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Administer - Work to be done

08.03.2024 - 9.45 | Company update

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.

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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.

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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.

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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.

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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.

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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.

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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).

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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.

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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.

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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).

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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.

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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.

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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)

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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.

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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).

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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%.

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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.

Open report

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)

Open report

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)

Open report

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.

Open report

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).

Open report

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).

Open report

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.

Open report

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.

Open report

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.

Open report

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.

Open report

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.

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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

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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. 

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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).

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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.

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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.

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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).

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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.

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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).

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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.

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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).

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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). 

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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.

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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. 

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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.

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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.

Open report

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.

Open report

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.

Open report

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.

Open report

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.

Open report

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

Open report

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).

Open report

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. 

Open report

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.

Open report

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. 

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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)

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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. 

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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.

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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. 

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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.

Open report

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.

Open report

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%.

Open report

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)

Open report

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.

Open report

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).

Open report

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 the low-mid single digits. We expect acquisitions to still be an important part of Etteplan’s growth strategy in 2023 despite uncertainties and with a few more targeted acquisitions growth could push towards the double-digit mark. In terms of margins, we expect rather flat development y/y, seeing potential for earnings improvement through operative enhancements but also noting inflationary pressure.

HOLD with a target price of EUR 15.0 (13.5)
We have made no changes to our estimates ahead of Q4. With a rise in peer valuation levels, we adjust our target price to EUR 15.0 (EUR 13.5) and retain our HOLD-rating. Our target price values Etteplan at ~16x 2023e P/E, quite in line with peers but below historical levels given current uncertainties.

Open report

Finnair - Close to expectations

15.02.2023 - 09.30 | Earnings Flash

Finnair’s Q4 revenue hit estimates well, while adjusted EBIT was a bit stronger than expected. At first glance the report doesn’t seem to contain any major surprises. Travel demand continues high after the pandemic for now, while inflation is still a challenge.

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  • Q4 revenue landed at EUR 687.3m, compared to the EUR 679.0m/681.2m Evli/consensus estimates.
  • Adjusted EBIT was EUR 17.9m vs the EUR 13.5m/2.7m Evli/consensus estimates.
  • Fuel costs amounted to EUR 228m vs our EUR 222m estimate, whereas staff costs were EUR 115m vs our EUR 115m estimate. All other OPEX+D&A totaled EUR 364m, compared to our EUR 370m estimate.
  • Cost per Available Seat Kilometer was 8.18 eurocents vs our estimate of 8.13 eurocents.
  • The BoD proposes no dividend to be paid for the year (as expected).
  • Finnair expects to operate an average capacity of 80-85%, in terms of ASKs, in 2023 compared to 2019. High demand should support unit revenues in the short-term, while normal seasonality returns, which may result in negative Q1 EBIT. Finnair estimates FY ’23 revenue to increase significantly but will not yet reach the level of FY ’19.

Open report

Raute - Western markets hold up well

15.02.2023 - 08.35 | Company update

We make some cuts to our estimates after Raute’s Q4 report, but the bigger picture remains largely unchanged.

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Bottom line and new orders a bit soft, but no major news

Raute’s EUR 45.7m Q4 revenue grew 4% y/y and was clearly above our EUR 38.0m estimate. The EUR 0.5m Q4 EBIT was soft relative to our EUR 0.7m estimate, despite the high revenue figure, as inflation still limited projects’ profitability; Services revenue continued to grow y/y, but there were changes in mix and certain delivery challenges. The EUR 28m Q4 order intake lacked modernization orders and was soft relative to EUR 36m estimate, however there seem to have been no significant negative changes in market demand since Q3.

We revise our FY ’23 revenue estimate down to EUR 133m

Raute’s earnings recovery path continues without major surprises, however we revise our estimates down as Q4 order intake was lower than we expected; the company begins the year with slightly lower order book than we estimated. European plywood investments (particularly within birch) should remain high, but we estimate European and North American revenues to remain roughly flat this year (both almost doubled in FY ’22); there is more scope for growth in Latin America and Asia-Pacific, but these markets have traditionally been more marginal for Raute. We likewise expect the Services and Analyzers businesses to remain stable in FY ’23, whereas the missing Russian revenue could leave Wood Processing top line down by 20%.

We now estimate FY ’23 EBIT at EUR 2.5m (prev. EUR 5.3m)

Raute’s guidance doesn’t seem challenging from profitability perspective as the minimum implies comparable EBITDA of only ca. EUR 6m (Raute’s comparable EBITDA amounted to EUR 8.7m in H2’22); further growth this year in Europe and North America within smaller equipment orders may not be that easy but a larger (European) order, should it materialize in early FY ‘23, could add a significant amount of revenue and thus help Raute specify its guidance upwards. Raute’s high operating leverage works both ways, but in our view comparable EBITDA of around EUR 8m should be achievable this year even if revenue declines by some 15%. The 17.5x EV/EBIT multiple, on our updated FY ’23 estimates, is not low but acceptable given earnings potential in the long-term. We retain our EUR 11 TP and BUY rating.

Open report

Raute - Order intake a bit soft in Q4

14.02.2023 - 09.45 | Earnings Flash

Raute’s Q4 revenue was clearly higher than we estimated, whereas EBIT was on the soft side especially considering the strong top line. The EUR 28m in new orders was also softer than we expected. Raute revealed a new reporting structure and guides FY ’23 revenue to be above EUR 130m and comparable EBITDA margin of above 4%.

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  • Raute Q4 revenue was EUR 45.7m vs our EUR 38.0m estimate. Top line grew by 4% y/y. Raute revealed a new reporting structure, according to which Wood Processing generated EUR 33.3m, Services EUR 8.7m and Analyzers EUR 3.7m in Q4.
  • EBIT came in at EUR 0.5m, compared to our EUR 0.7m estimate. Comparable EBITDA was EUR 2.7m, of which EUR 1.1m was attributable to Analyzers. Wood Processing generated EUR 0.9m and Services EUR 0.7m.
  • Q4 order intake amounted to EUR 28m, while we estimated EUR 36m.
  • Order book amounted to EUR 84m at the end of Q4, including EUR 4m attributable to Russia.
  • The BoD proposes (as expected) that no dividend is to be paid for the year.
  • Raute guides FY ’23 revenue to be above EUR 130m and comparable EBITDA margin of above 4%.

Open report

Vaisala - Foreseeing a firm end for the year

14.02.2023 - 09.15 | Preview

Vaisala reports its Q4 result on Thursday, 16th of Feb. We expect the company to post double-digit growth and EBIT above the comparison period. With W&E estimate upgrades, we adjust our TP to EUR 41.0 (40.0) and retain HOLD-rating.

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Expecting strong Q4 
Vaisala guides topline between EUR 500-520m and EBIT between EUR 62-72m for 2022. We expect Vaisala to enjoy a strong end for the year 2022. In our estimates, Vaisala faces a 12% growth by its Q4 topline amounting to EUR 140.0m. We expect W&E to experience a 5% y/y growth in Q4. On the other hand, in Q4, we anticipate IM to record a 23% y/y increase. Even though fixed costs face pressures through front-loaded investments and material costs increase with component shortage, we yet foresee Q4 EBIT improving to EUR 15.2m (10.9% margin). In total, we expect Vaisala’s topline to land a bit above and EBIT a bit below the mid-point of the guidance. With 22E EPS amounting to EUR 1.30, we estimate the BoD to propose a DPS of EUR 0.70.

Outlook as a main interest
According to PM indices, US and Euro Area manufacturing might face declines in the coming months. However, a large recession in Europe seems much unlike with energy shortage resolved. Furthermore, Vaisala’s positioning provides some protection against the slowing economy with investments in renewable energy. For now, the record high order book provides some foundation for growth in H1’23, but the visibility into H2 is yet somewhat foggy. Vaisala has generally been quite conservative in giving its guidance; with the management’s 2023 outlook providing some growth, we foresee the company having good trust/visibility for the full year. Moreover, component availability is set to improve which should provide some lifting support for EBIT.

HOLD with a target price of EUR 41.0
We revised our W&A’s near-term estimates, reflecting a better-than-expected market outlook. With our revised estimates, Vaisala trades approx. in line with its peer group, even below by considering 2023-24 figures. With minor estimate changes, we adjust our TP to EUR 41.0 (40.0). Reflecting neutral valuation, we retain our HOLD-rating ahead of the Q4 result.

Open report

Marimekko - Valuation on par

13.02.2023 - 09.30 | Preview

Marimekko reports its Q4 result on Wednesday, 15th of Feb. We anticipate the growth pace to slow down and cost pressures to cut margins. We retain a TP of 10.0, but adjust the rating to HOLD (BUY), reflecting a neutral valuation.

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Q4 result should contain no surprises
Marimekko expects its 2022 revenue to grow and adj. EBIT margin to land between 17-20%. The growth rate already saw some decelerating in Q3 and came in at 4.0%. In Q4, we expect the company to post a y/y growth of 2.7%, with revenue amounting to EUR 49.4m. The growth is driven by int’l sales while we expect revenue in Finland to decline due to a lack of extraordinary wholesale deliveries. With cost pressures arising from higher material costs and elevated fixed costs, our Q4 adj. EBIT estimate falls below that of the comparison period, to EUR 6.4m (13.0% adj. EBIT margin). With 22E EPS amounting to EUR 0.59, we expect the BoD to propose a DPS of EUR 0.38 (~60% payout rate). Overall, we foresee that Q4 should contain no large surprises.

Navigating through a tough market
We foresee the expected slowing economic growth and inflation to have an impact on fashion spending in 2023 with consumers fighting against a decline in purchasing power. Inflation has also risen in one of Marimekko’s core markets Japan. We expect Marimekko’s strong brand to protect the demand for the company, even during harder times. Although, we expect topline growth to significantly slow down from the levels seen during the past few years. For 2023, we estimate y/y growth of 6.9%, with revenue amounting to EUR 179.0m. The topline growth is largely supported by int’l sales while we expect sales in Finland to grow only by 4% in 2023. We anticipate profitability to remain at strong levels, 23E EBIT margin amounting to 18.2%. Furthermore, with its new strategy, the company aims to improve its scalability and aims for a 20% adj. EBIT margin.

HOLD with a target price of 10.0
We made no changes to our estimates ahead of the Q4 result. Since our last update, Marimekko’s share price has improved by some 10% which in our view has changed the valuation neutral. The company currently trades with 23-24E EV/EBIT and P/E multiples of 13-11x and 16-15.5x respectively. We adjust our rating to HOLD (BUY) and retain a TP of EUR 10.0.

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Pihlajalinna - Focus shifts towards bottom line

10.02.2023 - 09.40 | Preview

Pihlajalinna reports Q4 results on Feb 17. Last year the company positioned itself for growth, while this year focus rests more on profitability enhancing initiatives.

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Less growth and more earnings this year

Pihlajalinna revised FY ’22 guidance down in Q4 as the factors which hit EBITA earlier in the year persisted. Capacity additions hurt earnings especially in H1, while certain cost inflation and productivity issues continued to weigh H2. Covid-19 services have also been missing, but other than that there have been no demand side issues. Organic growth has been robust, and the Pohjola Hospital acquisition helped the company grow at a high-teens rate in FY ’22. We make no changes to our Q4 estimates. We estimate 3% growth for FY ’23 and ca. EUR 10m profitability increase; we expect Pihlajalinna to guide flat growth and increasing EBITA for the year as the company is now done with its late capacity expansion and will focus on enhancing margins.

Capacity costs have been accompanied by other items

The two larger Finnish players, Mehiläinen and Terveystalo, had major issues last year despite strong growth. Mehiläinen, more than twice the size of Pihlajalinna in revenue, saw its profitability decrease by ca. EUR 35m due to many issues such as inflation and labor shortages. Pihlajalinna likewise has endured some cost inflation as well as labor issues due to both high sick rates and tight availability of recruits. The announced negotiations play their part in managing costs, while Pihlajalinna also divests its EUR 16m dental business, a small alleviation to the indebtedness issues. Price hikes prop top line in FY ’23, but we would also like to hear views on volumes. Public queues need to be dealt with, one area which could add volumes. Organic growth outlook is decent; there are minor top line headwinds due to the dental divestment as well as outsourcing restructurings, but these represent only ca. 5% of revenue and support margins.

Valuation unchanged and relatively undemanding

Pihlajalinna’s valuation, 14x EV/EBIT on our FY ’23 estimates, hasn’t changed in the past few months, while peer multiples have seen some gains. In our view the valuation leaves adequate upside potential as the roughly 5% EBIT margin we estimate for the year remains well short of the company’s long-term earnings potential. We retain our EUR 10 TP and BUY rating.

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Innofactor - Starting to prove its worth

10.02.2023 - 09.15 | Company update

Innofactor posted solid Q4 figures and is well set to continue top- and bottom-line growth in 2023e. We retain our BUY-rating with a target price of EUR 1.5 (1.25).

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Good figures posted in Q4
Innofactor reported Q4 results in line with our expectations. Revenue grew 17.1% y/y (12.7% organically) to EUR 20.5m (Evli EUR 20.5m) while EBITDA and EBIT amounted to EUR 2.6m (Evli EUR 2.7m) and 1.8m (Evli EUR 1.9m) respectively. The order backlog stood at EUR 75.8m, up 4.1% y/y. Innofactor’s BoD proposes a distribution of EUR 0.06 per share as repayment of capital (Evli EUR 0.06). Innofactor’s 2023 guidance was not a surprise, expecting net sales to increase from 2022 (EUR 77.1m) and EBITDA to increase from 2022 (EUR 7.8m). Q4 figures were solid, considering also the EUR 0.4m deduction made in Q4 revenue due to uncertainty in receivables of a single project, without which the reported EBITDA -margin of 12.7% would have been boosted by some 1.5%p. 

Expecting top- and bottom-line growth in 2023 
On our largely unchanged estimates, we expect revenue growth of 6.4% in 2023, driven by the weak comparison H1 and a continued modest growth outlook. Innofactor has not noted any demand issues but the prevailing economic uncertainty in our view is nonetheless not to be disregarded. We expect EBITDA to improve to EUR 9.7m (2022: 7.8m) supported by the improved operational efficiency after H1/22 challenges, topline growth and improved sales mix, with the SaaS+license share of revenue up 3%p by year-end. The deduced revenue in Q4 can still materialize in 2023, providing some further potential improvement to figures. 

BUY with a target price of EUR 1.5 (1.25)
Current valuation levels in our view price in a flat earnings development at best, with implied 2022 P/E of ~13x, still clearly below peer 2022 and 2023e multiples. Some caution is however warranted, with Innofactor now having posted only two solid quarters after challenges before that. We adjust our TP to EUR 1.5 (1.25) and retain our BUY-rating.

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Finnair - Challenging altitude for valuation

09.02.2023 - 09.25 | Preview

Finnair reports Q4 results on Feb 15. Travel demand may remain robust and fuel prices have declined, but high valuation doesn’t seem to leave much upside potential.

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Q4 EBIT likely to be a bit subdued after strong Q3

Finnair’s Q3 topped expectations as yields proved higher than estimated. High passenger revenues (some EUR 50m above estimates), helped by the seasonal strength of Q3, as well as income from wet leases translated into an adj. EBIT of EUR 35m (some EUR 40m above estimates). Q4 EBIT should have improved y/y but should be down somewhat q/q; passenger volumes are still recovering from the pandemic slump, but Q4 also includes slower periods and in the case of Finnair there’s the lack of North Atlantic volumes as certain routes have been missing after the summer months. We estimate Q4 revenue at EUR 679m and adj. EBIT at EUR 13m. We believe Finnair will not issue any specific guidance (beyond capacity and load factors) as the company and its main markets are still going through significant changes.

Volumes are still recovering while fuel prices have declined

Finnair now breaks out data for the Middle Eastern routes. The region, based on the initial figures, contributed 25% of the volume in January which Europe and Asia each lately turned out; we look forward to comments on how much these new routes might grow over the year. Finnair’s Asian volumes are now 50% compared to pre-pandemic levels, and even if China is only now opening it’s uncertain how much further the flows may grow as the Russian airspace stays closed. We also look forward to comments regarding ticket pricing as jet fuel prices began to decline in Q4. Jet fuel prices have declined especially in EUR terms (around 20% in the past 3 months) while there should still be significant pent-up travel demand following the pandemic.

Upside appears elusive for now despite lower fuel prices

We estimate 6% EBIT for FY ’24 vs Finnair’s target of at least 5% after H1’24. Lower fuel prices help airlines’ earnings and thus higher valuations are justifiable, however the pace of gains has been rapid in the past few months and sector multiples seem high. Some uplift may be warranted also in the case of Finnair, but the company trades 18x EV/EBIT on our FY ’23 estimates (vs 11x for a typical peer) and ca. 11x for next year (vs 8.4x). Our new TP is EUR 0.45 (0.40); our new rating is SELL (HOLD).

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Innofactor - Nice finish to the year

09.02.2023 - 09.20 | Earnings Flash

Innofactor’s Q4 results were in line with expectations. Net sales grew 17.1% y/y to EUR 20.5m (Evli EUR 20.5m). EBIT amounted to EUR 1.8m (Evli EUR 1.9m). Innofactor’s net sales and EBITDA in 2023 are expected to increase compared with 2022. Dividend proposal EUR 0.06 per share (Evli EUR 0.06).

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  • Net sales in Q4 amounted to EUR 20.5m (EUR 17.5m in Q4/21), in line with our estimates (Evli EUR 20.5m). Net sales in Q4 grew 17.1% y/y and 12.7% organically. Net sales increased in Finland and Norway but declined in Sweden and Denmark. 
  • EBITDA in Q4 was EUR 2.6m (EUR 1.7m in Q4/21, in line with our estimates (Evli EUR 2.7m), at a margin of 12.7%. 
  • Operating profit in Q4 amounted to EUR 1.8m (EUR 0.5m in Q4/21, in line with our estimates (Evli EUR 1.9m), at a margin of 8.8%. 
  • Order backlog at EUR 75.8m, up 4.1% y/y. New orders included an information management solution for the Finnish Defence Forces Logistics Command, approximately EUR 22 million (not yet in order backlog, slightly over half estimated to be entered in Q1/2023).
  • Guidance for 2023: Innofactor’s net sales is expected to increase from 2022 (EUR 77.1m) and EBITDA is expected to increase from 2022 (EUR 7.8m).
  • Dividend proposal: Innofactor’s BoD proposes a distribution of EUR 0.06 per share a repayment of capital (Evli EUR 0.06).

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Raute - Profitability in recovery mode

08.02.2023 - 09.30 | Preview

Raute reports Q4 results on Feb 14. There’s still haze around revenue and margins going forward, but long-term potential exists while downside should be limited even if FY ’23 EBIT proves to be more on the soft side.

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Q4 EBIT likely to be modest relative to Q3

Raute’s Q3 report was a positive surprise as Europe in particular drove top line EUR 8m above our estimate. The very high EUR 19m services revenue helped EBIT beat our estimate. Raute’s positive margin development is set to continue this year as the worst inflation shock has passed; Raute should have also learned to cope with inflation in project pricing. The Q3 report highlighted strong demand in North America and Europe (partly due to the Russian import gap), in addition to which there have been encouraging signs in Latin America and Asia. We expect stable Q4 EBIT development y/y while we estimate revenue down 14% y/y to EUR 38m. We estimate Q4 EBIT at EUR 0.7m, down from the EUR 1.4m Q3 figure as services revenue is unlikely to be that high this time due to a relative lack of modernization orders.

Profitability should heal over the course of the year

Russian order book was already down to EUR 6m at the end of Q3 and therefore the Q4 report should have no big news on that front, however we expect to hear an update on net working capital issues related to the cancelled Russian projects as well as recent component availability challenges. Raute’s guidance is always loose; we expect the company to guide improving (positive) EBIT for the year. A larger order could lift outlook further if demand remains strong over the course of the year.

Short-term downside seems limited, lots of EBIT potential

Raute should reach at least some modest positive EBIT in FY ’23 as inflation abates and the company achieves EUR 4-5m in annual savings. Favorable revenue (and mix) development could drive FY ’23 EBIT to a very decent level, although still likely well short of EUR 10m even in an optimistic scenario. We consider FY ’23 EBIT of ca. EUR 5m a realistic scenario. Raute may miss our base case estimate for FY ‘23 if Western demand begins to sour, but even in that case downside should be limited as there seem to have been no changes to Raute’s competitive positioning. We thus consider the 7x EV/EBIT valuation, on our FY ’23 estimates, undemanding. We retain our EUR 11 TP and BUY rating.

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Suominen - Volume growth and higher margins

06.02.2023 - 09.25 | Company update

Suominen’s Q4 figures remained below estimates; volumes and margins will rebound this year, but valuation already reflects improvement amid uncertainty around the factors.

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Improvement continues, but Q4 earnings remained very low

Suominen’s Q4 revenue landed at EUR 133m vs the EUR 140m/140m Evli/cons. estimates. Sales prices remained high, and the EUR 9m FX tailwind also helped, while Q4 volumes were flat q/q and y/y as US volumes continued to improve but not quite at the expected pace; raw materials deflation has led to some customer caution, in addition to which there have been manufacturing workforce shortages. The 5% gross margin, when adjusted for the EUR 4.8m hit in Italy, was a small improvement q/q but still clearly below our 10% estimate. Adj. EBITDA, at EUR 5.0m, came in below the EUR 11.8m/9.8m Evli/cons. estimates. FX lifted EBITDA by EUR 0.7m, while it lacked positive one-offs from the comparison period and was burdened by CEO change costs. Cash flow was strong as inventories and receivables declined q/q.

We estimate Americas revenue to grow by 13% in FY ‘23

Raw materials and energy prices continue to slide in Q1, which means Suominen’s pricing adjusts down in Q1 but slower than input costs. Meanwhile volumes and mix are improving; the US drives meaningful volume gains this year as especially H1’22 was challenging. Sustainable nonwovens’ growing share supports margins, but the relatively challenging European supply-demand balance in traditional products poses a headwind. We make some further small estimate cuts for this year; we estimate ca. 5% top line growth for the year, driven by double-digit growth in the US.

Focus rests on volumes over the coming quarters

H1’23 enjoys a favorable dynamic between falling input costs and relatively high (but already declining) nonwovens prices. The situation could extend to H2’23 if input costs continue to decline after the spring, but in our view margin gains are more likely to rely on improving volumes and mix after H1’23. FY ’23 results should thus demonstrate stabilizing profitability levels for Suominen after the rapid gains and declines seen in recent years. Suominen is valued below 5x EV/EBITDA and 9x EV/EBIT on our FY ’23 estimates, which we consider neutral levels since margins are likely to remain subdued especially during the early parts of the year. Our new TP is EUR 3.0 (3.5); we retain our HOLD rating.

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Consti - Strong finish to the year

03.02.2023 - 16.20 | Company update

Consti’s Q4 results were strong as both revenue and profitability figures exceeded our estimates. The valuation is still rather undemanding despite the recent share price strength, we also see the dividend yield attractive. We retain our BUY-rating and adjust our target price to EUR 14.0 (13.0).

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Q4 results were strong

Net sales in Q4 were EUR 93.3m (EUR 82.6m in Q4/21), above our and consensus estimates (EUR 85.1m/86.0m Evli/cons.). Sales growth was impressive at 12.9% y/y. Operating profit in Q4 amounted to EUR 4.8m (EUR 3.0m in Q4/21), above our and consensus estimates (EUR 3.7m/3.4m Evli/cons.) at a margin of 5.2% (3.6%). We estimated improvement in profitability y/y as the comparison period was affected by poor performance of two regional business units, yet the published figures were even stronger than anticipated. The order backlog in Q4 was EUR 246.7m (EUR 218.6m in Q4/21), up by 12.8% y/y driven by strong order intake of EUR 109.1m in Q4 (Q4/21: EUR 66.9m). Consti’s BoD proposes a dividend of EUR 0.60 per share.

 

Positive development expected to continue

Consti expects that the operating result for 2023 will be in the range of EUR 9.5–13.5 million. We have made small adjustments to our forecasts, our current estimate for 2023 revenue is at EUR 315.2m (EUR 303.8m) and EBIT slightly above the guidance middle point at EUR 12.3m (EUR 11.6m). The estimate adjustments are driven by the company’s order backlog, easing cost inflation and volume growth. We still see potential margin pressure coming from salary cost inflation, on the other hand, the material cost inflation is clearly slowing down.

 

BUY with a target price of EUR 14.0 (13.0)

We continue to see the case attractive despite the recent share price strength. The company has shown its capabilities in a difficult market, and we expect the positive development to continue. The valuation is still rather undemanding when comparing to its key peers. In addition to the favorable relative valuation, we see the company’s dividend yield attractive at the current price levels. We adjust our target price to EUR 14.0 (13.0) with BUY-rating intact.

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Suominen - Still very modest results

03.02.2023 - 10.00 | Earnings Flash

Suominen’s Q4 results remained below estimates. Top line grew 15% y/y but was still soft relative to expectations, while cost inflation didn’t yet ease that much to translate into significantly better margins. Profitability hence stayed at a very modest level.

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  • Suominen Q4 revenue grew by 15.1% y/y to EUR 133.1m vs the EUR 140.0m/140.4m Evli/consensus estimates. Americas came in at EUR 81.7m, compared to our EUR 84.0m estimate, while Europe amounted to EUR 51.4m vs our EUR 56.0m estimate. Currencies had a positive impact of EUR 9.3m on sales.
  • Gross profit was EUR 1.8m, compared to our EUR 14.0m estimate, and gross margin was therefore 1.4% vs our 10.0% estimate.
  • Adjusted EBITDA landed at EUR 5.0m in Q4, compared to the EUR 11.8m/9.8m Evli/consensus estimates. Meanwhile adjusted EBIT was EUR -0.2m vs our EUR 6.8m estimate.
  • Suominen guides its comparable EBITDA to increase in 2023 (EUR 15.3m in 2022).
  • The BoD proposes EUR 0.10 per share dividend to be paid for the year, compared to the EUR 0.15/0.08 Evli/consensus estimates.

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Consti - Even stronger than expected

03.02.2023 - 10.00 | Earnings Flash

Consti's net sales in Q4 amounted to EUR 93.3m, above our and consensus estimates (EUR 85.1m/86.0m Evli/cons.), with growth of 12.9% y/y. EBIT amounted to EUR 4.8m, also above our and consensus estimates (EUR 3.7m/3.4m Evli/cons.). Guidance for FY 2023: operating result for 2023 will be in the range of EUR 9.5–13.5 million.

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  • Net sales in Q4 were EUR 93.3m (EUR 82.6m in Q4/21), above our and consensus estimates (EUR 85.1m/86.0m Evli/cons.). Sales growth was impressive at 12.9% y/y.
  • operating profit in Q4 amounted to EUR 4.8m (EUR 3.0m in Q4/21), above our and consensus estimates (EUR 3.7m/3.4m Evli/cons.) at a margin of 5.2% (3.6%).
  • EPS in Q4 amounted to EUR 0.49 (EUR 0.30 in Q4/21), above our and consensus estimates (EUR 0.36/0.33 Evli/cons.).
  • The order backlog in Q4 was EUR 246.7m (EUR 218.6m in Q4/21), up by 12.8% y/y. Order intake was EUR 109.1m in Q4 (Q4/21: EUR 66.9m).
  • Free cash flow amounted to EUR 10.4m (Q4/21: EUR 6.1m).
  • The company’s order intake was impressive as it won multiple significant orders during Q4 such as Oulunkylä elementary school and kindergarten and Jorvi Hospital
  • The profitability continues to be strong despite the cost inflation having a negative effect, the projects progressed as planned during the quarter and Consti did not experience such problems with projects as it did during Q4 2021
  • Guidance for 2023: Operating result for 2023 will be in the range of EUR 9.5–13.5 million

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CapMan - Decent quarter with some surprises

03.02.2023 - 09.30 | Company update

CapMan’s operative performance in Q4 was quite decent with the big surprise being the divestment of JAY Solutions. The outlook for 2023 remains quite good and the investment case attractive despite some uncertainty.

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Operatively quite as expected
CapMan reported operatively rather decent Q4 figures. The larger surprises came in the divestment of JAY Solutions (CapMan’s ownership 60%) and appointment of a new CEO. JAY Solutions was sold to Bas Invest for a consideration of EUR 8.5m at an attractive valuation of ~4x sales. CapMan, however, booked an EUR 2.6m goodwill impairment charge due to an accounting technicality relating to the option for the minority stake. As a result, EBIT came in softer than expected at EUR 7.5m (EUR 11.4m/9.6m Evli/cons.), adj. EBIT at EUR 10.1m. CapMan’s BoD proposed a dividend of EUR 0.17, a notch above expectations (EUR 0.16 Evli/cons.), for a dividend yield of ~6%. 

Outlook remains quite good
The overall fairly decent fundraising and transaction outlook does not appear to have changed at least for the worse in the past months. The fundraising activity is seeing some support from a rebound in previous investment decision making slowness, with recent development in some funds having been slower than expected. We expect similar operating profit levels in 2023 as in 2022. The expected larger negative is in fund returns, after a stellar comparison period. We expect the Management Company business to clearly improve mainly through increased carried interest while expecting the Services business to improve on an adj. basis through growth and divestment of the loss-making JAY solutions. 

BUY with a target price of EUR 3.2 (3.1)
CapMan in our view continues to convince despite some market softness. The market situation and an on our estimates higher expected share of more uncertain carried interest creates some uncertainty. With the not too challenging valuation level and the ~6% dividend yield the investment case remains attractive. We retain our BUY-rating with a TP of EUR 3.2 (3.1).  

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Detection Technology - Short-term valuation remains elevated

03.02.2023 - 09.30 | Company update

DT delivered solid Q4 growth. EBIT came down with high cost inflation. The growth outlook for H1’23 seems bright, but visibility into H2’23 is yet blurry. With the valuation remaining elevated, we retain our SELL rating. TP adjusts to EUR 16.5 (16.0) with minor estimate changes made.

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Good growth, profitability came down as expected
Q4 group net sales accounted for EUR 28.2m (27.4m/28.3m Evli/cons.), reflecting 14.1% y/y growth. The growth was supported by the strong performance of SBU and IBU, while MBU suffered from supply chain issues and a softer market. Gross margin slightly decreased from the comparison period with continued spot-component purchases. In addition, fixed costs faced notable increases and DT’s Q4 EBIT fell clearly short of last year. Q4 EBIT amounted to EUR 2.8m (9.9% margin). For the year 2022, the BoD proposes a dividend of EUR 0.20 which reflects 58% of the company’s net result.

Minor estimate adjustments made
We raised our 23E EBIT by some 2%, reflecting upgraded net sales estimates and the company’s comments on profitability development. However, we expect the scalability to kick in more prominently in 2024 with additional cost pressures easing and revenue growth continuing. Our 23E net sales estimate amounts to EUR 111.5m, reflecting y/y growth of 13.1%. We expect all DT’s businesses to show growth, especially SBU to perform strongly with aviation investments and gained market share. With strong topline growth, our 23 EBIT estimate lands at EUR 14.0m, reflecting an EBIT margin of 12.6% which yet falls short of the company's 15% target. There exists yet some tails from 2022 that deteriorate DT’s 23E profitability. However, in 2024, we expect DT to exceed its profitability target and record an EBIT margin of 15.2%.

SELL with a target price of EUR 16.5
With our 2023 estimates, DT continues trading above its peers. With small estimate revisions made, we adjust our TP to EUR 16.5 (16.0). We however still see the company as overvalued and hence retain our SELL rating. For a longer-term investor, we see DT as an interesting investment case with both topline and EBIT growth. 

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SRV - Well positioned for a difficult market

03.02.2023 - 09.30 | Company update

SRV enters difficult market with a low-risk project portfolio and a healthy balance sheet. We see the near-term upside limited yet the valuation looks rather undemanding in the long-term. We retain our HOLD-rating and TP of EUR 4.3.

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Q4 was weaker than expected

SRV reported Q4 results which were below our estimates. Revenue amounted to EUR 181.2m (EUR 211.9m/214.0m Evli/cons.) and EBIT was EUR -6.3m (EUR 3.6/4.1m Evli/cons.). The company estimates that 2023 group revenue is lower and operative operating profit is positive but lower than in 2022. SRV also updated its long-term financial targets (by 2026): Revenue EUR 900m and operative operating profit margin 6%. In addition, SRV aims to distribute 30-50% of earnings as dividend.

 

Challenging market ahead

The current estimates point towards a slowdown for 2023 in the Finnish construction market driven particularly by decreasing housing construction volumes. The market conditions are starting to show in the company’s numbers as the housing construction backlog continued to decline and the company’s revenue for Q4 was affected by delays in project starts. In our view, SRV is well positioned for a difficult market as the company’s order intake in business construction was strong during the fourth quarter. In addition to the strong presence in the lower risk business construction contracting market, the company’s balance sheet is healthy after the financing arrangements completed during H1 2022.

 

HOLD with a target price of EUR 4.3

We estimate revenue to decline 13.7% y/y in 2023 driven by a lack of developer contracted housing units and lower residential construction volumes while seeing healthy conditions for business construction supported by backlog growth. Because of the estimated project mix, we have also lowered our margin expectations for 2023. In our view, the near-term upside is limited yet the valuation looks rather undemanding in the long-term. We retain our HOLD-rating and TP of EUR 4.3.

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Detection Technology - Expected downturn in Q4 EBIT, solid full-year growth despite challenges

02.02.2023 - 09.50 | Earnings Flash

DT’s Q4 and 22 EBIT saw an expected decrease. Group topline however grew nicely and soft Q4 profitability is explained by cost inflation.

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  • Q4 group result: net sales grew by 14.1% y/y to EUR 28.2m, approx. in line with our and cons. estimates (24.7m/28.3m Evli/cons.). The growth was driven by strong demand for industrial and security solutions, while medical BU saw some softness during the period. EBIT of EUR 2.8m came in above our and cons. estimates (2.5m/2.6m Evli/cons.), but clearly below that of the comparison period. EBIT was negatively impacted by cost inflation arising from spot-component purchases, R&D, and logistics as well as personnel expenses. EBIT margin was 9.9%. EPS accounted for EUR 0.16, beating our expectations (0.13/0.15 Evli/cons.).
  • Medical (MBU): mainly driven by softer market and supply chain issues, MBU’s net sales decreased by 6.6% y/y to EUR 12.7m (Evli: 13.5m). According to the company’s management, the underlying long-term demand outlook for MBU is positive.
  • Security (SBU): with strong underlying demand for CT and line-scan security equipment, SBU’s net sales grew by 41% y/y to EUR 10.9m, topping our expectations (Evli: 9.8m). DT gained new customers during the period.
  • Industrial (IBU): IBU’s net sales grew by 34.5% to EUR 4.6m, beating our estimates (Evli: 4.1m). The strong performance was supported by improved delivery capabilities and new customers gained during 2022.
  • The BoD proposes a DPS of EUR 0.20 (0.19/0.21 Evli/cons.) for the fiscal year 2022.
  • Outlook: DT expects group net sales and all its BUs to grow by double-digits in Q1 and H1’23. Outlook for medical solutions came in above our expectations, forcing some upward pressure on our 2023 estimates. DT anticipates not achieving its profitability target in 2023 yet, but says it’s on its way toward an EBIT margin of 15%. Long-term targets intact: at least 10% annual growth and 15% EBIT margin.

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CapMan - Operatively quite as expected

02.02.2023 - 08.30 | Earnings Flash

CapMan's net sales in Q4 amounted to EUR 19.7m, in line with our estimates and consensus (EUR 19.8m/18.9m Evli/cons.). EBIT amounted to EUR 7.5m adj. EBIT EUR 10.0m), below our consensus estimates (EUR 11.4m/9.6m Evli/cons.). Dividend proposal EUR 0.17 per share (EUR 0.16/0.16 Evli/Cons.).

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  • Revenue in Q4 was EUR 19.7m (EUR 14.7m in Q4/21), in line with our and consensus estimates (EUR 19.8m/18.9m Evli/Cons.). Growth in Q4 amounted to 34% y/y.
  • Operating profit in Q4 amounted to EUR 7.5m (EUR 12.2m in Q4/21), below our estimates and consensus estimates (EUR 11.4m/9.6m Evli/cons.). An EUR 2.6m impairment of goodwill related to the disposal of the JAY Solutions business was booked, adj. operating profit was EUR 10.0m.
  • EPS in Q4 amounted to EUR 0.03 (EUR 0.06 in Q4/21), below our estimates and consensus estimates (EUR 0.06/0.05 Evli/cons.).
  • Management Company business revenue was EUR 17.1m vs. EUR 16.0m Evli. Operating profit EUR 7.6m vs. EUR 6.7m Evli. Carried interest EUR 4.1m (Evli 4.0m)
  • Revenue in Investment business in Q4 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q4 amounted to EUR 3.7m vs. EUR 4.8m Evli. 
  • Revenue in Services business in Q4 was EUR 2.4m vs. EUR 3.3m Evli. Operating profit in Q4 amounted to EUR -1.9m vs. EUR 1.7m Evli. 
  • Dividend proposal: CapMan proposes a dividend of EUR 0.17 per share (EUR 0.16/0.16 Evli/Cons.).
  • Capital under management by the end of Q4 was EUR 5.04bn (Q4/21: EUR 4.9bn). 
  • Pia Kåll appointed as CEO of CapMan, current CEO Joakim Frimodig to become full Chair of the Board.

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Detection Technology - Valuation turns expensive

31.01.2023 - 14.50 | Preview

DT reports its Q4 result on February 2nd. Despite supply chain issues affecting especially MBU’s Q4 growth, we expect DT to deliver double-digit growth in Q4. However, a recent rally in stock price has turned DT’s valuation quite elevated. We downgrade our rating to SELL (HOLD) and adjust TP to 16.0 (16.5).

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Supply chain issues to cut MBU’s growth in Q4
In its pre-silent call, DT’s management indicated that additional supply chain issues have caused some challenges to MBU’s deliveries. To our understanding, these challenges concern especially China, in which DT holds a strong position in medical solutions. Such issues are expected to have a significant impact on MBU’s growth prospects and thus we have revised our Q4 MBU topline estimates downwards. We now expect MBU’s Q4 net sales to decrease by 0.4% y/y to EUR 13.5m. We expect the situation not to limit in Q4’22 and MBU’s growth to see some softness also in Q1’23.

SBU and IBU to perform well
We don’t expect MBU’s situation to reflect in the performance of SBU and IBU since MBU operates mainly with a separate supply chain. In addition, the underlying demand for security solutions is currently high. In Q4, we expect SBU to grow by 26.4% to EUR 9.8m and IBU to increase by 20.2% to EUR 4.1m. In our view, SBU’s growth is largely supported by increased investments in aviation. Moreover, we see IBU facing solid momentum that results in recently won customers despite uncertain macroeconomic trends. In total, DT’s Q4 revenue will face a 10.9% y/y growth, amounting to EUR 27.4m (prev. 28.7m).

SELL with a target price of EUR 16.0 (16.5)
Continued spot-component purchases deteriorate DT’s profitability to some extent, despite the company being able to transfer some of the increased material costs to customer prices. We expect Q4 EBIT to amount to 2.5m (prev. 2.8m), reflecting a 9.2% margin. The company also faces cost pressures originating from fixed costs. With our revised estimates and recent rally in stock price, DT’s valuation turns expensive. We downgrade our rating to SELL (HOLD) and adjust TP to EUR 16.0 (16.5) ahead of the Q4 result.

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Fellow Bank - So far, so good

31.01.2023 - 09.15 | Company update

Fellow Bank has met the expectations that were set out for 2022. The market environment changes provide some near-term benefits but increase uncertainty regarding the lending outlook. We adjust our TP to EUR 0.40 (EUR 0.42), HOLD-rating intact.

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On track with set out expectations for 2022
Fellow Bank’s development during H2 has progressed in line with expectations set out earlier. The loan portfolio at the end of 2022 was at EUR 159.9m (target > EUR 150m). Deposits amounted to EUR 246.8m, showing an expected more modest growth. The provided funding amounts on a monthly level have also showed a slight positive trend, with the monthly average (R3m) near EUR 28m. Actions to strengthen equity were also completed as expected with the issue of an EUR 6.1m debenture loan during the fall.

Market environment development positives and negatives
The interest rate environment and macroeconomic uncertainties bring some added flavour to the mix, the effects of which we currently view as slightly net negative for Fellow Bank. The effect on near-term expected net interest income is positive, although the higher interest rates on deposits and current loan portfolio to deposit ratio reduces some of the positive impact. The interest rate hikes coupled with the macroeconomic uncertainties, however, increase the uncertainty in the growth of funding volumes going forward. The effects so far appear to have been mostly visible through somewhat stricter lending policies and higher loan loss provisions, but we foresee some increases in competition through pricing going forward.  The overall financial impacts on our estimates for the coming years are not substantial through the higher expected interest income and somewhat lower growth and higher loan loss expectations. 

