Despite the long-term potential, we consider SRV as fairly valued especially given the low visibility into 2025E.

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SRV - Profitability remained modest

01.02.2024 - 09.30 | Earnings Flash

SRV's net sales in Q4 amounted to EUR 181.8m, below our estimate of EUR 195.6m. Driven by lower volumes, the operative EBIT was also lower than our estimate.

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  • Revenue in Q4 was EUR 181.8m (EUR 181.2m in Q4/22), below our estimate of EUR 195.6m. Revenue grew 0.3% y/y.
  • The operative operating profit in Q4 amounted to EUR 2.4m, also below our estimate of EUR 5.6m.
  • SRV’s signed new agreements worth EUR 253.1m (EUR 287.2m in Q4/22).
  • The order backlog in Q4 was EUR 1048.6m (EUR 838.8m in Q4/22), up by 25% y/y.
  • Business construction revenue in Q4 was EUR 153.1m, (EUR 180.2m Evli estimate) up 36.3% y/y. The large projects such as Laakso Joint Hospital and Metsä Wood’s Kerto timber mill supported volumes yet not as strongly as we expected.
  • Housing construction revenue in Q4 was EUR 28.7m (EUR 15.0m. Evli estimate). SRV recognized only 4 residential units as income which was expected. Revenue from development projects exceeded our estimates.
  • Despite the weaker than expected revenue and profitability, the company’s improving backlog was a clear positive and will serve as a catalyst for growth in the forthcoming quarters and years.
  • SRV outlook 2024: Full-year consolidated revenue for 2024 is expected to grow compared to 2023 (revenue in 2023: EUR 610.0 million). Operative operating profit is expected to improve on 2023 (operative operating profit in 2023: EUR 1.1 million).
  • Revenue is expected to consist of low-margin yet low-risk cooperative contracting and, to a lesser extent, of development projects sold to investors and housing construction contracting.

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Detection Technology - Results were better than estimated

01.02.2024 - 09.30 | Earnings Flash

DT’s Q4 results were somewhat better than estimated. All three units grew, while fixed costs decreased, and the EUR 4.6m EBITA figure came in above our EUR 4.2m estimate.

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  • DT Q4 revenue grew by 10.9% y/y to EUR 31.3m vs the EUR 30.4m/30.6m Evli/consensus estimates. Adjusted EBITA amounted to EUR 4.6m, compared to our EUR 4.2m estimate. EBIT was EUR 4.3m vs the EUR 3.7m/3.5m Evli/consensus estimates. Fixed costs decreased due to the measures carried out in Q3, while sales growth supported profitability.
  • Medical (MBU) revenue was up by 3.6% y/y to EUR 13.1m, compared to our EUR 13.3m estimate. The Chinese government’s anti-corruption campaign caused demand softness in medical CT applications, however the closing of the Chinese public administration’s annual budgets helped sales to increase.
  • Security (SBU) grew by 21.1% y/y to EUR 13.2m vs our EUR 12.4m estimate. The Chinese market remained challenging, but especially Americas and India drove higher demand within other geographies (strong increase in aviation demand as well as in CT and line scan applications).
  • Industrial (IBU) revenue increased by 7.1% y/y to EUR 5.0m vs our EUR 4.8m estimate. Growth was driven by TFT flat panel detector sales.
  • DT expects Q1 and H1 revenue to remain stable y/y. MBU sales will decrease, while SBU and IBU are to see double-digit growth over the course of H1. In our view DT could achieve roughly 5% y/y growth in H1.
  • The BoD proposes a dividend per share of EUR 0.23 to be distributed for FY ’23, compared to the EUR 0.19/0.18 Evli/consensus estimates.

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Suominen - Higher volumes to lift earnings

31.01.2024 - 09.30 | Preview

Suominen reports Q4 results on Feb 6. Earnings are to continue their recovery, but the gradient is driven by US demand and its improvement pace remains crucial.

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Sales margins have improved, higher volumes need to follow

Suominen’s sales margins improved in Q3, even though volumes stayed soft, as raw materials prices slid. The conditions have been favorable for sales margins as nonwovens prices don’t decline as fast as raw materials, however Suominen’s pricing cycle may have reached another inflection point as both wood and oil-based raw materials prices saw modest gains in Q4 (we estimate Suominen’s raw materials prices to have trended up less than 5% q/q in Q4). We make only small estimate revisions before the report; we estimate EUR 112m in Q4 revenue as European volumes are likely to have remained soft, whereas Americas should show somewhat more encouraging development. We estimate Q4 EBITDA at EUR 7.7m, in other words further improvement from the recent low levels but still quite modest in the long-term context.

At least some further EBITDA gains to be seen this year

Assuming stabilizing price trends going forward, Suominen’s raw materials prices should settle around the average levels seen in FY ’23. Further sales margins gains are now harder to achieve, while on the other hand the apparent bottom in raw materials prices signals improving demand. We continue to expect recovery in Suominen’s gross margin towards the 10% level, the achievement of which would require more US volumes. The demand situation in the US continues to be of vital interest; there should be at least some additional gradual improvement in demand as recent high inventories have already been declining. Suominen should guide at least some increase in FY ’24 EBITDA as Q4 figures are likely to have remained moderate enough so that further gains aren’t too challenging to achieve. FY ’23 EBITDA is likely to have remained below EUR 20m; in our view FY ’24 EBITDA is set to improve above EUR 35m, assuming the demand recovery materializes.

Valuation still looks quite neutral amid earnings recovery

Suominen is valued 9x EV/EBIT on our FY ’24 estimates, a level we view neutral as our earnings estimates are in line with historical averages. Earnings will recover from the low levels, but a lot depends on the US. We retain our EUR 2.7 TP and HOLD rating.

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SRV - Focus is on the outlook

30.01.2024 - 08.30 | Preview

SRV will release its Q4 results on Feb 1; we expect revenue to turn to growth with ongoing business construction projects supporting the volumes. Our focus lies on the order backlog development and FY 2024 outlook.

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Q3 was encouraging, CMD provided color on revised strategy

SRV delivered encouraging Q3 results considering the current market conditions. With the operative EBIT of EUR 4.6m for Q3, SRV’s YTD operative EBIT is at EUR -1.3m ahead of the Q4 release. The company’s guidance remained unchanged as the company expects the operative EBIT to be positive for FY 2023. SRV updated its strategy in November's CMD, aiming for an operative EBIT of minimum EUR 50m by 2027. Achieving this is feasible, but our long-term forecasts fall short of this goal, which is highly reliant on market conditions.

 

Slight estimate adjustments for Q4/23 and FY 2024

We have revised our growth estimates for Q4/23 and FY 2024 slightly. Our updated net sales estimate for Q4 2023 stands at EUR 195.6m (prev. EUR 203.3m), with the lower net sales and expected continued cost inflation, our estimate for Q4/23 operative EBIT is at EUR 5.6m (prev. EUR 6.5m). We still expect that the large business construction projects started during Q3 will contribute to revenue growth during Q4 (estimating 7.8% y/y growth for Q4/23). For housing construction, our estimates remain at a conservative level. We also revise our 2024E net sales estimate to EUR 714.8m (prev. EUR 749.8m) as we expect that the business construction revenue growth will continue in 2024 supported by the current backlog, yet at a slightly slower pace than previously expected. We now expect EBIT of EUR 18.1m for 2024E (prev. EUR 18.7m), with the negative effect of lower net sales somewhat offset by the ongoing change negotiations.

 

HOLD (BUY) at a TP of EUR 4.1

We currently estimate revenue growth for 2024E, yet profitability is expected to remain at a relatively low level driven by the project mix. After a nearly 20% share price rally since our rating upgrade, we see that the largest medium-term upside has been reduced. We consider the company's current pricing fair at roughly 11x P/E and EV/EBIT on our 2024E forecasts. We retain our TP at EUR 4.1 yet adjust our rating to HOLD (BUY).

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Detection Technology - More revenue and earnings growth

26.01.2024 - 09.35 | Preview

DT reports Q4 on Feb 1. MBU may not grow much this year, yet organic SBU-driven recovery and recent measures are to underpin earnings growth this year as well as next.

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SBU growth and cost measures continue to lift earnings

DT’s Q3 top line declined 10% y/y as MBU faced headwinds due to a high comparison period and Chinese anticorruption campaign, yet profitability already improved thanks to the cost reduction measures. Meanwhile SBU volumes continued to recover, driven by the aviation market, and we estimate the segment’s growth to extend at similar double-digit rates (excluding China, where volumes should remain quite flat) going forward as CT systems are delivered to airports in many countries. We make no changes to our Q4 estimates; we estimate 8% y/y growth, mostly driven by SBU. We expect adj. EBITA to have further improved to EUR 4.2m.

Performance improves despite challenging Chinese markets

SBU should drive growth also this year (there’s growth, besides aviation, in urban applications) whereas MBU and IBU volumes can be expected to stabilize in organic terms after recent softness, although the Chinese MBU market remains challenging in the short-term as prices are likely to decline by around 10%. IBU’s organic growth may also still be quite soft due to e.g. the food industry, but industrial outlook should soften no more and the Haobo acquisition could help to drive rather strong revenue growth for the segment. We therefore expect SBU and IBU to show significant relative growth figures this year, while MBU may stay roughly flat. We estimate DT to grow around 10% this year, and the improved cost efficiency and gross margins should help the company to about 13-15% relative profitability (the Haobo acquisition dilutes earnings a bit as it still makes a loss).

Valuation not demanding as growth translates to earnings

DT is likely to guide at least some growth for Q1. In our view the FY ’23 comparison figures suggest growth could materialize at a relatively steady pace over the course of the year, but earnings are in any case improving (we estimate the FY ’24 gain at some EUR 6m). Valuation has also gained to above 13x EV/EBIT on our FY ’24 estimates, however the level remains quite modest relative to peers especially considering the longer term potential DT still has. Our new TP is EUR 16.0 (13.5) as we retain our BUY rating.

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Consti - Closing out another solid year

26.01.2024 - 08.30 | Preview

Consti reports its Q4 figures on 2nd of February. We expect a solid finish to the year despite continued salary inflation as we expect slight net sales growth for the quarter.

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Strong performance during the first three quarters

Consti’s net sales grew by 10.7% y/y during 1-9/23 from EUR 212.0m during 1-9/22 to EUR 234.5m. Growth was driven by the Corporations and Public Sector segments where the company has had major projects such as school and shopping center projects underway. The company’s EBIT for the first nine months amounted to EUR 8.4m (EUR 6.6m 1-9/22) with a margin of 3.6% (3.1%). Profitability improved yet was affected by cost inflation. Consti recognized a gain of roughly EUR 1m on the sale of property-related relining business which supported the profitability in Q3. At the end of Q3, the company’s backlog was near ATH levels at EUR 247.3m, up 17.5% y/y yet down nearly the same amount q/q.

 

Focus is on the backlog development and guidance for FY24

We maintain our estimate for net sales at EUR 96.1m with growth of roughly 3% y/y. We see the y/y growth slowing down from Q3 as the company faces a tougher comparison period in Q4. We have revised our profitability estimate slightly as we think that Consti's profitability has still been impacted by cost inflation. Our updated EBIT estimate for Q4 is EUR 4.8m (prev. EUR 5.0m), implying EBIT of EUR 13.3m (adj. EBIT EUR 12.3m) for FY 23. With the estimated solid Q4, our focus shifts to backlog trends and FY 24 guidance. The addition of two major projects to the Q4 backlog is positive, yet further small project wins are necessary for sustained backlog growth. Our FY 24 forecasts have been slightly updated, factoring in Sähkö-Huhta acquisition for inorganic growth. We've also tweaked the Corporations segment growth estimates, now expecting group wide net sales of EUR 341.6m with a 3.3% y/y increase and an EBIT of EUR 13.3m for FY 2024.

 

Valuation remains attractive

Consti trades at 7-6x adj. EV/EBIT and 10-9x adj. P/E for 23-24E. The valuation is modest in absolute terms and Consti trades at a roughly 20-40% discount compared to our peer groups. We continue to lean on the company’s historic multiple levels in our valuation in addition to the peer multiples. We retain our TP at EUR 13.0 with BUY-rating intact.

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Etteplan - Difficulties continued during Q4

19.01.2024 - 08.10 | Preview

Etteplan gave a profit warning as its EBIT fell short of expectations in Q4. The profit warning came as no surprise as the guidance allowed little margin for error in Q4. The EBIT miss vs. our estimates was only slight, roughly 2%.

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Guidance allowed little margin for error in Q4

In its interim report published in October, the company estimated its revenue in 2023 to be EUR 355-370m and EBIT EUR 26-28.5m. Etteplan's Q3 was soft and as we commented in our Q3 company update, it made Q4 more challenging to achieve the guidance. The guidance implied revenue of roughly EUR 90-105m and EBIT of roughly EUR 9-11m for Q4. According to the preliminary figures, the company’s Q4 net sales came in at roughly EUR 94m and EBIT was EUR 8.1 m, for FY, the company net sales were at EUR 359m and EBIT at EUR 25.4m. We forecasted net sales of EUR 360.4m and EBIT of EUR 26.0m for FY 2023. Our prediction for net sales was close to the actual results, but the actual EBIT was 2.3% lower than our prediction. The main causes for the EBIT shortfall were the ongoing weak market, the high rate of sick leaves and more holidays taken than expected during Christmas time. As the guidance was tight, the problems quickly led to the EBIT shortfall.

 

Acquisitions provide a slight boost to net sales for FY 2024

We have adjusted our model in accordance with the preliminary numbers for FY 2023, in addition, we have made some changes to our FY 2024 forecasts. We now expect net sales of EUR 380.5m for FY 2024 (prev. 369.4m) driven by the acquisitions completed during H2 2023. In terms of profitability, we still anticipate a margin increase vs. FY 2023, yet the visibility remains low. Our revised FY 2024 EBITA forecast is EUR 35.4m, up from EUR 34.9m, due to anticipated higher net sales and year-over-year profitability improvement. We have also reduced our margin estimates for some of the segments.

 

HOLD with a TP of EUR 13.0

The valuation is still reasonable with our updated estimates. Etteplan trades at a premium of roughly 13% when compared to our peer group on 23-24E EV/EBITDA basis, yet roughly in line with its own historic multiple levels. We retain our rating at HOLD with a TP of EUR 13.0.

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Duell - Promising start for the fiscal year

19.01.2024 - 08.00 | Company update

Duell's results exceeded our estimates for revenue and adj. EBITA. The revenue beat was largely due to our cautious net sales estimates for Rest of Europe.

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Q1 figures were above our estimates

The company reported net sales of EUR 27.0m in Q1 (Q1/23: EUR 25.8m, Evli: EUR 24.5m). Net sales in the Nordics were EUR 15.1m (Q1/23: EUR 16.0m, Evli: EUR 15.2m), while net sales in Rest of Europe were EUR 11.9m (Q1/23: EUR 9.7m, Evli: EUR 9.3m). For Rest of Europe, our prediction for both organic and inorganic net sales development were too conservative. With the higher sales, the adj. EBITA was slightly higher than we estimated at EUR 0.3m (Evli: EUR 0.0m), as the company was able to improve its gross margin and had a lower comparable cost base. Due to seasonality, the company’s NWC and net debt increased q/q yet were at a lower level when compared to Q1 2023.

 

End-market to remain challenging throughout the FY 2024

Duell maintained its outlook for FY 2024; Duell will keep up its programme to improve profitability and strengthen the net working capital position in financial year 2024. Duell expects adjusted EBITA to increase from the level of the previous year. With the higher than anticipated organic and inorganic net sales growth in Rest of Europe, we raise our estimates especially for Q2/24 as Tran-Am acquisition will keep contributing to inorganic sales growth. The adjustments for the FY 2024 estimate are minor, we raise our net sales estimate to EUR 120.1m (prev. EUR 117.7m) and adj. EBITA to EUR 6.0m (prev. EUR 5.9m). We still anticipate soft market conditions for the whole of FY 2024 as the end-market is expected to stay weak and dealers persist in their cautious inventory management approach. In addition, the current geopolitical tensions bring upside risk to logistics costs.

 

HOLD with a TP of EUR 0.04 (0.04)

With no major changes to our estimates, the 2024E multiples remain elevated. On the other hand, the 2025 adj. P/E and EV/EBITA imply a discount of 5-20% relative to our main peer group and DCF indicates an upside of 26%. Considering the strengthened balance sheet post-RI and a positive start to the FY, we base our valuation on 24-25E multiples along with DCF.

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Duell - Inorganic growth supported the result

18.01.2024 - 09.20 | Earnings Flash

Duell was able to grow its revenue 4.9% y/y during the seasonally slow Q1 as the inorganic growth supported the company’s development. With the stronger than expected sales, the adj. EBITA was slightly higher than expected at EUR 0.3m (Evli est. EUR 0.0m)

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  • Q1 net sales came in at EUR 27.0m (EUR 25.8m in Q1/23, EUR 24.5m Evli).
  • Net sales in the Nordics amounted to EUR 15.1m (EUR 16.0m in Q1/23, EUR 15.2m Evli), in Rest of Europe net sales stood at EUR 11.9m (EUR 9.7m in Q1/23, EUR 9.3m Evli)
  • Net sales development was better than expected in the rest of Europe as inorganic growth was even stronger than we had expected.
  • EBITA in Q1 amounted to EUR 0.3m (EUR -0.4m in Q1/23, EUR 0.0m Evli).
  • Net debt at the end of Q1 stood at EUR 45.2m, up q/q from EUR 38.2m at the end of FY 2023, yet down y/y from EUR 50.4m at the end of Q1/23.
  • Similarly, NWC increased q/q to EUR 55.5m from EUR 49.9m at the end of FY 2023, yet down y/y from EUR 62.1m at the end of Q1/23
  • Operating free cash flow amounted to EUR -6.2m (Q1/23: EUR -5.0m).
  • Outlook for FY 2024 (unchanged): Net sales guidance not given due to weakened market predictability. Duell will continue its profitability improvement programme and enhance the net working capital position in financial year 2024. Duell estimates adjusted EBITA to improve from previous year’s level.

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Duell - Seasonal slowness ahead

11.01.2024 - 09.00 | Preview

Duell publishes its Q1 2024 business report on 18th of January. The company’s RI was successful as expected yet we predict that the market softness continued to affect the company’s performance during the seasonally slow Q1.

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Completed rights issue reduces the risk level

Duell completed its rights issue (RI) in December as the offering was oversubscribed. We updated the effects of the RI to our estimates in early December as the company had a subscription guarantee undertaking given by Hartwall Capital. As the RI was oversubscribed, the guarantee was not used. After the RI, there are over 1b shares outstanding and net proceeds of EUR 17.7m from the offering. With the net proceeds, Duell’s net debt to adjusted EBITDA ratio drops to roughly 3.7x at the end of 2023 and below 3.0x based on our estimates for 2024E.

 

Expecting slow Q1 due to seasonality and market dynamics

First quarter is typically the lowest sales quarter and includes large amount of seasonal pre-sales with discounted prices to dealers. The snowmobile and ATV product segments are important during the winter season as most of the segment items are sold during the first half of the fiscal year. We expect that the powersports market has continued to decline during the quarter and that dealers have continued to implement cautious inventory policies. We have made only slight adjustments to our estimates. We expect net sales of EUR 24.5m for Q1/24, down 5% y/y from EUR 25.8m in Q1/23. With the lower volumes, our estimate for adj. EBITA in Q1/24 is only slightly positive at EUR 0.0m (EUR -0.4m Q1/23). We expect a slight improvement in profitability due to Duell’s cost efficiency efforts, although we predict only a modest impact due to projected lower net sales.

 

HOLD with a TP of EUR 0.04 (EUR 0.03)

We retain our rating at HOLD yet adjust our TP to EUR 0.04 (EUR 0.03). Duell trades at 9.8x and 7.0x on adj. EV/EBITA for 2024E and 2025E. The 2024E multiples are slightly elevated, yet we continue to see the long-term upside potential albeit the visibility to the projected turnaround remains low. The 2025E adj. P/E and EV/EBITA imply a discount of 5-21% relative to our main peer group and DCF indicates an upside of 27%.

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Administer - Weaker finish to challenging year

20.12.2023 - 09.15 | Company update

Administer issued its second profit warning for 2023, driven mainly by the weakened economic situation. Growth is looking more challenging, while cost savings support improvements in profitability.

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Lowered net sales and profitability guidance
Administer issued a profit warning on December 19th, lowering both its net sales and EBITDA-% guidance. The company now expects 2023 revenue of EUR 75-77m (prev. 76-81m) and an EBITDA-% of 3-5% (prev. 4-8%). The main component of the downgrade appears to be a lower than anticipated net sales in the staffing services business, which has been affected by the weakened economic situation in Finland. Profitability has further been affected by onetime costs relating to Administer’s profitability programme and writeoff of certain software development costs in Adner. 

Estimates lowered on more challenging growth outlook
We have revised our 2023 net sales and EBITDA-% estimates to EUR 76.3m (EUR 80.4m) and 3.5% (4.8%) respectively. With the macroeconomic headwinds we have also lowered our corresponding estimates for 2024 to EUR 80.4m (85.8m) and 7.9% (11.4%). A small positive in the profit warning is the implied cost structure, which compared with our former estimates is already showing signs of easing. Administer has through its cost savings programme already taken measures, but the results are to be more visible next year. Despite the headwinds we still continue to anticipate growth through acquisitions, although organic growth is starting to look more challenging. Moving into the final year of its current strategy period, we expect an update in the not too distant future, which should provide more insight into coming year ambitions.  

BUY with a target price of EUR 3.0 (3.5)
With our lowered estimates, we revise our target price to EUR 3.0 (3.5), valuing Administer at ~14x 2024 P/E (excl. goodwill amortization) and ~0.7x EV/Sales. As a turnaround case valuation still seems appealing despite near-term growth challenges starting to pose a threat. 

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Endomines - Year ends with a resource increase

19.12.2023 - 08.30 | Company update

Endomines updated its mineral resource estimate for Korvilansuo. While the resource increase and current strong gold prices support the investment case, significant uncertainties persist.

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Korvilansuo resources increased by 307%

Endomines reported updated mineral resource estimate for its Korvilansuo deposit situated in the Karelian Gold Line, roughly 20 kilometers south of Pampalo mine. The updated mineral resources include 838 kt @2.49 g/t Au for 67,200 ounces of contained gold. Previously, Korvilansuo deposit hosted 256 kt @ 2.00 g/t Au for 16,500 ounces. The updated resource estimate therefore increases ore tonnes by 227% and gold ounces by 307% as the grade of the new findings exceeds that of the old resources.

 

Multiple adjustments into our estimates and SOTP model

The estimate update represents a notable increase to the company’s resource base in the Karelian gold line. We have included the new resources into our real option model for the Karelian Gold Line satellite deposits. One of the company’s operational goals is to have a partnership agreement in the US by the end of 2023, as there has been no news on the subject, we have revised our estimate for the value downwards. Our current estimate for the US asset value is roughly in line with the current balance sheet value (Idaho 24m USD, Montana 12m USD). Additionally, we made updates to our operational estimates. With the changes, we now estimate revenue of EUR 21.3m (prev. EUR 20.8m) and EBITDA of EUR 1.1m (EUR 0.9m) for FY 2023. We have also increased Pampalo's production forecasts for the coming years as financing for initiating production from Hosko deposit has been secured.

 

HOLD with a TP of EUR 4.7

We maintain our valuation at the lower end of our SOTP-based valuation range. The positive adjustments for Pampalo and Karelian Gold Line are offset by negative adjustments to the value of the company’s US assets. We also see that the company may require further financing for exploration activities in 2024 depending on the planned scale. We keep our rating and TP unchanged at HOLD with a TP of EUR 4.7.

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Duell - Rights issue terms announced

01.12.2023 - 09.00 | Company update

Duell announced the terms of its fully guaranteed rights offering. The strengthened balance sheet post RI lowers risk, yet continued market weakness is likely to hinder the operational performance.

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Gross proceeds of EUR 20.2m, with up to 1b of new shares

Duell announced a fully guaranteed EUR 20.2m right offering, each shareholder will receive one subscription right on the record date which entitles its holder to subscribe for 33 offer shares at a subscription price of EUR 0.02. The net proceeds are expected to be roughly EUR 17.7m. The proceeds will be used to repay EUR 2.5m of its debt related to the facilities agreement and deferred purchase price of roughly GBP 4.9m related to the TranAm acquisition. In addition, the proceeds aid in executing the company's strategy for European expansion and overall self-help. We consider the left-over proceeds rather as an “insurance policy” and expect no further acquisitions in the short term. The TERP is slightly below EUR 0.03 for which the subscription price presents a discount of roughly 32.4%.

 

Strengthened balance sheet post RI reduces the risk level

With EUR 17.7m in net proceeds, Duell’s net debt to adjusted EBITDA ratio drops to roughly 3.7x when considering net debt at the end of Q4/23 and FY 23 adjusted EBITDA. The ratio still falls short of the company’s medium-term target for leverage of net debt to adjusted EBITDA of 2-3x yet is considerably healthier than the 7x at the end of Q4/23. Based on our current estimates, the net debt to adjusted EBITDA will fall below 3x at the end of 2024. Duell aims to repay EUR 2.5m of its credit facility, the impact on our interest expense forecasts is only slight.

 

HOLD (SELL) with a TP of EUR 0.03 (EUR 0.40)

Despite a stronger balance sheet reducing risk, we anticipate ongoing market weakness to continue to hinder the development operationally. The 2023 result doesn't support the current valuation, for 2024E, the valuation is relatively neutral when compared to our European peer group. The 2025E adj. EV/EBIT stands at 6.0x, which is already a low level. We see further self-help potential in 2024E and beyond, yet the visibility remains low. Considering the decline in share price since our latest update and the RI, we reduce our TP to EUR 0.03 (EUR 0.40) while adjusting our rating to HOLD (prev. SELL).

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SRV - CMD notes

22.11.2023 - 08.40 | Company update

SRV’s CMD provided color on the company’s revised strategy and the path towards sustainable profitability. We continue to consider the company’s long-term targets rather ambitious, yet the current valuation remains undemanding.

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Operative EBIT of at least EUR 50m by the end of 2027

With the revised strategy, SRV strives towards sustainable profitability and aims to reach the updated long-term financial objectives through the continuous optimization of its business operations. SRV targets to have operative EBIT of at least EUR 50m (prev. 6%) and revenue >EUR 900m (prev. EUR 900m). The company seeks to achieve the long-term financial objectives by the end of 2027 (prev. 2026).

 

Story remains largely unchanged

As commented in our previous company update, SRV is in a strong position to navigate the current challenging construction market. We still see that the profitability will remain depressed in 2024E as the share of developer contracted housing will remain small with the current low level of starts. Going forward, the two main drivers for the company to reach operative EBIT of at least EUR 50m by 2027 are 1) volume increase and 2) increase in development and developer contracting projects. SRV has a substantial amount of floor space in its project development pipeline which is ready to be utilized during the strategy period. We revise our long-term estimates slightly driven by the refined strategy of boosting the proportion of development and developer-contracted projects. This is further backed by the company's preparedness to execute projects, supported by the development pipeline. Our estimates remain below the long-term financial targets as our long-term margin estimates are roughly in line with the company’s historical operative margin levels.

 

BUY with a TP of EUR 4.1 (4.0)

Our 2023E estimates do not support the current pricing, on the other hand, SRV trades at roughly 9-10x 2024E P/E and EV/EBIT which we view as a fairly moderate level. We continue to see long-term potential, however, visibility remains low, especially in the midst of the current unpredictable market conditions. With slight revisions to our estimates and higher peer group multiples, we adjust our TP to EUR 4.1 (4.0) with BUY-rating intact.

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Loihde - Ambitious plans for profitability

17.11.2023 - 09.15 | Company update

Loihde is under its updated strategy seeking to grow 10% annually and achieve an adj. EBITDA of 15% by 2027 for which Loihde, despite a confidence boosting CMD, still has quite a lot to show for.

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Eventful week 
Loihde had an eventful week, posting a profit warning, deciding on an additional dividend, updating its strategy and hosting its CMD on November 16th. The profit warning was not very surprising given the high expectations set for Q4, with the main change being the lowered 2023 adj. EBITDA guidance to EUR 7-9m (prev. >EUR 10.3m), but still a disappointment given the reiterated guidance just two weeks prior. Loihde decided on the payment of an additional dividend of EUR 1.0 per share, with the record date being November 21st. 

Ambitious plans for profitability
Loihde’s updated strategy and CMD did not show any major deviations from the current business operations, but emphasis was put on further structural efficiency, service area and industry focus, as well as growth in continuous services. Loihde is also looking to utilize its strong balance sheet slightly more aggressively through the use of leverage for continuing acquisitions. The new financial targets are on the more ambitious side, at least given the recent performance, looking to grow around 10% annually, also including inorganic growth, and to reach an adj. EBITDA-margin of 15% by 2027. ROI is sought to be above 10% while retaining a quite modest net debt/EBITDA of 0-2x. The CMD for us was a slight confidence booster when looking at expectations for coming year profitability improvement, but Loihde still has quite a lot to prove when it comes to the long-term target. 

HOLD with a target price of EUR 12.3 (ex-div)
Despite the guidance downgrade and as such lowered 2023 estimates, the elements behind it were not game-changing and Loihde is still set for an overall decent year-end, and we keep our coming year estimates largely intact. We adjust our TP, excluding the additional dividend, to EUR 12.3 (prev. 13.0 pre-div).

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Exel Composites - CMD notes

14.11.2023 - 09.35 | Company update

Exel’s CMD added details to its new strategy. Many important decisions are still to be worked out, but in our view the path for value creation is a lot clearer now.

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Higher volumes and lower costs are to tame leverage ratio…

Exel aims to keep NIBD/EBITDA below 3x by 2028; Exel has historically been around the ratio, but earnings weakness now pushed it to 4.8x even when the absolute level of debt was kept in check. The ratio is to improve next year as Exel sees growth in wind power but also within other industries as certain large integrated players, who have some insourced pultrusion volumes, are outsourcing business back to Exel. Margins have remained stable, despite the recent inflationary environment, and thus earnings have good potential to bounce back with higher volumes especially when Exel has achieved fixed cost reductions. Some portion of the EUR 20-25m projected financing need for the strategy period should be covered with internal cash flow when earnings rebound, yet there could be some larger outlays into key sites which would require a stronger balance sheet.

…while key asset focus may yet require external financing

Pultruded profiles’ ability to insulate is one key quality driving volumes for buildings and transportation. China (wind power and transportation) is to be a volume site, whereas assets in Europe and the US are likely to be mostly tailored sites. Such sites help Exel integrate within the value chain (both engineering and post-processing services) and they should also feed orders to the volume business (such accounts need not be larger than EUR 4-5m). Exel expects the long-term split between tailored and volume sites at 60/40, whereas we would have expected the volume share to be a bit larger than that. Exel says post-processing services, which can e.g. help make final assembly easier, can be as valuable as the tailored composite volumes. Exel can also be quite selective within the tailored business, and we see value chain integration as a major part of the new strategy.

Our near-term estimates remain unchanged for now

Exel is likely to achieve a lot better results next year, but the rate of volume recovery is still uncertain while balance sheet could be stronger. The 9x EV/EBIT multiple, on our FY ’24 estimates, isn’t very high but in our view the uncertainties continue to limit upside potential. We retain our EUR 2.7 TP and HOLD rating.

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Marimekko - Scaling according to the plan

09.11.2023 - 09.00 | Company update

Marimekko reported Q3 figures that were largely in line with our estimates. We estimate that the company’s current good form will continue to Q4. While the soft domestic market poses challenges for 2024, expected international profitable growth, particularly in the APAC region, is anticipated to support overall performance.

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Q3 figures were in line with our estimates

Driven by strong wholesale sales development across the globe, Marimekko’s net sales grew 9% y/y to EUR 47.9m, in line with our estimates (48.5/49.3m Evli/cons.). Int’l sales grew 13% y/y driven by strong wholesale sales especially in APAC, NA and Scandinavia. Finnish retail sales declined by 1% y/y while the non-recurring promotional deliveries supported domestic wholesale figures which grew 18% y/y. Despite the wholesale driven growth, Marimekko’s gross margin improved slightly supported by lower transport costs. The company’s fixed costs kept increasing yet higher volumes and improved gross margin boosted adj. EBIT to EUR 13.1m (12.6/12.8m Evli/cons.), fairly well in line with our estimates.

 

Profitable growth supported by int’l areas going forward

Even with the growth driven by wholesale sales, the company managed to improve its gross margin y/y. Furthermore, the company's EBIT margin saw an uptick due to sales growth, demonstrating the scalable nature of Marimekko's business model and its loose franchise model in Asia. The Finnish consumer confidence has continued to weaken during Q3 and start of Q4 and is currently clearly below the long-term average. We have revised our sales growth estimates upwards for Q4 and 2024 in int’l areas, on the other hand, we have lowered our net sales estimates for Finland. Our updated estimate for FY 2023 net sales is at EUR 176.6m (prev. EUR 178.1m) and adj. EBIT at EUR 33.1 (prev. EUR 32.9m) with adj. EBIT margin of 18.8% (prev. 18.5%).

 

HOLD with a TP of EUR 11.0 (10.5)

With only slight adjustments to our estimates, we continue to consider Marimekko’s valuation neutral. The company trades between our premium (32% premium on 2023E EV/EBIT basis) and luxury goods (7% discount) peer groups. We adjust our TP to EUR 11.0 (EUR 10.5) with HOLD-rating intact.

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Marimekko - Well in line with expectations

08.11.2023 - 09.00 | Earnings Flash

Marimekko reported Q3 results well in line with our estimates. Both revenue and profitability were fairly in line while the margin was touch above our estimate. The guidance for 2023 was reiterated and the market outlook implies growth to continue in all of Marimekko’s main markets.

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  • Group result: driven by strong wholesale development globally, Q3 net sales grew by 9% to EUR 47.9m (48.5/49.3m Evli/cons.), roughly in line with our expectations. Finnish sales were supported by non-recurring promotional deliveries as expected while domestic retail declined by 1% y/y. Gross margin improved slightly supported by lower transport costs. Despite increased fixed costs, higher volumes and improved gross margin boosted adj. EBIT above the comparison period. Adj. EBIT amounted to EUR 13.1m (6/12.8m Evli/cons.), reflecting a margin of 27.4%. Adj. EPS came in at EUR 0.26 (0.25/0.24 Evli/cons.).
  • Finland: topline increased by 6% to EUR 28.2m, which was a touch below our estimates (Evli: 29.5m). The growth was driven by non-recurring promotional wholesale deliveries as expected while domestic retail declined by 1% y/y.
  • Int’l: net sales came in strong, slightly above our expectations. Topline grew by 13% to EUR 19.7m (Evli: 19.1m). The growth was supported by strong wholesale growth across the globe.
  • 23 market outlook: Marimekko expects its domestic sales to grow, and one-off wholesale deliveries to support Finnish sales development in H2. The APAC region and Int’l net sales are expected to grow. The aim is to open roughly 15-20 new Marimekko stores and shop-in-shops in 2023, and most of the planned openings will be in Asia.
  • 23 guidance intact: Net sales to grow and adj. EBIT margin between 16-19%.

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Exel Composites - Earnings wait for higher orders

06.11.2023 - 09.30 | Company update

Exel has taken actions to recover earnings. In our view wind power orders should drive at least some growth next year, but order outlook uncertainty continues to limit upside.

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Actions support bottom line, but order outlook is still soft

Exel Q3 revenue declined 39% y/y, which led to an adj. EBIT of EUR -1.2m. Exel has cut costs and was also able to generate a positive cash flow of EUR 1.2m, however on the negative side Q4 orders may stay rather soft as larger orders have been further postponed due to cool demand in many industries. Destocking has been a big theme for a while, but in our view Exel’s industries’ long-term drivers are intact and hence we would expect at least modest growth across customer accounts next year if markets stabilize. We cut our Q4 revenue estimate by EUR 5m and make more downward revisions to our FY ’24 estimates.

Wind power orders to drive growth next year

Wind power generated EUR 25-30m revenue in previous years, whereas we estimate it to make only some EUR 10m this year. In our view wind power could add another EUR 10m in revenue next year, assuming the industry order outlook somewhat normalizes. Comparison top line figures will be soft for almost all customer industries next year, and the US unit reorientation alone will help achieve EUR 3m in annual cost savings. The asset-light business model shouldn’t require much capex especially in the short run when there’s still a lot of existing capacity to be utilized. Exel will however soon provide more detail on the kind of modifications its current plant network needs. We believe there to be not much need for growth capex at this point, and single production line updates shouldn’t be too expensive as we understand such lines often cost well below EUR 1m each.

EBIT will recover once orders start to pick up

We estimate wind power to drive double-digit growth next year. In our view EUR 115m top line going forward should support 6% EBIT margins, considering the cost measures Exel has implemented and still finds. Exel is valued some 9x EV/EBIT, which we don’t view too expensive as an EBIT of below EUR 7m would still be quite modest relative to potential. We don’t see margin potential as such as the key issue going forward, but rather order recovery is required before upside can materialize. Our new TP is EUR 2.7 (3.0) as we retain our HOLD rating.

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Marimekko - Expecting profitable growth

06.11.2023 - 08.10 | Preview

Marimekko reports its Q3 result 8th of November. We expect pick-up in growth driven by strong overall momentum outside Finland, new store openings and domestic non-recurring wholesale deliveries.

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First half of the year was still relatively slow

Marimekko’s revenue grew 2% to EUR 75.6m (H1/22 EUR 74.0m) during the first half of 2023. The company’s growth slowed down during the first half driven by the slowdown in the domestic wholesale business and a tough comparison period. Gross margin was roughly in line with the comparison period at 62.1% (62.8% in H1/22). Comparable EBIT decreased to EUR 10.6m (EUR 12.3m in H1/22) with comparable EBIT margin of 14.0% (16.6% in H1/22) driven by higher fixed costs and lower volumes in Q1. In Q2, the comparable EBIT margin significantly improved year-over-year, reaching 16.8%, compared to 15.0% in Q2/22. The increase was primarily due to the rise in volumes and the manifestation of the company's operating leverage.

 

Expecting profitable growth during the second half of 2023

We expect solid growth for H2 driven by two main factors: non-recurring wholesale promotional deliveries in Finland and new loose franchise store openings in APAC. With the projected growth, we see that the profitability will continue to improve y/y. We expect gross margin to be supported by growth in licensing revenue and lower impact of logistics costs. We forecast net sales of EUR 48.5m and EBIT of EUR 12.6m for Q3. For FY 2023, we project net sales of EUR 178.1m and EBIT of EUR 32.9m. Marimekko expects its net sales to grow in 2023 from the previous year and comparable EBIT margin is expected to be approximately 16-19%. Our current estimate for comparable EBIT margin stands at 18.5%, at the upper end of the current guidance.

 

Valuation remains at a neutral level

With no changes to our estimates, Marimekko’s valuation remains neutral as it currently trades between our luxury (13% discount on 23E EV/EBIT basis) and premium goods (22% premium) peer groups. Marimekko trades at roughly 14-12x EV/EBIT and 18-16x P/E (23-24E). We retain our TP at 10.5 while keeping HOLD-rating intact.

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Exel Composites - Cost measures continued

03.11.2023 - 09.30 | Earnings Flash

Exel’s Q3 headline figures were known beforehand. Volumes fell across the geographic regions and especially in North America where the business still lacked large wind power orders. Exel has continued to implement cost measures, and on the positive side working capital and inventory reductions helped produce a positive Q3 cash flow of EUR 1.2m.

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  • Exel’s Q3 revenue fell by 39.2% y/y to EUR 20.5m. Exel had previously published preliminary Q3 figures and so the actual headline numbers didn’t contain news. Europe declined by 28.2% y/y, while North America fell 56.3% as the business still lacked large wind power orders.
  • Wind power was EUR 2.1m vs our EUR 2.0m estimate, whereas Buildings and infrastructure amounted to EUR 5.7m vs our EUR 5.1m estimate. Transportation came in at EUR 3.1m, compared to our EUR 2.3m estimate.
  • Adjusted EBIT was EUR -1.2m due to the low level of revenue, while cost management activities continued. Fixed costs decreased y/y due to lower personnel costs as the company has rightsized. Exel has also reduced working capital and inventories, which resulted in a positive Q3 cash flow of EUR 1.2m.
  • Order intake amounted to EUR 22.8m in Q3 as it fell by 6.7% y/y. Order intake is expected to continue slow until the end of the year.
  • Exel guides revenue and adjusted EBIT to decrease significantly in FY ’23 compared to the previous year (guidance updated on Oct 19).

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Aspo - Improving in stabilizing markets

02.11.2023 - 09.30 | Company update

Aspo’s Q3 results delivered a positive surprise due to Telko. ESL’s recovery pace for next year remains a bit uncertain, but in our view all three segments have room to improve.

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ESL continues to recover, but Q4 EBIT will remain moderate

Aspo’s EUR 130m Q3 revenue came in vs the EUR 142m/137m Evli/cons estimates, but the EUR 7.4m adj. EBIT was higher than the EUR 6.6m/6.0m Evli/cons estimates as Telko’s EUR 3.1m EBIT beat our estimate by EUR 1m. EBIT gained EUR 2.2m q/q as prices stabilized after a weak Q2. Plastics especially drove improvement, and its performance should continue to trend up despite still challenging market conditions. ESL’s EBIT already gained a bit q/q from the lows; in our view the guidance midpoint suggests ESL’s Q4 EBIT will remain low relative to its potential as the last quarter is the strongest. We estimate ESL’s Q4’23 EBIT only at EUR 6.7m vs the EUR 10m levels seen in the two previous years.

ESL’s long-term sustained EBIT rate should be ca. EUR 30m

Supramaxes have hit earnings and volumes have been lower also for smaller vessels following the very high demand levels of previous years. Forest and steel industry volumes have been soft but are stabilizing, however ESL’s earnings recovery pace remains the most significant source of short-term uncertainty. The current market will not let ESL reach EUR 38m EBIT again anytime soon even when the company receives its green coasters, which are to support growth soon. We estimate ESL’s FY ’23 EBIT at EUR 20m, from which we see a gain of EUR 5m next year. Telko has implemented cost measures (a run-rate of EUR 1.5m); we estimate some 6% Telko EBIT margins going forward, on which there should be further long-term upside. We estimate 4% margins for Leipurin, in line with the Q3 result, which also remains short of long-term potential. We make only small group-level estimate revisions and see FY ’24 EBIT at EUR 37.4m.

Next year’s improvement still leaves room for further gains

We estimate EBIT to have bottomed out as ESL has plenty of room to gain next year even if the market stays a bit cool, whereas Telko and Leipurin should be able to keep their respective 6% and 4% EBIT margins. Aspo is valued some 8.5x EV/EBIT on our FY ’24 estimates, which we don’t view too demanding as our estimates leave long-term upside potential. We retain our EUR 7.0 TP; our new rating is BUY (HOLD).

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Loihde - Looking for a solid finish to 2023

02.11.2023 - 09.00 | Company update

Loihde’s Q3 saw profitability improve while lacking growth. With the reiterated guidance, Loihde will be looking for a solid Q4 in terms of profitability. We retain our HOLD-rating with a target price of EUR 13.0 (13.5).

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Profitability improved but lackluster growth 
Loihde’s Q3 results showed favourable profitability development but were somewhat below our estimates. The net sales development y/y was essentially flat, with net sales amounting to EUR 29.9m (Evli EUR 32.3m). The Group’s adj. EBITDA amounted to EUR 2.9m (4.0m), at a margin of 9.7%. Net sales in Security Solutions (SeSo) and Digital Development (DiDe) was EUR 21.4m (Evli EUR 23.6m) and EUR 8.5m (Evli EUR 8.8m), with sales growth of 1% and -1% respectively. SeSo’s development was affected by some project postponements and the slowdown in the construction market adding price competition in other areas. The ERP renewal project also continued to cause some challenges, but clearly less than in H1. The market situation in DiDe overall continues to be challenging but utilization rates were fairly good in Q3.

Expectations for a solid finish to 2023
Loihde kept its guidance for 2023 impact, implying expectations of a strong Q4 in terms of profitability. SeSo is expected to have a larger contribution given project delivery timings, but still requires good performance across the board. Following some revisions due to the Q3 results, our 2023 estimates remain more or less barely within the guidance. The guidance still appears challenging, but confidence appears quite high given the reiteration of the guidance at this point of the year. Our views for the upcoming year are largely intact, having slightly lowered our growth expectations given the continued market uncertainty along with recruitment challenges in some key growth areas. 

HOLD with a target price of EUR 13.0 (13.5)
With the minor downward revisions to our estimates, we adjust our target price to EUR 13.0 (13.5). Based on estimated coming year earnings capacity and peer multiples, current valuation levels still appears reasonable, and we retain our HOLD-rating. 

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Aspo - Telko supported earnings

01.11.2023 - 10.00 | Earnings Flash

Aspo’s EUR 7.4m Q3 EBIT landed well above estimates. The positive surprise seems to have been driven by Telko. Aspo had to cut away the upper half of its previous guidance range as there are still market challenges in the form of soft demand.

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  • Aspo Q3 revenue from continuing operations was EUR 130.0m vs the EUR 141.5m/136.7m Evli/consensus estimates. Adjusted EBIT from continuing operations amounted to EUR 7.4m, compared to the EUR 6.6m/6.0m Evli/consensus estimates.
  • ESL Q3 top line was EUR 43.0m vs our EUR 48.9m estimate, while EBIT amounted to EUR 4.0m vs our EUR 4.5m estimate. Volumes picked up after the summer and ESL was able to optimize transportation flows and capacity utilization. Q4 industrial activity and volumes are seen lower than they were previous year.
  • Telko revenue came in at EUR 53.8m, compared to our EUR 55.7m estimate, whereas EBIT landed at EUR 3.1m vs our EUR 2.1m estimate. Market prices, especially those of plastics, stabilized and Telko was able to gain market share. Demand outlook remains somewhat low for Q4.
  • Leipurin revenue amounted to EUR 33.2m vs our EUR 36.9m estimate. Adj. EBIT was EUR 1.3m, compared to our EUR 1.3m estimate. Pricing levels flattened out while volumes seem to be stabilizing. Management sees opportunities for organic growth and efficiency improvements, while M&A is also on the agenda.
  • Other operations cost EUR 1.0m vs our EUR 1.3m estimate.
  • Aspo specifies FY ‘23 guidance: the new guidance range is for EUR 25-30m in comparable EBIT, whereas the previous was EUR 25-35m.

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Finnair - Flying high again

01.11.2023 - 09.30 | Company update

Finnair announced the terms of its rights offering, which in our view contained no material surprises. We still expect Finnair’s earnings to remain high going forward, however we see current trading levels elevating multiples too high.

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The rights offering terms included no material surprises

The offering has a ratio of 27/2 for new shares vs existing ones, and the 19bn shares offered at the EUR 0.03 per share subscription price will raise Finnair some EUR 570m in gross proceeds. The fully underwritten offering has its subscription period Nov 3-17; the rights can be traded Nov 3-13. The TERP is a bit below EUR 0.05, to which the EUR 0.03 subscription price implies a 39% discount, and the value of a right is thus EUR 0.23.

Strong balance sheet and high earnings going forward

Finnair targets financial leverage of 1-2x (net debt to comparable EBITDA, which will now be about 1.5x) by the end of FY ‘25 and looks to reinstate dividends from the same year onwards (based on FY ’24 earnings). In our view the strengthened balance sheet and recovered earnings level mean the company will be positioned to begin the renewal of its narrow-body fleet in a few years’ time. In our opinion it shouldn’t be too hard for Finnair to hit the EUR 180m EBIT midpoint of its guidance range for the year even though airline profitability outlook has weakened a bit since the summer months. Finnair might well have topped EUR 200m in a more favorable environment, however we still expect EBIT to stay at around EUR 190m despite the headwind caused by higher jet fuel prices.

Current earnings multiples limit potential for gains

Finnair now trades around 10.5x EV/EBIT and would be valued a bit above 9x EV/EBIT on our updated TP of EUR 0.05, compared to the median peer level of slightly below 7x. Airlines’ earnings levels are still expected to advance next year as FY ’24 top line growth is estimated at around 7% while y/y EBIT margin gains are seen to be roughly around 100bps. In this light our estimates for Finnair are rather conservative as we estimate only 3.5% growth and flat margins going forward; from this perspective downside risks to our estimates seem quite limited for now, however Finnair’s current earnings multiples in our view limit upside potential even in the case of continued profitability improvement. Our new rating is therefore SELL (HOLD).

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Loihde - Profitability developed favourably

01.11.2023 - 09.00 | Earnings Flash

Loihde’s Q3 saw adj. EBITDA improving 30% y/y, but was below our estimates, at EUR 2.9m (Evli 4.0m). Growth was flat y/y, with net sales at EUR 29.9m (Evli EUR 32.3m). Profitability development is expected to continue favourably also during the end of the year.

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  • Group results: Loihde’s net sales were slightly below our expectations. Net sales grew by 1% y/y to EUR 29.9m (Evli: 32.3m). The growth slowed down compared with H1 partly due to a lower impact of acquisitions but the market demand situation has also fluctuated, affecting the net sales development. Adj. EBITDA amounted to EUR 2.9m (Evli: 4.0m), reflecting a margin of 9.7%. 
  • Security Solutions (SeSo): Net sales came in somewhat below our expectations, growing by 1% to EUR 21.4m (Evli: 23.6m). Growth was anticipated to slow down compared with the clear double-digit figures during H1, with the lower impact of acquisitions. The uncertain market situation is also showing, with for instance the slowdown in the construction sector being one negative driver.
  • Digital Development (DiDe): Net sales declined by 1% to EUR 8.5m and came in slightly below our estimates (Evli: 8.8m). The market demand has posed challenges for growth during this year, with the decrease in demand for software development having shown, although demand in other areas such as cloud services, data and analytics, and AI have supported net sales. 
  • 2023 guidance intact (revised on 22nd Aug): SeSo to grow by over 10% and DiDe to be flat or grow. Adj. EBITDA to improve from EUR 10.3m. Given the YTD adj. EBITDA of EUR 3.8m, the profitability guidance puts a lot of pressure on Q4. 

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Etteplan - Uncertainties remain high

01.11.2023 - 06.30 | Company update

Etteplan reported Q3 figures that were below our estimates. The company’s sales and EBIT were at EUR 80.0m (Evli est. EUR 81.7m) and EUR 5.0 (Evli est. EUR 5.8m) respectively. The main drivers behind the lower-than-expected results were Technical Communication and Engineering Solutions service areas.

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Weak market continues to hamper the development

Net sales in Q3 were EUR 80.0m (EUR 80.3m in Q3/22), slightly below our estimates and consensus estimates (EUR 81.7m/82.0m Evli/Cons.). EBIT in Q3 amounted to EUR 5.0m (EUR 5.8m in Q3/22), below our estimates and consensus estimates (EUR 5.8m/6.0m Evli/cons.), at a margin of 6.2%. The worst development was seen with Technical Communication Solutions as the service area suffered from weak demand even more than expected, particularly in the Central European market.

 

Soft Q3 adds pressure for the remainder of the year

Etteplan kept its guidance unchanged (from September): revenue is estimated to be EUR 355-370m and EBIT EUR 26-28.5m. The company has implemented corrective measures for Technical Communication and Engineering Solutions to improve operational efficiency going forward. We expect that the company will return to revenue growth in Q4 helped by growth in ES and less severe revenue decline expected in S&E driven by the slight pickup in product development projects. Profitability in Q4/23 is expected to be at a slightly lower level when compared to Q4/22. We currently forecast revenue of EUR 360.4m and EBIT of EUR 26.0m for the FY 2023. Our estimates lie at the lower end of the company’s guidance range, and we see that the soft Q3 has increased pressure to reach the guidance for Q4. For 2024E, we see the demand being slow at the start of the year yet picking up towards the latter part of the year while profitability climbs closer to the levels seen 2021-2022.

 

HOLD with a TP of EUR 13.0

Etteplan continues to trade at a premium of roughly 10-15% on 23-24E EV/EBITDA basis when compared to our peer group. The current valuation levels are quite well in line with the company’s historic levels. With uncertainties persisting, we struggle to find positive drivers for the stock. We retain our TP at EUR 13.0 with HOLD-rating intact.

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Etteplan - Softness continues

31.10.2023 - 13.40 | Earnings Flash

Etteplan’s sales and EBIT for Q3 were lower than expected at EUR 80.0m and EUR 5.0m respectively. Market remained tough as customers remain slow to make decisions on starting new projects.

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  • Net sales in Q3 were EUR 80.0m (EUR 80.3m in Q3/22), slightly below our estimates and consensus estimates (EUR 81.7m/82.0m Evli/Cons.). Revenue decreased 0.4% y/y, yet increased 2.1% at comparable FX rates.
  • EBIT in Q3 amounted to EUR 5.0m (EUR 5.8m in Q3/22), below our estimates and consensus estimates (EUR 5.8m/6.0m Evli/cons.), at a margin of 6.2%. EBIT was affected by weaker profitability in the Engineering Solutions and Technical Communication Solutions segments.
  • EPS in Q3 amounted to EUR 0.10 (EUR -0.03 in Q3/22), below our estimates (EUR 0.16 Evli).
  • Net sales in Engineering Solutions in Q3 were EUR 45.1m vs. EUR 44.5m Evli. EBITA in Q3 amounted to EUR 3.9m vs. EUR 4.5m Evli.
  • Net sales in Software and Embedded Solutions in Q3 were EUR 19.2m vs. EUR 21.5m Evli. EBITA in Q3 amounted to EUR 2.0m vs. EUR 1.7m Evli.
  • Net sales in Technical Communication Solutions in Q3 were EUR 15.5m vs. EUR 15.6m Evli. EBITA in Q3 amounted to EUR 0.7m vs. EUR 1.1m Evli.
  • Guidance for 2023 (unchanged from September): revenue in 2023 to be EUR 355-370 million, and operating profit (EBIT) in 2023 to be EUR 26-28.5 million.
  • The clear positive of the report was the quick rebound of Software and Embedded Solutions as the segment’s profitability bounced back quickly from the low levels seen during Q2

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Consti - Solid performance continues

30.10.2023 - 06.30 | Company update

Consti’s steady development continued with slightly higher than expected growth during the Q3. With the gain from the sale of relining business, the company is pushing the higher limit of the current guidance.

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Growth exceeded our expectations in Q3

Consti’s net sales grew 13.8% y/y during the Q3/23 with the support of strong growth in Corporations business area where the main driver was shopping centre projects and Public Sector business area where the growth was supported by the ongoing school projects. The sale of Consti’s relining business had a positive effect of EUR 1m on the company’s profitability. Excluding the sale, profitability was roughly at the same level seen during Q3/22. The company’s EBIT for Q3 2023 amounted to EUR 4.8m (Q3/22 3.3m) with a margin of 5.3% (Q3/22 4.2%).

 

Revised FY 23E estimates push the guidance range top

With the first three quarters of the FY in the books, Consti’s EBIT stands at EUR 8.4m, not very far from the lower end of the current guidance range which stays unchanged (Consti estimates that 2023 EBIT will be in the range of EUR 9.5-13.5m). Our revised estimate for the company’s net sales is EUR 330.7m for FY 2023 and we forecast EBIT of EUR 13.4m, which pushes the top of the current guidance range. We see that the growth continues in Q4, albeit at a slower rate when compared to Q3 with similar margin levels compared to Q4/22. We have revised our growth estimates for 2024E slightly as we see increased softness in the renovation construction market. However, in our view Consti is still well positioned within the renovation segment and operates in regions which are affected to a lesser extent.

 

BUY with a TP of EUR 13.0 (14.0)

With our revised estimates, we adjust our target price to EUR 13 (prev. EUR 14.0). We still see the company’s valuation undemanding with multiples clearly below the peers despite Consti being active in the more stable renovation construction market. In addition to peer group multiples, Consti trades at a discount to its own historic multiple levels despite the strong performance witnessed during FY 22-23.

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Vaisala - Navigating through the tougher market

30.10.2023 - 06.30 | Company update

Vaisala delivered strong profitability amid a difficult market for Q3. Net sales fell short of our estimates, yet EBIT was robust. After minor estimate revisions, we adjust our TP to EUR 37.0 (prev. EUR 39.0) with BUY rating intact.

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Solid Q3 figures despite the difficult market

Vaisala’s net sales decreased by 2% (+2% excl. FX) to EUR 130.4m, below our estimates (139.2/137.8m Evli/cons.). The sales decline was mostly driven by the IM segment and FX effects for both of the segments. Through improved gross margin and cost discipline in OPEX, the company’s EBIT improved to EUR 25.2m (EUR 22.0m Q3/22). The main driver behind the gross margin improvement was the significantly lower impact of the spot component purchases. W&E order intake was 2% lower (+2% FX) yet the backlog at the end of the period increased 7% y/y to EUR 131.5m. IM order intake decreased 14% (-8% FX) and the order backlog stood at EUR 34.3m at the end of period, down 12% y/y. Vaisala now sees that the markets for high-end industrial instruments and life science have somewhat declined and do not expect recovery this year.

 

Slower growth expected, yet margins stay firm

With the lower than anticipated sales for IM and declined outlook for some of the markets, we have taken growth estimates down for both Q4 2023 and 2024E. We also updated our growth projections for W&E, and despite the revisions, we continue to anticipate y/y growth in the fourth quarter of 2023. Moreover, we have slightly reduced our W&E growth predictions for 2024E. In terms of profitability, we upgraded our estimates for IM as the Q3 showed a quick rebound from the lower levels of Q2. With the estimate adjustments, we now expect net sales of EUR 538.1m and reported EBIT of EUR 68.9m for FY 2023. Our updated estimate is well within the guidance range as Vaisala kept its guidance for 2023 unchanged at net sales of EUR 530-560m and EBIT of EUR 65-75m.

 

BUY with a TP of EUR 37.0 (39.0)

With the slight adjustments to our estimates and lower peer group multiples, we revise our TP to EUR 37.0 (39.0) while keeping the rating at BUY. We continue to consider Vaisala as moderately valued, trading at a roughly 10% discount compared to our peer group on adj. EV/EBIT basis (23-24E).

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Enersense - Scope for further earnings gains

29.10.2023 - 23.00 | Company update

Enersense’s revenue continued to grow strong in Q3, however the ERP investment costs limited profitability potential while the segments’ margins are still improving. In our view growth will stabilize while earnings climb more.

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High growth, earnings are still burdened by investments

Enersense’s Q3 revenue grew 46% y/y to EUR 94m, above our EUR 80m estimate as all other segments except Connectivity grew faster than we estimated. The EUR 3.9m EBITDA, however, missed our EUR 5.2m estimate. The earnings miss was attributable to the ERP investment costs as segmental profitability levels were as a group in line with our estimates. Investments in the EV charging business somewhat limited Power’s profitability, and Smart Industry still has room to improve as its offshore business continues to scale up. Enersense revised its revenue guidance upwards, which wasn’t a surprise given the high demand; next year’s growth is likely to be much more modest, but profitability has a lot more room to gain. Enersense’s guidance leaves the range for Q4 EBITDA rather wide (including wind farm projects within Power) as investments continue while there are still variables related to seasonality and larger projects.

Most segments continue to grow next year

ERP investments burden Q4 and next year to some extent, whereas Power’s EV charging investments aren’t that large at group level. Connectivity and Power have scope to grow also next year thanks to their order backlog, while the offshore scale up drives Smart Industry. The Baltic business has turned around in terms of profitability after a period of high inflation, however International Operations may not grow next year as order backlog has peaked and it needs to find new growth opportunities. In our view this shouldn’t be a long-term problem but it demands some time and effort.

Earnings growth implies low multiples going forward

We estimate around 4% growth for next year, not that much compared to this year’s estimated 24% rate, yet margins are set to improve further. We continue to estimate Enersense’s FY ’24 EBITDA at some EUR 22m; Enersense is therefore valued around 7x EV/EBIT on our FY ’24 estimates, a significant peer discount. Our new TP is EUR 5.0 (7.0) as we retain BUY rating.

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Detection Technology - Earnings about to pick up more

29.10.2023 - 22.25 | Company update

DT’s cost measures were visible in Q3 figures, and SBU-driven growth is to show more earnings gains next year.

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Revenue in line with estimates, earnings continue to gain

DT’s Q3 revenue declined 10% y/y to EUR 24.5m vs the EUR 24.8m/24.6m Evli/cons estimates. MBU was soft relative to our estimate, due to a Chinese anticorruption campaign (a short-term issue but not a long-term problem) and a high comparison period, while SBU came in above our estimate. There was nothing special to note about the sales mix, however DT’s EUR 2.2m adj. EBITA was above our EUR 1.6m estimate as personnel cost reductions helped profitability a bit more than we estimated. DT’s comments about Q4 growth didn’t come as a surprise, and we estimate SBU to contribute the most growth in Q4 and next year as well. We make only small estimate revision following the report.

MBU and IBU have short-term challenges, but SBU drives

IBU still missed organic growth, but we continue to estimate its FY ’24 growth in the double-digits. MBU should also show signs of improvement, but we don’t expect it to be such a major driver in the short-term as the Chinese medical markets are going through a period of reform (Chinese pricing pressure also remains intense). We estimate DT to grow some 13% next year and its majority should be driven by SBU; the security solutions market is underpinned by favorable long-term demand trends, whereas the aviation market’s rebound has been due for some time and is set to continue at least over the course of next year. CT investments are materializing and SBU grows even if the Chinese market remains challenging in the short-term (some of the latest relevant projects include airports in e.g. Munich and Mumbai). We estimate the high single-digit growth seen for Q4 to add some further EUR 1m y/y in earnings even though its comparison period wasn’t too bad either.

Valuation not demanding as earnings improve further

We estimate DT’s FY ’24 operating margins comfortably in the double digits, which would be roughly a 500bps increase. Such an improvement implies a multiple of only around 10x in terms of EV/EBIT and represents a meaningful discount relative to peers. We update our TP to EUR 13.5 (13) and retain BUY rating.

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Suominen - Upside rests on volume gains

29.10.2023 - 22.05 | Company update

Suominen’s earnings still missed estimates as top line remained very soft. The market challenges continue, while raw materials dynamics and Suominen’s own actions have also helped margins. We see increased uncertainty around earnings improvement pace going forward.

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Some more improvement to be expected going forward

Suominen’s Q3 revenue fell 19% y/y to EUR 106m vs the EUR 129m/120m Evli/cons estimates. Americas declined and Europe even more so as the closure of the Mozzate plant caused some more volume softness. Low raw materials prices further dragged nonwovens prices down, however sales margins have improved due to the mechanism pricing lag. Suominen’s EUR 5.2m comparable EBITDA still missed our EUR 6.2m estimate, however the 6% gross margin (a gain of more than 300bps q/q) was relatively strong in the light of the considerable top line softness. In our view this is partly a result of the current raw materials market dynamic but also reflects Suominen’s own actions to improve mix, in addition to finding additional cost measures.

We cut FY ’24 earnings estimates by additional EUR 4m

European volumes are to remain soft; the market continues to be challenging also in the US, although less so. The challenges have been prolonged for a while, and as a result Suominen’s own actions to help margins have gained even more importance. The Mozzate closure achieved cost reductions, and its volumes have been transferred to other plants, but some volumes have also slipped. Suominen retains guidance for higher FY ‘23 EBITDA although the game remains flat so far into the year. We revise our estimates down due to the lower-than-estimated revenue levels; we estimate Q4 gross margin to gain another 300bps even if top line stays at a similarly low level as seen over the course of this year. We thus estimate Q4 EBITDA at EUR 7.9m.

A lot of uncertainty around next year’s earnings gain pace

Valued at 8.5x EV/EBIT on our FY ’24 estimates, which is not a particularly low multiple, the valuation reflects improvement going forward. Better market conditions, on top of Suominen’s own measures, could drive significantly higher earnings next year. Higher volumes would support valuation, but uncertainty around their recovery and margin gains pace still limit upside potential. Our TP remains EUR 2.7 as we retain HOLD rating.

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Scanfil - High margins to be maintained

29.10.2023 - 21.40 | Company update

Scanfil’s Q3 results landed quite near estimates. In our view growth is bound to moderate next year, but EBIT should stay high at around EUR 60m as current volumes hold up.

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Q3 near estimates, already signs of moderating growth

Scanfil’s Q3 revenue remained roughly flat at EUR 213m, compared to the EUR 219m/216m Evli/cons estimates. Growth excluding spot market purchases was still a very decent 9% y/y, which can be compared to the roughly 5-7% long-term CAGR prospects seen in the relevant niches of the EMS industry, although already clearly lower than the 30% rate clocked in Q2. In our view it has long been evident growth will have to settle down a bit no matter how favorably positioned Scanfil’s customer portfolio may be. We note so far Scanfil’s customer outlook changes have been rather small. EBIT amounted to EUR 15.2m vs the EUR 15.7m/15.3m Evli/cons estimates while the margin was still a very good 7.2%.

We expect only marginal growth in the short-term

We estimate Q4 figures a bit above the midpoints of their respective guidance ranges, while there’s still quite a lot of uncertainty regarding where the underlying volume growth rate will settle next year. We estimate only rather marginal growth for FY ’24-25 relative to the 5-7% long-term potential/target rates following recent years’ double-digit CAGR. Scanfil will review its annual strategy early next year; we wouldn’t expect very significant or visible changes at this point as Scanfil already has a high-performing two-tiered plant network and customer portfolio focused on attractive OEMs, many of them driven by megatrends related to e.g. green energy transition. In our view Scanfil might look to find more small but high-growth accounts within Energy & Cleantech and Medtech & Life Science, however such efforts will take time to make a visible impact on figures even when successful.

EBIT to remain above EUR 60m with a CAGR of 2%

We continue to estimate 7% EBIT margins going forward; EBIT should stay above EUR 60m assuming a relatively flat top line for the next couple of years. Scanfil is valued around 7.0-7.5x EV/EBIT on our FY ’23-24 estimates, which still represents an attractive discount relative to peers even if their multiples have declined a bit lately. We retain our EUR 9.0 TP and BUY rating.

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Enersense - High growth, margins to improve

27.10.2023 - 12.30 | Earnings Flash

Enersense’s Q3 revenue topped our estimate, while profitability figures came in below our estimates. International Operations and Connectivity achieved margin improvement, while investments burdened Smart Industry and Power profitability.

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  • Enersense Q3 revenue increased by 46.2% y/y to EUR 94.2m, compared to our EUR 80.0m estimate. Higher volumes in service and project businesses drove 74% y/y growth for Smart Industry. Strong order backlog drove Power’s 51% growth, while International Operations’ 40% growth was mainly due to the Baltic high-voltage power line construction projects. Connectivity also grew by 20%.
  • EBITDA landed at EUR 3.9m vs our EUR 5.2m estimate, while EBIT was EUR 1.6m vs our EUR 2.9m estimate. Power’s profitability remained flat y/y as it was burdened by investments in the EV charging solutions business. Connectivity and International Operations showed the best performance in terms of improving profitability. Connectivity’s higher volumes and improved operational efficiency helped results, and higher costs were transferred to sales prices. The segment also continues to improve in these respects. International Operations’ comparison figures were burdened by steep increases in material and other costs in the Baltics.
  • Order backlog stood at EUR 511m at the end of Q3 (EUR 385m a year ago). Order backlog grew the most in Connectivity, but also within Power. Smart Industry and International Operations backlogs remained rather flat y/y.
  • Enersense guides FY ‘23 adjusted EBITDA in the range of EUR 12-18m (unchanged), but now expects revenue to be over EUR 330m (previously over EUR 300m).

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Suominen - Still soft, but margins improve

27.10.2023 - 10.00 | Earnings Flash

Suominen’s Q3 revenue fell clearly below our estimate, however profitability figures landed surprisingly close to our estimates in this light. In our view the relatively high margins imply continued profitability improvement going towards next year.

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  • Suominen’s Q3 revenue decreased by 19% y/y to EUR 106.4m, compared to the EUR 129.0m/120.4m Evli/consensus estimates. Americas landed at EUR 70.9m vs our EUR 80.0m estimate. Europe amounted to EUR 35.6m while we estimated EUR 49.0m. Sales volumes decreased following the closure of the Mozzate plant in Italy in Q2. Currencies had a negative top line impact of EUR 5.2m. Sales prices continued to decrease following lower raw material prices.
  • Gross profit came in at EUR 6.4m, compared to our EUR 8.4m estimate. Gross margin was 6.0% vs our 6.5% estimate, a relatively strong performance considering the low top line.
  • Comparable EBITDA was EUR 5.2m vs our EUR 6.2m estimate. Comparable EBIT amounted to EUR 0.7m, compared to our EUR 1.2m estimate. Increased sales margins helped profitability.
  • Suominen guides comparable EBITDA to increase in FY ’23 compared to previous year (unchanged). Suominen sees, at the moment, positive signs in its business environment in 2024.

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Vaisala - Profitability improved above estimates

27.10.2023 - 09.40 | Earnings Flash

Vaisala posted Q3 results with net sales slightly below our expectations, yet EBIT was very strong and above our estimates driven by even stronger gross margin improvement than expected.

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  • Q3 group result: Orders received decreased by 8% y/y while order book stood at EUR 165.8m (+2%). Group net sales decreased by 2% to EUR 130.4m, slightly below above our estimates (139.2/137.8m Evli/cons.). Sales decline was mostly driven by the IM segment and FX effects for both of the segments. Gross margin improved to a very strong level of 58% (54.7% Q3/22). EBIT amounted to EUR 25.2m (23.8/24.5m Evli/cons.), reflecting a margin of 19.3%. EBIT improvement was mainly driven by the gross margin development. EPS amounted to EUR 0.51 (0.50/0.52m Evli/cons.).
  • Industrial measurements (IM): Orders decreased by 14% (FX -8%) y/y and order book declined to EUR 34.3m (-12%). Net sales decreaed by 6% y/y to EUR 53.9m (FX 0%), below our estimates (Evli: 56.1m). Net sales decreased in life science and industrial instruments market segments, in liquid measurements market sales were flat. On the other hand, net sales in power and energy market segment grew very strongly. EBIT amounted to EUR 14.7m (27.3% margin) and was driven by lower amount of component spot purchases, price pressure especially in China and unfavorable product mix continued to burden the gross margin.
  • Weather and Environment (W&E): Orders received declined by 2% (FX 2%) y/y yet order book was up by 7% y/y. W&E’s net sales grew by 1% (FX 4%) to EUR 76.4m, slightly below our estimates (Evli: 83.1m). The growth was strong in road weather and automotive and renewable energy, yet aviation market segment was down. Similarly to IM, improved gross margin due to lower amount of component spot purchases drove EBIT margin to 13.7% (9.9%).

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Detection Technology - Profitability higher than estimated

27.10.2023 - 09.30 | Earnings Flash

DT’s Q3 revenue declined y/y much as expected, however profitability figures came in a bit above our estimates as cost measures have already had an effect.

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  • DT Q3 revenue decreased by 10.2% y/y to EUR 24.5m, compared to the EUR 24.8m/24.6m Evli/consensus estimates. Adjusted EBITA landed at EUR 2.2m vs our EUR 1.6m estimate. Profitability measures helped already more than we estimated.
  • Medical (MBU) top line declined by 27.0% y/y to EUR 10.8m vs our EUR 11.7m estimate. Decrease in sales was attributable to both a new anticorruption campaign in China and a high comparison period.
  • Security (SBU) revenue increased by 13.7% y/y to EUR 9.7m, compared to our EUR 9.1m estimate. Activity and demand continued to recover in all security applications and especially in aviation.
  • Industrial (IBU) grew by 1.6% to EUR 4.0m vs our EUR 4.0m estimate. Sales were negatively impacted by low food industry demand.
  • DT expects its revenue to grow in Q4’23 (all segments grow, high single-digit growth in group revenue) as well as in Q1’24. China should grow too in Q4.

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CapMan - Near-term softness persists

27.10.2023 - 09.30 | Company update

CapMan’s Q3 was below estimates mainly due to carry and FV changes. Potential appears to remain high but near-term market conditions remain uncertain.

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Below expectations mainly through carry and FV changes
CapMan reported Q3 results somewhat below our expectations. Revenue amounted to EUR 13.7m (EUR 17.3m/17.3m Evli/Cons.) while operating profit amounted to EUR 4.8m (EUR 7.0m/7.2m Evli/cons.). The main difference to our estimates came from the Management Company business, with limited carried interest and management fees also on the softer side due to limited new fundraising. Fair value changes were further slightly below our expectations. Assets under management amounted to EUR 5.0bn, on par with previous year levels. CapMan updated it distribution policy, aiming to 70% of profits attributable to equity holders excl. FV change impact and may additionally pay out distributions accrued from investment operations. The BoD is expected to propose a DPS of EUR 8-12 cents to the 2024 AGM, a notable decrease from a DPS of EUR 17 cents in 2023. 

Near-term still appears slow
Performance remains weakened by low carried interest and FV changes and signs of significant near-term improvement in that regard are limited. Our revised 2023e estimates for revenue and operating profit are EUR 61.2m (68.7m) and EUR 13.7m (22.5m) respectively, and our 2024 operating profit estimate is down by ~20%, anticipating a slower start to the year. Although not visible in the financial performance, near-term activity appears reasonably high through the fundraising pipeline and carry potential, with the Services business also continuing solid performance. We also interpret management comments as likely M&A activity in the near-term. The main uncertainties remain the timing uncertainty and investor demand. 

BUY with a target price of EUR 2.4 (2.8)
With our lowered estimates and the reduced distribution outlook, we lower our TP to EUR 2.4 (2.8). CapMan is clearly gearing up for growth and the current valuation in our view does not reflect the earnings potential in coming years.

Open report

Consti - Strong performance

27.10.2023 - 09.00 | Earnings Flash

Consti's net sales in Q3 amounted to EUR 89.9m above our estimates (Evli est. EUR 81.5m.), with growth of 13.8% y/y. EBIT amounted to EUR 4.8m, clearly above our estimates (Evli est. EUR 3.4m) driven partly by the sale of the company’s relining business.

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  • Net sales in Q3 were EUR 89.9m (EUR 79.0m in Q3/22), above our estimates (EUR 81.5m). Sales grew 13.8% y/y.
  • Operating profit in Q3 amounted to EUR 4.8m (EUR 3.3m in Q3/22), above our estimates (EUR 3.4m) at a margin of 5.3% (4.2%).
  • A gain recognised on the sale of Consti’s property-related relining business at the end of the reporting period amounting approximately EUR 1m supported the profitability in the third quarter.
  • EPS in Q3 amounted to EUR 0.47 (EUR 0.32 in Q3/22), also above our estimates (EUR 0.32)
  • The order backlog at the end of Q3 was EUR 247.3m (EUR 210.5m in Q3/22), up by 17.5% y/y. Order intake was EUR 23.2m in Q3 (Q3/22: EUR 38.4m).
  • Free cash flow amounted to EUR 7.1m (Q3/22: EUR 5.8m).
  • When adjusting for the sale of the company’s relining business, Consti beat our net sales estimates by 10% and EBIT estimates by 12%
  • Order backlog strengthened y/y yet was already at a lower level when compared to H1/23. In addition, the order intake fell y/y, on the other hand, Q2 order intake was very strong and Q3 is typically slower on the order intake side.
  • Guidance for 2023 (unchanged): Operating result for 2023 will be in the range of EUR 9.5–13.5 million

Open report

Scanfil - Q3 was largely as expected

27.10.2023 - 08.30 | Earnings Flash

Scanfil’s Q3 figures were mostly as estimated. The headline revenue figure remained flat, but growth excluding spot market purchases was 9%. The EUR 15.2m EBIT also landed near estimates, and guidance implies Q4 sees similar levels of profitability.

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  • Scanfil Q3 revenue grew by 0.4% y/y to EUR 212.8m vs the EUR 218.9m/215.9m Evli/consensus estimates. Growth excluding spot market purchases was 9%.
  • Advanced Consumer Applications was EUR 49.8m, compared to our EUR 59.0m estimate, while Energy & Cleantech amounted to EUR 73.5m vs our EUR 63.2m estimate. Automation & Safety landed at EUR 42.2m, compared to our EUR 45.5m estimate. Energy & Cleantech continued to grow at a 38% y/y rate.
  • EBIT amounted to EUR 15.2m, compared to the EUR 15.7m/15.3m Evli/consensus estimates, and hence operating margin was 7.2%. Good customer demand continued and supply chain challenges further eased. Scanfil has also focused on automation and digitalization to improve operational efficiency.
  • Scanfil guides FY ’23 revenue to be in the range of EUR 880-920m and adjusted EBIT of EUR 60-66m (updated on Oct 10), which implies respective Q4 revenue and EBIT guidance midpoints of EUR 219m and EUR 15.1m.

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Solteq - Shifting course slowly but steadily

27.10.2023 - 07.15 | Company update

Solteq’s Q3 was slightly upbeat despite the weak figures and the company remains on track on its turnaround trip. We have slightly softened our growth expectations for 2024 and adjust our TP to EUR 0.85 (0.90).

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Some more positive signs in Q3
Solteq reported slightly upbeat Q3 results. Revenue grew 1.9% in comparable terms to EUR 12.2m (Evli EUR 12.6m) and the adj. EBIT amounted to EUR -0.7m (Evli EUR -1.2m). The performance of Retail & Commerce was on the positive side, growing slightly y/y in comparable terms while successful cost control saw profitability improve to rather decent figures, with the adj. EBITDA-% up to 11.3%. In Utilities, profitability remained weak, as was still to be expected. 

Return to profitability next year
Overall, the Q3 report did not notably change our views on Solteq’s equity story. We assess a slightly slower pick-up in growth in the near-term than previously anticipated. We have slightly revised our 2023e estimates based mainly on the Q3 results. Solteq concluded the change negotiations in the Utilities-segment and expects annual cost savings of EUR 3.8m, to be visible largely in 2024. We expect the growth potential in Utilities to start to materialize more visibly in the second half of 2024 and with the cost savings the profitability to improve substantially next year. In Retail & Commerce we now expect a slightly more modest growth given the market situation, in comparable terms in the lower to mid single-digits with margins improving slightly y/y. For Solteq, we expect revenue to decline 2.5% in 2024, impacted by the divestment this year, and the adj. EBIT-% to improve to 3.4% from -5.6% in 2023e.

HOLD with a target price of EUR 0.85 (0.90)
In light of our revised estimates, we lower our TP to EUR 0.85 (0.90). On our estimates, the valuation is stretched on 2024e figures, but the upside potential is significant on 2025e figures, should the Utilities-segment start to perform closer to its potential. That path is, however, still riddled with uncertainty. 

Open report

SRV - Upgrade to BUY

27.10.2023 - 06.30 | Company update

SRV delivered encouraging Q3 results considering the current market conditions. Despite net sales being slightly below our estimate (EUR 146.9m, EUR 151.7m Evli est.), operative profitability outperformed expectations (EUR 4.6m, EUR 1.6m Evli est.).

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Strong operational profitability eases the burden for Q4

With the operative EBIT of EUR 4.6m for Q3, SRV’s YTD operative EBIT is at EUR -1.3m. The company kept its outlook unchanged and expects that operative EBIT is positive, but lower than in 2022. With the robust backlog that consists mostly of lower risk cooperative business premises contracts, we now see the risk of falling short of the guidance low. We also see that the strong, lower risk backlog, EUR 995.6m at the end of Q3, supports the development in the coming years, especially during FY 2024.

 

Business construction continues to drive the growth

We have made positive estimate adjustment for both Q4 2023 and the coming years. We now estimate that the business construction revenue growth will be even stronger than earlier expected in Q4 2023 and in 2024E driven by the solid order backlog. Our estimates for housing construction have been reduced due to the lack of an immediate market upturn, which aligns with the current forecasts for Finnish housing construction volumes for both 2023 and 2024. With the increase in group-level revenue growth, our operative EBIT estimate for FY 2023 has been increased to EUR 5.2m (previously EUR 1.1m), and for FY 2024E to EUR 18.7m (previously EUR 15.5m), implying an operative EBIT margin of 2.5% (previously 2.2%).

 

BUY (HOLD) with a TP of 4.0 (4.3)

SRV remains in a strong position to navigate the challenging construction market. Several positive factors support the case including a healthy balance sheet, low amount of unsold developer contracted units, a solid backlog of lower-risk business construction projects and a positive operative profitability for Q3 that also decreases the risk for falling short of the current guidance. We have adjusted our target price to EUR 4.0 (down from EUR 4.3) in response to lower peer group multiples. Following a roughly 15% decrease in share price since our last report, we upgrade our rating to BUY (prev. HOLD).

Open report

Dovre - Stabilizing EBIT after high growth

26.10.2023 - 20.20 | Company update

Dovre’s Q3 EBIT topped our estimate as Project Personnel drove results. We see only moderate earnings growth prospects in the short term, yet valuation is undemanding.

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Project Personnel helped EBIT amid high comparison figures

Dovre’s Q3 revenue fell 11.6% y/y to EUR 52.8m, close to our EUR 53.5m estimate. Top line would have been some 5% better than that at fixed FX rates as weak NOK had an impact. Renewable Energy was expected to decline relative to a more favorable comparison period, but its 38% y/y fall was clearly steeper than we estimated. The segment’s EBIT, however, was a bit better than expected. Consulting figures didn’t meet our estimates, but their softness was more than compensated by Project Personnel; the segment’s 6% EBIT margin helped drive Dovre’s EUR 2.7m EBIT above our EUR 2.2m estimate.

We estimate annual EBIT to pick up from around EUR 7m

In our opinion Project Personnel will not find annual 4% EBIT margin too high a hurdle, and hence we view EUR 4.5m EBIT a reasonable level for next year, assuming moderate growth. The segment could even land near EUR 5m annual EBIT, while Consulting’s annual rate appears to be roughly EUR 2m for now. In our view Consulting’s longer-term potential remains closer to EUR 3m should growth and margins pick up again. Renewable Energy still has most long-term upside, but a more challenging Finnish wind power construction market limits its potential for now. Both Consulting and Renewable Energy continue to face high comparison figures also for Q4, and neither were those of Project Personnel soft. We thus believe Dovre’s Q4 EBIT will weaken by some EUR 1m y/y. For next year we expect some reversion as Consulting and Renewable Energy will have room to improve, whereas Project Personnel may remain a bit soft or flat.

Short-term earnings growth modest, yet valuation is low

We estimate FY ’24 EBIT at EUR 7.3m, which would be only a marginal improvement on our FY ’23 estimate of EUR 7.1m. In our view Dovre still has potential to reach above 4% EBIT margin in the long-term as Consulting and Renewable Energy return to growth. Meanwhile valuation implies very modest expectations; Dovre is valued only some 6x EV/EBIT (excl. 49% of Renewable Energy EBIT) and peer multiples have also declined recently. We revise our TP to EUR 0.65 (0.80) and retain BUY rating.

Open report

Raute - Progress despite market challenges

26.10.2023 - 20.00 | Company update

Raute’s Q3, like its orders, showed twofold developments as margins were relatively high while market uncertainty has increased even further in Europe.

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Q3 margins were already quite high, order intake was soft

Raute’s EUR 34.0m Q3 top line fell short of our EUR 39.2m estimate as order book mix (tilted to large projects) and the new ERP system’s adoption caused Wood Processing and Services revenue to be soft. Raute’s EUR 3.0m comp. EBITDA was nonetheless as we estimated as the improvement program has yielded results, and it should also be noted Analyzers mix wasn’t particularly favorable. The EUR 19m order intake fell clearly short of our EUR 29m estimate, which by itself isn’t a very significant issue since there’s always some quarterly variation; this time there were also postponed North American orders, but at least so far order prospects haven’t vanished. Services’ order activity isn’t too bad, but short-term market uncertainty has increased further in Europe (by contrast demand remains good in North America); the softwood plywood market has been weak for a while and the sentiment seems to have spread to birch plywood as well.

Smaller European orders may still be missed for a while

The report was twofold in the sense that relative profitability was higher than we estimated, while outlook for smaller orders has worsened in Europe as construction industry challenges continue. Raute’s improvement program will achieve EUR 4-5m in annual cost savings by the end of this year; Raute returns to growth next year and needs to hire some additional labor, but in our view this is not a major issue from the perspective of productivity and earnings. There’s likely to be at least some q/q pick up in Q4 order intake (thanks to North America), but a prolonged dearth in European production line and spare parts orders would cast some more uncertainty around the pace of next year’s earnings improvement.

Valuation implies a lot of uncertainty around FY ’24 EBIT

Raute’s strategy execution is on track and we continue to see the company headed towards EUR 10m EBIT over the next few years. European market softness remains the most significant source of short-term uncertainty, but we still see EUR 8m EBIT within reach next year. Raute is valued below 5x EV/EBIT on that basis. We retain our EUR 12.0 TP and BUY rating.

Open report

Alisa Bank - Significant challenges

26.10.2023 - 09.45 | Company update

Alisa Bank’s equity story took a hit from challenges relating to strengthening of the capital structure and growth is delayed. We lower our TP to EUR 0.2 (0.37), rating now SELL (HOLD).

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Capital structure strengthening not going as planned
Alisa Bank issued a profit warning on October 24th in terms of its income development. Previously the company expected its income to increase in H2 compared with H1, now estimated to decrease. The bank’s profit before non-recurring items is still estimated to be positive in 2023. Alisa Bank’s procedures aimed at strengthening the capital structure have not progress on schedule due to the unfavourable market situation, earlier aimed for H2/2023. The decrease in income in H2 compared with H1 is due to the bank’s capital adequacy target limiting lending, as well as prudence in lending, especially for business customers, where the weakened economic situation in particular for the construction sector is starting to show.

Clear setback to growth ambitions
The situation is a double-negative for Alisa Bank, as without a strengthening of the capital structure the capital adequacy targets hinder growth in the loan portfolio, while the market situation in itself is further unsupportive of growth. Based on the current outlook we assume that additional financing will be secured in 2024, delaying the growth ambitions significantly. We have as such lowered our coming year estimates notably. 

SELL (HOLD) with a target price of EUR 0.2 (0.37)
With the challenges in strengthening the balance sheet, a severe dent is in made in the company’s equity story, as the growth outlook and as such reaching any meaningful levels of profitability is delayed and highly uncertain. The company targets a ROE of over 15% by 2026. Without additional funding and related loan book growth potential, Alisa Bank will have a hard time achieving a ROE figure above the lower single digits. As such the current valuation (2023e P/B ~0.8x) is a stretch and with the uncertainty and risks related to the financing we lower our TP to EUR 0.2 (0.37) and lower our rating to SELL (HOLD).

Open report

SRV - Solid performance in a tough market

26.10.2023 - 09.30 | Earnings Flash

SRV's net sales in Q3 amounted to EUR 146.9m, only slightly below our estimate of EUR 151.7m. Operative profitability was significantly better than expected, with operative EBIT at EUR 4.6m (EUR 1.6m Evli).

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  • Revenue in Q3 was EUR 146.9m (EUR 186.8m in Q3/22), slightly below our estimate of EUR 151.7m. Revenue declined 21% y/y.
  • The operative operating profit in Q3 amounted to EUR 4.6m, clearly above our estimate of EUR 1.6m.
  • EBIT was at EUR -4.9m, with EUR -9.5m effect coming from the sale of most of the remaining Russian assets during the quarter as communicated earlier by the company (we did not include the effect in our estimates)
  • SRV’s order intake during Q3 was roughly at the level of last year, at EUR 132.5m (EUR 135.0m in Q3/22).
  • The order backlog at the end of Q3 was EUR 995.6m (EUR 717.1m in Q3/22), up by 39% y/y.
  • Business construction revenue in Q3 was EUR 130.5m (EUR 114.4m Evli estimate). The strong business construction revenue was driven by the robust backlog of project management and alliance projects.
  • Housing construction revenue in Q3 was EUR 16.3m (EUR 36.9m. Evli estimate). The housing construction activity was even weaker during the quarter than we had previously estimated with zero developer-contracted residential units recognized as income and only 541 residential units under construction at the end of September.
  • The report’s clear positive was the company’s business construction operations where the volumes increased at an even faster rate than we had expected which led to improved profitability for the segment.
  • Outlook for 2023 remains unchanged.

Open report

Dovre - Earnings clearly above our estimates

26.10.2023 - 09.30 | Earnings Flash

Dovre’s Q3 revenue was close to our estimate as Project Personnel landed significantly higher while Consulting and Renewable Energy were soft. Meanwhile earnings came in clearly above our estimates, driven by Project Personnel’s performance.

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  • Dovre Q3 revenue declined by 11.6% y/y to EUR 52.8m, compared to our EUR 53.5m estimate. The figure would have decreased 6.4% at fixed exchange rates as weak NOK had an impact. Project Personnel was EUR 28.8m vs our EUR 23.3m estimate, while Consulting landed at EUR 3.5m vs our EUR 4.1m estimate. Renewable Energy was EUR 20.5m, compared to our EUR 26.1m estimate.
  • EBITDA came in at EUR 2.9m vs our EUR 2.4m estimate, while EBIT was EUR 2.7m vs our EUR 2.2m estimate. Project Personnel EBIT amounted to EUR 1.7m, compared to our EUR 1.1m estimate, whereas Consulting was EUR 0.4m vs our EUR 0.6m estimate. Renewable Energy was EUR 0.9m, compared to our EUR 0.8m estimate.
  • New activities include a major biodiesel refinery project in Canada (Project Personnel), a new multi-year framework agreement with the Ministry of Finance (Consulting), and a Fortum heat-exchange power plant in Finland as well as an “early works contract” for two large wind farms in Sweden (Renewable Energy).
  • A ransom attack on Norwegian operations in late September impacted systems. Dovre has recovered from the incident without interruption to its services and has used the opportunity to transfer to cloud-based financial systems. The move will yield lower costs for the financial function in Norway starting from Q4’23.
  • Dovre guides FY ’23 revenue in the range of EUR 185-195m and EBIT at above EUR 7.0m (unchanged).

Open report

CapMan - Fairly decent quarter

26.10.2023 - 09.15 | Earnings Flash

CapMan's net sales in Q3 amounted to EUR 13.7m, below our estimates and below consensus (EUR 17.3m/17.3m Evli/cons.). EBIT amounted to EUR 4.8m, also below our estimates and below consensus (EUR 7.0m/7.2m Evli/cons.). Apart from carried interest, CapMan’s Q3 profitability was fairly in line with expectations.

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  • Revenue in Q3 was EUR 13.7m (EUR 15.9m in Q3/22), below our estimates and consensus estimates (EUR 17.3m/17.3m Evli/Cons.). Growth in Q3 amounted to -14% y/y.
  • Operating profit in Q3 amounted to EUR 4.8m (EUR 12.7m in Q3/22), below our estimates and consensus estimates (EUR 7.0m/7.2m Evli/cons.), at a margin of 35.1%. The main difference to our estimates came from carried interest (EUR 0.3m/EUR 2.0m actual/Evli).
  • EPS in Q3 amounted to EUR 0.02 (EUR 0.06 in Q3/22), slightly below our estimates and consensus estimates (EUR 0.03/0.03 Evli/cons.).
  • Revenue in Management Company business in Q3 was EUR 11.1m vs. EUR 14.6m Evli. Operating profit in Q3 amounted to EUR 3.6m vs. EUR 5.4m Evli. 
  • Revenue in Investment business in Q3 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q3 amounted to EUR 0.9m vs. EUR 1.4m Evli. 
  • Revenue in Services business in Q3 was EUR 2.5m vs. EUR 2.5m Evli. Operating profit in Q3 amounted to EUR 1.4m vs. EUR 1.6m Evli. 
  • Capital under management by the end of Q3 was EUR 5.02bn (Q3/22: EUR 5.04bn). Real estate funds: EUR 3.05bn, private equity & credit funds: EUR 0.97bn, infra funds: EUR 0.55bn, and wealth management funds: EUR 0.46bn.

Open report

Raute - Decent profitability, low orders

26.10.2023 - 09.00 | Earnings Flash

Raute’s Q3 revenue was meaningfully lower than we estimated, yet absolute profitability figures were still in line with our estimates as the company’s improvement program has produced results. Order intake was quite a bit lower than we estimated, but we believe Q4 orders should show at least some q/q improvement.

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  • Raute Q3 revenue declined by 18.5% y/y to EUR 34.0m, compared to our EUR 39.2m estimate. Wood Processing came in at EUR 21.5m vs our EUR 24.7m estimate. Services amounted to EUR 8.0m, compared to our EUR 9.8m estimate, while Analyzers was EUR 4.6m vs our EUR 4.7m estimate. The new ERP system’s implementation affected Wood Processing and Services sales.
  • Comparable EBITDA was EUR 3.0m vs our EUR 3.0m estimate, whereas EBIT landed at EUR 1.4m vs our EUR 1.5m estimate. The profitability improvement program’s progress supported profitability. The program should achieve EUR 4-5m annual cost savings by the end of this year.
  • Q3 order intake amounted to EUR 19m, compared to our EUR 29m estimate. Order intake mainly consisted of after-sales services and modernization projects, while some orders were postponed to Q4. Increased short-term market uncertainty impacts the demand for single production lines and spare parts.
  • Order book was EUR 192m at the end of Q3 (EUR 94m a year ago). Raute has no more order book left to be delivered to Russia.
  • Raute guides FY ‘23 revenue to be in the range of EUR 140-150m and comparable EBITDA margin at above 6% (guidance updated on Oct 19).

Open report

Solteq - Some signs of improvement 

26.10.2023 - 08.45 | Earnings Flash

Solteq’s Q3 results were as expected rather weak but revenue turned to growth in comparable terms and profitability was better than feared. Revenue was at EUR 12.2m (Evli EUR 12.6m) and adj. EBIT at EUR -0.7m (Evli EUR -1.2m).

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  • Net sales in Q3 were EUR 12.2m (EUR 14.4m in Q3/22), slightly below our estimates (Evli EUR 12.6m). Revenue declined 14.9% y/y in Q3. In comparable terms revenue grew by 1.9% y/y.
  • The operating profit and adj. operating profit in Q3 amounted to EUR -0.7m/-0.7m respectively (EUR -5.0m/-0.7m in Q3/22), above our estimates (Evli EUR -1.2m/-1.2m). 
  • In Utilities, profitability suffered from a heavy cost structure. The change negotiations were concluded in October and the company anticipates annual cost savings of EUR 3.8m. In Retail & Commerce the growth in comparable revenue and successful cost control resulted in improved profitability. 
  • Retail and commerce: revenue in Q3 amounted to EUR 9.2m (Q3/22: EUR 11.4m) vs. Evli EUR 9.3m. Revenue declined by 18.8% driven by lower demand and the divestment. The adj. EBIT was EUR 0.4m (Q3/22: EUR -0.1m) vs. Evli EUR -0.2m. 
  • Utilities: Revenue in Q3 amounted to EUR 3.0m (Q3/22: EUR 3.0m) vs. Evli EUR 3.3m. The adj. EBIT was EUR -1.0m (Q3/22: EUR -0.6m) vs. Evli EUR -1.0m. 
  • Guidance for 2023 (published 19.9.2023): group revenue is expected to be EUR 57-59m and the operating result negative (excl. divestment profit recognition). 

Open report

Finnair - Solid high profitability

25.10.2023 - 09.35 | Company update

Finnair’s Q3 EBIT was impressive even if higher fuel prices already had some adverse impact. The company faces much more demanding comparison figures next year, but EBIT should remain high despite the slightly more challenging environment after the recovery and high summer season.

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Guidance range still wide due to fuel price uncertainty

Finnair’s EUR 817m Q3 revenue landed close to the EUR 826m/804m Evli/cons. estimates. Profitability was expected to be high, yet the EUR 94m adj. EBIT still managed to top the EUR 74m/84m Evli/cons. estimates even if higher fuel prices began to gnaw margins towards the autumn months. Finnair was able to maintain the EUR 180m midpoint of its EBIT guidance, despite the rise in fuel prices, although geopolitical tensions have lately elevated fuel price uncertainty. Profitability has fully recovered, and in our opinion it doesn’t seem too hard for Finnair to reach the upper half of its profitability guidance range despite the fact that it remains quite wide given the prevailing circumstances.

Ex-fuel CASK stays competitive, some more revenue drivers

We see (absolute) operating expenditure levels rather stable from now on, which should help keep unit costs competitive as capacity increases further, while there will be more fuel cost pressure at least in the short term. Finnair’s volumes have mostly recovered to their new normal level, yet Asian and European (short haul) routes should still support growth next year while in our view there’s more uncertainty around e.g. North Atlantic volumes. Unit yields should have some further marginal upside in the short term, but there’s also room for additional price hikes in the case of extended fuel price inflation. Next year Finnair will face comparison figures no longer that easy to beat, but pricing focus and cost measures alike should secure relatively high profitability going forward.

Valued neutral around the assumption of roughly 6% EBIT

In our view Finnair’s revenue should grow a few percentage points next year (due to modest gains in volumes and yields), yet the favorable profitability impact may be mostly offset by higher fuel prices. We thus estimate Finnair’s FY ’24 EBIT stable at around EUR 190m, or a bit above 6% in terms of EBIT margin. On that basis Finnair remains valued some 7x EV/EBIT, a level in line with peers. We retain our EUR 0.35 TP and HOLD rating.

Open report

Innofactor- Good going, at least for now

25.10.2023 - 09.30 | Company update

Innofactor posted good Q3 results, in line with our estimates. The market situation continues to be challenging and remains the key concern going forward. We retain our BUY-rating with a target price of EUR 1.4 (1.5).

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Good Q3 results, in line with our estimates
Innofactor reported Q3 results that were quite in line with our estimates and the best third quarter in terms of revenue and EBITDA in the company’s history. Revenue grew 8.0% organically to EUR 18.0m (Evli EUR 18.1m) and EBITDA amounted to EUR 2.0m (Evli EUR 1.8m). Innofactor noted continued intense price competition, although the weighted average prices of new contracts increased slightly from the exceptionally tough second quarter in terms of price competition. New sales in Q3 were below target levels and no new significant tender offers were won. As a result, the order backlog declined by 7.6% y/y to EUR 71.4m.     