HOLD with a target price of EUR 0.40
Fellow Bank’s investment case relies on the growth of its loan book in the coming years and the benefits of scalability. The current outlook has in our view slightly weakened, and we adjust our target price to EUR 0.40 (EUR 0.42), HOLD-rating intact.

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Consti - Positive development expected

30.01.2023 - 09.20 | Preview

Consti reports its Q4 2022 results on February 3rd. We expect that the steady performance continues, and operative profitability improves year-on-year. We retain our BUY-rating and adjust our target price to EUR 13.0 (12.0).

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Steady performance expected to continue in Q4

Consti reports its Q4 results on February 3rd. The company’s performance has been steady during the first nine months, and we expect that the development has continued during the last quarter. We estimate revenue growth of 2.8% for Q4 driven by slightly higher backlog burn yet lack of inorganic growth when comparing to Q4 2021. Consti estimates that the EBIT for FY will be in the range of EUR 9-13 (EUR 2.4-6.4m implied guidance for Q4). Our estimate for FY EBIT stands at EUR 10.3m (EUR 3.7m for Q4), slightly below the middle point of the guidance. We expect that the company can improve its relative profitability y/y despite the cost inflationary environment as Q4 2021 was affected by two regional business units with poor profitability.

 

Renovation market is expected to grow slightly in 2023

Despite the anticipated decrease in new construction, the Finnish renovation construction volumes are predicted to experience a slight increase in 2023. The Confederation of Finnish Construction Industries RT predicts that renovation output will increase by 2% in 2023. We currently forecast revenue growth of 2.2% and EBIT margin of 3.8% for 2023, we expect the company's growth to continue, though at a slightly slower pace due to a lack of inorganic growth. However, margins are predicted to improve as a result of higher volumes and slowing cost inflation. Consti’s backlog is still at healthy levels and the company has been able to win projects especially on non-residential renovation. The demand for renovations by housing companies in 2023 is uncertain due to the high interest rates and renovation costs.

 

BUY with a target price of EUR 13.0 (12.0)

We have not made any adjustments to our estimates. Due to higher peer group multiples, we adjust our target price to EUR 13.0 (12.0) with BUY-rating intact.

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Suominen - Improving again after challenges

27.01.2023 - 09.35 | Preview

Suominen reports Q4 results on Feb 3. It’s clear Q4 will be a lot better than previous quarters, while FY ’23 profitability continues to improve. Many factors now support margins, but valuation also reflects better performance.

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US volumes recover while raw materials prices decline

Suominen’s Q3’22 top line recovered a lot even when its early part remained difficult in the US. We expect the continued rebound to have helped Suominen grow 21% y/y to EUR 140m in Q4 revenue. We estimate Suominen’s raw materials prices to have declined by almost 10% q/q in Q4, which together with higher delivery volumes and relatively stable sales prices should have helped the company to a significant profitability improvement not only q/q but also y/y. We estimate Q4 EBITDA at EUR 11.8m. USD has lately weakened by some 10% against EUR but is still relatively strong compared to year ago. We therefore believe the US business to drive growth also this year.

European volumes seem unlikely to grow much this year

Suominen plans to close another of its plants in Italy. European demand for traditional wipes is soft, while Turkish and Chinese imports have added a lot of supply within such segments, and the Mozzate plant isn’t positioned to produce sustainable nonwovens. Italy’s position is also challenging in terms of energy costs. The closure would result in EUR 9m in one-offs and EUR 3m in added annual EBITDA as utilization rates improve. Q4’22 and Q1’23 energy costs in Europe might prove to be a bit lower than feared due to the mild winter, whereas the situation in the US may have been more challenging relative to expectations. Suominen should guide at least some EBITDA improvement for this year as H1’22 comparison base is so weak, however the Q4 report might be a bit too early to give very strong guidance.

Valuation neutral, uncertainties around improvement pace

The closure and lower USD represent some estimate headwinds, but we would still expect Suominen to grow by at least a few percentage points this year. Suominen’s valuation (8x EV/EBIT on our FY ’23 estimates) is not very challenging as profitability continues to improve from the lows, driven by higher top line and lower raw materials prices, but valuation already reflects improvement while a lot of uncertainty remains around its pace. We update our TP to EUR 3.5 (3.0); our rating is now HOLD (BUY).

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Enersense - Organic improvement continues

24.01.2023 - 09.30 | Company update

The upgrade implies Q4 was a lot better than we previously estimated but also suggests further improvement this year after recent challenges caused by high inflation.

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Q4 figures clearly better than previously estimated

Enersense upgraded its FY ’22 guidance. Revenue should be around EUR 265m while adj. EBITDA will top EUR 12m. We had previously estimated relatively robust 8% top line growth for Q4’22, however we update our estimate to 31% ahead of the report. We saw Q4 EBITDA margin slightly below 2% but now update our estimate to 4.5%. The positive revision was driven by wind power projects, which proceeded ahead of schedule, yet our EUR 15m top line and EUR 2.6m profitability revisions suggest our previous estimates to have been cautious on other fronts as well. Organic growth outlook seems to be stronger than we previously estimated as each of the four segments appears headed for double-digit growth also this year.

High growth to continue even without the Voimatel deal

In our view Enersense is set to achieve significant earnings improvement in FY ’23 as inflation was a major challenge throughout last year, dragging profitability over the crucial summer months. Enersense has been negotiating inflation compensation for a while, the results of which are set to materialize with a lag, and this year inflation should prove much more modest whereas top line growth looks to remain in the double-digit territory. We note Connectivity has recently announced EUR 65m in contracts for the coming years. We estimate Enersense should be able to achieve roughly 200bps gains in operating margins this year. The Voimatel acquisition, should it go through, would help drive further operational improvement, but for now it’s still being processed by the FCCA.

FY ’23 figures and wind power projects could drive upside

Enersense continues to invest in growth this year, helped by the EUR 26m in proceeds from convertible notes. We have updated our FY ’23 EBIT estimate to EUR 11.4m (previously EUR 8.4m), on which Enersense trades roughly 10x. The valuation is not particularly challenging, especially relative to peers; the 3.8% EBIT margin we estimate also doesn’t reflect full profitability potential and hence earnings growth should continue next year. Our updated TP is EUR 7.0 (6.0) as we retain our HOLD rating.

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Solteq - CMD: Turning the tide 

19.01.2023 - 09.45 | Company update

Solteq presented its new strategy in its CMD 2023 event, reiterating near-term challenges and setting forth steps to build a stronger Solteq in the long-term. We retain our HOLD-rating and adjust our TP to EUR 1.3 (1.2)

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New strategy set
Solteq hosted its Capital Markets Day 2023 on January 18th, giving more insight into the recently set new strategy. Solteq had previously announced that it will operate under two new segments, Retail & Commerce and Utilities. Long-term growth and EBIT-% targets for the segments were set at 8%/8% and 15%/18% respectively. The company’s primary focus in the near-term will be on profitability, while also seeking to return on a growth path.

Near-term softness, building for the long-term
Solteq is heading into the new strategy period with a heavily renewed management team, including both new segments. For the short-term, Solteq reiterated the challenges faced in product development and macroeconomic headwinds. For the Utilities-segment, 2023 is expected to be a turn-around year, with ramp-up towards normalized operations and healthier financials towards H2/2023. In the Retail & Commerce-segment the growth ambitions in our view appear reasonable, although expectations in the near-term seem muted due to current headwinds. Newly appointed EVP Jesper Boye previously successfully headed Solteq’s business in Denmark and we see potential in future pan-Nordic growth. In our view the key takeaway from the CMD was the confirmation of Solteq’s own abilities and focus on near-term measures to build a much more capable Solteq towards the latter part of the strategy period.

HOLD with a TP of EUR 1.3 (1.2)
From a valuation perspective, the near-term remains subdued by challenges in the Utilities business. The significant upside potential in our view lies in the turnaround and tapping into the other Nordic countries, assuming the implementation of Datahub in Sweden. We adjust our TP to EUR 1.3 (1.2) due to a slight rebound in peer multiples, HOLD-rating intact.

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Endomines - New drill results from Pampalo

04.01.2023 - 09.50 | Company update

Endomines reported high-grade drill results significantly below the current production level. Even though the result is based on a single drill hole, it confirms the continuation of the deposit to the depth. We have not made changes to our production estimates, yet we increase the possible Pampalo Life of Mine in our option model. We increase our TP to EUR 6.5 (5.4), HOLD-rating intact.

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High-grade drill results from Pampalo

Endomines is currently extracting ore from the 755-815 level and have inferred resources (Pampalo deep) at the 815-875 level. The new drill hole intersected 6.0m grading 9.2g/t gold at the 1050 level, roughly 175-235m below the 815-875 level. The company has historically been able to produce approximately 20k ounces of gold per 50 meters at the Pampalo underground mine.

 

Probability of extending Pampalo Life of Mine increases

The results are based on a single drill hole and further drilling is needed to determine the economic feasibility of the mining area. Even though it is too early to determine if the company is able to economically extract the ore, the result confirms the continuation of the deposit. The gold was found in a location where the company expected, which shows that the mineralization continues according to the company’s previous expectations.  

 

HOLD with a target price of EUR 6.5 (5.4)

We have not made changes to our production estimates based on the published results. Our valuation for the company’s Pampalo mine is based on DCF which considers the ore reserves and resources between the 755-815 and 815-875 levels. The rest of the value is derived from a real option model which considers the possibility of Pampalo LoM increase. We have made adjustment to the real option model regarding the possible scale of the LoM increase. As a result of the changes to the model and the favorable gold price development, we increase our target price to EUR 6.5 (5.4), HOLD-rating intact.

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Consti - Steady progress, favourable valuation

22.12.2022 - 09.20 | Company report

Consti is the leading renovation construction company in Finland. Despite facing an uncertain market with rising building costs, the company has been able to successfully turnaround and maintain its profitability. We continue to see the valuation rather undemanding and the discount to its main peers unjustified. We retain our BUY-rating and adjust our target price to EUR 12.0 (11.0).

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Finland’s leading renovation construction company
Consti is a construction service company focused on renovation construction and building technology contracting and services. The company operates solely in Finland with a focus on Finnish growth centers. Consti is the largest renovation construction company in Finland measured by revenue and the company’s building technology unit is the 5th largest building technology company in Finland.

Turnaround achieved amid uncertain market
During 2017-2018, Consti experienced challenges with project execution and management that resulted in negative earnings. Due to the suboptimal profitability, the company implemented corrective measures that began to show results already in 2019. The company has posted over 3% adjusted EBIT margin during 2020-2021. In 2022, the company has been able to maintain its profitability despite the rising construction material costs. In our view, the company’s long-term profitability target of 5% EBIT margin is ambitious but we see potential for improvement through fixed cost containment, optimization of the sales mix, and improved project management and procurement.

BUY with a target price of EUR 12.0 (11.0)
We see the case attractive despite the current construction market uncertainty and the recent share price strength. In our view, the company’s valuation discount to its new construction focused peer companies is unjustified. We also see a strong long-term upside potential if the company can reach its long-term operational targets. We retain our BUY-rating and adjust our target price to EUR 12.0 (11.0).  

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Endomines - Starting a new chapter

20.12.2022 - 09.10 | Company update

Trading with the company’s shares in Nasdaq Helsinki commences today under ticker PAMPALO. Endomines raised gross proceeds of EUR 13m which are used especially for exploration activities along the Karelian gold line. With the funding, the company is starting a new chapter as it begins to implement its updated strategy on a larger scale. We update our target price to EUR 5.4 (SEK 59), HOLD-rating intact.

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Endomines raised gross proceeds of EUR 13m
The public offering of Endomines Finland was oversubscribed yet the company’s BoD did not exercise the one million share upsize option. Therefore, the gross proceeds from the offering stayed at EUR 13m, with EUR 4m paid in cash and roughly EUR 9m paid by setting of the outstanding receivables based on the convertible loans issued by Endomines Finland. The result of the offering was in line with our prior assumptions.

Financing secured, strategy implementation ahead
Despite the dilution effect from the offering, we see the completion of the offering positive for the investment case. The company has now resources to begin larger scale exploration activities in the Karelian gold line which is one of the company’s strategic focus areas. The funding also allows management to focus on wider strategy implementation such as ramping up the Karelian gold line gold concentrate production and partnerships and/or asset sales in the United States. In addition, the company’s annual financing costs decrease as part of the offering is paid by convertible note conversion.

HOLD with a target price of EUR 5.4 (SEK 59)
Our view of the company remains largely unchanged from the previous update. Even though we see the completion of the offering as a great enabler for the company’s strategy implementation, we still see uncertainty regarding the successfulness of the company’s exploration activities and the value realization of the US assets. We update our target price to EUR 5.4 (SEK 59), HOLD-rating intact. 

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Netum - Near-term challenges continue

16.12.2022 - 09.35 | Company update

Netum issued a profit warning, lowering its EBITA-margin range. We see continued solid mid-term potential through the public sector exposure despite near-term challenges.

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Lowered 2022E EBITA-% from 12-14% to 9-10%
Netum issued a profit warning on December 15th. The guidance for growth of over 30% in 2022 remains intact, while the EBITA-margin estimate was lowered from 12-14% to 9-10%. There is evidently no clear sole reason for the lowered guidance, but a product of among other things slightly below expected top-line growth, recruitments, additional expenses incurred from organizational restructuring during H2 and wage and general cost increases. Project challenges or delays have not been an issue. Growth and demand have to our understanding overall remained good despite some softness within the more competed for “general” projects and in private sector demand. The high share of public sector clients and related solid demand and better prerequisites for transferring cost increases to the customer remain beneficial.

Margin improvement potential in our view remains intact
With the lowered guidance we have lowered our 2022 EBITA-% estimate to 9.6% and our sales growth estimate by some 3%p. We continue to see clear potential for double-digit EBITA-margins and the long-term target of 14% not overly ambitious. Uncertainty regarding 2023 is elevated but assuming that the demand situation continues to support top-line growth and among other things the challenges with Netum’s Cyber security business ease and savings from the organizational restructuring and acquisition synergies materialize, we expect margins to improve to 13% in 2023. Netum has continued active recruiting and although profitability challenges will likely somewhat affect growth ambitions, we continue to expect double-digit growth.

BUY with a target price of EUR 4.2 (4.5)
Netum’s investment case in our view remains supported by the public sector exposure and good demand in the area and margin potential and we have yet to identify any major weaknesses. We retain our BUY-rating but lower our TP to EUR 4.2 (4.5). 

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Endomines - Offering underway, uncertainties remain

02.12.2022 - 09.50 | Company update

Endomines seeks to raise gross proceeds of EUR 13m (SEK 141m), the proceedings are used especially for exploration activities along the Karelian gold line. The investment case relies on the successfulness of the company’s exploration activities, for which visibility remains low. Additionally, we see clear risks in the value realization of the company’s United States asset portfolio.

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Endomines to raise gross proceeds of EUR 13m

Endomines seeks to raise gross proceeds of EUR 13m (SEK 141m). The 2.6 million new shares offered represents 38.9% of the current shares outstanding. The subscription price is EUR 5.00 (SEK 54.25 at the current FX rate). In case of oversubscription, the company’s BoD may increase the number of shares issued up to 3.6m shares with a one million share upsize option. The net proceedings from the issue (excl. upsize option) are roughly EUR 12.3m (SEK 134m). The company has received commitments from investors worth of EUR 12.2m in total (or roughly 94% of the total offering) of which roughly EUR 3.4m is paid in cash.

 

Proceeds used to fund exploration activities in Finland

Endomines updated its strategy earlier this year which set the company’s focus back to Finland. The company aims to conduct wide scale exploration activities in the Karelian gold line with a mid-term target of defining a deposit with more than one million ounces of gold resources. The proceeds of the issue are used for the implementation of the new strategy and especially for exploration activities along the Karelian Gold Line.

 

HOLD with a target price of SEK 59 (64)

We have adjusted the shares outstanding and net debt figures with an assumption that the offering will be fully subscribed. In addition, we have made changes to our estimates and the SOTP valuation. The favorable gold price development is outweighed by the dilution effect from the offering and the uncertainty regarding the successfulness of the company’s exploration activities, the value realization of the US assets and changes in the FX rates. We decrease our target price to SEK 59 (64), HOLD-rating remains intact.

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Pihlajalinna - EBITA muted in the short-term

22.11.2022 - 09.30 | Company update

Pihlajalinna’s guidance downgrade wasn’t very big news as costs have remained relatively high over the course of this year. Demand is strong, but short-term upside is now more limited due to the uncertainty around FY ’23 improvement.

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Q4 EBITA not to improve that much

Pihlajalinna downgraded its guidance. Top line will still increase substantially, but FY ‘22 adj. EBITA is to decrease relative to the EUR 37.3m comparison figure. The earlier guidance suggested flat EBITA, and we previously estimated the figure at EUR 36.5m. We revise our Q4 EBITA estimate down to EUR 9.0m and hence now see the FY ’22 figure at EUR 33.5m. We note the EUR 7.8m figure seen in Q4’21 was weighed down by some EUR 2m in extraordinary high service costs within complete outsourcing contracts, and hence Pihlajalinna should be able to achieve at least flattish y/y profitability development in Q4’22.

EBITA is bound to improve next year

Pihlajalinna has scaled up its capacity over the past year; volumes and revenue have followed pretty much according to plan. Pohjola Hospital burdened profitability in H1, while new clinic ramp-ups continued to drag Q3 results. Personnel absence-related costs moderated a bit in Q3 but were still EUR 1m. Lower Covid-19 services revenue was another headwind. Pohjola Hospital cost synergies have already been realized and the units are profitable, but there’s still work to be done in driving higher capacity utilization rates across the network and especially within high value-added categories such as surgery procedures. Demand continues at a high level and Pihlajalinna has scope to raise prices; in our view profitability is set to follow up with top line next year, however we revise our FY ’23 profitability estimates down by EUR 3m.

Uncertainty around FY ’23 improvement pace limits upside

We make no changes to our revenue estimates as in our view the update concerns the cost levels which have continued relatively high. Pihlajalinna is valued at 14x EV/EBIT on our FY ’23 estimates, which is still not a high figure relative to peers while we estimate the respective EBIT margin almost 300bps below peers’. Long-term potential should remain large, but uncertainty around costs limits upside at least in the short-term perspective. Our updated TP is EUR 10 (11); we retain BUY rating.

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Administer - Bumping up growth

15.11.2022 - 09.45 | Company update

Administer acquired financial and HR administration services specialist Econia, taking a clear leap towards its 2024 net sales target of EUR 84m.

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Acquired Econia and adjusted 2022 guidance
Administer announced the acquisition of Econia Ltd. Econia is a company specialised in financial and HR administration and international services operating in 13 locations in Finland and in Fuengirola, Spain. Econia’s pro forma net sales and EBITDA in 2021 were EUR 19.1m and EUR 1.7m, with corresponding predicted 2022 figures at around EUR 25m and EUR 3m. Growth has been aided by acquisitions, but organic growth has to our understanding been solid. The debt-free purchase price of the acquisition is EUR 20m, of which EUR 18m is paid in cash at the time of closing, with an additional purchase price of max. EUR 4m to be paid by June 30th, 2025. The acquisition is funded by IPO proceeds and long-term debt of EUR 13m.

Back on track to achieve growth targets
In conjunction with the acquisition Administer adjusted its 2022 guidance for net sales to EUR 50-52m (prev. 47-49m) and the EBITDA-margin to 5.5-7.5% (5.0-7.0%). The adjustment is purely related to the completed acquisition and according to management no notable deviations in the underlying business have been seen from what was communicated in the H1 earnings release. The acquisition puts Administer well back on track to achieve its 2024 net sales target of EUR 84m, also providing an additional avenue for growth internationally. Econia will also aid near-term profitability and we expect Administer to move to double-digit EBITDA-margins in 2023. Reaching the 2024 target of 24%, however, still requires significant internal actions to improve efficiency.

BUY with a target price of EUR 3.6
Current valuation levels (0.6x 2023e EV/sales) continue to suggest essentially no expectations of improvement potential. We see continued support for margins picking up through acquisition synergies and improved efficiency, although we still find the 24% EBITDA-margin target challenging.

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Vaisala - Update on Vaisala’s W&E business

14.11.2022 - 13.55 | Company update

We attended Vaisala’s investor event in its wind Lidar R&D and production facilities in Saclay, France. The information we got further strengthened our view of W&E’s long-term potential.

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Profitability is currently driven by flagship businesses
Vaisala introduced its W&E business area and its strategy more in detail at its investor event in Saclay, France. W&E aims for growth through its growing and emerging businesses while the profitability is currently driven by the flagship businesses, i.e., product and project sales in meteorological and aviation markets. W&E is a clear market leader in selected niche markets in its flagship businesses but the growth opportunities in named business areas are highly restricted. Vaisala continues to selectively invest in its flagship markets, but the growth potentials lie in the rest of its businesses.

From hardware to software
While in the past Vaisala was known for its highly accurate measurement hardware, a general trend in W&E’s growing and emerging businesses is an increased share of software which nowadays drives a significant part of the value-add. With certain acquisitions made during the past, Vaisala has gained access to technologies, such as Lidars and developer tools, with which it's aiming to gain an annual double-digit topline growth. Growing businesses consist of from-distance measurements, i.e., Lidar equipment as well as air quality solution and road weather and environmental solutions. Meanwhile, in its emerging businesses (Xweather), W&E provides only subscription-based data and solution services combining hardware and software. Xweather’s profitability potential is notable given its scalable platform, but the business is still in its early stages. The presentations of W&E’s growing and emerging businesses further strengthened our impression of W&E’s future potential from both growth and profitability perspective.

Investment case unchanged for now
Although W&E’s prospects seem bright now, the uncertainty concerning economic development keeps us cautious and we remain to wait for the company’s further comments on visibility to 2023. We currently expect low single-digit growth in 23 due to strong comparison periods as well as weakening economic conditions. With valuation remaining elevated and our estimates intact, we retain our HOLD-rating and TP of EUR 40.0.

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Pihlajalinna - Earnings to improve a lot in Q4

07.11.2022 - 09.35 | Company update

Pihlajalinna’s Q3 ramp-up costs were larger than expected, but Q4 should already show a clear y/y EBITA improvement.

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There were still many profitability headwinds in Q3

Pihlajalinna’s Q3 revenue was EUR 165m, compared to the EUR 167m/165m Evli/cons. estimates. The 17.5% growth was driven by corporate and private volumes, which grew strong also on an organic basis when considering the headwind from lower Covid-19 services revenue (e.g. surgical procedures grew 61%). The mix was tilted less towards public customers, where profitability improved within outsourcing agreements due to efficiency measures, than we estimated. Private clinic capacity ramp-up costs, in addition to lower Covid-19 revenue, limited profitability as fixed costs were high during the summer months. Personnel-absence related costs, at EUR 1.0m, were lower than before, however there’s still uncertainty as to how these will develop in Q4. The EUR 9.4m adj. EBITA missed our estimate by EUR 2.6m, while the EUR 7.3m adj. EBIT was EUR 2m below the consensus.

Q4 and FY ’23 EBITA are set to see meaningful gains

Pihlajalinna retained its guidance, which now implies ca. EUR 5m y/y EBITA gain for Q4. The comparison figure suffered a EUR 2m hit from high costs within complete outsourcing contracts, so Pihlajalinna should still be able to reach a steep y/y improvement especially when ramp-up costs are to no more burden Q4 that much. Q4 also has some favorable seasonal demand patterns going on, including influenza vaccines, and the capacity additions (high value-added categories like surgical services) should have a significant EBITA contribution throughout next year. Pihlajalinna’s growth strategy is focused on major Finnish urban regions and increasingly relies on remote service paths to drive procedure volumes. Pohjola Hospital cost synergies have been taken in and hence the focus there is also on driving higher volumes. Pihlajalinna has already made some upward pricing adjustments and the tailwind continues to support next year.

Uncertainty around improvement pace, yet plenty of upside

The capacity drive-up has lifted indebtedness, but Q4 should provide a clear demonstration of higher EBITA. Pihlajalinna is valued around 13x EV/EBIT on our FY ’23 estimates, where the 5.6% EBIT margin estimate is still well below peers’ and long-term potential. Our new TP is EUR 11.0 (12.5); retain BUY rating.

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Exel Composites - Growth and EBIT potential remain

04.11.2022 - 09.05 | Company update

Exel’s Q3 results didn’t meet our estimates, but long-term EBIT potential remains significant even if it materializes somewhat slower than we previously estimated.

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Top and bottom line a bit shy but no major issues

Exel’s Q3 revenue was EUR 33.8m vs our EUR 37.5m estimate. The two largest regions, Europe and North America, continued to grow at a rate of some 5% y/y while Asia-Pacific declined by 6%. The largest customer segments landed close to our estimates, while relative softness within the smaller segments added up and hence Exel’s volumes were not quite as high as we expected. The relative lack in volumes also left the EUR 1.8m adj. EBIT muted vs our EUR 2.7m estimate. The summer months were quiet in terms of new orders however the levels have begun to improve over the autumn. Exel left its guidance unchanged; in our view Q4 EBIT is set to improve y/y as the comparison figure is low, while there should be potential for at least some improvement q/q.

Long-term CAGR should remain around 5-10%

Exel’s long-term drivers are in place as before and we believe the company has been able to find the right types of customer accounts. The 6.7% adj. EBIT margin seen this year is not too bad, yet there should be plenty of upside left beyond that level. The consolidation of the two Chinese plants yields annual cost savings of EUR 0.7m, while wind power is likely to remain an important driver next year. The Indian JV may prove useful in this respect. The 24% growth seen last year was a rate very difficult to sustain for long, and Exel’s top line may not grow much this year, but in our view Exel’s accounts should still support long-term CAGR of some 5-10%. Such rates, combined with further margin upside, mean there’s still meaningful EBIT potential left.

Valuation not demanding even if growth slows a bit

Exel is valued at slightly above 8x EV/EBIT on our FY ’23 estimates, which is not a particularly high level considering our respective 7.5% EBIT margin estimate is well below the long-term benchmark level of 10% the company has been able to touch on a few occasions with significantly lower top line. In our view Exel’s key customer accounts could help the company grow even in a more challenging macro environment, however short order visibility is one factor limiting earnings multiples potential. We update our TP to EUR 6.5 (8.5) and retain our BUY rating.

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Pihlajalinna - Q3 EBIT not quite where estimated

04.11.2022 - 08.30 | Earnings Flash

Pihlajalinna’s Q3 revenue landed close to estimates, whereas profitability came in on the soft side. In our view the roughly EUR 2m miss in profitability could be at least partly attributable to capacity ramp-up costs.

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  • Pihlajalinna Q3 revenue was up 17.5% y/y to EUR 165.2m, compared to the EUR 166.8m/164.9m Evli/consensus estimates. Organic growth was 3.3%. Corporate customers landed at EUR 52.8m vs our EUR 51.2m estimate, while private customers amounted to EUR 23.9m vs our EUR 21.4m estimate. Public sector customers were EUR 106.3m, compared to our EUR 111.9m estimate. Private clinic customer volumes grew 47% y/y (16% on an organic basis), while remote services use increased by 34%.
  • Covid-19 services revenue amounted to EUR 2.3m, a decrease of EUR 9.5m y/y. Organic growth would have been 10.0% without Covid-19 services.
  • Adjusted EBITDA was EUR 18.9m vs the EUR 20.5m/20.3m Evli/consensus estimates, whereas adjusted EBITA was EUR 9.4m vs our EUR 12.0m estimate. Adjusted EBIT landed at EUR 7.3m, compared to the EUR 10.0m/9.2m Evli/consensus estimates. Sickness-related personnel absences caused operational challenges and cost some EUR 1.0m in Q3. The costs of public services within complete outsourcing agreements also remained at a fairly high level.
  • Pihlajalinna guides FY ’22 revenue to increase substantially and adjusted EBITA to be on a par with 2021 (unchanged).

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Eltel - High growth, earnings to follow

03.11.2022 - 16.00 | Company update

Eltel is likely to grow at high single-digit rates from here, but valuation already largely anticipates improving EBIT.

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Growth and new orders, inflation still a major issue

Eltel’s Q3 revenue grew 7% y/y to EUR 207m vs the EUR 202m/201m Evli/cons. estimates. We find the top line beat was attributable to Norway, which grew 16%. Eltel has recently announced many new contracts, one-third of which are new business, and the EUR 406m orders will help EBIT to bottom out especially when they reflect higher costs. Inflation will, however, have a negative effect of more than EUR 10m this year. Q3 produced an EBIT of EUR 4.1m vs the EUR 3.2m/3.4m Evli/cons. estimates. The inflation challenge may already be easing a bit, but there are additional challenges such as employee turnover. Certain new projects may also come with a learning curve; e.g. Norwegian Q3 profitability was negatively impacted by the mix shift to more remote and smaller Communication projects.

Demand should support high single-digit growth rates

The Q3 report produced no big surprises in the sense that demand was known to be high, as highlighted by the many new contract announcements (further Power agreements have been announced after Q3). Customer investment levels are rebounding after the pandemic, but inflation is more widespread than previously estimated and its precise effect on 2-3 year-long frame contracts is hard to anticipate. Employee turnover is a particular problem in Sweden, but labor shortage issues extend to other countries as well. Profitability development hence remains highly uncertain for at least a couple of more quarters. Long-term demand and profitability drivers are in place like before for both Power and Connectivity. Eltel also announced its aim to capture 10% of the Finnish wind power market by 2025.

Valuation unchallenging from long-term margins view

Valuation isn’t very challenging as EBIT is bottoming out this year, while growth and inflation compensation are likely to drive margins for at least a couple of years. Growth should continue at high single-digit rates from Q4 on, yet we find the 11x EV/EBIT valuation, on our FY ’23 estimates, still neutral relative to peers. Eltel’s EBIT potential extends beyond that, and the 6x EV/EBIT on our FY ’24 estimates isn’t expensive but remains too far in the future. Our new TP is SEK 7.0 (9.0); we retain our HOLD rating.

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Exel Composites - Q3 figures a bit soft

03.11.2022 - 09.30 | Earnings Flash

Exel’s Q3 results came in soft relative to our estimates. There appears to be nothing particularly dramatic, but both top and bottom line landed relatively low after the strong Q2 report.

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  • Exel Q3 revenue grew by 1% y/y to EUR 33.8m vs our EUR 37.5m estimate. Growth was driven by North America while sales also increased in Europe.
  • Wind power landed at EUR 8.0m vs our EUR 8.0m estimate, while Buildings and infrastructure was EUR 7.8m vs our EUR 8.3m estimate. Equipment and other industries amounted to EUR 5.6m, compared to our EUR 6.0m estimate. Growth was particularly strong within Transportation.
  • Adjusted EBIT amounted to EUR 1.8m, compared to our EUR 2.7m estimate. The US unit performs at a better level compared to last year while Exel has succeeded quite well in transferring inflation to its prices.
  • Order intake was EUR 24.5m during Q3, in other words flat y/y.
  • Exel guides FY ’22 revenue to be at last year’s level and adjusted EBIT to increase compared to previous year (unchanged).

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Aspo - High results even without Russia

03.11.2022 - 08.40 | Company update

Aspo achieved again very high profitability, this time even with Russia mostly neutralized. This year makes for tough comparison figures, but valuation isn’t that demanding.

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Telko and Leipurin close to estimates, ESL drove the beat

Aspo’s EUR 160m in Q3 revenue and EUR 13m adj. EBIT were both roughly 15% above the respective Evli/cons. estimates. Telko and Leipurin developed relatively close to our estimates, at least in terms of profitability, while ESL’s continued strong performance explained a large part of the earnings beat. ESL has improved a lot in recent years due to both better operational efficiency and market conditions; the latter factor may not provide much more tailwind going forward, while the former still has potential especially in the long run. ESL’s niche positioning means overall cargo demand and pricing environment remains stable even if global spot markets have recently softened. Telko had already close to zero EBIT contribution from Russia and Belarus while the respective top line declines were roughly 40-50%. Leipurin exit process may lag that of Telko a bit, but Aspo’s key figures are already relatively clean of Russia.

ESL and Telko Q3 figures are high but largely sustainable

Telko’s Western EBIT has remained strong y/y and q/q thanks to its focus on more value-added categories. Telko’s EUR 3.7m Q3 EBIT implies an annual run-rate of close to EUR 15m; in our view the current market environment is more likely to soften than strengthen, but for now Telko’s demand and pricing situation stays relatively stable. We continue to estimate Telko’s FY ’23 EBIT at above EUR 13m. ESL has further long-term tailwinds thanks to its specialized positioning as a critical Baltic player; improved route optimization could still support EBIT in the short-term despite high comparison figures, while the hybrid vessels and their pooling will naturally add to long-term EBIT potential. We expect only a small ESL EBIT decline for FY ’23.

Telko H1 figures imply above EUR 10m EBIT gap for FY ‘23

We estimate Q4 EBIT at EUR 12.1m and believe Aspo is headed close to the upper end of its current guidance range. FY ’23 EBIT is thus very likely to decline after an extraordinary year. We make very little changes to our respective EUR 44.5m estimate. We still don’t view Aspo’s current EV/EBIT multiples of around 8x that challenging. We retain our EUR 9.5 TP and BUY rating.

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Marimekko - Growth continues with a gentler slope

03.11.2022 - 08.10 | Company update

Marimekko's Q3 growth was solid although EBIT fell short of our expectations. With higher-than-expected cost development, we modified our EBIT estimates downwards.

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Decent Q3 result, EBIT below market expectations
Marimekko posted solid Q3 figures. Although, due to strong comparison figures both the top- and bottom line fell short of expectations. Group net sales grew by 4% y/y to EUR 44.1m driven by strong int’l sales and good growth in domestic retail sales. Domestic net sales declined by 7% y/y while int’l sales increased by 28% y/y mostly driven by strong development of the APAC region. Increased logistics costs pressed the gross margin slightly below that of the comparison period. Moreover, fixed costs saw some pressure through elevated personnel and IT-related costs which caused Q3 EBIT to fall below the comparison period. Q3 EBIT amounted to EUR 11.1m, reflecting an EBIT margin of 25.2% which was still on a great level.

Market might challenge the company's increased ambitions
Marimekko renewed its strategy for 2023-27 and consequently raised its growth target to 15%. Currently, against the company's growth ambitions, we see low consumer purchasing power and slowing economy support rather single- than double-digit growth seen during the recent years. On the other hand, increasing brand awareness should support the demand also during uncertain times. We expect the company to perform operatively well in a weaker market driven by lessons learned during the pandemic, but we estimate the demand for Marimekko’s offering to see some slowdown. For that reason, we expect the company not to reach its growth target in the coming years.

Valuation remains favorable
We lowered our estimates, driven by higher-than-expected cost pressures. Despite decreased EBIT estimates, we see upside potential in Marimekko’s current valuation. Currently, Marimekko is valued with 23E EV/EBIT of 11x while we, with our new target price, value the company with a corresponding multiple of 12x. Reflecting estimate adjustments, we adjust our TP to EUR 10.0 (prev. 12.0). With a moderate valuation, we retain our BUY-rating.

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Aspo - Another strong quarter

02.11.2022 - 10.00 | Earnings Flash

Aspo’s Q3 results topped estimates. In our view the beat was driven by ESL, where Q3 was again a very strong quarter.

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  • Aspo Q3 revenue landed at EUR 160.1m vs the EUR 141.8m/143.5m Evli/consensus estimates.
  • Adjusted EBIT amounted to EUR 13.0m, compared to the EUR 11.3m/11.1m Evli/consensus estimates.
  • ESL Q3 revenue was EUR 65.0m vs our EUR 59.8m estimate, while EBIT amounted to EUR 9.7m, compared to our EUR 8.2m estimate. Contract traffic demand remained strong over the quarter while there was some softening in spot market rates towards the end of Q3, the energy industry being an exception.
  • Telko revenue amounted to EUR 60.5m, compared to our EUR 56.7m estimate. Comparable EBIT stood at EUR 3.7m vs our EUR 3.8m estimate. Plastics prices declined, especially within volume plastics, while chemicals prices declined during Q3 but stabilized towards the end of the quarter.
  • Leipurin top line was EUR 32.3m vs our EUR 25.3m estimate, while EBIT landed at EUR 0.6m vs our EUR 0.8m estimate.
  • Other operations cost EUR 0.9m, compared to our EUR 1.5m estimate.
  • Aspo guides comparable EBIT to be EUR 52-57m in FY ’22 (unchanged).

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Eltel - Q3 landed a bit above the estimates

02.11.2022 - 09.30 | Earnings Flash

Eltel’s Q3 results were somewhat above our and consensus estimates. Demand is now strong and it helps to compensate for high inflation, however Q3 is a seasonally favorable quarter and there are still uncertainties related to improvement pace, including labor shortage issues.

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  • Eltel Q3 revenue grew by 7% y/y to EUR 207.0m vs the EUR 201.8m/201.3m Evli/consensus estimates. Growth was attributable to Norway, Sweden and Finland while Denmark remained flat. Eltel also signed agreements worth a combined EUR 406m during the quarter, including one of Eltel’s largest fiber contracts ever. Workforce shortages are an issue, however high demand also helps to increase prices in tender offers.
  • EBIT landed at EUR 4.1m, compared to the EUR 3.2m/3.4m Evli/consensus estimates. Operative EBITA was EUR 4.1m, compared to our EUR 3.3m estimate. Profitability was burdened by increased costs and low utilization due to high sick-leave rates and employee turnover, while administrative costs were lower than in the comparative period.
  • Finland’s profitability remained flat y/y and was helped by a solid performance in Communication. Swedish and Danish profitability levels also remained roughly flat, while margins in Norway declined due to a change in production mix.
  • Eltel does not provide guidance for FY ’22.

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Marimekko - Growth rate slowed down as expected

02.11.2022 - 09.05 | Earnings Flash

Marimekko delivered solid Q3 figures. Net sales came in with single-digit growth and relative profitability was on a robust level.

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  • Group result: Marimekko’s net sales came in slightly below expectations and grew by 4% y/y to EUR 44.1m (45.0/45.3m Evli/cons.). The growth was driven by both Int’l sales and retail sales in Finland. Adj. EBIT was clearly below our expectations and amounted to EUR 11.1m (25.2% margin) (13.0/12.3m Evli/cons.). Profitability was negatively affected by elevated fixed costs (increased IT-investments and personnel costs) and weaker gross margin (increased logistics costs and elevated discounts).  In turn, the profitability was supported by favorable sales-mix and pricing. EPS amounted to EUR 0.22 (0.25/0.24 Evli/cons.).
  • Finland declined by 7% y/y to EUR 26.7m (Evli: 29.1m) due to weaker wholesale deliveries which the company was already guided. However, retail sales saw solid 10% growth.
  • Int’l grew strongly by 28% y/y to EUR 17.4m and came in above our expectations (Evli: 15.9m). The growth was supported by retail and wholesale sales in the APAC region as well as abnormal wholesale deliveries compared to Q3’21. The growth was also strong in Scandinavia and EMEA region.
  • 2022 outlook: Domestic sales are expected to grow, but wholesale deliveries to be below that of the comparison period. The APAC region and international sales are expected to increase clearly on the comparison period. In total, net sales are expected to grow, but the growth pace to slow down in H2’22. Licensing income is expected to be above comparison period.
  • FY22 guidance intact: expecting net sales to grow and an EBIT margin between 17-20%.
  • Analyst comment: Although the result came in below our expectations, the rate of int’l sales growth surprised us positively which we see crucial for Marimekko’s long-term success.

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Pihlajalinna - Profitability gains towards next year

01.11.2022 - 09.40 | Preview

Pihlajalinna reports Q3 results on Nov 4. We still expect Q3 EBITA to have remained a bit muted, but Q4 should see earnings growth while multiples and margins imply upside.

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High growth to have continued in Q3, EBITA flat y/y

Pihlajalinna grew strong in Q2, due to organic and inorganic growth within corporate and private customers, and we wouldn’t expect Q3 to have been much different in this respect. Capacity has increased a lot over the past few quarters, while Q3 still saw an increase albeit a more marginal one. Demand has kept up with the supply increases, and this should continue to be the case going forward even with self-paying private customers as Pihlajalinna is the lowest cost provider; the company has done some price hikes earlier this year, while prices are to rise further in H2 and especially within private customers next year. We don’t thus expect the inflationary environment to pose major hurdles as Pihlajalinna should be positioned to find compensation for e.g. higher energy costs (which are often not that significant except for certain specialty practices). We estimate Q3 revenue to have grown 19% y/y to EUR 166.8m and see EBITA at EUR 12.0m.