Market situation remains key concern
Innofactor’s financial development in the short-term remains well on track, but the market situation remains a concern for 2024. We expect to see some stabilization after the more recent period of high price competition but for the demand to remain weaker. We have lowered our sales estimates for 2024, expecting only slight growth. New sales, however, need to pick up in Q4 for the growth to continue. We have also slightly lowered our expectations for profitability in 2024 with the expected slower growth. Operatively, Innofactor still has room for margin improvement as EBITDA in the other Nordic countries, accounting for 28% of sales YTD, was mostly on the negative side. The market situation is, however, unlikely to alleviate the situation in the short-term. 

BUY with a target price of EUR 1.4 (1.5)
Innofactor’s valuation remains at a clear discount to peers despite good growth and improved profitability YTD. 2023e P/E of ~10x on the current share price is also not challenging. We retain our BUY-rating but adjust our target price to EUR 1.4 (1.5) on softer 2024e expectations. 

Open report

Etteplan - Slower quarter ahead

25.10.2023 - 08.50 | Preview

Etteplan reports Q3 results on October 31st. We anticipate a slower quarter due to the prevailing market conditions and seasonality. After slight changes to our estimates, we retain our HOLD-rating with a TP of EUR 13.0.

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Profit warning set the tone for H2

Etteplan’s Q2 was soft as the y/y growth slowed down to near zero driven by the modest performance of the Software and Embedded Solutions segment. In September, Etteplan released a profit warning and lowered and specified its guidance for 2023. According to the new estimate, the revenue is estimated to be EUR 355-370m (prev. EUR 360-380m) and EBIT to be EUR 26-28.5m (prev. EUR 28-31m). Our FY 2023 estimates for sales and EBIT are at EUR 360.7m and EUR 26.5m respectively.

 

Anticipating continued growth from Engineering Solutions

The profit warning was prompted by a combination of factors, including the subdued performance of the Software and Embedded operational area during Q2, NRIs and FX effects during H1, and more recently, shifts in demand from specific clients in the Technical Communication Solutions service area in Central Europe. To our understanding, the company has not been able to adjust its workforce according to the demand which has led to capacity utilization issues in Central Europe. We make slight negative estimate adjustments ahead of Q3. Our estimate for Q3 net sales is now at EUR 81.7m and EBIT at EUR 5.8m. We forecast continued growth and profitability for the company’s largest segment, Engineering Solutions as the demand for Engineer-to-Order projects remains strong. For Software and Embedded and Technical Communications we continue to forecast y/y revenue decline for both Q3 and Q4. In addition to changes to the FY 2023 estimates, we revise our estimates down for FY 2024.

 

HOLD with a TP of EUR 13.0

With our updated estimates, Etteplan trades at a premium of roughly 10-15% on 23-24E EV/EBITDA basis when compared to our peer group. The current valuation levels are quite well in line with the company’s historic levels. We retain our TP at EUR 13.0 with HOLD-rating intact.

Open report

Finnair - Q3 profitability was very high

24.10.2023 - 09.30 | Earnings Flash

Finnair’s Q3 profitability topped estimates while revenue was much as estimated. The company achieved a very high bottom line as fuel prices remained relatively low, but their recent increase will have an adverse effect going forward. Finnair narrowed its EBIT guidance a bit, but the midpoint for the year remains at EUR 180m.

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  • Finnair Q3 revenue increased by 13.7% y/y to EUR 817.3m vs the EUR 825.7m/804.2m Evli/consensus estimates. Passenger revenue grew by 21.5% y/y to EUR 673.1m and was in line with our estimate.
  • Comparable EBIT amounted to EUR 94.3m, compared to the EUR 74.1m/83.8m Evli/consensus estimates. Higher fuel prices had an adverse impact on profitability towards the end of the period.
  • Fuel costs were EUR 238m vs our EUR 259m estimate. Staff costs amounted to EUR 120m, compared to our EUR 129m estimate, while all other OPEX+D&A were EUR 392m vs our EUR 399m estimate.
  • Cost per Available Seat Kilometer was 7.74 eurocents, compared to our estimate of 8.04 eurocents.
  • Finnair specifies its guidance for FY ’23 revenue and now estimates it to be in the range of EUR 2.9-3.1bn. Finnair now sees comparable EBIT for the year in the range of EUR 160-200m, based on current fuel prices and exchange rates. The guidance midpoint suggests Q4 EBIT at EUR 19m. Finnair still expects to operate an average capacity of 80-85% in 2023 (in terms of ASK) compared to 2019, including the agreed wet leases.

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Innofactor - Good performance despite headwinds

24.10.2023 - 09.30 | Earnings Flash

Innofactor’s Q3 results were good and quite as expected despite market headwinds. Net sales were organically up 8% y/y to EUR 18.0m (Evli EUR 18.1m). EBITDA was slightly above expectations at EUR 2.0m (Evli EUR 1.8m). Guidance reiterated, Innofactor’s net sales and EBITDA in 2023 are expected to increase compared with 2022.

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  • Net sales in Q3 amounted to EUR 18.0m (EUR 16.7m in Q3/22), in line with our estimates (Evli EUR 18.1m). Net sales in Q3 grew 8%, of which all was organic growth. Net sales increased in Finland and Norway.
  • EBITDA in Q3 was EUR 2.0m (EUR 1.8m in Q3/22, slightly above our estimates (Evli EUR 1.8m), at a margin of 10.9%. 
  • Operating profit in Q3 amounted to EUR 1.2m (EUR 1.0m in Q3/22, slightly above our estimates (Evli EUR 1.2m), at a margin of 6.7%. 
  • Price competition in the markets remained intense in the third quarter, although the weighted average prices of new contracts increased slightly from the preceding quarter. New sales in Q3 were still below target and led to a decrease in the order backlog but Innofactor expects to be able to increase the volume of new sales in Q4.
  • Order backlog at EUR 71.4m, down 7.6% y/y. Due to the challenging market situation Innofactor did not win any new significant tenders during the quarter. 
  • Guidance for 2023 (reiterated): Innofactor’s net sales is expected to increase from 2022 (EUR 77.1m) and EBITDA is expected to increase from 2022 (EUR 7.8m).

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Suominen - Volumes and margins improve

23.10.2023 - 09.35 | Preview

Suominen reports Q3 results on Oct 27. Q2 profitability remained very weak, but volumes should continue to improve over H2 (driven by the US) while the current raw materials price environment appears to be favorable from Suominen’s perspective.

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Prices have continued to decrease while volumes increase

Suominen’s Q2 results continued to be weak as there were not yet enough volume gains. Supply chain inventories should however continue to melt after a prolonged period of disruption but also due to the seasonally high demand for hygiene products seen in H2. Suominen has implemented various measures in response to the extended tough market conditions (especially in Europe), whereas in the US the focus is still around key account restocking and a recovery in delivery volumes. Nonwovens prices continue to adjust down following raw materials prices while volumes improve, and as a result Suominen’s top line should remain rather flat going forward. The US will drive Americas’ revenue this year, whereas there’s still uncertainty around European softening. We estimate Q3 revenue at EUR 129m and EBITDA at EUR 6.2m.

Higher volumes and sales margins about to lift earnings

Raw materials prices have declined for more than a year now. We find Suominen’s raw materials prices to have remained rather flat in Q3, however they may have already bottomed out. In our view the environment should still be quite favorable for Suominen from the perspective of sales margins; higher volumes and resulting utilization rates should drive gross margins closer to 10% over H2. The apparent stabilization in raw materials prices may also signal an end to the destocking cycle, which would support volume rebound over the course of H2. We estimate stable top line development and 10% gross margins to lead to roughly 5% EBIT margins going forward to next year.

Earnings improvement has been anticipated

Suominen’s comparison figures aren’t challenging and hence H2 is bound to show some improvement so long as higher volumes continue to come through. Suominen is valued about 7x EV/EBIT on our FY ’24 estimate of some 5% EBIT margin, which we consider a neutral level as Suominen has historically averaged 10% gross margins. We retain our EUR 2.7 TP and HOLD rating.

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Detection Technology - Security business drives growth

23.10.2023 - 09.15 | Preview

DT reports Q3 results on Oct 27. Q3 results will remain modest, but aviation rebound helps SBU to drive growth over the next year or so while cost savings also help.

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Q3 not yet great, but SBU investment continues to rebound

DT’s Q2 saw 11% y/y growth, driven by medical and security and in part because of a soft comparison period. There was already uncertainty around the Chinese markets and customer inventory corrections, and such concerns seem to have persisted over the course of Q3. The MBU unit in particular faces high comparison figures and we estimate its Q3 top line to have declined by 21% y/y. Meanwhile SBU has been growing since last year as the aviation sector has recovered since the pandemic shut its investments. Growth there derives from both the US and China; we estimate SBU’s Q3 growth at 7% and note the rate should improve in Q4 (despite a relatively strong comparison period), and we expect SBU to drive growth also next year. We estimate DT Q3 revenue to have declined 9% y/y to EUR 24.8m. We see Q3 adj. EBIT at EUR 1.3m, a meaningful improvement over the comparison period although still quite shy relative to potential.

Focus has already shifted to Q4’23 and FY ’24 figures

MBU volumes should show signs of stabilization in Q4, while the unit has potential to grow a bit next year (despite pressure on pricing and challenges in China). We expect SBU to be by far the most important growth driver over the next year or two as aviation recovery has found solid ground, while the prospects shouldn’t be too bad either for other relevant security applications. IBU has a lot of potential, but its organic growth is likely to remain soft in the short term as many sectors’ industrial outlook is still uncertain. Cost savings (EUR 2m on an annual basis) are to help bottom-line already in Q4, which we estimate to lead to EUR 3.6m EBIT together with 8% y/y growth.

Double-digit growth drives FY ’24 EBITA margin above 13%

FY ’23 adj. EBITA margin is to remain modest at around 8%, however we estimate profitability to recover above 13% next year thanks to both volume growth and cost savings. DT’s multiples remain elevated relative to peers on modest FY ’23 earnings, but the valuation is only around 10.5x EV/EBIT on our FY ’24 estimates, which represents a significant discount to peer multiples. Our new TP is EUR 13.0 (15.5); we retain BUY rating.

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Exel Composites - Still left waiting for higher volumes

20.10.2023 - 09.35 | Company update

Exel cut guidance as Q3 was very soft. Exel works out its new strategy in detail, to achieve at least some efficiency gains, yet volume remains the value driver for now.

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Q3 ended up being a lot softer than previously estimated

Exel revised its guidance down and now expects FY ‘23 revenue to decrease significantly. Demand softness has been widespread and extended for longer than previously seen. Order timings have also been delayed for larger projects. Exel published preliminary figures: Q3 was seen to be soft before, however a revenue of only EUR 20.5m proved to be way below our earlier EUR 29.9m estimate and thus we also cut our Q3 EBIT estimate by EUR 2.5m.

Improvement after Q3, but its pace remains uncertain

We cut our estimates also beyond Q3 as softness persists. Exel updates its plant network strategy to better organize production; some details have already been worked out but there are still reviews going on. Wind power volumes are to be generated mostly in China and India from now on while the US unit will focus on buildings and infrastructure applications as well as electrical products, which we believe remain attractive categories. The restructuring is to yield cost savings of EUR 3m, a big sum on top of other measures Exel has implemented (and is yet to decide on). Exel’s reorganization means EBIT should bounce back sharp once the volumes come through, and hence focus rests on top line even more than usual over the next few quarters. The comparison volumes for Q4 aren’t that high as they already fell 15% y/y, yet Exel may still struggle to achieve notable growth even if Q4 should gain q/q from the lows.

EBIT to bounce back with volumes, but outlook still unclear

Low demand over the past year has left Q3’23 LTM adj. EBIT around break-even, so it’s clear Exel’s EBIT improves next year. The two-tiered factory strategy is to bring more manufacturing efficiency gains, while demand is already improving, but it remains unclear how much volumes recover next year. We estimate EUR 120m in revenue and EUR 7.5m EBIT for next year, which roughly equal the average levels seen in FY ’19-22. Exel is valued about 8x EV/EBIT on that estimate, which isn’t very high considering how efficiency measures could also support EBIT above our estimate. Yet in our view limited demand outlook curbs upside for now. Our TP is now EUR 3.0 (3.5); retain HOLD.

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Raute - Only missing some smaller orders

20.10.2023 - 09.20 | Preview

Raute reports Q3 results on Oct 26. Raute’s EBIT is bound to improve in the coming years, whereas short-term focus may lie more around smaller European equipment orders.

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Pick-up in small orders would improve outlook even further

Raute’s earnings have been recovering gradually for the last 12 months, however Q2 was a bit softer than the previous quarters due to a lack of Wood Processing and Services revenue. Very high North American orders were a positive surprise; although Europe may continue to miss some smaller equipment orders going forward the outlook for the next year or two isn’t too bad given the three large projects to be delivered to Europe and Uruguay. We therefore believe Raute’s EBIT is poised to trend towards an annual level of EUR 10m in the medium term. Raute didn’t disclose any larger new orders during Q3, and smaller equipment orders are one of the key short-term focus issues. We expect Q3 order intake to have amounted to EUR 29m; the figure could end up lower than that if there’s a temporary lack of North American orders after the Q2 burst and if Europe also proves very soft, but we believe EUR 30m to be a reasonable quarterly ballpark estimate for now. The small order level could also gain considerably if the outlook in Europe begins to improve.

We upgrade our FY ’23 earnings estimates by EUR 1m

We estimate Raute’s Q3 top line to have improved considerably q/q but been soft y/y (we see no very large y/y changes in mix). We see Q3 EBIT at EUR 1.5m, in other words roughly flat y/y. The new ERP system may cause no larger issues, and in our view quarterly EBIT is set to improve closer to EUR 2m and above over the next year or so. Raute’s guidance update wasn’t a very big surprise; we now estimate 6.5% adj. EBITDA margin on a revenue of EUR 148m. We make only marginal estimate revisions for the coming years. Wood Processing revenue will gain significantly next year, whereas Analyzers should have more stable long-term potential in terms of revenue and earnings.

EBIT likely to reach EUR 8m and above in the coming years

FY ’23 profitability will remain rather modest as H1 lacked volumes, however H2 should show solid improvement which is to be continued also next year. We estimate Raute to reach above EUR 8m FY ’24 EBIT, on which the company remains valued at a multiple of 5.1x. We retain our EUR 12.0 TP and BUY rating.

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Vaisala - Expecting slower growth

20.10.2023 - 08.20 | Preview

Vaisala reports its Q3 earnings on 27th of October. Low industrial activity slowed down IM’s growth during Q2 which we estimate to have continued during Q3. We continue to see the valuation attractive despite the temporary market pressure.

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Slight adjustments to estimates ahead of Q3

Despite the current weak market sentiment, especially on the IM side of Vaisala’s business, we expect group level net sales in Q3/23 to grow to EUR 139.2m, with y/y growth of 4.5%. In terms of profitability, we estimate group EBIT of EUR 23.8m for Q3/23 with slightly improved margins when compared to Q3/22. For W&E, we expect y/y net sales growth of 9.8% during Q3 while for IM we expect a slight net sales decrease of 2.5% y/y. For IM, we see continued gross margin pressure as a result of price competition especially in the Chinese market. In addition to gross margin pressure, we expect overall lower profitability driven by the soft net sales development. For W&E, we estimate margin improvement for Q3 y/y driven by higher volumes and continued strong gross margin development stemming from improved sales mix and lower amount of spot component purchases. Our projected net sales for 2023 are EUR 552.8m, with reported EBIT reaching EUR 66.4m, both within the guidance range that was updated ahead of the Q2 earnings release.

 

Market conditions in Q3 remained largely unchanged

Vaisala’s Q2 was two-folded as the demand continued strong for W&E side of the business while IM business area suffered from lower demand driven by slowed down industrial activity. We estimate that the development seen during Q2 has largely continued to Q3. We see no improvement in the economic data when looking at the industrial production globally, on the other hand, there has been no major negative shift when compared to Q2. W&E is different story as it has a larger proportion of public clients, reducing the business area's susceptibility to economic cycles. Hence, we anticipate continuation of strong performance.

 

BUY with a TP of EUR 39 (42)

We revise our TP slightly downwards driven by our estimate changes and lower peer group multiples. We continue to consider Vaisala moderately valued, trading at a 10-15% discount compared to our peer group on adj. EV/EBIT basis.

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Consti - Valuation doesn’t set the bar high

19.10.2023 - 08.30 | Preview

Consti reports its Q3 results on 27th of October. We expect continued good execution supported by the strong backlog. We continue to keep an eye on order intake and the future outlook as the renovation market sentiment shows signs of weakness.

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Strong backlog supports the development in H2

Consti’s order backlog finished at all time high levels of EUR 297.9m at the end of Q2 2023. We expect net sales of EUR 81.5m with growth of 3.1% for Q3, for FY 23, we estimate revenue growth of 5.4%. The expected growth during H2 is driven by the current strong backlog of projects. In terms of profitability, we estimate EBIT of EUR 3.4m for Q3 and EUR 12.2m for FY 2023, within Consti’s EBIT guidance range of EUR 9.5-13.5m. The sale of the company’s property-related relining business to Spolargruppen might have a slight positive effect on the Q3 result yet we have not included it in our estimates.

 

Signs of weakening demand for renovation

Confederation of Finnish Construction Industries (RT) revised its estimates of Finnish renovation construction volumes downwards in September. Before, it had projected growth of 1.5% for 2023 and a 2% increase for 2024. However, the revised forecasts now indicate a 4% reduction in volumes in 2023, with the decline persisting into 2024, where volumes are anticipated to decrease by 1%. The main drivers for the weaker outlook include cost inflation and tighter financing environment. In addition to RT, the Finnish Association of HVAC Technical Contractors published their balance figures for renovation construction which declined notably from the figures published in March. Despite the negative outlook spreading from new construction to renovation construction, we see that Consti is well positioned within the renovation segment. Consti mainly operates in the largest cities within Finland where the market is expected to fare better when compared to more rural areas.

 

Valuation remains conservative

Our TP values Consti at roughly 12x 2023 P/E and 9x 2023 EV/EBIT. Consti trades at a discount to both our peer group and the company’s own historical valuation levels. We continue to see the current pricing hard to justify given the company’s exposure to the more stable renovation market.

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Finnair - Balancing volumes and yields

18.10.2023 - 09.35 | Preview

Finnair reports Q3 results on Oct 24. We make some downward revisions to our estimates, but note earnings outlook remains strong even if it has lately softened a bit.

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We now estimate FY ’23 EBIT at EUR 178m

Finnair’s Q3 RPK gained 13% y/y, which augurs strong profitability as the comparison period’s EUR 35m adj. EBIT wasn’t too bad either, however the volume fell some 8% short of our previous estimate as PLF was more than 200bps softer than we anticipated. Unit yields have improved further, and a key question is just how much further they can do so in the short and medium term without sacrificing too much demand. Fuel prices bottomed out over the summer and are now 25% up from their lows; we revise our EBIT estimates down to reflect the change. We now estimate Q3 EBIT at EUR 74m (prev. EUR 85m). In our view Finnair’s long-term 6% EBIT target still looks very reasonable, but an extended fuel price elevation would limit potential above that level as unit yields should stabilize soon.

Equity issue gives the flexibility for narrow-body renewal

Finnair’s EUR 600m equity issue will heal its balance sheet: Finnair has no urgent investment needs as current fleet is now pretty much optimal for the circumstances, however financial flexibility will be useful for the purposes of narrow-body fleet renewal. This will be a long-term development project and can be expected to materialize in steps towards the end of the decade as this portion of the fleet has a broad range in terms of age.

Lower earnings and multiples have hit airline valuations

Airline valuations have recently been hit hard as EV/EBIT multiples have declined by roughly 10% while earnings estimates have softened due to e.g. higher fuel prices. Expectations were high amid a boom in travel; earnings should remain high (and even improve a bit further) also next year, but expectations have moderated. Airline earnings remain cyclical, but so far there have been no major signs of weakening demand after a sharp post-pandemic recovery. Cost control is still important, but in our view focus now rests more on the revenue side (balancing between volumes and yields). Finnair is valued a bit above 7x EV/EBIT on our FY ’23 estimates, in line with peers. We find the level neutral assuming roughly 6% EBIT margins going forward. Our TP is now EUR 0.35 (0.54); we retain our HOLD rating.

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Scanfil - Margins set to stay high

12.10.2023 - 09.25 | Company update

Scanfil cut FY ‘23 guidance down a bit, but the news wasn’t big and EBIT should stay above EUR 60m also next year.

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Some softening in volume growth was long due

Scanfil made small cuts to its guidance ranges for the year. The revisions weren’t large as revenue and EBIT midpoints declined by some respective 3% and 2%. The update undid the positive July revision; the current revenue midpoint lands a bit below the April upgrade while the EBIT midpoint is still 5% above where it was 6 months ago. In our view the update doesn’t contain any substantial news as it was clear before the 30% underlying growth seen in Q2 figures (including 61% y/y organic growth for Energy & Cleantech) couldn’t possibly be sustained for very long.

Growth a bit uncertain, but EBIT to remain above EUR 60m

The guidance midpoints suggest Scanfil will reach 7.0% EBIT margin in H2’23; in our view the 7% margin assumption shouldn’t be too sensitive to growth going forward, in other words Scanfil should be able to manage roughly such high margins even if top line declines slightly next year. We revise our revenue estimates down by EUR 30m for this year and EUR 60m for next. We don’t make any meaningful changes to our EBIT margin estimates, but revise our absolute EBIT estimates down by around EUR 2-3m for this and coming years. In our view there’s some elevated uncertainty around growth rates going forward after such a period of high demand, yet EBIT should remain above EUR 60m even in a softer demand environment.

Earnings multiples have again turned compelling

Scanfil traded above 10x EV/EBIT only a couple of months ago (then about 10% higher than peer multiples), however the multiple has now declined to around 7.5x on our FY ’23 estimates. Meanwhile peer multiples haven’t changed much and Scanfil is thus now valued at a double-digit discount. There’s some variation in peer multiples but they mostly trade around 8.5-9.5x EV/EBIT on FY ’23-24 estimates, and therefore Scanfil’s 7.0x EV/EBIT (on our EUR 64.7m estimate for next year) likewise represents a meaningful discount. Scanfil may not be able to achieve EBIT margins significantly higher than 7% (already 30% above peers), yet profitability is unlikely to soften much below that level unless there’ll be a dramatic top line decline. Our new TP is EUR 9.0 (11.5); our rating is now BUY (HOLD).

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Duell - Difficulties persist

10.10.2023 - 09.10 | Company update

Duell’s Q4 results were largely in line with the previously released preliminary figures. Reflecting the ongoing strain on the company's balance sheet, Duell announced that it is considering a rights issue to strengthen the balance sheet. With the expected continued operational softness and no positive drivers for the stock ahead of the potential sizeable rights issue, we further downgrade our TP to EUR 0.4 (0.9) and rating to SELL (HOLD).

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Q4 operative figures brought no real surprises

Duell’s net sales were roughly in line with the previously released preliminary figures. Net sales in Q4 amounted to EUR 29.9m (EUR 34.6m in Q4/22, EUR 29m Evli) and adj. EBITA was at EUR 0.2m (EUR 1.8m in Q4/22, EUR 0.1m Evli). The weak profitability was clearly driven by the soft volume development as the company’s gross margin improved y/y.

 

Considering a larger-than-expected rights issue

Despite the successful unloading of inventory during the Q4 leading to lower net debt levels, the company’s balance sheet remained stretched. Due to the lackluster operational results and high amount of debt, the company’s net debt to adjusted EBITDA was at 7x at the end of FY 2023. As a result, the conditions for the covenants for loans from financial institutions were not met. To strengthen its balance sheet, the company announced that it is considering a rights issue. According to preliminary plans, the size of the rights issue would be up to roughly EUR 20m. The rights issue is substantial and if completed, heavily dilutive for shareholders that do not exercise their rights, as the company’s market cap is currently approximately EUR 15m. We have not included the potential right issue to our estimates as the completion, timing and conditions of the issue are still uncertain.

 

SELL (HOLD) with a TP of EUR 0.4 (0.9)

As mentioned in our previous updates, we see no signs of fast recovery in consumer confidence, in addition, the company’s customers conservative approach to inventory management is likely to continue. With the continued weak outlook, stretched balance sheet and no positive drivers for the stock ahead of the potential rights issue, we further downgrade our TP to EUR 0.4 (0.9) and rating to SELL (HOLD).

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Duell - A challenging quarter as expected

09.10.2023 - 09.30 | Earnings Flash

The Q4 softness came as a no surprise as the company provided preliminary figures in September in conjunction with the profit warning.

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  • Net sales in Q4 were EUR 29.9m (EUR 34.6m in Q4/22, EUR 29m Evli).
  • EBITA in Q4 amounted to EUR 0.2m (EUR 1.8m in Q4/22, EUR 0.1m Evli).
  • EPS (excl. goodwill amortization and NRIs) in Q4 amounted to EUR -0.03 (EUR 0.05 in Q4/22, -0.03 Evli).
  • Net debt at the end of FY 2023 was at EUR 38m, in line with our expectations (EUR 38m Evli).
  • The company was able to lower net working capital levels from EUR 61.8m at the end of Q3 2023 to EUR 49.9m at the end of Q4 2023 (NWC was at EUR 57.7m at the end of FY 2022).
  • Operating free cash flow amounted to EUR 10.6m (Q4/22: EUR 9.4m).
  • Tran-Am’s unaudited figures for 17-month period ended on 31 August 2023 (financial period extended by 5 months to bring it in line with Duell’s) were strong as net sales were at GBP 16.2m and EBITDA at GBP 3.3m resulting in a EBITDA margin of roughly 20%.
  • The covenants for the company’s loans from financial institutions were not met at the end of the reporting period, Duell is currently in negotiations with the bank to amend the covenant levels.
  • According to comments by CEO, the target for FY 2024 is to improve profitability by EUR 3-4m.
  • The timeframe for the medium-term target for net sales changed: Net sales in the range of EUR 200-300 million in medium term (prev. by the end of 2025).
  • Guidance for FY 2024: Net sales guidance not given due to weakened market predictability. Duell will continue its profitability improvement programme and plans to strengthen its capital structure in financial year 2024. Duell estimates adjusted EBITA to improve from previous year’s level.

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Duell - Softness to continue

21.09.2023 - 08.40 | Company update

Duell released a profit warning ahead of the FY 2023 earnings which will be published 9th of October. The preliminary FY 2023 figures were clearly lower than we had anticipated. We downgrade our rating to HOLD (BUY) and TP to EUR 0.9 (1.4).

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Preliminary FY 2023 figures short of our estimates

In connection with the profit warning, Duell provided preliminary financial information regarding FY 2023 figures. Duell now expects net sales to be approximately EUR 118 million (EUR 124m FY 2022, EUR 125m Evli est.) and adjusted EBITA to be approximately EUR 4.5m (EUR 8.7m FY 2022, EUR 7.4m Evli est.). The preliminary figures imply net sales of roughly EUR 29m (-16% y/y) and adjusted EBITA of roughly EUR 0.1m during Q4.

 

Market pressure expected to persist

For FY 2023, our estimates now align with the preliminary figures provided by the company for revenue and adj. EBITA. We previously estimated revenue growth of 4.1% y/y for Q4 2023 driven by inorganic growth while we estimated that the organic sales continue to decline. With the implied net sales of EUR 29m in Q4, the company’s net sales declined roughly 16% y/y. Adj. EBITA was also clearly lower than our estimate. Our interpretation is that the weak net sales and profitability were driven by lower-than-expected volumes, FX related losses and discount sales. In addition to the preliminary figures, Duell also commented that it has been able to reduce inventory levels as planned which lowers the net debt. We now estimate that the market pressure is likely to continue as we see no signs of fast recovery in the consumer confidence across the operating regions. In addition, Duell’s customers have indicated that the conservative approach to inventory management is likely to continue. In addition to FY 2023, we have revised our estimates for coming years as we see the softness likely to continue especially during FY 2024.

 

HOLD (BUY) with a TP of EUR 0.9 (1.4)

With the substantial downward revisions to our estimates, we downgrade our rating to HOLD (BUY) and TP to EUR 0.9 (1.4). The beforementioned headwinds are likely to continue to affect Duell’s performance. On the other hand, the decrease in inventory levels eases short-term balance sheet pressure.

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Etteplan - Lowers 2023 guidance

19.09.2023 - 09.20 | Company update

Etteplan issued a profit warning and lowered its guidance for FY 2023. The profit warning doesn’t come as a surprise considering the soft H1 which increased pressure for the rest of the year, as outlined in our previous update.

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Lowered guidance due to the weakening market

Due to weaker market situation, in particular in the demand of consumer product manufacturing customers in the Technical Communication Solutions, Etteplan lowers its guidance for 2023. According to the new estimate, the revenue is estimated to be EUR 355-370m (prev. EUR 360-380m) and EBIT to be EUR 26-28.5m (prev. EUR 28-31m).

 

Downward estimate revisions across the board

Our estimates after Q2 were at the lower end of the earlier guidance and roughly at the top end of the updated guidance (net sales of EUR 371.0m and EBIT of EUR 28.5m for FY 2023). The profit warning did not come as a surprise as the company’s soft H1 left little room for error in H2. With the weaker outlook, we have made multiple adjustments to our estimates for 2023E and beyond. Our updated estimate for 2023E revenue comes in at EUR 360.7m (-2.8% vs. prev. estimate) and EBIT EUR 26.6m (-6.8% vs. prev. estimate). We have made negative estimate adjustments especially for the Technical Communication Solutions segment as the segment was flagged weaker than expected due to negative changes in the demand of consumer product manufacturing customers. While the consumer segment was only 2% of the total revenue in H1 2023, we continue to see more pronounced signs of a slowdown accross Etteplan’s customer’s end markets, therefore we have also revised our growth and profitability estimates downwards beyond 2023. With the revised estimates, we no longer expect that the company reaches its target level of profitability in 2024.

 

HOLD with a target price of EUR 13.0 (15.0)

With our updated estimates, Etteplan trades at a 10-15% premium vs. our peer group on adj. EV/EBIT 23-24E basis. Driven by the adjustments to our estimates and the expected near-term pressure due to weak market sentiment, we further decrease our target price to EUR 13.0 (15.0) while keeping our rating at HOLD.

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Administer - Focus on profitability

01.09.2023 - 09.15 | Company update

Administer is seeking an annual profitability improvement of EUR 7m, with profitability in H1 being rather weak. The margin improvement potential supports valuation upside.

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Weak profitability in H1
Administer reported H1 results quite on par with our estimates, profitability as expected was weak due to the impact of cost inflation. Net sales grew some 64% to EUR 39.2m (Evli EUR 39.0m), of which some 10% was organic. EBITDA amounted to EUR 1.6m (Evli EUR 1.9m). The H1 report per se contained little new information given the guidance downgrade and announced profitability improvement programme earlier in August. Administer will seek an annual profitability improvement of EUR 7m, estimated to actualize during 2024, and decided to begin change negotiations, which could lead to a reduction of 31 employees at maximum. Strategy work was also initiated.

Notable profitability improvements expected in 2024
The planned profitability improvement is substantial, corresponding to close to 10% of our estimated cost base for 2023e, but details on how it is to be achieved were still limited. We assume potential one-offs relating to the change negotiations to impact H2, and have lower our EBITDA-margin estimate, now 4.8% (prev. 6.3%), closer to the lower end of the guidance. We for now expect a very minor decrease in the overall cost base in 2024, together with an estimated growth of 6.7% bringing our 2024e EBITDA-margin estimate to 11.4%. Focus will be on profitability, but we anticipate continued targeted smaller acquisitions, which would further boost growth potential. Administer in its growth ambitions apart from Finland now also noted the Baltic Sea region, having formerly noted potential of expanding in Sweden.

BUY with a target price of EUR 3.5
Valuation continues to appear attractive, should Administer reach double-digit EBITDA-margins next year, which should the planned savings be reached is well achievable. Uncertainty still remains high given the more recent profitability track. We retain our BUY-rating and target price of EUR 3.5. 

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Loihde - Year-end profitability has to be stronger

31.08.2023 - 23.30 | Company update

Loihde reported two-folded Q2 figures. Net sales came in strong with 15% growth, despite soft digital development sales. Profitability was weak, which leaves a lot to catch up in H2.

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Sales growth was driven by good demand for security solutions
In total, Loihde group’s net sales grew by 15% y/y to EUR 34.2m. Demand for security solutions remained strong and acquisitions boosted the unit’s expansion further. SeSo grew by 25% y/y to EUR 24.1m. Our view is that Loihde’s consistent work on its continuing services has supported SeSo’s organic growth as well as profitability, despite a notable decline in locking services within the construction sector. Although Loihde succeeded in data, analytics, and AI sales during the quarter, the decrease in software development caused a 4% decline in DiDe’s revenue. In our view, the decline in software development was significant as well-succeeded data and analytics represent a notable share of DiDe’s business. DiDe’s net sales amounted to EUR 10.1m. Low utilization rates as well as additional costs from SeSo’s ERP project hurt Loihde’s profitability. Adj. EBITDA amounted to EUR 1.0m which was clearly below our expectations.

Outlook for SeSo remains solid, DiDe very uncertain
The outlook for SeSo’s H2 seems bright, although the impact of the acquisition of Turvakolmio will fade away in H2. We expect the digital development market to continue as soft through 2023. Loihde revised its DiDe’s sales estimate recently with the divestment of Sweden's operations and soft market. Geographical expansion sees a temporal stop with the company now trying to fine-tune its operations in home markets. Although the management is confident in reaching the profit target of EUR 10.3, with soft Q2 and elevated uncertainty in topline and cost development, our 23E adj. EBITDA lands slightly below the company’s target at EUR 10.1m.

HOLD with a target price of EUR 13.5
With only minor revisions made in our 2024 estimates, our TP remains at EUR 13.5. Loihde’s valuation seems slightly elevated with a 24E P/E of 14x, which is above its peers. Although 24E EV/EBIT of 8x sounds not expensive, considering the uncertainty in the markets and ongoing internal challenges, we retain our HOLD rating.

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Administer - On par with expectations

31.08.2023 - 09.30 | Earnings Flash

Administer’s H1 figures were on par with our expectations. Revenue amounted to EUR 39.2m (Evli EUR 39.0m), with growth of 64.1%. EBITDA amounted to EUR 1.6m (Evli EUR 1.9m). Administer initiated a cost savings programme and change negotiations, seeking an annual profitability improvement of EUR 7m in 2024.

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  • Net sales in H1 amounted to EUR 39.2m (EUR 23.9m in H1/22), in line with our estimates (Evli EUR 39.0m). Net sales in H1 grew 64.1% y/y. Growth was mainly attributable to the acquisition of Econia last year.
  • EBITDA and EBITA in H1 were EUR 1.6m (H1/22: EUR 1.0m) and EUR 0.7m (H1/22: EUR 0.6m) respectively, fairly in line with our estimates (Evli EUR 1.9m/1.2m). Profitability was burdened by accelerated cost inflation.
  • Operating profit in H1 amounted to EUR -1.2m (EUR -0.5m in H1/22), below our estimates (Evli EUR -0.6m), with D&A some EUR 0.4m larger than our estimates.
  • During H1 Administer carried out three accounting firm acquisitions. 
  • Administer also started the implementation of the profitability programme that was announced earlier. The company seeks an annual profitability improvement of EUR 7m, including different measures in different Group companies, and also decided to being change negotiations. Administer also initiated strategy works and will set new long-term financial targets. Administer has been on track towards its EUR 84m net sales target in 2024, still falling clearly short of the 24% EBITDA-margin target. 
  • Guidance for 2023 (updated on August 8th): Net sales is estimated to be EUR 76-81m and EBITDA-margin to be 4-8%.

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Loihde - Two-folded quarter

31.08.2023 - 08.40 | Earnings Flash

Loihde released Q2 result with strong topline growth. Net sales grew in line with our expectations, with strong SeSo sales, while DiDe was negatively impacted by the soft market. Profitability fell short of our expectations and was weak with market issues. Year-end seems brighter, but uncertainty remains high, especially in DiDe.

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  • Group results: Loihde’s net sales came in line with our expectations. Net sales grew by 15% to EUR 34.2m (Evli: 34.2m). The growth was driven by strong demand for security solutions. With soft utilization rates in DiDe and one-time costs from SeSo’s ERP program, Loihde’s profitability came in softer than we expected. Adj. EBITDA amounted to EUR 1.0m (Evli: 2.2m), reflecting a margin of 2.9%. Challenges in ERP program are seen to fade away in H2 and cost savings are expected to boost H2 profitability.
  • Security Solutions (SeSo): Net sales came in roughly in line with our expectations and grew by 25% to EUR 24.1m (Evli: 23.8m). The growth was driven by strong demand for both physical and digital security solutions. Acquisitions had also a positive impact on the growth rate. An important concept of One Security has grown driven by both new client acquisitions as well as up-selling. ERP challenges limited SeSo’s profitability, and the company sees it fading away during H2.
  • Digital Development (DiDe): Net sales declined by 4% to EUR 10.1m and came in roughly in line with our estimates (Evli: 10.4m). The decline was due to decreased demand for software development while the demand for cloud services, data and analytics, and AI grew during the quarter. DiDe’s low utilization rates pushed the unit’s profitability down. Cost savings should improve DiDe’s profitability going forward despite the uncertain market environment.
  • 2023 guidance intact (revised on 22nd Aug): SeSo to grow by over 10% and DiDe to be flat or grow. Adj. EBITDA to improve from EUR 10.3m.

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Loihde - Strong security drives Q2 growth

29.08.2023 - 12.30 | Preview

Loihde reports its Q2 result on Thursday. While SeSo is expected to drive strong Q2 growth, the current market environment has continued weak and uncertain in DiDe. In addition to the soft utilization rates of DiDe, we expect SeSo’s ERP project to bring additional costs that together limit Q2 and 23E profitability.

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Low utilization rates and additional costs limit profitability
With soft market news stemming from lower investment activity of private sector customers, we slightly downgraded DiDe’s growth and profitability, meanwhile, we increased SeSo’s growth estimates by expecting strong security demand to continue. We expect Q2 group net sales of EUR 34.2m with y/y growth of 15%. SeSo’s organic growth is further supported by inorganic expansion made in 2022. Meanwhile, we expect DiDe to decline. Continued issues in the ERP program and soft utilization rates translate to a decreased profitability expectation. We expect adj. EBITDA of EUR 2.2m (6.3% of net sales) and adj. EPS of EUR 0.06 in Q2’23.

Revised guidance with divestment and soft market
Several digital development peers have issued profit warnings or noted a weak market in digital development. Software development has been an area of soft performance with private customers withdrawing or postponing their new investments. To our understanding, the market has however slightly improved from that seen in Q1, but high uncertainty is still present. With lately issued profit warning and divested Sweden operations (see page 2), we have downgraded our 23E EBITDA (adj.) to EUR 10.2m, which is equivalent to a ~3% decline from what we earlier expected. With estimate revisions, our expected profitability is approx. on par with the previous year, but below the company’s guidance. This is explained by our weaker expectations of sales growth and softer OPEX development. With an uncertain market, we also lowered our estimates for 2024, which mainly reflects the decline in our target price.

No significant room for an upside in the share price
Loihde is valued at 23-24E EV/EBITDA and EV/EBIT (adj.) of 5-4x and 15-8x. We don’t see short-term upside potential in the share price with uncertainty concerning DiDe high. In addition, by measuring valuation with 23-24E P/E, Loihde trades with a notable premium to its peers. We retain our HOLD rating but lower TP to EUR 13.5 (15.0) with estimate revisions and uncertainty.

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Raute - Proceeding according to strategy

28.08.2023 - 09.30 | Company update

Raute’s Q2 showed mixed trends, yet the company proceeds with a very high order book and strategic developments.

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Q2 figures were a bit mixed but overall no large surprises

Raute’s Q2 profitability improved y/y from the very low comparison figures, however the EUR 0.7m adj. EBITDA didn’t meet our EUR 1.8m estimate as softness in Wood Processing and Services demand left the EUR 29.3m revenue short of our EUR 31.4m estimate. Meanwhile Analyzers’ performance was a positive surprise, although it should be noted its margins were to a certain extent exceptionally high. Q2 produced a record-high EUR 112m order intake, driven by two large European orders, and it topped our estimate by EUR 17m largely thanks to North America, where there was also a somewhat exceptionally strong burst of orders. We believe North America is unlikely to reach such high order intake levels going forward, however the local demand outlook remains clearly better than that of Europe.

Many different developments largely as expected

Raute’s Q2 results and comments weren’t overall surprising as construction slowdown reduces softwood plywood demand, whereas outlook remains better for certain types of industrial uses. Europe’s short-term outlook is weaker than that of North America, yet birch plywood demand is high and its supply a bottleneck due to the vanished Russian imports. Raute still has large order potential in Europe, but also in more exotic locations. The uncertainties in Europe are the most significant source of short-term risk (e.g. spare parts demand could be better), however we believe Raute is more likely than not able to specify its guidance upwards some time during H2 especially in terms of profitability (we estimate 5.6% adj. EBITDA margin for FY ’23). Raute achieves its cost savings according to plan, whereas the new ERP system may still cause some minor issues. Raute continues to look for M&A opportunities long-term, but strategy also relies on organic growth helped by own R&D investments.

Valuation remains undemanding relative to potential

We make only marginal estimate revisions following the Q2 report. Raute is valued 5.5x EV/EBIT on our FY ’24 estimates, which we consider an unchallenging level as our respective EUR 8.3m estimate remains quite modest in the light of long-term potential. We retain our EUR 12.0 TP and BUY rating.

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Raute - Somewhat mixed developments

25.08.2023 - 09.00 | Earnings Flash

Raute’s Q2 figures were a bit of a mixed bag relative to our estimates as top line and profitability were lower than we expected while order intake came in even higher than we estimated.

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  • Raute Q2 revenue declined by 1% y/y to EUR 29.3m vs our EUR 31.4m estimate. Wood Processing amounted to EUR 17.3m, compared to our EUR 18.9m estimate, whereas Services came in at EUR 6.5m vs our EUR 8.7m estimate. Analyzers was EUR 5.5m, compared to our EUR 3.8m estimate. Increased market uncertainty has impacted customer demand for single production lines as well as for spare parts. The construction market’s slowdown has reduced demand for softwood plywood especially in the European and North American markets.
  • Comparable EBITDA landed at EUR 0.7m vs our EUR 1.8m estimate, while EBIT amounted to EUR -1.0m vs our EUR 0.4m estimate. Lower activity level in Wood Processing and Services burdened profitability (in addition to the inefficiencies caused by the ERP implementation), while Analyzers profitability increased significantly thanks to strong sales growth. Raute is also on track to reach its targeted EUR 4-5m in cost savings.
  • Q2 order intake was EUR 112m, compared to our EUR 95m estimate. Customers continue to plan capacity long-term despite the current market situation.
  • Order book stood at EUR 202m at the end of Q2, including EUR 2m in Russian orders.
  • Raute guides FY ’23 revenue to be above EUR 150m and comparable EBITDA margin to be above 4% (unchanged).

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Solteq - Setting up future profitability

24.08.2023 - 09.00 | Company update

Solteq’s FY 2023 continues to look challenging, but cost savings measures being taken support the turnaround in 2024. We retain our HOLD-rating, TP EUR 1.1 (1.3).

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Weak figures in Q2
Solteq reported Q2 results that were weaker than we had anticipated. Net sales in Q2 were EUR 14.3m (Evli EUR 16.0m), declining 20.4% y/y and 8.2% in comparable terms. The operating profit and adj. operating profit in Q2 amounted to EUR 6.3m and -1.9m respectively (Evli EUR 7.8m/-0.3m). According to Solteq the quarter was affected by weaker demand in the Retail & Commerce segment results and a heavy cost structure in Utilities but in line with the company’s own expectations. 

Cost savings support turnaround in 2024
Solteq announced the initiation of change negotiations in the Utilities segment, seeking annual savings of approx. EUR 3m. Measures are also being taken to improve the company’s overhead cost situation after the divestment of the Group’s ERP business based on Microsoft BC and LS Retail Solutions. Solteq expects its operating result (excl. profit recognition from the divestment) in 2023 to be slightly negative. Assuming the completion of the change negotiations as planned and during Q4/2023, due to related one-off items, we find the guidance to be challenging. This despite an anticipated pick-up in growth in Utilities due to starting customer deliveries and in Retail & Commerce due to previous project postponements and slight demand recovery. Our 2023e EBIT estimate is at EUR -1.6m. With the savings in Utilities, the segment is on track to push EBITDA-margins into the double digits next year supported by continued good demand, and we anticipate significant profitability improvements for Solteq in 2024e. 

HOLD with a target price of EUR 1.1 (1.3)
Valuation remains on the higher side in the near-term despite anticipated improvements. Long-term upside drivers from the Utilities segment, however, still remains in place. We retain our HOLD-rating but with continued uncertainty regarding the turnaround speed we lower out TP to EUR 1.1 (1.3).

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Solteq - Tough quarter

23.08.2023 - 09.15 | Earnings Flash

Solteq’s Q2 results were quite weak and both revenue and profitability fell below our estimates. Revenue was at EUR 14.3m (Evli EUR 16.0m) and adj. EBIT at EUR -1.9m (Evli EUR -0.3m).

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  • Net sales in Q2 were EUR 14.3m (EUR 17.9m in Q2/22), below our estimates (Evli EUR 16.0m). Revenue declined 20.4% y/y in Q2. The comparable revenue amounted to EUR 13.6m (EUR 14.8m), down by 8.2% y/y.
  • The operating profit and adj. operating profit in Q2 amounted to EUR 6.3m and -1.9m respectively (EUR 0.4m/1.3m in Q2/22), below our estimates (Evli EUR 7.8m/-0.3m). EBIT includes proceeds from the sale of the Group’s ERP business based on Microsoft BC and LS Retail Solutions.
  • According to Solteq, the second quarter performance was weak, mainly due to a weaker demand in the Retail & Commere segment. In Utilities, profitability suffered from a heavy cost structure. 
  • Retail and commerce: revenue in Q2 amounted to EUR 10.8m (Q2/22: EUR 14.3m) vs. Evli EUR 12.1m. Revenue declined by 24.3% driven by lower demand and the divestment. The adj. EBIT was EUR -0.3m (Q2/22: EUR 0.8m) vs. Evli EUR 0.5m. 
  • Utilities: Revenue in Q2 amounted to EUR 3.4m (Q2/22: EUR 3.6m) vs. Evli EUR 3.9m. The adj. EBIT was EUR -1.5m (Q2/22: EUR -0.7m) vs. Evli EUR -0.8m. 
  • Guidance for 2023 (published 3.5.2023): group revenue is expected to be EUR 60-62m and the operating result slightly negative (excl. divestment profit recognition). 

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Exel Composites - Looking to deliver more volumes

21.08.2023 - 09.30 | Company update

Exel’s results are yet to see demand pick up, and although valuation isn’t demanding uncertainty still limits upside.

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Still very soft results, however H2 should show gains

Exel’s Q2 was expected to be still somewhat soft, but the EUR 25.4m revenue came in well below our EUR 34.3m estimate as e.g. Wind power and Transportation, which had high Q2’22 deliveries, saw low demand especially in North America. Many key industries continued to reduce inventories, yet Exel saw demand developing largely according to its expectations and sees its delivery volumes begin to recover towards the end of the year. Q2 revenue declined by another 12% q/q, in the light of which the EUR 0.1m adj. EBIT already showed some results in terms of lower costs. Exel has some further scope to cut costs, and achieved results in terms of margin management, yet lacking volumes left adj. EBIT far from our EUR 1.2m estimate.

Many applications have already shown promise

Raw materials prices should remain stable, and pricing hasn’t been an issue for Exel, while cost cuts help results only so much. We estimate Q3 revenue to decline 11% y/y (meaning 18% q/q growth) while the EUR 35m revenue we estimate for Q4 should be enough to produce a healthy level of EBIT (we estimate EUR 2.5m Q4 EBIT). The demand and inventory cycles now produce large variations in results, and recent areas of particular softness (e.g. North American Wind power and Transportation) are also likely to make up much of the volume recovery going towards next year. Exel updates its strategy this fall; it’s clear Wind power remains a key driver (e.g. the Indian JV), but there should be other products to capitalize on (incl. conductor core rods) and ways to specify growth path in e.g. Transportation and Defense.

H2 figures to reflect the pace of demand improvement

Q4 might show a strong EBIT, but we see FY ’23 adj. EBIT halving to EUR 3.9m, a very modest level which means FY ’23 earnings multiples are elevated (20x EV/EBIT on our estimates). Exel’s valuation can’t be really described as expensive since profitability is to improve from here on, and the 7.5x EV/EBIT on our FY ’24 EBIT estimate of EUR 8.5m isn’t that challenging especially when such a level of EBIT would still be shy relative to long-term potential, yet the fog around demand pick-up keeps uncertainty high. Our new TP is EUR 3.5 (4.3); retain HOLD rating.

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Alisa Bank - Slow near-term development

21.08.2023 - 09.15 | Company update

Alisa Bank’s total income in H fell short of our estimates, PTP slightly better than expected. Capital constraints limit near-term growth, but the outlook still remains fairly good once additional capital has been raised.

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Total income below expectations, slightly better PTP
Alisa Bank’s H1 results were slightly better than anticipated on bottom-line level. Total income of EUR 8.4m was below our estimates (Evli EUR 9.5m) mainly due to the lower than estimated net fee and commission income of EUR 0.8m (Evli EUR 1.7m). Total OPEX of EUR 5.7m corresponded to our estimates and the C/I-ratio improved to 69% but still well above desired long-term levels. PTP amounted to EUR 0.4m (Evli EUR 0.1m), with lower than anticipated impairment of receivables (act./Evli EUR 2.2m/3.7m) compensating for the lower than estimated total income. 

Capital constraints limiting growth in the near-term
We continue to expect to see the slow growth in H1 be reflected also in H2. The company expects income to grow in H2 compared with H1, with the impact of market interest rates in our view to be the larger driver behind growth. We currently anticipate only a small growth in the loan portfolio. The raising of additional capital remains instrumental in enabling more rapid growth of the loan book, which we are confident will happen during H2. The consumer lending environment remains slightly more challenging due to the higher interest rates and stricter lending policies and capital constraints while corporate customer lending has grown in particular due to invoice financing. We expect to see a pick-up in growth in 2024e, but current market conditions remain a challenge in achieving the annual growth target of the loan book of more than 25%, and limited OPEX growth needs to support improved bottom-line figures. 

HOLD with a target price of EUR 0.37
We see no notable changes to our views on Alisa Bank due to the H1 report. 2023 is set to remain on the weaker side on growth and earnings while the company continues to build foundations for ramping up growth in the coming years.  

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Alisa Bank - Fairly decent first half

18.08.2023 - 09.30 | Earnings Flash

Alisa Bank’s H1 profitability was slightly better than anticipated, with PTP at EUR 0.4m (Evli EUR 0.1m). Total income was below our expectations but lower expected and realized credit losses made up for the difference. Profits in H2 expected to increase from H1.

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  • Total income during H1/23 amounted to EUR 8.4m (Evli EUR 9.5m). Net interest income amounted to EUR 7.4m (Evli EUR 7.8m) and net fee and commission income to EUR 0.8m (Evli EUR 1.7m). 
  • In H1 the volume of funding in corporate financing increased 19% y/y, driven by invoice financing, while the credit portfolio in consumer customers remained at previous year levels. 
  • The loan portfolio (before expected credit losses) at the end of H1 amounted to EUR 170.3m (163.8m) and the deposits amounted to EUR 241.7m (246.8m).
  • The pre-tax profit during H1 amounted to EUR 0.4m (Evli EUR 0.1m). Although the total income fell short of our estimates, the impairment of receivables was lower than expected at EUR -2.2m (Evli -3.7m). Total OPEX was quite in line with expectations. 
  • Earnings per share amounted to EUR 0.00 compared with our estimate of EUR 0.00.
  • CET1 and the CET1 ratio amounted to EUR 17.7m and 12.0% and total capital ratio to 15.5% 
  • The cost / income ratio amounted to 69%.
  • Outlook for 2023: The bank’s profits in H2 are expected to increase from H1. The result before non-recurring items is estimated to be positive in 2023. Total capital adequacy target set at 16%. Aim to strengthen own capital during H2.

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Exel Composites - Q2 figures remained below estimates

18.08.2023 - 09.30 | Earnings Flash

Exel’s Q2 results remained very soft as many customer industries saw demand challenges and continued to reduce inventories. Revenue fell clearly below our estimate, which naturally hit EBIT hard, however profitability improved slightly q/q even though top line declined another 12% q/q.

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  • Exel Q2 revenue decreased by 33.3% y/y to EUR 25.4m vs our EUR 34.3m estimate. European top line fared relatively well, declining by 16.0% y/y, whereas North America fell 61.3% as wind power demand was soft while Transportation also declined.
  • Wind power amounted to EUR 2.3m, compared to our EUR 4.0m estimate, while Buildings and infrastructure came in at EUR 6.5m vs our EUR 7.7m estimate. Transportation amounted to EUR 3.7m, compared to our EUR 8.0m estimate.
  • Adjusted EBIT landed at EUR 0.1m vs our EUR 1.2m estimate. Low volumes burdened EBIT, however Exel’s profitability improved slightly q/q despite the fact top line declined by 12% q/q as Exel aims to contain costs.
  • Order intake was EUR 25.4m in Q2 and declined by 31.4%. Customer inventory reductions continued. The market in general was soft but in line with the company’s expectations.
  • Exel guides FY ‘23 revenue to decrease and adjusted operating profit to decrease significantly (unchanged).

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Dovre - Many energy sector opportunities

18.08.2023 - 08.55 | Company update

Dovre’s Q2 results landed near our estimates. Renewable Energy drags EBIT this year, but demand remains in place and all segments still have room to improve going forward.

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Renewable Energy Q2 EBIT proved better than we estimated

Dovre’s Q2 top line developments were twofold: on the one hand Project Personnel continued to grow at a strong rate of 15.7% y/y, driven by demand in Canada, while Consulting saw a slower quarter after strong Q1 (Q2 revenue was down by 13.5% y/y as new Norwegian legislation on temporary hiring affects the public sector market of Consulting more than it does the energy sector of Project Personnel). Renewable Energy revenue declined much as expected, however its EUR 0.5m EBIT was a positive surprise as it improved a bit y/y. Project Personnel’s strong performance pushed Dovre’s EUR 47.3m revenue above our EUR 44.4m estimate, whereas Renewable Energy’s bottom line performance helped the EUR 1.5m EBIT slightly above our EUR 1.4m estimate.

Renewable Energy is likely to drive growth next year

Project Personnel has grown at a CAGR of 18% after FY ’20; the comparison figures are high, but we continue to expect further incremental growth in H2. We see Consulting top line flat or slightly down for the year after double-digit growth in recent years, whereas Renewable Energy should again see growth next year as new Finnish electricity transmission capacity opens construction bottlenecks. We estimate Project Personnel EBIT to develop flat this year and next but note there should be more potential towards an EBIT margin of 5%. We estimate Consulting EBIT down EUR 0.3m this year; the legislation on temporary hiring limits potential, and we have been expecting more moderate growth for the segment compared to the other two.

Earnings multiples remain undemanding

In our view Dovre is likely to land near the upper end of its revenue guidance range, while we note Q3 is important for EBIT due to the seasonality of Renewable Energy. Our group-level estimate revisions remain small while peer multiples have gained recently; Consulting peer multiples are rather high at around 16x EV/EBIT, but we have also revised down our estimates for the segment. Dovre is valued only 7x EV/EBIT on our FY ’23 estimates (excl. 49% of Suvic EBIT), while most peers trade well above 10x. Our new TP is EUR 0.80 (0.77); we retain BUY rating.

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Marimekko - Accelerating towards year-end

18.08.2023 - 08.50 | Company update

Marimekko’s Q2 EBIT came in strong, and the company’s current profitability potential seems more robust than we earlier anticipated with increased outlook of licensing income. We adjusted our estimates such that 23E EBIT saw a 5% increase.

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Strong profitability in Q2
While Marimekko’s Q2 topline was in line with our expectations, the company’s profitability came in strong, beating our estimates. Q2 net sales grew by 6% to EUR 40.3m, supported by strong Int’l growth. Soft wholesale sales pushed domestic sales below the comparison period. With higher licensing sales and lower logistics costs, the company’s gross margin improved to 63.7% which we view as very strong. Traditionally, a higher share of scalable licensing sales boosts the company’s gross margin as the material costs concerning such sales are very minor. By combining solid net sales growth and improved gross margin, Marimekko’s Q2 adj. EBIT improved to EUR 6.8m (16.8% margin). Adj. EPS amounted to EUR 0.12, which could have been stronger without increased net financial costs.

Increased ambition with new store openings
Although economic uncertainty is present globally, we expect that the company’s visibility to new demand in Asia has improved which is now seen in the increased estimate of new stores (15-20). Most of the store openings happen in Asia, which is one of the main drivers of Marimekko’s current strategy. By opening stores in new market areas, such as Singapore, Malesia, and Vietnam, Marimekko starts to build its ecosystem starting from key cities through which it eventually expands also to other cities. This concept has already demonstrated its effectiveness in other Asian countries such as Japan, Thailand, and China. Marimekko’s track record makes us confident in believing in the company’s success in long-term market expansion, especially when collaborating with competent partners.

Share price rally keeps the valuation neutral
We slightly upgraded our 23-24E EBIT estimates with positive profitability development of Q2 and an improved outlook of licensing sales. In our view, the company’s valuation remains neutral with the after-result rally in the share price. We retain our HOLD rating. By valuing Marimekko with the same multiples as earlier (23-24E EV/EBIT 13-11x), our TP is now EUR 10.5 (10.0).

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Endomines - Uncertainties remain high

18.08.2023 - 08.50 | Company update

Endomines' H1 2023 revenue aligned with our estimates, yet profitability fell short of expectations. Due to estimate changes, continued uncertainty regarding the US asset portfolio and stretched balance sheet, we downgrade our rating to HOLD (BUY) and adjust TP to EUR 4.7 (5.6).

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Production developed as estimated

Revenue in H1 2023 amounted to EUR 10.7m, up by 91.1% y/y. The reason for strong growth was previously announced increase in gold production. The production increased from 3,478 oz in H1 2022 to 6,753 oz, up by 94.1% y/y. The company’s EBITDA reached positive territory at EUR 0.4m, (-3.5m H1 2022) yet was lower than we anticipated (Evli est. EUR 1.6m). The reason for lower-than-expected profitability was higher overhead costs and lower than anticipated profitability for Pampalo mine. With the modest profitability, the company’s cash flow from operating activities was EUR -2.3m and cash in hand stood at EUR 1.2m. Despite the convertible loan financing that was agreed upon in June, the current cash position is arguably low.

 

H2 volume estimates stable, profitability lowered

Endomines updated its FY 2023 outlook, anticipating Pampalo production to hit the higher end of the growth range (+35-55% y/y). We maintain our production estimates for H2, already projecting a 54% growth in produced ounces for FY 2023. Profitability wise, the main changes relate to Pampalo as the cash cost for H1 2023 was at a higher level than we had anticipated. With the revised estimates, we expect EBITDA of EUR 5.0m for Pampalo for FY 2023 (prev. EUR 7.2m). In aggregate, we now expect group EBITDA of EUR 0.9m (prev. EUR 3.5m). Alongside the updated production guidance, the company reaffirmed its goal to finalize partnership discussions concerning its US assets by the end of 2023. Endomines conducted preliminary negotiations with potential partners during H1 2023 yet there was no concrete evidence yet regarding potential deals.

 

Current valuation appears fair considering the risks

Given the uncertainties, we maintain our valuation on the lower end of our SOTP-based valuation range. Driven by the beforementioned estimate revisions, continued uncertainty regarding the US asset portfolio and stretched balance sheet, we lower our rating to HOLD (BUY) and adjust TP to EUR 4.7 (5.6).

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Endomines - Profitability improved yet below estimate

17.08.2023 - 13.20 | Earnings Flash

The transformation programme is beginning to deliver results as the company’s EBITDA improved to EUR 0.4m (-3.5m H1 2022) during the first half of 2023. While the development was positive, the profitability was still weaker than we had estimated.

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  • Revenue in H1 amounted to EUR 10.7m, roughly in line with our estimate of EUR 11.2m. Previously announced gold production amounted to 6,753 oz during the first half, up by 94.1% y/y.
  • EBITDA in H1 was at EUR 0.4m (-3.5m H1 2022), lower than our estimate of EUR 1.6m.
  • EBIT in H1 amounted to EUR -2.3m, lower than our estimate of EUR 0.2m.
  • EBITDA from Pampalo production was at EUR 2.4m, up from EUR 0.2m during the first half of 2022.
  • EBITDA from the company’s other functions (Karelian gold line operations, USA operations and common functions) was at EUR -2.0m.
  • EBITDA from the company’s other functions was roughly in line with our expectations while the Pampalo’s operating expenses were still at a slightly higher level than expected.
  • During the first half of the year, Endomines has conducted preliminary negotiations with potential partners regarding the company’s US assets, based on the preliminary interest, Endomines still targets to conclude the negotiations during 2023.
  • As expected, Endomines revises the Pampalo production guidance for 2023 (current guidance: production increase of 35-55% y/y), the company expects that the production will be near the upper end of the given range (Evli current est. increase of 55% y/y).

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Dovre - Q2 a bit better than we estimated

17.08.2023 - 09.35 | Earnings Flash

Dovre’s Q2 figures came in a bit better than we had estimated as Project Personnel continued to grow at a 16% y/y rate while the profitability of Renewable Energy remained better than we expected.

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  • Dovre Q2 revenue remained flat y/y at EUR 47.3m vs our EUR 44.4m estimate. Project Personnel landed at EUR 25.9m, compared to our EUR 22.7m estimate, while Consulting came in at EUR 4.0m vs our EUR 4.6m estimate. Renewable Energy amounted to EUR 17.4m while we estimated EUR 17.1m. Dovre’s H1 top line growth would have been 3.4% instead of -2.1% when controlling for the effect of currencies (mostly weak NOK). Activity levels were strong especially in Canada.
  • EBITDA amounted to EUR 1.8m, compared to our EUR 1.6m estimate. EBIT was EUR 1.5m vs our EUR 1.4m estimate. Project Personnel EBIT was EUR 0.9m, compared to our EUR 1.0m estimate, while Consulting amounted to EUR 0.4m vs our EUR 0.5m estimate. Renewable Energy landed at EUR 0.5m vs our EUR 0.2m estimate, in other words improved a bit y/y. Dovre proactively implements measures to enhance operational efficiency.
  • Dovre guides FY ’23 revenue to be in the range of EUR 185-195m and EBIT to be above EUR 7m (guidance issued on Jun 26).

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Administer - Profitability improvement setback

17.08.2023 - 09.15 | Company update

The profitability guidance downgrade creates a near-term setback, but improvement potential still favours valuation upside. We lower our TP to EUR 3.5 (4.0), BUY-rating intact.

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Lowered profitability guidance
Administer issued a profit warning on August 8th, lowering its guidance for profitability in 2023. According to the new guidance, the EBITDA-margin in 2023 is estimated to be 4-8% (prev. 7-9%). The net sales guidance of EUR 76-81m remains intact. According to the company, profitability during H1/2023 was burdened by wage inflation and other increased expenses, which the company was not able to fully transfer into customer prices. Administer is preparing a profitability programme, focusing on long-term improvements in profitability and in addition new was to identify additional net sales opportunities.

Profitability improvement path postponed
The revised guidance is an unfortunate dent in the company’s long-term ambitions for improving profitability, as the guidance range suggests that relative profitability more likely will decrease y/y. With the acquisition of Econia, the previous guidance appeared more on the conservative side, and our estimates were previously slightly above the guidance range (net sales EUR 82.4m and EBITDA-margin 9.8%). The company has grown and is expected to grow rapidly also in 2023 due to acquisitions made, and expectations were for operational efficiency and profitability improvements to become an increasing area of focus. We expect an EBITDA-margin of 6.3% in 2023, with EBIT in the red in H1. 

BUY with a target price of EUR 3.5 (4.0)
We continue to see clear potential for profitability improvements in the coming years, despite the set-back now seen. Valuation continues to be attractive, an approx. 3%p y/y increase in EBITDA-margins in 2024 on our estimates would imply an ~10x P/E (excl. goodwill amortizations) and EV/sales remains firmly below 1x. With the near-term setback to profitability improvement, however, we lower our target price to EUR 3.5 (4.0), BUY-rating intact.

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Marimekko - Profitability way above expectations

17.08.2023 - 08.50 | Earnings Flash

Marimekko reported Q2 results above expectations. Q2 net sales came in line with our estimates while profitability topped our expectations. The guidance for 2023 was reiterated and the market outlook implies growth to continue in all of Marimekko’s main markets.

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  • Group result: driven by strong Int’l development, Q2 net sales grew by 6% to EUR 40.3m (40.6/39.0m Evli/cons.), roughly in line with our expectations. Domestic sales however came in soft with decreased demand for wholesale sales. Improved gross margin was supported by lower logistics costs and increased licensing sales. Despite increased fixed costs, higher volumes and improved gross margin boosted adj. EBIT above the comparison period and our expectations. Adj. EBIT amounted to EUR 6.6m (4.9/5.0m Evli/cons.), reflecting a margin of 16.8%. Adj. EPS accounted for EUR 0.12 (0.09/0.10 Evli/cons.), which could have been better without decreased net financials.
  • Finland: topline decreased by 3% to EUR 22.2m, which was below our estimates (Evli: 24.2m). The growth was driven by solid retail sales while wholesale and licensing sales decreased by some 20%.
  • Int’l: net sales came in very strong and above our expectations. Topline grew by 21% to EUR 18.1m (Evli: 16.4m). The increase was supported by strong APAC and EMEA regions as well as North America. In total, Int’l wholesale sales increased by 18% y/y.
  • 23 market outlook: Marimekko expects its domestic sales to grow, and one-off wholesale deliveries to support Finnish sales development in H2. The APAC region and Int’l net sales are expected to grow. Licensing sales are expected to increase.
  • 23 guidance intact: Net sales to grow and adj. EBIT margin between 16-19%.

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Raute - Growth to continue long-term

16.08.2023 - 09.30 | Preview

Raute reports Q2 results on Aug 25. We see Q2 a bit soft but growth is set to continue next year with large orders.

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Q2 may see some softening relative to the preceding ones

Raute has already shown encouraging profitability development in the past year or so even when it has lacked volumes due to the rapid shift away from Russia. The company completed its EUR 18m financing in June and is now positioned for growth according to its new strategy, which likely includes Analyzers M&A. We expect Q2 results to be a bit modest compared to the 3 previous quarters (but no deep losses as in Q2’22) as we estimate soft Wood Processing revenue, in addition to which the new ERP system has caused challenges. We estimate top line to have grown at a modest 6% y/y rate from the low comparison period and see EBIT at EUR 0.4m. Raute’s guidance is still quite loose, and we believe H2 figures are likely to specify it upwards.

Large projects to drive growth, short-term more uncertain

Raute has already bagged three large orders, worth a total of EUR 125m, to be delivered in FY ’24-25. These by themselves are likely to push annual revenue well above EUR 150m in the coming years even if smaller order flows prove softer than they have recently been. The three projects do not even include Finland, where Metsä Group has lately confirmed its EUR 300m LVL factory investment; the mill will not be ready until late ’26, its construction probably beginning next spring, but in our view Raute is more likely than not to sign an order of some EUR 50m for the project (the delivery of which could be timed around FY ’25-26 and hence fitting nicely with Raute’s current backlog). Raute’s short-term market outlook and customer demand picture may continue to be somewhat mixed as many industrial end-uses should still fare better than construction activity.

Valuation unchallenging especially in the light of potential

Many Nordic capital goods companies’ valuations have declined over the past few months, however in our view Raute does not have any particularly relevant listed peers. FY ’23 revenue will still be rather modest and bottom line not representative of potential. We continue to estimate 7% FY ‘24 EBITDA margin, a very conservative assumption considering Raute managed 7.7% already in Q1. On that basis Raute is valued 5x EV/EBIT on our FY ’24 estimates. We retain our EUR 12.0 TP and BUY rating.

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Alisa Bank - Awaiting pick-up in growth

16.08.2023 - 08.30 | Preview

Alisa Bank reports its H1 results on August 18th. The loan portfolio development YTD has been flat, with growing interest rates on deposits adding pressure on H2. The growth potential remains in place, but more proof is needed. We adjust our TP to EUR 0.37 (0.40), HOLD-rating intact.

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Loan portfolio development flat despite volume growth
Alisa Bank (Fellow Bank until April, 2023) will report its H1 results on August 18th. The company’s loan portfolio growth YTD has been sluggish and more or less flat at EUR 157.8m in July. This, despite a rather steady growth in monthly figures for intermediated financing, having seen a peak of nearly EUR 40m in May. Deposits have likewise remained flat, at EUR 249.4m in July. The loan book has remained mostly within the EUR 160-170m mark, which according to the company would be needed to reach positive profit levels. Our net earnings estimate is at EUR 0.1m, with uncertainty relating to realized and expected credit losses.

Growth needed to counteract increasing interest expenses
We have lowered our estimates for the remained of the year, now expecting near-zero net earnings. The challenge for Alisa Bank in our view right now is the discrepancy between the loan book and deposits. The company has been actively raising the interest on its deposits throughout H2, now at 3%. Without growth of the loan book, interest expenses will start to become a burden on earnings. Therefore, our key interest in the H1 report lies on the company’s growth outlook and more recent new products, such as the Banking-as-a-Service cooperation with Talenom. 

HOLD with a target price of EUR 0.37 (0.40)
With the start-up of operations, rebranding (and expected focus on marketing), new products and lending activity remaining fairly good, despite a slower start to 2023, growth potential still remains. Awaiting more signs of growth and on our lowered estimates, we adjust our TP to EUR 0.37 (0.40), HOLD-rating intact.

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Detection Technology - Initiates change negotiations

14.08.2023 - 13.10 | Analyst comment

As a part of its cost-saving program, DT today initiated change negotiations which may end up in a termination of a maximum of 9 employments and changes in roles. In addition, other measures to improve cost efficiency will be taken in all of the company’s operations.

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  • In its Q2 report, DT already announced that cost savings are made to meet its 15% EBITA margin target in 2024. Today the company announced change negotiations concerning 95 senior salaried employees in Finland. In total, the measures that may be implemented after the change negotiations could lead to a termination of a maximum of 9 employments and changes in job roles.
  • DT has already taken small measures that have decreased its fixed costs to some extent and will continue to improve its efficiency globally. For example, the company shut down its talent hub organization in Nanjing, China which consisted of personnel of less than five.
  • Forementioned measures are estimated to continue until the end of Sep 2023. Thus, the impact could be visible already in Q4. However, the termination of employment likely includes extra one-time costs of which P&L recognition schedule is yet unsure.
  • In our last update on the 4th of Aug, we already counted some cost savings in our estimates, starting from Q3, but increasingly in Q4 and 2024. In our estimations, the departure of nine senior salaried persons could end up in savings of over EUR 1m in personnel costs on a year basis. However, the acquisition of Haobo Imaging, salary inflation, and the extent of savings in other operative costs mix the equation and the net impact on fixed costs is difficult to estimate.
  • However, we view the news as positive, but not expect DT reaching its EBITA margin target of 15% yet in 2024. Before relying on the company's medium-term target, we need more evidence on the success of saving-program as the company's profit performance has lagged during the past few years.
  • At this point, we do not make any changes to our estimates.

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Marimekko - Back on a growth track

14.08.2023 - 09.50 | Preview

Marimekko publishes its Q2 result on Thursday, Aug 17th. We expect the company to deliver solid 7% growth and profitability on a double-digit level in Q2. New store openings are anticipated to boost H2 growth.

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Expecting decent growth and profitability on a solid level
Marimekko saw a temporal decrease in net sales in Q1, while we expect the company to step back on a growth track with a y/y growth of 7% in Q2. Our Q2 net sales estimate amounts to EUR 40.6m, with Finland contributing by 5% and Int’l markets by 10% net sales increase. Topline growth is supported by strong domestic retail and wholesale sales as well as decent growth of the APAC region’s wholesale sales. Our view is that expanding fixed costs and gross margin below the comparison period will push profitability below the comparison period. Our Q2 adj. EBIT estimate amounts to EUR 4.9m (12% of net sales).

New store openings to boost H2 growth
Marimekko plans to open 10-15 new stores during 2023. Most of the openings will take place in the Asia region. In addition to sales, new stores will bring Marimekko global visibility and increase brand awareness. During the fall of 2023, Marimekko plans to open a new location in Singapore and a flagship store in Copenhagen, Denmark. Singapore expansion is made in cooperation with the company’s partner Tanachira which has built the foundation for Marimekko’s success in Thailand. After the Q1 result, we have counted such store openings in our estimates and expect them to bring additional revenue for H2’23.

Valuation on par
In our view, Marimekko’s short-term operating environment has stayed relatively intact, and thus we have made no changes to our estimates ahead of Q2 result. Additional uncertainty stems from the unstable macroeconomic environment, subdued consumer spending in China, the decreased purchasing power of European consumers, and the prevailing geopolitical tensions. However, we expect the company to deliver a 7% y/y increase in net sales aligned with its growth guidance in 2023. We foresee 23E adj. EBIT margin to continue in a declining trend with cost pressures, however remaining on a great level at 17.5%. With no changes in our estimates and share price in line with the previous update, we view the valuation as neutral and retain our HOLD rating. Target price is intact at EUR 10.

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Aspo - Challenges cut EBIT for the year

11.08.2023 - 09.25 | Company update

Aspo’s outlook worsened this spring, and Q2 results fell below reduced estimates. ESL and Telko face their own issues, but the challenges are largely temporary in nature.

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ESL and Telko had issues which burdened profitability

Aspo’s EUR 133m Q2 revenue was a bit soft relative to the EUR 143m/138m Evli/cons. estimates, while the EUR 3.6m adj. EBIT fell clearly short of the EUR 6.5m/6.5m Evli/cons. estimates due to especially because of ESL’s challenges but also because of the hit Telko endured as market prices dropped (down 40% y/y in some plastics categories). Increased Asian imports restrained volumes in the case of plastics, but overall Telko’s demand outlook stays good. ESL was hit by Supramax losses while demand for the smaller core vessels remains rather stable albeit at a lower level of volumes this year; the demand softness is due to the key industries, steel and forest, which make more than 50% of volumes. Leipurin performed pretty much as expected.

We expect modest improvement in conditions for H2

Aspo’s guidance implies EBIT in the range of EUR 13-23m for H2; Q3 will improve a bit q/q but will still not be great. ESL’s demand and Telko’s market prices are the main drivers, meaning Aspo could still reach the upper end of the range should the situation begin to improve soon. We estimate ESL’s FY ’23 EBIT at EUR 22m, a steep drop relative to the EUR 37m comparison figure but also likely to be the trough before ESL’s fleet expands with green coasters. The Supramaxes will be sold, and ESL’s market opportunity is set to grow long-term thanks to significant industrial investments on both sides of the Bothnian Bay. Telko still pursues European M&A despite the market challenges.

This year is likely to set quite low comparison figures

We estimate adj. EBIT of EUR 28.7m for the year; the respective above 12x EV/EBIT multiple represents a somewhat elevated level as both ESL and Telko are likely to generate quite soft figures for the year. We believe Aspo has a fair chance of reaching above EUR 35m EBIT again next year as the recent troubles of ESL and Telko are largely temporary in nature and Leipurin proceeds according to plan. Aspo is then valued around 9x EV/EBIT on our FY ‘24 estimates, which we consider a fair level. Our new TP is EUR 7.0 (8.0) as we revise our EBIT estimates down by some 10-15% for this year and next. We retain our HOLD rating.

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Etteplan - Weaker market beginning to show

11.08.2023 - 08.40 | Company update

Etteplan reported Q2 results that were below our estimates. Etteplan’s sales and EBIT from business operations were at EUR 89.8m (Evli est. EUR 93.2m) and EUR 6.1m (Evli est. EUR 7.8m) respectively. The Software and Embedded Solutions segment underperformed due to market weakness, especially in early Q2.

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Profitability suffered from a weak market

In Q2, Etteplan’s revenue growth slowed down to 0.7% as the company’s revenue came in at EUR 89.8m (EUR 89.3m in Q2/22, EUR 93.2m Evli est.). With the slow growth, the company’s EBIT decreased by 10.3% to EUR 6.1m (EUR 6.8m in Q2/22, EUR 7.8m Evli est.). As a result of the softer Q2, the company specified its financial guidance; revenue in 2023 to be EUR 360-380 (previously 360-390) million, and operating profit (EBIT) in 2023 to be EUR 28-31 (previously 28-33) million.

 

FY 2023 estimates revised downwards

The Q2 softness was led by the Software and Embedded Solutions service area, where activity notably slowed in April. Client R&D projects are being deferred due to a challenging macroeconomic environment with high interest rates and persistent inflation. Despite the slowdown, the company saw improving activity already at the end of the quarter as several major contracts were secured. We raised revenue growth forecasts for Engineering Solutions due to strong Q2 performance and the LAE Engineering acquisition in early Q3. Conversely, we revised Software and Embedded, and Technical Communication Solutions estimates downward due to lower expected volumes and softness seen during H1. We now estimate net sales of EUR 371.0m and EBIT of EUR 28.5m for FY 2023.

 

HOLD with a target price of EUR 15.0 (16.0)

Etteplan's weak H1 puts pressure to H2, our estimate for the FY EBIT lies in the lower end of the current guidance range. We revise our target price to EUR 15.0 (16.0), HOLD-rating intact due to the elevated 2023E multiples based on our updated estimates. When looking at 2024E multiples, our target P/E and EV/EBIT multiples are roughly in line with the company’s historic average levels. In addition, the current valuation is significantly below the value derived from our discounted cash flow valuation.

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Aspo - A challenging quarter

10.08.2023 - 10.00 | Earnings Flash

Aspo’s Q2 results fell short of estimates especially due to the loss-making Supramax vessels and certain other dry bulk market challenges, while Telko’s business suffered from declining prices.

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  • Aspo Q2 revenue from continuing operations amounted to EUR 132.6m, compared to the EUR 143.2m/138.1m Evli/consensus estimates.
  • Adjusted EBIT was EUR 3.6m vs the EUR 6.5m/6.5m Evli/consensus estimates. The shortfall was due to both ESL and Telko, whereas Leipurin met estimates.
  • ESL Q2 revenue was EUR 44.0m, compared to our EUR 52.2m estimate, while adjusted EBIT landed at EUR 3.3m vs our EUR 4.9m estimate. Weak spot market demand for the two Supramax vessels had an especially negative impact. Pricing of time-chartered vessels, dockings and specific supply chain conditions also had a negative impact. Q2 is a seasonally slow quarter, so there’s to be some pick up in demand after the summer although steel and forest industry demand is unlikely to be that high this year.
  • Telko revenue amounted to EUR 54.2m vs our EUR 55.3m estimate, whereas adjusted EBIT came in at EUR 0.9m vs our EUR 2.1m estimate. Prices declined and plastics demand was soft. Higher Asian imports caused competition, while development in chemicals and especially lubricants was more positive. The overall price outlook for H2 looks somewhat more stable, but perhaps still on the soft side.
  • Leipurin revenue landed at EUR 34.4m, compared to our EUR 35.7m estimate, while adjusted EBIT was EUR 1.1m vs our EUR 1.2m estimate.
  • Other operations cost EUR 1.7m vs our EUR 1.7m estimate.
  • Aspo guides comparable operating profit to be EUR 25-35m in FY ’23 (EUR 55.3m in FY ’22).

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Etteplan - Profitability below expectations

10.08.2023 - 09.40 | Earnings Flash

Etteplan’s sales and EBIT from business operations were at EUR 89.8m and EUR 6.1m respectively. EBIT was below our estimates especially due to weaker profitability in Software and Embedded solutions.

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  • Net sales in Q2 were EUR 89.8m (EUR 89.3m in Q2/22), slightly below our estimates and consensus estimates (EUR 93.2m/93.9m Evli/Cons.). Growth in Q2 amounted to 0.7% y/y, of which 0.3% organic growth (3.2% and 2.7% at comparable FX respectively).
  • EBIT in Q2 amounted to EUR 6.1m (EUR 6.8m in Q2/22), below our estimates and consensus estimates (EUR 7.8m/7.6m Evli/cons.), at a margin of 6.8%. EBIT was affected by weak profitability in the Software and Embedded Solutions segment as it faced particularly difficult market conditions.
  • EPS in Q2 amounted to EUR 0.15 (EUR 0.22 in Q2/22), below our estimates (EUR 0.22 Evli).
  • Net sales in Engineering Solutions in Q2 were EUR 51.0m vs. EUR 50.8m Evli. EBITA in Q2 amounted to EUR 5.2m vs. EUR 5.3m Evli.
  • Net sales in Software and Embedded Solutions in Q2 were EUR 21.2m vs. EUR 23.2m Evli. EBITA in Q2 amounted to EUR 1.1m vs. EUR 2.2m Evli.
  • Net sales in Technical Communication Solutions in Q2 were EUR 17.4m vs. EUR 19.0m Evli. EBITA in Q2 amounted to EUR 1.4m vs. EUR 1.7m Evli.
  • Guidance for 2023 specified: revenue in 2023 to be EUR 360-380 (previously 360-390) million, and operating profit (EBIT) in 2023 to be EUR 28-31 (previously 28-33) million.

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Suominen - H2 volume recovery to prove

10.08.2023 - 09.05 | Company update

Suominen should make further progress towards restoring profitability in H2, however Q2 results remained very soft.

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Q2 results were still weak, but figures are to improve in H2

Suominen’s Q2 revenue declined 4.5% y/y and was EUR 113m, compared to the EUR 121m/120m Evli/cons. estimates, as Europe came in as we estimated but Americas fell EUR 8m short of our estimate. There was some progress as volumes increased slightly, but not quite as much as might have been expected. The low volumes meant gross profit fell some EUR 5m short of our estimate, however sales margins are already improving due to the lag between sales prices and lower raw materials prices. Decreased SG&A costs also helped a bit, but operating profitability figures ended more than EUR 3m lower than we estimated. Cash flow was strong thanks to declining inventories.

Focus rests on both volume growth and efficiency

Suominen continues to expect comp. EBITDA to increase, even when the H1’23 figure was flat y/y, since there are still signs the US supply chain inventory situation is improving further; H2 is also usually stronger as demand for hygiene products picks up in late summer. Suominen hence focuses on volume recovery and plant-level efficiency measures; the latter has recently included the closure of the plant in Mozzate, and the issues related to European production transfers still demand some attention (in addition to which Suominen also looks for some incremental cost measures). The US market is central for a meaningful group-level volume recovery, but Suominen is also bringing the EUR 6m Nakkila sustainable products investment to completion in H2 as new products sales continues to be another key focus area.

H2 improvement still needs to justify current valuation

We revise our estimates down for both this year and next. We expect FY ‘23 top line to stay flat when volumes improve while prices decline. We revise our FY ’23 profitability estimates down by EUR 10m and those of FY ‘24 by EUR 3m. FY ’23 profitability seems to remain low, but we estimate Suominen to reach around 8% EBITDA and 5% EBIT margins by the end of the year. Further marginal improvement next year should then produce an EBITDA north of EUR 40m, which would be in line with historical averages and values Suominen about 7.5x EV/EBIT on our FY ’24 estimates. We retain our TP of EUR 2.7 and HOLD rating.

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Suominen - Q2 remained very soft

09.08.2023 - 10.00 | Earnings Flash

Suominen’s Q2 results showed some improvement in terms of operational efficiency, however top line fell clearly short of estimates and profitability is yet to improve in a meaningful way.

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  • Suominen Q2 revenue decreased by 4.5% y/y to EUR 112.7m vs the EUR 121.0m/119.6m Evli/consensus estimates. Americas came in at EUR 69.8m, compared to our EUR 78.0m estimate, while Europe was EUR 42.9m vs our EUR 43.0m estimate. Sales volumes were slightly higher relative to the comparison period, but sales prices decreased following lower raw material prices. Currencies had an impact of EUR -1.6m.
  • Gross profit amounted to EUR 3.1m, compared to our EUR 8.5m estimate, therefore gross margin was 2.7% vs our 7.0% estimate.
  • Comparable EBITDA landed at EUR 2.7m vs the EUR 6.3m/4.5m Evli/consensus estimates, whereas comparable EBIT was EUR -2.1m vs our EUR 1.3m estimate. SG&A costs decreased. Production at the Mozzate plant ended in April and Suominen continues to improve other plants’ operational efficiency. The Nakkila investment project related to a sustainable products production line proceeds as planned and will be completed in H2’23.
  • Suominen guides FY ‘23 comparable EBITDA to increase relative to the EUR 15.3m comparison figure (guidance unchanged).

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Scanfil - To be continued on a strong note

07.08.2023 - 09.30 | Company update

Scanfil’s Q2 results were a bit better than we estimated. Favorable positioning has already produced strong results and thus demand outlook beyond this year drives valuation.

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Results continued to improve rapidly in Q2

Scanfil’s top line grew 14% y/y to EUR 243m vs the EUR 240m/237m Evli/cons. estimates. Spot market component purchases declined by EUR 24m y/y to EUR 5m and hence growth excluding them amounted to 30%. The high figure was driven by Energy & Cleantech, but demand remained good across all the segments; Advanced Consumer Applications’ headline revenue decreased by 16% but grew 7% excluding spot purchases. EBIT amounted to EUR 17.5m, compared to the EUR 16.2m/16.6m Evli/cons. estimates, and net working capital and inventory management turned cash flow very strong.

Scanfil has already basically achieved its margin potential

The component situation has improved a lot this year, but there are still some availability issues. Scanfil’s EBIT has already gained markedly thanks to better productivity due to component availability as well as recent production transfers within the network. Scanfil has made incremental capacity investments for a while now and announced the EUR 20m expansion of its facilities in Poland as the latest measure. The investment isn’t that big on group level yet adds up together with other recent expansions. Scanfil begins to fill the space with lines from Q2’25 onwards. Long-term trends are favorable and we believe e.g. energy efficiency continues to be a key theme which drives many Scanfil accounts. Scanfil should have an attractive pipeline of Energy & Cleantech customers, which helps secure long-term potential. Scanfil continues to assess capacity growth plans from the perspective of both M&A and incremental plant expansions.

Valuation reflects high profitability levels

We make marginal upward revisions to our estimates. Demand trends appear strong enough to sustain at least some further growth next year, but Scanfil has already achieved its long-term margin potential and valuation also reflects the fact. Scanfil trades 10.5x EV/EBIT on our FY ’23 estimates. The 10x multiple on our FY ’24 estimates likewise represents a double-digit premium relative to peers, which we see justified by the relatively high margins. Our new TP is EUR 11.5 (11.0); retain our HOLD rating.

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Detection Technology - Patience pays off

04.08.2023 - 09.00 | Company update

Although DT delivered solid revenue growth in Q2, the group EBIT fell short of our low expectations. Short-term outlook in medical is uncertain while security solutions are expected to see strong growth from Q3’23 onwards. We expect a significant improvement in EBITA in the coming years.

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Decent growth, but profitability fell short again
DT's second quarter was characterized by increased uncertainty and soft market. DT posted Q2 topline in line with our expectations. Group net sales amounted to EUR 25.2m with y/y growth of 10.8%. The growth was driven by medical and security markets while industrial solutions saw a decline. Traditionally DT’s cost base has scaled quite nicely with revenue growth. Q2 EBIT however fell short of our low expectations with lower volumes, unfavorable sales mix, increased credit loss provisions and the usage of spot-components. Q2 EBIT amounted to EUR 1.4m, reflecting a margin of 5.4%.

Cost savings should support 24E profitability
With soft market and uncertain near future, DT has taken actions to improve its profitability towards its medium-term target of 15%. First actions have already been taken as the company shut down its Talent hub in Nanjing. Our view its that the program will support Q3 profitability to some extent, but negative sales development will limit the margin expansion. However, from Q4’23 onwards, we foresee the profitability improving significantly. Reaching 15% EBITA margin target however contains elevated uncertainty.

Market’s expectations for 2024 pushed low
Our 23E EBITA declined due to estimate revisions, but 24E EBITA remained relatively stable compared to our previous expectations. With 23E profitability below DT’s sustainable level and better outlook of 2024 profitability, we continue to value the company with our 2024 estimates. DT currently trades with a 24E EV/EBITA multiple of 11x, which represent notable discount to the company’s peers as well as to its sustainable historical levels. Poor track during the past few years on one hand justifies valuation below peers, but on the other hand, with decent revenue growth and cost savings materializing, EPS growth potential is significant. We adjust our TP to EUR 15.5 (16.0) with 24-25E EBIT estimates intact but uncertainty elevated. Valuation remains attractive; our rating remains at BUY. 

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Enersense - More long-term earnings potential

04.08.2023 - 09.00 | Company update

Enersense’s Q2 results recovered well from the challenging comparison period, and earnings should have further room to grow also next year and beyond.

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Results are by and large improving across the board

Enersense’s Q2 revenue grew 44% y/y to EUR 86m, compared to our EUR 77m estimate. The top line beat was driven by Power and Connectivity, however all segments still saw roughly similarly high double-digit growth rates. The EUR 3.1m adj. EBITDA was above our EUR 2.3m estimate; Smart Industry continued to incur ramp-up costs related to its offshore business (should reach profitability in Q4 although it continues to scale up beyond that) in addition to the EUR 0.9m capital gain from the sale of Enersense Solutions and the EUR 0.4m credit loss provision. Strategic investments burdened EBITDA to the tune of EUR 1.6m. International Operations’ margins improved clearly more than we estimated as the Baltic contracts have now mostly adjusted to recent inflation. Power achieved a clearly better profitability than we estimated, despite investments in the EV charging business, while Connectivity came in soft relative to our estimates due to issues related to e.g. labor efficiency.

Many earnings growth drivers remain in place next year

Q2 saw a strong order intake within Connectivity due to fibre projects. The segment still has scope for price increases, and thus we expect its results to contribute to further earnings growth next year. Certain industrial customers see lower demand going forward, but Smart Industry has diversified operations and the offshore ramp-up is likely to lift its profitability next year. International Operations’ order activity has cooled a bit from the recent highs, but it achieved a decent 4.7% EBITDA while we believe the margin to expand more on a full-year basis next year. The ERP system investment continues next year, but it is to help long-term potential in addition to which Enersense’s small portfolio streamlining decisions help retain core focus.

Valuation not challenging considering earnings potential

We estimate 21% growth for the year, and while we see long-term organic growth at a more modest level we still estimate FY ’24 profitability to improve by EUR 4m. The 14x FY ‘23 EV/EBIT multiple isn’t cheap relative to peers, but it should decline to ca. 8x next year. Our new TP is EUR 7.0 (6.5); we retain BUY rating.

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Scanfil - Results stronger than estimated

04.08.2023 - 08.30 | Earnings Flash

Scanfil’s Q2 results came in somewhat higher than estimated. Top line was a bit higher than we expected, driven by Energy & Cleantech, while EBIT topped our and consensus estimates by some EUR 1m.

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  • Scanfil Q2 revenue grew by 14.3% y/y to EUR 243.3m, compared to the EUR 239.9m/237.1m Evli/consensus estimates. Growth was largely driven by the Energy & Cleantech segment (recycling, green energy and energy efficiency solutions). Strong demand, better electronic components availability and investments in production capacity enabled higher production volumes.
  • Advanced Consumer Applications amounted to EUR 57.9m vs our EUR 68.0m estimate, while Energy & Cleantech was EUR 86.0m vs our EUR 65.3m estimate. Automation & Safety was EUR 47.5m, compared to our EUR 55.6m estimate.
  • EBIT came in at EUR 17.5m vs the EUR 16.2m/16.6m Evli/consensus estimates, meaning operating margin was 7.2%. High production volumes and capacity utilization rates, increased operational efficiency and successful cost inflation management supported profitability.
  • Scanfil guides FY ’23 revenue in the range of EUR 900-950m and adjusted EBIT of EUR 61-68m (updated on Jul 10).
  • Scanfil has also decided to invest EUR 20m in a new factory building in Sieradz, Poland. The new building will increase its Sieradz plant factory floor area by over 70%. The project starts this month and the new building is estimated to be ready for production in Q2’25. Additional expansion investments will be done gradually in line with production volume growth.

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Enersense - Results top estimates

03.08.2023 - 12.30 | Earnings Flash

Enersense’s Q2 figures were better than we estimated as Power and Connectivity revenue clearly topped our estimates while profitability improved in all segments.

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  • Enersense Q2 revenue grew by 44.3% y/y to EUR 86.3m vs our EUR 77.2m estimate. High growth continued across the board. Smart Industry top line was close to our estimate, while International Operations came in a bit below our estimate. Both Power and Connectivity were clearly above our estimates.
  • Adjusted EBITDA was EUR 3.1m, compared to our EUR 2.3m estimate, while EBIT amounted to EUR 0.6m vs our EUR 0.1m estimate. Core business profitability improved in all segments, especially within International Operations and Power, while investments in strategic focus areas (offshore ramp-up, EV charging and a new ERP system) had a negative EBITDA impact of EUR 1.6m in Q2. EBITDA also includes a capital gain of EUR 0.9m from the sale of Enersense Solutions and a credit loss provision of EUR 0.4m related to a customer’s insolvency (recorded within Smart Industry).
  • Order backlog amounted to EUR 527m at the end of Q2 (EUR 295m a year ago). Order backlog grew especially within Connectivity.
  • Enersense guides FY ‘23 revenue to be over EUR 300m and adjusted EBITDA in the range of EUR 12-18m (unchanged).

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Detection Technology - EBIT softer than expected

03.08.2023 - 09.45 | Earnings Flash

DT posted Q2 net sales in line with our expectations, while adj. EBIT fell short of our estimates. Medical market is showing increased uncertainty while security markets are expected to improve. Group sales anticipated to decline in Q3 and grow in H2’23.

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  • Group results: net sales increased by 10.8% y/y to EUR 25.2m, just in line with our expectations (25.2/25.2m Evli/cons.). The growth was driven by medical and security solutions. Adj. EBIT came in below our expectations and amounted to EUR 1.4m (1.9/2.0m Evli/cons.). The profitability was impacted by lower volumes, sales mix, increased credit loss provisions and spot-components. Necessary measures to normalize the profitability are now being taken. Group EPS accounted for EUR 0.03, which also fell short of our expectations (0.1/0.1 Evli/cons.).
  • Medical (MBU): MBU’s sales grew by 22.3% to EUR 12.4m, quite in line with our expectations (Evli: 12.5m). The demand was however softer than DT expected, and the double-digit growth rate is largely due to soft comparison period. The demand for CT-solutions continued strong.
  • Security (SBU): SBU’s revenue increased by 5% y/y to EUR 9.1m and came in above our expectations (Evli: 8.7m). The growth was backed by the markets of America and India, while China performed poorly. Outlook for security demand is expected to strengthen with bids and orders coming both from China and the US.
  • Industrial (IBU): IBU’s net sales declined by 6.2% to EUR 3.7 (Evli: 4.0m), due to customers’ inventory corrections and soft market of China. The demand however recovered towards the end of the quarter.
  • Haobo Imaging: the acquisition was closed after Q2, and DT’s expanded product portfolio has been enthusiastically welcomed by the markets. Haobo sales is expected to amount to a couple of million euros in H2’23.
  • Outlook: Group revenue expected to decline in Q3, but grow in H2. DT expects MBU to decline, SBU to grow by double-digits, and IBU to grow in Q3.

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CapMan - Investment returns remained weaker

03.08.2023 - 09.00 | Earnings Flash

CapMan's net sales in Q2 amounted to EUR 16.5m, below our estimates and below consensus (EUR 18.5m/19.4m Evli/cons.). EBIT amounted to EUR 4.2m, below our estimates and below consensus (EUR 10.7m/10.5m Evli/cons.), on our estimates mainly due to fair value changes.

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  • Revenue in Q2 was EUR 16.5m (EUR 17.7m in Q2/22), below our estimates and consensus estimates (EUR 18.5m/19.4m Evli/Cons.). Growth in Q2 amounted to -7% y/y.
  • Operating profit in Q2 amounted to EUR 4.2m (EUR 14.1m in Q2/22), below our estimates and consensus estimates (EUR 10.7m/10.5m Evli/cons.), at a margin of 25.3%.
  • EPS in Q2 amounted to EUR 0.02 (EUR 0.07 in Q2/22), below our estimates and consensus estimates (EUR 0.05/0.05 Evli/cons.).
  • Revenue in Management Company business in Q2 was EUR 13.6m vs. EUR 15.8m Evli. Operating profit in Q2 amounted to EUR 5.0m vs. EUR 6.8m Evli. CapMan booked carried interest of EUR 2.7m (Evli EUR 3.0m).
  • Revenue in Investment business in Q2 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q2 amounted to EUR -0.4m vs. EUR 3.9m Evli. 
  • Revenue in Services business in Q2 was EUR 2.7m vs. EUR 2.7m Evli. Operating profit in Q2 amounted to EUR 1.5m vs. EUR 1.6m Evli. 
  • Capital under management by the end of Q2 was EUR 5.0bn (Q2/22: EUR 5.0bn). Real estate funds: EUR 3.1bn, private equity & credit funds: EUR 0.9bn, infra funds: EUR 0.5bn, and other funds: EUR 0.4bn.

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Suominen - Recovering towards potential

02.08.2023 - 09.35 | Preview

Suominen reports Q2 results on Aug 9. We expect meaningful signs of earnings recovery as raw materials prices have mostly normalized and higher US volumes begin to come through.

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Q2 results to improve, but recovery continues in H2 as well

Suominen’s Q1 volumes developed flat largely as expected; the US inventory levels have to some extent begun to melt, but delivery volumes were not nearly yet at the levels where Suominen would have been able to achieve decent earnings. Q1 EBITDA therefore remained a very modest EUR 2.6m. Raw materials prices have been on a declining trend for a year now, which we believe will help Q2 profitability improve even if volumes are still somewhat lacking. We estimate Q2 revenue to have grown 3% y/y to EUR 121m, thanks to incremental volume recovery in the US, while we see EBITDA at EUR 6.3m.