Q4 EBITA should see a significant y/y increase

We don’t expect EBITA to have yet increased y/y, despite high growth and positive results from Pohjola Hospital, as we understand employee sick leave rates to have remained relatively high in Q3 although a bit more moderate than in H1. We continue to expect further improvements in capacity utilization rates to drive Q4 EBITA to a gain of some EUR 3m y/y. Our H2 EBITA estimate is in line with guidance; we don’t expect Pihlajalinna to make changes to its guidance at this point, but in our view Q4 results could still end up driving FY ’22 EBITA higher than the current guidance implies. In any case, longer term earnings drivers are in place; Pihlajalinna has plenty of margin potential left as demand picks up while Pohjola Hospital continues toward above 20% EBITDA margins.

Valuation very much on the undemanding side

Pihlajalinna is unlikely to make further M&A moves in the short and medium term as organic growth potential remains plentiful. The 12x EV/EBIT valuation, on our FY ’23 estimates, isn’t challenging as we estimate the margin at 6%, still well below many peers. We retain our EUR 12.5 TP and BUY rating.

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Etteplan - Downgrade to HOLD

01.11.2022 - 09.15 | Company update

Etteplan’s operative performance was good in Q3 although bottom-line figures were weaker than expected. The market outlook appears to be taking some toll on growth ambitions and uncertainty is increasing. We lower our rating to HOLD (BUY) with a target price of EUR 13.5 (15.0).

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Operatively good quarter, bottom-line below estimates
Etteplan reported operatively good Q3 results. Net sales in Q3 were EUR 80.3m (EUR 78.1m/78.4m Evli/Cons.), with growth of some 20% y/y (12.0% organic excl. FX). EBIT amounted to EUR 5.8m (EUR 4.7m/5.2m Evli/cons.) and some EUR 6.5m excl. one-offs (Evli EUR 5.7m). Bottom-line figures were below our expectations, as financial items relating to the Semcon offer were clearly larger than anticipated. As a result, despite the better operating performance, EPS was negative at EUR -0.03 (EUR 0.04/0.01 Evli/cons.). Etteplan adjusted it guidance, expecting revenue of EUR 345-360m (340-370m) and EBIT of EUR 28-31m (28-32m).

Taking growth ambitions down a notch
Etteplan’s comments related to the market outlook were slightly on the negative side. Further softness is seen in China and Etteplan has also pre-emptively taken a more conservative approach to recruitments. Expectations are still good for the remainder of the year and signs of a significant decline in demand remain somewhat limited, although fluctuations in different customer segments are high and visibility going forward is lower. Our 2022 operative estimates are slightly up given the better than anticipated Q3 figures, currency hedging still poses a risk for the bottom line. We have also slightly lowered our estimates for the coming years based on an anticipated slow-down in growth.

HOLD (BUY) with a target price of EUR 13.5 (15.0)
Uncertainty going forward is clearly increasing, and although we for now do not see a reason to interpret the company’s comments in Q3 as indicative of any major downswing, some added caution is warranted. We lower our TP to EUR 13.5 (15.0) and our rating to HOLD, valuing Etteplan at ~14.0x 2023e P/E.

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Enersense - Organic as well as inorganic growth

31.10.2022 - 09.45 | Company update

Enersense Q3 report didn’t contain major surprises. Profitability is set to improve with growth and inflation compensation, but at least Q4 may see muted bottom line.

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Not many surprises while order backlog is now tall

Q3 revenue was EUR 64.4m vs our EUR 65.4m estimate. The 10.5% y/y growth was driven by all segments except Smart Industry, where the lower volumes of the OL3 project left a gap soon to be filled by the EUR 200m Helen contract. Low volumes, inflation, and Offshore ramp-up hurt margins, while the segment’s EBITDA gained from EUR 2.1m in items due to a capital gain as well as a change to the considerations related to an acquisition. Enersense’s headline EUR 4.3m EBITDA was above our EUR 2.0m estimate, but in line considering the one-offs. There were some items, such as Power’s costs with Megatuuli, which weren’t there to burden the comparison period. Connectivity EBITDA increased, however orders remained muted for now as top line is driven by long-term agreements, some of which should be signed soon. Meanwhile Power backlog doubled.

Both organic and inorganic growth to be seen

We would expect Enersense’s organic growth to help it reach healthy profitability levels in FY ’23, while the Baltics are likely to continue to dilute margins for a while. The Voimatel deal’s EUR 130m revenue and EUR 4m EBITDA, at an EV of EUR 10m, would add a lot of value with significant cost synergies but is yet to be approved by the competition authorities. The expansion to EV charging technology is another strategic addition. The initial Unified Chargers price tag is negligible, while it remains to be seen just how much value the deal will add (competition includes e.g. Kempower). The ERP project will continue next year while Offshore projects should begin to contribute then.

Q4 margins uncertain, but bound to get better next year

In our view Enersense is positioned for at least a high single-digit growth next year. Enersense’s guidance suggests there’s still a lot of uncertainty around Q4 profitability, in our view due to inflation and the fact that seasonal project patterns have been different this year. Enersense is valued some 5x EV/EBITDA and 10x EV/EBIT, which are not high levels compared to peers while there remains uncertainty around the improvement pace. We retain our EUR 6.0 TP and HOLD rating.

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Etteplan - Good operational performance

31.10.2022 - 09.40 | Earnings Flash

Etteplan's net sales in Q3 amounted to EUR 80.3m, slightly above our and consensus estimates (EUR 78.1m/78.4m Evli/cons.). EBIT amounted to EUR 5.8m, above our estimates and above consensus estimates (EUR 4.7m/5.2m Evli/cons.). Guidance for 2022 specified: revenue EUR 345-360m (EUR 340-370m) and EBIT 28-31m (EUR 28-32m).

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  • Net sales in Q3 were EUR 80.3m (EUR 66.9m in Q3/21), slightly above our estimates and consensus estimates (EUR 78.1m/78.4m Evli/Cons.). Growth in Q3 amounted to 20% y/y.
  • EBIT in Q3 amounted to EUR 5.8m (EUR 4.7m in Q3/21), above our estimates and consensus estimates (EUR 4.7m/5.2m Evli/cons.), at a margin of 7.2%.
  • EPS in Q3 amounted to EUR -0.03 (EUR 0.14 in Q3/21), below our estimates and consensus estimates (EUR 0.04/0.01 Evli/cons.).
  • Net sales in Engineering Solutions in Q3 were EUR 41.9m vs. EUR 40.1m Evli. EBITA in Q3 amounted to EUR 4.3m vs. EUR 3.7m Evli. 
  • Net sales in Software and Embedded Solutions in Q3 were EUR 22.0m vs. EUR 22.0m Evli. EBITA in Q3 amounted to EUR 2.2m vs. EUR 2.0m Evli. 
  • Net sales in Technical Documentation Solutions in Q3 were EUR 16.3m vs. EUR 15.9m Evli. EBITA in Q3 amounted to EUR 1.3m vs. EUR 1.5m Evli. 
  • Guidance for 2022 (specified): Revenue is estimated to be EUR 345-360m (EUR 340-370m) and the operating profit is estimated to be EUR 28-31m (EUR 28-32m)

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Finnair - Still way to go before take-off

31.10.2022 - 09.25 | Company update

Finnair touched a milestone, but there’s more to go before EBIT reaches adequate levels while valuation remains full.

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High passenger yields drove a revenue and EBIT beat

Finnair’s Q3 revenue reached EUR 719m, clearly above the EUR 645m/667m Evli/cons. estimates as passenger revenues were some EUR 50m higher than we estimated. Seasonally strong Q3, including EUR 56m in other operating income mostly attributable to wet leases, coupled with improving unit revenues helped Finnair’s EBIT to EUR 35m vs the EUR -7m/-4m Evli/cons. estimates. In our view the top line and EBIT beats were driven by higher than estimated passenger yields. The positive EBIT was an important milestone for Finnair, but there’s still distance left to go until profitability reaches a firm footing.

Improvement to continue, but not as steep as in Q3

Q3 EBIT was a major improvement q/q as passenger yields increased by some 10% over Q2. Q4 will be a bit softer in terms of volumes; October bookings look good, but November is seasonally soft before December’s seasonal travel volumes. We estimate 5% q/q passenger yield decline for Q4, but high jet fuel prices should still provide some ticket pricing tailwind in addition to a rebound in corporate travel, which has reached around 80% of the pre-pandemic level when adjusted for capacity. Meanwhile Finnair’s strategy includes efforts to secure high unit revenues (e.g. the share of direct distribution has already roughly doubled to 60%). Passenger yields are therefore likely to stay relatively high, but there’s also uncertainty around next year’s passenger volumes as China’s opening may be further delayed.

Valuation well anticipates long-term improvement

There’s a lot of uncertainty around factors such as yields, volumes as well as costs (including fuel prices) going forward. Finnair should achieve a positive FY ’23 EBIT, but it’s likely to be muted due to a certain lag in passenger volumes and wouldn’t in any case be enough to justify current valuation, which still isn’t cheap. Finnair’s valuation seems based on the assumption that it will eventually catch up with peer profitability levels; valued about 12x EV/EBIT on our FY ’24 estimates, clearly above peers while EBIT margin is to lag by many percentage points. The assumption may be fair, but leaves Finnair pretty much fully valued. We update our TP to EUR 0.40 (0.36); retain HOLD rating.

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Vaisala - Well positioned for uncertain future

31.10.2022 - 08.45 | Company update

The strong demand for Vaisala’s solutions continued with the order received increasing by 25% in Q3. Net sales saw double-digit growth and EBIT was on a solid level. We believe Vaisala to enjoy solid growth during H2’22-H1’23 but H2’23 being somewhat gloomy.

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Orderbook was yet again on a record level
Vaisala has increased its orders received for four consecutive quarters and the Q3 orderbook was on a record level. Q3 IM net sales grew by 22% y/y while the growth was stronger than expected in W&E which recorded y/y growth of 18%. In total, Q3 net sales amounted to EUR 133.3m (+20% y/y). Gross margin was hit by continued spot-component purchases which eventually amounted to 54.7%. With fixed costs elevated and gross margin weaker, relative profitability saw also a slight decline. Q3 EBIT amounted to EUR 22.0m, representing a 16.5% EBIT margin. The outlook for the near future remains bright despite the weakening economic indicators.

2023 uncertain, but megatrends support the demand
Guidance implies growth to continue in Q4. The record orderbook provides a foundation for H1’23 growth but the visibility to H2’23 is somewhat gloomy. Vaisala’s resilience to possible economic slowdown is hard to estimate but the company is exposed both for industrial investments and public spending. However, the company operates within fields in which growth is boosted by several megatrends. We consider these trends supporting the demand during uncertain times. In addition, the energy crisis in Europe will likely increase investments in renewable energy, power, and gas industries in which the company already operates.

Valuation remains elevated
We made no significant changes to our estimates. We see Vaisala developing favorably in Q4’22 and H1’23 but expect W&E to experience headwinds in H2’23. In total, we expect 23E group net sales to grow only by 2.5% but EBIT margin to further improve due to the margin impact of improved component availability. Vaisala’s 23E valuation remains somewhat elevated. We don’t see significant room for an upside in the share price, but we enjoy the ride with the high-class business of Vaisala. We retain our HOLD-rating and TP of EUR 40.0.

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Enersense - Relatively good development

28.10.2022 - 12.30 | Earnings Flash

Enersense’s Q3 profitability topped our estimates as EBITDA development was favorable in all other segments except International Operations, where we believe inflation continues to be more of a problem than in Finland.

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  • Enersense Q3 revenue grew 10.5% y/y to EUR 64.4m, compared to our EUR 65.4m estimate. Revenue grew in all other segments except Smart Industry, where the 18% y/y decline was mainly due to the lower volumes of the Olkiluoto 3 project. Power and Connectivity top lines were close to our estimates.
  • Adjusted EBITDA landed at EUR 4.3m vs our EUR 2.0m estimate, while EBIT was EUR 1.9m vs our EUR -0.3m estimate. EBITDA improved in Power as well as Connectivity while it remained flat in Smart Industry. International Operations saw EBITDA decrease due to high inflation in the Baltics. Q3 EBITDA was burdened by investments in offshore wind power and a new ERP system to the tune of EUR 1.0m. Enersense has managed to negotiate price increases for new as well as existing contracts to compensate for inflation.
  • Order backlog amounted to EUR 385m at the end of Q3, while it was EUR 272m a year ago. Smart Industry order backlog increased significantly, including the EUR 100m agreement with the energy company Helen (EUR 200m including the options to extend the agreement). Development was strong also in Power.
  • Enersense guides FY ’22 revenue to be in the EUR 245-265m range and adjusted EBITDA EUR 6-12m (unchanged).

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Consti - Steady development in a difficult market

28.10.2022 - 09.45 | Company update

Consti reported Q3 figures that were in line with our estimates. The company was able to defend its margins in a difficult market environment. Consti’s order backlog decreased slightly but remains at healthy levels, which supports the company’s near-term development. Although the construction market outlook is quite grim, the near-term growth outlook for renovation construction remains decent. We retain our BUY-rating and TP of EUR 11.0.

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Q3 results in line with our estimates

Consti Q3 results were in line with our estimates. Net sales in Q3 were EUR 79.0m (EUR 76.0m in Q3/21), in line with our and consensus estimates (EUR 79.8m/79.6m Evli/Cons.). Sales grew 4.0% y/y. Adj. operating profit in Q3 amounted to EUR 3.3m (EUR 3.1m in Q3/21), in line with our and consensus estimates (EUR 3.2m/3.3m Evli/cons.). The company was able to defend its margins in a difficult market environment as the operating margin stood at 4.2% (4.1% in Q3/21). The guidance for operating profit is intact at EUR 9-13m for FY 2022.

 

Strong backlog, market remains uncertain

Even though order intake and backlog decreased slightly y/y, both were still at a healthy level supporting the company’s near-term development especially during the rest of the year. According to the CFCI estimates, the Finnish renovation construction market is expected to grow 2% in 2023 while Euroconstruct expects volume growth of 1.3%. A survey study conducted by Talotekniikkaliitto in September, however, pointed towards a slower market development especially in the non-residential renovation building technology. The market environment also remains uncertain due to the higher construction costs and rising interest rates, although the labour-intensity of renovation alleviates some concerns.

 

BUY with a target price of EUR 11.0

Consti has been able to perform well in the turbulent market and the healthy backlog supports continued good near-term development. We find the story still attractive because of the supportive long-term drivers and undemanding valuation.

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Solteq - New challenges met

28.10.2022 - 09.45 | Company update

Solteq’s Q3 was somewhat below our expectations and most notably, challenges were seen now also in Solteq Digital. We adjust our TP to EUR 1.2 (1.5), rating still HOLD.

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New challenges from Solteq Digital
Solteq reported Q3 results below our already rather low expectations. Net sales declined 3.7% y/y to EUR 14.4m (Evli EUR 14.7m). The operating profit and adj. operating profit amounted to EUR -5.0m and -0.5m respectively (EUR 1.1m/1.2m in Q3/21), below our estimates (Evli EUR -4.1m/0.3m). Solteq Software’s EBIT was negative as expected while the modest growth was a positive. Solteq Digital unexpectedly showed a rather notable 9.6% y/y growth decline and profitability as a result was also on the weaker side. Problems appear to relate market demand and some delays and hesitation in customer activity.

Near-term outlook not the best
With the added woes of Solteq Digital, the near-term for Solteq looks rather challenging. Fortunately, Solteq Software showed some signs of the product development related challenges being alleviated and customer demand remains healthy. Nonetheless, with the problems being more fundamental in nature a clear recovery appears more likely to materialize during H1/2023. The market sentiment driven challenges in Solteq Digital are quite worrisome, with the segment having been the main driver of profitability. The challenges are likely to continue to some extent going forward as customers review investment needs, but a larger deterioration still appears unlikely supported by necessity-based investments. With the challenges, our expectations for 2023 remain on the softer side. Visibility is also subdued by the market environment and the pace at which Solteq Software, with the key Utilities business, is able to ramp-up growth again.

HOLD with a target price of EUR 1.2 (1.5)
With the added concerns and reduced visibility near-term upside remains somewhat limited although Solteq still exhibits significant and proven potential. On our estimates valuation upside relies on mid-term potential or significant improvements next year. We lower our TP to EUR 1.2 (1.5), HOLD-rating intact.

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Vaisala - The momentum continued in Q3

28.10.2022 - 09.40 | Earnings Flash

Preliminary figures given with the positive profit warning, Vaisala’s Q3 result came in strong and included no large surprises. Net sales saw a double-digit growth while EBIT remained on a good level.

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  • Group result: Orders received grew nicely by 25% and the orderbook was 14% higher than in the previous year. Net sales grew by 20% y/y to EUR 133.3m (133.3/133.3m Evli/cons.). The growth was driven by both Vaisala’s business units. Spot-component impact continued stronger than a year ago, and gross margin fell short that of the previous year. EBIT slightly improved and amounted to EUR 22.0m (22.0/22.0m Evli/cons.), EBIT margin of 16.5%. EPS amounted to EUR 0.44 (0.45/0.47 Evli/cons.).
  • Industrial measurements (IM): Orders received grew by 30% (FX: 21%) y/y and the orderbook was 60% higher than a year ago. Net sales increased by 22% (FX: 14%) y/y to EUR 57.6m (Evli: 59.9m). A weaker gross margin had an impact on the EBIT margin which amounted to 25.3%. Profitability was under pressure of increased material and fixed costs.
  • Weather and Environment (W&E): Orders received increased by 21% (FX: 14%) y/y and the orderbook was 6% higher than a year ago. Net sales grew by 18% (FX: 11%) y/y to EUR 75.7m slightly beating our estimates (Evli: 73.4m). Spot-component purchases weakened the gross margin, but surprisingly EBIT margin improved to 9.9% against our expectations.
  • Market outlook: High-end industrial instruments, life science, power industry, and liquid measurements are expected to grow. Meteorology and ground transportation are expected to be stable. Aviation is expected to recover towards pre-pandemic level. Renewable energy market is expected to continue to grow. The global shortage of components is expected to continue during Q4’22 causing additional material costs.
  • Guidance intact (revised on 14th Oct): Net sales of EUR 500-520m and EBIT of 62-72m.

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Finnair - Reached positive EBIT

28.10.2022 - 09.30 | Earnings Flash

Finnair’s Q3 results came in clearly above estimates as strong development in unit revenues drove top line as well as profitability. Finnair turned in a positive EBIT for the first time since Q4’19.

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  • Q3 revenue was EUR 719.2m, compared to the EUR 645.0m/666.6m Evli/consensus estimates. Good development in unit revenues supported top line, and total passenger revenue was some EUR 50m higher than we estimated. The performance was also helped by the fact that Q3 is seasonally the strongest quarter.
  • Adjusted EBIT amounted to EUR 35.2m vs the EUR -7.3m/-4.1m Evli/consensus estimates.
  • Fuel costs were EUR 242m vs our EUR 215m estimate, while staff costs amounted to EUR 117m vs our EUR 115m estimate. All other OPEX+D&A amounted to EUR 381m, compared to our EUR 353m estimate.
  • Cost per Available Seat Kilometer was 8.18 eurocents vs our estimate of 7.81 eurocents.
  • Finnair expects to operate an average capacity of around 70% (ASK) in Q4’22 in comparison to the figure in Q4’19. Leases of aircraft and crew would bring the total deployed capacity to about 80%. Strong travel demand should continue in the short-term and thus support unit revenues as in the summer months of 2022.

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SRV - Tougher times ahead

28.10.2022 - 09.20 | Company update

SRV’s Q3 was rather uneventful and construction profitability remained at reasonable levels. Near-term upside remains limited in the challenging market, and we lower our TP to EUR 4.3 (5.0), HOLD-rating intact.

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Reasonable profitability given market conditions
SRV’s Q3 results were largely rather uneventful. Revenue in Q3 was EUR 186.8m (EUR 176.7m/194.0m Evli/Cons.), near previous year levels. The operating profit amounted to EUR 5.5m (EUR 3.1m/2.7m Evli/cons.). The difference was due to capital gains from the sale of a commercial centre and the operating profit margin in construction was slightly below our expectations (2.6%/2.9% act./Evli). Profitability was supported by improved controllability of projects, successful inflation control and ensuring the availability of materials. The order backlog at the end of the review period stood at EUR 717.1m, down some 30% y/y. SRV announced the initiation of change negotiations to meet the current market demand situation.

Heading into challenging market conditions
SRV is heading into a quite tough market, with construction material costs and inflation continuing to cause some hassle along with expectations of a decline in new building construction volumes. The pipeline for business construction appears to be somewhat fruitful but we see little support for the generally more profitable housing construction volumes. The visibility into 2023 is weak and currently we expect a sales decline of some 6%. There is still some potential for margin improvement potential, although we see the current headwinds limiting that in the short-term, and the completed financing arrangements will support bottom-line figures.

HOLD with a TP of EUR 4.3 (5.0)
Although valuation looks cheap, with the market challenges we see little potential for materialization of valuation upside compared with peers in the near-term. In the mid-term, improved margins and initiation of dividend payments could act as a catalyst, again however limited by current uncertainties. We retain our HOLD-rating with a TP of EUR 4.3 (5.0).

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Verkkokauppa.com - Tough times ahead before market recovery

28.10.2022 - 08.15 | Company update

Verkkokauppa.com’s Q3 result came in soft as expected. The current market includes a significant portion of uncertainty, and we find it better off to wait for the first signs of market recovery. We downgrade our rating to SELL (HOLD) and adjust TP to EUR 2.2 (3.5).

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Topline came in above expectations, but EBIT was modest
Due to the challenging market, Verkkokauppa.com’s Q3 result came in modest. Net sales declined by 2.3% y/y to EUR 137.8m. The decline was mostly driven by the consumer segment and core categories. Sales grew in the Export and B2B segments. B2B growth pace slowed down to 5% with reduced activity of SMB clients and Export growth was mostly supported by new customers gained. Evolving categories performed well in a challenging market and managed to grow by 3.1% y/y. Unfavorable sales mix and increased price competition showed in a weaker gross margin of 14.6%. The profitability was further harmed by increased cost pressures through investments in personnel and elevated logistics costs. Q3 adj. EBIT amounted to EUR 2.1m (1.5% margin).


2023 going to be challenging as well
The company guides for 2022: net sales of EUR 530-560m and adj. EBIT of EUR 5-9m. Lots of tasks must be done to reach the guidance since the weak market doesn’t provide much support. At this moment, large inventory burns cash, and the company has pressures to release capital from expanded inventories. A side effect of inventory clearance, namely margin investments possibly hurt profitability. We expect the inventory clearance to continue also in 2023. With low sales volumes and existing cost pressures, we expect the profitability to lag also in H1’23.


Negative view with elevated valuation
We decreased our estimates after the Q3 result. We see the upcoming year as challenging and our previous 2023 estimates seemed quite optimistic. With decreased topline estimates our 23 EBIT estimate saw a ~50% drop. We see it challenging for the company to stay profitable in H1’23, but EBIT to notably improve in H2’23. However, we find the current market as too uncertain. With our revised estimates, uncertain market environment and high valuation, we downgrade our rating to SELL (HOLD) and adjust TP to EUR 2.2 (3.5).

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CapMan - Slight headwinds in sight

28.10.2022 - 08.15 | Company update

CapMan continued its good performance in Q3 and results apart from carried interest corresponded to expectations. With some near-term softness seen in fundraising and transaction activity, we lower our TP to EUR 3.1 (3.4), BUY-rating remains intact.

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Results apart from carried interest as expected
CapMan continued its good performance in Q3 and apart from carried interest (EUR 1.0m/5.0m act./Evli) coming in lower than we expected, the results were well in line with our expectations. Revenue amounted to EUR 15.9m (EUR 19.7m/19.2m Evli/Cons.) and operating profit to EUR 12.7m (EUR 16.5m/12.3m Evli/cons.). Capital under management increased to EUR 4.9bn. Investment returns continued to be at good levels despite valuation level decreases, aided by a few significant exits and strong operational performance in several portfolio companies. Carried interest was earned from Growth Equity and NRE funds.

Near-term softness seen in fundraising and transactions
In the near-term, some softness is anticipated in fundraising and transaction activity, although the overall sentiment still remains rather solid. Alternative asset AUM growth is forecasted to decline 3%p during 2021-2027e compared with 2015-2021, but the estimated growth of 11.9% p.a. is still at healthy levels. In terms of our estimates, we have made slight downward tweaks to our end of year expectations for carried interest and investment returns but otherwise no significant changes. We expect operating profit levels of EUR 50-60m during 2022-2023e with further potential in the mid- to long-term should fundraising activity remain at forecasted levels. Timing of carried interest realization and investment returns remain key short-term uncertainties.

BUY with a target price of EUR 3.1 (3.4)
CapMan’s investment case continues to remain favourable in our view and valuation still remains attractive. With some anticipated near-term softness and the potential impact on non-recurring income we lower our TP to EUR 3.1 (3.4), BUY-rating still intact.

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Consti - In line with our estimates

27.10.2022 - 09.45 | Earnings Flash

Consti's net sales in Q3 amounted to EUR 79.0m, in line with our and consensus estimates (EUR 79.8m/79.6m Evli/cons.), with growth of 4.0% y/y. EBIT amounted to EUR 3.3m, in line with our and consensus estimates (EUR 3.2m/3.3m Evli/cons.). Guidance reiterated: operating result in 2022 is expected to be EUR 9-13m.

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Consti's net sales in Q3 amounted to EUR 79.0m, in line with our and consensus estimates (EUR 79.8m/79.6m Evli/cons.), with growth of 4.0% y/y. EBIT amounted to EUR 3.3m, in line with our and consensus estimates (EUR 3.2m/3.3m Evli/cons.). Guidance reiterated: operating result in 2022 is expected to be EUR 9-13m.

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Suominen - Recovering with higher US volumes

27.10.2022 - 09.45 | Company update

Suominen’s margins remained very low in Q3, but the worst of cost pressures are easing and continued high demand, especially in the US, should begin to drive significant gains.

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High growth but still low profitability margins in Q3

Suominen’s EUR 131.9m Q3 revenue grew by 34% y/y and topped the EUR 123.0m/121.5m Evli/cons. estimates. Growth was attributable to higher volumes, sales prices, and currencies in roughly equal portions. Early part of the quarter was still difficult especially due to low volumes in the US, but August and September were better as demand improved toward the end of Q3. There are still account-specific differences in the US with regards to the inventory build-up situation, but overall demand is clearly improving over the course of Q4. Meanwhile cost pressures remained larger than we estimated as profitability missed our estimates despite the high revenue. Gross profit was only EUR 5.2m vs our EUR 9.2m estimate, while the EUR 5.1m Q3 EBITDA (vs our EUR 7.0m estimate) benefited from tax credits.

US likely to continue to drive growth for some time

Americas already grew by 41% y/y to EUR 80m, while there should still be plenty of additional capacity to utilize in the US. It remains to be seen at how high a level Americas’ growth continues, but we would expect it to remain well above 20% for at least a couple of quarters. Meanwhile Europe’s growth should moderate over the course of next year as sales prices are no more to increase with raw materials prices (there’s also not that much additional capacity to utilize in Europe). We update our Q4 revenue estimate to EUR 145m (prev. EUR 129m).

US recovery and cost compensation to drive earnings up

Q3’s relative softness and the comments regarding the pattern of demand in the US over the quarter suggest Q4 will see steeper q/q improvement than we previously estimated. Earnings are set to increase from here, however considerable uncertainty persists around where the level will land next year. Further top line growth should be expected, due to demand volume trends, while energy costs will remain another profitability hurdle for at least a few quarters. We estimate 7.5% growth for next year, which in our view appears to be on the conservative side. Suominen remains valued a bit above 3x EV/EBITDA and 5.5x EV/EBIT on our FY ’23 estimates. We retain our EUR 3.0 TP and BUY rating.

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SRV - Decent profitability, difficult market

27.10.2022 - 09.30 | Earnings Flash

SRV's net sales in Q3 amounted to EUR 186.8m, above our estimates and below consensus (EUR 176.7m/194.0m Evli/cons.). EBIT of EUR 5.5m was a positive, beating expectations (EUR 3.1m/2.7m Evli/cons.).

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  • Revenue in Q3 was EUR 186.8m (EUR 191.1m in Q3/21), above our estimates and below consensus estimates (EUR 176.7m/194.0m Evli/Cons.). Growth in Q3 amounted to -2% y/y.
  • Operating profit in Q3 amounted to EUR 5.5m (EUR -1.6m in Q3/21), above our and consensus estimates (EUR 3.1m/2.7m Evli/cons.), at a margin of 2.9%. Profitability in Q3 was supported by improvement in the controllability of projects, successful inflation control and ensuring the availability of materials.
  • Revenue in Construction in Q3 was EUR 183.9m vs. EUR 176.7m Evli. Operating profit in Q3 amounted to EUR 4.7m vs. EUR 5.1m Evli. 
  • Revenue in Investments in Q3 was EUR 3.2m vs. EUR 1.1m Evli. Operating profit in Q3 amounted to EUR 1.9m vs. EUR -1.0m Evli. 
  • Revenue in Other operations and elim. in Q3 was EUR -0.3m vs. EUR -1.1m Evli. Operating profit in Q3 amounted to EUR -1.2m vs. EUR -1.0m Evli. 
  • SRV will start change negotiations to adjust the company’s cost structure and number of personnel to meet the demand of the current market situation.
  • The weakened consumer confidence, increased interest rates and investors’ return requirements have deteriorated the outlook for the construction sector
  • Guidance for 2022 (updated 25.10): Revenue in 2022 is expected to be EUR 770-820m (800-860m) and operative operating profit to amount to EUR 17-23m (15-25m).

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Dovre - Margin potential leaves upside

27.10.2022 - 09.20 | Company update

Dovre posted Q3 results above our estimates; in our view earnings growth should continue next year, while valuation still leaves enough upside potential.

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Especially high growth in Norway during Q3

Q3 revenue grew to EUR 59.7m, above our EUR 54.1m estimate. The 28.5% growth was driven by all three segments. High demand in Norway continued to support both Project Personnel and Consulting, and in our view the latter’s 33% growth was encouraging as it was driven by several larger projects within the Norwegian public sector as well as energy. Consulting continues to grow in Finland, but Suvic’s wind farm projects remain the more significant Dovre business. Dovre's EUR 3.0m EBIT topped our EUR 2.2m estimate (due to all three); Renewable Energy EBIT declined y/y (as the combination of busy construction season and inflation causes some challenges) but was nevertheless above our estimate. Dovre also made an upward revision to its guidance.

Renewable Energy and Consulting to drive FY ’23 EBIT

Dovre says this year has seen extraordinarily high growth (in our view the note concerns particularly Project Personnel) and such a level is not to be expected next year. This is no surprise, and we expect organic growth to slow to 7% in Q4. We have previously estimated an organic CAGR of 5% to be a reasonable long-term pace for Dovre, and we continue to expect such a rate for next year. We also see there to be further earnings growth potential especially within Renewable Energy; Suvic has managed well in terms of profitability despite the inflationary environment, and we see scope for margin improvement next year as wind farm demand remains high while the operating environment should be more normal. We continue to expect flattish profitability for Project Personnel going forward, while Consulting should be able to achieve earnings growth also next year.

Multiples are down, earnings growth potential attractive

We see a 5% growth rate realistic for next year and wouldn’t be surprised by a high single-digit rate, whereas such an organic double-digit rate as seen this year shouldn’t be expected. Dovre’s valuation is reasonable, around 8x EV/EBIT on our FY ’22 estimates, while we expect 50bps EBIT margin gain for next year. Peer multiples have retreated a bit, but we retain our EUR 0.75 TP and BUY rating as we make some upward estimate revisions.

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CapMan - Good performance continues

27.10.2022 - 09.00 | Earnings Flash

CapMan's net sales in Q3 amounted to EUR 15.9m, below our estimates and below consensus (EUR 19.7m/19.2m Evli/cons.). EBIT amounted to EUR 12.7m, below our estimates and in line with consensus (EUR 16.5m/12.3m Evli/cons.). Apart from carried interest (Act./Evli EUR 1.0m/5.0m), results were well in line with our expectations.

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  • Revenue in Q3 was EUR 15.9m (EUR 14.9m in Q3/21), below our estimates and consensus estimates (EUR 19.7m/19.2m Evli/Cons.). Growth in Q3 amounted to 7% y/y.
  • Operating profit in Q3 amounted to EUR 12.7m (EUR 10.9m in Q3/21), below our estimates and in line with consensus estimates (EUR 16.5m/12.3m Evli/cons.), at a margin of 79.7%.
  • EPS in Q3 amounted to EUR 0.06 (EUR 0.06 in Q3/21), below our estimates and above consensus estimates (EUR 0.08/0.06 Evli/cons.).
  • Results were in line with our expectations apart from carried interest (Act./Evli EUR 1.0m/5.0m).
  • Revenue in Management Company business in Q3 was EUR 12.6m vs. EUR 16.8m Evli. Operating profit in Q3 amounted to EUR 4.2m vs. EUR 8.2m Evli. 
  • Revenue in Investment business in Q3 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q3 amounted to EUR 7.9m vs. EUR 7.8m Evli. 
  • Revenue in Services business in Q3 was EUR 3.1m vs. EUR 2.9m Evli. Operating profit in Q3 amounted to EUR 1.8m vs. EUR 1.7m Evli. 
  • Capital under management by the end of Q3 was EUR 4.9bn (Q3/21: EUR 4.3bn). Real estate funds: EUR 3.3bn, private equity & credit funds: EUR 1.0bn, infra funds: EUR 0.5bn, and other funds: EUR 0.1bn.

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Scanfil - Profitability continues to improve

27.10.2022 - 08.55 | Company update

Scanfil’s Q3 results were largely as expected. Demand remains strong and EBIT should continue to increase as the gradually easing component shortage situation further helps plant productivity.

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Q3 figures and management comments largely as expected

Scanfil Q3 revenue grew to EUR 212m, compared to the EUR 210m/209m Evli/cons. estimates. Growth continued to stem across all customer segments. The 26% y/y growth (23% without the EUR 20m transitory spot component purchases) was a record pace and may not be reached again as it was driven by a very high level of customer demand as well as inflation. EBIT amounted to EUR 11.5m vs the EUR 12.3m/11.5m Evli/cons. estimates, and EBIT margin was a decent 6% when excluding the spot purchases. The amount of these transitory items already declined by a third q/q and thus suggests component availability challenges continue to ease, yet the situation will still take a while to wholly normalize.

Underlying growth should moderate a bit but remain strong

Scanfil’s business model allows incremental capacity additions, and hence supply-demand balance is unlikely to be altered too unfavorably even if EMS players, including Scanfil, expand their footprint in response to a particular phase of high demand. The Atlanta investments (EUR 4m in an SMT line as well as additional production space), in addition to production space increases in other locations, will mostly address needs current customers have, although Scanfil is also active in new customer acquisition. Customer demand forecasts remain strong across all key markets, at least for now, and Scanfil’s diverse customer base means demand risks are manageable even in the case of softening.

Further earnings growth with an undemanding valuation

The plant network is performing well, and no plant is lagging. The guidance midpoint suggests y/y growth will continue at a 14% pace in Q4; Scanfil should reach an above 6% EBIT margin even with some spot purchases. The estimated Q4 run-rate EBIT implies well above EUR 50m figure for FY ’23, which should be achievable even if top line growth turns negative due to the lost transitory invoicing items. Meanwhile Scanfil’s valuation is not too demanding, below 9x EV/EBIT on our FY ’22 estimates and around 7x next year. Our updated TP is EUR 7.0 (8.0); retain BUY.

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Verkkokauppa.com - A victim of poor market

27.10.2022 - 08.45 | Earnings Flash

Preliminary figures given, Verkkokauppa.com’s Q3 report included no large surprises. Net sales continued in decline and profitability was hit by lower volumes, weaker sales mix, price competition and elevated cost levels. Guidance intact (revised ahead of Q3 result).

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  • Group results: net sales declined by 2.3% y/y to EUR 137.8m (135.9/136.5m Evli/cons.). Acquired e-ville.com contributed to Q3 net sales and EBIT by EUR 2.4m and 0.6m respectively. Gross margin was negatively impacted by weaker sales mix and price competition. Adj. EBIT was EUR 2.1m (3.1/2.6m Evli/cons.) as a result of the elevated cost level. EPS amounted to EUR 0.01 (0.05/0.04 Evli/cons.).
  • Online sales: represented 58% of total net sales and decreased by 3.5% y/y while brick-and-mortar saw a 7.7% y/y decline.
  • Category split: demand was good in some segments of core categories, such as household appliances and home entertainment devices, but in total the category declined by 5.2% y/y. The demand for evolving categories continued as good by growing by 3.1% y/y in a challenging market environment.
  • Consumer segment: consumer segment continued lagging and declined by 7.8% y/y. The segment represented 70% of the group net sales.
  • B2B segment: growth pace saw a slowdown to 5% y/y with SME clients reducing their activity. The segment represented 21% of the group net sales.
  • Export segment: gained new customers from acquired e-ville.com and grew by 35.1% y/y, being 9% of total net sales. Net sales came back to its levels before the disposal of sales to Russia.
  • Guidance was lowered ahead of Q3 result: net sales between EUR 530-560m and adj. EBIT between EUR 5-9m. Mid-point implies a revenue decline of 5.1% and an EBIT margin of 1.3%.

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Solteq - Certainly not the best of quarters

27.10.2022 - 08.30 | Earnings Flash

Solteq’s Q3 was below the already weak expectations, with revenue at EUR 14.4m (Evli EUR 14.7m) and adj. EBIT at EUR -0.5m (Evli EUR 0.3m). The weakness relates to earlier communicated challenges in Solteq Utilities’ software development and lower revenue and profitability in Solteq Digital.

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  • Net sales in Q3 were EUR 14.4m (EUR 14.9m in Q3/21), slightly below our estimates (Evli EUR 14.7m). Growth in Q3 amounted to -3.7% y/y. 
  • The operating profit and adj. operating profit in Q3 amounted to EUR -5.0m and -0.5m respectively (EUR 1.1m/1.2m in Q3/21), below our estimates (Evli EUR -4.1m/0.3m). 
  • Q3 challenges relates to earlier communicated challenges in Solteq Utilities’ software development and lower revenue and profitability in Solteq Digital. Write-downs relating to Solteq Robotics had a negative one-off impact of EUR 4.4m on EBIT.
  • Solteq Digital: revenue in Q3 amounted to EUR 8.6m (Q3/21: EUR 9.6m) vs. Evli EUR 9.4m. Growth amounted to -9.6%. The adj. EBIT was EUR 0.2m (Q3/21: EUR 0.9m) vs. Evli EUR 0.8m. Demand in key business areas, such as digital business and commerce solutions, is expected to remain at a good level during the ongoing quarter.
  • Solteq Software: Revenue in Q3 amounted to EUR 5.7m (Q3/21: EUR 5.4m) vs. Evli EUR 5.3m. The adj. EBIT was EUR -0.7m (Q3/21: EUR 0.3m) vs. Evli EUR -0.5m. Growth was 6.6%. The business outlook for Solteq Software is expected to remain positive.
  • Guidance for 2022 (reiterated): group revenue is expected to remain at same levels as in 2021 and operating profit to be negative.

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Detection Technology - Back on the growth track

27.10.2022 - 08.00 | Company update

Detection Technology’s Q3 result was strong in terms of growth. Yet, profitability deteriorated due to continued cost pressures and one-time provision made. With increased volumes and elevated costs easing down, DT's profitability is expected to improve.

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Margins under powerful pressure despite solid growth
After soft Q2 DT delivered solid growth figures with SBU and MBU growing by double-digits while IBU’s low single-digit growth was restricted by a very strong comparison period. Group net sales increased by 17.5% y/y and amounted to EUR 27.3m (Evli: 27.1m). Q3 growth was supported by solid demand for medical CT devices, postponed Q2 deliveries, and strong aviation security sales. Despite strong growth, profitability was weak due to elevated material, logistics, and R&D costs. In addition, DT made EUR 1.3m provision due to the credit issues of its North American customer which eventually deteriorated DT’s profits further. Q3 EBIT accounted for EUR 0.6m (2.3% margin) which fell significantly short of our expectations (Evli: 3.8m).