Raw materials prices seem to have already normalized

Recent double-digit q/q declines in pulp prices support margins at least in Q2 and Q3, however nonwovens prices will also follow down with a lag. We hence believe Suominen’s margins to gain markedly over the course of this summer, and any further earnings gains after that are more likely to be driven by higher US volumes. Oil-based raw materials like polyester and polypropylene declined steeply already in H2’22 and hence their price development has been more stable this year. We believe the raw materials price correction has now mostly materialized, which should let Suominen focus on volumes and new products’ sales. We estimate Suominen’s FY ’23 gross margin to remain at a rather low level of some 8% yet see the quarterly margin improving to above 10% by the year’s end. Suominen currently guides increasing EBITDA for the year, and an upgrade wouldn’t be that surprising should it arrive at some point this year.

Valuation reflects expectations about H2 recovery

Suominen’s FY ’23 earnings multiples remain elevated as H1’23 results stay soft, but we estimate H2 improvement to deliver some 9% EBITDA and 5% EBIT margins and hence FY ’24 should see earnings above such levels. Suominen is now valued 15x EV/EBIT on our FY ’23 estimates, however we expect the multiple to decline to around 6x next year. We continue to view valuation neutral. We retain our EUR 2.7 TP and HOLD rating.

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Vaisala - Soft market opens a spot to BUY

31.07.2023 - 08.50 | Company update

Vaisala had a two-folded quarter with W&E delivering solid 18% growth while IM saw a decline due to a soft market. The outlook remains strong for W&E, but IM’s markets remain uncertain which impacts the BU’s growth prospects in H2.

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W&E delivered growth, IM was impacted by a weak market
Vaisala had a two-folded quarter. W&E grew nicely in orders received and net sales. Meanwhile, IM suffered from soft market demand and its orders received and net sales declined from the comparison period. In total, Vaisala’s Q2 orders received grew by 5% y/y and net sales amounted to EUR 130.8m with a y/y growth of 9%. Gross margin was a bit below the comparison period at 51.1% and was negatively impacted by the unfavorable sales mix and price competition of IM. Despite lower volumes and softer gross margin of IM, group EBIT improved to EUR 11.9m (9.1% margin). Profitability was supported by an increased share of high-profitable businesses of W&E.

Low industrial activity likely to decelerate net sales growth
While the outlook for W&E seems bright with megatrend-driven investments continuing, we foresee IM’s growth prospects in 2023 clearly weakening. A high share of W&E’s revenue is funded by public entities that tend to be less cyclical. Meanwhile, industrial activity has decreased, and uncertainty is elevated. Additional uncertainty is brought by IM’s short order book. After the Q2 result, we made no significant group-level changes to our estimates. In total, we expect Vaisala’s group to continue growth during 2023-24, but with a gentler slope than seen recently. EBIT is also seen to improve but relative profitability takes a setback compared to that of the comparison period. Eventually, the period is characterized by strong development of W&E and uncertainty considering IM.

Valuation remains attractive despite uncertainty
With no material reaction in the share price, we continue to view Vaisala as moderately valued. While Vaisala is priced with 23-24E EV/EBIT multiples of 20-16x, its peers are trading above that of the company. We view that Vaisala is benefiting from the robust underlying megatrends over time, despite temporary softness in customer demand, leading to a clear positive development in EPS. We retain our BUY rating and TP of 42.0, reflecting a moderate valuation.

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Detection Technology - The group will grow, EBIT yet limited

31.07.2023 - 08.25 | Preview

DT reports its Q2 results on Thursday, July 3rd. We expect the medical business to bring strong revenue growth while Q2 EBIT is yet limited by cost inflation and stagnant market of China. With moderate valuation, we raise our rating to BUY (HOLD). With adjusted estimates, TP is set at 16.0 (17.5).

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Strong MBU, EBIT limited by several factors
Despite the continued strength of the medical markets, the security market in China has shown stagnation following the reopening of COVID-19 restrictions. In addition, the inventory corrections seen in Q1 are expected to continue also in Q2 among industrial customers. For Q2, we project a solid 11% y/y growth in group net sales, reaching EUR 25.2 million, primarily driven by MBU. Meanwhile, SBU and IBU are expected to remain relatively flat compared to the comparison figures, mainly due to soft market demand. Our view is that Q2 EBIT is yet limited by soft net sales development in SBU and IBU as well as cost inflation stemming from fixed costs. Our EBIT estimate for Q2 amounts to EUR 1.6m. Third quarter may pose additional challenges as DT faces a strong comparison period in the medical sector. However, we remain optimistic about Q4, with a promising outlook for security demand as we anticipate an increase in TSA aviation orders towards the year-end.

Haobo acquisition to bring new growth opportunities
The acquisition of Haobo Imaging was confirmed at the beginning of July, and has no impact on DT’s Q2 figures yet. Haobo’s revenue impact is yet small but the integration of new technologies into DT's portfolio has the potential to unlock substantial growth potential also within medical customers. Over the next few years, DT plans to make investments in Haobo to foster its growth, aiming to achieve positive EBIT by 2025. Haobo caters mostly to industrial customers, and we foresee the company accelerating IBU’s H2’23 growth.

Low market expectations for the next two years
Although our EBIT estimates decreased by over 10%, DT’s valuation doesn’t appear very expensive. By considering 24E EBIT, DT trades below its historical valuation, and the discount to its peer group is notable. We adjust our TP to EUR 16.0 (17.5) with estimate adjustments. However, moderate valuation and expected earnings growth provides us a spot to take a positive view in DT. Our rating is now BUY (HOLD).

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Vaisala - Two-folded quarter

28.07.2023 - 09.40 | Earnings Flash

With preliminary figures already given, Vaisala’s Q2 result contained no big surprises. W&E grew nicely while IM suffered from a soft market. Market outlook provides decent growth to continue with elevated uncertainty in the industrial market segments.

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  • Group result: Orders received grew by 5% y/y and order book was on a solid level at EUR 167.4m (+6% y/y). Net sales at EUR 130.8m, with y/y growth of 9%. The increase in net sales was driven by W&E’s growing market segments. Gross margin was a bit below the comparison period. EBIT improved but was negatively impacted by the low volumes and soft gross margin of IM. The deceleration in fixed costs growth was positive news for us. EPS amounted to EUR 0.22.
  • Industrial measurements (IM): Orders received decreased by 6% and order book was flat at EUR 37.2m. Net sales declined by 3% to EUR 52.8m, due to decrease of life science. Gross margin came in soft, driven by unfavorable sales mix and elevated price competition. EBIT amounted to EUR 6.8m with a margin of 12.9%.
  • Weather and Environment (W&E): Orders received increased by 14% and order book was on a good level at EUR 130.2m (+8% y/y). Net sales increased by 18% to EUR 78.0m. The growth was driven by renewable energy, roads and automotive as well as meteorology market segments. Gross margin came in above our expectations, with higher share of more profitable businesses. EBIT came in surprisingly strong at EUR 4.9m, 6.3% of net sales.
  • Market outlook: Vaisala expects its high-end industrial instruments and life science market segments to grow moderately. Renewable energy and roads and automotive market as well as power and energy and liquid measurements segments are anticipated to grow. The company foresees aviation market segment to be stable or grow and meteorology market segment to be stable.
  • 23 guidance intact (revised on July 17th): net sales between EUR 530-560m and EBIT between EUR 65-75m.

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Finnair - Profitability largely recovered

24.07.2023 - 09.35 | Company update

Finnair should still have scope for further improvement, however current market conditions also inform some caution with respect to long-term financial targets.

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Very high profitability even ahead of the summer season

Finnair’s EUR 749m Q2 revenue landed near the EUR 724m/760m Evli/cons. estimates, while passenger revenue was EUR 40m above our estimate as unit yields were higher than we expected (RASK was 27% above the Q2’19 level). Finnair had its best Q2 in history in terms of EBIT; there were no big cost surprises relative to our estimates and hence the higher-than-estimated top line translated well to comparable EBIT, which was EUR 66m vs the EUR 44m/51m Evli/cons. estimates. Capacity constraints meant maintenance costs were low, but the issue had no major impact on numbers. The capacity issues also led to a further lag in ASK compared to pre-pandemic levels, an industry-wide challenge which however has helped profitability in the short-term.

Out of the woods, yet strategy execution work continues

On the one hand airlines are in a spot from where it’s unlikely to get much better, considering the high yields and current supply bottlenecks as well as improved cost competitiveness in the wake of the pandemic, while on the other hand certain demand trends may prove to be secular. Experience consumption has so far showed resiliency against inflation, and hybrid work has expanded the market for leisure travel. Competitive landscape appears stable especially in Europe, while the field is level in markets like Japan and Korea, but Atlantic competition is more intense. Finnair still does some further network optimization, while long-term strategy requires new fuel-efficient planes.

6% EBIT margin already has a rather solid basis

The low end of the EUR 150-210m range seems very cautious as we believe Finnair will achieve more than EUR 150m in combined Q2 & Q3 EBIT alone. Finnair is likely to achieve an EBIT of 6% already this year, which makes the new long-term target of 6% by the end of ‘25 look muted. We estimated above 6% levels for the coming years already before the update and thus make only marginal revisions. Finnair trades ca. 8.5x EV/EBIT on our FY ’23 estimates, a double-digit premium to peers which we find acceptable as above 6% EBIT looks realistic already quite soon. Our new TP is EUR 0.54 (0.53) as we retain our HOLD rating.

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Consti - Smooth sailing

21.07.2023 - 16.50 | Company update

Consti’s Q2 report provided no real surprises, and the figures were largely in line with our estimates. Our focus for Q2 was on the company’s order intake which came in strong at EUR 106.5m in Q2 (Q2/22: EUR 98.7m). We see continued steady development going forward backed by the healthy backlog.

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Q2 results were in line with our estimates

Q2 net sales were EUR 75.7m (compared to EUR 73.1m in Q2/22), roughly in line with our and consensus estimates (EUR 79.8m/77.7m Evli/cons.). Sales grew 3.6% y/y. Operating profit in Q2 was EUR 3.0m (EUR 2.9m in Q2/22), aligning with our and consensus estimates (EUR 3.1m/3.1m Evli/cons.) at a 4.0% margin. EPS in Q2 was EUR 0.29 (EUR 0.28 in Q2/22), in line with our and consensus estimates (EUR 0.29/0.29 Evli/cons.). Cash flow generation was strong during the quarter, with free cash flow improving to EUR 4.1m (EUR 2.6m in Q2/22) due to good profitability and released working capital.

 

Improved backlog strengthens future outlook

Consti’s order backlog kept growing both y/y and q/q as it reached new record level of EUR 297.9m, the improved backlog strengthens outlook for H2 and 2024. As the company’s development was steady during the first half of 2023, we have made only slight adjustments to our estimates. After the minor adjustments, we forecast revenue of EUR 321.9m for 2023 with EBIT of EUR 12.2m. Consti kept its guidance for 2023 unchanged as it estimates EBIT of EUR 9.5–13.5m for the FY. Our estimate for EBIT sits above the middle point of the guidance. We estimate that the company maintains similar profitability level compared to H2 2022 despite increased volumes, due to expected cost inflationary pressure.

 

BUY with TP of EUR 14.0

We base our valuation of Consti on both the company’s own historic multiple levels and relative valuation. Based on our estimates for 2023, the company trades at 8.9x P/E and 6.3x EV/EBIT. In our view, Consti's current price undervalues its current form, and the valuation remains attractive.

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Innofactor - Ups and downs

21.07.2023 - 09.50 | Company update

Innofactor saw some challenges in Q2 but still reported rather decent results. Increased price competition remains a short-term threat, but financially, we expect improvements towards the end of the year.

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Some challenges in Q2
Innofactor reported rather decent results despite margins falling short of our estimates. Net sales amounted to EUR 20.1m (Evli EUR 19.4m), growing by 18.6% y/y and 11.1% organically. EBITDA amounted to EUR 1.8m (Evli EUR 2.3m). Q2 was affected by Easter and other weekday holidays and usage of flexi leaves around these. Onboarding of a notable number of new employees also reduced invoicing rates during April-May, while Innofactor in June achieved its highest single-month billing rate since going public. Exchange rates also had a significant negative impact. The order backlog remained on previous year levels, at EUR 77.3m, with the price competition for public sector tenders having increased significantly during the quarter. 

Expect improvements towards the end of the year
The increased price competition causes some concerns for the remainder of the year. Although the prices in public tenders appear unsustainable and will likely rebound, we expect competition to still remain tough. The backlog supports growth for now, but new sales will need to pick up for Innofactor to remain on a more rapid growth track. The more recent development of billing rates is encouraging and along with the recent recruitments and reduced employee turnover providing support for margin improvement. In terms of financial figures, we expect Q3 to likely still be a bit more challenging but Q4 to be notably better. We have made only smaller adjustments to our estimates for 2023e, mainly due to Q2 figures.  

BUY with a target price of EUR 1.5 (1.6)
With the slight headwinds seen, as well as the minor downward adjustments to our estimates, we lower our target price to EUR 1.5 (1.6) but retain our BUY-rating. Although valuation is currently rather fair on our 2023 estimates, we see valuation remaining favourable due to the margin improvement potential.  

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Finnair - Profitability climbed above estimates

21.07.2023 - 09.30 | Earnings Flash

Finnair’s Q2 revenue was well in line with estimates while the EUR 66m comparable EBIT was clearly stronger than expected. Finnair also specified its profitability guidance range for the year and updated its long-term profitability target to 6% by the end of 2025.

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  • Finnair Q2 revenue grew by 36.2% y/y and amounted to EUR 749.2m, compared to the EUR 724.1m/759.6m Evli/consensus estimates. Passenger revenue grew 55.5% y/y to EUR 612.1m. Demand remains strong and is already at a good level for the upcoming winter season.
  • Comparable EBIT was EUR 66.2m vs the EUR 43.7m/50.7m Evli/consensus estimates.
  • Fuel costs amounted to EUR 220m vs our EUR 221m estimate, while staff costs were EUR 125m, compared to our EUR 122m estimate. All other OPEX+D&A amounted to EUR 365m vs our EUR 376m estimate.
  • Cost per Available Seat Kilometer was 7.41 eurocents, compared to our estimate of 7.39 eurocents.
  • Finnair specifies its guidance in terms of comparable EBIT and now estimates the figure to be in the range of EUR 150-210m for the year, based on current fuel prices and exchange rates. Finnair expects FY ’23 revenue not yet to reach the level of FY ’19.
  • Finnair updates its strategic profitability target to 6% comparable EBIT margin by the end of 2025 and also intends to call its EUR 200m hybrid bond in early September.

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Consti - Steady development, strong orders

21.07.2023 - 09.00 | Earnings Flash

Consti's net sales in Q2 amounted to EUR 75.7m, roughly in line with our and consensus estimates (EUR 79.8m/77.7m Evli/cons.), with growth of 3.6% y/y. EBIT amounted to EUR 3.0m, also in line with our and consensus estimates (EUR 3.1m/3.1m Evli/cons.). Guidance for FY 2023 (unchanged): operating result for 2023 will be in the range of EUR 9.5–13.5 million.

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  • Net sales in Q2 were EUR 75.7m (EUR 73.1m in Q2/22), roughly in line with our and consensus estimates (EUR 79.8m/77.7m Evli/cons.). Sales grew 3.6% y/y.
  • Operating profit in Q2 amounted to EUR 3.0m (EUR 2.9m in Q2/22), in line with our and consensus estimates (EUR 3.1m/3.1m Evli/cons.) at a margin of 4.0% (4.0%).
  • EPS in Q2 amounted to EUR 0.29 (EUR 0.28 in Q2/22), in line with our and consensus estimates (EUR 0.29/0.29 Evli/cons.).
  • The order backlog at the end of Q2 was EUR 297.9m (EUR 240.8m in Q2/22), up by 23.7% y/y. Order intake was EUR 106.5m in Q2 (Q2/22: EUR 98.7m).
  • Free cash flow amounted to EUR 4.1m (Q2/22: EUR 2.6m).
  • The company’s steady development continues in line with our estimates, the order intake, which was particular interest of ours for Q2, was strong and order backlog grew almost 24% y/y.
  • The strengthened order backlog likely supports volumes for H2 2023
  • Guidance for 2023 (unchanged): Operating result for 2023 will be in the range of EUR 9.5–13.5 million

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SRV - Backlog promises a better tomorrow

20.07.2023 - 16.40 | Company update

SRV reported Q2 figures that were lower than we estimated for both net sales (EUR 141.3m vs. Evli est. EUR 156.1m) and operative EBIT (EUR -3.9m vs. Evli est. EUR 1.2m). SRV's healthy backlog provides support for H2 and beyond.

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Profitability remained under pressure during Q2

Revenue in Q2 was EUR 143.1m (EUR 211.4m in Q2/22), below our estimate of EUR 156.1m. Revenue declined 32.3% y/y. Operating profit in Q2 amounted to EUR -3.0m (EUR 10.1m in Q2/22), below our estimate of EUR 1.2m, at a margin of -2.1%. The operative operating profit in Q2 amounted to EUR -3.9m, also below our estimate of EUR 1.2m. The outlook for 2023 was kept unchanged and SRV still expects y/y revenue decline in 2023 and positive yet lower than 2022 operative operating profit.

 

Soft H1 increases pressure for H2

SRV’s order intake during Q2 was impressive at EUR 245.9m (EUR 72.3m in Q2/22). With the strong order intake, the company’s order backlog was at a healthy level of EUR 993.1m at the end of Q2 2023 (EUR 745.9m in Q2/22), up by 33.1% y/y. The company expects that the strong backlog in business construction will start to bring in net sales especially during the Q4 2023 and beyond. We have kept our estimates for business construction net sales intact as we keep forecasting substantially higher volumes for Q4 2023. For housing construction, we increased our estimates for H2 2023 as the activity level was higher than expected during Q2 2023 and the company was able to start new units at the end of the quarter. With the Q2 figures and our revised estimates, our estimate for FY 2023 operative EBIT is at EUR 1.1m. Our revised estimates align with the company's 2023 outlook, yet the risk of falling short of the guidance has increased.

 

HOLD with a target price of EUR 4.3 (4.4)

We estimate that the current backlog will start delivering net sales at the latter part of H2 2023 and beyond. With the soft H1 profitability, risk of falling short of the current guidance has increased. Despite near-term pressure, the healthy backlog promises a better future. We revise our target price to EUR 4.3 (4.4) and retain our HOLD rating.

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Vaisala - Industrial demand softening

20.07.2023 - 09.40 | Company update

Some of Vaisala's industrial customers have recently postponed their investment decisions which was reflected in the BU’s preliminary Q2 figures. W&E experienced better-than-expected growth and profitability during Q2. With revised guidance and milder Q2, we cut our 23-24E EBIT estimates by approx. 9%.

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23E EBIT guidance reduced, industrial demand soft
Vaisala revised its 23E net sales guidance to a range of EUR 530-560m (prev. 530-570m) and reduced its EBIT expectations to EUR 65-75m (prev. 70-85m). Our view is that the decrease in EBIT is primarily attributed to the weakened market environment of IM. Meanwhile, the demand for W&E was strong with its recurring service sales and renewable energy showing robust growth. In the preliminary Q2 figures, the overall topline saw a 9% increase, reaching EUR 130.8 million, largely driven by W&E's remarkable 18% y/y growth. Meanwhile, IM experienced a 3% decline in revenue, facing challenges from soft demand in the markets. Q2 EBIT improved to EUR 11.9m (9.1% margin) with the help of W&E, while IM’s EBIT saw a significant decline due to soft sales and an unfavorable sales-mix. Preliminary Q2 figures show that pressures in fixed costs have eased, and W&E’s 23E EBIT is likely to come in above our previous expectations.

We made some estimate adjustments
In light of the new guidance and preliminary Q2 figures, we adjusted our group estimates downwards. Our 23-24E EBIT estimates saw a significant downgrade of approximately 9%, primarily attributed to the weaker-than-expected performance of IM. However, the decline is partly offset by revisions made to W&E’s estimates. Our 23E EBIT estimate now stands at EUR 66.2 million, which nears the lower end of the company's new guidance range. We foresee that achieving the EBIT target of 15% in 2024 is likely to become even more challenging due to the softness of the industrial market.

Valuation favorable
We value Vaisala with 23-24E EV/EBIT of 23-18x, which, with estimate revisions, implies a target price of EUR 42.0 (44.0). In our view, Vaisala's current valuation portrays a more turbulent performance outlook than we anticipate. With that, we raise our rating to BUY (HOLD), reflecting moderate valuation relative to the company’s history and its peers.

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Innofactor - Some challenges but still quite good

20.07.2023 - 09.30 | Earnings Flash

Innofactor’s Q2 saw continued good growth, better than anticipated, up 18.6% y/y to EUR 20.1m (Evli EUR 19.4m). EBITDA was below expectations at EUR 1.8m (Evli EUR 2.3m), with the EBITDA-margin improving slightly y/y. Guidance reiterated, Innofactor’s net sales and EBITDA in 2023 are expected to increase compared with 2022.

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  • Net sales in Q2 amounted to EUR 20.1m (EUR 16.9m in Q2/22), slightly above our estimates (Evli EUR 19.4m). Net sales in Q2 grew 18.6% y/y and 11.1% organically. Net sales increased in Finland, Sweden and Norway in local currency despite weak exchange rates but declined in Denmark. 
  • EBITDA in Q2 was EUR 1.8m (EUR 1.4m in Q2/22, below our estimates (Evli EUR 2.3m), at a margin of 8.8%. 
  • Operating profit in Q2 amounted to EUR 1.0m (EUR 0.7m in Q2/22, below our estimates (Evli EUR 1.5m), at a margin of 4.9%. 
  • The second quarter was affected by Easter and other weekday holidays and usage of flexi leaves around these. onboarding of a notable number of new employees also reduced invoicing rates during April-May, while Innofactor in June achieved its highest single-month invoicing rate since going public.
  • Order backlog at EUR 77.3m, at previous year levels. Price competition in the market during the second quarter was exceptionally intense, and Innofactor did not win any new significant tenders during the quarter. 
  • Guidance for 2023 (reiterated): Innofactor’s net sales is expected to increase from 2022 (EUR 77.1m) and EBITDA is expected to increase from 2022 (EUR 7.8m).

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SRV - Profitability remains weak

20.07.2023 - 09.00 | Earnings Flash

SRV's net sales in Q2 amounted to EUR 143.1m, below our estimate of EUR 156.1m. Due to volume miss, the profitability was a disappointment, with EBIT at EUR - 3.0m (EUR 1.2m Evli).

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  • Revenue in Q2 was EUR 143.1m (EUR 211.4m in Q2/22), below our estimate of EUR 156.1m. Revenue declined -32.3% y/y.
  • Operating profit in Q2 amounted to EUR -3.0m (EUR 10.1m in Q2/22), below our estimate of EUR 1.2m, at a margin of -2.1%. The operative operating profit in Q2 amounted to EUR -3.9m, also below our estimate of EUR 1.2m.
  • The order backlog in Q2 was EUR 993.1m (EUR 745.9m in Q2/22), up by 33.1% y/y.
  • SRV’s order intake during Q2 was impressive at EUR 245.9m (EUR 72.3m in Q2/22).
  • Business construction revenue in Q2 was EUR 111.0m (EUR 130.0m Evli estimate). The reason for the weak revenue development for business construction was that the projects recognized in the order backlog during the review period have not yet generated significant revenue.
  • Housing construction revenue in Q2 was EUR 32.1m (EUR 25.8m. Evli estimate). The housing construction activity was slightly above the level that we expected, as we estimated, the company did not recognize any developer-contracted units as income during the period yet the company was able to launch multiple residential projects during the period.
  • Despite the weaker than expected profitability, the company’s improving backlog was a clear positive and will serve as a catalyst for growth in the forthcoming quarters.
  • Outlook for 2023 remains unchanged.

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Vaisala - Lowered EBIT guidance, preliminary Q2 figures below expectations

17.07.2023 - 19.40 | Analyst comment

Vaisala revised its net sales guidance and reduced its EBIT expectations for 2023. Simultaneously, the company provided preliminary figures for Q2.

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  • Revised guidance for 2023: net sales of EUR 530-560m (prev. 530-570m) and EBIT of EUR 65-75 (prev. 70-85m). The midpoint implies y/y growth of 6% and an EBIT margin of 12.8%.
  • Preliminary Q2 figures show growth and profitability below our expectations: net sales of EUR 130.8m (Evli: 135.6m) and EBIT of EUR 11.9m (Evli: 14.1m).
  • IM’s orders received declined by 6% y/y, attributed to delayed investments among industrial customers. Meanwhile, W&E’s orders received saw a robust increase of 14% due to strong customer demand. Overall, Vaisala’s Q2 orders received grew 5% to EUR 129.3m.
  • Vaisala’s Q2 net sales grew by 9% to EUR 130.8m with W&E’s y/y growth of 18%, attributed to strong demand in roads and automotive and renewable energy segments as well as in subscription sales. Meanwhile, IM saw a 3% decline due to soft customer demand.
  • Group’s Q2 gross margin amounted to 55.1% which was almost in line with the comparison period. The gross margin was negatively impacted by price competition and unfavorable sales-mix in IM, and positively impacted by increased product margins of W&E. The negative impact of spot-components decreased during the quarter, by having no large impact on the gross margin.
  • With a softer gross margin, soft sales, and elevated fixed costs, IM’s EBIT saw a significant decrease to EUR 6.8m (12.9% margin). Conversely, W&E’s Q2 EBIT saw a notable increase, amounting to EUR 4.9m (6.4% margin). Overall, group EBIT improved by 15% to EUR 11.9m in Q2.
  • Vaisala reports its official Q2 results on Friday, July 28th. We update our estimates in the coming days before the company’s Q2 report.

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Finnair - Earnings potential begins to show

17.07.2023 - 09.35 | Preview

Finnair reports Q2 results on Jul 21. The recent profit warning indicates this year will already see decent results, however valuation also requires further improvement.

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A lot of volume potential over the summer and beyond

The summer travel season is once again set to be busy, as indicated by Finnair’s recent positive profit warning and high load factors already in June. Finnair’s positioning has meant its Q2’23 RPK was still some 30% below the Q2’19 comparison figure, however we estimate continued high passenger yields and achieved cost cuts to have helped Q2 EBIT to EUR 44m (close to the EUR 47m Q2’19 figure). We estimate FY ’23 EBIT at EUR 165m, by itself a decent figure and which Finnair could well top if yields and volumes develop favorably also in H2. Volume recovery is set to continue due to Finnair’s positioning; pricing levels don’t seem to be declining any time soon, but neither may they have much further potential to advance from here on.

Finnair’s volumes are still building up after years of crisis

Lately Asia and the Middle East have been most visibly driving Finnair’s volume recovery. Neither region has yet quite reached their potential as the former’s volumes were still only 50% of their Q2’19 levels while the latter is a new focus area. European volumes were a bit above 80% of the Q2’19 levels and so may not have that much further potential as Asian volumes will not recover fully to generate enough transit passengers, whereas North American traffic is another piece of the puzzle for Finnair to build its network large enough to sustain the current fleet.

Valuation demands at least some more earnings gains

Many airlines reached decent figures already last year, and margins are to improve across the board this year. Finnair will see a much steeper improvement than a typical airline due to its positioning. Next year is unlikely to be too bad as a typical peer’s EBIT margin is expected to improve by another two percentage points. We estimate Finnair’s similar improvement at less than half that rate even though it starts from a considerably lower base. Finnair trades roughly 10x EV/EBIT on our FY ’23 estimates, some 20% premium relative to peers. The multiple is 8x on our FY ’24 estimates, still an above 10% premium but which we view acceptable given Finnair’s potential to achieve some more catch-up relative to peers. We retain our EUR 0.53 TP and HOLD rating.

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Consti - Focus on order intake

14.07.2023 - 09.20 | Preview

Consti reports its Q2 results on July 21st. We anticipate continued y/y growth and expect profitability to stay at a similar level compared to the previous year despite increased volumes, due to expected cost inflationary pressure. We see the Q2 order intake development crucial for H2 volumes.

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Expecting a solid Q2, focus is on order intake development

We estimate net sales of EUR 79.8m for Q2, with 9% y/y growth. The estimated continued growth is driven by the Housing Companies and Corporations segments. In terms of profitability, we estimate EBIT of EUR 3.1m with similar profitability levels when compared to last year despite higher volumes given the cost inflationary pressures in materials and personnel expenses. Besides the figures, our attention is on the order intake development. With the end of Q1 backlog being more evenly distributed across subsequent years, new orders are necessary to fill the volumes for the remainder of 2023.

Overall construction market outlook remains gloomy

The construction market is expected to slow down in 2023 driven especially by the residential new construction market. The renovation construction market is still expected to experience slight growth during 2023 driven by the need-based nature of the segment. While the renovation construction market typically operates differently, the notable decline in the new construction market may impact renovation construction to some extent. Some of Consti’s customers have already publicly announced delays and postponements of renovations and other repairs driven by the increased interest expenses and other costs. Although the market outlook remains gloomy, we haven't adjusted our estimates. However, the recent news flow has drawn greater attention into the order intake development. The development in the housing company segment is of key interest as the future outlook should be clearer after H1.

BUY with TP of EUR 14.0 (14.0)

We continue to see the valuation of Consti undemanding. The company trades at 8.8x P/E and 6.1x EV/EBIT on our 2023 estimates which offers a significant discount to both the main peer companies (Table 1) and Consti’s own historic multiples.

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Duell - Initiating coverage with BUY

13.07.2023 - 09.20 | Company report

Duell has faced challenges during the FY 2023 due to the current high interest rate environment, leading to reduced demand across the powersports aftermarket value chain. Despite the recent share price strength after the company posted solid Q3 figures, we see the current valuation moderate as we estimate continued growth in Europe and improved margins going forward. We initiate coverage of Duell with a BUY rating and TP of EUR 1.4.

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One-stop shop for powersports aftermarket products

Duell is a Finnish powersports aftermarket distribution company established in 1983, headquartered in Mustasaari, with warehouses and sales offices across Europe. It serves as a source for a diverse range of equipment and parts in all powersports categories, acting as a convenient one-stop-shop. With approximately 600 brand owners and manufacturers, including Duell's own brands primarily based in Asia, the company ensures a wide supply network. Dealers benefit from Duell's distinctive brand and product selection, offering over 150,000 SKUs from more than 500 brands.

Expecting growth and improved margins going forward

We estimate that the organic sales will continue to decrease during Q4 while the inorganic growth is expected to support the company’s sales. For the FY 2023, we estimate total net sales of EUR 125m with 0.8% y/y growth. In terms of profitability, we estimate that Duell will reach adj. EBITA of EUR 7.4m in 2023 with margin of 5.9%, down from EUR 8.7m and 7.0% during FY 2022. Going forward, we estimate that Duell will return to profitable growth with the help of European expansion, partly scalable cost structure and the ongoing efficiency programme.

BUY with a target price of EUR 1.4

We initiate coverage of Duell with a BUY-rating and target price of EUR 1.4. In our view, the valuation looks moderate considering the Duell’s growth prospects in the Europe and the ongoing efficiency programme that we estimate to improve the company’s margins going forward. On our estimates for 2023E, the company trades at slightly elevated multiples yet on a discount when looking at 2024E relative multiples and the value derived from our discounted cash flow model.

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Scanfil - Realizing earnings potential

12.07.2023 - 09.30 | Company update

Scanfil upgraded its guidance, and although the hike wasn’t very big it was already the second time this year.

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We make only small revisions for this and coming years

Scanfil upped its guidance: the new revenue and EBIT midpoints are up by 1.6% and 7.5% respectively, and so the revision wasn’t that significant in magnitude but was the second upgrade this year. Well-known incremental drivers were behind the upgrade, namely strong demand, further improvement in electronics availability and increases in production capacity. Scanfil has therefore been able to match high demand with supply. We make only small estimate revisions as our previous estimates were still within the current range. Scanfil’s FY ‘23 EBIT margin is likely to land close to 7%; in our view there isn’t any clear reason why this wouldn’t be the case also going forward. We revise our EBIT estimates up by around EUR 2m for this and coming years.

Growth to continue, EBIT margins are where they should be

We estimate Scanfil to reach a CAGR of 16% in the 3-year period of FY ’21-23; the latest year still contains some spot purchases, which are inflationary items as they don’t add margins, but underlying organic growth has remained strong to the extent that Scanfil may well reach double-digit headline growth also this year despite the nominal headwind posed by the fading spot items (Q1 growth was 21% y/y excluding them). Scanfil has done price hikes for deliveries in response to inflation, however higher volumes have driven a much more significant part of Scanfil’s recent growth. In our view the pricing dynamic may well turn deflationary soon, and as such represent a top line headwind, yet Scanfil’s growth is still most likely to be driven by higher volumes stemming from its favorably positioned customer accounts.

Some premium in valuation is warranted

Double-digit growth is unlikely to extend for very long, and while we expect 5%+ CAGR to be a realistic long-term rate we still estimate next year’s growth below such levels due to issues related to components and pricing as well as softening in demand following a period of high growth. Scanfil is valued 11.5x EV/EBIT on our FY ’23 estimates; the valuation implies some 15% premium relative to peers, a justified level (and our estimates still have upside potential) yet we continue to view valuation fair. Our new TP is EUR 11.0 (10.0); retain HOLD rating.

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Dovre - Well-positioned despite headwinds

04.07.2023 - 09.30 | Company update

Dovre revised guidance down due to larger-than-expected challenges in the Finnish wind power construction market.

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We cut our FY ’23 EBIT estimate by EUR 1.4m

Dovre downgraded guidance due to headwinds already to some extent visible in the Q1 report but which have since proved more pronounced. Dovre previously expected FY ‘23 top line to improve and EBIT to stay about the same compared to FY ’22, however the new guidance hints revenue to decline by a roughly mid-single digit rate while EBIT may be down by more than EUR 1m. We revise our FY ’23 revenue estimate down by 8% to EUR 190.8m and estimate EBIT at EUR 7.3m (prev. EUR 8.7m). We make only marginal revisions for Project Personnel and Consulting; we cut our FY ’23 revenue estimate for Renewable Energy by 16%, now estimating the segmental EBIT at EUR 1.5m (prev. EUR 2.8m). Our estimates for the coming years are likewise down for Renewable Energy (we trim some EUR 1m in terms of EBIT) but remain intact for Project Personnel and Consulting.

Strong resilient Norwegian results

No softness was to be seen in the performance of Project Personnel and Consulting last year and Q1 showed high growth even in EUR terms despite weak NOK; we expect the Norwegian businesses’ performance to translate to flattish or slightly positive y/y development. Suvic’s long-term demand drivers remain intact as countries like Finland are still far from done building up their wind power capacity, however the lack of transmission capacity may in places limit demand in the short-term. In our view such challenges should be relatively easy to solve in countries like Finland (compared to e.g. the US where there are many other complicating factors besides long distances). We hence believe Renewable Energy is likely to grow again next year; our respective EUR 84m top line and 3% EBIT margin estimates are more likely to be on the conservative side.

Finnish wind power market to add earnings again next year

We expect Renewable Energy EBIT to improve again to EUR 2.5m next year, which would help Dovre EBIT to EUR 8.2m. Dovre is valued no more than 7x EV/EBIT on our FY ’23 estimates (excl. 49% of Suvic), an undemanding level considering the resilient Norwegian performance and temporary softness in Finland. Our new TP is EUR 0.77 (0.82); we retain BUY rating.

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Detection Technology - Brisk earnings growth ahead

22.06.2023 - 02.10 | Company report

DT has successfully navigated through external obstacles and now has a prime opportunity to concentrate on growth, business development, and profitability. Despite uncertain economic conditions, the underlying demand remains robust.

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The widest X-ray detection provider
DT specializes in the development, manufacturing, and marketing of digital X-ray detection solutions for medical, security, and industrial applications. The company adopts an asset-light business model by focusing solely on value-adding processes. With the recent acquisition of Haobo Imaging, DT now offers a complete range of digital X-ray detection technologies, expanding its market exposure to approx. EUR 3bn. DT aims to establish itself as the growth leader in selected X-ray imaging segments. To achieve this, the company consistently invests approx. 11% of its net sales in R&D annually. While keeping the option open for inorganic revenue expansion, DT has made only two acquisitions in its history.

Few obstacles faced, now time to scale up
Over its history, the company has demonstrated strong growth, achieving a CAGR of 18% during 2010-22. However, DT has recently faced challenges due to various market disruptions, including the COVID-19 pandemic and component shortages. These factors have constrained the company's growth and negatively impacted its profit margins. Despite global economic uncertainty, the growth outlook for DT appears promising. The growth is supported by increased investments in aviation security and its recent expansion into the TFT FPDs markets. Furthermore, starting from a soft 2022, DT's EBIT is expected to show a significant improvement in the coming years. It is worth noting that some of this positive expectation is already reflected in the stock price.

Valuation little elevated but not challenging
We made no changes to our estimates. DT guides double-digit growth for Q2 and H1 as a group. We anticipate the company delivering y/y growth of 15% and an EBIT margin of 11.8% in 2023 Based on our estimates, we consider the current valuation to be neutral or slightly elevated, with surprises in growth being one of the key drivers of the stock's performance. We retain our HOLD rating and TP of EUR 17.5.

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Endomines - Secured financing for production increase

21.06.2023 - 09.30 | Company update

Endomines agreed on convertible loan financing with Finnish investors to start production at Hosko and to increase production at the Pampalo underground mine.

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Financing up to EUR 3.6 million secured

Endomines secured a convertible loan of up to EUR 3.6m from Finnish investors for gold production at Hosko and increased production at Pampalo. The agreement includes an initial EUR 1.8m in June 2023 and an option for another EUR 1.8m in October 2023. The convertible loans can be exchanged for shares after 24 months. The loans have a 36-month maturity with a 12% annual interest rate. Despite the high cost and risk for dilution, we see the financing positive as it supports the company’s strategy execution in the Karelian Gold Line.

 

We revised our production estimates upwards

Endomines aims to produce 20k ounces by 2024 through investments in Hosko and Pampalo. Hosko is projected to contribute 10-30% of total production in 2024. With the investment in Pampalo underground mine, our production estimates for Pampalo have slightly increased. Alongside this, we expect Hosko to contribute around 20% of total production in 2024. Our 2024 production estimate is around 15.5k ounces, well below the company's target, due to the Pampalo gold reserves at the end of FY 2022 being only 29k ounces. We have also adjusted our estimates for CapEx, interest expenses, and depreciation.

 

BUY with TP of EUR 5.6 (6.5)

The revised production estimates do not have significant impact on our SOTP valuation, as we have already accounted for the potential of the satellite deposits along the Karelian Gold Line in our real option value model. The valuation of the company's US assets remains the biggest uncertainty in the SOTP model as Endomines has not yet released any information regarding the potential partnerships and/or divestments of these assets. We adjust the valuation downwards and value the US assets at EUR 42-46/oz (incl. net debt) which is roughly in line with the peer group EV/Resources (Table 3) and close to the original purchase price. Given the uncertainties, we maintain our valuation on the lower end of our SOTP-based valuation range.

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Finnair - Nearing cruising speed

14.06.2023 - 09.30 | Company update

Finnair issued a positive profit warning, and although the revision wasn’t a big surprise it came relatively early.

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Finnair hits above 5% EBIT margin already this year

Finnair upgraded guidance, according to which it will near or even exceed the FY ‘19 adj. EBIT level of EUR 163m this year. Finnair did EUR 3,098m in FY ’19 revenue, but is still likely to remain a bit shy of that figure this year. We don’t view the upgrade a big surprise (although it arrived early) as Finnair has reached positive EBIT since Q3’22, and Q1’23 results were also strong considering seasonality. The revision was driven by the extension of factors which helped it reach its break-even Q1’23 EBIT, in other words continued high demand, moderating fuel prices and strategy execution. We previously estimated Finnair to reach EUR 127m EBIT this year, whereas our new estimate is EUR 160m. We make minor revisions to our top line estimates but update our FY ’24 EBIT estimate to EUR 199m (prev. EUR 186m).

The market environment is quite favorable right now

Fuel prices have already slid a lot from their peak, yet the levels are still high in the historical context and hence a further decline seems more likely than an increase. In any case the airline industry continues to be in a rather sweet spot for now as higher ticket prices have not so far curtailed demand. The inflationary environment itself causes uncertainty around demand and operating costs going forward, while it’s also unclear to what extent inflation persists. We note our Finnair EBIT margin estimates continue to significantly lag those of its peers.

At least some further improvement to be expected

Finnair’s peers’ EBIT margin estimates for FY ’23-24 have gained by 100bps in less than two months. We update our FY ’23 estimate by 100bps, but our revision is only 40bps for next year. We believe Finnair will issue new long-term targets soon as the ones given only nine months ago have already become outdated. Those targets at no point looked too challenging, but back then Finnair still had a lot to do in terms of strategy implementation. Finnair is now on a sound footing, but it remains to be seen how much more improvement continues to come through now that the market is already very favorable. Finnair is valued 10x and 8x EV/EBIT on our FY ’23-24 estimates, which we view neutral levels. Our new TP is EUR 0.53 (0.49); we retain HOLD rating.

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Vaisala - Time to ramp up scalability

12.06.2023 - 09.30 | Company report

Vaisala’s recent growth has been supported by strong underlying demand and the alleviation of the pandemic's impact. As economic conditions have become more challenging, the company now has an opportunity to confirm its competitiveness and demonstrate the sustainability of its growth. Furthermore, the projected scalability should be unleashed from 2024 onwards.

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Vaisala focuses on high-end measurements
Vaisala strategically targets niche segments within the global high-end measurements markets. The company focuses exclusively on providing solutions that deliver substantial value-add, thereby enhancing its pricing position and customer loyalty. Vaisala places great emphasis on R&D, considering it as a vital component of its growth. With an annual R&D investment of approximately 12% of net sales, Vaisala aims to ensure long-term growth and maintain its competitive edge. The company's steadfast commitment to R&D has yielded double-digit growth and an expansion of market share in recent years in our view.

Strategy has proceeded as expected
Vaisala updated its well-succeeded strategy in 2021 to better reflect the core of its business, vision, and megatrends applying to its industry. Simultaneously, the company elevated its growth and profitability targets. Vaisala has made significant progress in achieving its growth targets, although there is still work to be done to reach the EBIT margin target of 15%. Currently, the company is making substantial investments in its digital services and other growing business segments. Our view is that these segments will serve as the primary growth catalysts in the coming years, while the flagship businesses, particularly in W&E, are expected to develop moderately.

Figures seen to improve, valuation at a neutral level
We foresee a robust growth trajectory for Vaisala, with a projected CAGR of 7.4% (2022-25). The expected EPS growth is even more impressive, with a growth rate of 17.7%. We find Vaisala’s current valuation to be relatively neutral, as it’s trading in alignment with its historical and peer median multiples. With the recent upward trend in the share price, we downgrade our rating to HOLD (BUY). We reiterate our TP of EUR 44.0, with our estimates relatively intact. 

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SRV - Weathering the storm

05.06.2023 - 09.20 | Company report

We see SRV as well positioned to weather the storm driven by the company’s healthy, low-risk project backlog and low amount of unsold completed units in its balance sheet. Despite the long-term potential driven by the projected turnaround, we continue to see the short-term potential for the stock limited. We retain our HOLD-rating and adjust our target price to EUR 4.4 (4.1).

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Leading project management contractor in Finland

SRV is a leading Finnish project management contractor and one of the largest house builders in the Helsinki Metropolitan Area. SRV business model is largely based on the company’s own project management model, the SRV approach. The SRV approach relies heavily on the company’s subcontractor network, financing and other partners. In 2022, SRV was the 5th largest construction company in Finland measured by revenue.

 

Weak market hampers turnaround

Due to the prevailing high inflation and interest rate environment, the construction volumes are expected to decrease in 2023, primarily driven by a decline in residential construction. SRV’s construction margins have slowly improved during the last two years yet we expect profitability to stay at low levels during 2023 driven by low residential volumes. Despite lower volumes in the higher margin potential residential development projects, we see that the company is able to weather the current storm well as majority of its backlog consists of lower risk non-residential contracting projects. In addition, SRV has low amount of unsold developer contracted units in its balance sheet.

 

HOLD with a target price of EUR 4.4 (4.1)

On our estimates, the near-term valuation upside remains limited. SRV trades at a premium to its Nordic construction peer companies based on our 2023E multiples, yet, when looking at 2024E P/E and EV/EBIT multiples, the valuation appears neutral. The current valuation is significantly below the 2025E peer group multiples and the value derived from our discounted cash flow valuation, yet we see it currently justified because of the company’s track record during the last years and the low visibility for the projected turnaround in profitability.

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Raute - Moving on after challenging years

25.05.2023 - 09.30 | Company update

Raute is set to complete its equity injections during the next few weeks. The terms didn’t include very significant news, whereas the recent French order was a small positive.

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Raute adds EUR 18m to its equity base

Raute proceeds with its capital raising plans as expected. The EUR 18m sum includes a perpetual junior loan of EUR 4m which Raute can repay after 3 years. The holders also have a conversion right, at a strike of EUR 13.50 per share, which extends to 4 years. The loan initially carries a coupon of some 11% over the first 3 years, after which the spread jumps by 500bps. Raute recently completed a directed issue of EUR 6.4m, while the EUR 7.5m rights issue further lifts share count by 20%. We calculate the value of a right at EUR 0.575 per share.

Three large orders drive results next year

Raute has recently secured EUR 125m in orders attributable to three large projects. Deliveries begin next year, and we estimate close to two-thirds of the value to be attributable to FY ’24. The EUR 45m French greenfield LVL order went to Europe, as expected, but the destination was a lot more in the west than we expected and hence Raute should still have more long-term large order potential in countries such as Finland, Poland and the Baltics. We leave our FY ’23 estimates unchanged, but now estimate next year’s growth rate at 25%. The Q1 report highlighted smaller order demand as a point of softness, and its potential extension casts some uncertainty around the pace of improvement, but next year is bound to see significant growth in any case. Recent years’ challenges ate into the balance sheet, but now improving top line and profitability as well as the capital raise have given Raute the strength to work on long-term strategic plans, including some potential M&A which would be most likely to add capabilities for the Analyzers segment.

Ex-rights a minus, the large French LVL order a plus

Raute is valued at 6x EV/EBIT on our FY ’24 estimates, which we don’t view too challenging as our EUR 8.5m EBIT estimate remains far short of long-term potential. The ex-rights date detracts from the share price, however Raute has also signed the French order since our latest update (although it was referred to earlier its confirmation details still delivered a positive surprise). We retain our EUR 12.0 TP and BUY rating.

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Aspo - A cooling-off period for ESL

17.05.2023 - 09.35 | Company update

Q1 showed weakening for ESL this year, yet the guidance downgrade and recent Supramax comments indicate larger short-term headwinds than seen only a while back.

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Issues with larger and smaller vessels; Handysize performs

Aspo cut guidance shortly after Q1 report as Q2 seems weaker than earlier expected and especially as ESL’s FY ’23 outlook has turned even softer after a record-year. The market for Supramaxes has weakened for a while, but their current drag on profitability seems larger than estimated before. Coasters’ profitability suffers from higher rental costs as well as capacity issues, in addition to which Q2 and Q3 dockings will have further impact, however Handysize vessels still seem to perform stable this year. The hybrid Coasters should add some earnings already next year; the outlook for Supramaxes has likely improved by FY ’24, however ESL is set to divest its two vessels soon and use the proceeds to help fund expansion within the Handysize segment as Northern Sweden by itself should see more than SEK 1,000bn in industrial investments over the next 20 years.

We estimate ESL’s EBIT to decline by a third this year

We previously estimated ESL’s FY ’22 EBIT of EUR 37m to decline to EUR 30m this year; our new EUR 25m estimate stands quite well in line with the only “normal” level of FY ‘21 for ESL’s current fleet structure as the past years’ investments first had to weather demand challenges (as well as technical issues) before and early in the pandemic, whereas last year’s result proved simply too high to sustain with current capacity levels. In our view ESL’s profitability (and capacity excluding the Supramaxes) should improve at least modestly next year so long as demand stays roughly stable around current levels. We now estimate ESL FY ’24 EBIT at EUR 30.0m (prev. EUR 31.5m).

Not too expensive, but ESL’s softness limits near potential

We leave our Leipurin estimates unchanged, whereas we make small downward revisions to our Telko estimates. Aspo’s organic profitability development should stabilize going towards next year, assuming no larger demand headwinds prevail. EUR 40m hence appears a realistic EBIT level again next year; the corresponding 8.5x EV/EBIT isn’t that high, but this year’s softness raises the multiple to 11x and limits upside potential. Our new TP is EUR 8.0 (9.5); our rating is now HOLD (BUY).

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Marimekko - Result as expected, growth foreseen towards year-end

17.05.2023 - 08.55 | Company update

Marimekko reported Q1 results roughly in line with our expectations. Growth is seen to return and EBIT to improve in H2. We retain our HOLD-rating and TP of EUR 10.0.

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Q1 net sales and EBIT decreased as expected
Q1 was characterized by robust comparative figures and subdued market development in Finland's wholesale deliveries, along with a decline in licensing sales that directly affected the overall scale. In Q1, the group net sales declined by 2% y/y to EUR 35.3m, however coming in slightly above our expectations. The decline was driven by softer sales development in Finland, the EMEA region and North America. Meanwhile, the APAC region and Scandinavia scored strong double-digit sales growth. Decreased licensing sales lowered gross margin below the comparison period despite product margins remaining on a solid level. Furthermore, increased fixed costs pressed Q1 adj. EBIT to EUR 3.8m, implying a margin of 10.9%. Our view is that the result contained no big surprises despite EBIT fell short of consensus quite clearly. 