Outlook implies growth to continue
The outlook for security seems bright. Aviation CT equipment upgrades have proceeded both in the US and Europe. Visibility to SBU’s demand continues far but medical OEMs have indicated market growth slowing down. In addition, visibility to industrial demand is somewhat foggy. In total, we expect DT to show double-digit growth both in 2022 and 2023. With spot-component purchases diminishing and additional R&D projects ending, we see DT’s profitability improving significantly. The company guides double-digit growth for Q4’22 and Q1’23 in all its business units.

Valuation neutral with our revised estimates
We made some minor downward adjustments to our 2023-24 estimates considering recent news. DT is currently trading approx. in line with its peers, and we see the valuation as not challenging. Security business provides visibility but uncertainty concerning medical growth and general downward economic development keeps us cautious. We retain our HOLD-rating and adjust TP to EUR 16.5 (prev. 17.0).

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Detection Technology - Demand continued strong, EBIT fell short

26.10.2022 - 10.00 | Earnings Flash

Detection Technology’s Q3 topline came in strong. Net sales growth continued but profitability was harmed by supply chain issues and one-time provision made.

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  • Group results: net sales grew by 17.5% y/y to 27.3 and was in line with our and market estimates (27.1/27.2m Evli/cons.). Component shortage restricted DT’s growth in all its business segments. Adj. EBIT was a disappointment, amounting to EUR 0.6m (3.8/3.6m Evli/cons.). Adj. EBIT margin was 2.3%. With low profitability also Q3 EPS of EUR 0.05 fell short of our and market estimates (0.20/0.20 Evli/cons.).
  • Component shortage was present, and DT continued its sourcing of more expensive spot-components. Logistics costs were up, and the product modification project kept R&D costs elevated. In addition, a one-time provision worth EUR 1.3m had a significant impact on DT’s profitability. Component availability is expected to improve, and DT sees its profitability improving in Q4.
  • Medical (MBU) grew by 24% y/y to EUR 14.8m, beating our expectations (Evli: 13.9m). The growth was driven by strong demand for CT-devices. In addition, postponed deliveries from Q2 supported medical growth in Q3.
  • Security (SBU) increased by 14.6% y/y to EUR 8.5 and was below our expectations (Evli: 9.3m). Growth was driven by increased demand for aviation solutions. DT strengthened its position in the US aviation market which is good news considering future growth.
  • Industrial (IBU): after a strong comparison period IBU showed y/y growth of 2.8%. Net sales amounted to EUR 3.9m and was in line with our expectations (Evli: 3.9m). Demand in the food segment continued at a good level, and demand increased in mining and NDT applications.
  • Outlook: DT expects its group net sales and all business units to grow by double-digits in Q4’22 and Q1’23.

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Suominen - Some improvement to be seen

26.10.2022 - 10.00 | Earnings Flash

Suominen’s Q3 profitability improved a bit from the recent lows but remained very modest and below our estimate as energy costs seem to have been a bigger challenge than we expected. Revenue topped estimates as sales volumes grew again in North America.

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  • Suominen Q3 revenue was up by 34% y/y to EUR 131.9m, compared to the EUR 123.0m/121.5m Evli/consensus estimates. Higher volumes and prices helped, while there was a currency tailwind of some EUR 11.1m. Americas amounted to EUR 80.3m vs our EUR 73.0m estimate, while Europe was EUR 51.7m vs our EUR 50.0m estimate.
  • Gross profit landed at EUR 5.2m vs our EUR 9.2m estimate. Gross margin was hence 3.9% vs our 7.5% estimate, which implies energy costs in particular were higher than we expected.
  • Q3 EBITDA amounted to EUR 5.1m, compared to our EUR 7.0m estimate, while EBIT was EUR 0.2m vs our EUR 2.0m estimate. Higher volumes had a positive effect on profitability, but sales prices could not entirely keep up with raw material and energy costs.
  • Suominen guides comparable FY ‘22 EBITDA to decrease clearly from previous year (unchanged). Suominen sees further US demand recovery as well as easing in high raw materials prices during Q4.

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Innofactor - Showing much needed improvement

26.10.2022 - 09.40 | Company update

Innofactor showed promising progress in Q3, boding well for 2023, and now needs to provide further signs of sustained performance given recent challenges. We retain our target price of EUR 1.25 and BUY-rating intact.

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Clear growth boost in Q3
Innofactor reported better than expected results. Growth clearly picked up a notch, 21.5% y/y (13.4% organic), with net sales of EUR 16.7m (Evli 14.9m). Growth was aided by improved invoicing rates following actions implemented after the weaker H1. Profitability came in line with our expectations, with EBITDA of EUR 1.8m (Evli EUR 1.9m). Relative profitability was in our view slightly soft but still at good levels. Subcontracting expenses increased y/y and the improvement in invoicing was gradual throughout the quarter, with September having been strong according to the company. The order backlog was up 7.3% y/y.

Potential for 2023 but too early to get overly excited
The achieved sales growth in Q3 along with the gradually improved invoicing rate provides very good support for the end of the year and confidence for Q4 appears to be strong. With the demand situation looking unchanged and should the achieved efficiency be sustained, Innofactor is set for notable earnings improvement potential heading into 2023. The sustainability of the higher operative performance remains a key concern given recent challenges, and further proof is warranted. We currently estimate a ~2%p increase in the EBITDA-margin in 2023 should the late-Q3 performance be sustained in the near future, although H1/22 was soft, and the potential is bigger than that.

BUY with a target price of EUR 1.25
Innofactor currently trades below peers. In our view this is not fully unjustified given the sub-par performance during 2022. We, however, still see that the shown improvement signs and potential still supports valuation upside. We retain our target price of EUR 1.25, valuing Innofactor near the peer median, and our BUY-rating intact. We note that peer multiples have come down recently and in absolute terms, the implied 2023 target P/E of ~10.5x is not overly challenging.

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Dovre - Topped estimates

26.10.2022 - 09.15 | Earnings Flash

Dovre’s Q3 results were clearly above our estimates as all three segments recorded figures higher than we had expected. Dovre also issued a positive guidance update yesterday; our latest estimates would still be in line with the new guidance, but the very strong Q3 report suggests our Q4 estimates are too modest.

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  • Dovre Q3 revenue grew by 28.5% y/y to EUR 59.7m vs our EUR 54.1m estimate. Project Personnel top line was EUR 22.5m, compared to our EUR 21.8m estimate. Consulting amounted to EUR 4.4m vs our EUR 3.4m estimate, while Renewable Energy was EUR 32.9m vs our EUR 28.9m estimate.
  • Dovre EBITDA was EUR 3.2m, compared to our EUR 2.4m estimate, while EBIT was EUR 3.0m vs our EUR 2.2m estimate. Project Personnel EBIT amounted to EUR 1.1m vs our EUR 0.9m estimate. Consulting managed EUR 0.7m, compared to our EUR 0.4m estimate, whereas Renewable Energy EBIT was EUR 1.4m vs our EUR 1.2m estimate. Other functions & unallocated cost EUR 0.3m vs our EUR 0.3m estimate.
  • Dovre’s new guidance is for revenue above EUR 195m and EBIT of more than EUR 7.3m. The previous guidance was for revenue above EUR 185m and EBIT in the range of EUR 6.5-7.5m. Dovre raised guidance yesterday thanks to strong demand in Project Personnel and Consulting as well as solid execution of Renewable Energy construction projects. Our latest estimates remain still in line with the new guidance, but our Q4 estimates now look a bit modest given the strong Q3 performance.

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Scanfil - Decent results, better to come in Q4

26.10.2022 - 08.30 | Earnings Flash

Scanfil Q3 results landed largely in line with expectations as top line was up 26% y/y and EBIT margin amounted to a decent 5.4%. Scanfil expects further improvement for Q4.

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  • Q3 revenue grew by 26.3% y/y to EUR 211.9m, compared to the EUR 210.3m/208.6m Evli/consensus estimates. Transitory component invoicing amounted to some EUR 20m as the component availability challenges eased a bit. Customer demand remained strong in all customer segments.
  • Advanced Consumer Applications amounted to EUR 67.8m vs our EUR 70.4m estimate, while Energy & Cleantech was EUR 53.1m vs our EUR 52.6m estimate. Automation & Safety amounted to EUR 44.2m, compared to our EUR 41.0m estimate.
  • Adjusted EBIT landed at EUR 11.5m vs the EUR 12.3m/11.5m Evli/consensus estimates. Higher delivery volumes and lower FX losses had a positive effect. The pandemic did not have any significant effect and Scanfil expects further positive development for Q4.
  • Scanfil guides revenue of EUR 800-880m and adjusted EBIT of EUR 43-48m for FY ’22 (unchanged). The guidance’s midpoints now suggest EUR 219m revenue and EUR 13.5m EBIT for Q4.

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Innofactor - Posted solid growth figures

25.10.2022 - 09.30 | Earnings Flash

Innofactor’s Q3 results were better than expected. Net sales turned to a clear growth of 21.5% y/y to EUR 16.7m (Evli EUR 14.9m) aided by improved invoicing rates after the more challenging first half of 2022. Q3 EBIT of EUR 1.0m was in line with our estimates (Evli EUR 1.1m).

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  • Net sales in Q3 amounted to EUR 16.7m (EUR 13.7m in Q3/21), clearly above our estimates (Evli EUR 14.9m). Net sales in Q3 grew 21.5% y/y and 13.4% organically. Net sales increased in all operating countries. Net sales growth was aided by improvements in invoicing rates.
  • EBITDA in Q3 was EUR 1.8m (EUR 1.7m in Q3/21, in line with our estimates (Evli EUR 1.9m), at a margin of 10.7%. EBITDA was positive in all operating countries.
  • Operating profit in Q3 amounted to EUR 1.0m (EUR 0.9m in Q3/21, in line with our estimates (Evli EUR 1.1m), at a margin of 5.8%. 
  • Order backlog at EUR 77.3m, up 7.3% y/y. New orders included for instance the Legal Register Centre (approx. EUR 4.0m) Aalto University Foundation’s (approx. EUR 5.0m).
  • Guidance for 2022 (reiterated): Innofactor’s net sales is expected to increase from 2021 (EUR 66.4m) and EBITDA is expected to increase from EUR 7.5m, which would have been EBITDA without the proceeds of EUR 2.6m from the sale of the Prime business. 

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Finnair - Pivoting and downsizing

25.10.2022 - 09.30 | Preview

Finnair reports Q3 results on Oct 28. We make only small adjustments to our estimates ahead of the report.

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We make no big estimate revisions before the report

Finnair’s Q3 RPK was as we expected, while the 80% load factor was about 5 percentage points higher than we estimated. North Atlantic RPK was already more than 40% above the Q3’19 comparison figure, which is one of the clearest demonstrations of the recent (necessary) updates to strategy. We estimate the continued recovery in passenger volumes, along with some increases to ticket prices, to have helped Finnair’s revenue to EUR 645m in Q3. Jet fuel prices seem to have stabilized lately but remain still very high in the historical context. We expect Finnair’s EBIT to have continued to improve, however we estimate it to have remained slightly negative in Q3.

Qatar Airways partnership one of the major recent updates

Finnair formally announced the keys of its updated strategy in September. Many of the points had been already discussed over the spring and summer months, including the pivot to North America and India, but Finnair has also signed a partnership with Qatar Airways which is to better connect Nordic capitals with the Middle East. The updated network as well as favorable terms on leased out planes and crew help Finnair’s continued recovery after the pandemic, but the Russian airspace closure still forces the company to make some downsizing choices. We estimate Finnair to reach positive EBIT next year, however our 2.3% EBIT margin estimate remains well shy of the 5% level the company aims to reach in H2’24. Finnair’s liquidity position is adequate, although the recent blows will leave their mark on the balance sheet. Then again, Finnair has no need to make major fleet refurbishments in the short to medium term. We look forward to comments regarding ASK and LFs in the coming quarters.

Valuation has moderated a bit, but still not cheap

Finnair continues to trade at high FY ’23 earnings multiples relative to peers as the pandemic already hurt the (legacy) Asian strategy more than those of other airlines. Finnair is valued around 12x EV/EBIT on our FY ’24 estimates, while other airlines are valued roughly that level on FY ’23 estimates. In our view this puts Finnair’s valuation in the fair to fully valued range. We retain our EUR 0.36 TP; our rating is now HOLD (SELL).

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Consti - Market outlook of key interest

24.10.2022 - 09.40 | Preview

Consti reports Q3 results on October 27th. Financials are of lesser interest, with some cost impact likely, while the currently mixed market outlook is of key interest.

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Expecting uneventful Q3, some cost impact likely
Consti reports its Q3 results on October 27th. Progress during the first half of 2022 was at a rather good level despite some negative impact from rising material prices and inflationary pressure. Apart from some minor tweaks, our estimates remain intact. We expect continued modest growth supported by the order backlog and profitability levels similar to the comparison period given the slight strains from construction material increases. Consti’s 2022 operating profit guidance is at EUR 9-13m, with our estimate at EUR 10.2m.

Mixed signals on market outlook
The market outlook remains rather favourable for the on-going year aided by order backlogs, while the outlook going forward is showing mixed signs. The Confederation of Finnish Construction Industries RT (CFCI), in its October business cycle review, estimates the renovation volumes to grow by 1.5% and 2.0% in 2022e and 2023e respectively. On the other hand, a survey conducted by Talotekniikkaliitto during autumn 2022 regarding the Finnish renovation building technology market shows an increase of respondents expecting a slow-down of near 12%p to 31.4% compared with the survey conducted in spring 2022. The new residential building construction outlook is grimmer, with CFCI estimating a volume decline of 5.8% in 2023e. Data on construction cost development from Statistics Finland suggests a clear slow-down in cost growth during Q3, although still at a clearly elevated level on y/y basis.

BUY with a target price of EUR 11.0 (12.0)
Consti currently trades clearly below peers, which in our view remains hard to justify given the exposure to the more stable renovation market compared with the new construction focused peers. The continued high construction costs, economic uncertainty and inflationary environment, however, remain a threat, and we lower our target price to EUR 11.0 (12.0).

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Raute - Positioned to improve with West

24.10.2022 - 09.30 | Company update

Raute’s Q3 figures were encouraging, and although profitability may still be muted for a few quarters we view valuation conservative enough to leave adequate upside.

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Some encouraging profitability development

Raute’s Q3 revenue grew 10% y/y to EUR 42m, above our EUR 34m estimate. The beat was due to both projects and services, driven by Europe, and in our view the high EUR 19m service revenue also helped EBIT back to black (EUR 1.4m vs our EUR -0.3m estimate) as inflation has been more of a problem on the project front. Inflation eased a bit, but we believe Raute has also learned to better price in inflation within projects over the past year. The unwinding of the Russian book has had an adverse effect on working capital, hurting cash flow, but the issue is by nature temporary and Raute’s overall workload situation is not too bad despite the fact that Russia was an important market.

Top line may not grow next year without larger mill orders

Raute booked EUR 35m in new orders for the quarter, compared to our EUR 38m estimate. Services orders were soft compared to our estimate as modernization orders declined from the recent high figures, but we find it encouraging Raute has managed to gather solid order amounts for many quarters in a row without any larger mill orders. Smaller orders from North America are especially helpful at this point, while there’s a bit more uncertainty around Europe, the current largest market, going forward. There’s a need to add capacity in order to fill the gap left by the end to Russian imports. It’s unclear how this trend continues to play out in the short-term, but demand for large mill projects remains in place along the Eastern flank of Europe. Latin America is also showing signs of improvement, although it’s likely to remain a smallish market at least in the short-term.

We see more upside than downside from this point forward

Q4 is in our view still unlikely to be a great quarter in terms of profitability, but overall development appears favorable going towards next year, when the EUR 4-5m in cost efficiency measures should materialize, in addition to the benefits of the ERP project. Raute is valued around 6x EV/EBIT on our FY ’23 estimates, which we don’t view a challenging level considering our EUR 5.6m EBIT estimate is still far from long-term potential. We update our TP to EUR 11 (9); our new rating is BUY (HOLD).

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Verkkokauppa.com - No signs of market recovery yet

24.10.2022 - 09.25 | Preview

Verkkokauppa.com publishes its Q3 result on Thursday, 28th Oct. In addition to the consumer segment and contrary to its performance in H1, we expect the B2B segment to see some softness in H2. Due to no signs of market recovery yet, we adjusted our short-term estimates downwards ahead of Q3 result.

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Volumes still in decline
During H1’22, the consumer electronics market fell by ~6% in terms of volumes (GfK, ETK, GoTech). However, during the same period, sales declined only by a percent, which can be explained by the price increases made. Based on monthly data, there are no signs of market recovery starting yet as electronics sales declined by 12% y/y in August (Stat.fi).

Weak demand burdens Q3 profitability
Verkkokauppa.com has suffered from weak consumer demand, which started with the soft consumer electronics market in Q4’21. We have adjusted our short-term estimates downwards driven by the lack of evidence of market recovery. While the B2B segment has shown strong growth during uncertain H1’22, we now expect the segment to experience some headwinds. In Q3, we expect net sales to decrease by 3.6% y/y to EUR 135.9m. Weakness is seen throughout product segments and sales channels. In total, we expect the full-year topline to amount to EUR 554.0m, reflecting a y/y decline of 3.6%. The company has continued its long-term investments according to its strategy despite the uncertain market environment. We estimate that these investments will be visible in increased fixed costs. With a narrow gross margin and lower net sales, Verkkokauppa.com’s profitability sees an extensive decline. Our Q3 EBIT estimate amounts to EUR 3.1m, while with 2022 adj. EBIT estimate of EUR 7.8m, we expect the company to fall short of its guidance slightly.

HOLD with a TP of EUR 3.5 (prev. 3.7)
Verkkokauppa.com currently trades with 23E P/E of 16x which is below its historical levels. However, we currently see no notable upside potential in valuation multiples given the company trading above the peer group’s median and a weakening economic outlook. We retain our HOLD-rating and lower TP to EUR 3.5 (prev. 3.7), mainly reflecting decreased expectations.

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Raute - Revenue and EBIT above estimates

21.10.2022 - 09.30 | Earnings Flash

Raute’s Q3 top line and profitability topped our estimates. Inflation pressures eased up a bit while Western demand remained high.

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  • Q3 revenue grew by 10% y/y to EUR 41.8m, compared to our EUR 34.0m estimate. Project revenue was EUR 22.6m, compared to our EUR 19.0m estimate, while services revenue amounted to EUR 19.2m vs our EUR 15.0m estimate.
  • EBIT amounted to EUR 1.4m vs our EUR -0.3m estimate. The remaining Russian project deliveries had a neutral profitability effect. The worst inflation pressures seem to have eased, but inflation remained a challenge in Q3. Component availability is still weak.
  • Order intake was EUR 35m, compared to our EUR 38m estimate. Project orders were EUR 24m vs our EUR 20m estimate, while services orders amounted to EUR 11m, compared to our EUR 18m estimate. Modernization orders declined from the comparison period. Overall Western demand remained good, especially in North America.
  • Order book amounted to EUR 94m at the end of Q3, of which EUR 6m was attributable to Russia.

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Detection Technology - Outlook has slightly deteriorated

21.10.2022 - 09.15 | Preview

DT releases its Q3 result on Wednesday, 26th of Oct. With weakened macroeconomic outlook and increased cost pressures, we adjusted our short-term estimates but still expect DT to deliver solid growth in coming years.

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Growth is expected to continue in Q3 and H2
After the soft quarter of Q2, we expect DT to deliver double-digit topline growth both in Q3 and H2. With delayed Q2 net sales (due to supply chain issues), we expect MBU to grow by 16.4% y/y in Q3. Our SBU’s Q3 growth estimate of 24.7% is supported by a favorable market trend after a weak performance during the pandemic times. IBU had a strong comparison period (Q3’21: EUR 3.8m) and thus we expect the BU to grow only by 2.4% y/y. Our Q3 group net sales estimate amounts to EUR 27.1m, reflecting 16.8% y/y growth. In total, we expect DT to grow by 9.8% to EUR 98.6m in 2022.

Margins are under short-term pressure
Due to reduced topline estimates and cost inflation, we expect Q3 EBIT to land at EUR 3.8m (13.9% margin). Elevated material costs and higher investment in R&D cause some stress on Q3 and H2 margins. Our 2022 EBIT estimate of EUR 9.7m (9.9% margin) is quite moderate against DT’s margin potential and those seen in the past. We expect margins to significantly improve in 2023 when component availability improves and extraordinary R&D investments are over.

Outlook for security is favorable, medical growth to calm
Security market has performed well in 2022 and the demand outlook is bright. Major countries are investing in infrastructure security, aviation being one of the largest contributors. Both the company’s management and OEMs have indicated that the growth in the medical markets might be slowing down. However, we expect MBU to grow also in the future, at or above long-term the market.

Valuation neutral ahead of Q3, but risks are elevated
Our 23 EBIT estimate was decreased by some 17% due to elevated risk levels. With the recent decline in DT’s share price, 23E valuation seems quite neutral (23E EV/EBIT of 14x and P/E of 20x). We, however, don’t see much upside potential in multiples given weakening economic and industrial activity. We retain our HOLD-rating but lower TP to EUR 17.0 (20.0) ahead of Q3 result.

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Suominen - Higher volumes to support margins

20.10.2022 - 09.35 | Preview

Suominen reports Q3 results on Oct 26. We make only minor estimate revisions ahead of the report as we continue to expect improvement over the coming quarters.

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H1 profitability was very weak, but H2 is set to be better

Suominen’s Q2 profitability proved a lot worse than we expected as margins continued to decline. Higher raw materials and energy prices hurt while there was still no remarkable recovery in US volumes. In our view US volumes are no more such a big problem in H2, whereas the cost side developments are twofold. Raw materials prices seem to have already reached their peak, while it’s far from clear how much higher energy costs may climb over the coming winter months.

Higher margins driven by volumes and cost compensation

We find Suominen’s raw materials prices (a composite including pulp, polyester, and polypropylene) declined by a couple of percentage points q/q in Q3. The development helps H2 margins as Suominen’s mechanism pricing continues to catch up with the price inflation seen earlier this year. Meanwhile energy costs, especially for the two Italian plants but also in other locations including the US, have continued to soar. Suominen has also implemented additional energy surcharges in Q3 which will help profitability over the coming winter months. Q3 profitability will nevertheless remain very much subdued; we make only minor estimate revisions ahead of the report, and now estimate Q3 revenue at EUR 123m (prev. EUR 121m) and EBITDA at EUR 7.0m (prev. EUR 7.4m). We expect Americas’ revenue to have grown by 28% y/y, helped by strong USD as well as a recovery in volumes (partly thanks to production line conversions to better address current demand) and higher sales prices. We estimate line upgrades in Italy to have helped Europe to a 20% y/y growth.

US volume recovery is a key value driver from now on

Mechanism pricing and energy surcharges mean Suominen’s margins adjust to inflation incrementally and hence will rebound from the lows. US volume recovery is thus the crucial operational profitability driver from now on. In our view nonwovens wipes’ consumable nature helps their demand to stick high after the initial pandemic boost. Suominen’s valuation remains undemanding, some 3x EV/EBITDA and 5.5x EV/EBIT on our FY ’23 estimates. Our new TP is EUR 3.0 (3.5); we retain our BUY rating.

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Raute - Tackling challenges

19.10.2022 - 09.35 | Preview

Raute reports Q3 results on Oct 21. We expect gradual improvement amid inflation and shift to Western markets.

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Cost inflation will continue to burden Q3 results

Raute’s Q2 bottom line was burdened by some EUR 11m in one-off items mostly related to Russian orders, in addition to which cost inflation was a bigger challenge than we had expected. Q3 figures should be clear of exceptional provisions, but we expect inflation will still be a major limiting force on profitability even if Raute has learned to better anticipate cost issues since late last year. We estimate EUR 34m top line and EUR -0.3m in EBIT for Q3, which implies q/q improvement but clearly below the y/y comparison period. Q2 report saw a high level of EUR 40m in order intake as a bright spot; there have now been a few quarters with such healthy order levels in a row without any larger projects, and we expect EUR 38m in Q3 order intake.

Orders have developed favorably even without larger ones

Small order demand should have remained at a good level especially in North America, while Europe is now Raute’s most important market. European demand doesn’t currently appear quite as strong as in America, except for the Baltics and Eastern Europe, but Raute’s order book should remain above EUR 100m going into next year. We thus estimate FY ’23 revenue roughly flat at around EUR 140m. In our view such a workload should be more than enough to help the company reach positive EBIT next year, especially given the fact that Raute has recently implemented cost savings measures. Raute could reach positive EBIT already in Q4’22 assuming services demand remains high.

Downside is limited, but upside still waits a few triggers

We estimate some EUR 4m in FY ’23 EBIT, which we believe Raute should be able to achieve even if top line remains modestly below EUR 140m. Such figures would still fall clearly short of longer-term potential, and the 7.5x EV/EBIT valuation on our FY ’23 estimates doesn’t seem very challenging. Any changes to Raute’s competitive positioning appear unlikely, and hence downside should be limited given the current low expectations. The upside potential, however, is likely to be triggered only once Raute has demonstrated results after the recent burst of inflation as well as continued solid demand in Western markets. Our new TP is EUR 9 (11); we retain our HOLD rating.

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Aspo - ESL supports high profitability

18.10.2022 - 09.30 | Company update

Aspo upgraded its FY ‘22 guidance, thanks to ESL’s continued strong performance, and gave an update on exits. We continue to see FY ’23 EBIT well above EUR 40m.

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The guidance upgrade, due to ESL, wasn’t a major surprise

Aspo’s upgraded guidance has a midpoint of EUR 54.5m as ESL will continue to drive high profitability also in H2. We view ESL’s current operating environment relatively normal in the sense that the war has had only a very limited impact (we note ESL’s performance is not sensitive to raw materials price changes), however it should also be noted the dry cargo market has gained strength since H2’20 and ESL may now have reached a point where it’s not easy to improve without additional capacity; short term outlook remains strong, while some softening may be due in the medium term. The hybrid vessel investments will support long term profitability potential. The Baltic Dry Index is down by double digits from its recent highs, but this may have only muted implications for ESL due to its differentiated positioning compared to large global dry bulk cargo carriers.

We make only small upward estimate revisions

Aspo disclosed progress regarding Telko’s Russian exit, for which the company is set to receive some EUR 9.5m from a local industrial buyer after the authorities have approved the deal. An exit from Belarus is also in the works. Leipurin is similarly in the process of looking for an exit, but in our view the integration with Kobian is a more significant short to medium term development. We previously estimated EUR 52.7m for FY ’22 adj. EBIT and our revised estimate stands at EUR 55.1m. Our updated estimate for next year is EUR 44.4m (previously EUR 43.4m). Leipurin’s EBIT will likely continue to improve thanks to the Kobian deal, whereas we estimate ESL’s EBIT to decline by some EUR 3m next year. In our view Telko’s H2’22 and FY ‘23 performance remains the biggest question mark as possible price declines could hit margins along with lower volumes.

Valuation not challenging on our ca. EUR 45m FY ’23 EBIT

We expect FY ’23 EBIT to remain well below EUR 50m, mostly due to Telko’s softening, but the below 8x EV/EBIT valuation levels are not that challenging especially when Telko and Leipurin continue to tilt West and ESL still has long term potential left thanks to its upcoming investments. We retain our EUR 9.5 TP and BUY rating.

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Etteplan - Closing one chapter

17.10.2022 - 09.15 | Company update

We revise our estimates due to the financial impact of the unsuccessful Semcon acquisition and accordingly lower our target price to EUR 15.0 (18.0).

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One growth leap came to an end
Etteplan’s ambitions to acquire Semcon through a public offer were halted earlier in October after a competing offer came in from Ratos AB. Etteplan had announced that the offer price would not be increased, and the offer ended as Etteplan’s offer was not accepted to an extent that would have enabled ownership of more than 90% of outstanding shares. One-time costs related to the preparation of the transaction are booked in the third quarter of the current year. The financial guidance for 2022 remains unchanged, with revenue estimated to be EUR 340-370m and EBIT EUR 28-32m. Currency hedging risks relating to the transaction will have a significant negative impact on Q3 EPS and the final effect is recorded in Q4.

2022 earnings impacted by one-offs relating to the offer
The unsuccessful offer is unfortunate given our assessment of the mid- and long-term potential of the combined companies and the associated costs will weigh on 2022 financials. We have revised our 2022 EBIT estimate to EUR 28.2m (prev. EUR 29.2m) based on the perceived transaction costs and EPS to EUR 0.74 (prev. EUR 0.90), with our adj. EPS estimate still at EUR 0.90. The one-offs have increased profit warning risks for H2 should market conditions deteriorate but on the other hand, with the guidance still intact, slight added confidence is provided for the level of operative performance.

BUY with a target price of EUR 15.0 (18.0)
With the offer for Semcon not being successful we adjust our target price to EUR 15.0 (EUR 18.0) based on the perceived missed out value creation potential. Continued market uncertainty has further had a slight impact on peer multiples. Our TP values Etteplan at ~16.5x 22e adj. P/E, above the peer median given Etteplan’s historical and anticipated performance but below recent year historical averages due to the market outlook. We retain our BUY-rating.

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Vaisala - Stronger H2 than expected upcoming

16.10.2022 - 12.30 | Company update

Vaisala upgraded its 2022 guidance and published preliminary figures for Q3’22. With no major changes made to 2023 estimates, we retain our HOLD-rating and TP of EUR 40.0 ahead of Q3 result.

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Outlook even brighter than expected
Vaisala upgraded its guidance and reported preliminary figures for Q3’22. Guidance raise was expected with strong demand seen throughout the year as well as the record-high order book. In its new guidance, Vaisala expects 2022 revenue to land between EUR 500-520m (prev. 465-495m) and EBIT to amount to EUR 62-72m (55-70m). Mid-point of the guidance implies y/y growth of 16% and an EBIT margin of 13%. Q3 received orders worth EUR 137.2m implies the demand continuing strong also in Q4 and possibly in Q1’23.

Strong H2 upcoming
According to the preliminary figures, Vaisala had a successful Q3 in terms of both sales and profitability considering the current market environment. Q3 net sales grew by ~20% y/y to EUR 133.3m (Evli estimate: 119.2m) and EBIT amounted to EUR 22.0m (Evli estimate: 19.6m). Q3 EBIT margin of 16.5% was approx. in line with our expectations. In our estimates, both BUs delivered strong growth in Q3, but the magnitude was more prominent in industrial measurements.

Estimating the growth to slow down in 2023
With upgraded guidance, we slightly adjusted our short-term estimates upwards. Our 2022 net sales estimate amounts to EUR 512.6m (17.1% y/y growth) and the EBIT estimate lands at EUR 65.1m (12.7% margin). We expect elevated cost pressures to restrict profitability somewhat. Only minor adjustments were made to 2023 estimates: we expect Vaisala to see more restrained growth with weaker macroeconomic conditions decreasing the investment activity. We expect Vaisala to show solid growth in H1’23 but slope to reverse in H2’23 due to a strong comparison period and economic uncertainty. In our view, valuation still stretches somewhat providing no large upside potential. We retain our HOLD-rating and target price of EUR 40.0 ahead of the Q3 result.

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Endomines - Reverse share split

30.09.2022 - 12.45 | Analyst comment

Endomines EGM was held on 26 September 2022 which resolved on a reverse share split through which forty existing shares will be consolidated into one share. We update our TP to SEK 64.0 (1.6) due to the reverse split. HOLD-rating intact.

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  • Following the reverse share split, the number of shares will decrease from 267,198,378 to 6,679,959
  • From today, 30 September 2022, the share price will reflect the effect of the reverse share split
  • In addition to the reverse share split, the EGM resolved to approve the planned cross-border downstream merger
  • As a result of the merger, Endomines Finland will be the new parent company of the group
  • Shareholders of the company will receive one new share in Endomines Finland for each share owned in the company
  • Final conditions of the merger are expected to be fulfilled on or about 16 December 2022 
  • We have updated our models regarding the number of shares, there are no changes to our estimates. We update our TP to SEK 64.0 (1.6) due to the reverse split. HOLD-rating intact.
  • The gold price has stayed roughly at the levels seen during our last update
  • No updates to other assumptions regarding the company’s financials 
  • Therefore, the target price change is purely driven by the change in number of shares

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Endomines - Strategy updated, implementation ahead

22.09.2022 - 09.30 | Company report

The updated strategy sets the company’s focus back to Finland. We see potential upside through successful exploration and mining efforts in the Karelian gold line, on the other hand, we see clear risks in the value realization of the company’s United States asset portfolio. The increasing real interest rates put further pressure to gold prices and the investment case. We decrease our TP to SEK 1.6 (1.7), HOLD-rating intact.

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Issues in the United States have continued to weaken the performance
During the recent years, the company has faced issues in the Friday mine and processing plant ramp-up. According to the new strategy, the company’s assets in the United States are developed through partnerships, additionally, divestments are considered as a potential option. In our view, the company’s ability to realize value in the United States is essential for the investment case.

Focus on the Karelian gold line
Production in Pampalo mine was commenced in Q1 2022 supported by the current favorable gold prices. Endomines was able to produce 2 227 ounces of gold in the second quarter of 2022 and posted a positive EBITDA for the Pampalo operations. In the coming years, Endomines is planning to commence production from the satellite deposits and conduct a wide scale exploration campaign in the Karelian gold line. There is also likely to be life of mine increases in Pampalo underground mine as the company is currently extending the decline deeper. We see potential upside for the valuation via successful exploration and mining efforts.

HOLD with a target price of SEK 1.6 (1.7)
We decrease our target price to SEK 1.6 (1.7). The positive assumptions changes regarding the Pampalo underground potential and the Karelian Gold Line satellite deposits are outweighed by adjustments to gold price estimates driven by souring gold market sentiment.

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Solteq - Headwinds grow stronger

20.09.2022 - 09.45 | Company update

Solteq issued its second profit warning for 2022, with challenges in both segments and significant write-offs relating to the Solteq Robotics business. We downgrade our rating to HOLD (BUY) with a TP of EUR 1.5 (2.7).

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Second profit warning for 2022
Solteq issued its second profit warning this year. With the new guidance Solteq expects group revenue to stay at the same level as in the previous year (prev. grow) and operating profit to be negative (prev. weaken). A key item in the downgrade is the write-off of product development investments made into the Solteq Robotics business, resulting in a one-off impact of approx. EUR 4.4m in the third quarter off 2022. Product development costs of Solteq Utilities have also continued to affect the business and project and service delivery costs of Solteq Utilities have increased. The revenue and profitability of the Solteq Digital segment have also weakened.

Some challenges across the board
Solteq had issued a profit warning in May, largely relating to challenges in the Utilities business. The challenges relate to productization of the solutions and performance was hampered by resourcing challenges relating to deliveries and customer project fixes. The previous guidance put quite some catch-up pressure on operational performance in H2/2022 after the weak Q2 results. Those risks appear to have materialized and with Solteq Digital also seeing some continued weakness, the overall market uncertainties may be starting to show. The Solteq Robotics business has seen commercialization challenges due to the pandemic and we have not emphasized any potential in our estimates. The write-off is still notably negative given previous fairly upbeat comments.

HOLD (BUY) with a target price of EUR 1.5 (2.7).
On our revised estimates, excl. the one-offs, valuation on current expected current year performance is quite stretched. Uncertainty is clearly elevated and overshadows coming years earnings improvement potential. We downgrade our rating to HOLD (BUY) with a target price of EUR 1.5 (2.7).

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Marimekko - Upgrade to BUY

14.09.2022 - 22.50 | Company update

Marimekko elaborated the details of its revised strategy in its CMD and increased its targets to a more ambitious level. We left our estimates broadly intact with the uncertain market restricting future visibility. With the declined stock price, Marimekko’s valuation seems quite attractive, and we raise our rating to BUY (HOLD) but adjust TP to EUR 12.0 (13.2) reflecting the uncertain market environment.

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Long-term targets were raised
In its capital markets day, Marimekko introduced its revised strategy for the period of 2023-27 and opened drivers for its updated long-term financial targets. The company aims for an annual net sales growth of 15% (prev. 10%) and a comparable operating profit of 20% (prev. 15%). Net debt to EBITDA ratio of max. 2x and yearly dividends of 50% of net earnings were left intact. We see the growth target as somewhat ambitious, especially during uncertain times that the western economies are currently facing. Meanwhile, we believe that the margin target is within a reach with the topline growth continuing and investments in efficiency.

Five success factors for scalable growth
The success of Marimekko’s strategy is based on five different pillars of which several relies on megatrends. The company emphasizes sustainability, a creative vision to obtain a wider audience, accelerating growth in Asia, love for the Marimekko brand and people, and end-to-end digitality to boost omnichannel growth and efficiency in order to achieve its ambitious targets. We see that Marimekko is well positioned in sustainability which is an ever-increasing trend in lifestyle products. Moreover, Marimekko’s strong brand supports the demand for Marimekko products even during uncertain times.

BUY with a TP of EUR 12.0
With the recent decline in Marimekko’s stock price, we see the company’s current valuation as quite attractive and upgrade our rating to BUY (prev. HOLD). However, with the uncertainty concerning the market environment and our estimates, we lower our TP to EUR 12.0 (prev. 13.2).

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Vaisala - Cutting-edge quality with high price tag

09.09.2022 - 15.45 | Company report

Vaisala’s journey has developed well and with its revised strategy the company continues to seek scalable growth within high-end measurement solutions. We find Vaisala’s valuation stretched but a solid expected 14% annual EPS growth is in favor of holding the stock.

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Global player in value-adding high-end measurements
Vaisala operates in niche segments of weather, environmental and industrial measurements. The company focuses high value-adding processes and delivers mostly customized solutions. The company emphasizes its R&D activities with annual investments of 13% of net sales on average. We see Vaisala having solid competitive advantages, such as science-based technology leadership, elevated knowledge in high-mix/low-volume operations, a broad product portfolio, and fast and reliable delivery. Moreover, bolt-on acquisitions have boosted the company’s market share and provided new growth opportunities in new market areas.

Continuity with the revised strategy
Vaisala updated its well-succeeded strategy in 2021 to better reflect the core of its business, vision, and megatrends applying to its industry. The company highlights its product and technology leadership, deep customer understanding and application know-how, scalability, and engaged and talented personnel in its current strategy. In our view, the execution of the company’s strategy has started well. Vaisala has grown quite profitably in 2021 and 22, and in early 2022, the company acquired US-based SaaS company AerisWeather to increase its technological capabilities and scalable digital business.

Uncertain market environment forms some gray clouds
We see the current market environment as quite uncertain and with slowing GDP growth and industrial activity, we revised our 2023-24 estimates slightly downwards. The company’s valuation is quite stretched, and valuation multiples have no room for any upside in our view. With our revised estimates and Vaisala’s elevated valuation, we lower our TP to EUR 40.0 (prev. 43.0) and retain HOLD-rating.

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CapMan - Seeking pickup in growth

08.09.2022 - 09.15 | Company update

CapMan somewhat ambitiously set its sights on doubling AUM over the next five years, but the CMD provided good insight into measures to achieve the target.

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Seeking to double AUM over the next five years
CapMan held its Capital Markets Day 2022 event on September 7th. CapMan has somewhat ambitiously set its sights on doubling AUM over the next five years and raised the combined growth objective for the Management Company and Service businesses (excl. carried interest) to more than 15% p.a. on average (prev. >10%). The company is now also more proactively seeking M&A opportunities, which to our understanding would lean towards the investment product scope. CapMan is also clearly making sustainability an even more integral part of its operations and seeking to act as a frontrunner in the industry. CapMan kept its ROE target of over 20% p.a. on average and its objective to pay annually increasing dividends intact, adjusting its equity ratio target to over 50% (prev. >60%).

Mid-term estimates slightly raised in light of growth target
We have made revisions to our mid-term estimates based on the new targets, having raised our AUM growth estimates and Management company business turnover and operating profit estimates accordingly. Reaching the AUM target will in our view require M&A activity at some point in time and continued good traction for private asset allocations. Growth will still rely on further scaling of CapMan’s private equity strategies, having successfully built the foundations during the previous strategy period, and new investment products indeed seem to be in the pipeline across the board. The CMD overall acted as a further confidence boost to the investment case and CapMan demonstrated that CapMan is a force to be reckoned with.

BUY with a target price of EUR 3.4
The CMD further reaffirmed our positive views on CapMan’s investment case and demand appears to remain fairly solid overall. Although we have slightly raised our estimates, with the overall market uncertainty we retain our target price of EUR 3.4 and BUY-rating.

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Marimekko - Upgrades its long-term financial targets

06.09.2022 - 13.40 | Analyst comment

Marimekko raises its long-term financial targets and reveals its focus areas for the new strategy period of 2023-27.