Tightened grip on Asian shop openings
The company upgraded its outlook on new store openings in 2023 with now expecting to establish 10-15 new stores with most of them located in the Asia. In our view, this provides decent growth prospects for H2’23 and 2024, and consequently we slightly increased our H2 net sales estimates for the APAC region. Marimekko expects its 2023 EBIT margin to range between 16-19% which might imply a relative profitability below that of the comparison period. We however foresee this temporal due to the company’s front-loaded investments in its capabilities. In total, our 23E EBIT decreased by 1% while 24E profitability improved by 2%, reflecting enhanced beliefs for the APAC region’s growth.

Valuation not challenging
We foresee Marimekko’s valuation as not challenging with it trading above its premium, but below the luxury peer group. Marimekko’s earnings growth for 2023-24 will remain subdued due to uncertain market environment and front-loaded OPEX investments. With only minor adjustments made to our estimates, we retain our HOLD-rating and target price of EUR 10.0.

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Marimekko - No big surprises

16.05.2023 - 08.55 | Earnings Flash

Marimekko reported Q1 results broadly in line with our expectations. Q1 topline came in slightly above our expectations while EBIT fell short of our estimates. The company reiterated its guidance for 2023.

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  • Group result: Q1 net sales decreased by 2% y/y to EUR 35.3m, roughly in line with our expectations (34.8/34.1m Evli/cons.). The decline was driven by strong comparison figures as well as softer wholesale and licensing sales. Net sales were supported by the growth of Finnish retail and Int’l wholesale sales. EBIT was impacted by softer gross margin and increased fixed costs. Q1 adj. EBIT amounted to EUR 3.8m (10.9% margin), that fell short of our expectations (4.3/4.6m Evli/cons.), but contained no big surprises. Adj. EPS amounted to EUR 0.06 (0.08/0.09 Evli/cons.).
  • Finland: Net sales amounted to EUR 18.0m (Evli: 17.5m), reflecting y/y decline of 3%. Sales developed positively in retail while wholesale sales decreased as expected.
  • Int’l: Net sales came in in line with our estimates at EUR 17.3m (Evli: 17.3m), reflecting a y/y decline of 1%. The decline was driven by the EMEA region (-31%) as well as North America (-11%). Net sales development was positive in Scandinavia (+16%) and the APAC region (+16%).
  • 23 market outlook: Finnish sales expected to grow, driven by additional wholesale deliveries in H2. The APAC region expected to grow. 10 to 15 new stores opening, with most of them located in Asia. Licensing sales expected to decline y/y.
  • 23 guidance intact: Net sales to grow and EBIT margin between 16-19%.

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Etteplan - Good quarter excluding NRI’s

12.05.2023 - 09.30 | Company update

Etteplan’s continued good performance in Q1 was overshadowed by significant non-recurring items. The outlook still remains quite decent in the uncertain market.

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Profitability burdened by non-recurring items
Etteplan’s Q1 results, operatively speaking, were slightly better than we expected. Net sales amounted to EUR 95.0m (EUR 92.0m/91.7m Evli/Cons.), with growth of 8% (6.9% organic) at comparable FX. EBIT came in at EUR 6.3m (EUR 7.4m/7.0m Evli/cons.). EBIT included exceptional items amounting to EUR -2.0m. We had anticipated some softness due to the anticipated one-off salary payments in accordance with the collective labour agreement in Finland, but Etteplan also booked EUR 0.9m in NRI’s mainly due to organizational restructuring costs concerning Technical Communication Solutions. In terms of service areas, the operational efficiency of Engineering Solutions was again at a good level, while Software and Embedded Solutions and Technical Communication Solutions remained sub-par.

Room for margin improvement
Our estimates on an annual basis remain quite unchanged excl. the Q1 NRI’s, with our EBIT estimate now at EUR 29.9m (prev. 31.5m, co’s guidance 28-33m). Potential for improvement towards the upper half of the guidance remains from the still somewhat underperforming services areas, with Etteplan seeing potential for the latter half of the year after actions taken, but we still remain cautious. We see no clear changes to the market outlook, with the overall demand situation remaining modest. Customer demand potential appears firm, but investment willingness is still bogged down by macroeconomic uncertainties. We continue to see potential for Etteplan to move above the 10% EBITA-margin mark on group level in 2024, providing earnings upside amidst the slower growth environment.

HOLD with a target price of EUR 16.0
Without any notable changes to our estimates, views, or valuation multiples, we retain our HOLD-rating and target price of EUR 16.0, valuing Etteplan at a slight premium to peers. 

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Marimekko - Expecting a quiet quarter

12.05.2023 - 08.35 | Preview

Marimekko reports its Q1 result on Tuesday, May 16th. We expect a decline in revenue, driven by a top comparison period, soft performance in Finland, and prevailing market uncertainty.

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Softness and uncertainty affecting Q1 net sales
We foresee that the uncertainty faced in Q4’22 will persist also into Q1’23, resulting in a 3.5% y/y decline in estimated Q1 net sales to EUR 34.8m. We expect a 5% drop in Finland sales and a slight 1% decline in international sales. This decline in revenue is primarily due to the uncertainty and strong comparison figures, as well as the soft outlook for wholesale and licensing sales in Finland in early 2023. We expect rising material costs, combined with market uncertainty, resulting in a lower gross margin compared to the previous period. Furthermore, with increasing fixed costs, our estimated adj. EBIT for Q1 is significantly lower than the previous year at EUR 4.3m, reflecting a margin of 12.4%.


Expecting growth and solid margins for full 2023
Despite the prevailing uncertainty, the fashion market in Finland appears to be performing relatively well, with some double-digit growth in Q1. However, Marimekko's top performance year ago partly explains its expected decline in Q1 sales. Nevertheless, our estimate for net sales in 2023 is EUR 175.3m, indicating a y/y growth of 5.3%. This growth is supported by new store openings in Asia and additional wholesale deliveries in Finland in H2. Marimekko itself anticipates growth in net sales in Finland and the APAC region, as well as internationally, while licensing income is expected to decline in 2023. Despite cost pressures, we expect the 2023 adj. EBIT margin to remain solid at 18.1%, slightly lower than the comparison period. With revenue growth, we expect the cost-base to scale more prominently in H2, leading in improving profitability towards the year-end. Our profitability estimate is close to the upper bound of the company's guidance range of 16-19%.


Valuation neutral ahead of Q1 result
We consider Marimekko's valuation to be neutral, as it currently trades between our luxury (40% discount) and premium goods peer group (20% premium). With our estimates intact, we retain our HOLD rating and target price of EUR 10.0 ahead of Q1 result. 

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Etteplan - Good operative performance

11.05.2023 - 13.30 | Earnings Flash

Etteplan's net sales in Q1 amounted to EUR 95.0m, slightly above our and consensus estimates (EUR 92.0m/91.7m Evli/cons.). EBIT amounted to EUR 6.3m, below our estimates and below consensus (EUR 7.4m/7.0m Evli/cons.), but excluding EUR 2.0m in NRI’s, the profitability exceeded our expectations.

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  • Net sales in Q1 were EUR 95.0m (EUR 89.6m in Q1/22), slightly above our estimates and consensus estimates (EUR 92.0m/91.7m Evli/Cons.). Growth in Q1 amounted to 6% y/y, of which 4.9% organic growth (8% and 6.9% at comparable FX respectively).
  • EBIT in Q1 amounted to EUR 6.3m (EUR 7.6m in Q1/22), below our estimates and consensus estimates (EUR 7.4m/7.0m Evli/cons.), at a margin of 6.6%. EBIT was affected by NRI’s and one-time salary payments in accordance with the collective labour agreement in Finland, amounting to EUR -2.0m.
  • EPS in Q1 amounted to EUR 0.17 (EUR 0.23 in Q1/22), below our estimates and consensus estimates (EUR 0.22/0.20 Evli/cons.).
  • Net sales in Engineering Solutions in Q1 were EUR 51.7m vs. EUR 49.0m Evli. EBITA in Q1 amounted to EUR 4.9m vs. EUR 5.0m Evli. 
  • Net sales in Software and Embedded Solutions in Q1 were EUR 23.9m vs. EUR 24.8m Evli. EBITA in Q1 amounted to EUR 1.6m vs. EUR 2.4m Evli. 
  • Net sales in Technical Communication Solutions in Q1 were EUR 19.2m vs. EUR 18.0m Evli. EBITA in Q1 amounted to EUR 1.2m vs. EUR 1.4m Evli. 
  • Guidance for 2023: Revenue is estimated to be EUR 360-390m and the operating profit is estimated to be EUR 28-33m.

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Enersense - High growth and improving earnings

09.05.2023 - 09.30 | Company update

Enersense’s Q1 results showed extended high growth as well as stabilizing bottom line after last year’s challenges. Growth has been set to continue over the course of next year while profitability has only begun to improve.

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Top line beat estimates, bottom line close to expectations

Enersense Q1 revenue grew 39% y/y to EUR 75m vs the EUR 63m/65m Evli/cons. estimates. Smart Industry (driven by the Helen agreement and scaling up of offshore wind) and International Operations (Baltic grids) drove growth. Connectivity also grew by 15%, and the combination of high demand and lesser cost pressure helped core operations’ profitability to improve by some EUR 3m y/y. There were still EUR 2.3m in Q1 extraordinary costs related to the new ERP system and offshore scale-up; the projects, in addition to onshore wind, will still limit EBITDA in FY ‘23 but the burden should largely fade by next year.

Growth to continue, profitability on track to improve more

Q1 showed continued high demand and stabilizing bottom line performance after last year’s challenges. We estimate 21% top line growth for this year and note Q3 & Q4 are set to be the strongest quarters. For FY ’24 we estimate 7% growth, which is not a low rate in Enersense’s industrial context but can still prove a conservative assumption; the Baltic backlog continued to grow despite high project revenue, in addition to which the offshore and EV charging businesses are set to add further growth next year. Profitability should improve more next year thanks not only to higher volumes across the board but the completion of the ERP project as well as the fact that the offshore business has rather high fixed costs to break even. We estimate adj. EBITDA to improve by some EUR 5m next year to EUR 22m.

Estimate changes rather small, but outlook has solidified

Enersense’s peer multiples have decreased quite a bit in the past few months while growth and earnings outlook has remained largely unchanged. Enersense’s valuation is still not cheap on our FY ’23 estimates, at 13x EV/EBIT, but on our FY ’24 estimates the multiple is only about 7x whereas we estimate Enersense’s EBITDA margin to remain some 250bps below that of a typical peer. We hence view current valuation rather conservative in the light of improving performance. We retain our EUR 6.5 TP; our new rating is BUY (HOLD).

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Enersense - High top line growth

08.05.2023 - 12.45 | Earnings Flash

Enersense’s Q1 revenue grew clearly faster than estimated, at a rate of 39% y/y, which also helped profitability relatively near expectations. Enersense also updated its revenue guidance for the year on the back of strong orders.

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  • Enersense Q1 revenue grew 39.4% y/y to EUR 75.0m, compared to the EUR 62.7m/65.1m Evli/consensus estimates. Revenue grew across the board, but most clearly in Smart Industry and International Operations.
  • Adjusted EBITDA amounted to EUR 0.4m vs the EUR 3.1m/0.7m Evli/consensus estimates. EBIT landed at EUR -2.3m, compared to the EUR 0.9m/-1.6m Evli/consensus estimates. Q1 typically sees the lowest profitability, but the level in the core business has improved considering seasonality. Profitability improvement was most visible in Smart Industry, while International Operations also improved clearly despite inflation still being a challenge. Higher volumes similarly helped the profitability of Connectivity.
  • Order backlog was EUR 526m at the end of Q1 (EUR 288m a year ago). Smart Industry increased particularly due to the EUR 100m Helen agreement. Strong demand also supported Power and Connectivity. Activity in the offshore wind power market is increasing.
  • Enersense guides FY ’23 revenue to be over EUR 300m and adjusted EBITDA to be in the range of EUR 12-18m (previous guidance was revenue in the range of EUR 280-310m and adjusted EBITDA in the range of EUR 12-18m). Strong order backlog supports revenue, while wind power portfolio development has accelerated. Profitability headwinds include the implementation of the new ERP system as well as on-going investments in the offshore wind power business and acceleration of onshore wind power project development.

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Vaisala - Margin expansion to be seen in H2

08.05.2023 - 08.20 | Company update

Vaisala delivered strong topline and solid order growth in Q1. Despite soft Q1 EBIT, we foresee the profitability improving towards year-end. We retain BUY rating and TP of EUR 44.0.

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Delivered growth beyond expectations
Vaisala delivered strong Q1 growth both in orders and net sales. Group net sales grew by 11% y/y to EUR 131.8m. EBIT came in slightly soft at EUR 13.3m (10.1% margin). Growth was driven by each IM’s main segments while W&E performed well in continuing services, i.e., road weather and automotive, as well as in renewable energy. EBIT was impacted by flat gross margin and significantly increased fixed costs, which were driven by investments in sales, marketing, R&D and IT-systems. Vaisala’s strategic area of X-Weather posted strong double-digit growth. In our view, X-Weather has a significant potential to drive W&E's EBIT margin expansion due to its scalable business model. However, the margin impact may take a few years as we currently estimate X-Weather being yet unprofitable due to strong investments in growth.

EBIT should improve towards year-end
During 2022-23, according to its strategy, Vaisala has allocated capital in internal capabilities to ensure growth for the company’s future. Such investments have however been more extensive than we previously expected, which is seen in Q1 EBIT coming in below our expectations. Since the majority of the increased fixed costs are expected to be permanent, scalability is likely to kick in more extensively by 2024. Although Q1 EBIT was a bit soft, the company reiterating its guidance for 2023 indicates improving margins towards the year-end. Moreover, Vaisala’s target is to reach an EBIT margin of 15% by the end of 2025, which we foresee achievable, although expect further evidence on scale.

Still some room for an upside
With our estimates relatively intact, Vaisala continues to trade below its peers. In our view, the company should be priced at least in line with its peer group, considering its presence in defensively growing markets, technology leadership and EBIT improvement. We retain our BUY rating and TP of EUR 44.0.

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Vaisala - Strong growth and good order flow

05.05.2023 - 09.45 | Earnings Flash

Vaisala posted strong Q1 net sales above our expectations. EBIT fell clearly short of our estimates. Guidance provides improving EBIT and sales growth.

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  • Q1 group result: Orders received grew by 11% y/y while order book stood at EUR 163.7m (+12%). Group net sales grew by 11% to EUR 131.8m, a bit above our estimates (129.1/127.6m Evli/cons.). Growth was mostly driven by IM while W&E grew by mid-single-digit. Gross margin was approx. flat y/y, while it improved q/q. Profitability was weak and fell short of our expectations. EBIT amounted to EUR 13.3m (17.2/17.9m Evli/cons.), reflecting a margin of 10.1%. EBIT was impacted by elevated fixed costs. EPS amounted to EUR 0.27 (0.37/0.39m Evli/cons.).
  • Industrial measurements (IM): Orders grew nicely by 9% (FX 10%) y/y and order book was on a strong level at EUR 38.6m (+10%). Net sales increased by 19% y/y to EUR 63m, above our estimates (Evli: 59.5m). The growth was driven by all main segments, while the growth was especially strong in industrial instruments, life science and power. EBIT amounted to EUR 15m (23.8% margin) and was negatively impacted by softer gross margin and increased fixed costs.
  • Weather and Environment (W&E): Orders received grew by 13% (FX 12%) y/y and order book was up by 13% y/y. From strong comparison period, W&E’s net sales grew by 5% (FX 4%) to EUR 68.8m, felling a bit short of our expectations (Evli: 69.6m). The growth was strong in road weather and automotive, by X-Weather increasing by 27% y/y. Gross margin improved while increased fixed costs pushed EBIT negative to EUR -1.7m.
  • Market outlook: Industrial instruments, life science, power and energy and liquid measurements to grow. Renewable energy, road weather and automotive to grow. Aviation to remain flat or grow. Meteorology to remain flat.
  • 23 guidance intact: Net sales of EUR 530-570m, mid-point implying ~7% growth. EBIT is estimated to reach EUR 70-85m, midpoint indicating a ~14% margin.

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Solteq - Long road to healthy profitability ahead

05.05.2023 - 09.35 | Company update

Solteq reported slightly better than anticipated Q1 results. The short-term performance appears to be burdened more than anticipated by disproportionate overhead expenses, our views on the long-term development remain intact.

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Slightly better than expected Q1 aided by good cost control 
Solteq reported Q1 results that were slightly better than anticipated. Revenue was in line with our estimates at EUR 16.9m (Evli EUR 17.1m) while the adj. operating profit of EUR 0.1m beat our cautious estimate of EUR -0.5m. In terms of segment performance, Retail & Commerce saw healthy and better than expected profitability despite the anticipated y/y revenue decline. The good profitability level was according to the company driven by an improved cost control. The Utilities-segment performed quite as expected, still clearly loss making following earlier product development challenges. Solteq also issued a guidance for 2023, expecting revenue to amount to EUR 60-62m and operating profit (excl. divestment profit recognition) to be slightly negative.  

Weaker in the short-term, long-term potential intact
The 2023 guidance was quite as expected, although our EBIT (excl. divestment profit recognition) estimate pre-Q1 was slightly positive. With Q1 stronger than we anticipated profitability-wise, we assume the anticipated burden of overhead expenses on Retail & Commerce in the short-term to be larger than we estimated. We have lowered our 2023 estimates slightly to fit the guidance but the revisions are in our view rather trivial. The investment story narrative continues to focus on 2024->, where the key success factor remains in the recovery and scalability of the Utilities-segment, and also to a lesser extent being able to adapt overhead expenses to the new company size. 

HOLD with a target price of EUR 1.3
With no material changes to our estimates or views, we retain our HOLD-rating and target price of EUR 1.3. Valuation remains stretched in the near-term, but now with the stronger balance sheet and scalability factors the long-term potential remains significant.

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Suominen - Valuation reflects margin gains

05.05.2023 - 09.35 | Company update

Suominen’s Q1 results remained weak. Earnings are to improve at some rate going forward, but valuation reflects expectations about meaningful gains towards next year.

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We estimate H2 EBITDA to gain EUR 15m compared to H1

Suominen’s Q1 revenue grew 6% y/y to EUR 117m but missed our EUR 120m estimate. Growth was driven by higher prices in the wake of raw materials’, while FX also added EUR 3.4m. Both Americas and Europe were soft relative to our estimates. Volumes were flat while Finnish ports and the Mozzate plant saw strikes. The 4.2% gross margin didn’t meet our 7.0% estimate, in our view due to the top line miss but also because of slower-than-estimated margin rebound following the easing of raw materials costs. The comparable earnings metrics thus fell more than EUR 3m short of our estimates. Suominen retained its guidance, which wasn’t surprising since earnings are bound to increase by at least some amount from the low comparison period, but valuation increasingly places burden of proof on H2.

Our EBITDA estimate for the year is down 15% to EUR 33m

Suominen’s margins and volumes have been volatile in the past three years and so it’s hard to estimate where the gross margin will ultimately land now that the environment, at least in terms of raw materials prices, has began to normalize. The outlook on the balance between supply and demand is no more as favorable as it was. On the positive side Suominen’s new products’ share has continued to increase across the regions, which should support gross margin potential. In our view wiping end-market demand can be expected to remain stable, but there’s still the question of how rapid volume and margin gains the melting of US inventory levels may produce in H2. We believe Suominen’s fixed cost base, following the closure of the Mozzate plant, is adequate to support meaningful earnings recovery (above 10% gross margins) if higher volumes come through.

Valuation neutral assuming a return to historical margins

The 15x EV/EBIT multiple, on our updated FY ’23 estimates, isn’t cheap, whereas the 6x multiple for next year could already be described low. We find the valuation still rather neutral, assuming higher volumes and low double-digit gross margins (historical norm) begin to materialize going towards next year. Our updated TP is EUR 2.7 (3.0) as we retain our HOLD rating.

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Suominen - Remained soft relative to estimates

04.05.2023 - 10.00 | Earnings Flash

Suominen’s Q1 results saw top line grow 6% y/y, driven by higher raw materials prices, but revenue as well as profitability remained soft relative to our estimates. Suominen retains its guidance, expecting incremental improvement as H2 should be better.

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  • Suominen Q1 revenue grew by 6% y/y to EUR 116.8m, compared to our EUR 120.0m estimate. Americas amounted to EUR 75.0m vs our EUR 77.0m estimate while Europe came in at EUR 41.8m, compared to our EUR 43.0m estimate. Sales prices increased, following higher raw materials prices, while sales volumes remained flat (despite Finnish port and Mozzate plant strikes) relative to the comparison period. Currencies had a positive EUR 3.4m impact on top line.
  • Gross profit amounted to EUR 4.9m vs our EUR 8.4m estimate, meaning gross margin was 4.2% vs our 7.0% estimate. Raw materials prices declined q/q in Q1 and should remain flattish going forward.
  • Adjusted EBITDA was EUR 2.6m, compared to our EUR 6.2m estimate, while adjusted EBIT landed at EUR -2.0m vs our EUR 1.2m estimate.
  • Suominen’s guidance remains unchanged, expects its comparable EBITDA to increase this year (EUR 15.3m in FY ’22).

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Aspo - Many avenues for long-term growth

04.05.2023 - 09.15 | Company update

Aspo’s Q1 results came in quite close to estimates. ESL’s outlook for the year has softened a bit more than we previously estimated, but new vessel investments should take the carrier to a whole new level in the coming years.

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Overall Q1 results didn’t show any particular large surprises

Q1 revenue from cont. operations grew 10% y/y to EUR 142m, driven by the Kobia acquisition and Telko’s 7% growth excl. Russia and Belarus. The EUR 148m top line, incl. non-cont. operations, was soft vs the EUR 160m/152m Evli/cons. estimates. ESL’s EBIT declined to EUR 6.0m, missing our EUR 8.5m estimate, due to lower volumes. Meanwhile Telko’s EUR 2.7m EBIT was clearly above our EUR 1.9m estimate; EUR 10m annual EBIT shouldn’t be too hard to achieve as recent M&A is yet to reach full earnings accretion. Leipurin bottom line developed well, as expected, and the overall EUR 8.5m EBIT came in relatively close to the EUR 9.7m/8.8m Evli/cons. estimates. Our updated EBIT estimate for the year stands at EUR 39.7m (prev. EUR 42.4m).

FY ’23 somewhat softer for ESL, but the fleet will grow

The Kobia deal is delivering according to plan and Telko’s EBIT is stabilizing around a 5% margin after the Russian exit, while M&A should continue to contribute. ESL sees lower volumes this year, yet pricing holds up. We thus expect EBIT to hold around EUR 40m, in the short and medium term, for the current operations. Large industrial investments around the Baltic Rim will expand ESL’s market in the future. ESL seems well-placed to capitalize on a big cargo increase, and we believe its plans will involve several new Handysize vessels. ESL will soon begin to receive its own (and pooled) Coaster hybrid vessels, but the EUR 150m investment is likely to be topped by the long-term opportunity. The move will require measures such as divesting the Supramaxes, new external minority equity and vessel pooling.

10x EV/EBIT isn’t high as all three are to grow long-term

ESL’s fleet is to grow by a significant amount over the long-term and the new assets will further solidify its position. The moves add to ESL’s value attributable to current shareholders, but the magnitude of the positive is hard to gauge due to the open size of the investment and financing required. Meanwhile Aspo is valued 10x EV/EBIT on our FY ’23 estimates, a level we don’t view too challenging. We retain our EUR 9.5 TP and BUY rating.

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Solteq - Slightly better than expected Q1

04.05.2023 - 08.35 | Earnings Flash

Solteq’s Q1 results were rather decent considering earlier challenges and profitability was above our expectations. Revenue was at EUR 16.9m (Evli EUR 17.1m) and adj. EBIT at EUR 0.1m (Evli EUR -0.5m). Guidance for 2023 (published 3.5.2023): revenue is expected to be EUR 60-62m and operating profit (excl divestment profit recognition) slightly negative.

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  • Net sales in Q1 were EUR 16.9m (EUR 19.2m in Q1/22), in line with our estimates (Evli EUR 17.1m). Revenue delinked 12.2% y/y in Q1. 
  • The operating profit and adj. operating profit in Q1 amounted to EUR -0.1m and 0.1m respectively (EUR 1.4m/1.6m in Q1/22), above our estimates (Evli EUR -0.5m/-0.5m). 
  • According to Solteq, the first quarter performance was moderate, and the profitability development was better than expected.
  • Retail and commerce: revenue in Q1 amounted to EUR 13.4m (Q1/22: EUR 14.9m) vs. Evli EUR 13.5m. Growth amounted to -9.8% driven by lower demand. The adj. EBIT was EUR 1.2m (Q1/22: EUR 1.5m) vs. Evli EUR 0.5m. 
  • Utilities: Revenue in Q1 amounted to EUR 3.5m (Q1/22: EUR 4.3m) vs. Evli EUR 3.6m. The adj. EBIT was EUR -1.2m (Q1/22: EUR 0.1m) vs. Evli EUR -1.0m. 
  • Guidance for 2023 (published 3.5.2023): group revenue is expected to be EUR 60-62m and the operating result slightly negative (excl. divestment profit recognition). Our estimates for revenue and adj. EBIT before the guidance was given were EUR 61.6m and EUR 0.4m. 

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Exel Composites - Preparing for larger volumes

03.05.2023 - 15.15 | Company update

Exel’s Q1 was expected to be soft but it turned out quite weak. This year will continue to see rather modest profitability while long-term potential still exists.

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Weakness largely attributable to low Wind power volumes

Exel’s Q1 revenue fell 16% y/y to EUR 28.8m vs the EUR 32.2m/33.6m Evli/cons. estimates. H1 was seen soft due to lacking Wind power orders however such volumes came in at EUR 1.5m in Q1 vs our EUR 5.9m estimate. The figure was lower than Exel expected, in addition to which there was softness in Equipment and other industries. Transportation still saw strong development, yet small and mid-sized customers continued to reduce inventories as seen already in H2’22. Exel has already taken some cost actions and although there weren’t any notable cost-related surprises the demand softness led to an adj. EBIT of EUR 0.0m, compared to the EUR 1.2m/1.4m Evli/cons. estimates. Exel consequently downgraded its guidance as any significant demand recovery is unlikely to begin before H2’23, while the company will also incur some EUR 1m in additional expenses this year as it seeks to ensure its competitiveness within Wind power.

We also cut our FY ’24 EBIT estimate by more than 20%

Wind power’s development program is unlikely to change the company’s focus on turbine blade reinforcement elements; rather it should enhance Exel’s ability to deliver the needed volumes. Wind power may see some volume improvement already later this year, but the next couple of quarters are likely to remain soft before high growth again really begins to come through next year. Wind power aside, Exel looks to better capture sustained growth by focusing more on larger accounts. Exel’s strategy worked well in the past few years as it achieved a CAGR of 12% in FY ’19-21 however now seems to be a time for enhancing commercial focus. Such strategy themes (focus on high-volume accounts) aren’t very surprising in the light of Exel’s business model, in which a relatively high amount of customer account concentration tends to optimize profitability.

Valuation not particularly cheap in the short-term

Exel has a lot more potential thanks to its existing applications and their further scaling over the coming years, yet the 13x and 8x EV/EBIT multiples appear neutral on our estimates for FY ’23-24. Our new TP is EUR 4.3 (5.8); our rating is now HOLD (BUY).

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Aspo - Results slightly lower than estimated

03.05.2023 - 10.00 | Earnings Flash

Aspo’s Q1 results were a bit lower than estimated. We find there to have been mixed development underneath as Telko on the one hand beat our estimates while on the other ESL’s profitability softened more than we had estimated.

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  • Aspo Q1 revenue was EUR 147.5m vs the EUR 159.8m/151.5m Evli/consensus estimates.
  • Adjusted EBIT amounted to EUR 8.0m, compared to the EUR 9.7m/8.8m Evli/consensus estimates. EBIT for continuing operations was EUR 8.4m.
  • ESL Q1 revenue landed at EUR 52.7m vs our EUR 59.7m estimate, while adjusted EBIT was EUR 6.0m vs our EUR 8.5m estimate. Handysize vessels had stable volumes, while coasters suffered not only from a strike but also capacity constraints due to limited availability of time charter tonnage and unexpected 35 days maintenance off-hire of two owned sister vessels. The market for Supramax vessels was significantly lower compared to year ago. The steel industry has fairly stable volume expectations for the remainder of the year.
  • Telko revenue amounted to EUR 54.3m, compared to our EUR 58.6m estimate, whereas EBIT was EUR 2.7m vs our EUR 1.9m estimate. Prices seemed to have remained overall quite stable and should stay so over the course of H1.
  • Leipurin revenue was EUR 34.6m in Q1 vs our EUR 41.5m estimate. EBIT came in at EUR 1.0m, compared to our EUR 1.2m estimate. Rapid raw material inflation has continued to hurt demand.
  • Other operations cost EUR 1.3m, compared to our EUR 1.9m estimate.
  • Aspo guides comparable operating profit to be higher than EUR 35m in 2023 (unchanged).

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Vaisala - Upgrade to BUY

03.05.2023 - 08.30 | Preview

Vaisala reports its Q1 result on Friday, May 5th. Growth is foreseen, but margin improvement is yet limited with temporal pressures in fixed costs. With valuation attractive, we upgrade our rating to BUY.

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Solid growth expected despite strong comparison period
Despite uncertain market, we expect Vaisala to deliver solid topline growth in Q1’23. Overall, we anticipate Vaisala’s Q1 net sales to increase by 8.7% y/y to EUR 129.1m, supported by IM’s double-digit and W&E’s mid-single-digit growth. The comparison period was strong in terms of both top- and bottomline. In particular, EBIT of W&E was robust, considering Q1 typically being its weakest quarter of the year. The comparison EBIT was supported by, for example, low usage of spot components. In addition, long-term investments made during 2022 were not visible in Q1’22 figures yet. Therefore, we expect Q1’23 group EBIT to decline by some 2% y/y to EUR 17.2m (13.3% margin). We however foresee IM’s Q1 EBIT improving in line with its solid topline growth.

Main focus on orders and comments on the future
Vaisala’s Q4’22 order book was strong, providing a good growth base for H1. Our interest in the Q1 report is on the order development and comments on the demand during uncertain market. In late April, Vaisala announced that it will report the S/DaaS revenue separately to increase visibility into its continuing services business of X-Weather. In 2022, X-Weather’s net sales amounted to EUR 28.4m and, according to our assessment, the segment grew by some 25-35% y/y. In our view, such reporting allows investors to measure the value of Vaisala’s growth. Based on our estimates, X-Weather could potentially generate gross margin around 80% which in the future has a significant potential to improve W&E’s profitability. 

Attractive valuation ahead of Q1 result
Given the 10% decline in Vaisala's share price since our last update, we find the current valuation quite attractive, considering Vaisala's high exposure to growing niche markets. Additionally, earnings are expected to grow with the conclusion of Vaisala's efficiency reinforcement programs during 2023-24. With our estimates intact, we reiterate a TP of EUR 44.0. Our TP provides a decent premium to the current share price, and therefore, we upgrade our rating to BUY (HOLD) ahead of the Q1 result.

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CapMan - Year could have kicked off better

02.05.2023 - 09.35 | Company update

CapMan’s Q1 results were quite weak on paper, but the operational performance remained at a rather good level. Despite uncertainties, the outlook in our view remains favourable.

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Clearly lowered operating profit in Q1
CapMan reported Q1 results that were clearly below expectations. Revenue in Q1 was EUR 15.1m (EUR 16.9m/17.2m Evli/Cons.) while the operating profit amounted to EUR 0.5m (EUR 11.6m/10.4m Evli/cons.). The most notable deviation from our estimates arose from the Investment business (EBIT act./Evli EUR -2.5m/4.9m), where profitability was affected by FX rates relating to external funds despite own funds showing positive fair value changes. CapMan booked no carried interest in Q1. Profitability in the Management business was below our expectations due to some one-off expenses, otherwise the overall operating performance corresponded to our expectations. 

Operational development still good
We have made some downward revisions to our estimates for 2023, mainly within the Investments business, which together with the weaker Q1 result in a lowering of our 2023 EBIT estimate to EUR 40.5m (prev. EUR 54.9m). Despite the on paper weak Q1 results, we emphasize the continued good fee-based operating performance, and we expect to see continued positive development. Continued slower macro-driven fundraising activity remains a slight issue, with private asset allocations impacted by investors’ liquidity preferences and allocation potential affected by performance of other assets classes, despite apparent continued good interest towards private asset classes. Carried interest potential also remains, but timing remains highly uncertain, further so now with lower transaction volumes.

BUY with a target price of EUR 3.0 (3.2)
On our revised estimates absolute valuation levels are starting to look fairer on our 2023 estimates. CapMan’s potential, however, goes beyond that and we still see valuation attractive on achievable earnings levels assuming improved market conditions. We retain our BUY-rating but lower our TP to EUR 3.0 (3.2).

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Exel Composites - Weaker than expected

02.05.2023 - 09.30 | Earnings Flash

Exel’s Q1 results came in clearly below our and consensus estimates. At least Q2 is also to remain weak, however H2’23 should see some improvement. Exel nevertheless downgraded its guidance due to weaker-than-expected short-term development and EUR 1m in additional costs related to a Wind power development program.

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  • Exel Q1 revenue decreased by 15.7% y/y to EUR 28.8m, compared to the EUR 32.2m/33.6m Evli/consensus estimates. Europe grew by 3% y/y, but all the other geographic regions declined significantly.
  • Wind power was EUR 1.5m vs our EUR 5.9m estimate, while Buildings and infrastructure amounted to EUR 7.8m, compared to our EUR 6.8m estimate. Equipment and other industries came in at EUR 5.6m, compared to our EUR 6.5m estimate. Small and mid-size customers reduced their inventories, while demand for Wind power equipment was lower than expected.
  • Adjusted EBIT landed at EUR 0.0m vs the EUR 1.2m/1.4m Evli/consensus estimates. Costs remained generally in line with the company’s own expectations.
  • Order intake amounted to EUR 26.3m in Q1, declining by 30.0% y/y.
  • Exel guides FY ’23 revenue to decrease and adjusted EBIT to decrease significantly compared to previous year. Exel lowered guidance due to lower-than-expected revenue and adjusted EBIT in Q1, while demand outlook is weaker-than-expected in the short-term. The company has also started a major development program to capture opportunities within Wind power. Adjusted EBIT will therefore include more than EUR 1m in additional costs related to the program in FY ’23. Exel continues to expect demand to improve in H2’23, driven by Wind power.

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Raute - Building on top of strengths

02.05.2023 - 08.50 | Company update

Raute’s Q1 was mostly better than we estimated. Large orders have on the one hand improved outlook, while on the other there seems to be more uncertainty around Services and smaller orders going forward.

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Q1 better than expected, but haze around smaller orders

Q1 revenue fell 11% y/y to EUR 37m but beat our EUR 32m estimate. The EUR 5.5m in Russian revenue, due to deliveries’ commissioning tasks, was a bit larger than estimated. Raute has also gone through other initiatives, besides exiting Russia, such as the restructuring of Chinese operations and building an ERP system (the system will soon be adopted and may cause some issues in Q2). The two together cost EUR 0.9m in Q1, but Raute’s EUR 0.9m EBIT still came in higher than our EUR 0.3m estimate. The report showed softness in terms of small Wood Processing orders; in our view the lack of single line orders reflects market uncertainty as well as cooling after previous year’s high tally. In this sense the outlook for smaller and larger orders has now reversed; the picture is mixed as there’s still good automation & modernization demand while Services outlook has slowed.

Big orders drive growth now; Analyzers key to strategy

Raute’s outlook for the coming years has solidified a lot in a short period of time as the company has signed two projects worth a combined EUR 80m and to be delivered over the same period starting next year. Raute may yet sign a third large order worth EUR 45m and should still be able to deliver it roughly at the same time. Raute’s strategy aims to capitalize on its leading wood manufacturing technology position; only the high-end of the Chinese market continues to interest Raute whereas the Analyzers segment should act as a spearhead and drive also Wood Processing orders as well as Raute’s technology leadership.

Valuation hasn’t changed much as downside seems limited

We make only rather small positive upward revisions to our profitability estimates even though large projects have helped lift outlook for the coming years and Q1 margins proved better than we expected. Larger orders carry lower margins while there’s a risk Services and small order outlook may continue to soften. The big picture in terms of valuation, however, hasn’t changed much. Raute is valued some 19x and 6.5x EV/EBIT on our estimates for this year and next. Our TP is EUR 12.0 (11.0); retain BUY rating.

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Loihde - Earnings poised to soar towards year-end

02.05.2023 - 08.35 | Company update

Q1 profitability came in soft. While growth is expected going forward, the extent of profitability remains uncertain due to challenges affecting margins. We downgraded our 23E EBIT, but expect earnings growth remaining robust for 2023-25.

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Mixed quarter; solid topline but soft EBITDA
Loihde faced temporal challenges impacting its Q1 performance. SeSo grew by a solid 22%, but DiDe struggled due to tough market conditions, leading to a decline in net sales. Despite this, Q1 group net sales showed a y/y growth of 13%, amounting to EUR 31.3m. Loihde's key strategic pillars, One Security and continuing services, continued on a strong growth trajectory. However, internal integration challenges resulted in negative margins, raising concerns about future integration processes. The company expects challenges to ease towards the end of the year which should positively drive Loihde’s profitability.

Getting better towards the end of the year
ERP project challenges have persisted into Q2, but we anticipate a lesser impact moving forward. Utilization rates are expected to recover and improve in H2, that should provide some year-end scale. While we have reduced growth estimates for both businesses due to a more pessimistic view of Q2 and H2, we believe that DiDe's demand will improve and SeSo's temporal challenges affecting margins will fade away in H2. We view the demand for SeSo's offering continuing solid with acquisitions supporting the overall growth. Despite a significant downgrade in Loihde's 23E adj. EBITDA estimate by combining a very soft Q1 and reduced estimates, the downgrade for the 2024 adj. EBITDA estimate was relatively small, but still notable at approx. 10%.

HOLD with a target price of EUR 15.0 (16.5)
With our revised estimates, Loihde’s current valuation turns out to be quite elevated. The company trades with 23-24E EV/EBITDA and P/E multiples of 4.8-4.6x and 37-17x respectively. Considering elevated valuation, but also highlighting robust estimated earnings growth during 2023-25, we retain our HOLD rating. With significant decline in 23-24E EBIT estimates, our TP is now EUR 15.0 (16.5).

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SRV - Residential a thorn in the side

28.04.2023 - 09.50 | Company update

SRV’s revenue declined clearly in Q1, as residential construction volumes were low, and profitability as a result in the red. Market conditions remain challenging, but we expect bottom levels to have been seen and a bounce back in top- and bottom-line figures going forward.

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Q1 below already low expectations

SRV reported Q1 results below our already very cautious estimates. Revenue amounted to EUR 138.3m (EUR 147.4m/151.5m Evli/cons.) and declined some 28% y/y. Housing construction volumes came down clearly, with revenue at EUR 24.0m in Q1 compared with EUR 76.5m in Q1/22. EBIT was at EUR -2.0m (EUR 1.5/1.6m Evli/cons.), weakened by the lower volumes and higher share of lower-margin construction projects. 

Challenging market ahead

The market challenges are becoming more and more visible and the new residential construction in Finland is seeing a particularly bleak outlook. Fortunately for SRV, the already earlier declining share of developer contracted projects clearly lowers the balance sheet risk. New developer contracted residential projects and residential development projects start-ups, potential sources of growth and higher margins, will however be a challenge going forward. We have revised our views for residential construction and expect essentially no revenue from developer contracted projects in 2023 and just slight improvement in 2024, mostly coming from revenue recognition of units currently under construction and unsold inventory. For residential development projects we expect slight improvement in volumes towards the end of 2023. Simultaneously, we have revised our estimates for business construction upwards driven by the improved backlog. Estimate changes: Revenue 23E 619.4m (prev. EUR 664.6m) and 24E EUR 698.5m (prev. EUR 787.0m), for EBIT, our estimate for 23E is at EUR 7.0m (prev. EUR 10.3m) and for 2024 EUR 15.4m (prev. EUR 24.1m).

HOLD with a target price of EUR 4.1 (4.3)

On our estimates, near-term valuation upside remains limited. Long-term potential remains in place should also the potentially higher-margin residential projects pick-up. We retain our HOLD-rating and adjust our TP to EUR 4.1 (EUR 4.3).

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Consti - Delivering as expected, plus some more

28.04.2023 - 09.50 | Company update

Consti reported Q1 figures that were above our estimates. We continue to see the valuation undemanding as the company keeps delivering strong figures. After only slight adjustments to our estimates, we retain our BUY-rating with TP of EUR 14.0 (14.0)

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Q1 figures were above our estimates

Consti's net sales in Q1 amounted to EUR 68.9m, above our and consensus estimates (EUR 62.5m/62.3m Evli/cons.), with impressive growth of 15.2% y/y. EBIT amounted to EUR 0.7m, also above our and consensus estimates (EUR 0.5m/0.5m Evli/cons.). The company’s order intake was particularly strong at EUR 58.6m (Q1/22: EUR 37.6m), up by 56.1% y/y. Due to strong order intake, the company’s order backlog continued its growth and was at EUR 253.8m (Q1/22: EUR 205.1m).

 

Slight adjustments to our estimates for FY 2023

Due to strong growth witnessed in Q1, we have revised our revenue estimates slightly upwards to EUR 328.2m for 23E (prev. EUR 315.2m). Despite the strong growth for both revenue and backlog, based on management comments, it seems that the company has not yet filled up its schedule for the next 9 months, and therefore is needs to succeed in project sales to secure volumes for the remainder of the year. The current cost inflationary environment still affects the company through higher construction and indirect costs. Additionally, salary expenses will increase during Q2 2023. In light of these cost pressures, our estimate for the company's EBIT margin has been lowered to 3.8% (prev. 3.9%), even though the projected volumes are higher. Overall, we anticipate EBIT of EUR 12.4m (prev. EUR 12.3m) for FY 2023, which falls within the company's guidance range of EUR 9.5-13.5m.

 

BUY with TP of EUR 14.0 (14.0)

We have made only small adjustments to our estimates. Our view remains unchanged, we continue to see the company’s valuation undemanding. Based on our estimates, Consti trades with 23E EV/EBIT and P/E multiples of 7.2x and 10.2x offering a significant discount compared to both the Construction and Building Installations and Services peer groups. We retain our BUY rating and TP of EUR 14.0.

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Dovre - Encouraging Norwegian performance

28.04.2023 - 09.20 | Company update

Dovre’s Norwegian operations drove Q1 EBIT above our estimate even when there was an FX headwind and Renewable Energy missed our estimates.

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EBIT was encouraging despite a few top line headwinds

Dovre’s Q1 revenue declined 4% y/y to EUR 45.8m vs our EUR 48.3m estimate. Top line for both Project Personnel and Consulting came in clearly above our estimates, whereas Renewable Energy missed our estimate by more than EUR 6m. EBIT was in line with these trends as the two Norwegian focused businesses topped our estimates even despite the fact that controlling for FX changes, especially weak NOK, top line would have actually gained 5%. Any softness in the results was thus due to Renewable Energy, where seasonality remains and the fact that the Finnish wind market has been taking a breather after a busy year as e.g. transfer capacity is now a bottleneck.

Business in Norway continues to perform well

Dovre and Suvic are expanding to solar power, Suvic in its capacity as a specialty construction company whereas Dovre has established a project development company called Renetec, which may also expand beyond solar. We make only small estimate revisions after the report; we estimate very decent 5-6% growth for Project Personnel and Consulting (in EUR terms) and some profitability improvement in absolute terms, a slight revision on our previous estimates as new Norwegian legislation on temporary hiring hasn’t proved any major challenge. We make some downward revisions to our Renewable Energy estimates and now expect flat margin development for the year.

EV/EBIT of around 7x not a very challenging multiple

In our view it wouldn’t seem too hard for Dovre to end up improving at least a bit this year in terms of EBIT. Profitability should hold up well especially within Project Personnel and Consulting, and Renewable Energy has a lot more long-term potential even if this year’s margins may remain somewhat low. There have been no big changes in peer multiples over the past few months, and while our group level estimates have remained basically unchanged the relatively strong report increased our confidence in the profitability path’s sustainability. Our updated SOTP valuation indicates value of roughly EUR 0.85 per share. We update our TP to EUR 0.82 (0.80) and retain our BUY rating.

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Loihde - Q1 performance was colored by challenges

28.04.2023 - 08.50 | Earnings Flash

Loihde’s Q1 result came in below expectations. While net sales increased by 13%, adj. EBITDA fell below zero due to challenges faced. Guidance intact: double-digit growth and improving profitability.

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  • Group results: Q1 net sales fell short of our expectation by net sales amounting to EUR 31.3m (Evli: 33.7). In total, net sales grew by 13% y/y. The growth was strong in SeSo, while DiDe decreased from that of the comparison period due to soft demand. Adj. EBITDA decreased to EUR -0.1m, coming in below our expectations (Evli: 2.1). Profitability was negatively impacted by challenges in ERP launch and utilization rates as well as postponed projects. The company expects such one-timer challenges to fade away. Q1 EPS amounted to EUR -0.35 (Evli: 0.06).
  • Security Solutions (SeSo): net sales grew by 22% to EUR 20.2m (Evli: 21.7m). Loihde has succeeded in project tendering both in the public and private sectors. Cyber security and its continuing services as well as One Security were one of the growth drivers. Although uncertainty is present among customers, the outlook seems bright for the demand for security solutions. Challenges in the launch of the ERP system complicated organizing front-office work and caused some additional costs that hurt EBITDA. 
  • Digital Development (DiDe): net sales decreased by 1% due to soft demand and customer uncertainty. Q1 net sales amounted to EUR 11.1m (Evli: 12.1m). The rate of recruitment has been reduced which should elevate utilization rates going forward. The company believes in double-digit topline growth in 2023 with a strong order book. Cloud services grew in line with the company’s expectations.
  • 2023 guidance intact: double-digit growth in both businesses. EBITDA above that of the previous year.

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Finnair - Building sustainable recovery

28.04.2023 - 08.50 | Company update

Finnair’s Q1 further demonstrated solid recovery, however valuation still demands a lot more long-term improvement.

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High unit yields due to market and own initiatives

Finnair’s EUR 695m Q1 revenue easily topped the EUR 572m/647m Evli/cons. estimates. Passenger revenue was EUR 130m above our estimate as unit yields were higher than estimated across the network; some q/q decline was expected as Q1 is seasonally soft, however such pricing softness turned out to be negligible. RASK was 30% above Q1’19 due to dynamic pricing and a larger share of direct distribution (doubled to 65%). Finnair reached 80% of Q1’19 ASK (86% incl. wet leases). The EUR 0.9m EBIT was above the EUR -32.4m/-23.1m Evli/cons. estimates and would have been strong for any Q1, let alone one during which Finnair still recovered from major volume losses.

The recovery appears to have found solid footing

The fleet is now optimal for the network, which in our view shows the net volume loss due to lesser Asian exposure to be smaller than feared (Finnair says demand for e.g. Doha routes has been higher than anticipated). The new routes which fill the lost volumes may not be as profitable as the Asian ones were, but Finnair has done major cost cuts since FY ’19 while RASK levels are now way higher. Asian volumes will grow more, driven by e.g. Japanese leisure, and yields can further advance. Yet prices may be exceptionally high, so it’s difficult to say how much yield gains can support results next year. Chinese route recovery may not be really seen before Q3 as the opening surprised many. Chinese carriers can also fly over Russia so the competitive situation is uneven, however Finnair’s guidance doesn’t seem to rely on Chinese recovery to any significant extent.

Valuation still seems quite full, at least in the short-term

Recovery continues and we expect Finnair to reach a decent EUR 127m EBIT this year, while next year should see results above pre-pandemic levels. On our respective estimates Finnair is valued 12x and 8.5x EV/EBIT, which we note are still not cheap levels. We continue to view Finnair pretty much fully valued; results over the summer should demonstrate more clearly how much EBIT potential there exists over the longer term, especially as the market may also take some of the good away. Our new TP is EUR 0.49 (0.47) as we retain our HOLD rating.

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CapMan - Fair value change driven EBIT decline

28.04.2023 - 08.35 | Earnings Flash

CapMan's net sales in Q1 amounted to EUR 15.1m, below our estimates and below consensus (EUR 16.9m/17.2m Evli/cons.). EBIT amounted to EUR 0.5m, below our estimates and below consensus (EUR 11.6m/10.4m Evli/cons.), impacted by negative FV changes and lack of carried interest.