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  • Marimekko’s new long-term financial targets are:
    • Annual growth of 15% in net sales (prev. over 10%)
    • Comparable EBIT margin of 20% (prev. 15%)
    • Net debt/EBITDA ratio max. 2x (unchanged)
    • Intentions to pay a yearly dividend, at least 50% of net income (unchanged).
  • In our view, net sales target is somewhat ambitious but well within reach with int’l growth succeeding. However, current macroeconomic trends, especially in western economies, might cause some challenges in achieving annual growth of 15% in the short-term.
  • A comparable EBIT margin target of 20% was expected as the company has outpaced its profitability target during the past two years. In 2021, the company recorded an EBIT margin of 20.5% while our margin estimate for 2022 is 19.4%.
  • Marimekko intends to focus on scaling its business and growth, especially in international markets during the next strategy period of 2023–27. The success relies on factors such as focus on sustainability, vision to speak to a wider audience, accelerated growth in Asia, love for the Marimekko brand, and increased digitalization to boost omnichannel growth and efficiency.
  • The company will elaborate on the strategic direction and the new long-term financial goals in its Capital Markets Day on 14 September. We maintain our estimates and recommendation intact and publish an update on Marimekko after the CMD.

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Administer - Progress coupled with challenges

01.09.2022 - 09.35 | Company update

Administer reported better H1 results than we had expected. With on-going uncertainties and challenges we have somewhat dimmed our coming year expectations and lower our TP to EUR 3.6 (4.0), BUY-rating intact.

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H1 results better than anticipated
Administer reported better H1 results than we had anticipated. Net sales in H1 amounted to EUR 23.9m (EUR 21.9m in H1/21) (Evli EUR 21.9m) and grew 20.5% y/y driven by acquisitions. Net sales were burdened by the impacts of general economic uncertainty on customer activity as well as by the customer losses in Adner in 2021. EBITDA amounted to EUR 1.0m (Evli EUR 0.5m), at a margin of 4.2%. Profitability was burdened by higher than anticipated overlapping costs for the old and new system stemming from Administer’s subsidiary Adner’s system reform.

Somewhat dimmed expectations for coming years
Administer remained on track on its inorganic growth strategy, with five acquisitions announced/completed YTD (2022 target 5-10). Investments are being made into technology and strengthening the organization as part of the strategy. Administer lowered its guidance on August 12th, expecting net sales of EUR 47-49m and an EBITDA-margin of 5-7%. Our estimates remain at the midpoint of the guidance ranges. We have somewhat lowered our 2023 expectations, still expecting rapid, largely inorganic growth. We expect profitability to improve because of a lower impact of Adner’s system reform and small overall improvements. With the current uncertainties we expect a more normalized run-rate level of profitability in 2023, while further profitability improvements through Administer’s strategy and acquisition synergies appears more distant.

BUY-rating with a target price of EUR 3.6 (4.0)
Administer currently trades clearly below peers. We have and continue to see a clear discount as warranted given recent year challenges and rather low profitability. Current valuation levels (0.6x 2022e EV/sales), however, suggest little to no improvement potential. With somewhat lowered expectations for coming years, we adjust our TP to EUR 3.6 (4.0), BUY-rating intact.

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Administer - Decent H1 despite challenges

31.08.2022 - 09.15 | Earnings Flash

Administer’s H1 figures were better than expected. Revenue amounted to EUR 23.9m (Evli EUR 21.9m), growing 20.5% mainly due to completed acquisitions. EBITA amounted to EUR 0.6m (Evli EUR 0.1m), adversely affected by Administer’s subsidiary Adner’s system reform but still better than anticipated.

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  • Net sales in H1 amounted to EUR 23.9m (EUR 21.9m in H1/21), above our estimates (Evli EUR 21.9m). Net sales in H1 grew 20.5% y/y. Growth was mainly attributable to the acquisition of EmCe and acquisitions made during H1.
  • EBITDA and EBITA in H1 were EUR 1.0m (H1/21: EUR 0.6m) and EUR 0.6m (H1/21: EUR 0.2m) respectively, above our estimates (Evli EUR 0.5m/0.1m). The EBITA-margin amounted to 2.3%. Profitability was burdened by higher than anticipated overlapping costs for the old and new system stemming from Administer’s subsidiary Adner’s system reform
  • Operating profit in H1 amounted to EUR -0.5m (EUR -0.3m in H1/21), above our estimates (Evli EUR -0.9m).
  • During H1 Administer completed the acquisition of the payroll services of Konjunktuuri Oy, international financial and payroll management specialist WaBuCo Financial Services, and accounting services providers Sydän-Suomen Taloushallinta and Tilitoimisto Ollikainen.
  • Guidance for 2022 (updated 12.8.2022): Administer expects that its net sales will amount to EUR 47-49m and the EBITDA-margin to be 5-7%. The company further expects to make 5-10 acquisitions over the course of 2022. 

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Fellow Bank - Decent start to banking operations

26.08.2022 - 09.30 | Company update

Fellow Bank’s H1 figures were weak due to ECL changes driven by the loan book growth and non-recurring items but operatively decent. Additional capital (T2) is sought to support growth. Early growth figures look promising and profitability scaling potential remains, albeit at a slower pace than we previously expected.

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Weak H1 earnings but operatively decent figures
Fellow Bank reported H1 results which operatively were slightly better than we estimated but the change in expected credit losses due to the loan book growth clearly exceeded our expectations and as such the profitability was below expectations (PTP act./Evli EUR -7.4m/-2.3m). Realized credit losses were on a moderate level (EUR 0.7m). Total income of EUR 2.4m (Evli EUR 2.8m) was skewed by the old P2P loans while NII of EUR 2.5m exceeded our expectations (Evli EUR 2.0m). Total OPEX excl. non-recurring items was quite in line with our expectations. After starting the banking operations, Fellow Bank’s business lending and consumer lending volumes increased by 49% and 35% respectively compared with the beginning of the year, supported by competitiveness of the new operating model.

Additional capital needed to support loan book growth
Fellow Bank estimates that the loss in H2 will be clearly smaller than in H1. Potential for positive monthly profit levels during H1/23 is seen, assuming a loan portfolio of around EUR 180m and the bank’s estimated cost level and lending interest margin. The total capital ratio was at 19.4% and the need for additional capital to continue growth kicked in sooner than we anticipated due to the H1 losses. Fellow Bank announced actions aiming at the issue of a Tier 2 debenture in the early autumn.

HOLD with a target price of EUR 0.42
Apart from the clear difference to our estimates in the non-cash ECL changes and the faster than anticipated need for additional capital, performance was quite as expected, and growth figures look promising. Profitability scaling due to growth ambitions appears slightly slower than we previously anticipated but intact. We retain our HOLD-rating and TP of EUR 0.42.

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Fellow Bank - Operations launch burdened figures

25.08.2022 - 11.00 | Earnings Flash

Fellow Bank started its banking operations in April and financial figures were accordingly burdened. Lending volumes showed positive signs aided by the new, more competitive business model. Fellow Bank started actions to strengthen the capital adequacy to support growth after the reporting period.

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  • Total income during H1/22 amounted to EUR 2.3m (Evli EUR 2.8m). Net interest income amounted to EUR 2.5m (Evli EUR 2.0m) and net fee and commission income to EUR 0.0m (Evli EUR 0.8m). 
  • After starting the banking operations, business lending and consumer lending volumes increased by 49% and 35% respectively compared with the beginning of the year
  • The loan portfolio at the end H1 amounted to EUR 114.5m and the deposit portfolio was EUR 223.4m.
  • The pre-tax profit during H1 amounted to EUR -7.4m (Evli EUR -2.3m). The difference compared with our estimates was mainly due to a larger than estimated ECL change due to growth in the loan book, total OPEX also slightly above our estimates at EUR 5.6m (Evli EUR 5.1m). Profitability was burdened by non-recurring costs relating to the launch of banking growth investments
  • Earnings per share amounted to EUR -0.1 compared with our estimate of EUR -0.02.
  • CET1 and the CET1 ratio amounted to EUR 19.6m and 19.4%. After the reporting period, Fellow Bank started actions aiming at the issue of a Tier 2 debenture in the early autumn.
  • The cost / income ratio amounted to 235%.

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Etteplan - Seeking big leap in growth story

24.08.2022 - 09.45 | Company update

Etteplan announced a recommended cash offer for Swedish technology company Semcon. The transaction would strengthen the market position and appears favourable for shareholders of both companies. We adjust our TP to EUR 18 (16) and upgrade our rating to BUY (HOLD)

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Cash offer for Swedish technology company Semcon
Etteplan announced a recommended cash offer of SEK 149 per Semcon’s share, for a total value of approx. SEK 2,699m. The Board of Directors of Semcon has unanimously recommended that the shareholders of Semcon accept the offer. The offer is conditional among other things upon the offer being accepted to more than 90 percent and approval from the Swedish Competition Authority. Semcon is an international technology company with more than 2,000 employees and 2021 revenue of SEK 1,711.3m and operating profit of SEK 175.1m. The combined entity would on consensus estimates have a combined 2022e revenue of over EUR 500m and have a strong market position in particular in the Nordics. Synergy effects are estimated to amount to EUR 5m on an annual basis.

Financing secured, planning EUR 110-125m rights issue
The completion of the offer is not subject to any financing condition and Etteplan is furthermore planning a rights issue of EUR 110-125m. Both the offer and rights issue appear to have good support from existing shareholders of Both Semcon and Etteplan. We see that the transaction would benefit both Etteplan as a company as well as shareholders.

BUY (HOLD) with a target price of EUR 18 (16)
Considering consensus estimates for Etteplan and Semcon along with valuation considerations and the impact of the transaction on net debt and nr. of shares, we see a potential of some 10-20% in the coming years depending on realization of synergy effects. Despite uncertainty, the offer appears favourable for shareholders and with the size and geographic presences of both companies and geographic presences the likelihood of regulatory obstacles appears limited. We adjust our TP to EUR 18 (16), rating upgraded to BUY (HOLD). Our estimates remain intact for now.

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Etteplan - Announces cash offer for Semcon

23.08.2022 - 10.00 | Analyst comment

Etteplan announced a recommended cash offer of SEK 149 per Semcon’s share, for a total value of approx. SEK 2,699m. Semcon would in our view be a suitable fit for Etteplan, strengthening the service offering and international presence along with offered synergy effects.

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  • Etteplan announced a recommended cash offer of SEK 149 in cash per Semcon’s share. The total value of the offer is approximately SEK 2,699m. The offer price will not be increased.
  • The offer price represents a premium of of 31.6 percent compared to the closing price of Semcon shares on Nasdaq Stockholm on 22 August 2022 and 32.0/27.6 percent compared to the volume-weighted average trading price during the last 30/180 trading days prior to the announcement of the offer.
  • The Board of Directors of Semcon unanimously recommends that the shareholders of Semcon accept the offer.
  • The Offer is conditional among other things upon the offer being accepted to such extent that Etteplan becomes the owner of shares in Semcon representing more than 90 percent of the total number of shares in Semcon (on a fully diluted basis).
  • Semcon is an international technology company with more than 2,000 employees in seven different countries. Semcon’s revenue in 2021 amounted to SEK 1,711.3m and operating profit to SEK 175.1m. 
  • On 2022 estimates (one analyst) the offer would value Semcon at ~16x P/E and EV/EBIT of ~12x, roughly in line with Etteplan’s current valuation.

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Dovre - Earnings continue to grow

19.08.2022 - 09.35 | Company update

Dovre’s Q2 EBIT came in above our estimate due to Project Personnel. There were no big surprises; we expect earnings growth to continue also next year.

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Another strong quarter for Project Personnel

Dovre grew 38% y/y to EUR 47.3m top line vs our EUR 50.5m estimate. Project Personnel and Consulting landed close to our estimates, while Renewable Energy fell EUR 3m short. We reckon late Finnish spring to have caused Suvic project delays, but the segment didn’t disappoint in terms of EBIT as it posted a big y/y improvement despite Q2 being relatively slow and this year also challenged by an inflation spike. Consulting EBIT was as expected as progress continued in both Norway and Finland. Consulting is still mostly driven by early-stage reviews of Norwegian civil & infrastructure projects, however the acquisition of eSite has added a new angle to serve Finnish industrial clients with VR solutions. Extended high demand in Norway also helped Project Personnel to top our EBIT estimate, and as a result Dovre’s EUR 1.7m EBIT came in easily above our EUR 1.2m estimate.

Renewable Energy could still drive another positive revision

Dovre revised its guidance only two weeks ago, so it came as no surprise there was no further upgrade despite the continued high Q2 profitability and demand outlook for H2. Oil prices stay high, which supports oil & gas capex levels and hence Project Personnel, but risks seem to tilt more towards downside from here on. We estimate 4.5% FY ‘22 EBIT margin for Project Personnel, which is more than a satisfactory level yet still short of long-term potential. We continue to expect only flat PP EBIT development for next year. Covid-19 may still cause some sick leaves, while extraordinary inflation rates tend to be more of an issue for Renewable Energy than the other two segments. Q3 is seasonally the best one for Suvic but it may not achieve y/y EBIT improvement this year due to a very strong comparison period.

EUR 7.5m EBIT leaves ample room for earnings growth

We see Dovre headed towards the upper end of its EBIT guidance range. Suvic’s H2 performance could yet lead Dovre to top the range, while Consulting should be able to resume earnings growth next year. Renewable Energy’s expansion is also set to continue. We see potential for EBIT to improve to EUR 9m next year and thus we revise our TP to EUR 0.75 (0.70); retain BUY.

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Endomines - Clearly shifting strategic focus

19.08.2022 - 09.30 | Company update

Endomines saw good development on the production front in Finland in H1. The updated strategy adds more emphasis on production in Finland while the US operations are planned to be run through partnership models. We lower our TP to SEK 1.7 (2.2), HOLD-rating intact.

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Operative H1 figures quite in line with expectations
Endomines reported H1 operative figures well in line with our estimates. Pampalo gold production amounted to 3,478 oz vs our estimate of 3,622 oz. Revenue amounted to SEK 59.1m (Evli SEK 60.4m) while EBITDA amounted to SEK -38.0m (Evli SEK -36.6m). EBIT of SEK -107.1m came below our estimate (SEK -73.6m) due to amortizations of Friday assets. EBITDA of Pampalo operations turned positive in Q2, at SEK 7.7m. Endomines expects production in H2/2022 to increase by 30-70% compared with H1, putting the full year estimate at roughly 8,000-9,400 oz (Evli updated estimate 8,847 oz). No production is expected from Friday in H2.

Strategy focusing on Finland and partnerships in the US
Endomines updated its strategy, with focus on Pampalo and development and exploration along the Karelian Gold Line. Focus in the US will be on partnership models, meaning that Endomines will not operate any assets by itself. We expect production to rely on Pampalo in the near-term, with potential to bring Hosko and/or Rämepuro to production in H2/2023, not yet included in our estimates. A significant amount of resources will be used for exploration along the Karelian Gold Line and the further funding in the near-term remains on the agenda. The new strategy brings further uncertainty to the future of the US assets but given the company’s resources and funding needs the logic is sound.

HOLD with a target price of SEK 1.7 (2.2)
With the new focus and corresponding changes to our SOTP- model, having lowered the implied value of Friday and revisions to gold price estimates due to recent volatility and changing interest environment, we adjust our TP to SEK 1.7 (2.2). Our HOLD-rating remains intact.

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Endomines - Production at Pampalo picking up

18.08.2022 - 13.30 | Earnings Flash

Ramp-up of Pampalo progressed quite in line with our expectations. Friday operations remain halted and appear to be on hold for the unforeseeable future. The updated strategy revolves more heavily around Finland and the future of the US operations remain a big question mark.

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  • Revenue     in H1 amounted to SEK 59.1m, in line with our estimate of SEK 60.4m. Gold production amounted to 3,478 oz vs our estimate of 3,622 oz.
  • EBITDA in H1 was at SEK -38.0, in line with our estimate of SEK -36.6m.
  • EBIT in H1 amounted to SEK -107.1m (Evli SEK -73.6m), including an impairment charge of SEK 54.9m for the Friday tangible assets. 
  • During H1, at Pampalo, gold production increased by 78% in Q2 to 2,227 oz compared with Q1. H2 production at Pampalo is estimated to be 30-70% higher than production during H1/2022, i.e. ~4,500-5,900 oz (Evli 5,671 oz).
  • Production at Friday remains halted and no gold production will be realized during H2/2022. Current focus is on investigating partnership options for both the mine and the Orogrande processing plant operations. 
  • At US Grant, Endomines is planning to undertake initial permitting activities and continue studies to define necessary development steps during H2/2022.
  • Endomines updated its strategy, which appears to lean on Pampalo and other deposits and exploration at the Karelian Gold Line, while focus in the U.S. is shifting towards partnership models.

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Dovre - High profitability continued

18.08.2022 - 09.45 | Earnings Flash

Dovre’s Q2 profitability topped our estimates mostly thanks to Project Personnel, where demand remained high particularly in Norway.

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  • Dovre Q2 revenue grew by 38% y/y to EUR 47.3m, compared to our EUR 50.5m estimate. The growth was all organic, some 75% of it due to Renewable Energy. Project Personnel amounted to EUR 22.4m vs our EUR 22.9m estimate, while Consulting revenue landed at EUR 4.6m vs our EUR 4.5m estimate. Renewable Energy recorded EUR 20.3m, compared to our EUR 23.1m estimate.
  • Q2 EBITDA came in at EUR 1.9m vs our EUR 1.4m estimate. EBIT was EUR 1.7m, compared to our EUR 1.2m estimate. Project Personnel EBIT amounted to EUR 0.9m vs our EUR 0.6m estimate, while Consulting was EUR 0.6m vs our EUR 0.6m estimate. Renewable Energy was EUR 0.4m, compared to our EUR 0.3m estimate. Other functions & unallocated cost EUR -0.2m vs our EUR -0.3m estimate.
  • Dovre guides FY ’22 revenue to be more than EUR 185m and EBIT to be in the range of EUR 6.5-7.5m (unchanged).

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Marimekko - Some uncertainty ahead

18.08.2022 - 09.25 | Company update

Marimekko’s Q2 result was strong and broadly in line with expectations. The outlook provided for H2 is solid, but the upside potential is in our view restricted.

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Growth as expected, EBIT slightly above our estimates
Marimekko delivered solid topline growth in Q2 with net sales amounting to EUR 38.0m (Evli: 37.0m), representing 16% y/y growth. The growth was driven by strong retail sales in Finland and solid development of int’l sales. According to the company, int’l sales were impacted by unusual weightings of wholesale deliveries, partly indicating a strong comparison period. Gross margin remained at the comparison period’s level, thanks to a favorable sales-mix. With revenue growing nicely, Q2 EBIT improved to EUR 5.7m (Evli: 5.3m), reflecting an EBIT margin of 15%. However, increased fixed costs restricted the profitability improvement somewhat.

We made some marginal estimate adjustments
We slightly adjusted our near-term estimates mainly driven by the solid outlook provided for H2. We see the sales development strong given the company’s outlook and the brands ATH awareness. In 2022, we expect net sales in Finland to grow by 9% y/y to EUR 100.9m while our estimate for int’l sales is EUR 67.4m, reflecting y/y growth of 13%. Our group revenue estimate for 2022 amounts to EUR 168.3m. With increased cost pressures, we expect a 22E EBIT of EUR 32.6m (19.4% margin). In 2023, we expect group revenue to grow by 7% y/y, driven by both Finland (+5%) and int’l sales (+10%). Meanwhile, with gross margin improving slightly and the increase in fixed costs calming down, our 23E EBIT margin estimate is 19.7%.

HOLD with a target price of EUR 13.2 (14.5)
With the increased uncertainty and risks concerning the development of the market environment, we have downgraded our valuation multiples for Marimekko. We approximate Marimekko should be trading with 22-23E EV/EBIT multiples of 16-15x. Now the company trades below our TP, but with the earnings growth being moderate and upside potential not being massive, we retain our HOLD-rating and adjust TP to EUR 13.2 (14.5).

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Marimekko - Continues to deliver strong results

17.08.2022 - 09.10 | Earnings Flash

Marimekko delivered strong Q2 result, with net sales broadly in line with and EBIT beating our estimates. The growth was strong in domestic market with y/y growth of 25% while int’l sales grew by 5% y/y.

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•    Q2 group result: net sales increased by 16% y/y to EUR 38.0m, which was broadly in line with our and consensus expectations (37.0/36.6m Evli/cons.). The growth was driven by domestic sales while international growth was a bit moderate. Gross margin was approx. flat y/y. With increased revenue, adj. EBIT amounted to EUR 5.7m (5.3/5.8m Evli/cons.), reflecting an EBIT margin of 15%. EPS amounted to EUR 0.12 (0.10 Evli/ cons.).
•    Finland: driven by strong retail sales, Finnish net sales increased by 25% y/y to EUR 23.0m (Evli: 20.5m). Wholesale sales were flat y/y.
•    Int’l: with y/y growth of 5%, net sales amounted to EUR 15.0m (Evli: 16.5m). The growth was driven by Scandinavia, the EMEA region, and the APAC region while North America saw low double-digit y/y decrease in its net sales. Int’l business was negatively impacted by a different kind of weighting of wholesale deliveries.
•    Category split: Fashion sales amounted to EUR 12.0m (+6% y/y). Home category grew by 11% y/y to EUR 16.9m. Bags and accessories showed strong y/y growth of 48% and amounted to EUR 9.0m.
•    Market outlook: Marimekko expects domestic sales to grow as well as APAC sales and int’l sales to increase significantly. Both retail and wholesale revenue are expected to increase in 2022. Licensing income is also estimated to be higher than that of the comparison period. In percentage terms, net sales growth is expected to be stronger at the beginning of 2022 than in H2.
•    FY’22 guidance intact: expecting revenue to grow and an EBIT margin ranging between 17-20%.

Open report

Netum - Upgrade to BUY

17.08.2022 - 08.45 | Company update

Netum’s H1 brought no surprises due to given preliminary figures but provided further reassurance of a solid growth outlook. We adjust our target price to EUR 4.5 (4.3) and upgrade our rating to BUY (HOLD).

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Investments into growth in H1
Netum had provided preliminary figures ahead of H1 and the earnings report as such held no notable surprises. Net sales grew 47.8% y/y to EUR 15.4m, of which 22.6% was organic growth. The comp. EBITA increased by 14.0% y/y to EUR 1.8m, but the comp. EBITA-margin declined by 4.0%p. The number of employees grew to 263 (H1/21: 171) mainly from successful new recruitments but also the Cerion Solutions acquisition. H1 organic growth was supported by the increased workloads under long framework agreements and the continued high level of demand, while profitability was affected by front-loaded growth investments and increased sick leaves due to the pandemic.

Public sector exposure proving to be beneficial
Demand in the public sector, accounting for the majority of Netum’s net sales, has been and appears to continue to be at a high level, while the private sector has shown some more fluctuation. New recruitments have notedly become more challenging, but with the large number of recruitments made during H1, domestic geographical expansion, and high public sector demand coupled with long framework agreements, the near-term growth prospects remain solid. The wage inflation/customer pricing equation currently appears to be well manageable and although the current environment creates some margin pressure, we expect profitability to remain at healthy levels. We have made limited revisions to our estimates, expecting net sales growth of 42.5% (guidance >30%) and an EBITA-margin of 12.5% (guidance 12-14%).

BUY (HOLD) with a target price of EUR 4.5 (4.3)
Netum currently trades quite in line with peers. With continued confidence in the growth outlook through the public sector exposure, we adjust our TP to EUR 4.5 (4.3), valuing Netum at ~17x 2022e adj. P/E, and upgrade our rating to BUY (HOLD).

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Netum - No surprises due to preliminary figures

16.08.2022 - 09.15 | Earnings Flash

Netum had provided preliminary figures before the H1 results and the earnings report held no surprises. Revenue grew 47.8% y/y (22.6% organic) while the comp. EBITA-margin fell by 4.0%p y/y to 11.4%. The number of employees grew 53.8% y/y.

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  • Netum’s net sales in H1 amounted to EUR 15.4m (EUR 10.4m in H1/21), with preliminary figures provided pre-H1. Net sales grew 47.8% y/y, of which 22.6% was organic growth. Organic growth was attributable to increased workloads under long framework agreements and to the continued high level of demand.
  • EBITA in H1 was EUR 1.7m (EUR 1.8m in H1/21) and comparable EBITA EUR 1.8m (EUR 1.6m in H1/21). Comp. EBITA increased by 14.0% y/y, but the comp. EBITA-margin declined by 4.0%p. Profitability was affected by growth investments and increased subcontracting as well as sick leaves caused by the pandemic.
  • Operating profit in H1 amounted to EUR 0.9m (EUR 1.3m in H1/21), in line with our estimates (Evli EUR 0.9m), at a margin of 5.6%. 
  • Earnings per share was EUR 0.04 (H1/21: 0.01) vs. our estimate of EUR 0.05.
  • Personnel at the end of the period amounted to 263 (171).
  • Guidance for 2022 (updated 8.8.2022): Netum expects its revenue to grow by at least 30% and the EBITA-margin to be 12-14%.

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Pihlajalinna - Investments are starting to pay off

15.08.2022 - 09.35 | Company update

Pihlajalinna’s Q2 didn’t deliver many surprises; we expect further improvement to materialize over the course of H2.

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Q2 results were overall quite close to estimates

Pihlajalinna grew 22% y/y; the EUR 174m revenue topped the EUR 170m/167m Evli/cons. estimates thanks to strong corporate as well as private customers, although the latter volumes are still lagging relative to 2019. Outsourcing profitability improved by EUR 0.7m y/y, despite continued high costs, due to efficiency measures, index adjustments and service fee refunds. H1 employee costs were exceptionally high by EUR 2.5m; the burden was slightly higher in Q1 than in Q2, but together with capacity additions (including four new private clinics) meant profitability excluding outsourcing fell by EUR 2.3m y/y in Q2. The EUR 16.9m adj. EBITDA was in line with estimates while the EUR 5.2m EBIT was a bit soft relative to the EUR 5.9m/6.3m Evli/cons. estimates.

We expect H2 improvement to be visible in Q4 profitability

Q3 absences have been lower so far, but the situation could again change over the fall. Capacity scales further up, however Pihlajalinna has already added most of its targeted level and hence higher utilization rates should drive profitability in H2. Pihlajalinna has also increased prices while inflation appears to be manageable. Q3 EBITA will remain burdened y/y, yet Q4 could achieve significant y/y improvement (Q4’21 was negatively affected, by some EUR 2m, by a spike in complete outsourcing specialized care costs while Covid-19 services revenue was still at a high level). High demand continues to support profitability, and H2 tends to be seasonally favorable, but short-term cost issues and Pohjola Hospital’s improvement pace create some uncertainty around H2 results. Meanwhile NIBD/EBITDA has been elevated, at least in the short-term, due to the various recent investments for which Pihlajalinna now looks to reap gains.

Long-term margin potential remains the big upside driver

We still don’t view the guidance challenging, although a positive revision may not arrive until around Q4; earnings growth should in any case continue next year. The 13x EV/EBIT valuation, on our FY ’23 estimates, is some 15% below peers’ while Pihlajalinna’s EBIT margin is likely to stay at least a third below a typical peer. Long-term upside potential hence continues to be meaningful. We revise our TP to EUR 12.5 (13.0) and retain our BUY rating.

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Administer - Lowered FY2022 guidance

15.08.2022 - 09.30 | Company update

Administer lowered its guidance for net sales and profitability in 2022. The mid-term potential remains but with the near-term uncertainty we lower our TP to EUR 4.0 (4.7), BUY-rating intact.

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Net sales and profitability seen to be weaker than expected
Administer issued a profit warning on Friday, Aug 12th. The company now expects 2022 net sales of EUR 47-49m (prev. >EUR 51m) and an EBITDA-margin of 5-7% (prev. >8%). The lowering of the guidance is based upon the general economic uncertainty and the impact on customer activity. Higher than anticipated overlapping costs for the old and new system stemming from Administer’s subsidiary Adner’s system reform have also impacted profitability negatively during the current year. In addition, net sales from system consulting and expert services in connection with EmCe’s client projects have been slightly lower than the company had expected.

Organic growth and transactional volumes a concern
We have for now adjusted our estimates towards the mid-range of the new guidance and our 2022 EBITDA estimate is as such down by near 40%. In our view the lower customer activity due to the general economy is of more concern, as costs relating to the system reform should ease at some point and we hypothesize that the lower project-based revenue may at least partially be due to higher sick-leaves that have been seen in Finland during H1 due to the pandemic. Administer reports its H1/2022 results on August 31st. Inorganic growth plans have progressed according to communicated plans, with four acquisitions so far during 2022, and our interest in the results will be primarily oriented towards the noted factors affecting growth and the development of organic growth ambitions.

BUY-rating with a target price of EUR 4.0 (4.7)
Administer’s 2022 financials were known to be sub-par in 2022 due to previous challenges but the guidance downgrade brings an unfortunate dent in the growth and profitability trajectory. The company’s mid-term potential remains, but with the noted challenges we lower our TP to EUR 4.0 (4.7), BUY-rating intact.

Open report

Marimekko - The undervaluation has narrowed

14.08.2022 - 18.40 | Preview

Marimekko releases its Q2 result on Wednesday. The company delivered strong Q1 result, and we expect the trend to continue also in Q2. The demand for lifestyle products has been favorable in H1, but strong comparison figures, low consumer trust, and an inflationary environment might affect the magnitude of H2 growth.

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Demand still strong, inflation kicks in during H2 and 2023
The demand for fashion and lifestyle products has been strong in H1. We see the trend especially in fashion, bags, and accessories where the consumers have been renewing their wardrobe collections after COVID-19 lockdowns. In addition, Marimekko has consistently grown its brand awareness abroad which can be seen in a strong international growth. However, we see the inflation starting to kick in during H2 and 2023, and with the combination of low consumer trust and strong comparison figures, we see the growth slowing down in H2.

Q2 is driven by both domestic and international growth
We made no changes to our estimates ahead of the Q2 result. In Q2, with the favorable market environment, we expect revenue to amount to EUR 37.0m driven by domestic growth of 12% and international growth of 15%. We expect all markets, except North America, to see double-digit growth in Q2. We expect adj. EBIT to improve y/y to EUR 5.3m, but adj. EBIT margin of 14.3% to fall below the comparison period driven by softer gross margin and increased fixed costs. Our 2022 topline estimate is EUR 167.7m (+10% y/y) and EBIT is EUR 32.5m (19.4% margin). The company expects its 2022 revenue to be higher that of the comparison period and its EBIT margin to land within the range of 17-20%.

HOLD (BUY) with a target price of EUR 14.5
Marimekko is valued with 22-23E EV/EBIT multiples of 16-14.5x and 22-23E P/E multiples of 21-20x. The current valuation is quite neutral, but most of the undervaluation has shrunk since our last update. In our view, the visibility of H2 is somewhat uncertain and with inflation starting to kick in, we see that consumer demand could be diluted or skewing towards lower price point lifestyle goods. We downgrade our rating to HOLD (prev. BUY) and retain TP of EUR 14.5.

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Solteq - Near-term challenges to overcome

12.08.2022 - 09.30 | Company update

Solteq reported weak Q2 figures, mainly due to challenges in the Utilities business. Despite near-term uncertainty, the investment case in terms of focus areas, demand, and increased share of software still looks favourable.

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Q2 figures well below expectations
Solteq reported weak Q2 figures. Revenue declined 3.0% y/y to EUR 17.9m (Evli EUR 19.9m) while EBIT fell clearly y/y to EUR 0.4m (Evli EUR 2.0m). Solteq Software performed well below expectations, with revenue of EUR 6.5m (Evli EUR 7.3m) and adj. EBIT of EUR -0.9m (Evli EUR 0.1m). Solteq Digital was also slightly below expectations due to some delays in the start of certain customer projects, but relative profitability still remained at a good level. Solteq still kept its guidance intact, expecting Group revenue to grow and profit to weaken.

Challenges to overcome in Utilities business
The main reason behind the weak Q2 figures was challenges relating to product development in the Solteq Utilities business. The Utilities business to our understanding suffered from a combination of rapid growth, having previously signed several significant orders, and non-sufficient standardization of products. As a result, resources were in sub-optimal use due to more time having to be spent on developing and improving products as opposed to project deliveries. The situation is being alleviated but we see that some catch-up will be seen during H2. The more fundamental issue relating to product development and standardization will likely be a lengthier process, and Solteq noted an updated strategy being worked on. Notably, Solteq did not amend its guidance, which implies expectations of good performance during H2.

BUY-rating with a target price of EUR 2.7 (3.4)
Valuation on our 2022e estimates is stretched, but we still see that the market demand, strategic focus on the Utilities business and recurring revenue potential support the investment case in the mid-term. With the near-term challenges and uncertainty, we adjust our TP to EUR 2.7 (3.4), BUY-rating intact.

Open report

Pihlajalinna - Results largely in line

12.08.2022 - 08.30 | Earnings Flash

Pihlajalinna’s Q2 results came in largely according to expectations. Top line growth continued strong and certain cost items remained high.

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  • Q2 revenue grew by 21.9% y/y and amounted to EUR 173.7m, compared to the EUR 169.5m/166.6m Evli/consensus estimates. Corporate customer revenue was EUR 56.0m vs the EUR 52.7m/51.8m Evli/consensus estimates, while private customers amounted to EUR 27.4m vs the EUR 22.4m/23.4m Evli/consensus estimates. Public sector customers came in at EUR 108.8m, compared to the EUR 113.0m/109.8m Evli/consensus estimates. Revenue grew 5.3% on an organic basis and customer volumes, excluding municipal outsourcing arrangements and Covid-19 testing, grew 69% y/y (28% without M&A transactions). Organic growth was at an especially good level in occupational health services and surgical operations.
  • Covid-19 services revenue was EUR 3.2m in Q2 (EUR 8.2m a year ago).
  • Adjusted EBITDA was EUR 16.9m vs the EUR 16.4m/17.0m Evli/consensus estimates, while adjusted EBITA was EUR 7.3m vs our EUR 7.9m estimate. Adjusted EBIT landed at EUR 5.2m, compared to the EUR 5.9m/6.3m Evli/consensus estimates. Employee benefit expenses were again exceptionally high due to sickness-related absences which increased costs by some EUR 2.5m. Meanwhile Pihlajalinna’s supply of appointments and imaging services grew by nearly 38%. The costs of complete outsourcing arrangements were still fairly high, but profitability improved slightly in Q2 thanks to efficiency improvement programs, index adjustments and service fee refunds.
  • Pihlajalinna guides FY ’22 revenue to increase substantially, while adjusted EBITA is expected to be on a par with 2021 (unchanged).

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Aspo - Earnings to remain relatively high

11.08.2022 - 09.40 | Company update

Aspo’s record high H1 results are to face headwinds in H2, but in our view EBIT may well stay above EUR 40m also next year thanks to ESL and developments in Leipurin.

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Telko especially will meet headwinds in H2 and FY ‘23

Aspo’s Q2 revenue grew by 16% y/y to EUR 161m vs the EUR 142m/148m Evli/cons. estimates. All segments hit revenues above our estimates, and the EUR 16.0m adj. EBIT clearly topped the EUR 9.3m/9.5m Evli/cons. estimates. H2 has typically been Aspo’s stronger half in terms of profitability but this year will be different, however the company seems headed close to EUR 50m FY ‘22 EBIT despite some softening in H2. It’s still very early innings in terms of Aspo’s updated compounder strategy, but the company appears poised to make further progress with M&A as well as ESL’s vessel pooling partnership.

ESL and Leipurin to deliver robust results in H2 and FY ‘23

ESL may not improve next year given the EUR 17m adj. EBIT in H1’22, yet outlook remains strong enough so that we wouldn’t expect a large EBIT decline either. Meanwhile Telko’s quarterly EBIT has recently jumped to the EUR 7-8m ballpark, compared to earlier levels of EUR 4-5m before raw materials prices shot up. Telko’s H2’22 EBIT may stay relatively high as most prices are yet to decline, but there’s a risk of reversion to more moderate levels by next year. Telko has many different product categories, and the overall price outlook appears stable although the risks tilt more towards downside. Telko has also placed more Western volumes recently, and against this backdrop our ca. EUR 4m quarterly EBIT estimates seem conservative. Leipurin closes the Kobia acquisition on Sep 1, which adds to our estimates in addition to the recent relatively strong organic performance.

Valuation continues to be undemanding

Our estimate revisions for H2’22 and FY ’23 come in relatively small. We estimate H2’22 EBIT at EUR 21.4m (prev. EUR 20.2m), while we see FY ’23 EBIT at EUR 43.4m (prev. EUR 39.0m). The increases are especially due to Leipurin as the company is making progress with its acquisition as well as the divestiture of the machinery business. Multiples are still not demanding, despite the inevitable short to medium term softening in EBIT, as Aspo is valued only around 8x EV/EBIT on our FY ’23 estimates. We update our TP to EUR 9.5 (8.5); we retain our BUY rating.

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Etteplan - Market environment main concern

11.08.2022 - 09.15 | Company update

Etteplan continued to post good growth figures in Q2, but profitability came in slightly soft. Etteplan expects the demand situation to remain fairly good throughout 2022, but we see some added uncertainty going forward.

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Continued good growth, profitability on the softer side
Etteplan reported fairly good Q2 results despite some softness in profitability. Revenue grew 18.9% y/y (10.3% organic excl. FX) to EUR 89.3m (88.8m/89.9m Evli/cons.) and EBIT amounted to EUR 6.8m (7.4m/8.0m Evli/cons.). The performance in Engineering Solutions was very good and slightly above our estimates while Technical Documentation Solutions and Software and Embedded Solutions performed below expectations. Group profitability overall was affected by increased travel and personnel event/training related expenses along with increased sick leaves and holidays. Organizational restructuring measures were implemented in Software and Embedded Solutions due to a weakened operational efficiency. Guidance kept intact, expecting revenue of EUR 340-370m and EBIT of EUR 28-32m in 2022.

Earnings uncertainty increased heading into H2
Based on management comments the market environment is expected to remain at fairly decent levels despite the uncertainty and some fluctuations. Our estimates remain largely unchanged, having slightly lowered our profitability expectations following continued weaker profitability in Technical Documentation Solutions and Software and Embedded Solutions. A normalization of the high level of travel and personnel expenses in Q2 should slightly benefit profitability but the faced challenges relating to operational efficiency appear unlikely to be fixed in the very short-term.

HOLD-rating with a target price of EUR 16.0 (17.0)
Etteplan’s Q2 report overall was slightly on the softer and we perceive a slight increase in uncertainty related to the market environment, due to which we adjust our target price to EUR 16.0 (17.0), HOLD-rating intact. Etteplan’s valuation currently remains justifiably above the peer median but potential upside remains limited in the current environment.

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Solteq - Challenging quarter

11.08.2022 - 08.30 | Earnings Flash

Solteq’s Q2 fell short our expectations, with revenue at EUR 17.9m (Evli EUR 19.9m) and adj. EBIT at EUR 0.6m (Evli EUR 2.0m). Challenges were caused by the development of software products in the Solteq Utilities business and the resulting increase in project delivery costs.

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  • Net sales in Q2 were EUR 17.9m (EUR 18.5m in Q2/21), below our estimates (Evli EUR 19.9m). Growth in Q2 amounted to -3.0% y/y. 
  • The operating profit and adj. operating profit in Q2 amounted to EUR 0.4m and 0.6m respectively (EUR 2.4m/2.5m in Q2/21), clearly below our estimates (Evli EUR 2.0m/2.0m). 
  • Q2 was challenging for Solteq, with main challenges caused by the development of software products in the Solteq Utilities business and the resulting increase in project delivery costs. Despite the challenges, the outlook for Solteq Group’s international and domestic business is estimated to remain positive.
  • Solteq Digital: revenue in Q2 amounted to EUR 11.4m (Q2/21: EUR 11.9m) vs. Evli EUR 12.6m. Growth amounted to -4.1%. The adj. EBIT was EUR 1.5m (Q2/21: EUR 1.9m) vs. Evli EUR 1.9m. Demand in key business areas, such as digital business and commerce solutions, is expected to remain at a good level during the ongoing quarter.
  • Solteq Software: Revenue in Q2 amounted to EUR 6.5m (Q2/21: EUR 6.6m) vs. Evli EUR 7.3m. The adj. EBIT was EUR -0.9m (Q2/21: EUR 0.6m) vs. Evli EUR 0.1m. Growth was -0.9%. The business outlook for Solteq Software is expected to remain positive.
  • Guidance for 2022 (reiterated): group revenue is expected to grow and operating profit to weaken.