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  • Revenue in Q1 was EUR 15.1m (EUR 14.2m in Q1/22), below our estimates and consensus estimates (EUR 16.9m/17.2m Evli/Cons.). Growth in Q1 amounted to 6% y/y.
  • Operating profit in Q1 amounted to EUR 0.5m (EUR 18.9m in Q1/22), below our estimates and consensus estimates (EUR 11.6m/10.4m Evli/cons.), at a margin of 3.5%.
  • Compared with our estimates, the clear deviation in EBIT was due to negative FV changes and lack of carried interest (Evli est. EUR 3.0m).
  • EPS in Q1 amounted to EUR 0.00 (EUR 0.08 in Q1/22), below our estimates and consensus estimates (EUR 0.06/0.05 Evli/cons.).
  • Revenue in Management Company business in Q1 was EUR 12.5m vs. EUR 14.7m Evli. Operating profit in Q1 amounted to EUR 3.2m vs. EUR 6.9m Evli. 
  • Revenue in Investment business in Q1 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q1 amounted to EUR -2.5m vs. EUR 4.9m Evli. 
  • Revenue in Services business in Q1 was EUR 2.6m vs. EUR 2.2m Evli. Operating profit in Q1 amounted to EUR 1.5m vs. EUR 1.3m Evli. 
  • Assets under management by the end of Q1 was EUR 5.07bn (Q1/22: EUR 5.06bn). Real estate funds: EUR 3.2bn, private equity & credit funds: EUR 0.9bn, infra funds: EUR 0.5bn, and other funds: EUR 0.5bn.

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Raute - Clearly better than estimated Q1

28.04.2023 - 08.30 | Earnings Flash

Raute’s Q1 results came in clearly better than our estimates. Top line fell, as expected, but less than we had estimated, while profitability remained relatively strong despite the lower revenue. Only Q1 order intake showed some softness relative to our estimate, but this may have mostly to do with the large projects the company has been signing lately.

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  • Raute Q1 revenue fell by 10.8% y/y to EUR 36.8m, compared to our EUR 32.0m estimate. Wood Processing came in at EUR 24.4m vs our EUR 21.0m estimate, while Services was EUR 8.3m, compared to our EUR 8.0m estimate. Analyzers amounted to EUR 4.1m vs our EUR 3.0m estimate.
  • EBIT amounted to EUR 0.9m vs our EUR 0.3m estimate, while comparable EBITDA was EUR 2.8m vs our 1.5m estimate. Profitability improved especially in Wood Processing (up EUR 2.2m and 4.5% comparable EBITDA margin vs -3.7% a year ago due to lesser cost pressure and better mix) but also in Analyzers, while Services remained flat. Cost inflation is no more a big problem, but there are still challenges related to component availability.
  • Q1 order intake came in at EUR 67m, compared to our EUR 81m estimate. In our view this softness relative to our estimate stems from Europe (where the company has signed a big order in Q2) and North America.
  • Order book amounted to EUR 121m at the end of Q1, including EUR 3m in Russian orders.
  • Raute guides FY ‘23 revenue to be above EUR 150m and comparable EBITDA margin above 4% (updated on Apr 25).

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Detection Technology - Towards improved margins

28.04.2023 - 08.00 | Company update

DT recorded strong Q1 growth while its profitability fell short of expectations. We foresee the growth drivers for the next few years as strong and expect EBIT to eventually improve.

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Strong growth but margin improvement yet limited
In Q1, DT delivered strong topline growth, roughly in line with our estimates. Group net sales amounted to EUR 22.8m. The 12% y/y growth was driven by medical and security segments while IBU’s net sales declined due to its customers’ inventory reductions. Q1 EBIT improvement was limited by low volumes, unfavorable sales mix, and usage of spot components. Eventually, adj. EBIT amounted to EUR 1.5m (6.5% margin), which fell short of our expectations. DT reiterated its guidance for H1 by expecting group net sales growth at or above 10%. In Q2, DT expects SBU and MBU to record double-digit growth while it expects IBU to grow.

Drivers for net sales growth have increased
We expect the growth to continue as strong. In the short-term, demand disruptions might have an impact on growth rates, meanwhile, in the longer term, the recovery of China and aviation as well as general investments in security and health care will likely keep DT’s growth above market growth rates. For example, TSA has announced new CT equipment orders, which promote growth opportunities for DT for the next few years. We also foresee China’s opening to have a positive impact on SBU’s net sales development over time. In addition, with DT expanding into TFT flat panel markets, new opportunities within medical and industrial segments will arise. The expansion allows DT to expand its offering for its current medical clients and therefore has further potential to gain market share. In our view, the outlook for the coming years remains bright, which supports our estimated double-digit growth for 2023-24. However, relative EBIT might not actualize to the extent we previously estimated.

HOLD with a target price of EUR 17.5
With our revised estimates, DT is valued with 23-24E EV/EBIT and P/E multiples of 19-13x and 27-18x respectively. While DT's valuation for 2023 is still relatively high, we find that the premium is justified given the expected growth in profitability in 2024. We reiterate TP of EUR 17.5, due to only minor changes made to our 24E EBIT estimate. Rating intact at HOLD.

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Dovre - Profitability relatively strong

27.04.2023 - 10.00 | Earnings Flash

Dovre’s Q1 profitability came in above our estimates despite some softness in top line attributable to Renewable Energy. Project Personnel and Consulting performed a bit better than we estimated, and new Norwegian legislation on temporary work seems to be having only limited effects on business.

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  • Dovre Q1 revenue declined by 4.3% y/y to EUR 45.8m, compared to our EUR 48.3m estimate. Project Personnel came in at EUR 24.8m vs our EUR 21.6m estimate, while Consulting amounted to EUR 5.1m, compared to our EUR 4.5m estimate. Renewable Energy was EUR 15.9m, compared to our EUR 22.2m estimate. Renewable Energy is seasonally driven, and the wind power construction market has been less active than last year.
  • EBITDA landed at EUR 1.9m while we estimated EUR 1.7m. EBIT amounted to EUR 1.7m vs our EUR 1.5m estimate. Project Personnel EBIT was EUR 1.2m, compared to our EUR 1.0m estimate, while Consulting came in at EUR 0.6m vs our EUR 0.4m estimate. Renewable Energy landed at EUR 0.2m vs our EUR 0.4m estimate.
  • Dovre guides revenue to improve from FY ’22 and EBIT to be about the same as last year (unchanged). The new Norwegian legislation on temporary work seems to be having only very limited negative effects on the group’s local businesses.

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Detection Technology - Strong sales growth, EBIT below expectations

27.04.2023 - 09.45 | Earnings Flash

Detection Technology’s Q1 topline came in as expected. Low volumes and weaker gross margin pushed EBIT below expectations. Outlook provides double-digit growth for H1.

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  • Group results: DT’s Q1 net sales grew by 12% y/y to EUR 22.8m, roughly in line with our expectations (22.5/22.8m Evli/cons.). Growth was good in security and medical segments while IBU in fact declined. With lower volumes, unfavorable sales mix and higher material costs due to the usage of spot components, adj. EBIT fell short of our expectations. Adj. EBIT amounted to EUR 1.5m (1.9/1.7m Evli/cons.), reflecting a margin of 6.5%. Adj. EPS amounted to EUR 0.06 (0.11/0.1 Evli/cons.), below our expectations.
  • Medical (MBU): MBU faced strong demand and net sales grew by 14.6% y/y to EUR 12m, roughly in line with our expectations (Evli: 11.7m). Growth was good in high-tier CT solutions in both developing and developed markets.
  • Security (SBU): SBU grew by 16.2% y/y to EUR 7.3m, in line with our estimates (Evli: 7.2m). Strong growth was driven by urban security while aviation was yet quite sluggish. However, TSA has announced new significant CT equipment order which provides potential growth for DT during next few years.
  • Industrial (IBU): compared to growth seen previously, IBU came in soft as expected. IBU’s Q1 net sales declined by 3% y/y to EUR 3.4m, below our expectations (Evli: 3.6m). DT expects demand disruptions (customer inventory reductions) seen in Q1 to fade away in H2.
  • Outlook: DT expects double-digit sales growth and improving quarterly EBIT. DT sees SBU and MBU growing over 10% while IBU is expected to grow in Q2. Group revenue expected to face double-digit growth in H1. Haobo acquisition expected to have a positive impact on sales in H2.

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Finnair - Q1 flew clearly above estimates

27.04.2023 - 09.30 | Earnings Flash

Finnair’s Q1 results topped estimates as high unit yields drove passenger revenue. EBIT remained slightly positive, despite the seasonally slow quarter, as the company has managed to revamp its strategy while also benefiting from a favorable market situation.

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  • Finnair Q1 revenue was EUR 694.7m vs the EUR 572.1m/646.8m Evli/consensus estimates. High unit yields drove passenger revenues way above estimates.
  • Adjusted EBIT landed at EUR 0.9m, compared to the EUR -32.4m/-23.1m Evli/consensus estimates. The positive surprise, especially as Q1 EBIT is often negative even in more normal circumstances, reflects both the new strategy’s successful implementation as well as current favorable market environment.
  • Fuel costs were EUR 220m vs our EUR 213m estimate. Staff costs amounted to EUR 129m, compared to our EUR 115m estimate. All other OPEX+D&A amounted to EUR 376m, compared to our EUR 319m estimate.
  • Cost per Available Seat Kilometer was 8.11 eurocents vs our estimate of 7.07 eurocents.
  • Finnair reiterates guidance, expecting FY ‘23 ASK levels to reach 80-85% of those of FY ’19. Unit yields should develop favorably at least over the summer season as demand remains high, however there’s uncertainty beyond that timeframe due to e.g. normal seasonality and inflation. FY ’23 revenue will therefore significantly increase and comparable EBIT will significantly improve y/y, especially due to H1’22 weakness, but will not yet reach the levels of FY ’19.

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Consti - Another strong quarter

27.04.2023 - 09.20 | Earnings Flash

Consti's net sales in Q1 amounted to EUR 68.9m, above our and consensus estimates (EUR 62.5m/62.3m Evli/cons.), with impressive growth of 15.2% y/y. EBIT amounted to EUR 0.7m, also above our and consensus estimates (EUR 0.5m/0.5m Evli/cons.). Guidance for FY 2023 remains unchanged.

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  • Net sales in Q1 were EUR 68.9m (EUR 59.8m in Q1/22), above our and consensus estimates (EUR 62.5m/62.3m Evli/cons.). Sales growth was impressive at 15.2% y/y.
  • Adj. operating profit in Q1 amounted to EUR 0.7m (EUR 0.4m in Q1/22), above our and consensus estimates (EUR 0.5m/0.5m Evli/cons.) at a margin of 1.0% (0.6%). 
  • EPS in Q1 amounted to EUR 0.04 (EUR 0.01 in Q1/22), above our and consensus estimates (EUR 0.02/0.02 Evli/cons.).
  • The order backlog in Q1 was EUR 253.8m (EUR 205.1m in Q1/22), up by 23.7% y/y. 
  • Free cash flow amounted to EUR -1.0m (Q1/22: EUR -0.8m).
  • The company’s order intake was impressive as the intake in Q1 was EUR 58.6m (Q1/22: EUR 37.6m), up by 56.1%. During the quarter, Consti agreed on a comprehensive renovation project of a housing company in Myllypuro owned by the city of Helsinki, the contract is worth EUR 26m or roughly 10% of the current total backlog.
  • The profitability continues to be strong despite the cost inflation having a negative effect through higher construction and indirect costs.
  • Guidance for 2023 (unchanged): Operating result for 2023 will be in the range of EUR 9.5–13.5 million

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SRV - Lower volumes showing

27.04.2023 - 09.05 | Earnings Flash

SRV's net sales in Q1 declined clearly to EUR 138.3m, below our and consensus estimates (EUR 147.4m/151.5m Evli/cons.). The lower volumes and higher share of lower-margin construction projects pushed profitability figures into the red, with EBIT of EUR -2.0m falling short of expectations (EUR 1.5m/1.6m Evli/cons.).

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  • Revenue in Q1 was EUR 138.3m (EUR 190.7m in Q1/22), below our and consensus estimates (EUR 147.4m/151.5m Evli/Cons.). Revenue declined 27.5% in Q1.
  • Operating profit and operative operating profit in Q1 amounted to EUR -2.0m (EUR -85.7m/4.9m in Q1/22), below our and consensus estimates (EUR 1.5m/1.6m Evli/cons.), at a margin of -1.4%. Profitability in Q1 was affected by the lower volumes and larger share of lower margin construction projects.
  • Residential construction revenue declined clearly to EUR 24.0m (Evli EUR 43.2m, EUR 76.5m in Q1/22). Non-residential construction revenue grew to EUR 113.9m (Evli EUR 103.3m, EUR 98.7min Q1/22).
  • SRV changed its reporting structure and no longer separately reports the Construction and Investments segments and Other operations and eliminations.
  • The order backlog grew slightly to EUR 871.0m (858.0m in Q1/22). New orders in Q1 amounted to EUR 149.9m. Of the backlog, non-residential construction accounted for EUR 742.4m and residential construction for 128.5m.
  • Guidance for 2023 (reiterated): Revenue in 2023 is expected to be lower than in 2022 (EUR 770.1m) and the operative operating profit to be lower than in 2022 (EUR 18.9m) but to be positive.

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Scanfil - Some more profitable growth ahead

27.04.2023 - 08.35 | Company update

Scanfil’s Q1 figures beat estimates even if expectations were already high. EBIT will remain high, but focus is already shifting to long-term development opportunities.

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High volumes in particular drove an earnings beat

Scanfil’s revenue was EUR 225m, up 14% y/y (21% excluding spot purchases), vs the EUR 206m/216m Evli/cons. estimates. All segments grew nominally some 20% y/y, except for Advanced Consumer Applications but even there growth wasn’t too bad adjusting for spot purchases. Energy & Cleantech contributed most to growth, driven by demand in Europe where green transformation is taking place. Improved component availability lifted productivity as expected; the 6.7% EBIT margin wasn’t such a large surprise after the guidance revision, but high demand and the company’s ability to meet it helped EBIT to EUR 15.1m vs the EUR 13.7m/13.8m Evli/cons. estimates. Successful cost inflation management was another factor in producing a high absolute profitability level for a quarter which is often relatively muted.

Capacity additions beyond Europe likely in the long-term

High demand and component supply issues in the past years have built up inventories as Scanfil has tried to make sure it can meet demand. We believe inventories have peaked, but their rotation continues to be in focus going forward. Capacity utilization rate already runs high and hence the incremental investments will come handy. Scanfil remains ready for M&A, and expansion outside Europe is more likely than not in the long-term; the scope for deals may focus on Asia, but the US is also an option. European expansion has not been ruled out but isn’t as likely due to the already significant presence there.

We make only small estimate revisions after the report

Scanfil’s customer base is well diversified already, in its own EMS context, the accounts compete with each other only to a limited extent and a CAGR of 5%+ should be sustainable in the long run. Recent high growth however creates some uncertainty around the rate going forward and we would expect it to drop below 5% in the coming years. The 10x EV/EBIT valuation, on our FY ’23 estimates, isn’t yet that high as further growth and margin expansion might take it down to around 8.5-9.5x in the years to come, however we see valuation to have reached a neutral level. We retain our EUR 10.0 TP. Our new rating is HOLD (BUY).

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Innofactor - Operational stability being achieved

26.04.2023 - 16.30 | Company update

Innofactor’s Q1 results were good and beat our expectations. The outlook remains quite favourable, and we do not expect performance during the remainder of 2023 to significantly improve from the good performance in Q1.

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Q1 results beat our expectations
Innofactor reported good Q1 results that beat our expectations. Net sales grew 19.2% y/y to EUR 20.2m (Evli EUR 18.3m). The growth in net sales amounted to 19.2%, of which 10.9% organic. EBITDA amounted to EUR 2.5m (Evli EUR 2.2m). The performance in Q1 was aided enhanced internal efficiency and the billing rates remaining at good levels, along with an increase in the number of employees and use of subcontracting. The order backlog was at EUR 76.3m, up 6.9% y/y. Innofactor reiterated its guidance, expecting net sales to increase from 2022 (EUR 71.1m) and EBITDA is expected to increase from 2022 (EUR 7.8m). 

Currently performing rather well
We have made only smaller upwards adjustments to our estimates based on the higher than anticipated Q1 results. The total revenue growth pace is expected to slow down with the fewer working days in Q2 and the impact of the Invenco acquisition only affecting H1. We still expect to see quite good organic growth supported by the order backlog and continued shift away from project business revenue towards revenue sources of more recurring nature. We do not expect significant margin improvement in the very near-term, with the implied performance of the Finnish business already at good levels, and growth investments likely to have minor impact. There is still room for improvement in the operations abroad, but that road has been bumpier and is likely to remain so in the near-term.

BUY with a target price of EUR 1.6 (1.5)
With further signs of Innofactor having achieved a more stable financial performance, we lift our target price slightly to EUR 1.6 (1.5) and retain our BUY-rating. The implied 2023e P/E of ~12.5x remains below the peer median. Further proof of double-digit organic growth and earnings stability would in our view provide further valuation upside. 

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Suominen - Volumes and profitability recover

26.04.2023 - 09.05 | Preview

Suominen reports Q1 results on May 4. We expect the company to have managed a modest improvement but focus rests on continued volume gains in the US business.

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Some gains to be expected, but focus is on US volumes

Suominen’s Q4 results remained below our estimates as the US business still lacked volumes. Raw materials prices began to decline last year, but the relatively low volumes curbed earnings recovery. We believe earnings will begin to recover this year especially due to improving volumes and mix in the US, while raw materials prices should continue to stabilize. We expect these factors to drive earnings gains over the year, however we revise our Q1 EBITDA estimate to EUR 6.2m (prev. EUR 8.0m) as certain oil-based raw materials didn’t decline any longer in Q1 after their plunge in Q4. We leave our revenue estimate unchanged at EUR 120m and note Suominen may well achieve a double-digit growth rate as the comparison figure is very low.

We estimate double-digit growth for Americas this year

We estimate Suominen’s raw materials prices to have continued their slide in Q1 at a rate of a few percentage points q/q; the rate is somewhat slower than seen in Q4 as we estimate the prices to have fallen at an almost double-digit rate back then. We find there to have been some mixed developments lately as pulp prices have declined, at varying rates depending on the grade, while oil-based materials like polyester and polypropylene have remained rather flat after a steep drop in Q4. In our opinion such a stabilizing pricing environment is beneficial for Suominen, and hence focus rests more on product mix and volume gains. European revenue continued to grow last year, but we expect lower prices and traditional product exposure to pose a headwind there. Meanwhile Americas should reach a new top line high as US volumes return.

Valuation still appears neutral

In our view Suominen seems fully valued from a short-term perspective; we don’t consider the 10x EV/EBIT multiple, on our FY ’23 estimates, cheap. Meanwhile valuation doesn’t look too expensive against longer term potential, as the multiple amounts to 5x on our FY ’24 estimates when we expect gross and EBIT margins to have regained their respective historical levels of above 11% and 6%. We retain our EUR 3.0 TP and HOLD rating.

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Scanfil - Figures stand high

26.04.2023 - 08.30 | Earnings Flash

Scanfil’s Q1 was expected to be strong, however the results still clearly topped estimates by many percentage points. In our view it wouldn’t seem too difficult for the company to reach the higher end of its guidance range for the year.

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  • Scanfil Q1 revenue grew by 14.2% y/y to EUR 224.6m vs the EUR 205.9m/216.1m Evli/consensus estimates. The figure includes EUR 7.9m of spot market component purchases.
  • Advanced Consumer Applications was EUR 51.3m vs our EUR 53.9m estimate, whereas Energy & Cleantech amounted to EUR 67.5m, compared to our EUR 56.2m estimate. Automation & Safety was EUR 52.5m, compared to our EUR 48.1m estimate.
  • EBIT amounted to EUR 15.1m, compared to the EUR 13.7m/13.8m Evli/consensus estimates. EBIT margin was thus 6.7%, matching our estimate. High capacity utilization rate, increased efficiency due to improving component availability and successful cost inflation management helped produce the highest quarterly margin in two years.
  • Scanfil guides revenue for FY ’23 to amount to EUR 880-940m and EBIT of EUR 56-64m (outlook revised on Apr 12).

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Innofactor - Solid growth pace continues

25.04.2023 - 09.15 | Earnings Flash

Innofactor’s Q1 results were good and surpassed our expectations. Net sales grew 19.2% y/y to EUR 20.2m (Evli EUR 18.3m). EBITDA amounted to EUR 2.5m (Evli EUR 2.2m). Guidance reiterated, Innofactor’s net sales and EBITDA in 2023 are expected to increase compared with 2022.

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  • Net sales in Q1 amounted to EUR 20.2m (EUR 17.0m in Q1/22), above our estimates (Evli EUR 18.3m). Net sales in Q1 grew 19.2% y/y and 10.9% organically. Net sales increased in Finland and Norway, and in Sweden in local currency, but declined in Denmark. 
  • EBITDA in Q1 was EUR 2.5m (EUR 2.0m in Q1/22, above our estimates (Evli EUR 2.2m), at a margin of 12.3%. 
  • Operating profit in Q1 amounted to EUR 1.7m (EUR 1.3m in Q1/22, above our estimates (Evli EUR 1.4m), at a margin of 8.5%. 
  • In Q1 Innofactor managed to further enhance the efficiency of its operations and the invoicing rate improved when compared to Q4/22. Innofactor’s number of personnel increased by over 13 percent y/y and the use of subcontracting increased. The increase in FTE’s involved in customer work promoted the growth of net sales and the operating margin.
  • Order backlog at EUR 76.3m, up 6.9% y/y. New orders included a digitalization project Metso Outotec Plc (approx. EUR 0.7m) and the continued development and maintenance of Senate Properties’ HR system (approx. EUR 0.8m)
  • Guidance for 2023 (reiterated): Innofactor’s net sales is expected to increase from 2022 (EUR 77.1m) and EBITDA is expected to increase from 2022 (EUR 7.8m).

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Loihde - Expecting a growth-filled first quarter

25.04.2023 - 08.20 | Preview

Loihde reports its Q1 results on Friday, April 28th. We expect the company's Q1 double-digit growth to be strongly supported by its security business. Driven by increased estimates resulting from the acquisition of Hämeen Lukko, we have raised our target price to EUR 16.5 (16.0), while maintaining our rating at HOLD.

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Expecting strong topline growth
The growth prospects for Security Solutions (SeSo) remain strong. In Q1, we expect high double-digit growth for SeSo, fueled by the acquisition of Turvakolmio. On the other hand, we expect that the Q1 growth of Digital Development (DiDe) slows down due to customer uncertainty. Overall, we estimate Q1 net sales of EUR 33.7 million which reflects y/y growth of 18.6%. Considering the slower net sales development of DiDe, we expect that lower utilization rates will have some impact on margins. As a result, we foresee Loihde's adjusted EBITDA landing at EUR 2.1 million, which reflects a margin of 6.4%. 

Acquisition expands SeSo’s reach
Uncertainty observed in digital services markets seems to have spilled over into the cyber security markets, where Loihde's peers have reported delayed deal closings due to customer uncertainty. However, such slowdown has only a minor impact on SeSo's 23E growth. In addition to M&A enabled growth from 2022, the acquisition of Hämeen Lukko (see page 2) will strengthen SeSo's position and inorganic revenue expansion further. We foresee DiDe stepping back on the double-digit growth path in H2. Our 23E net sales estimate for the group amounts to EUR 144.1m, reflecting a y/y growth of 17.2%. We expect that efficiency investments will bear fruit by improving adj. EBITDA margin by some 0.3%-p to 8.7%. Leverage will become more visible in 2024 when we expect a margin improvement of 0.7%-p.

HOLD with a target price of EUR 16.5 (16.0)
Loihde is valued with 23-24E EV/EBITDA multiples of 4-4.5x which reflects clear discount to peer median. However, the company’s relative valuation turns quite expensive by considering it without its net cash position (23-24E P/E of 22-15x). With ~3% increase in 23E EBIT, we adjust our TP to EUR 16.5 (16.0). Rating remains at HOLD.

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Finnair - The long recovery continues

24.04.2023 - 09.40 | Preview

Finnair reports Q1 results on Apr 27. Finnair has lagged its peers in terms of pandemic recovery due to the legacy Asian strategy, while from now on further volume recovery should be found with the help of a pivoted network.

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We make only minor estimate revisions ahead of the report

Finnair’s RPK almost doubled y/y in Q1, as estimated, and thus reached 77% of the Q1’19 comparison figure. Q1 is always seasonally quiet, however yields should have stayed robust as a lot of pent-up demand is yet to be sated. Finnair’s EBIT returned to black in H2’22, but Q1 EBIT is likely to be negative unless pricing tailwinds have proved stronger than estimated. We estimate Q1 revenue at EUR 572m and EBIT at EUR -32m.

The pivoted network to be seen clear over the summer

Asian volumes are now catching up as the key countries have lifted their travel restrictions, yet Finnair’s Asian volumes in Q1 were still only 54% of the Q1’19 comparison figure while Europe reached more than 80% of the corresponding figure. The Asian figures therefore still have some room to improve after the pandemic slump, but the Russian airspace closure limits their recovery potential and consequently Europe too lacks some of its former potential. Further recovery will thus rely on the network updates and increased density to North Atlantic, Middle East and India routes. We estimate Finnair’s FY ’23 RPK to reach 82% of FY ’19 levels, while strong pricing environment could help revenue to almost 94% of the FY ’19 figure this year. We expect FY ’23 EBIT at EUR 104m on this basis, well short of targeted levels.

Valuation closer to neutral from a long-term perspective

Airline valuations haven’t budged much in the past few months; absolute valuations have remained steady while earnings outlook has improved further. Finnair remains valued around 15x EV/EBIT on our FY ’23 estimates, a considerable premium relative to a typical peer. The multiple is about 9x on our FY ’24 estimates, which is still above many peers while we estimate Finnair’s profitability to stay well below those of its peers. We hence view Finnair rather fully valued in the short-term perspective; Finnair’s 5% EBIT margin target, set to be achieved from H2’24 onwards, may not prove too challenging as long as key value drivers like passenger volumes continue to trend favorably. We retain our EUR 0.47 TP; our new rating is HOLD (SELL).

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Detection Technology - Growth accelerates towards H2

24.04.2023 - 09.20 | Preview

We lowered our Q1 estimates, but with promising growth prospects from Q2 onwards, our 23-24E EBIT estimates saw a decent improvement.

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Estimating a slower start to the year
Ahead of the Q1 result, our Q1 estimates saw a reasonable decrease due to a slower than expected start to the year. In our view, IBU is facing softer than previously expected demand due to OEMs’ overstocking which has temporarily decelerated growth. Additionally, the security market has been slower than expected. In our view, the state of medical markets continues as steady. Overall, we estimate Q1 group net sales to reach EUR 22.5m with 10.6% y/y growth. With decreased volumes, our Q1 EBIT estimate also saw a moderate decline. We expect Q1 EBIT to land at EUR 1.9m, reflecting an 8.6% margin.

Demand set to improve during Q2 and H2
We foresee the growth prospects for DT as strong. Considering China’s increased aviation passenger volumes and low investments in aviation security due to the pandemic lockdowns, the demand for SBU has significant potential to improve. In addition, TSA’s new orders should start to generate revenue in the coming year(s). OEMs have also reported on new security CT renewals in Europe. Despite soft Q1, we expect IBU to score solid growth figures in 2023. In our view, the medical market continues to deliver steady growth and with DT’s technology expansion, we foresee MBU expanding its market share during the next few years. In total, we expect revenue growth of 14.1% in 2023. In our view, DT’s scalable business model begins to lever with volumes clearly above EUR 100m. With that, we expect the 23E EBIT margin to double from that of the previous year to 12.5%

Valuation for 2024 not demanding
With our revised estimates, DT trades with 23-24E EV/EBIT multiples of 18-13x. With expected EBIT growth, 24E valuation seems not challenging. With a decent increase in our EBIT estimates and a minor decline in share price since our last update, we upgrade our rating to HOLD (SELL) and adjust TP to EUR 17.5 (16.5) ahead of the Q1 result.

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Consti - Expecting a solid yet seasonally slow Q1

20.04.2023 - 09.20 | Preview

Consti reports its Q1 2023 earnings on 27th of April. We expect the positive development seen during 2022 to continue driven by the company’s healthy backlog, higher volumes and slower construction cost inflation. With estimates intact, we retain our BUY rating and TP of EUR 14.0.

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Solid development expected to continue

Consti had a strong finish to the year 2022 and we expect the positive development to continue during 2023. For Q1 2023, we estimate revenue growth of 4.5% y/y and EBIT margin of 0.9% (0.6% Q1 2022). Our estimate for the continued positive development is driven by the company’s healthy backlog (EUR 246.7m 12/22), higher volumes, improved project management and slower construction cost inflation.

 

Renovation volumes expected to increase during 2023

RT expects that the renovation volumes grow by 1.5% in 2023, driven by both the slow down in new construction and on the other hand, slower construction cost inflation. The growth in renovation volumes is expected to focus on the Finnish growth centers where Consti is active. The construction cost inflation has slowed down from the high levels seen in the first half of 2022, yet the growth was still at roughly 6.5% y/y during Q1 2023. The current high cost and interest rate environment make the company's potential remarks on the demand outlook for the housing company segment especially interesting.

 

BUY with a target price of EUR 14.0

We have not made changes to our estimates, we expect that the company’s steady and positive development witnessed during 2022 has continued in Q1 2023. We still see the company’s valuation undemanding on both relative and absolute terms. Consti trades with 23E EV/EBIT and P/E multiples of 6.8x and 9.7x offering a significant discount compared to both the Construction and Building Installations and Services peer groups. We retain our BUY rating and TP of EUR 14.0.

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Solteq - Sizeable spring cleaning

20.04.2023 - 09.00 | Company update

Solteq intends to divest its ERP business based on Microsoft BC and LS Retail solutions. The valuation of the deal is quite attractive and would ease the company’s balance sheet situation, while near-term profitability is under further pressure.

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Intention to divest a quite considerable part of its business
Solteq signed a business transfer agreement regarding the divestment of its ERP business based on Microsoft BC and LS Retail solutions to Azets. The revenue of the transferring business in 2022 was EUR 11.2 m and the operating profit was EUR 1.5m and as such represents a quite considerable part Solteq’s total business. The net debt-free purchase price of the business is a maximum of EUR 20m and the fixed purchase price is EUR 15m deducted by the net working capital of the business. Solteq will recognize an estimated one-time profit of EUR 8m (pre-tax) on the fixed purchase price in Q2. The transaction is estimated to be completed on May 2, subject to customary preconditions. Solteq withdrew its guidance due to the on-going transaction. 

Attractive valuation and easing of balance sheet pressure 
In light of the updated strategy, divestments were to be expected. Although the to be transferred business per se is in not fully non-core and has a healthy profitability, the deal makes sense given the attractive valuation. In terms of size the announced transaction in our view represents the bulk of possibly planned divestments, a further smaller transaction is still in our view somewhat likely. The main benefit of the transaction is in our view the valuation and easing of the balance sheet burden, as Solteq through its issued bond has been relatively indebted. In the short-term, the transaction will if completed add pressure on overhead expenses in relations to the business size and will likely induce actions to remedy the situation.

HOLD with a target price of EUR 1.3
Ultimately, our view of the transaction is quite neutral. The balance sheet improvement will provide financial leeway, but near-term profitability will be further constrained. We retain our target price of EUR 1.3 and HOLD-rating. 

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Raute - Americas to drive future growth

19.04.2023 - 09.35 | Preview

Raute reports Q1 results on Apr 28. Large projects solidify outlook, while the new strategy hints at growth ambitions particularly in Americas and within Services & Analyzers.

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We leave our FY ’23 estimates basically intact

We expect Raute’s Q1 margins to have recovered a bit from the weak comparison period, despite lower top line, as inflation should no more be such a problem for Wood Processing while Services & Analyzers should have still seen growth. We estimate group revenue at EUR 32m and hence EBITDA at a modest EUR 1.5m. Continued earnings recovery over the year is a priority, but attention also focuses on growth outlook for the coming years.

We see Americas and Services & Analyzers as focus areas

Raute will deliver EUR 50m in equipment to Uruguay starting next year. We view the destination a positive surprise, as Raute hasn’t delivered big LatAm projects since ‘12. We update our FY ’24 revenue estimate to EUR 155m (prev. EUR 140m) and raise our margin estimates by some 50bps, which we view a conservative assumption. Raute’s pipeline also includes another slightly smaller project, yet to be signed, which we expect to be destined to Europe. Raute’s new long-term targets set the ambition high, especially in terms of growth as the EUR 250m top line target for FY ’28 implies double-digit CAGR from this year on (compared to ca. 3-4% CAGR seen for customer end-demand). Europe will remain a key market, however we would expect Raute to pursue a lot more growth within Americas as its Wood Processing market shares there are lower. We also view Services and Analyzers as particular spearheads in this sense.

Downside appears limited relative to long-term potential

Raute may add technology edge via M&A, but such deals have historically been small and hence we would expect organic execution to remain of great importance. The directed issue added ca. 20% to share count, and thus the EV/EBIT multiple has respectively increased to 20.5x on our FY ’23 estimates. The multiple remains a modest 6.5x on our FY ’24 estimates; our margin estimates appear conservative while there’s still a rights issue to come, plus maybe a junior loan. In our opinion it’s early to give much weight for the new strategy’s targets, however we still view downside limited whereas long-term potential is considerable. We retain our EUR 11.0 TP and BUY rating.

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Scanfil - High growth and profitability

14.04.2023 - 09.35 | Company update

Scanfil’s guidance upgrade arrived early in the year and was of notable size. Multiples aren’t too high, in the light of robust EBIT, but may now be sensitive to growth outlook.

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Early upgrade hints at strong Q1 and gains over the year

Scanfil upgraded guidance as customer demand has continued to pick up especially within the Energy & Cleantech, Automation & Safety, and Medtech & Life Science segments. Electronic components’ availability was a bottleneck on productivity (and hence EBIT) last year, but the situation has now been improving for a while. Continued strong demand and further improvement in component availability are not in our view by themselves major news, however the respective 6% and 15% revisions in revenue and EBIT guidance midpoints are of significant magnitude and arrive at an early point in the year; in our view the upgrade suggests even the seasonally slow Q1 has topped the company’s own expectations. We expect absolute EBIT to increase over the coming quarters and note Scanfil may land very near its long-term 7% EBIT margin target already this year.

7% EBIT margin target remains relevant going forward

In our opinion Scanfil’s 7% EBIT target has been very realistic for years and is also sustainable in the long run. We believe there’s unlikely to be any great upside to the target, although Scanfil may well revise it slightly at some point in the future. Scanfil’s plant network is in great shape and production capacity shouldn’t prove a bottleneck, at least in the short-term, as the company has recently been investing in new space and lines. Any larger capacity step-ups are still more likely to happen through M&A rather than a greenfield project. We believe such potential is most likely to be found in an Asian country like Vietnam.

Growth outlook is likely to drive valuation from now on

Scanfil is again set to grow at double-digits, excluding the spot purchases. This high organic CAGR is unlikely to last for very long in the EMS business, even if Scanfil has an attractive account portfolio. Valuation is henceforth likely to be more sensitive to growth outlook, as there’s relatively little uncertainty around the 7% EBIT margin. Scanfil is valued 10x EV/EBIT on our FY ’23 estimates and 9x for FY ’24. The multiples remain in line with peers, while Scanfil’s margins should stay well above those of a typical peer. Our new TP is EUR 10.0 (8.75); we retain BUY rating.

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Endomines - Strong production figures for Q1

05.04.2023 - 09.30 | Company update

Endomines reported strong production figures for Pampalo as the production increased 215% y/y during Q1 2023. In our view, the company is making good progress in alignment with its revised strategy and the favorable development is further supported by the current strong gold market.

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Pampalo production increased 215% year-on-year

Endomines released an operational update for Q1 2023 that included updated gold production figures for Pampalo. The company was able to produce 3588 ounces of gold during Q1 2023 which was 215% higher when comparing to last year (1137 ounces in Q1 2022). In addition to strong production figures, the company's drilling program in the Karelian gold line developed according to plans during the first quarter. Endomines has completed roughly half of the planned drilling in the Korvilansuo area, and the results are expected to be published in April-July.

 

We increase our production estimate for H1 2023

We increase our H1 2023 production estimate to 6893 ounces (5817 ounces) driven by the strong production figures for Q1. Endomines expects production increase of 35-55% for FY 2023 when comparing to FY 2022, our current production estimate is at the top end of the guidance range. There is further upside to our production estimate if the company can maintain the rate of production achieved in Q1 over the upcoming quarters. We also increase our profitability estimate for 2023 driven by the increased volumes in the first half and overall improved profitability for the full year due to the combination of lower energy prices and higher gold prices in relation to 2022.

 

BUY with a target price of EUR 6.5

Our view of the company remains unchanged, Endomines is implementing its strategy effectively in Finland and is benefitting from the strong gold market. However, we continue to see risks associated with the value realization of the company's asset portfolio in the United States. In addition, there is limited visibility regarding the company's exploration activities and the future Pampalo production. Due to the existing uncertainties, we base our valuation on the lower end of our SOTP-based valuation range. We retain our BUY-rating and TP of EUR 6.5.

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Administer - Guidance not convincing

04.04.2023 - 09.15 | Company update

Administer reported H2 figures a notch above our expectations. The guidance appears rather conservative, and our estimates remain above the guidance range.

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H2 figures a notch above our expectations
Administer reported rather good H2 figures and a notch above our expectations. Revenue amounted to EUR 28.9m (Evli EUR 27.4m), with growth of 30.8% driven by acquisitions as well as new customers won by Silta. EBITDA amounted to EUR 2.7m (Evli EUR 2.4m). We had assumed no dividend to paid due to growth ambitions, but the BoD proposed a dividend of EUR 0.05. Although the implied dividend yield is low (~1.5%), the commencing of payments is a positive sign for share expectations given lack of dividends so far. 

Guidance appears rather conservative
The guidance for 2023 was surprisingly soft and appears rather conservative. Revenue is expected to amount to EUR 76-81m and the EBITDA-margin to 7-9%. With the acquisition of Econia the run-rate revenue should already be around EUR 80m and the guidance as such imply no or very little organic growth. We have retained our revenue estimate at EUR 82.4m, above the guidance, and expect further acquisitions to also boost growth and a guidance upgrade later on in the year.   We have slightly trimmed our EBITDA-margin expectations (9.8%) downwards but still above the guidance range. Administer’s EBITDA-margin in 2022 was at 7.1%, with a weaker H1. Our improvement expectations rely on the in relative terms more profitable Econia and synergies from acquisitions. We note that there is larger uncertainty in our margin expectations due to the lack of proof of significant profitability improvements from operational efficiency. 

BUY with a target price of EUR 4.0
With our estimates largely intact, we retain our target price of EUR 4.0 and BUY-rating. Our TP values Administer at approx. 10x EV/EBITA. The potential remains considerable on the 2024 EBITDA-margin target (24% in 2024), but we continue to see Administer still being a long way away from achieving those.

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Administer - Quite in line with expectations

30.03.2023 - 09.15 | Earnings Flash

Administer’s H2 figures were slightly better than expected. Revenue amounted to EUR 28.9m (Evli EUR 27.4m), with growth of 30.8%. EBITA amounted to EUR 2.1m (Evli EUR 2.0m). The 2022 dividend proposal is EUR 0.05 per share (Evli EUR 0.00). Guidance for 2023: Revenue EUR 76-81m and EBITDA-margin 7-9%.

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  • Net sales in H2 amounted to EUR 28.9m (EUR 22.1m in H2/21), slightly above our estimates (Evli EUR 27.4m). Net sales in H2 grew 30.8% y/y. Growth was mainly attributable to acquisitions made during 2022 and the new customers won by Silta.
  • EBITDA and EBITA in H2 were EUR 2.7m (H2/21: EUR 1.7m) and EUR 2.1m (H2/21: EUR 1.3m) respectively, above our estimates (Evli EUR 2.4m/2.0m). The EBITDA-margin amounted to 9.5%. Profitability improved in the accounting, payroll and HR services as well as in the software business.
  • Operating profit in H2 amounted to EUR 0.6m (EUR 0.3m in H2/21), slightly below our estimates (Evli EUR 0.8m). EBIT was affected by amortization of goodwill from the acquisitions amounting to EUR 1.5m (H2/21: EUR 1.0m).
  • During H2 Administer completed the acquisition of accounting firm Varkauden Tili Oy, accounting and financial management services provider Tunturi-Lapin Yrityspalvelu Oy, the accounting business of Laine Consulting Oy and financial and HR administration and international services provider Econia.
  • Dividend proposal: Administer’s BoD proposes a dividend of EUR 0.05 per share be paid for 2022 (Evli EUR 0.00).
  • Guidance for 2023: Administer seeks to continue growth investments as well as organic and inorganic growth in 2023. Net sales is estimated to be EUR 76-81m and EBITDA margin at 7-9%.

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Administer - Growth in place, profitability up next

24.03.2023 - 08.15 | Preview

Administer reports its H2/2022 results on March 30th. Earnings figures are of lesser interest, the outlook more so with the leap in size and earnings given the acquisition of Econia.

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H2 earnings report interest lies on 2023 outlook
Administer reports its H2/2022 results on March 30th. The earnings figures are of lesser interest, with the fiscal year guidance range (revenue EUR 50-52m, EBITDA-% 5.5-7.5%) implying improved relative profitability from the more challenging H1 but still clearly sub-par compared with long-term targets. Of more interest is the outlook for 2023 following the sizeable acquisition of Econia at the end of 2022 and expected ramp-up of the company’s profitability scaling. Technically Administer should on our estimates be able to pay a dividend for FY 2022 but we assume no payout given the focus on growth. 

Big leap in size and earnings in 2023
With the acquisition of Econia, Administer is set to take a significant growth leap in 2023. To our understanding the prevailing market conditions have been a lesser nuisance than expected and organic growth initiatives progressed quite well, due to which we raise our 2023 revenue estimate close to the 2024 target of EUR 84m. We have not included further M&A in our estimates, but with continued acquisitions very likely, the target should reasonably be achievable in 2023. We also expect EBITDA to over double compared with 2022, largely due to the in relative terms notably more profitable Econia. The 2024 EBITDA-% target of 24%, however, still appears distant. Synergies from acquisitions provide margin upside, while inorganic growth and operational efficiency should kick in to provide larger potential. 

BUY with a target price of EUR 4.0 (3.6)
Valuation compared with peers on our 2023-2024 estimates continues to remain favourable. A discount remains warranted given the yet limited proof of profitability improvement but the current valuation in our view does not reflect the company’s potential. On our adjusted estimates we raise our target price to EUR 4.0 (3.6), BUY-rating intact.

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Detection Technology - Acquires Chinese flat panel provider

15.03.2023 - 12.20 | Analyst comment

DT has signed an agreement to acquire Shanghai Haobo Imaging Technology, an X-ray flat panel detector provider to broaden its technology base.

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  • Haobo focuses on X-ray flat panel detectors, offering a-Si, IGZO, and CMOS technologies. With the acquisition, DT taps into TFT flat panel (a-Si & IGZO) markets which almost doubles DT’s addressable market size to EUR 3.1bn (2025). The main application for TFT flat panels is in medical X-ray imaging, and there is also growing demand in industrial and veterinary.
  • While DT already has offering in high-end flat panel imaging with CMOS technology, with the acquisition of Haobo the company broadens its flat panel offering into lower price point detectors.
  • Haobo’s customer base centralizes in the industrial segment while DT has the muscles to monetize the technology for its existing medical customer base. However, positive EBIT is expected not until 2025 due to the conservativity of medical customers.
  • Haobo's enterprise value amounts to EUR 14m and net sales were EUR 3.0m in 2022. EV/Sales 4.7x valuation implies the strategic value of the acquisition with DT mainly acquiring technology and capabilities. The acquisition will be financed with existing cash and a new term loan. In addition, DT has agreed on an increase in the existing revolving credit line to finance growth-enabling investments.
  • DT will acquire 90% of the shares in Haobo from its founders and main owner. The founders and management will continue to hold 10% of the shares. DT has agreed on an option to acquire the shares of the Haobo management when certain performance targets are met. Closing is expected by the end of June 2023.
  • In our view, the acquisition offers DT new opportunities in medical markets while we also foresee the growth base in industrial markets to further accelerate. We however foresee the impact materializing during 2024-26.
  • For now, we see the acquisition having no significant impact on our near-term estimates. We retain our SELL rating with elevated valuation, and TP of EUR 16.5 with estimates intact.

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Loihde - Initiating coverage with HOLD

13.03.2023 - 09.10 | Company report

Loihde has strong long-term growth prospects and with scalability starting to kick in, we see the company as quite interesting as an investment. We initiate the coverage of Loihde with a HOLD rating and target price of EUR 16.0.

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Security and digital IT services from under the same roof
The company is currently under a large turnaround after massive organizational changes made during 2017-2021. The current business consists of two separate but complementary businesses of security and IT services. EBITDA has already seen positive development during 2021-22, but the company has still work to be done until reaching its target of a 10% EBITDA margin. We see the growth prospects as good with strong underlying megatrends supporting the market growth. In addition, Loihde has lots of up- and cross-sales opportunities within the company which consists of multiple subsidiaries which originally have been formed from acquired companies.

Comprehensive offering as a competitive factor
In our view, the company stands out from its competitors with its unique offering in which the company can utilize industry-overlapping capabilities to deliver next-gen solutions. For example, the company has delivered to Finnish Customs physical security surveillance service which is highly enforced by intelligence. Moreover, with the One Security concept, the company provides both physical and digital security services in which the data collected from physical devices is enriched by analytics to provide either stronger security or to support business decisions. 

Valuation not challenging, but further evidence is needed
We view the current valuation of Loihde as not challenging, but with a sustainable profitability level still unproven, we justify multiples below the peer group median. We value Loihde with 23E EV/EBITDA and EV/EBIT multiples of 6.4x and 9.6x respectively. The near future includes some uncertainty with slowing demand for DiDe. We initiate the coverage of Loihde with a HOLD rating and TP of EUR 16.0.

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Netum - Rapid growth set to continue

08.03.2023 - 09.35 | Company update

Netum’s H2 fell below our expectations, but the outlook for 2023 appears quite strong. We retain our BUY-rating and target price of EUR 4.2.

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H2 below our expectations
Netum reported H2 results below our expectations. Revenue grew 14.7% (3.8% organic growth) to EUR 13.7m (Evli EUR 15.8m). EBITA amounted to EUR 0.8m (Evli EUR 1.3m). Growth was partially affected by a slow start to certain projects, which along with frontloaded growth investments, internal development projects, and wage and general cost increases lowered profitability. Netum’s BoD proposes a dividend of EUR 0.11 per share (Evli EUR 0.10). Netum expects revenue growth of over 20% in 2023 and an EBITA-margin of over 10%.  

Confidently eyeing clear double-digit growth in 2023
The growth figures in H2/22 were rather disappointing after solid double-digit organic growth in H1, but with the healthy pipeline management appeared very confident in achieving the targeted growth in 2023. Growth will to a smaller extent be aided by previous acquisitions, with Studyo Oy being the most recent acquisition in December 2022, but the bulk will need to be organic. Price competition in the public sector tenders remains stiff, but increased focus also on the private sector, an area where Netum’s offering has been more limited, opens up new potential. We have somewhat lowered our estimates due to the below expectations revenue in H2/22 as well as through a more cautious take on margin improvement speed. We still expect a 2.7%p y/y EBITA-margin improvement mainly through improved billing rates. The perceived rather good ability to transfer inflationary impact on customers should also benefit.

BUY with a target price of EUR 4.2
Despite slightly lowered estimates, the improved visibility regarding the growth outlook reduces the near-term uncertainty and we retain our target price of EUR 4.2, valuing Netum at around 16x 2023e P/E (goodwill amortization adjusted). Our BUY-rating remains intact. 

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Netum - Promising better figures in 2023

07.03.2023 - 09.15 | Earnings Flash

Netum’s H2 results fell short of our expectations, with revenue growth more lack-luster than anticipated. 2023e guidance appears to be in line with expectations given the lower-than-expected growth in H2. The BoD proses a dividend of EUR 0.11 per share (Evli EUR 0.10).

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  • Netum’s net sales in H2 amounted to EUR 13.7m (EUR 12.0m in H2/21), below our estimates (Evli EUR 15.8m). Net sales grew 14.7% y/y, of which 3.8% was organic growth. 
  • EBITA in H2 was EUR 0.8m (EUR 1.4m in H2/21) and comparable EBITA EUR 0.8m (EUR 1.5m in H2/21), below our estimates (Evli EUR 1.3m/1.3m). Profitability was affected by growth investments and internal development projects as well as wage and general cost increases.
  • Operating profit in H2 amounted to EUR -0.1m (EUR 0.7m in H2/21), below our estimates (Evli EUR 0.4m), at a margin of -0.8%. 
  • Earnings per share was EUR -0.03 (H2/21: 0.04) vs. our estimate of EUR 0.01.
  • Personnel at the end of the period amounted to 276 (217).
  • Guidance for 2023: Netum expects its revenue to grow by at least 20% and the EBITA-margin to be at least 10% (Evli 2023e: 17% growth and 13% EBITA-margin).
  • Dividend proposal: Netum’s BoD proposes that a dividend of EUR 0.11 per share be distributed (Evli EUR 0.10).

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Endomines - Updated ore estimate for Pampalo

06.03.2023 - 09.30 | Company update

Endomines announced an update in ore reserves and mineral resources. The update brings an 60% increase to Pampalo reserve ounces when comparing to the ore reserves at the end of 2021. Due to a 13% share price decline since our previous update, the company’s steady progress in accordance with the new strategy and a strong gold market, we upgrade our rating to BUY (HOLD) while maintaining our target price at EUR 6.5 (6.5).