Open report

Etteplan - Solid growth continues 

10.08.2022 - 13.30 | Earnings Flash

Etteplan's net sales in Q2 amounted to EUR 89.3m (EUR 88.8m/89.9m Evli/cons.), with continued solid growth of 19% y/y (10.3% organic). EBIT amounted to EUR 6.8m (EUR 7.4m/8.0m Evli/cons.), with lower relative profitability y/y due to among other things increases in personnel events as well as sick leaves and holidays.

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  • Net sales in Q2 were EUR 89.3m (EUR 75.0m in Q2/21), in line with our estimates and consensus estimates (EUR 88.8m/89.9m Evli/Cons.). Growth in Q2 amounted to 19% y/y, of which 10.3% organic growth.
  • EBIT in Q2 amounted to EUR 6.8m (EUR 6.7m in Q2/21), below our estimates and consensus estimates (EUR 7.4m/8.0m Evli/cons.), at a margin of 7.6%. Profitability was affected by increased costs relating to employee training and social events, sick leaves and holidays, and organizational restructuring in the software business.
  • EPS in Q2 amounted to EUR 0.22 (EUR 0.20 in Q2/21), slightly below our and consensus estimates (EUR 0.23/0.24 Evli/cons.).
  • Net sales in Engineering Solutions in Q2 were EUR 46.2m vs. EUR 46.0m Evli. EBITA in Q2 amounted to EUR 4.9m vs. EUR 4.6m Evli. 
  • Net sales in Software and Embedded Solutions in Q2 were EUR 25.1m vs. EUR 24.6m Evli. EBITA in Q2 amounted to EUR 1.9m vs. EUR 2.3m Evli. 
  • Net sales in Technical Documentation Solutions in Q2 were EUR 17.7m vs. EUR 18.0m Evli. EBITA in Q2 amounted to EUR 1.5m vs. EUR 2.0m Evli. 
  • Guidance for 2022 (intact): Revenue is estimated to be EUR 340-370m and the operating profit is estimated to be EUR 28-32m

Open report

Aspo - Another record EBIT

10.08.2022 - 10.00 | Earnings Flash

Aspo’s Q2 results were broadly higher than expected as all three segments reached record-high quarterly profitability levels. ESL’s H2 looks to remain strong, while Telko needs to manage with decreasing top line due to the exit from Russia.

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  • Aspo Q2 revenue for continuing operations increased by 16% y/y to EUR 161.4m, compared to the EUR 142.0m/148.3m Evli/consensus estimates.
  • Q2 adjusted EBIT was EUR 16.0m vs the EUR 9.3m/9.5m Evli/consensus estimates.
  • ESL Q2 revenue amounted to EUR 60.3m vs our EUR 50.2m estimate, while adjusted EBIT landed at EUR 9.2m vs our EUR 6.3m estimate. All vessel categories’ profitability remained strong during the quarter. Demand looks to stay high at least over the course of H2.
  • Telko’s top line was EUR 71.8m, compared to our EUR 68.5m estimate, whereas adjusted EBIT amounted to EUR 7.2m vs our EUR 4.2m estimate. Price levels remained high, and volumes grew especially in Western markets. Western sales are expected to stay at a relatively stable level, but significantly decreasing sales in Russia will drag revenue lower during H2. The overall outlook on prices seems to be somewhat stable.
  • Leipurin Q2 revenue was EUR 29.3m vs our EUR 23.3m estimate. Adjusted EBIT came in at EUR 0.9m, compared to our EUR 0.3m estimate.
  • Other operations cost EUR 1.4m, compared to our EUR 1.5m estimate.
  • Aspo’s guidance remains unchanged as the company expects comparable operating profit to improve from previous year (EUR 42.4m).

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Suominen - Margins are catching up in H2

10.08.2022 - 09.20 | Company update

Suominen’s Q2 earnings missed estimates, but valuation isn’t very demanding on moderate estimate levels.

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Suominen’s pricing will need to catch up some more in H2

Suominen’s Q2 revenue grew 4% y/y to EUR 118m, compared to the EUR 116m/118m Evli/cons. estimates. Americas’ EUR 64m top line was soft relative to our estimate despite the EUR 8m FX tailwind, however Europe continued to grow at a 16% y/y pace. We note neither Europe nor Brazil have seen inventory-related demand issues like the US. Group sales volumes improved just a bit q/q, in both Americas and Europe, but remained below the level seen a year ago as US customers still suffered from high inventories which have been blocking up the retail channel. The problem arose last summer and Suominen’s customers expected earlier inventories to have melted by the middle of this year. The problem has since eased somewhat, although not as fast as was expected. Sales prices continued to follow raw materials but not enough to fully compensate for the cost inflation, which resumed at a high single-digit q/q level in Q2. EBITDA thus fell to EUR 1.9m vs the EUR 7.0m/6.7m Evli/cons. estimates. Raw materials prices may now be stabilizing, however energy prices, especially in Italy, will continue to climb in H2.

Volumes are growing, yet cost inflation remains a nuisance

Q3 will mark an improvement thanks to growing volumes, as seen already in July, and higher prices as they continue to catch up with raw material inflation. Moist toilet tissue volumes are set to rise over the course of H2 thanks to US production line conversions, while Suominen has recently completed incremental investments in Italy and announced a EUR 6m production line upgrade in Finland. We do not hence view capacity utilization levels a pressing risk, however cost inflation remains an acute issue. We make some upward revisions to our H2 revenue estimates, but we revise our Q3 EBITDA estimate to EUR 7.4m (prev. EUR 10.8m). We see H2’22 EBITDA at EUR 20.5m.

Multiples aren’t demanding in the light of H2 improvement

We estimate a marked improvement for H2, although the level is still quite modest. Suominen is valued 4x EV/EBITDA and 7x EV/EBIT on our FY ’23 estimates, which aren’t very high levels on moderate estimates. We retain our EUR 3.5 TP and BUY rating.

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Suominen - Profitability fell very low

09.08.2022 - 10.00 | Earnings Flash

Suominen’s Q2 profitability fell clearly below estimates as cost inflation continued again relatively strong. Profitability will nevertheless improve in Q3 and especially in Q4.

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  • Suominen Q2 revenue grew by 4% y/y to EUR 118.0m vs the EUR 116.0m/118.4m Evli/consensus estimates. The impact of currencies was EUR 8.0m. Americas landed at EUR 64.2m, compared to our EUR 67.0m estimate, while Europe amounted to EUR 53.8m vs our EUR 49.0m estimate. Overall sales volumes improved slightly q/q but remained well below y/y. Suominen has widened its product portfolio in the US for the production lines suffering from inventory imbalances and expects improved demand in H2’22 based on new contracted volumes.
  • Gross profit came in at EUR 5.0m, compared to our EUR 9.3m estimate. Gross margin was 4.2% vs our 8.0% estimate. Q2 did not see an improvement in demand for the hard surface disinfectant products which have caused trouble in the US supply chain. Cost inflation also continued in Q2, especially in Europe.
  • Q2 adjusted EBITDA was EUR 1.9m vs the EUR 7.0m/6.7m Evli/consensus estimates, while EBIT was EUR -2.9m vs our EUR 2.0m estimate. Fixed cost savings had a small positive impact on the result.
  • Suominen guides comparable EBITDA to decrease clearly in 2022 (unchanged).

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Pihlajalinna - Looking forward to H2 improvement

09.08.2022 - 09.20 | Preview

Pihlajalinna reports Q2 results on Fri, Aug 12. Q2 earnings will remain modest due to the integration process and a couple of other cost issues highlighted in the Q1 report.

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Q1 results were better than expected despite many burdens

Pihlajalinna’s Q1 results delivered a positive surprise as both revenue and EBIT topped estimates. Organic growth amounted to 7%, driven by corporate customers where the Pohjola Hospital acquisition was an additional help to top line. The integration process went clearly better than expected over the first few months while outsourcing profitability also improved. Surgical operations performed better than the company expected in Q1. There were a few factors in Q1, in addition to the integration process, which limited profitability and are likely to do so at least to some extent also in Q2. High levels of sick leaves (+50%) due to the pandemic led to exceptionally high employee costs as Pihlajalinna had to resort to substitutes. Meanwhile Covid-19 services revenue continues to decline and is no more very profitable. Pihlajalinna is at the same time scaling up capacity in anticipation of near future demand, all of which means Q2 profitability will remain modest relative to long-term potential.

Focus rests on improvement over the course of H2

We make only marginal estimate revisions ahead of the report. We expect flat profitability q/q, at EUR 7.9m in terms of adj. EBITA, or down by EUR 1.0m y/y. We estimate top line growth to have increased to 19% y/y as Q2 was the first quarter in which Pohjola Hospital was included from the beginning. The report will update on the integration process; the acquisition reached positive results in two months, and progress has likely continued over the summer. The report may also provide an update on certain outsourcing restructuring negotiations. We do not view the FY ‘22 guidance for flat adj. EBITA challenging and, although there are many moving parts, we consider a guidance upgrade likely during or after Q3.

Valuation not demanding considering the margin upside

Pihlajalinna’s valuation is still not too challenging as the earnings multiples are well below peers’ (by some 20%) while profitability margins only begin to catch up. Peer multiples have however faced headwinds in the past three months and hence we adjust our TP to EUR 13 (14). We retain our BUY rating.

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Netum - On track despite some challenges

09.08.2022 - 09.15 | Company update

Netum lowered its earnings guidance for 2022 following elevated H1 costs, while preliminary figures showed faster than expected growth, with the news in our view overall on the neutral/slightly positive side. We retain our target price of EUR 4.3 and HOLD-rating.

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Solid growth in H1 but softness in profitability
Netum provided preliminary information on its H1 results and lowered its earnings guidance. Netum’s revenue growth was faster than anticipated, up 47.8% y/y to EUR 15.4m (Evli EUR 14.1m). EBITA amounted to EUR 1.7m (Evli EUR 2.0m), with the EBITA-margin falling to 11.2% of revenue (H1/2021: 17.1%). Netum lowered its earnings guidance for 2022, now expecting an EBITA-margin of 12-14%, having previously expected to achieve an EBITA-margin of at least 14%. The company’s revenue is intact, with revenue expected to grow over 30% y/y. The lowered earnings guidance is due to larger than expected investments in personnel growth made in the first half of 2022, a higher than usual volume of subcontracting, sick leaves caused by the coronavirus and the general cost increase.

Announcement in our view neutral/slightly positive
The lower relative profitability is slightly on the negative side but given that the cost increase appears to be largely related to enabling growth, coupled with a good demand and faster than anticipated H1 growth, the development in our view is more on the neutral/slightly positive side. The revised guidance also implies profitability improvements in H2, but the development of the company’s cost base will still be something to watch going forward. We have revised our estimates, now expecting 2022 revenue of EUR 31.9m (prev. 29.6m), a y/y growth of 42.4%, and an EBITA of EUR 3.9m, (prev. 4.2m) for a 12.4% EBITA-margin.

HOLD-rating with a target price of EUR 4.3
We retain our target price of EUR 4.3 and HOLD-rating. Our TP values Netum at 16.1x and 11.9x 2022e and 2023e P/E (goodwill amort. adj.). We consider a premium to peers justified given the rapid growth and still rather healthy profitability, with the current valuation level rather fair given some uncertainty.

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Netum - Solid growth, profitability softness

08.08.2022 - 10.15 | Analyst comment

Netum provided preliminary H1/2022 figures, with growth better than we had expected while profitability was slightly weaker due to personnel growth, increased subcontracting, sick leaves and general cost increase. Netum still expects over 30% growth in 2022, EBITA now expected to be 12-14% of revenue (prev. over 14%).

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  • Netum provided preliminary information on its H1/2022 result and lowered its earnings estimate.
  • Netum’s revenue during H1/2022 grew 47.8% from the previous year and amounted to EUR 15.4m (Evli EUR 14.1m). EBITA was EUR 1.7m (Evli EUR 2.0m) or 11.2% of revenue.
  • Netum lowered its earnings estimate for the year 2022, expecting EBITA to be approximately 12–14% of revenue (prev. over 14%). The Group’s revenue estimate for 2022 is intact, with revenue expected to grow at least 30% from the previous year.
  • The company's profitability estimate is lowered due to the larger than expected investments in personnel growth made in the first half of 2022, a higher than usual volume of subcontracting, sick leaves caused by the coronavirus and the general cost increase.
  • Overall, the news is in our view slightly more on the positive side despite the profitability guidance downgrade given the rapid growth in the first half of the year and as the guidance implies expectations for improved profitability during H2. We had estimated a 2022 EBITA-margin of 14.3% and the difference to the mid-point of the new guidance is thus small.
  • Netum will publish its H1/2022 report on August 16th.

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Scanfil - High demand and better productivity

08.08.2022 - 09.35 | Company update

Scanfil’s Q2 report didn’t reveal big surprises, although there were a couple of profitability headwinds which should not limit performance that much going forward.

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Q2 profitability faced a couple of headwinds

Scanfil Q2 top line grew 23% y/y to EUR 213m vs the EUR 202m/213m Evli/cons. estimates. Growth was 11% when excluding the spot component purchases; 3% was due to inflation and thus underlying comparable growth was ca. 8%, neatly above the 5-7% long-term organic target. Advanced Consumer Applications didn’t achieve much growth without the transitory invoicing items, but other than that demand remained favorable for all segments. EBIT landed at EUR 10.1m vs the EUR 11.3m/11.2m Evli/cons. estimates. The miss can be attributed to the FX loss which was mainly due to strong USD; Scanfil has since put hedges into place, although it’s still not entirely immune to FX moves. Lockdowns in China also hit profitability in Suzhou during the spring, but the situation has since normalized.

Component shortages seem to be easing already

The component availability situation has been a nuisance for well over a year, but there are now signs of improvement. Scanfil sees Q3 spot market purchases already lower than in Q2 yet still somewhat high. The stabilizing component situation will help productivity and profitability going forward, and Scanfil looks to manage its elevated inventory levels down. This easing should be a major factor in helping H2 EBIT higher; Scanfil’s guidance implies meaningful EBIT margin improvement for H2 without any significant changes in product mix. Late increases in production space mean Scanfil can meet high customer demand at least in the short-term, while M&A remains a likely tool for potential larger increases in manufacturing footprint.

Profitability has room to improve quite a bit more

Scanfil may not achieve significant top line growth next year as the spot market purchases fade away, however that should not limit absolute profitability potential. Scanfil’s 7% long-term EBIT margin target remains a relevant benchmark, but it is likely to take at least a few more years to reach that level. Scanfil is valued 7.5x EV/EBITDA and 10x EV/EBIT on our FY ’22 estimates. The multiples are in line with peers’ while Scanfil’s margins top those of the typical peer. We retain our EUR 8 TP and BUY rating.

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CapMan - Steady as she goes

05.08.2022 - 09.15 | Company update

CapMan showed good progress across the board in Q2. The Services business is showing signs of bringing the growth pace up a notch and the overall expectations remain favourable. We retain our BUY-rating and TP of EUR 3.4.

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Q2 results slightly better than expected
CapMan reported slightly better than expected Q2 results. Turnover amounted to EUR 17.7m (EUR 16.5m/17.8m Evli/cons.) while operating profit amounted to EUR 14.1m (11.5m/11.9m Evli/cons.). The Management company business performance was in line with expectations (EBIT 6.1m/6.1m act./Evli), with 3.2m in carried interest (Evli EUR 3.0m) mainly from CapMan’s growth Equity fund. The Services business growth pace increased, and the business area exceeded our expectations on growth and profitability. The main deviations to our estimates came from fair value changes (EUR 9.8m/6.0m act./Evli) aided by the Picosun exit, CapMan’s largest exit measured by exit value. A one-off cost of EUR 1.4m due to the early vesting of CapMan’s 2020 performance share plan had a negative impact on costs.

Good overall expectations for H2/2022
Our 2022 estimates revisions roughly correspond to the deviation in our Q2 estimates and actual figures, now expecting an operating profit of EUR 65.1m (2021: 44.6m). The carry potential remains in place, noting however the uncertainty relating to timing and magnitude. On-going and completed deals post-Q2 provide additional support for continued solid investment returns. AUM growth is supported by the Infra II fund (recent first close) and the new Social Real Estate strategy fund (first close H2/22e) along with other on-going fund raisings and open-ended products. We expect the net AUM growth pace to slightly slow down following increased exits.

BUY-rating with a TP of EUR 3.4
Without larger changes to our estimates or views we retain our TP of EUR 3.4. Valuation remains favourable, with 2022e P/E at just below 10x. The high share of uncertain earnings from carry and investment returns remains a limiting factor for valuation upside, support is provided by growing dividend payments.

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Enersense - Results are burdened on many fronts

05.08.2022 - 09.05 | Company update

Enersense’s Q2 was weak, and H2 is set to remain modest. There’s still much uncertainty around the improvement slope, however valuation appears neutral relative to peers.

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Inflation and certain low project volumes hurt Q2 results

Enersense’s Q2 top line declined 3% y/y to EUR 59.8m. The softness was mostly due to Smart Industry, where e.g. lower Olkiluoto project volumes explained the fall. The war also led to project delays, and the ICT strike hurt volumes within Connectivity (it also suffered from inflation particularly due to fuel). Inflation, which in the case of Enersense mostly means higher metal and fuel prices, is especially a problem in the Baltics, where long contracts also add to the pain. International Operations thus saw a marked decline in profitability even when revenue grew by 14% y/y. Existing framework agreements suffer from inflation, although Enersense has been able to make some progress in adjusting their rates for higher costs. Power fared relatively well due to its more dynamic nature of business.

Enersense continues to work towards its targets

Inflation was a major issue as adj. EBITDA fell to EUR -0.4m from EUR 4.8m a year ago. Enersense sees Q3 as the most profitable quarter also this year even though inflation continues to hurt results in H2. Investments in offshore wind capabilities will still be a burden in H2, in addition to which ERP investments are set to continue for a few years. H2 profitability will remain far below potential, but volumes continue to grow as recent orders announced over the summer indicate. There are also no major issues with e.g. labor availability. Enersense recently announced the acquisition of Voimatel to add to Connectivity and Power, but the deal still waits for competition authority approvals.

Valuation appears broadly in line with peers

We cut our FY ’23 adj. EBITDA estimate to EUR 16.7m from EUR 22.2m due to the current challenges. Enersense is valued some 5.5x EV/EBITDA and 12x EV/EBIT on our FY ’23 estimates. The earnings multiples are broadly in line with those of peers; there remains much uncertainty around next year’s margins, but our estimated 2.9% EBIT is still not that high a level. Enersense’s multiples are close to Eltel’s, and the two are also similar in the sense that FY ’22 results are set to be modest for both. Our new TP is EUR 6 (8); we retain our HOLD rating.

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Scanfil - Strong H2 profitability in the cards

05.08.2022 - 08.30 | Earnings Flash

Scanfil’s Q2 report didn’t serve any major surprises. Top line was largely according to expectations, although Q2 profitability came in a little soft but only implies stronger EBIT in H2.

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  • Scanfil Q2 revenue grew by 23% y/y to EUR 212.9m, compared to the EUR 201.7m/212.5m Evli/consensus estimates. Transitory component invoicing amounted to EUR 29.5m during the quarter. Customer demand was generally strong in all customer segments, however poor availability of electronic components remained a challenge. Spot market component purchases will remain high at least in Q3.
  • Advanced Consumer Applications amounted to EUR 68.7m vs our EUR 64.6m estimate, while Energy & Cleantech was EUR 53.5m vs our EUR 54.2m estimate. Automation & Safety landed at EUR 45.6m, compared to our EUR 41.6m estimate.
  • Q2 adjusted EBIT came in at EUR 10.1m vs the EUR 11.3m/11.2m Evli/consensus estimates. There was an FX loss of EUR 1.4m, mainly due to the strengthening of the US dollar. China’s lockdown measures affected the Suzhou factory’s profitability especially in April, but the level returned to normal in May and June. Scanfil’s guidance also implies strong H2 profitability.
  • Scanfil guides EUR 800-880m in revenue and EUR 43-48m in adjusted EBIT for FY ’22.

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Enersense - Challenges will continue in H2

04.08.2022 - 13.00 | Earnings Flash

Enersense’s Q2 results were known before the official release as the company disclosed preliminary figures in connection with a negative earnings guidance revision.

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  • Enersense Q2 revenue amounted to EUR 59.8m, down by 2.9% y/y. Power revenue grew 17% y/y to EUR 14.0m, while International Operations grew by 14% to EUR 16.8m. Smart Industry declined by 20% to EUR 18.7m and Connectivity by 10% to EUR 10.2m.
  • Q2 adjusted EBITDA was EUR -0.4m, compared to EUR 4.8m a year ago. Profitability declined the most in Smart Industry, followed by Connectivity and International Operations, whereas Power managed relatively strong absolute EBITDA. Inflation was a major negative affecting the results throughout the group, but there were also some project volume issues as well as the six-week ICT strike in Finland which had an impact on Connectivity. H1’22 adjusted EBITDA also includes EUR 2.4m in investments in offshore wind power and a new ERP system.
  • Order backlog amounted to EUR 295.4m at the end of Q2. The order backlog contracts partially reflect increased pricing adjusted for inflation, whereas new contracts better reflect the cost pressure.
  • Enersense guides EUR 245-265m in revenue and EUR 6-12m in adjusted EBITDA for FY ’22. Inflation continues to cast uncertainty over H2’22 results and project starts may also be delayed.

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Dovre - EBIT to improve this year and next

04.08.2022 - 09.30 | Company update

Dovre revised its guidance up earlier than we expected. We make some estimate updates, but we don’t see major news.

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We don’t see any big news behind the guidance revision

Dovre specified its guidance somewhat earlier than we would have expected. The old guidance suggested revenue above EUR 165m and EBIT of more than EUR 6.1m, whereas the new guidance is for revenue above EUR 185m and EBIT in the range of EUR 6.5-7.5m. Our previous estimates were respectively for EUR 200.9m and EUR 8.4m. Dovre sees no negative changes in demand, which we do not consider especially surprising considering the three segments’ favorable positioning within energy markets as well as the Norwegian civil and infrastructure sectors. Our updated FY ‘22 revenue and EBIT estimates stand at EUR 199.1m and EUR 7.4m respectively.

Renewable Energy is operating in a busy environment

We leave our FY ’22 estimates for Consulting intact ahead of the report. We make minor downward revisions for Project Personnel; the segment had a very strong Q1 thanks to its favorable positioning within the Norwegian oil & gas sector. We previously estimated 4.2% EBIT margin for FY ’22, but we revise the estimate slightly down to 4.0%. We continue to expect similar levels for the coming years, although we don’t consider 5% EBIT that challenging as a long-term target. Our downward revisions concern mostly Renewable Energy. We would expect the specialty construction business to proceed mostly according to plan as Suvic is set to deliver some EUR 90m in Finnish wind farm projects this year. Materials challenges, including steel availability and prices, have not come as a surprise, but there’s still some uncertainty around execution and supplier networks given the current high demand. We thus revise our EBIT estimate for Renewable Energy down to EUR 2.8m from EUR 3.6m.

Still more earnings potential over the following years

We estimate Dovre’s FY ’22 EBIT margin at 3.7%, down from our previous estimate of 4.2%; in our view all three segments have further potential to improve beyond this year. Earnings growth outlook remains solid as before, while there have been no major changes in peer multiples. Dovre is valued around 9x EV/EBIT on our FY ’22 estimates, and SOTP valuation still implies upside. We retain our EUR 0.70 TP and BUY rating.

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Suominen - Looking for margin improvement

04.08.2022 - 09.10 | Preview

Suominen reports Q2 results on Tue, Aug 9. We continue to expect q/q improvement over the weak Q1 results.

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Some improvement should already be visible

Suominen’s Q1 figures were very soft, largely as expected although the EUR 3.3m EBITDA was somewhat below estimates. Q2 profitability is to remain at a modest level due to the spike in European energy costs, which in the case of Suominen amounts to mostly electricity. We believe the energy surcharge Suominen announced in Q1 will help Q2 profitability to improve q/q, however we estimate EBITDA to have declined more than 50% y/y to EUR 7.0m. We note raw materials prices surged at double-digit rates in H1’21, and even though there were some signs of stabilization before the war price levels have continued to advance over the spring and summer months. Suominen’s nonwovens pricing therefore continues to catch up with higher raw materials costs at least over this summer.

H2’22 EBITDA should be clearly better than the recent lows

We make only marginal estimate revisions ahead of the report. US demand may still fluctuate on a quarterly level due to the supply chain issues, but we expect Americas revenue to be up by 4% this year relative to last, when especially Q3 figures received a hit. Strong dollar will help top line and we estimate 6% growth for this year. The estimated EUR 469m revenue would be above the previous record of EUR 459m seen in FY ’20, however weak H1’22 profitability means FY ’22 EBITDA will stay far below the previous record. Suominen’s EBITDA amounted to only EUR 13m in H2’21 and we estimate the figure to have declined even lower, to EUR 10m, in H1’22. It remains unclear how much the figure will improve in H2’22 as cost inflation has not abated from the agenda; we estimate the figure at EUR 23m.

Valuation multiples are low on modest earnings levels

Suominen’s earnings can deviate a lot from those of its peers, but valuation is by no means challenging considering the low level from which profitability is likely to bottom out this year. Suominen trades around 4x EV/EBITDA and 6.5x EV/EBIT on our FY ’23 estimates. The level implies a discount of 50% relative to peers while we don’t consider our margin estimates for FY ’23 very challenging. We retain our EUR 3.5 TP and BUY rating.

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Detection Technology - Outlook for H2 remains strong

04.08.2022 - 09.00 | Company update

DT’s Q2 EBIT faced a significant decline due to low sales and increased costs. The outlook for H2 and 2023 seems bright and we expect the company to see a clear profitability improvement in 2023.

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SBU and IBU performed well
The strong growth of IBU and SBU wasn’t enough to offset the declined medical segment and Q2 group revenue decreased by 3.3% y/y. MBU suffered from a temporary supply chain issue and its topline decreased by 25.2% y/y while driven by all market segments, IBU and SBU recorded strong double-digit y/y growth of 29.4% and 25.4% respectively. The growth rate could have been higher as some sales were postponed due to the above-mentioned reasons as well as DT’s and its customers’ challenges to acquire components. With lower volumes, spot-component purchases, and increased logistic and R&D costs, DT’s margins tightened, and EBIT fell below the comparison period to EUR 1.2m (5.2% margin).

Demand is expected to further pick up
DT reiterated its guidance for H2, expecting double-digit growth both in Q3 and H2. Furthermore, the company clarified BU level outlook for Q3; expecting MBU and SBU to see double-digit growth while IBU is expected to grow. We foresee some uncertainty in the industrial markets with the global industrial activity decreasing. Meanwhile, we see IBU positioned well in its markets and expect the business to deliver growth even during uncertain times. Furthermore, the company’s management noted that the demand in all segments is picking up.

HOLD with a TP of EUR 20.0
We made only minor changes to our near-term net sales estimates while with soft Q2 profitability and increased cost pressures, our 22E EBIT estimate declined significantly. However, with net sales increasing and component availability improving, we expect 23E EBIT to improve significantly. In our view, with a 23E EV/EBIT multiple of 14x, the company’s valuation is quite neutral. The market environment however includes some uncertainty given signs of the global economy slowing down. We retain our HOLD-rating and TP of EUR 20.0.

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CapMan - Good performance across the board

04.08.2022 - 08.30 | Earnings Flash

CapMan's net sales in Q2 amounted to EUR 17.7m, slightly above our estimates and in line with consensus (EUR 16.5m/17.8m Evli/cons.). EBIT amounted to EUR 14.1m, above our and consensus estimates (EUR 11.5m/11.9m Evli/cons.).

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  • Revenue in Q2 was EUR 17.7m (EUR 11.9m in Q2/21), slightly above our estimates and in line with consensus estimates (EUR 16.5m/17.8m Evli/Cons.). Growth in Q2 amounted to 49% y/y.
  • Operating profit in Q2 amounted to EUR 14.1m (EUR 11.3m in Q2/21), above our estimates and consensus estimates (EUR 11.5m/11.9m Evli/cons.), at a margin of 79.8%. Compared with our estimates the difference was primarily due to higher than estimated fair value changes (EUR 6.0m/9.6m Evli/act.).
  • EPS in Q2 amounted to EUR 0.07 (EUR 0.06 in Q2/21), above our estimates and consensus estimates (EUR 0.06/0.05 Evli/cons.).
  • Revenue in Management Company business in Q2 was EUR 14.5m vs. EUR 14.2m Evli. Operating profit in Q2 amounted to EUR 6.1m vs. EUR 6.1m Evli. 
  • Revenue in Investment business in Q2 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q2 amounted to EUR 9.6m vs. EUR 5.8m Evli. 
  • Revenue in Services business in Q2 was EUR 3.2m vs. EUR 2.3m Evli. Operating profit in Q2 amounted to EUR 1.7m vs. EUR 1.0m Evli. 
  • Capital under management by the end of Q2 was EUR 4.8bn (Q2/21: EUR 4.3bn). Real estate funds: EUR 3.2bn, private equity & credit funds: EUR 1.1bn, infra funds: EUR 0.5bn, and other funds: EUR 0.1bn.

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Detection Technology - Temporary setback, demand picking up

03.08.2022 - 09.50 | Earnings Flash

Detection Technology’s Q2 net sales came down less than we expected. Net sales decreased by 3.3% due to soft sales development in medical markets while SBU and IBU saw strong double-digit growth during Q2.

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  • Group results: Q2 net sales topped our estimates and decreased by 3.3% y/y to EUR 22.8m (22.4/22.5m Evli/cons.). Demand would have allowed for a higher growth rate in sales, but component shortages and temporary setbacks in supply chain postponed sales to Q3. The postponed sales, spot purchases, and increasing logistics and product development costs eroded DT's profitability. Adj. EBIT amounted to EUR 1.2m (1.8/1.8m Evli/cons.), implying an EBIT margin of 5.2%. Q2 EPS amounted to EUR 0.05 (0.09/0.10 Evli/cons.).
  • Medical (MBU): In line with DT’s guidance, MBU’s net sales saw a significant y/y decrease of 25.2%, amounting to EUR 10.1m (Evli: 10.6m). Soft development was attributed to the one-off technical problems at two sub-suppliers and challenges of both the company and its customers to acquire critical components.
  • Security (SBU): SBU sales came in strong, by showing y/y growth of 25.4%. Net sales amounted to EUR 8.6m (Evli: 8.1m). DT’s customer base widened, and net sales growth was driven by all market segments, also aviation which took a huge hit from the pandemic.
  • Industrial (IBU): IBU continued its solid sales development by growing by 29.4% y/y with net sales amounting to EUR 4m (Evli: 3.7m). The growth was driven by all main market segments, especially the food industry.
  • Outlook: DT expects to see double-digit growth in Q2 and H2. In Q3, the company expects MBU and SBU to grow with double-digit figures while IBU is expected to grow. Demand for imaging solutions is expected to pick up in all BUs.

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Detection Technology - A quiet quarter ahead

28.07.2022 - 09.45 | Preview

DT releases its Q2 result on Wednesday, 3rd of Aug. With supply chain issues prolonging DT’s lead times and delaying customer demand, we expect Q2 net sales to decrease y/y and thus EBIT to experience a significant decline.

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Net sales and EBIT to decline in Q2
In June, DT downgraded its outlook for Q2’22 with a product quality issue in its supply chain and the challenges for the company and its customers to purchase other critical components. With the company now expecting Q2 net sales to decline y/y, our net sales estimate amounts to EUR 22.4m (22.5m cons.), representing a y/y decline of 4.8%. We expect SBU and IBU to see nice double-digit growth with SBU benefiting from the recovery of aviation solutions, but MBU to decline by 22%, driven by the above-mentioned factors. With a substantial decline in topline, we also expect EBIT to be below that of the comparison period and amount to EUR 1.8m (8.1% margin). The consensus estimate for EBIT is 1.8m.

Demand still on a good level, supply chain issues to ease
The outlook for H2 is brighter with the supply chain issues easing. Some medical OEMs have indicated that component supply would improve in H2’22, which is in line with DT’s outlook, providing group-level growth. DT has also mitigated its exposure to component shortage and has modified its products so that the need for most poorly available components will be reduced during H2. With that, we expect the company to see strong 20% y/y growth in H2 driven by all BUs.

Valuation neutral ahead of Q2, but risks are elevated
DT trades with 22-23E EV/EBIT multiples of 18-13x. We find the current valuation quite neutral as with our estimates the company’s valuation is roughly in line with its peer group (based on 22-23E EV/EBIT). However, the market environment contains multiple risks, such as the war in Ukraine, high inflation rates, interest rate hikes, and slowing economic growth and industrial activity which might affect DT’s short-term performance. With our estimates intact, we retain our HOLD-rating and TP of EUR 20.0 ahead of Q2 result.

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Eltel - Earnings gap for this year

27.07.2022 - 09.35 | Company update

We see Eltel’s earnings are to decline this year as H1 cost challenges will continue to burden H2 results as well.

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Nordics are coping with inflation, but H2 will still be soft

The EUR 208.6m Q2 revenue was soft vs the EUR 216.5m/215.2m Evli/cons. estimates. Finnish ICT strike hit top line in addition to a late spring, while Denmark suffered from low volumes as Eltel expected but more than we estimated. The other units’ top lines were above our estimates, but inflation was a lot bigger burden than we estimated: EBIT fell to EUR 0.4m vs the EUR 3.6m/3.2m Evli/cons. estimates. Finland performed better than we estimated despite inflation, which affected through its large Power business. Sweden improved the most in Q2, but the results beyond Finland and Sweden were clearly below our estimates. Inflation cover within frame agreements isn’t a major issue in Finland, Sweden and Denmark, whereas in Norway higher costs are yet to be addressed to a similar extent. Fuel and materials had ca. EUR 4m H1 impact and the level should be similar in H2.

We expect key markets to drive growth again next year

The inflation challenge is not that bad in the Nordics but remains a major issue in Poland, where it’s unclear how long beneficial outcomes might take to materialize. The possible divestiture of Poland has been on the agenda since last autumn, and a decision could be reached by the end of this year. Eltel’s long-term improvement path can still be seen as Finland and Sweden appear to continue firm on their own tracks. Meanwhile further progress should be expected from Norway and Denmark since both have recently signed large Communication agreements. We estimate Eltel to return to earnings growth again next year, however the weak H1 as well as the continued cost pressure over H2 imply FY ’22 will be a gap year in profitability terms.

Valuation appears fair in the light of margin potential

We shave our H2’22 EBITA estimates by EUR 5.3m, whereas our updated estimate for FY ’23 amounts to EUR 17.3m (prev. EUR 26.3m). Eltel is valued 5x EV/EBITDA and 14x EV/EBIT on our FY ’23 estimates, the former implying a discount to peers while the latter is a premium. We don’t consider valuation too challenging in the light of Eltel’s margin upside potential, however there’s still way to go before Eltel will be near its peers’ profitability. Our TP is now SEK 9 (10); we retain our HOLD rating.

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Eltel - Q2 figures fell below estimates

26.07.2022 - 09.30 | Earnings Flash

Eltel’s Q2 top line was soft relative to estimates and profitability fell clearly below expectations as inflation hit results more than was expected.

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  • Eltel Q2 revenue decreased by 0.8% y/y to EUR 208.6m, compared to the EUR 216.5m/215.2m Evli/consensus estimates. Denmark’s top line was particularly soft, while Sweden and Norway advanced.
  • EBIT was EUR 0.4m vs the EUR 3.6m/3.2m Evli/consensus estimates. Operative EBITA amounted to EUR 0.5m, compared to our EUR 3.7m estimate. Inflation was the main culprit for the weak numbers, however elevated sick-leave rates due to the pandemic as well as the late arrival of spring also contributed. Eltel has secured agreements with most of its customers to recover parts of the cost increases, but the company will not be able to recover the costs in full.
  • Finnish profitability remained a bright spot in Q2 despite a six-week strike among ICT personnel. Swedish results continued to improve, while Norway and Denmark faced setbacks, the latter especially so.
  • Eltel removed guidance in connection with the Q1 report.

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Raute - Improving with Western orders

25.07.2022 - 09.30 | Company update

Raute has now largely cleaned its Russian exposure and Western orders are materializing at a good pace, however H2’22 profitability will still be far from satisfactory.

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New Western orders will henceforth help profitability

Q2 top line fell 16.5% y/y to EUR 29.6m vs our EUR 38.0m estimate. The shortfall was due to projects, in particular Russian orders, whereas services figured above our estimate. The war led Raute to temporarily pause operations and assess the Russian order book, while the Chinese lockdowns induced production transfers. One-off issues led to EUR 11m in items, but cost inflation also affected the results more than we had estimated and thus Q2 EBIT was EUR -15.1m vs our EUR -10.7m estimate. Bottom line will now improve but we expect at least Q3 EBIT to stay negative due to inflation. Meanwhile services profitability is not suffering that much, in addition to which Q2 order intake amounted to EUR 40m vs our EUR 30m estimate. Demand has held up and there were again no large orders.

We would expect positive EBIT early next year at the latest

Order intake in Europe and Asia, excl. China where the situation is yet to normalize, drove the figure above our estimate. North American orders were soft relative to our estimate after high Q1, but demand there is strong. There’s more uncertainty around European demand, but the Baltics and Eastern European countries are bright spots. The overall outlook and the EUR 104m order book is not bad considering it has now been mostly cleaned of Russia while Raute has been able to book EUR 40m in new quarterly orders even without any large ones. Smaller order demand related to modernization and automation remains high on customers’ agenda. Raute’s outlook for the coming years could improve with larger orders, however EBIT will stay at a modest level for several quarters to come. Investments in R&D remain high, while Raute has a program to improve profitability.

High uncertainty but long-term multiples are undemanding

We make minor revisions and still expect positive EBIT for FY ’23, although it looks set to be a modest one. Raute trades 9x EV/EBIT on our FY ’23 estimates; next year’s EBIT is likely to stay far below potential, and valuation isn’t challenging in the long-term context. There’s however still much uncertainty and hence we view valuation fair. We retain our EUR 11 TP and HOLD rating.

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Consti - On track towards y/y improvement

25.07.2022 - 09.15 | Company update

Consti reported Q2 results that corresponded quite well with expectations. Prevailing market conditions still create some uncertainties for the end of the year but overall, the outlook is still quite positive. We retain our target price of EUR 12.0 per share and BUY-rating.

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Q2 results quite as expected
Consti reported Q2 results which overall corresponded well with expectations. The prolonged winter had a small impact on net sales growth, with growth nonetheless at 3.1% y/y to EUR 73.1m (EUR 74.6m/74.7m Evli/Cons.). The operating profit amounted to EUR 2.9m (EUR 3.0m/2.9m Evli/cons.), at a margin of 4.0%. The increase in construction materials prices had a greater impact than in the comparison period in certain on-going projects and inflation increased indirect costs. The order backlog was at a quite good level of EUR 240.8m, up 1.9% y/y, with a Q2 order intake of EUR 98.7m (98.5m). The 2022 operating profit guidance of EUR 9-13m was kept intact.

Near-term uncertainty still present
We have made only smaller adjustment to our estimates, till expecting relative growth to pick up slightly during the end of the year for an overall modest full-year growth. Our 2022e operating profit estimate is slightly below the guidance mid-point, at EUR 10.4m. The near-term demand situation remains affected by current uncertainties, especially within corporate customers. The situation with construction material prices and availability still has an impact, although smaller within renovation projects. Some indications of price peaks have been seen, but the uncertainty should still most likely be present at least throughout the year.

BUY with a target price of EUR 12.0
Despite the prevailing market situation and uncertainties Consti has in our view performed well and we remain rather optimistic also for the coming quarters. Long-term drivers still remain. Compared with peers the current valuation remains quite cheap. We keep our target price of EUR 12.0 intact, rating still BUY.

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Vaisala - Profitability under short-term pressure

25.07.2022 - 09.10 | Company update

Despite robust growth shown in Q2, Vaisala’s EBIT was a bit softer driven by increased cost pressures. We expect the demand for Vaisala’s products to continue strong while we foresee some short-term pressures on margins. We retain our HOLD-rating and adjust TP to EUR 43.0 (45.0).

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IM driving group topline growth, EBIT bit softish
Vaisala’s net sales grew nicely, by 10% to EUR 120.5m. The growth was mainly driven by the IM business unit (+24% y/y) while W&E’s revenue was approx. flat y/y. Vaisala managed to hold on to its margins and the group gross margin was on a solid level at 52.3%. The company continued its investments in its future growth and operative costs increased according to its plans. To our understanding, part of increased costs is short-term that will scale eventually after the IT-system update has been complete. EBIT decreased by 5% y/y, and fell short of our expectations, to EUR 10.3m (8.6% margin).