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Update increases ore reserves to 29 400 ounces of gold

The published update increases Pampalo reserves by 60% when comparing to the ore reserve status at the end of 2021. The ore reserves are doubled in ore tonnes as the open pit grades dilute the total grade, the Pampalo underground gold grades are at similar level compared to the previous ore reserve update. Most of the reserve increase comes from the underground drilling programme that was completed in 2022, the programme included 117 drill holes in total between the levels 815 and 875.

 

Visibility remains rather low

The current ore reserves in Pampalo are sufficient for roughly three years of gold production at the current production rate. The remaining production potential depends on the successfulness of the company’s exploration efforts in both Pampalo underground mine and in the Karelian gold line. The company’s mid-term target is to define over one-million-ounce gold mineralization on the Karelian gold line by the end of 2025. To reach the target, the company has started exploration drilling in the area. Despite limited visibility for exploration, the company's targeted zones, which have not been thoroughly investigated before, show promising potential.

 

BUY (HOLD) with a TP of EUR 6.5 (6.5)

We have made only slight adjustments to our SOTP-model. The increased reserves provide slightly better visibility for the production in Pampalo, on the other hand, we continue to see risks related to the value realization of the US asset portfolio. Endomines trades currently at a slight discount to its peers based on EV/Resources multiple when including the company’s historic resources (Figure 1). Due to a 13% share price decline since our previous update, we upgrade our rating to BUY (HOLD), noting however that junior gold miners entail significant risks.

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Enersense - Investments to continue

28.02.2023 - 09.30 | Company update

Enersense’s Q4 figures didn’t contain big news after the guidance revision, but FY ’23 results may remain muted.

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Q4 close to estimates, FY ’23 profitability guidance soft

Enersense top line grew 37% y/y to EUR 90m vs our EUR 87m estimate. All four segments grew, especially Power and International Operations (high-voltage projects in the Baltics drove revenue). Power’s EUR 8.7m y/y EBITDA gain included EUR 7.5m in wind power gains as the projects progressed faster than expected. Other segments’ profitability levels didn’t fare that well compared to Q4’21 as inflation hadn’t yet surged then. Investments in the ERP system and offshore wind power subtracted EUR 2.7m. Voimatel deal costs also weighed Q4; we hadn’t included the deal in our estimates but note it would’ve been a positive driver should it have gone through. The EUR 4.3m adj. EBITDA topped our estimate by EUR 0.4m while the EUR 1.1m EBIT missed our estimate by EUR 0.6m. Guidance didn’t surprise in terms of revenue, however the expectation for adj. EBITDA was soft (EUR 15m midpoint vs our EUR 20m estimate).

We make downward revisions to our profitability estimates

We cut our profitability estimates for FY ’23 by EUR 5.5m while we make minor upward revisions to our top line estimates. Last year’s Q2 was exceptionally soft due to project delays and a Finnish ICT strike. FY ’23 should see more regular project patterns, in addition to which inflation is moderating and at least is no more any surprise. The ERP system costs will increase this year, in addition to which wind power developments, both onshore and offshore, will create additional costs.

Longer term upside potential, lacks short-term drivers

Enersense is valued almost 20x EV/EBIT on our FY ’23 estimates, which in our view reflects the fact that profitability will remain below potential this year due to investments in the ERP system and wind power. Last year’s results were plagued by inflation, and even though the situation is easing we believe some cost headwinds will remain this year. Double-digit growth is likely to continue, and we estimate decent single-digit growth for FY ’24. Earnings growth potential is thus strong from a medium-term perspective, but margins may stay somewhat muted in the short-term. The valuation equals 8x EV/EBIT on our FY ’24 estimates. Our new TP is EUR 6.5 (7.0); we retain our HOLD rating.

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Enersense - Figures quite close to our estimates

27.02.2023 - 13.00 | Earnings Flash

Enersense’s Q4 figures were overall relatively close to our estimates. Revenue came in higher than we estimated, while adjusted EBITDA was higher and EBIT lower than we estimated. Enersense’s guidance midpoint suggests profitability is likely to increase at least a bit this year, however bottom line will still be weighed down by development projects.

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  • Enersense Q4 revenue increased 36.6% y/y to EUR 90.0m, compared to our EUR 86.5m estimate. Top line grew especially within Power and International Operations due to high volumes and project progress.
  • Adjusted EBITDA was EUR 4.3m vs our EUR 3.9m estimate. EBIT landed at EUR 1.1m, compared to our EUR 1.7m estimate. Power’s profitability improved significantly, while Smart Industry and International Operations weakened considerably due to e.g. inflation. Investments in offshore wind power and the new ERP system had a negative impact of EUR 2.7m.
  • Order backlog amounted to EUR 415m at the end of Q4, compared to EUR 291m a year ago. Onshore wind power project portfolio stood at approximately 8,000MW, compared to 3,000MW at the end of Q3’22.
  • The BoD proposes EUR 0.10 per share return of capital to be distributed for the year, in line with our estimate.
  • Enersense guides FY ’23 revenue to be in the range of EUR 280-310m and adjusted EBITDA in the range of EUR 12-18m. Investments in and the development of the new ERP system as well as offshore and onshore wind power will impact profitability. The projects should not burden profitability any more next year.

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Dovre - Moderation in growth to be expected

24.02.2023 - 09.30 | Company update

Dovre disclosed Q4 figures before the report and thus there were no big surprises. We make some downward revisions to our estimates yet note guidance appears conservative.

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No surprises in Q4; FY ’22 growth not to be repeated

Dovre continued to grow at a 14% y/y rate in Q4 and reached EUR 48m in top line vs our EUR 45m estimate. There were no big surprises as Consulting and Renewable Energy both grew by double digits whereas Project Personnel remained flat. An FPSO project in Singapore delivered to Equinor no longer contributed, but otherwise growth continued in Norway, Finland, and North America. Dovre disclosed preliminary Q4 figures before the report and the EUR 2.1m EBIT was in line with our estimate. Last year’s growth is not to be repeated but many Norwegian clients have extended their agreements while Consulting Finland has performed as expected after the eSite industrial VR acquisition. The Finnish wind power market helped Suvic grow 87% last year; growth is likely to be very modest this year relatively speaking however we still estimate a high single-digit figure.

EBIT should hold up at least flat in the short-term

The summer period is important for Renewable Energy and negotiations are still going on. Norway introduces new legislation in Q2 which regulates temporary staffing in various contexts, and it may also affect white collar work. Project Personnel and Consulting are coordinating with clients to make sure they comply. We make small revisions to our revenue estimates and see group growth at just above 3% this year. We revise our EBIT estimate for FY ’23 down to EUR 8.6m (prev. EUR 10.0m); we revise both Project Personnel and Consulting down by EUR 0.2m and Renewable Energy by EUR 1.0m. In our view Dovre’s guidance doesn’t seem demanding and our estimates are conservative. The worst inflationary period has likely passed and wasn’t such a big issue for Dovre, but the lingering level may still limit margin expansion now that growth is much more modest.

There remains earnings growth potential beyond this year

Dovre still trades only 7x EV/EBIT on our FY ’23 estimates while peer multiples, for all three segments, have gained significantly in the past few months. Our SOTP valuation indicates current fair value to be slightly north of EUR 0.80 per share. We thus update our TP to EUR 0.80 (0.75) and retain our BUY rating.

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Dovre - Growth likely to moderate this year

23.02.2023 - 09.30 | Earnings Flash

Dovre announced preliminary Q4 figures already on Feb 3, and therefore the Q4 report didn’t hold many surprises. Growth continued in all segments, especially in Consulting and Renewable Energy. EBIT should stay relatively high this year, but there are a few uncertain factors which may limit earnings growth.

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  • Dovre Q4 revenue grew by 13.6% y/y to EUR 48.1m, compared to our EUR 45.4m estimate. Project Personnel amounted to EUR 23.0m vs our EUR 22.8m estimate, while Consulting was EUR 4.8m vs our EUR 4.3m estimate. Renewable Energy landed at EUR 20.2m, compared to our EUR 18.3m estimate.
  • EBITDA came in at EUR 2.5m vs our EUR 2.3m estimate. EBIT was EUR 2.1m, compared to our EUR 2.1m estimate. Project Personnel EBIT was EUR 1.1m vs our EUR 1.1m estimate, whereas Consulting landed at EUR 0.9m vs our EUR 0.7m estimate. Renewable Energy amounted to EUR 0.4m vs our EUR 0.6m estimate.
  • The BoD proposes EUR 0.01 per share dividend to be distributed for the year, compared to our EUR 0.01 estimate.
  • Dovre guides FY ‘23 revenue to improve y/y and EBIT to be about the same as previous year. Norway introduces new legislation in Q2 which regulates the hire of temporary employees in various situations. Its impact on Project Personnel and Consulting is yet unclear as the segments typically employ white collar staff. Suvic’s sales cycle creates some uncertainty as negotiations for the summer period have not yet been fully completed.

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Scanfil - Ready to meet high demand

22.02.2023 - 09.35 | Company update

Scanfil’s year concluded on a strong note without any big surprises. Valuation has gained recently but in our view is still not too expensive thanks to growth and margin upside.

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Profitability advanced in Q4 as plant productivity improved

Scanfil Q4 top line grew 16% y/y to EUR 222m vs the EUR 216m/218m Evli/cons. estimates. Without spot purchases growth was 17% y/y, compared with the long-term target of 5-7%. There have been price increases, but volumes have mainly driven revenue. Demand remained high especially within accounts belonging to Automation & Safety, Energy & Cleantech as well as Medtech & Life Science. Scanfil’s guidance suggested EBIT would improve over the year, yet the EUR 13.4m EBIT was well above the EUR 12.8m/12.5m Evli/cons. estimates. EBIT margin, excluding spot purchases, was 6.5% as better component availability helped productivity. The component situation continues to normalize and should no longer be such a major issue, while inflation is now seen mostly in the low single digits.

Scanfil has already added some capacity to meet demand

Scanfil has achieved double-digit growth two years in a row and has already added capacity. This year sees capex in new electronics manufacturing lines in Atlanta (also widens services in the US) and Sieradz (a new building would make the Polish plant the main electronics production site in Europe). We estimate the guidance suggests close to 10% growth for the year excluding spot purchases; growth should be mostly driven by volumes rather than prices. Advanced Consumer Applications’ top line may decline this year due to the headwind from fading component purchases, but other segments should be positioned to achieve either flat or some positive headline revenue development. We estimate Automation & Safety to grow 10% nominally this year (in the high teens excluding spot purchases).

We don’t find valuation yet too expensive

The 9.5x EV/EBIT multiple, on our FY ’23 estimates, isn’t low in Scanfil’s historical context but remains in line with peers’, while Scanfil’s is still likely to achieve somewhat better margins than a typical peer. For FY ’24 we estimate 5% growth and 6.2% EBIT margin, which we view conservative in the light of long-term targets; the corresponding 8.7x EV/EBIT multiple is in line with peers’. We update our TP to EUR 8.75 (7.0) and retain BUY rating.

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Scanfil - No major surprises, strong report

21.02.2023 - 08.30 | Earnings Flash

Scanfil’s Q4 unfolded without any big surprises. The key figures developed well and were all somewhat better than estimated. Continued high demand and improved component availability supported profitability. Guidance suggests strong performance is set to continue this year as well.

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  • Scanfil Q4 revenue increased by 15.9% y/y to EUR 222.3m, compared to the EUR 215.6m/218.3m Evli/consensus estimates. The figure includes EUR 14.6m in invoicing of spot market purchases.
  • Advanced Consumer Applications amounted to EUR 56.3m vs our EUR 59.8m estimate, while Energy & Cleantech was EUR 61.3m, compared to our EUR 60.3m estimate. Automation & Safety was EUR 51.4m vs our EUR 46.0m estimate.
  • EBIT landed at EUR 13.4m vs the EUR 12.8m/12.5m Evli/consensus estimates and hence EBIT margin amounted to 6%. FX rate changes had a positive impact of EUR 0.3m. Continued good customer demand and improved manufacturing performance (due to better component availability) supported profitability to a high absolute level, whereas spot market purchases with negligible margin limited operating margin.
  • The BoD proposes EUR 0.21 per share dividend to be distributed for the year, compared to the EUR 0.20/0.20 Evli/consensus estimates.
  • Scanfil guides FY ’23 revenue to be in the range of EUR 820-890m and EBIT of EUR 49-55m. The number of spot market purchases is likely to decrease significantly compared to previous year.

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Exel Composites - Demand picks up towards year’s end

20.02.2023 - 09.35 | Company update

Exel’s Q4 figures missed estimates as demand was still softer than expected. H1’23 results are likely to remain modest relative to the high comparison period, but guidance indicates at least some improvement for H2’23.

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Heady growth continued in H1’22, but H2’22 was slower

Exel’s Q4 revenue landed at EUR 31m vs the EUR 36m/35m Evli/cons. estimates. Destocking, after a period of high demand following the initial shock of the pandemic, has been an issue lately and is expected to continue in H1’23. Equipment and other industries, the third largest customer group, was particularly soft relative to our estimates but there seems to have been nothing special going on apart from the destocking issues as well as normal cyclicality. The soft top line left adj. EBIT at EUR 0.9m vs the EUR 2.4m/2.0m Evli/cons. estimates.

H1’23 will still be soft; guidance suggests better H2’23

Exel sees improvement from Q2 in orders as well as EBIT; top line is to remain flat this year, while EBIT has ground from which to gain. The Runcorn cuts should produce EUR 1.6m in annual savings. Inflation hasn’t been a big issue for Exel and raw materials are stabilizing. Wind power should again grow, according to Exel, at a 15% y/y pace from H2’23. Wind power was Exel’s largest customer in 2019-20 and continued to grow at a CAGR of 16.5% in FY ’20-21, however its revenue fell by EUR 5.3m last year and was overtaken by Buildings and infrastructure already in 2021. Exel got its challenges in the US sorted out last year, but the relative softness in the three largest customer groups left its adj. EBIT for the year at EUR 8.0m (we consider it a modest level). We note the four smaller industries together grew by 19% last year, although this was mostly attributable to Transportation as it enjoyed pent-up demand after the pandemic and received initial orders for a new aerospace application.

Valuation is not challenging if growth returns in H2’23

Exel is valued 9.5x EV/EBIT on our FY ’23 estimates, which we consider a neutral level. The multiple is not very low, however we estimate an EBIT margin of 6.3% for the year whereas the company should still be on track towards its long-term 10% target (it reached almost 9% in FY ’20). For FY ’24 we estimate 7% growth and 7.5% EBIT margin, which would translate to an EV/EBIT of 7.5x. Our new TP is EUR 5.8 (6.5); our rating is BUY.

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Etteplan - Looking quite good despite headwinds

20.02.2023 - 09.35 | Company update

Despite a below expectations Q4, at least partly due to increased sickness-related absences, we see slightly improving expectations for 2023. We adjust our target price to EUR 16.0 (15.0), HOLD-rating intact.

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Q4 fell short of expectations
Etteplan reported Q4 results below expectations. Revenue grew 6.8% (organic 1.0%, org. const. FX 2.8%) to EUR 91.0m (EUR 99.0m/98.0m Evli/cons.) while EBIT came in at EUR 8.4m (EUR 8.9m/9.0m Evli/cons.). Growth was affected by a high level of sickness-related absences. On a service area level Engineering solutions continued solid performance. Software and Embedded Solutions saw good improvements in profitability from actions previously taken to enhance operational efficiency. Technical Documentation Solutions saw lower profitability due to below expectations performance of the in 2022 acquired Cognitas. The BoD proposed a dividend of EUR 0.36 (0.32/0.34 Evli cons.). 

2023 expectations rather decent despite headwinds 
Considering the below expectations Q4, Etteplan’s 2023 revenue guidance (EUR 360-390m) is slightly better than we expected, with our pre-Q4 estimates at the guidance range mid-point. The EBIT guidance of EUR 28-33m was slightly below expectations on the mid-point. Our 2023 estimates are essentially unchanged, revenue expectations at EUR 375.3m and EBIT at EUR 31.5m. Margins are under pressure through wage inflation, but we continue to earnings improvement potential through improved operational efficiency in Software and Embedded Solutions and Technical Documentation Solutions while also assuming decent prerequisites to transfer inflation to prices. Further M&A activity also provides good potential for more rapid growth.

HOLD with a target price of EUR 16.0 (15.0)
Despite elevated uncertainty and cost inflation and a more recent slow-down in recruitments having an impact, the outlook going forward still generally appears quite favourable and Etteplan further noted a positive development direction of market sentiment. We adjust our TP to EUR 16.0 (15.0), valuing Etteplan at ~17x 2023e P/E, HOLD-rating intact. 

Open report

Pihlajalinna - Earnings to gain from a low base

20.02.2023 - 09.05 | Company update

Pihlajalinna’s profitability challenges continued to be way worse in Q4 than estimated. The company has many tools to address the issue. Gains are very likely this year due to the low comparison figures (and measures), but valuation now appears neutral from a short-term perspective.

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Q4 was still plagued by many profitability-hurting issues

Pihlajalinna’s top line continued to grow at an annual rate of 22% in Q4; organic growth remained above 7% even with the headwind from lower Covid-19 services revenue. The lack of such services was one factor limiting profitability, in addition to continued high absence costs as well as public specialty care costs which were now tilted towards Q4. Employee benefit expenses were especially high. Key profit measures missed estimates by EUR 7m. Pihlajalinna guides increasing revenue (we estimate 3% growth) and improving adj. EBITA for the year. Last year involved a lot of transient cost factors, but the company also takes many measures to address the profitability challenge.

H2’23 should see meaningful earnings growth

Pihlajalinna has gone through a similar exercise in 2019. The company looks to e.g. cut physicians’ administrative roles and prune its service network. Price increases are to come in at 5-10%, especially within the private sphere while public contracts are also under review. The company’s financial headroom is now tight, but it stays within its covenant terms and doesn’t pay dividend for the year. We cut our FY ’23 EBIT estimate by EUR 5m but estimate EUR 12m EBITA improvement for the year.

At least the first quarters now seem to lack upside drivers

Valuation isn’t too cheap despite the profitability gains which are to be seen this year. The 19x EV/EBIT valuation, on our FY ’23 estimates, is neutral at best as it is in line or even slightly above that of peers. For FY ’24 we estimate an EBIT margin of 5.4% (some 100bps gain y/y), which may well prove too conservative, but the respective 14x multiple is still no more attractive than peer multiples. Pihlajalinna’s profitability measures are more likely than not to drive upside over the longer perspective, but in our view the share lacks material upside drivers from a short-term perspective. Pihlajalinna could specify its guidance upwards later this year, which would be one such driver. We revise our TP to EUR 9.0 (10.0); our new rating is HOLD (BUY).

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Etteplan - Guidance quite decent

17.02.2023 - 09.35 | Earnings Flash

Etteplan's net sales in Q4 amounted to EUR 91.0m, below our estimates and below consensus (EUR 99.0m/98.0m Evli/cons.). EBIT amounted to EUR 8.4m, below our estimates and below consensus (EUR 8.9m/9.0m Evli/cons.). Dividend proposal: Etteplan proposes a dividend of EUR 0.36 per share (EUR 0.32/0.34 Evli/Cons.).

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  • Net sales in Q4 were EUR 91.0m (EUR 85.3m in Q4/21), below our and consensus estimates (EUR 99.0m/98.0m Evli/Cons.). Growth in Q4 amounted to 7% y/y, of which 1% organic growth.
  • EBIT in Q4 amounted to EUR 8.4m (EUR 7.8m in Q4/21), below our and consensus estimates (EUR 8.9m/9.0m Evli/cons.), at a margin of 9.2%.
  • EPS in Q4 amounted to EUR 0.30 (EUR 0.25 in Q4/21), above our estimates and consensus estimates (EUR 0.21/0.27 Evli/cons.).
  • Net sales in Engineering Solutions in Q4 were EUR 48.9m vs. EUR 50.6m Evli. EBITA in Q4 amounted to EUR 5.3m vs. EUR 5.3m Evli. 
  • Net sales in Software and Embedded Solutions in Q4 were EUR 24.3m vs. EUR 28.8m Evli. EBITA in Q4 amounted to EUR 2.8m vs. EUR 3.1m Evli. 
  • Net sales in Technical Documentation Solutions in Q4 were EUR 17.7m vs. EUR 19.4m Evli. EBITA in Q4 amounted to EUR 1.4m vs. EUR 2.0m Evli. 
  • Dividend proposal: Etteplan proposes a dividend of EUR 0.36 per share (EUR 0.32/0.34 Evli/Cons.).
  • Guidance for 2023: Revenue is estimated to be EUR 360-390m (Evli EUR 375.8m) and the operating profit is estimated to be EUR 28-33m (Evli EUR 31.4m)

Open report

Exel Composites - Q4 figures missed estimates

17.02.2023 - 09.30 | Earnings Flash

Exel’s Q4 figures missed our and consensus estimates. Top line declined as there was temporary softness in e.g. wind power orders. Cost management helped profitability remain flat y/y. Exel guides flat revenue for the year and expects adjusted EBIT to increase.

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  • Q4 revenue decreased by 15% y/y to EUR 31.0m, compared to the EUR 36.3m/35.0m Evli/consensus estimates. All geographical regions declined y/y, particularly North America.
  • Wind power amounted to EUR 5.5m vs our EUR 7.2m estimate. Buildings and infrastructure came in at EUR 8.1m, compared to our EUR 7.8m estimate, whereas Equipment and other industries totaled EUR 4.3m vs our EUR 7.3m estimate. Machinery and electrical as well as Transportation grew y/y.
  • Adjusted EBIT was EUR 0.9m, compared to the EUR 2.4m/2.0m Evli/consensus estimates. Absolute profitability and operating margin hence remained roughly flat y/y as good cost management compensated for lower revenue.
  • Order intake amounted to EUR 25.6m in Q4, in other words decreased by 16% y/y.
  • The BoD proposes EUR 0.20 per share dividend to be distributed for the year, compared to the EUR 0.25/0.23 Evli/consensus estimates.
  • Exel guides FY ’23 revenue to be at last year’s level and adjusted EBIT to increase compared to last year. Wind power particularly should support development during the latter part of the year.

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Solteq - Financial gap year ahead

17.02.2023 - 09.00 | Company update

Solteq’s Q4 results were below our expectations, and the 2023 guidance appears softer than we had anticipated. We see the long-term investment case intact despite an incoming year of subpar performance.

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Challenges visible in Q4
Solteq reported Q4 results below our expectations. Net sales in Q4 were EUR 16.9m (Evli EUR 17.4m), declining 7.5% y/y. The operating profit and adj. operating profit in Q4 amounted to EUR -1.2m and -0.8m respectively (Evli EUR 0.7m/0.7m). Solteq Digital’s performance was fairly in line with expectations, with a y/y decline in revenue and profitability. Solteq Software’s profitability was clearly below expectations, with an adj. EBIT of EUR -1.3m (Evli EUR 0.0m). The segment has been burdened by challenges in Solteq Utilities’ software development and we had evidently underestimated the magnitude of the impact on Q4. Solteq’s BoD as expected proposed that no dividend be paid. 

Guidance for 2023 softer than anticipated
Solteq’s 2023 guidance is soft in comparison with our pre-Q4 estimates, expecting revenue to remain on 2022 levels and EBIT to be positive. Solteq has typically not given numerical guidance ranges, which leaves room for speculation regarding profitability, but with the expected flat revenue development and cost pressure caused by inflation we now expect EBIT to be only slightly positive at EUR 0.8m. We expect the challenges faced in Solteq Software to continue during H1/23 and gradual improvement through the year, and the headwinds faced in Solteq Digital through the market demand situation to continue to have a slight negative effect.  

HOLD with a target price of EUR 1.3
Despite the weaker than expected Q4 and softer than anticipated expectations in 2023 we see no fundamental changes to the investment case. Financially 2023 will clearly be a gap year on group level. Upside continues to lie in the long-term development and success of profitably growing the Utilities-business and of interest for the investment case in the near-term will be the development of said business. 

Open report

Pihlajalinna - Profitability took a big hit

17.02.2023 - 08.30 | Earnings Flash

Pihlajalinna’s Q4 report was a clear disappointment in terms of profitability even after the guidance downgrade late last year. The culprits for low profitability have been discussed many times, but their adverse impacts on Q4 bottom line were clearly larger than estimated.

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  • Q4 revenue grew by 21.8% y/y to EUR 188.4m vs the EUR 177.8m/179.1m Evli/consensus estimates. Organic growth was 7.4% and would have been 12.1% without Covid-19 services. Corporate customers amounted to EUR 65.1m, compared to the EUR 59.0m/58.6m Evli/consensus estimates. Private customers were EUR 28.3m vs the EUR 26.3m/26.9m Evli/consensus estimates, while Public sector customers totaled EUR 113.9m vs the EUR 112.4m/112.2m Evli/consensus estimates.
  • Covid-19 services revenue was EUR 2.8m, down by EUR 7.3m y/y.
  • Adjusted EBITDA amounted to EUR 12.0m, compared to the EUR 17.5m/18.5m Evli/consensus estimates. Adjusted EBITA was EUR 2.2m vs our EUR 9.0m estimate, while adjusted EBIT was EUR 0.1m vs the EUR 7.0m/7.0m Evli/consensus estimates. Employee benefit expenses were exceptionally high in Q4.
  • The BoD proposes no dividend distribution for the year vs the EUR 0.25/0.24 Evli/consensus estimates.
  • Pihlajalinna guides revenue to increase (EUR 690.5m in 2022) and adjusted EBITA to improve (EUR 26.7m in 2022) in FY ‘23.

Open report

Vaisala - Underlying demand continues strong

17.02.2023 - 07.45 | Company update

Vaisala delivered strong topline growth in Q4. Orders received and order book increased by double-digits which provides a firm foundation for 2023. The company guides solid growth and clear EBIT improvement for 2023. With adjusted estimates, we raise our TP to EUR 44.0 (41.0). Our rating remains at HOLD, reflecting a neutral valuation.

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Topline came in above expectations
In Q4, Vaisala grew by 13% (FX adjusted 8%) y/y to EUR 141.6m. The growth was supported by IM’s all segments and W&E’s aviation and meteorology. Spot component purchases continued, but the group gross margin remained flat. With relatively high growth in fixed costs, EBIT fell short of expectations. Q4 EBIT amounted to EUR 12.6m, reflecting a margin of 8.9%. Vaisala expects the component availability to neutralize during H1’23, and there have emerged signs of improvements already. In our view, this should result in an improved gross margin from H2’23 onwards. For 2022, the BoD proposes a DPS of 0.72.

The hot market supports demand also during 2023-24
Underlying megatrends provide continuity for Vaisala’s growth story. In addition, the company has made the right decisions during the past few years in our view, which has resulted in an expansion of market share. For example, investments in digital and renewable businesses have boosted W&E’s topline and we foresee that earlier-known steadily growing and somewhat cyclical business becomes more resilient to economic fluctuation. Moreover, with higher product margins, we see some room for profitability improvement. In addition, the company never halted R&D investments during the hardest times of COVID which enhanced Vaisala’s technology leadership position in our view. Vaisala has also benefitted from pent-up demand due to the pandemic which however likely fades away. In other words, achieving annual double-digit growth becomes even harder. We however see Vaisala as an attractive investment case with coming scalability providing EPS growth.

HOLD with a target price of EUR 44.0
With estimate revisions made, our 23E EBIT saw a 5% increase. Vaisala trades approx. in line with its peers. We retain the HOLD rating and adjust TP to EUR 44.0 (41.0), reflecting increased 23-24E estimates. 

Open report

Fellow Bank - Heavy lifting done, time to scale

17.02.2023 - 07.45 | Company update

Fellow Bank’s outlook for 2023 remains quite good and we expect continued growth and positive profitability to be achieved. We retain our TP of EUR 0.40 and HOLD-rating.

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H2 all in all slightly below our expectations
Fellow Bank’s H2 results came in slightly below our expectations. Total income amounted to EUR 7.9m (Evli EUR 7.1m). Net income of EUR 6.6m was quite in line with expectations (Evli EUR 6.8m), while net fee and commission income of EUR 1.5m beat our expectations (Evli EUR 0.3m), affected by changes to recognition of commission fees under IFRS 15. The pre-tax profit during H2 amounted to EUR -2.3m (Evli EUR -0.7m), with the difference compared with our estimates arising mainly from larger than estimated expected and realized credit losses, with total OPEX also above our estimates. OPEX was still affected by exceptional items relating to the startup of operations of some EUR 0.7m. The total capital ratio amounted to 16.8% (target adjusted: 18% -> 16%) and H2 cost / income ratio to 76%. 

Growth and positive profitability expected in 2023
Fellow Bank expects revenues to grow in 2023 and to achieve a positive profit level on a monthly basis during H1/2023. The market environment poses some threats to lending volume growth, with Fellow Bank having adopted somewhat stricter lending policies. We currently nonetheless expect solid y/y growth in 2023 mainly driven by the ramp-up focused comparison period but also good loan portfolio growth. We have further raised our 2023e PTP estimate to EUR 2.9m (1.8m) following a readjustment of the cost base assumptions. We expect 2023 to be quite busy for Fellow Bank with the launch and ramp up of new services. The company’s small business in Poland is also most likely to be divested and the further strengthening of the company’s capital is to be expected.  

HOLD with a target price of EUR 0.40
Valuation upside continues to remain limited in the near-term, affected further by some market uncertainties and on 2024 estimates, compared with peer multiples, current valuation levels appear fair. We retain our TP of EUR 0.40 and HOLD-rating.

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Marimekko - Slight uncertainty visible, but growth continues

17.02.2023 - 07.05 | Company update

Marimekko delivered solid Q4 figures despite a challenging domestic market. Q1’23 seems to continue soft in Finland, but on a group level, the company expects to see growth in 2023. We retain our HOLD rating and TP of EUR 10.0.

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Q4 EBIT came in above expectations
Marimekko delivered solid Q4 figures, especially considering the soft domestic wholesale market and strong comparison figures. Q4 net sales grew by 1% y/y to EUR 48.4m. The growth was mostly supported by int’l markets while sales in Finland declined by 2% due to lower non-recurring wholesale deliveries. Moreover, domestic wholesale customers experienced softness which was visible also in Marimekko’s Q4 net sales. Higher discounts and lower licensing income pushed the gross margin below the comparison period. In addition, Marimekko accordingly continued its investments in future growth and scalability which resulted in elevated fixed costs. Thus, EBIT fell short of the comparison period but landed above our expectations. Q4 adj. EBIT amounted to EUR 6.9m (8.9% margin). The BoD proposes a DPS of EUR 0.34 for 2022.

A strong brand provides growth in a challenging market
Finland discovered some softness in Q4 which we expect to continue also in Q1’23. The company guides 2023 revenue to grow and an EBIT margin between 16-19% (22: 18.2%). In our view, strong retail growth in 2022 reflects the power of the Marimekko brand and its capability to deliver growth also in a challenging market. In addition, non-recurring wholesale deliveries will support H2 growth in Finland. However, we foresee the growth pace to slow down from levels seen during the past few years. We expect Marimekko to grow by 5.3% in 2023, with domestic growth of 6% and int’l increase of 5%. With 23E gross margin flat and cost pressures arising from fixed costs, we expect no major expansion in 23E EBIT margin, with it amounting to 18.3%.

HOLD with a target price of EUR 10.0
We made no major changes in our estimates with the company’s guidance coming in quite in line with our expectations. The company’s 23-24E valuation seems quite modest compared to history and peers, but with uncertainty elevated, we retain our HOLD rating and TP of EUR 10.0. On the other hand, a subdued growth pace also justifies lower multiples.

Open report

Vaisala - Net sales came in strong, EBIT below expectations

16.02.2023 - 09.45 | Earnings Flash

Vaisala posted Q4 net sales roughly in line with our estimates. Orders continued in a trend of growth. EBIT however came in below our expectations with higher fixed costs. Guidance implies growth to continue also in 2023.

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  • Group result: Order received continued in a growing trend with y/y increase of 17%. Order book was strong at EUR 181.5m, but declined q/q. Driven by both businesses, net sales topped our estimates, by increasing by 13% to EUR 141.6m (140.0/139.0m Evli/cons.). Gross margin remained flat. With volumes high, EBIT also improved to EUR 12.6m, but fell short of our and cons. estimates (15.2/18.3m Evli/cons.). Profitability was harmed by higher fixed costs. EBIT margin was 8.9% (Q4’21: 9.5%). EPS amounted to EUR 0.25 (0.3/0.42 Evli/cons.).
  • Industrial measurements (IM): Orders received increased by 11%. Order book was yet again record high, at EUR 41.8m. 27% y/y growth in order book was supported by good sales in industrial instruments, life science, and power. Net sales amounted to EUR 60.2m (Evli: 61.4m), representing y/y growth of 20%. Growth was good in all market segments. Q4 EBIT improved and amounted to EUR 10.8m (Evli: 12.6m), reflecting a margin of 17.9%.
  • Weather and Environment (W&E): Orders received grew strongly by 24%. Order book was also strong, at EUR 139.6m, but below Q3’22. 10% y/y change in order book was driven by renewable energy and road weather. Net sales amounted to EUR 81.3m (Evli: 78.6m) and grew by 9% y/y. EBIT amounted to EUR 1.8m (Evli: 2.7m) and was affected by higher fixed costs. EBIT margin was 2.2%.
  • 22 DPS: The BoD proposes EUR 0.72 (0.7/0.71 Evli/cons.) dividend per share for FY’22 with a payout rate of ~60%.
  • Market outlook: Industrial instruments, life science, power and energy and liquid measurements to grow. Renewable energy, road weather and automotive to grow. Aviation to remain flat or grow. Meteorology to remain flat.
  • 23 guidance: Net sales of EUR 530-570m, mid-point implying ~7% growth. EBIT is estimated to reach EUR 70-85m, mid-point indicating a ~14% margin.

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Fellow Bank - Earnings below expectations

16.02.2023 - 09.35 | Earnings Flash

Fellow Bank’s top line figures were better than expected, while higher than expected opex and expected and realized credit losses saw earnings fall below our expectations. Positive profit levels on a monthly basis are expected to be reached during H1/2023.

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  • Total income during H2/22 amounted to EUR 7.9m (Evli EUR 7.1m). Net interest income amounted to EUR 6.6m (Evli EUR 6.8m) and net fee and commission income to EUR 1.5m (Evli EUR 0.3m). 
  • In H2 lending volumes exceeded those of H1 by 43% and the target increase of 46% in the loan portfolio for personal customers was reached. 
  • The loan portfolio at the end H2 amounted to EUR 163.8m and the deposit amounted to EUR 246.8m.
  • The pre-tax profit during H2 amounted to EUR -2.3m (Evli EUR -0.7m). The difference compared with our estimates was mainly due to a larger than estimated expected and realized credit losses, with total OPEX also above our estimates.
  • Earnings per share amounted to EUR -0.03 compared with our estimate of EUR -0.01.
  • CET1 and the CET1 ratio amounted to EUR 17.7m and 12.6% and total capital ratio to 16.8% 
  • The cost / income ratio amounted to 113%.
  • Outlook for 2023: The bank’s revenues are estimated to grow from 2022 and a positive profit level on a monthly basis is estimated to be reached during H1/2023. Capital adequacy target set at 16%.
  • Dividend proposal: The BoD proposes that no dividends be paid (Evli EUR 0.00)

Open report

Endomines - Important year ahead

16.02.2023 - 09.30 | Company update

Endomines volumes and revenue for H2 2022 were in line with our estimates yet the profitability was weaker than expected. The company anticipates a significant improvement in its financial performance in 2023 compared to 2022.

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Volumes developed as expected

Revenue in H2 amounted to EUR 7.9m, roughly in line with our estimate of EUR 8.1m. Gold production amounted to 5,123 oz vs. our estimate of 5,402 oz. Both EBITDA & EBIT missed our estimate as EBITDA for H2 2022 came at EUR -3.0 (Evli EUR 0.6m) and EBIT at EUR -5.4m (Evli EUR -0.8m). The second half of the year was negatively affected especially by increased cost of raw materials and energy. The second half was also negatively affected by non-recurring costs related to the transfer of domicile from Sweden to Finland.

 

2023 is an important year for the company

Endomines focused on building the foundation for its strategy implementation during the second half of 2022. In 2023, the company aims to build on this foundation and start to implement its strategy on a wider scale. In our view, the most important operational factors for the company in 2023 include improved mining operations in Pampalo, exploration activities in the Karelian gold line and the partnership negotiations in the United States.

 

HOLD with a target price of EUR 6.5

We have done slight adjustments to our estimates for the Pampalo mining operations as the company’s expectations for 2023 were slightly stronger than we had earlier estimated. We currently include only reserves and resources between the 755-815 and 815-875 levels in Pampalo to our estimates and therefore we do not estimate production post 2024. In our SOTP valuation approach, the rest of the value for the company’s operations in Finland is derived from a real option model which considers the possibility of Pampalo LoM increase and the possibility for the utilization of Karelian gold line satellite deposits. Despite the cautiously positive outlook for 2023, we still see uncertainty regarding the successfulness of the company’s exploration activities and the value realization of the US assets. We retain our HOLD-rating and TP of EUR 6.5.

Open report

Aspo - Some softening after a record year

16.02.2023 - 09.30 | Company update

Aspo’s Q4 didn’t hold big news, however the segments’ EBIT paths may diverge a bit this year after a very strong FY ’22.

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ESL and Leipurin topped our estimates, while Telko was soft

Aspo’s Q4 revenue landed at EUR 165m, compared to the EUR 157m/158m Evli/cons. estimates, while adj. EBIT was EUR 11.3m vs the EUR 12.1m/11.7m Evli/cons. estimates. The figures were hence overall relatively close to estimates, however Telko’s profitability was clearly below what we estimated whereas ESL and Leipurin were both somewhat better. Telko saw certain positive developments in Q4 as strong Western demand drove higher volumes organically and through acquisitions; lubricants also fared well, but plastics and chemicals prices decreased, in addition to which the challenging operating environment in Ukraine, Russia and Belarus limited profitability.

We already expected considerable EBIT decline for Telko

In our view Telko’s EBIT should begin to stabilize in H1’23 but will not reach the EUR 21m EBIT seen in recent years anytime soon. Aspo’s guidance doesn’t seem to set the bar for Telko very high, which in our view reflects the still highly uncertain environment for pricing and volumes. We previously expected Telko’s FY ’23 EBIT to decline some EUR 10m, and we now estimate the decline at EUR 11.5m. ESL’s outlook remains stable, at least for Q1 when the Supramaxes are still employed with good price levels, but it’s early to say how they might fare in H2’23. Smaller vessels should still have no trouble achieving highly satisfactory results, yet it may be hard to gain on last year. We expect ESL’s EBIT to decline a bit this year, but some of the new hybrid vessels are due to be delivered soon and hence EBIT should find further support even in the case of extended pricing headwinds. The Kobia acquisition’s synergies weren’t yet reflected last year, and hence we expect Leipurin EBIT to increase this year even if inflation and volume trends set some limits to organic development.

Valuation not challenging despite EBIT softness this year

Aspo is valued ca. 9x EV/EBIT on our FY ’23 estimates, which we see reflects relatively low valuation for ESL. An EV/EBIT multiple of 10x could be justified for the niche carrier as Algoma Central, arguably the most relevant peer, is valued above 10x as it derives a big share of its earnings through small dry bulk vessels around the Great Lakes region. We retain our EUR 9.5 TP and BUY rating.

Open report

Finnair - Coming through the storm

16.02.2023 - 09.00 | Company update

Finnair’s Q4 report was a bit better than expected, however we see current valuation limiting upside potential too much unless more positive surprises are yet to come.

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Q4 report a bit better than expected but nothing major

Finnair’s EUR 687m Q4 revenue was near the EUR 679m/681m Evli/cons. estimates as passenger revenues were some EUR 20m higher than we estimated (ancillary and cargo were a bit soft relative to what we expected). Finnair’s Q4’22 saw 79% of ASK relative to Q4’19, including wet leases, as demand stays high. Fuel prices remained high in the historical context, a crucial factor limiting EBIT when Finnair still missed major volumes due to the recent years’ double whammy. Finnair achieved another positive adj. EBIT, at EUR 17.9m vs the EUR 13.5m/2.7m Evli/cons. estimates, as unit yields continued to advance. Prices should hold up also in Q1 and beyond as demand persists despite potential economic headwinds. We didn’t find any big surprises in terms of cost inflation, but the topic remains very much on the agenda as Finnair continues to proceed towards its 5% EBIT margin target.

Volumes and pricing support profitability development

There are still uncertainties around Chinese demand in particular; from Finnair’s point of view the focus now rests much on Shanghai and Beijing, as opposed to any secondary Chinese cities. Finnair has extended its wet leases, and dynamic pricing has helped unit revenues increase by 25%; ancillary revenue per passenger also increased by 13% compared to 2019. Hence Finnair’s revenue will increase significantly this year, but we expect it to remain 10% short of that for FY ’19. We believe Q1’23 EBIT will be negative as the market has recovered enough so that certain seasonal patterns can again be seen, but for FY ’23 we estimate a positive EBIT of EUR 105m.

Coming through, but most good news seem to be priced in

In our view Finnair is set to achieve a positive EBIT this year, and the positive development should continue in FY ’24, but the company’s profitability continues to lag other airlines. Finnair is valued about 16x and 10x EV/EBIT on our FY ’23-24 estimates, which are levels well above peers’. We see Finnair’s recovery already priced in and hence upside would probably require more than one factor to deliver a positive surprise. We update our TP to EUR 0.47 (0.45) but retain our SELL rating.

Open report

Marimekko - Solid EBIT despite challenging market

16.02.2023 - 08.50 | Earnings Flash

Marimekko’s Q4 net sales came in below our expectations while EBIT was stronger than expected. Guidance for 2023 implies growth to continue and profitability to remain on a good level. However, soft market is expected to continue also in Q1’23 in Finland.

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  • Q4 group result: Net sales came in below our expectation, by growing by 1% y/ to EUR 48.4m (49.4/48.9m Evli/cons.). Growth was good in int’l markets while domestic sales declined as expected. Adj. EBIT landed at EUR 6.9m (14.3% margin), beating our and cons. expectations (6.4/6.5m Evli/cons.). Although, profitability was negatively impacted by softer gross margin and increased fixed costs.  Adj. EPS amounted to EUR 0.10 (0.13/0.13 Evli/cons.).
  • Finland: Net sales amounted to EUR 30.1m (Evli: 29.6m), reflecting y/y decline of 2%. Retail sales developed nicely by growing by 19% y/y while wholesale sales fell short of the comparison period due to a lack of extraordinary deliveries and soft market environment.
  • Int’l: Net sales grew by 5% to EUR 18.4m (Evli: 19.8m). Growth was good in the APAC and EMEA regions while Scandinavia and North America developed more moderately.
  • 22 DPS: The BoD proposes EUR 0.34 dividend per share for the year 2022 (0.38/0.41 Evli/cons.).
  • Market outlook for 23: The company expects Finland to grow with larger extraordinary wholesale sales deliveries than in 2022 as well as both the APAC region and int’l sales to grow. Q1’23 group net sales to fall short of that of the comparison period due to challenging wholesale environment in Finland, lower licensing sales and strong comparison period. 2023 licensing income is expected to come in below the comparison period.
  • 23 guidance: The company expects net sales to grow and an EBIT margin between 16-19%.

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Solteq - Challenges visible in earnings

16.02.2023 - 08.30 | Earnings Flash

Solteq’s Q4 results were weak and below our expectations, with revenue at EUR 16.9m (Evli EUR 17.4m) and adj. EBIT at EUR -0.8m (Evli EUR 0.7m), with the earlier noted challenges having a larger than anticipated impact. 2023 guidance is below our expectations, with revenue expected to remain at 2022 levels and EBIT to be positive.

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  • Net sales in Q4 were EUR 16.9m (EUR 18.3m in Q4/21), slightly below our estimates (Evli EUR 17.4m). Growth in Q4 amounted to -7.5% y/y. 
  • The operating profit and adj. operating profit in Q4 amounted to EUR -1.2m and -0.8m respectively (EUR 1.3m/1.4m in Q4/21), below our estimates (Evli EUR 0.7m/0.7m). 
  • Q4 challenges relates to earlier communicated challenges in Solteq Utilities’ software development and a weakened demand situation. 
  • Solteq Digital: revenue in Q4 amounted to EUR 10.3m (Q4/21: EUR 11.7m) vs. Evli EUR 10.8m. Growth amounted to -11.9%. The adj. EBIT was EUR 0.5m (Q4/21: EUR 1.4m) vs. Evli EUR 0.7m. 
  • Solteq Software: Revenue in Q4 amounted to EUR 6.6m (Q4/21: EUR 6.6m) vs. Evli EUR 6.6m. The adj. EBIT was EUR -1.3m (Q4/21: EUR -0.0m) vs. Evli EUR 0.0m. 
  • Guidance for 2023: group revenue is expected to remain at same levels as in 2022 and operating profit to be positive.
  • Dividend proposal: Solteq’s BoD proposes than no dividend be paid (Evli EUR 0.00)

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Endomines - Production developing as expected

15.02.2023 - 14.40 | Earnings Flash

The production ramp-up in Pampalo developed as expected during H2 2022, although profitability was impacted by cost inflation, which is anticipated to ease next year in 2023. Endomines anticipates a significant improvement in its financial performance in 2023 compared to 2022 driven by higher volumes, easing cost inflation and positive development of the price of gold.

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  • Revenue in H2 amounted to EUR 7.9m, roughly in line with our estimate of EUR 8.1m. Gold production amounted to 5,123 oz vs our estimate of 5,402 oz.
  • EBITDA in H2 was at EUR -3.0, lower than our estimate of EUR 0.6m. 
  • EBIT in H2 amounted to EUR -5.4m (Evli EUR -0.8m)
  • During H2, at Pampalo, gold production increased by 47% when comparing to H1. FY production came in at 8,601 oz, slightly lower than the middle point of 2022 FY guidance of roughly 8000 – 9400 Oz.
  • Profitability in H2 2022 was affected by cost inflation and non-recurring costs related to the transfer of domicile from Sweden to Finland
  • For 2023, the company expects gold production of roughly 11,600 – 13,300 Oz, our estimate for 2023 gold production is currently at 11,693 Oz.
  • In terms of profitability, Endomines expects its financial performance to improve considerably from 2022 driven by lower energy prices, positive development of gold prices, lower production costs especially during H2 2023 and higher volumes.

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Aspo - Relatively near estimates

15.02.2023 - 10.00 | Earnings Flash

Aspo’s Q4 results landed relatively close to estimates. ESL once again produced very high profitability, and outlook continues to be strong, while Telko’s profitability has decreased considerably after H1’22.

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  • Aspo Q4 revenue amounted to EUR 164.6m, compared to the EUR 156.6m/157.6m Evli/consensus estimates.
  • Adjusted EBIT was EUR 11.3m vs the EUR 12.1m/11.7m Evli/consensus estimates.
  • ESL Q4 top line was EUR 63.3m vs our EUR 66.1m estimate. Adjusted EBIT amounted to EUR 10.6m, compared to our EUR 9.6m estimate. Energy industry cargo demand was especially high and should remain so in H1. ESL’s main customers’ production volumes are expected to be satisfactory, albeit slightly lower than previous year.
  • Telko’s revenue was EUR 59.2m, compared to our EUR 52.7m estimate, while adjusted EBIT landed at EUR 1.3m vs our EUR 3.3m estimate. Telko’s net sales and profit will be significantly lower in FY ’23 than the previous year. Plastics and chemicals prices decreased steeply in H2’22 while still above their long-term averages. Some soft price development may continue in H1’23.
  • Leipurin revenue came in at EUR 41.3m vs our EUR 37.8m estimate. EBIT was EUR 1.1m vs our EUR 0.7m estimate.
  • Other operations cost EUR 1.8m, compared to our EUR 1.5m estimate.
  • The BoD proposes EUR 0.46 dividend per share to be paid for the year, compared to the EUR 0.46/0.46 Evli/consensus estimates.
  • Aspo guides comparable EBIT to be higher than EUR 35m in FY ’23 (EUR 55.3m in FY ’22).

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Etteplan - Market outlook uncertainties

15.02.2023 - 09.35 | Preview

Etteplan reports its Q4 results on February 17th. Sights are already set on the outlook for 2023, with our expectations being on a notable y/y slow-down in growth.

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Expecting good progress in 2022 to show also in Q4
Etteplan reports its Q4 results on February 17th. Operative performance during the year has so far been fairly solid and we expect the Q4 results to follow suite. Our estimates for revenue and EBIT are EUR 99.0m and EUR 8.9m respectively, with the implied Q4 guidance EUR 86-101m and EUR 7.8-10.8m respectively. Some risks to Q4 growth are posed by more conservative recruitment measures implemented in Q3 and the overall demand situation, although we expect the impact of the former to be more visible in 2023. We expect dividends to decrease y/y due to the exceptional items related to the Semcon offer, with our estimate at EUR 0.32 per share (2021: EUR 0.40), although a y/y increase is not out of question based on the on our estimates expected y/y adjusted earnings improvement. 

Growth seen to slow down in 2023
Etteplan is heading into 2023 with some uncertainty relating to organic growth given the more conservative approach to recruitments and more turbulent demand situation, despite double-digit organic growth so far during FY2022. We currently expect clearly slower organic growth, in t