Guidance reiterated, some uncertainty ahead
Vaisala reiterated its FY’22 guidance; net sales between EUR 465-495 and EBIT between EUR 55-70m. With IM’s market demand continuing strong and W&E’s order book being all-time-high, we consider the company achieving its guidance easily. However, with the COVID-19 situation in Asia continuing, the war in Ukraine not ending, and the low visibility of component availability, H2 includes some uncertainties that might affect the company’s performance. We slightly adjusted our estimates; 2022 net sales estimate of EUR 491.1m nears the upper bound of the guidance range while with cost pressures being elevated, our EBIT estimate of EUR 58.2 is below the mid-point of the guidance range.

HOLD with a target price of EUR 43.0 (45.0)
We made only minor upward adjustments to our topline estimates while we adjusted our short-term EBIT estimates downwards driven by increased costs pressures stemming mainly from the company’s increased investments in its future growth. Vaisala continues to trade above its peer group, with approx. 40% premium. We adjust our TP to EUR 43.0 (45.0) and retain HOLD-rating.

Open report

SRV - Headwinds remain, financially stable

22.07.2022 - 11.15 | Company update

SRV reported surprisingly good Q2 profitability, but headwinds still remain. With the recently completed transactions the company is now financially in good shape.

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Q2 profitability exceptionally good
SRV reported good Q2 results in term of P&L figures. Revenue was on par with comparison period figures at EUR 211.4m (EUR 191.7m/219.0m Evli/cons.), while profitability was above expectations, with an operating profit of EUR 10.1m (EUR 4.1m/5.5m Evli/cons.). The relative profitability was exceptionally good and not expected to be as high during H2. The order backlog development remained unfavourable, at EUR 745.9m at the end of Q2. H1 contained new agreements of EUR 202.4m. SRV specified its guidance, now expecting revenue of EUR 800-860m (prev. 800-950m) and an operative operating profit of EUR 15-25m (prev, >5.3m), which compared with our pre-Q2 estimates is slightly on the weaker side but understandable given the current market situation.

Current uncertainty threatening growth outlook
We have lowered our 2022 revenue estimate by 5% while our operative operating profit estimate is essentially intact nearer the upper end of the new guidance. We have lowered our estimates somewhat for 2023. Although SRV currently has EUR 1.3bn in won projects that are not yet entered into the order backlog, with the current uncertainty, order backlog development and lack of developer contracting housing unit start-ups we currently see limited signs of growth. Cost pressure is also still clearly present, but at least in some areas peak increases appear to be behind and the sector in general appears to have coped quite well with the pressure so far. With the completed financing arrangements SRV is now virtually net debt-free (excl. IFRS 16), thus clearly improving the risk profile.

HOLD with a TP of EUR 5.0 (prev. 0.18 pre-reverse split)
Following revisions to our estimates and with the reverse split completed in July we adjust our target price to EUR 5.0 (prev. 0.18) and retain our HOLD-rating. Our target price values SRV at around 6x EV/EBIT.

Open report

Vaisala - Strong demand, EBIT below expectations

22.07.2022 - 09.45 | Earnings Flash

Vaisala’s Q2 EBIT fell short of our and consensus expectations. Q2 received orders came in with y/y growth of 10% and the order book was on a record-high level. Group revenue grew by 10% y/y.

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  • Group result: Q2 orders received grew nicely to EUR 131.9m (+10% y/y) and the order book amounted to EUR 182.9m (+11% y/y). Net sales grew by 10% y/y to EUR 120.5m, being slightly above our expectations (EUR 118.1m/118.1m Evli/cons.). With smart pricing decisions and a favorable sales mix, the gross margin was flat y/y despite continued spot component purchases. Fixed costs increased by 19% and EBIT came in below our expectations at EUR 10.3m (EUR 12.5m/14.6m Evli/cons.), reflecting an EBIT margin of 8.6%. EPS amounted to EUR 0.18 (EUR 0.26/0.32 Evli/cons.).
  • Industrial measurements (IM): Driven by industrial instruments, life science, and power, IM’s orders saw a strong y/y increase, amounting to EUR 56.2m. Order book was 43% higher than a year ago, amounting to EUR 37.2m. Driven by industrial instruments, life science, and power, net sales amounted to EUR 54.7m (Evli: EUR 49.8m), reflecting y/y growth of 24%. EBIT improved y/y and amounted to EUR 11.5 (Evli: EUR 10.8m), reflecting an EBIT margin of 21%.
  • Weather & Environment (W&E): W&E’s quarter was solid with its orders received amounting to EUR 75.7m and order book accounting to 145.6m, reflecting y/y growth of 4%. Net sales increased by 1% (constant currencies -3%) y/y to EUR 65.9m (Evli: EUR 68.3m). Growth was good in aviation while road weather and renewable energy were flat. With a softer gross margin and increased fixed costs, W&E’s EBIT fell below zero to EUR -1.1m (Evli: EUR 2.2m), implying an EBIT margin of -1.6%.
  • 2022 guidance intact: expecting net sales between EUR 465-495m and EBIT between EUR 55-70m.
  • Market outlook: IM’s markets are expected to continue their growth while W&E’s markets are estimated to be rather stable (renewable energy is expected to grow).

Open report

Raute - Revenue and EBIT low, orders high

22.07.2022 - 09.30 | Earnings Flash

Raute’s Q2 revenue and EBIT were clearly worse than we expected, however order intake was well above our estimate. It is always unclear how well single quarter order intake extrapolates, but if new orders remain near the EUR 40m level seen in Q2 Raute will be able to fill the gap left by Russian business relatively quickly.

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  • Q2 revenue declined by 16.5% y/y and amounted to EUR 29.6m vs our EUR 38.0m estimate. Project revenue was EUR 12.7m, compared to our EUR 23.0m estimate, while services revenue was EUR 16.9m vs our EUR 15.0m estimate.
  • EBIT was EUR -15.1m vs our EUR -10.7m estimate. The result was burdened not only by the write-offs related to Russian projects but inefficiencies due to the reorganization of work. Cost inflation remained a significant profitability headwind.
  • Order intake came in at EUR 40m, compared to our EUR 30m estimate. Project orders were EUR 21m vs our EUR 15m estimate, while services orders amounted to EUR 19m vs our EUR 15m estimate. There were no single large orders, however modernization orders were at a high level and included a significant EUR 10m Latvian order.
  • Order book was EUR 104m at the end of Q2, including EUR 16m in Russian orders.

Open report

Consti - Well in line with expectations

22.07.2022 - 09.00 | Earnings Flash

Consti's net sales in Q2 amounted to EUR 73.1m, in line with our and consensus estimates (EUR 74.6m/74.7m Evli/cons.), with growth of 3.1% y/y. EBIT amounted to EUR 2.9m, in line with our and consensus estimates (EUR 3.0m/2.9m Evli/cons.). Guidance reiterated: operating result in 2022 is expected to be EUR 9-13m.

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  • Net sales in Q2 were EUR 73.1m (EUR 70.9m in Q2/21), in line with our and consensus estimates (EUR 74.6m/74.7m Evli/Cons.). Sales grew 3.1% y/y.
  • Adj. operating profit in Q2 amounted to EUR 2.9m (EUR 2.9m in Q2/21), in line with our and consensus estimates (EUR 3.0m/2.9m Evli/cons.), at a margin of 4.0%. 
  • The increase in construction materials prices had a greater impact than in the comparison period in certain on-going projects and inflation increased indirect costs. COVID also had an impact primarily through increased sick leaves.
  • EPS in Q2 amounted to EUR 0.28 (EUR -0.09 in Q2/21), in line with our and consensus estimates (EUR -0.28/0.27 Evli/cons.).
  • The order backlog in Q2 was EUR 240.8m (EUR 236.2m in Q2/21), up by 1.9% y/y. Order intake was EUR 98.7m in Q2 (Q2/21: EUR 98.5m).
  • Free cash flow amounted to EUR 2.6m (Q2/21: EUR -1.4m).
  • Guidance for 2022 (reiterated): Operating profit is expected to be between EUR 9-13m.  

Open report

Innofactor - Need to start delivering

22.07.2022 - 08.05 | Company update

Innofactor’s Q2 results were weaker than anticipated to a weakened billing rate and individual project delivery challenges. Improvement is needed during H2 to achieve the FY ‘22 guidance. Near-term operational capabilities are still of some concern, but the potential is still quite solid. We adjust our TP to EUR 1.25 (1.6), BUY-rating intact.

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Top-line and bottom-line figures short of our estimates
Innofactor’s Q2 results fell short of our expectations. A weakened billing rate and challenges relating to individual project deliveries resulted in a slight y/y decline in revenue to EUR 16.9m (Evli EUR 17.7m). As a result, the operating profit also fell to EUR 0.7m (Evli EUR 1.4m) for a rather meager operating profit margin of 3.9%. The order backlog remained at a good level of EUR 77.2m, up 6.1% y/y. During the quarter, Innofactor acquired Invenco Ltd, a company specializing in data and analytics, with some 50 employees and EUR 6m in annual revenue.

Improvement needed during H2
Following the weaker first half of the year, on our revised estimates, we expect Innofactor to be able to beat its guidance with a slim margin essentially thanks to the acquisition of Invenco. EBITDA-margins should return to ~12% during H2, a level that under current circumstances could be seen as a normal level for Innofactor. Despite the implied one-off nature of the project delivery challenges we are slightly concerned for the operational delivery capabilities and the revenue trend in relation to the order backlog growth. Still, the potential is still quite solid and with the acquisition of Invenco and a normal profitability EPS would on our estimates grow 30% y/y in 2023.

BUY with a target price of EUR 1.25 (1.60)
With our revised estimates and continued operational uncertainty, as well as declines in peer multiples, we adjust our target to EUR 1.25 (EUR 1.60). Our TP values Innofactor at a slight discount to peers. Upside potential is provided by the profitability improvement potential. We retain our BUY-rating.

Open report

Exel Composites - Continued progress

21.07.2022 - 09.35 | Company update

Exel’s Q2 results topped estimates and confirmed the company is advancing again after the recent profitability issues in the US.

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Absolute profitability topped the previous record

Exel’s top line grew 13.5% y/y to EUR 38.1m vs the EUR 36.8m/35.7m Evli/cons. estimates. Wind power customers developed soft relative to our estimate due to China and the local policies, but the shortfall was more than made up by Transportation where revenue grew by EUR 4.4m y/y to EUR 7.2m thanks to released pent up demand after the pandemic. The orders were attributable to old applications like train panels as well as a new aerospace application in North America, on the details of which Exel will elaborate later this year. Exel can already produce the application profitably even though it is only in the initial phases of its lifecycle. Q2 adj. EBIT reached EUR 3.1m, compared to the EUR 2.4m/2.2m Evli/cons. estimates. The 8.2% adj. EBIT margin was not bad, but Exel is still able to do better than that in the long-term assuming growth continues and the US unit keeps improving.

Progress is set to continue

The US unit has already improved a lot in recent quarters yet still has EBIT upside potential. This is also reflected by the EUR 37.0m order intake, which developed flat q/q but declined by 15% y/y as there were certain US Wind power orders last year which were later cancelled due to production challenges. The Q2 report confirmed Exel’s continued progress on its long-term track especially in that the company can find suitable high-volume customers and is not overly reliant on any one industry or application. The inflationary environment is not a major challenge given Exel’s niche position in the value chain. Exel left its guidance unchanged for now due to the well-known global uncertainties, however an upgrade seems likely in the months ahead.

Valuation is unchallenging as potential materializes

We make only very marginal updates to our estimates. We expect 10% growth for this year while we estimate a 7.4% adj. EBIT margin. The EUR 11m adj. EBIT translates to a valuation multiple of 10x, which would continue to decrease to 8x EV/EBIT on our FY ’23 estimates. We retain our EUR 8.5 TP and BUY rating.

Open report

Innofactor - Subpar performance 

21.07.2022 - 09.30 | Earnings Flash

Innofactor’s Q2 results were weaker than expected. Net sales declined 2% y/y to EUR 16.9m (Evli EUR 17.7m) due to a weakened invoicing ratio and individual project delivery challenges. Q2 EBIT of EUR 0.7m was also clearly weaker than in the comparison period and our estimates (Evli EUR 1.4m).

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  • Net sales in Q2 amounted to EUR 16.9m (EUR 17.5m in Q2/21), slightly below our estimates (Evli EUR 17.7m). Net sales in Q2 declined 2.0% y/y. Net sales increased in Norway and Denmark but decreased in Finland and Sweden due to a weakened invoicing ratio and challenges in individual project deliveries.
  • EBITDA in Q2 was EUR 1.4m (EUR 2.1m in Q2/21, below our estimates (Evli EUR 2.1m), at a margin of 8.1%. EBITDA was positive in all operating countries except in Sweden.
  • Operating profit in Q2 amounted to EUR 0.7m (EUR 1.3m in Q1/21, below our estimates (Evli EUR 1.4m), at a margin of 3.9%. 
  • Order backlog at EUR 77.2m, up 6.1% y/y. According to Innofactor the sales performance was strong in Q2. New orders included for instance Senate properties (approx. EUR 2.2m), Danish pharmaceuticals company (approx. EUR 2.1m) and the State Treasury of Finland (approx. EUR 5.5m).
  • In June, Innofactor acquired Invenco Ltd, a company specializing in data and analytics, with some 50 employees and EUR 6m revenue.
  • Guidance for 2022 (reiterated): Innofactor’s net sales is expected to increase from 2021 (EUR 66.4m) and EBITDA is expected to increase from EUR 7.5m, which would have been EBITDA without the proceeds of EUR 2.6m from the sale of the Prime business. 

Open report

SRV - Solid profitability in Q2

21.07.2022 - 09.00 | Earnings Flash

SRV's net sales in Q2 amounted to EUR 211.4m, above our estimates and in line with consensus (EUR 191.7m/219.0m Evli/cons.). EBIT amounted to EUR 10.1m, above our estimates and above consensus estimates (EUR 4.1m/5.5m Evli/cons.). SRV now expects a revenue of EUR 800-860m (800-950m) and an operative operating profit of EUR 15-25m (>5.3m) in 2022.

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  • Revenue in Q2 was EUR 211.4m (EUR 218.0m in Q2/21), above our estimates and slightly below consensus estimates (EUR 191.7m/219.0m Evli/Cons.). Growth in Q2 amounted to -3% y/y.
  • Operating profit in Q2 amounted to EUR 10.1m (EUR 6.3m in Q2/21), above our estimates and consensus estimates (EUR 4.1m/5.5m Evli/cons.), at a margin of 4.8%. Profitability in Q2 was supported by a higher profitability of the recognized income and a lower relative profitability is seen for the rest of the year. 
  • Revenue in Construction in Q2 was EUR 206.8m vs. EUR 191.7m Evli. Operating profit in Q2 amounted to EUR 9.9m vs. EUR 6.1m Evli. 
  • Revenue in Investments in Q2 was EUR 4.8m vs. EUR 1.1m Evli. Operating profit in Q2 amounted to EUR 1.4m vs. EUR -1.0m Evli. 
  • Revenue in Other operations and elim. in Q2 was EUR -0.2m vs. EUR -1.1m Evli. Operating profit in Q2 amounted to EUR -1.2m vs. EUR -1.0m Evli. 
  • Guidance for 2022 (specified): Revenue is estimated to be EUR 800-860m (prev. 800-950m) and the operative operating profit is estimated to be EUR 15-25m (prev. improve compared with 2021, when the operative operating profit amounted to EUR 5.3m). 

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Exel Composites - Clearly above estimates

20.07.2022 - 10.30 | Earnings Flash

Exel’s Q2 report didn’t disappoint as both revenue and profitability clearly topped estimates. Growth was driven by a new aerospace application within the Transportation customer industry. Exel leaves guidance unchanged, which now appears cautious, but the company seems set to advance on its improving track.

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  • Exel Q2 revenue grew by 13.5% y/y to EUR 38.1m, compared to the EUR 36.8m/35.7m Evli/consensus estimates. Growth in North America was an important contribution, which stemmed from a new aerospace application in the Transportation customer industry.
  • Wind power landed at EUR 6.5m vs our EUR 8.7m estimate, while Buildings and infrastructure was EUR 8.9m vs our EUR 9.2m estimate. Equipment and other industries amounted to EUR 5.9m, compared to our EUR 6.1m estimate.
  • Adjusted EBIT was EUR 3.1m vs the EUR 2.4m/2.2m Evli/consensus estimates. Adjusted EBIT margin was therefore a very decent 8.2%. The US unit’s performance continued to improve. Exel has been able to adjust its sales prices to reflect higher raw materials, logistics and energy prices.
  • Order intake amounted to EUR 37.0m in Q2, down by 14.9% y/y but flat q/q as there were large Wind power last year which were later cancelled.
  • Exel guides revenue in 2022 to be at last year’s level while adjusted operating profit will increase compared to 2021 (unchanged).

Open report

Finnair - EBIT outlook remains cloudy

20.07.2022 - 09.15 | Company update

Finnair continues to address its challenges, and EBIT will improve, but a lot of uncertainty lingers around outlook while valuation multiples remain high relative to peers.

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We make downward revisions to our estimates

Finnair’s EUR 550m Q2 revenue matched the EUR 549m/542m Evli/cons. estimates. Top line continued to rebound with higher passenger loads while cargo revenue was down q/q. Wet leases amounted to 6% of ASK and the figure continues to increase to above 10% as strong demand will extend over the winter and probably even up to next summer. The EUR -84.2m adj. EBIT missed the EUR -41.3m/-56.5m Evli/cons. estimates as jet fuel prices spiked during Q2. Ticket prices are to catch up with the resulting higher unit costs, but the big gap may not close for a while; yields picked up in June as demand matched capacity sufficiently to help revenue management efforts, but the pricing environment is to remain somewhat volatile. Finnair’s guidance for H2’22 implies further top line recovery, but we make some downward revisions to our ASK estimates. We expect Q3 EBIT to remain negative (EUR -9m vs our previous estimate of EUR 18m).

Roughly 10-15% of ASK could still be rerouted or sold

The EUR 60m in cuts should come in as planned and the new strategy, to be ready during the autumn, is to deliver more savings. Partnerships play an important role in the network strategy and the weight of previously marginal destinations, such as the US and India, will increase. Yet the new strategy also likely implies some aircraft sales. Leases can be included in the strategy, but we believe they are unlikely to amount to more than 10% of ASK. Hence some 10-15% of ASK needs to find new routes or be sold. Finnair has a strong record when it comes to flight and crew performance, and we expect the strategy will be able to secure profitability. FY ’23 is likely to see a meaningful positive EBIT, but there remains much uncertainty around the level. We now estimate the figure at EUR 77m (prev. EUR 116m).

Valuation appears tight relative to peer multiples

The competitive landscape remains stable; we see valuation tight against this backdrop when Finnair’s outlook is still subject to elevated uncertainty. Finnair trades around 26x and 12x EV/EBIT on our FY ’23-24 estimates; we find the levels high relative to peers. Our new TP is EUR 0.36 (0.43); our rating is SELL (HOLD).

Open report

Vaisala - Solid quarter incoming

19.07.2022 - 09.45 | Preview

Vaisala reports its Q2’22 result on Friday, 22nd of July. With its record high order book and solid outlook, we expect Vaisala to continue its robust revenue growth in Q2.

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Expecting solid growth to continue
Vaisala’s Q1’22 included some positive seasonality and revenue was on a great level although Q1 has been historically the quietest quarter. We expect Q2’22 to contain less seasonality and revenue amount to EUR 118.1m, reflecting y/y growth of 7.9%. Revenue growth is driven by solid order book of W&E and strong sales development of IM as well as Vaisala’s delivery reliability during uncertain times. Our IM’s Q2 revenue estimate amounts to EUR 49.8m (+12.9% y/y) while W&E’s revenue estimate lands at EUR 68.3m (+4.4% y/y). So far, the company has been able to deliver all its orders without delays despite issues in its supply chain. We remain to wait for the news of the company’s order book development and management’s comments on the market environment as there have been some signs of slowdowns in the global industrial activity.


Some supply chain disruptions might affect margins
With the lack of crucial components, the company has sourced components from spot markets which have increased material costs during recent quarters. So far, robust topline growth and sales mix have offset the spot component impact on profitability and Q1 EBIT was surprisingly high. However, the company’s management pointed out that it’s increasingly difficult to purchase spot components. With the revenue growth, we expect Q2 EBIT to also improve y/y to EUR 12.5m but the weaker gross margin to restrict the EBIT margin development to 10.6%. We foresee some increases in the OPEX development y/y. The uncertainty lies in the gross margin development that in turn is associated with the level of spot component purchases and sales mix, and therefore our EBIT estimate include some uncertainty.


Estimates intact, valuation elevated ahead of Q2
We have made no changes to our estimates ahead of Q2. Like before, the company’s valuation remains quite elevated which is in our view justified, given Vaisala’s technology leadership and delivery reliability, but not providing a reason for a rating upgrade. We retain our HOLD-rating and TP of EUR 45.0.

Open report

Finnair - Revenue in line, EBIT missed

19.07.2022 - 09.30 | Earnings Flash

Finnair’s Q2 top line was as expected, but EBIT came in below estimates as costs were high especially because of fuel. We also find Finnair’s guidance leaves some downward pressure on H2’22 estimates. Finnair is preparing a new strategy and looks to complete the work on it this autumn.

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  • Finnair Q2 revenue amounted to EUR 550.3m vs the EUR 548.7m/541.9m Evli/consensus estimates.
  • Adjusted EBIT landed at EUR -84.2m, compared to the EUR -41.3m/-56.5m Evli/consensus estimates.
  • Fuel costs were EUR 229m vs our EUR 175m estimate. Staff costs were EUR 114m, compared to our EUR 108m estimate. All other OPEX+D&A amounted to EUR 329m, compared to our EUR 355m estimate.
  • Cost per Available Seat Kilometer was 8.09 eurocents vs our estimate of 7.52 eurocents.
  • Finnair expects to operate an average Q3’22 capacity of some 70%, in terms of ASK, relative to the corresponding period in 2019. Capacity in Q4 will be similar or slightly higher than in Q3. (We find these would imply levels slightly below our estimates for ASK). Leases would bring the total capacity deployed to more than 80% in Q3 and some 80-85% in Q4. The 2022 comparable operating result will remain significantly negative. Finnair is preparing a new strategy and aims to complete the work during the autumn of 2022.

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Raute - Improving after the clean up

18.07.2022 - 09.35 | Preview

Raute reports Q2 results on Jul 22. We make downward revisions to our estimates due to the latest update as well as the deterioration in wider economic conditions.

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Profitability is set to improve in H2

Raute’s Q2 bottom line will be burdened by big one-offs, including EUR 8-9m in write-downs related to Russian projects and receivables as well as some EUR 1m in restructuring costs such as severance. We thus revise our Q2 EBIT estimate down to EUR -10.7m (prev. EUR -1.4m). H1 results would have been poor even without such items due to the inflation which affects already signed orders. Raute expects profitability to improve in H2, which we do not find a big surprise. Raute is also finding ways to improve margins and lower costs; results should already materialize this year and be even better visible in 2023 especially if Western demand continues to develop favorably.

Western orders continue to pick up after slow years

Raute’s focus tilts to West, especially after the Russian orders have been delivered. North American orders came in at a high level of EUR 15m in Q1, but the level may not extrapolate that well even in a more favorable economic backdrop let alone in a souring one. We still expect the American business continues to pick up as the market was cool even before the pandemic, however we trim our estimates for new orders. Similar logic applies to Europe as the local market softened considerably towards 2019 but showed marked increases in orders last year, including a large Baltic project. Additional large European orders could improve outlook, but it’s difficult to estimate the materialization and timing of such projects especially now that uncertainty tends to undermine plans for larger investments. Our FY ’22 revenue estimate is intact at EUR 146m, but we cut our FY ’23 estimate to EUR 141m (prev. EUR 152m). We cut our FY ’23 EBIT estimate to EUR 4.8m (prev. EUR 6.2m).

Valuation not very challenging, but outlook a bit unclear

In our view Raute retains its position as the global leader within the niche of plywood and LVL machinery, particularly at the upper end of the market. The current valuation of 8x EV/EBIT, on our FY ’23 estimates, is not all too challenging, however there’s still a lot of uncertainty around the next few years’ profitability levels. We revise our TP to EUR 11 (14); our rating is HOLD.

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Finnair - Working through the challenges

15.07.2022 - 09.30 | Preview

Finnair reports Q2 results on Jul 19. We revise our estimates up a bit due to busy early summer, but valuation continues to reflect the on-going improvement well.

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We believe EBIT could turn positive already in Q3’22

Q2 RPK topped our estimate by 12% thanks to high passenger loads, especially in June, as Europe was in line while Asian and North Atlantic flows were above our estimates. The overall Q2 RPK figure was roughly half of the level seen in 2019; Finnair’s European Q2 flows were already 70% of the corresponding 2019 figures, which reflects the fact that short-haul routes have rebounded faster than long-haul ones. Many airports have been strained under the traffic and Finnair cannot have dodged the challenge although the impact may have been less pronounced in its case. Finnair expected Q2 EBIT to land around the same level seen in Q4’21 (EUR -65m); we previously estimated the figure at EUR -80m but revise our estimate to EUR -41m due to the busier-than-expected early summer season. Finnair appears poised to reach profitability in the coming quarters, despite the Russian airspace closure, as Western routes continue to rebound and high travel demand helps secure good prices for wet leases.

Expect to hear more on shoring up long-term potential

The Russian closure is likely to limit Finnair’s long-term potential to some extent, however Finnair is yet to announce any sales of aircraft in response. It would therefore be interesting to get some further color on where Finnair sees itself standing now with respect to the already announced leases and potential additional capacity reduction measures. Finnair was quick to identify further EUR 60m in permanent cost savings, and there were hints the target could still be upped a bit. The company has also recently expanded its Stockholm Arlanda presence and may be able to pursue more growth from there.

Valuation reflects the improving environment

Jet fuel prices peaked in June and are already down by some 20% from those highs but the current levels remain elevated by historical standards. We have revised our EBIT estimates slightly upwards, but airline valuations have developed soft over the summer weeks and are now trading about 12x FY ’23 EV/EBIT. We don’t thus see upside on the 13-18x EV/EBIT multiples (on our FY ’23-24 estimates). We retain our EUR 0.43 TP and HOLD rating.

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Verkkokauppa.com - Profitability deteriorates notably

15.07.2022 - 09.05 | Company update

With lower volumes, increased fixed costs, and higher price competition, Verkkokauppa.com’s profitability faced a notable headwind in Q2. The development of consumer demand contains a large amount of uncertainty and the H2 result is likely below what we earlier expected.

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Market continued challenging
Verkkokauppa.com’s topline faced an expected decline y/y, and with lower volumes, increased costs, and softer gross margin EBIT fell negative. Group revenue decreased by 3.7% y/y to EUR 125.7m driven by soft development of the consumer segment with the record low consumer trust and reduced consumer purchasing power. B2B segment and evolving product categories brought light with their y/y sales growth of 12.6% and 4.8% respectively. Q2 inventory was significantly above the level that of the comparison period and hence logistics costs faced a notable increase y/y which with a help of a softer gross margin resulted in an EBIT of EUR -0.9m (adj. EUR -0.2m), implying an EBIT margin of -0.7% (adj. -0.2%). Q2 EPS amounted to EUR -0.02.

Guidance was revised downwards
The company lowered its guidance for FY’22, now expecting revenue between EUR 530-570m (prev. 530-590m) and an EBIT of EUR 8-14m (prev. 12-19m). The downgrade of the upper bound of the sales guidance was a result of weaker outlook for the consumer segment while EBIT guidance was decreased due to lower expected sales volumes and increased price pressures. In addition to rising price competition, a high level of inventory forces the company to either lower product margins to increase the inventory turnover or store products over a season both potentially resulting in weaker profitability.

HOLD with a target price of EUR 3.7 (4.3)
In the light of guidance revision and Q2 result, we adjusted our estimates downwards. We now expect 2022 revenue to amount to EUR 556.0m and adjusted EBIT to land at EUR 7.9m (1.4% margin). 2022 result will be record soft; hence, we value the company with 23E multiples. With the company trading above its peers, we retain our HOLD-rating and adjust the TP to EUR 3.7 (4.3).

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Verkkokauppa.com - Challenging environment continued

14.07.2022 - 09.00 | Earnings Flash

Verkkokauppa.com’s Q2 EBIT fell short of our expectations. Simultaneously, the company lowered its FY’22 guidance, which was driven by weak consumer trust, impaired consumer purchasing power, and increased operative costs.

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  • Group result: Q2 net sales decreased by 3.7% y/y to EUR 125.7m (EUR 123.7/122.9m Evli/cons.) driven by soft development of consumer and export segments. Price competition increased, resulting in a softer gross margin. Through lower net sales, increased fixed costs, and softer gross margin, the company’s EBIT fell below that of the comparison period to EUR -0.9m (EUR 2.4/2.1m Evli/cons.) implying an EBIT margin of -0.7% (Q1’21: 3.9%). EPS amounted to EUR -0.02 (EUR 0.03/0.03 Evli/cons.).
  • Online sales: weaker sales development was seen through all sales channels and online sales represented 63% (Q1’21: 61%) of total sales.
  • Category sales split: core categories represented 82% of total sales while evolving categories saw a y/y increase of 5% representing 18% of total sales.
  • Consumer segment: The main driver for the soft development of the consumer segment was weak demand in core categories and the delayed summer season. Meanwhile, the sales of evolving categories increased by 4.8% y/y. The segment represented 68% of total sales (Q2’21: 72%).
  • B2B segment continued its trend of strong development and corporate sales grew by 12.6% y/y. B2B segment represented 26% of total group sales (Q2’21: 22%).
  • Export segment: with the withdrawal of Russian markets, export sales declined y/y and represented 6% of total sales
  • FY’22 guidance lowered: last night the company lowered its FY’22 guidance, now expecting revenue to land between EUR 530-570m (prev. 530-590m) and EBIT to amount to EUR 8-14m (prev. 12-19m). According to the new guidance, the company’s topline will face a y/y decrease of 1-8% while EBIT is expected to clearly decline, by 31-61%.

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Verkkokauppa.com - Expecting softness to continue in Q2

11.07.2022 - 09.30 | Preview

The consumer demand for durable goods in the Nordic markets has continued softly in Q2 and hence we have made no changes to our estimates. We expect Q2 revenue to decline and profitability to weaken. We retain our HOLD-rating and TP of EUR 4.3 ahead of Q2’22.

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Late start of summer season has delayed sales somewhat
In our view, the demand for durable goods in Finland hasn’t taken notable positive steps ahead and hence we expect the company’s Q2 result to be soft. Market estimates imply the Finnish consumer electronics market not to see growth in 2022 which partly supports our Verkkokauppa.com expectations. In addition, the summer started relatively late in Finland which has in our view had a negative impact on Verkkokauppa.com’s sales from April to June.

Estimates intact, H2 defines full-year performance
Meanwhile, we expect the B2B segment to continue its ongoing trend with double-digit growth in Q2, on our estimates, the consumer segment sees a decline y/y. In our view, the trend of the consumer demand for H2 can be observed during August-September at the earliest, after the summer holidays are over, which eventually defines the company's full-year performance. Consequently, we expect Verkkokauppa.com’s revenue to decline also in Q3 while our Q4 estimates include some optimistic y/y growth. In Q2, we expect topline to decrease by ~5% y/y to EUR 123.7m, driven by low demand for consumer electronics and the late start of the summer in Finland. Our view is that the evolving categories might also have performed somewhat softer due to delayed season sales (grills and bicycles etc.). Due to lower revenue, softer gross margin, and increased fixed costs we expect EBIT to fall significantly to EUR 2.4m, implying an EBIT margin of 2%.

HOLD with a target price of EUR 4.3
The company’s 22E valuation is quite elevated compared to peers which is mostly explained by the company’s poor performance in 2022. However, on our 2023 estimates, the company’s EV/EBIT multiple falls below its peers with Verkkokauppa.com’s expected profitability improvement. We retain our HOLD-rating and TP of EUR 4.3 ahead of the Q2 result.

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Detection Technology - Detecting new sources of growth

16.06.2022 - 09.50 | Company report

Underlying demand in the imaging markets remains strong but issues in the supply chain have restricted DT’s growth. We expect revenue and profitability to see solid development in 2023 with the completion of the R&D program. We retain our HOLD-rating and TP of EUR 20.0.

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External factors still restricting DT’s full potential
MBU performed well during the whole pandemic time while decreased demand for aviation solutions caused a significant decline in SBU’s activity. Industrial clients started investments early during the pandemic and IBU has enjoyed a solid revenue growth since. The recovery of SBU has started but the revenue is still significantly lacking from the levels of 2019. Moreover, COVID-19 lockdowns in China have further restricted the availability of critical components, forcing DT and its clients to postpone their deliveries. Even though the lockdowns in China would ease, the “normal” component shortage is expected to continue.

R&D pipeline loaded with opportunities
DT initiated its R&D program in early 2022 to lower its exposure to the component shortage which eventually enables faster lead times and higher revenue growth. The company aims to renew its products so that the critical components with low availability can be replaced by the components with better availability. DT’s R&D pipeline provides a potential for future development as the usage of data-emphasized imaging increases in all its market segments. Furthermore, investments in multi-energy technology provide notable future potential when ME solutions commercialize.

HOLD with a target price of EUR 20.0
Supply chain issues and increasing cost inflation as well as geopolitical tenses have forced us to take a more conservative stance. However, we believe in DT’s long-term story given its growth potential and developing technology and thus we retain our HOLD-rating with a TP of EUR 20.0. Future earnings growth supports the stock’s upward development, but we see DT’s current valuation compared to its peers somewhat elevated, not providing a suitable moment for increasing the position in DT.

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Aspo - Outlook remains solid despite exits

16.06.2022 - 09.30 | Company update

Aspo’s guidance upgrade arrived sooner than we expected.

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Adj. EBIT will top the EUR 42.4m figure seen previous year

Aspo’s upgrade didn’t come as a big surprise since the guidance appeared to be on the cautious side after strong Q1 results, however the update materialized at least a few months before we would have expected. In our view there have been no major news regarding ESL’s and Telko’s development since the Q1 report, but the dry cargo shipping business is still likely to see additional improvement from last year despite high uncertainty around macroeconomic trends. Telko’s Q1 results happened to benefit from the war’s effects as high plastics and chemicals prices helped adj. EBIT margin to 11.3%, likely an unsustainable level in the long run as high costs already had some impact on customers’ operations in Q1. Short-term profitability outlook remains favorable for ESL and Telko as the former is set to near EUR 30m EBIT while the latter continues to operate in an inflationary environment in the short and medium term.

M&A will add on top of Western organic opportunities

We estimate Aspo to reach EUR 44m in adj. EBIT this year (prev. EUR 34m). We believe Telko will see some softening in margins in the medium term and hence we wouldn’t expect improvement in EBIT for next year. The impending exit from Russia and Belarus limits overall organic growth rate, although Western markets should be able to make up some of the lost volumes. Telko also continues to look for M&A targets, while Leipurin just announced a major acquisition in Sweden. The target, a bakery distributor called Kobia, seems a great fit for Leipurin and is in line with Aspo’s Western M&A aims. The EUR 50m business isn’t that big in the Aspo context but is a significant move for Leipurin and profitable with a 3% EBIT margin. We are yet to include the acquisition in our estimates, but it should close in a few months. In our view the acquisition underlines Aspo’s commitment to Leipurin as M&A focus has often seemed to be around Telko.

Valuation is undemanding in the light of EUR 40m EBIT

Aspo’s EBIT is likely to remain around EUR 40m in the coming years. It may be hard to significantly improve from that level considering the already favorable market outlooks, but we view valuation undemanding as our SOTP suggests equity value closer to EUR 10 per share. We retain our EUR 8.5 TP and BUY rating.

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Endomines - Focus on production in Finland

14.06.2022 - 09.20 | Company update

Endomines is ramping up production at Pampalo, while the Friday operations remain uncertain. Recent macroeconomic development is causing some potential headwind.

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Building up production volumes at Pampalo
Endomines has seen continued two-fold progress during H1 so far, with ramp-up of operations at Pampalo progressing quite as planned while the mining operations at the Friday mine appear to be halted for a prolonged period of time. At Pampalo, Endomines produced 1259oz of gold during Q1. Focus has been on achieving a state of steady gold production at the processing plant. Endomines also announced plans to open the East open pit at Pampalo, which according to the company would increase gold production volumes with 10-20%. Operations at the open pit are expected to continue for approx. two years. At Friday, Endomines has carried out an underground diamond drilling campaign, with promising results. Further drilling is however still required and will be considered in late 2022.

Investigating potential in Finland amid macro uncertainty
Our estimates for Friday now assume production to be restarted during H1/2023 (earlier assumption mid-2022). The company noted that it is investigating partnership options, which could be beneficial given the company’s current lack of cash flows and continued need for additional financing. Production ramp-up at Pampalo and the assumed start-up of the East open pit this year provides some additional leeway but further financing will in our view be needed to further increase production. Endomines has also investigated possibilities to develop known deposits within the Karelian Gold Line. Gold is still enjoying rather favourable price levels, but precious metals have as safe haven assets been under pressure due to a stronger dollar and anticipated interest rate hikes. Any gold price deterioration would in our view clearly limit the economic feasibility of the other assets in Finland.

HOLD with a target price of SEK 2.2 (2.3)
With estimates revisions both operatively and due to completed and anticipated financing arrangements along with gold price uncertainty we adjust our TP to SEK 2.2 (2.3), HOLD-rating intact.

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SRV - Balance sheet towards better shape

09.06.2022 - 09.45 | Company update

SRV embarked on the last phases of its balance sheet strengthening program. Following balance sheet estimate revisions and released subscription rights we adjust our TP to EUR 0.18 (0.35), HOLD-rating intact.

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Last steps of balance sheet strengthening program
SRV initiated a program to strengthen its balance sheet in conjunction with the Q1 results, seeking to increase equity by around EUR 100m and reduce IB net-debt by the same amount, due to the impact of the EUR 141.2m Q1 write-downs on its holdings in Russia and in Fennovoima on SRV’s equity and gearing. SRV is now approaching the final stages of the program to reorganize and strengthen its balance sheet. SRV resolved on a rights issue of up to approximately EUR 34.8m to existing shareholders on May 31st, with the subscription period running from 7.6.-21.6.2022 at a subscription price of EUR 0.10 per share offered.

Planned actions seen to increase equity ratio above 35%
Based on the company’s rights issue presentation, held on June 8th, we have adjusted our estimates assuming that shares are subscribed for up to maximum amount offered in both the rights issue and directed issue to hybrid note holders. At completion, this would increase the number of shares from approx. 263m to 670m. We have further adjusted our balance sheet estimates for the outcome of the tender offer and conversion regarding its senior unsecured notes. We have adjusted our operative estimates for the change in financial expenses, which according to SRV are expected to decrease by EUR 6m annually. After the transactions SRV’s equity ratio should rise to over 35% and the company should be close to being net-debt free (excluding the impact of IFRS 16).

HOLD-rating with a target price of EUR 0.18 (0.35)
On our revised estimates and the release of subscription rights we lower our TP to EUR 0.18 (0.35) and retain our HOLD-rating. Valuation is currently quite in line with peers, with 2022e EV/EBITDA, assuming full subscription, at 7.3x vs 7.6x for peers.

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Nordec - IPO research report - Building for the future

08.06.2022 - 09.45 | Company report

Nordec is one of the leading providers of steel frame structures and envelope solutions for construction projects in the Nordics, measured by revenue, with a strong position in the CEE countries. Nordec is through its planned IPO seeking capital to invest in future growth.

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Focus on the project execution
Nordec operates in the new non-residential construction market and designs, manufactures, and installs frame structures, envelopes and bridges. The company mainly uses steel in its structures but is able to complement its offering with other elements and materials. The company emphasizes its project management capabilities, which together with the wide service offering in our view provides a competitive advantage and serves the establishment of strong customer relationships.

Megatrends enable growth opportunities
Nordec operates in the traditional non-residential construction markets in Nordic and CEE countries. The market growth has been quite moderate but by focusing on growth pockets offered by current megatrends, the company gains access to more rapid growth opportunities. The company has delivered solutions for the battery value chain, logistics centers, and green transition investments in which the company in our view is well positioned to seek futher growth.

Implied equity value of EUR 71.7-85.0m
We have approached Nordec’s valuation mainly through peer group analysis. Nordec’s peers currently trade with 22-23E EV/EBITDA multiples of 6.4-6.2x and EV/EBIT multiples of 9.5-8.8x. In our view, Nordec’s valuation should near that of the peer group and should the company succeed in improving its profitability along with the investment program we see it justified that the company could be trading at or above its peers. Our implied equity value for Nordec lands between EUR 71.7-85.0m.

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Fellow Bank - Initiate coverage with HOLD

07.06.2022 - 09.30 | Company report

Fellow Bank is through its new operating model in a better position to accelerate growth and compete in new customer sub-segments. 2022 will be heavily affected by the transition but will set a foundation for clear growth and profitability improvements. We initiate coverage of Fellow Bank with a HOLD-rating and TP of EUR 0.42.

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Digital bank focused on own balance sheet lending
Fellow Bank is a digital bank providing lending and banking and financial services to individuals and SME’s and offering savers a return on their deposits. Through a recent merger, the company is shifting towards lending from its own balance sheet, having been established as an international marketplace lending platform. The new operating model and cheaper form of funding in our view offers additional growth potential and improves the company’s competitiveness, which opens up potential to target new customer sub-segments.

Seeking over 25% annual growth of loan portfolio
The company’s financial targets for 2022-2026 are: annual growth of more than 25% of the loan portfolio, a return on equity of more than 15% by the end of the target period and a capital adequacy ratio of at least 18% (T1). 2022 will be a tougher year financially due to exceptional costs relating to the merger and the build up the company’s loan book. We expect the company’s financials to turn on a clearly more favourable path in 2023 with the buildup of the loan book and further new growth. We expect profitability to pick-up during 2023-2024 with the growth and scalability of the operating model and expect the ROE to improve to 13.2% by 2024.

HOLD-rating with a target price of EUR 0.42
We initiate coverage of Fellow Bank with a target price of EUR 0.42 and HOLD-rating. Valuation is currently rather stretched when comparing with peers. Fellow Bank is however still in the early stages of its planned growth phase and the near-term potential for rapid growth in our view presents a justifiable reason to stay along for the early stages of the company’s growth story.

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Detection Technology - Gap quarter

07.06.2022 - 09.20 | Company update

DT issued a profit warning and lowered its Q2 guidance due to a product quality issue in the supply chain and component shortage. With our near-term estimates lowered, we retain our HOLD-rating and lower TP to EUR 20.0 (22.5).

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Soft quarter underway
DT lowered its Q2 guidance and expects group revenue to decline y/y. The weaker-than-expected development of net sales is attributed to a product quality issue in the supply chain and the challenges for the company and its customers to purchase other critical components. Even though the product quality issue has been resolved, some MBU sales will be postponed to Q3 due to delays in the supply chain.

We lowered our estimates
Due to the issues mentioned above, we downgraded our 2022 estimates (especially MBU’s) and took a more cautious stand on our near-future expectations, despite the fact that the company is expecting to see double-digit growth in H2’22. DT noted also that the underlying demand remains strong, and, to our understanding, upcoming product updates are expected to reduce DT’s exposure to the component shortage starting from Q3. Driven by DT’s strong leverage of earnings and with net sales decreasing, our Q2’22E EBIT estimate faced quite hefty downgrade, declining ~20% from what we earlier expected. More on page 2.

HOLD with a target price of EUR 20.0 (22.5)
Driven by the decline of our 22E EBIT estimate and increased uncertainty, we have adjusted our TP to EUR 20.0 (22.5). Both peer group’s and DT’s valuations have been quite stable since our last update (28th April). DT is now trading with 22-23E EV/EBITDA multiples of ~16-13x and EV/EBIT multiples of ~20-15x. At this stage, we will accept a 22E EV/EBIT multiple of 20x as in 2023 DT’s valuation drops near its peer valuation with our new target price. We retain our HOLD-rating.

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Solteq - Slower realization of potential

30.05.2022 - 09.45 | Company update

Solteq lowered its guidance for 2022 due to challenges relating to the Utilities business. With the downgrade, the company’s journey to realize its potential is prolonged. We lower our TP to EUR 3.4 (5.0), rating remains BUY.

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Guidance for 2022 lowered
Solteq issued a profit warning, lowering its guidance for 2022 for both revenue and operating profit. According to the new guidance revenue in 2022 is expected to grow and operating profit to weaken, while the company previously expected revenue to grow clearly and operating profit to improve. The guidance downgrade is driven in particular by the Utilities business, where Solteq sees that increased investments and project delivery costs will weaken the profitability and reduce customer invoicing.

Scalability potential not materializing as expected
We have lowered our estimates for the on-going year, with a quite notable decrease in operating profit. We now expect 2022 revenue of EUR 75.0m (prev. EUR 77.0m), for an implied growth of 8.7%. Taking into account the more recent acquisitions, the estimated organic growth is heading towards lower single-digit figures. We have lowered our operating profit estimates by some 15% to EUR 6.6m. All the made revisions relate to our estimates for Solteq Software. The reasons for the guidance downgrade appear to point to near-term challenges, but we expect a spill-over effect on 2023 thus slowing down the expected scaling of Solteq Software and with the added uncertainty we have also lowered our 2023 operating profit estimate by some 15%. The overall narrative is still seemingly unchanged, only the expected scaling of Solteq Software appears delayed.

BUY with a target price of EUR 3.4 (5.0)
Following our estimates revisions we lower our target price to EUR 3.4 (5.0) and retain our BUY-rating. We currently expect profitability in 2023 to improve to 2021 levels, with notable improvement potential still present through Solteq Software. With the bumps in the road we now value Solteq close to the IT services peers, having previously justified a larger premium.

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Solteq - Lowers 2022 guidance

25.05.2022 - 09.30 | Analyst comment

Solteq issued a profit warning, lowering both its guidance for revenue and operating profit by a notch. Revenue in 2022 is now expected to grow (prev. grow clearly) and operating profit to weaken (prev. improve).

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  • Solteq’s new guidance for 2022: Solteq Group’s revenue is expected to grow and profit to weaken.
  • Previous guidance: revenue is expected to grow clearly and operating profit to improve.
  • Solteq noted as reasons for the guidance downgrade the impact of higher-than-estimated investments in product development in Solteq’s Utilities business unit along with increased project delivery costs on profitability and reduced customer invoicing during the on-going financial year.
  • Our estimates for 2022e revenue and operating profit have been EUR 77.0m and 7.7m respectively, implying a revenue growth of 11.6% and ~8% improvement in operating profit y/y. The new guidance implies single-digit growth and compared with our estimates an over 10% decline in operating profit in 2022e.
  • The guidance downgrade is unfortunate for the near-term, but does not based on the reasons stated appear to give reason to assume that the long-term scalability drivers wouldn’t remain intact. 

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Dovre - Initiating coverage with BUY

20.05.2022 - 09.35 | Company report

Dovre is now in a favorable position in the sense that demand is robust for all three segments, yet we expect earnings growth to continue well beyond this year.

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Project Personnel continues to perform this year

The Norwegian oil and gas sector continues to stand in a favorable spot, and Project Personnel delivered solid figures already in FY ’21; performance continued to improve towards the end of the year with no sign of inflation affecting the results. Q1’22 results demonstrated no sign of weakness. Meanwhile there was some softness in Consulting due to a high comparison period, however the segment has always been a stable performer and we expect earnings growth again next year. Project Personnel may be in a particularly favorable spot right now, but Consulting has arguably more long-term potential. This would require successful execution in terms of new customers; Dovre may also find M&A targets to help growth. The new customers will probably not be too far from Consulting’s core Norwegian public sector civil and infrastructure projects, yet the segment could be looking to expand in Finland as well.

Consulting and Renewable Energy have more potential

Inflation does not seem to bother Project Personnel or Consulting, and even Renewable Energy appears to have been able to anticipate certain challenges well enough. We estimate EUR 201m revenue for this year and see EBIT at EUR 8.4m. The 4.2% EBIT margin would already be very decent, and translate to a high double-digit ROI, but we estimate Dovre’s profitability has more long-term potential as the results for Consulting and Renewable Energy are likely to remain a bit modest this year. The outlook for Dovre’s key client sectors is robust; we view our 5% organic CAGR estimates moderate. We also see Dovre’s EBIT margin poised to climb towards 5% in the coming years even when we estimate a conservative 4% EBIT margin for Project Personnel.

Valuation is not demanding

We regard SOTP the most appropriate way to value Dovre with its three distinct segments. We see the fair range around EUR 0.70-0.75 per share based on the FY ’21-22 peer multiples. We tilt towards the lower end of the range as valuations have been under pressure lately. Our TP is EUR 0.70; our rating is BUY.

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Marimekko - Top performance

14.05.2022 - 10.50 | Company update

Marimekko delivered strong Q1 figures by showing double-digit growth in all its markets. Although the market environment includes uncertainties, Marimekko is trading with a quite moderate valuation. We upgrade our rating to BUY (HOLD) and adjust TP to EUR 14.5 (12.8).

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Strong start for the year
Marimekko’s Q1 performance was clearly better than we had anticipated. Topline saw an increase of 24% y/y driven by all markets. A favorable trend of retail and wholesale sales in Finland and good development of int’l sales boosted the revenue to high double-digit growth. The largest segment, Marimekko’s home market Finland grew by 27% y/y while int’l sales increased by 20% y/y. Q1 group topline amounted to EUR 36.0m (Evli: 30.4m). Gross margin (63%) was negatively affected by increased logistics costs and higher discounts. Driven by softer gross margin and increased fixed costs, Q1 adj. EBIT margin (18.4%) was below that of the comparison period, adj. EBIT amounting to EUR 6.6m (Evli: 3.9m). EPS totaled EUR 0.12 (Evli: EUR 0.08).

Guidance intact, we made estimate revisions
Marimekko reiterated its 2022 guidance: revenue above the 2021 level and adj. EBIT margin between 17-20%. The company also expects the relative growth pace to slow down in H2, which stems from the strong comparison figures as well as lowered consumer confidence to which Marimekko was quite immune in Q1, in our understanding. We raised our 22E EBIT margin estimate near the upper bound of the guidance. Driven by a strong start of the year, we expect the company to face low double-digit growth in 2022 by full-year net sales amounting to EUR 167.7m and adj. EBIT totaling EUR 32.5m (more on report page 2).

BUY with a target price of EUR 14.5 (12.8)
The company’s share price has fallen from the 2021 highs by some ~50%. Meanwhile, Marimekko’s peers have also seen a decline in their valuation. Given the strong start of 2022 and by accepting a 22E EV/EBIT multiple of 18x, we upgrade our recommendation to BUY (HOLD) and adjust TP to EUR 14.5 (12.8).

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Marimekko - Q1 result topped our estimates

13.05.2022 - 09.10 | Earnings Flash

Marimekko came in strong with Q1 net sales as well as EBIT growing rapidly. The company’s resilience to weakened consumer confidence was stronger than we were expecting.

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•    Q1 group result: topline increased by 24% y/y to EUR 36.0m (EUR 30.4m/32.4m Evli/cons.) beating our and consensus estimates. Net sales growth was driven by solid development of wholesale and retail sales in Finland as well as good performance of int’l sales. Adj. EBIT improved to EUR 6.6m (EUR 3.9m/3.9m Evli/cons.), being 18.4% of revenue. Weakened relative profitability was driven by increased material and fixed costs. On the other hand, EBIT was supported by topline growth and lower D&A. EPS amounted to EUR 0.12 (EUR 0.08/0.08 Evli/cons.).
•    Finland: net sales grew by 27% y/y to EUR 18.5m (Evli: EUR 15.2m). The growth was driven by both retail (+18% y/y) and wholesale sales (+41% y/y).
•    Int’l: revenue saw an increase of 20% y/y, amounting to EUR 17.5m (Evli: EUR 15.2m). Good sales development was driven by all market segments. Topline grew strongly in the EMEA region (+34% y/y), North America (+26% y/y), and Scandinavia (+23% y/y) while the growth in the APAC region was more moderate with an increase of 10% y/y.
•    2022 guidance reiterated: Topline is expected to be above that of the comparison period (2021: EUR 152.2m) and adj. EBIT margin to be between 17-20% (2021: 20.5%).
•    Outlook: although consumer confidence has been in a trend of decline, it seems that Marimekko has enjoyed still solid demand in Q1. The company expects retail, license, and wholesale sales to grow in 2022. In percentage terms, Marimekko estimates the net sales growth to be stronger at the beginning of 2022 than in H2.

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Marimekko - Uncertainty ahead of Q1

10.05.2022 - 18.05 | Preview

We revised our near-term estimates ahead of Q1 due to declined consumer confidence, especially in Finland and Japan. We retain HOLD rating and adjust TP to EUR 12.8 (15.8).

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New collaborations incoming
In early 2022, Marimekko announced of few collaborations with global lifestyle brands to enhance its brand awareness in its growing markets. Adidas collaboration got a sequel with new spring/summer collection that dropped during April 2022. In addition, Marimekko collaborates with a luxury brand Mansur Gavriel. The bag collection will be available starting from June 2022. Moreover, Marimekko announced its collaboration with global furniture and décor company IKEA. The collection will be released in spring 2023. Collaborations bring Marimekko highly scalable licensing revenue but, more importantly, by cooperating with popular lifestyle companies Marimekko’s brand awareness improves abroad significantly.

Consumer trust in decline in Marimekko’s main markets
Driven by increased inflation and interest rate pressures as well as geopolitical tenses due to Russia’s attack on Ukraine, consumer trust has been in a trend of decline in the western markets. Also, in Marimekko’s second-largest market, Japan, the inflation has picked up driven by material and energy costs. We expect the declined consumer activity to have a slight impact on Marimekko’s Q1 sales development and thus we have revised our quite optimistic near-term estimates. From what we earlier expected, we have downgraded our 22E topline estimate by 2% while our 22E EBIT estimate faced a decrease of 5% (see report page 2).

HOLD with a target price of EUR 12.8 (15.8)
In recent months, Marimekko’s valuation has melted alongside its peer group’s valuation. With our revised estimates, the company trades with 22E EV/EBIT and P/E multiples of 15x and 19x respectively. Considering our acceptable 22E EV/EBIT and P/E multiples of 17x and 21x respectively, we see slight upside potential in Marimekko’s stock price but, at the same time, remind about the uncertainty concerning the demand for Marimekko’s products. We retain our HOLD rating and adjust TP to EUR 12.8 (15.8).

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Etteplan - Outlook still fairly favourable

06.05.2022 - 09.45 | Company update

Etteplan saw strong growth and good profitability in Q1. Presently, no clear signs of a notable deterioration in the demand situation appear to be seen, but the uncertainty has understandably increased.

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Double-digit organic growth in Q1
Etteplan reported overall solid Q1 results and clearly better than we had anticipated. Although increased sick-leaves and lockdowns affected operations, revenue still grew 23% y/y and near 15% organically to EUR 89.6m (EUR 81.2m/87.7m Evli/cons.). Profitability was also at good levels, with EBIT of EUR 7.6m (EUR 6.5m/6.9m Evli/cons.), at a margin of 8.5%. On service area levels, compared with our estimates, revenue and profitability was better across the board. Profitability in Engineering Solutions in particular was solid following as a result of excellent operational efficiency levels.

Market outlook still appears to be fairly favourable
Comments regarding the demand situation and market uncertainties were all in all somewhat upbeat, and potential near-term demand declines in some sectors seem to be offset by increased demand in others. The direct impacts of the war in Ukraine have as expected so far been limited. COVID-19 still poses issues due to sick-leaves and lockdowns in China. Etteplan kept its guidance intact, expecting revenue of EUR 340-370m and EBIT of EUR 28-32m. Following the solid Q1 figures and some slight tweaks to the following quarters our estimates are now quite in line with the mid-range of the guidance. We take a rather neutral approach given the current uncertainties, still seeing good organic growth but at a slightly lower pace compared with Q1.

HOLD with a target price of EUR 17.0 (16.5)
Etteplan currently quite justifiably trades above peers given the good growth and profitability. More optimal market conditions could well justify >20x P/E levels but with the current uncertainties and ~20% y/y deterioration in peer median NTM P/E current levels appear quite fair. We adjust our TP to EUR 17.0 (16.5) due to estimates revisions, HOLD-rating intact.

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Pihlajalinna - Steps towards higher profitability

06.05.2022 - 09.35 | Company update

The Q1 results and notes on Pohjola Hospital support the view Pihlajalinna is advancing in terms of profitability.

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Growth helped profitability top estimates

Q1 revenue grew 17% y/y to EUR 163m vs the EUR 157m/157m Evli/cons. estimates. Volume growth was even higher than the company expected, 7% on an organic basis. The beat was due to corporate customers, where Pohjola Hospital added EUR 9.4m, but also thanks to public sector, including Virta, where higher outsourcing pricing helped. Outsourcing profitability improved by EUR 1.5m y/y. High levels of sick leaves were a drag, and Covid-19 services are no more that profitable, but the volumes helped the EUR 5.9m adj. EBIT top the EUR 3.3m/3.5m Evli/cons. estimates. Pohjola Hospital’s integration has so far proceeded better than expected, but Pihlajalinna nevertheless retains its guidance for now as there remain a few uncertain factors.

Integration progress is ahead of plan in some ways

Pohjola Hospital posted positive results already two months after the acquisition, although not every unit is yet profitable. There’s still some uncertainty around how quickly the integrated whole can be turned to driving higher volumes, but positive development is likely to continue in H2. In this sense the guidance is on the conservative side, but it makes certain allowances for issues which may affect results during the following quarters. Sick leaves were high in Q1 due to infections, and this experience informs some caution. Certain negotiations related to Pohjola Hospital are yet to be completed, as is the case for outsourcing restructurings. Current labor market issues raise uncertainty, and in the case of Pihlajalinna the potential implications follow with a lag. Pihlajalinna is also scaling up capacity in advance to better meet future demand.

Guidance remains moderate for now

Our estimates for rest of the year are moderate, in line with the guidance, and there’s a good chance for an upgrade during or after Q3. Pihlajalinna’s margins have a lot of catching up to do with peers, but the Q1 results and comments on outlook suggest the company has established a firm footing. The 15.5x EV/EBIT valuation on our FY ’22 estimate isn’t high in the sector context, and we estimate the discount to grow and the multiple to drop to below 11x next year. We retain our EUR 14 TP and BUY rating.

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Etteplan - Solid growth in Q1

05.05.2022 - 13.30 | Earnings Flash

Our concerns for a softer Q1 were clearly unfounded, as Etteplan's net sales grew 23% to EUR 89.6m, above our estimates and slightly above consensus (EUR 81.2m/87.7m Evli/cons.). EBIT amounted to EUR 7.6m, above our and consensus estimates (EUR 6.5m/6.9m Evli/cons.).

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  • Net sales in Q1 were EUR 89.6m (EUR 73.0m in Q1/21), above our estimates and slightly above consensus estimates (EUR 81.2m/87.7m Evli/Cons.). Increased sickness-related absences affected Etteplan’s business, but growth was nonetheless strong, 23% y/y, of which 14.1% organic. 
  • EBIT in Q1 amounted to EUR 7.6m (EUR 6.6m in Q1/21), above our estimates and consensus estimates (EUR 6.5m/6.9m Evli/cons.), at a margin of 8.5%.
  • EPS in Q1 amounted to EUR 0.23 (EUR 0.21 in Q1/21), above our estimates and in line with consensus estimates (EUR 0.19/0.22 Evli/cons.).
  • Net sales in Engineering Solutions in Q1 were EUR 46.7m vs. EUR 44.0m Evli. EBITA in Q1 amounted to EUR 4.9m vs. EUR 4.2m Evli. 
  • Net sales in Software and Embedded Solutions in Q1 were EUR 24.6m vs. EUR 21.8m Evli. EBITA in Q1 amounted to EUR 2.3m vs. EUR 2.0m Evli. 
  • Net sales in Technical Documentation Solutions in Q1 were EUR 18.1m vs. EUR 15.2m Evli. EBITA in Q1 amounted to EUR 1.8m vs. EUR 1.6m Evli. 
  • Guidance for 2022 (reiterated): Revenue is estimated to be EUR 340-370m and the operating profit is estimated to be EUR 28-32m. In terms of market outlook, Etteplan expects the general demand situation to remain fairly good throughout 2022.

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Suominen - Margins remain set to improve

05.05.2022 - 09.25 | Company update

Suominen’s Q1 results and guidance downgrade weren’t that big negatives in our view, however there’s high uncertainty around the upcoming improvement pace. We nevertheless continue to expect significant gains for H2.

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Q1 results and guidance downgrade were minor negatives

Suominen’s EUR 110m Q1 top line landed close to the EUR 109m/115m Evli/cons. estimates. Revenue declined by 4% y/y as volumes decreased to an extent where higher sales prices could not help. Americas was a bit softer than we expected, while Europe compensated for the shortfall. The EUR 6.6m gross profit didn’t land that much below our EUR 7.1m estimate, but higher admin costs meant the EUR 3.3m EBITDA was below the EUR 4.8m/4.4m Evli/cons. estimates. Suominen revised its guidance down, but this wasn’t such a significant negative in the light of the current uncertain environment and Suominen’s P&L’s sensitivity to various factors. In our opinion Suominen’s profitability is set to improve from the current lows.

Q2 should already improve a bit q/q

Demand fluctuations remain in certain wiping product categories for now as high inventory levels continue to caution some US customers. Suominen’s response is to adjust its sales mix by repurposing manufacturing lines to better meet demand. Suominen has also been looking for new customers. There’s uncertainty around the overall improvement pace with regards to the whole supply chain, but we continue to expect revenue growth for this year. Increased energy costs (mostly electricity for Suominen) continue to weigh Q2 results to some extent, along with higher raw materials prices, but we see Q3 performance a lot improved. We trim our Q2 EBITDA estimate to EUR 7.5m (prev. EUR 9.7m). Our revised EBITDA estimate for this year stands at EUR 36.0m (prev. EUR 39.8m).

Valuation is by no means demanding

Suominen is valued around 5.5x EV/EBITDA and 12x EV/EBIT on our FY ’22 estimates. These are yet not particularly low multiples, but we continue to expect significant profitability improvement for H2. We now estimate 6.0% EBIT margin for next year (prev. 6.5%), and hence Suominen is valued about 4x EV/EBITDA and 6.5x EV/EBIT on our FY ’23 estimates. Our new TP is EUR 3.5 (4.0) as we retain our BUY rating.

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Aspo - Telko’s value is overlooked

05.05.2022 - 09.05 | Company update

Aspo’s Q1 results beat estimates. Uncertainty persists around H2, but we are now more confident towards Telko.

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Q1 figures in fact gained from the turbulence

Aspo’s Q1 revenue was driven to EUR 160m, compared to the EUR 132m/136m Evli/cons. estimates, by Telko’s high EUR 76m top line. We had estimated EUR 58m, and the figure was lifted by the extraordinary inflationary environment created by the war. Telko’s markets’ normalization is now postponed. Telko’s adj. EBIT reached EUR 8.6m, and Aspo’s EUR 10.3m EBIT was clearly above the EUR 8.0m/7.6m Evli/cons. estimates while there were EUR -4.9m in items affecting comparability. ESL’s performance didn’t come as a big surprise as it was known the war will have little direct impact on the dry bulk business.

We reckon Telko’s long-term potential hasn’t diminished

There are many moving parts but Q1 was overall a lot better than was estimated as the environment lifted prices and for that part supported the two raw material distributors. The war thus caused a short-term boost for Telko and Leipurin, but downscaling creates uncertainty particularly around H2. Leipurin will exit Russia, Belarus and Kazakhstan, which account for almost EUR 30m in revenue. Telko is reviewing possibilities to exit Russia, and we understand some 30% of Telko revenue may be affected. The closure is thus significant, but we understand its impact on margins will be modest. Telko’s long-term 8% EBIT target should remain relevant. We see Telko’s FY ’23 revenue down 20% from Q1’22 LTM; uncertainty hangs around the figure for the next few quarters, but we believe it shouldn’t take Telko too long to again reach EUR 15m EBIT. Demand for ESL’s handysize vessels temporarily softens in Q2 as customers adjust to the Russian situation, but larger vessel demand could compensate for this.

In our opinion valuation neglects Telko’s potential

Our estimate revisions are relatively small on an annual level. There are still many questions around Telko’s performance going forward, but the Q1 results were encouraging and in our view possibility for a positive guidance revision has increased. We view an EBIT of about EUR 40m a relevant possibility again in the coming years, which would correspond with the roughly EUR 30m and EUR 15m long-term EBIT levels for ESL and Telko. Our new TP is EUR 8.5 (8.0), and our rating is now BUY (HOLD).

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Eltel - Inflation caused a setback

05.05.2022 - 08.45 | Company update

Q1 profitability fell short of expectations and Eltel also removed guidance due to inflation. Long-term potential remains there, but we continue to view valuation fair.

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Revenue in line, profitability fell particularly in Sweden

Eltel’s Q1 revenue was EUR 184m vs the EUR 185m/180m Evli/cons. estimates. Top line turned to growth in Q1, and there were no delays although some Polish projects may be affected going forward. Winter conditions and infections also had a negative effect on productivity, but fibre and 5G demand remained very strong in the Nordics. Power grid works in the Nordics are prospects. Operative EBITA was EUR -2.4m vs our EUR -0.2m estimate as inflation accelerated. Finnish and Norwegian profitability levels were like we expected, Denmark was a bit soft; the miss was mostly due to Sweden. Eltel removes its guidance for the year because of the inflation spike, however the company expects to receive compensation for higher costs already in Q2 in the Nordics, but Poland might take longer.

Potential remains, but uncertainty is high

Inflation is really hurting the Power business through fuel, steel, cable and concrete prices, and the war in Ukraine is also an issue as it might delay projects in Poland. Eltel works on the assumption inflation will persist for now and hence the company also pushed its long-term financial performance target date forward by two years. We cut our Q2 EBITA estimate to EUR 3.7m (prev. EUR 7.1m). We therefore estimate only marginal profitability improvement this year. We expect Eltel’s earnings improvement to continue next year as the company is likely to receive adequate compensation for higher costs. We also expect Sweden to be back to black later this year and note Eltel is implementing certain profitability investments in the country.

Valuation is overall fair relative to peers

Our EBITA estimate for the year is now EUR 15.1m vs EUR 22.2m before the report. We make basically no changes to our top line estimates and apply only a minor cut to our FY ’23 profitability estimates. Eltel is valued at a relatively high 18x EV/EBIT level on our FY ’22 estimates, but the level should decline relatively fast in the coming years as profitability lags most peers. The valuation is modest relative to long-term potential, but in our view this is fair. Our TP is now SEK 10 (15); we retain our HOLD rating.

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Pihlajalinna - Figures above estimates

05.05.2022 - 08.30 | Earnings Flash

Pihlajalinna’s Q1 revenue came in 4% above estimates and helped profitability land some EUR 3m higher than was expected.

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  • Q1 revenue grew by 16.6% y/y to EUR 163.1m, compared to the EUR 156.6m/156.7m Evli/consensus estimates. Corporate customer revenue was EUR 49.3m vs the EUR 44.6m/44.6m Evli/consensus estimates, while private customers amounted to EUR 22.8m vs the EUR 22.6m/24.1m Evli/consensus estimates. Public sector customers were EUR 109.2m, compared to the EUR 107.8m/105.2m Evli/consensus estimates. Inorganic growth contributed EUR 15.9m while organic growth was EUR 7.3m, or 5.2%.
  • Covid-19 services revenue amounted to EUR 8.1m.
  • Adjusted EBITDA was EUR 16.5m vs the EUR 13.1m/12.1m Evli/consensus estimates, while adjusted EBIT landed at EUR 5.9m, compared to the EUR 3.3m/3.5m Evli/consensus estimates.
  • Pihlajalinna guides revenue to increase substantially and adjusted EBITA to remain flat (unchanged).

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Aspo - Q1 profitability remained high

04.05.2022 - 10.20 | Earnings Flash

Aspo’s Q1 results clearly topped estimates, however the previous full-year guidance is retained for now as much uncertainty persists around Telko’s H2.

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  • Aspo Q1 revenue was EUR 160.4m vs the EUR 132.2m/135.6m Evli/consensus estimates.
  • EBIT landed at EUR 10.3m, compared to the EUR 8.0m/7.6m Evli/consensus estimates. There were a total of EUR -4.9m in items affecting comparability, and Aspo’s adjusted EBIT amounted to EUR 15.0m.
  • ESL’s revenue was EUR 56.8m vs our EUR 50.9m estimate, while EBIT was EUR 7.9m vs our EUR 7.5m estimate.
  • Telko’s top line amounted to EUR 75.9m, compared to our EUR 58.1m estimate. EBIT was EUR 4.0m vs our EUR 1.8m estimate. There were a total of EUR -4.6m in items affecting comparability, and adjusted EBIT was EUR 8.6m. Telko’s Q2 performance should remain strong, but the situation for H2 is unclear.
  • Leipurin revenue was EUR 27.7m, compared to our EUR 23.2m estimate, while EBIT came in at EUR -0.4m vs our EUR 0.1m estimate. Items affecting comparability amounted to EUR -1.1m, adjusted EBIT being EUR 0.7m.
  • Other operations cost EUR 2.5m, compared to our EUR 1.4m estimate, including e.g. EUR 0.5m in extraordinary compensation to the former CEO.
  • Aspo retains its guidance and expects FY ‘22 EBIT in the EUR 27-34m range.

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Suominen - Earnings guidance revised down

04.05.2022 - 09.55 | Earnings Flash

Suominen’s Q1 results landed relatively close to estimates, although on the softer side. The company revises its earnings guidance down due to intensified cost inflation, while customer inventory levels in the US are normalizing but not as fast as expected.

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  • Q1 revenue was EUR 110.3m, a decline of 4% y/y, compared to the EUR 109.0m/114.7m Evli/consensus estimates. Americas amounted to EUR 61.7m vs our EUR 64.0m estimate while Europe was EUR 48.5m, compared to our EUR 45.0m estimate.
  • Gross profit was EUR 6.6m vs our EUR 7.1m estimate. Gross margin therefore amounted to 6.0%, compared to our 6.5% estimate.
  • EBITDA landed at EUR 3.3m vs the EUR 4.8m/4.4m Evli/consensus estimates. EBIT was EUR -1.3m vs the EUR -0.2m/-0.6m Evli/consensus estimates.
  • Suominen now guides EBITDA to decrease clearly this year. The war has intensified cost inflation. Customer inventory levels in the US have normalized to an extent, although somewhat slower than expected. Suominen expects demand to improve in H2.

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Eltel - Inflation hits profitability

04.05.2022 - 09.25 | Earnings Flash

Eltel’s Q1 top line was close to estimates, but the war and unforeseen inflation hit bottom line hard. Eltel may get compensation for the higher costs later during the year, but there is a risk the overall impact of inflation remains negative this year and hence Eltel also removes its guidance.

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  • Q1 revenue grew by 1% y/y and amounted to EUR 184.0m vs the EUR 185.4m/179.8m Evli/consensus estimates. Growth was strong in Sweden and Norway, while Finland declined and Denmark especially so partly because of slower than anticipated ramp up of new agreements. The demand for fibre and 5G overall remains high.
  • EBIT landed at EUR -2.5m, compared to our EUR -0.3m estimate. Operative EBITA was EUR -2.4m vs our EUR -0.2m estimate. Inflation hit the results in all markets, especially in the form of higher fuel and asphalt prices. The Finnish and Polish power businesses also saw inflation in materials such as steel. Eltel is in dialogue with customers regarding compensation for the cost increases.
  • Profitability in Finland remained sound, along with Norway, but the Q1 loss in Sweden deepened and Danish results also declined a lot.
  • Eltel removes guidance as the war and increased inflation raise uncertainty. The previous guidance expected FY ’22 operative EBITA margin to increase.

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Enersense - CMD notes

04.05.2022 - 08.35 | Company update

The CMD added color on Enersense’s plans to expand its print in the renewables value chain. Wind power, on sea as well as land, is the key in multiplying revenue and earnings as the company will both develop and own wind farms.

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EUR 500m revenue and EUR 100m EBITDA by 2027

Enersense targets EUR 300m revenue for the current construction and EUR 100m for the current wind power business by 2027. The former would contribute EUR 30m EBITDA and the latter EUR 35m. The Megatuuli acquisition helps the company to have a say on the kinds of wind power projects that get developed. Proprietary renewables production is to be ramped up to EUR 100m revenue, or 600-700MW of mostly Finnish onshore wind power capacity, which requires some EUR 300m of equity-like capital (assuming 40% equity ratio, depending on the exact financing structure, which we assume could include e.g. hybrid instruments). The projects would be valued at some 20x EV/EBITDA (an IRR of around 5-10%). Enersense develops its offshore wind power platforms to tackle the pack ice challenges. The Baltic wind power market also has plenty of growth potential as there’s not yet much local capacity.

Wind power dominates, but other renewables also figure in

The Finnish wind power market is now the most important but not the only focus area. Enersense also has interest towards solar energy as the company views it an overlooked source in Finland. Within nuclear power Enersense is involved in France and the UK, besides Finland. The new European project of energy self-sufficiency in general greatly helps Enersense’s long-term outlook and includes such concrete prospects as the Baltic transmission network’s desynchronization from the Russian system. Another opportunity is found in Finland, where the EV stock is expected to grow at an above 20% CAGR during this decade. There’s always the potential for some additional M&A, but we believe the already identified renewable production pipeline will claim most of the focus during the years to come.

The transformation happens gradually over the years

We make no changes to our estimates for now, but it’s clear Enersense’s financial profile is going to change a lot over the coming years as the company begins to add its own renewable energy production. We retain our EUR 8 TP and HOLD rating.

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Etteplan - Anticipating some softness

03.05.2022 - 09.45 | Preview

Etteplan reports Q1 results on May 5th. We remain on the cautious side due to the seen increase in sick leaves. Some uncertainty is brought by Ukraine crisis but overall, we see no major changes to our views.

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Cautious approach to Q1 due to increases in sick leaves
Etteplan reports Q1 results on May 5th. Our Q1 estimates remain more on the conservative side as a precaution given the increases in sick leaves seen in conjunction with the Q4 report, but with the good growth figures posted in Q4 there is certainly potential for faster growth. In terms of profitability, we expect a similar trend as during 2021, with the full-year EBIT-margins set to remain near the 9% mark. Our estimates for Q1 are unchanged ahead of the earnings report, with our net sales and EBIT estimates at EUR 81.2m (Q1/21: EUR 73.0m) and EUR 6.5m (Q1/21: EUR 6.6m) respectively.

Some potential indirect demand uncertainty
The guidance given for 2022 in the Q4 report was in our view quite solid, with revenue estimated to be between EUR 340-370m and EBIT to be between EUR 28-32m. The mid-range of the guidance according to our estimates would imply an organic growth of around 10% excluding potential new acquisitions. The situation in Ukraine has caused some additional demand uncertainty, although potential direct impacts should not be material, as Etteplan to our understanding does not have any significant business in the countries directly affected. Although we do not see any notable pressure on margins, we note that Etteplan proved its resilience and adaptability to changes in the demand environment during the pandemic. Our 2022 estimates remain unchanged, with our revenue and EBIT estimates at EUR 344.5m and 29.3m respectively.

HOLD with a target price of EUR 16.5 (17.5)
Although our estimates remain intact, we adjust our target price slightly to EUR 16.5 (17.5) in light of the added uncertainty factors. Our target price values Etteplan at approx. 19x 2022 P/E. We retain our HOLD-rating.

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Pihlajalinna - Earnings are to improve in H2

03.05.2022 - 09.30 | Preview

Pihlajalinna reports Q1 results on May 5. The company’s Q4 results were negatively affected by higher outsourcing costs, and the situation will not much improve for Q1. Pohjola Hospital will also have remained in the red during the quarter. We do not expect changes to guidance.

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We expect Q1 EBIT to have declined by EUR 3.4m y/y

Pihlajalinna’s organic growth was healthy throughout last year, including in Q4, as corporate and private customer demand bounced back from the pandemic lows. We estimate FY ‘22 organic growth to slow down to roughly half of the 13.5% rate seen last year. Q4 profitability saw a temporary setback as specialized care costs increased. We expect Pihlajalinna to receive compensation for these complete outsourcing costs later this year, but the negative effect was some EUR 2m in Q4 and we expect it to have been similarly significant in Q1 as well. Pohjola Hospital’s FY ’21 EBIT was ca. EUR -7m and hence Q1 EBIT will have to bear another meaningful burden. The Q1 figures will not fully reflect the acquisition as it was completed only by the beginning of February. We continue to expect EUR 156.6m revenue and EUR 3.3m EBIT for Q1.

Pohjola Hospital should involve no big surprises

Pihlajalinna previously indicated Covid-19 services revenue to decline this year. There was already some fading in Q4, and we expect this to have been the case also in Q1 even when the Finnish virus situation was by some measures the worst during the pandemic. We expect the Pohjola Hospital integration to have proceeded very much according to plan so far. Losses will still be there in Q2 but H2 could already show positive results. The EUR 5m in projected cost synergies are significant and the acquisition helps gain insurance customer volumes, which is an attractive segment.

Earnings and multiple expansion potential remain as before

Pihlajalinna’s peer multiples have remained largely unchanged in the past few months. The big picture on Pihlajalinna’s valuation is therefore intact: Pihlajalinna’s profitability now lags the (mostly) larger peers’ but should begin to catch up soon. Meanwhile the multiples for FY ’23-24 are some 30% below those of peers. We retain our EUR 14 TP and BUY rating.

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Consti - Some headwind seen

02.05.2022 - 09.40 | Company update

Consti saw some seasonal softness in growth in Q1. Demand and construction material uncertainty continues to have an impact, but we still see the renovation market being fairly well positioned.

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Growth softness in Q1 due to long winter
Consti’s Q1 results were fairly decent compared with our estimates. Revenue development was slow due to the longer winter, with y/y growth of 0.9% to EUR 59.8m (EUR 63.3m/64.4m Evli/cons.). Profitability was still at decent levels for the seasonally slower quarter, with EBIT at EUR 0.4m (EUR 0.0m/0.4m Evli/cons.). The increase in construction materials prices had a somewhat higher impact than in the comparison period. The order backlog grew 4.4% y/y on new orders of EUR 37.6m (Q1/21: 69.8m). Consti kept its guidance intact, expecting the operating profit in 2022 to be between EUR 9-13m.

2022 estimates still largely intact
We have only minor adjustments to our 2022 estimates, having slightly lowered our growth and profitability estimates for the rest of the year, while our full year EBIT estimate is slightly up due to the earnings beat in Q1. Our 2022 estimates for revenue and adj. EBIT are now at EUR 304.5m (2021: 288.8m) and 10.7m (2021: EUR 9.5m). The market continues to be affected to some degree by construction material availability and prices, with the crisis in Ukraine having further affected the situation and created short-term uncertainty relating to new projects in the negotiation phase, but overall still does not appear to have deteriorated materially and the long-term demand drivers for the renovation market provide continued support.

BUY with a target price of EUR 12.0 (13.0)
The uncertainty relating to demand and construction material prices and availability is currently at elevated levels and has understandably led to lower valuation multiples. Consti is in our view still less prone to the shocks compared with primarily new construction focused companies. Consti currently trades below peers, which given the aforementioned appears unjustified. We adjust our TP to EUR 12.0 (13.0) and retain our BUY-rating.

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Enersense - Inflation resistance to be tested

02.05.2022 - 09.30 | Company update

Enersense’s Q1 profitability figures beat our estimates but cost inflation can hurt figures more during the rest of the year. Long-term outlook remains favorable thanks to the green vertically integrated strategy, but we view current valuation overall fair.

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Strong headline EBITDA, but mixed results underneath

Enersense’s revenue was up by 1% y/y to EUR 53.8m, compared to our EUR 54.2m estimate. Smart Industry’s figures declined due to the Staff Leasing sale as well as the lower than estimated Olkiluoto nuclear power plant volumes. The Olkiluoto project hit profitability, and together with the Enersense Offshore integration helped produce an EBITDA of EUR -1.0m. Connectivity and International Operations were able to grow at double-digit rates as Covid-19 was no longer a major issue, but their EBITDA declined due to inflation. Power grew a lot more than we expected and contributed to the group EUR 5.5m adj. EBITDA, compared to our EUR 2.7m estimate, as high revenue, project execution and Megatuuli acquisition drove profitability.

Cost inflationary effects on H2 figures remain to be seen

Enersense retains its guidance as the war causes some project delays this spring and hence Q2 figures will be relatively low. Q3 and Q4 should again be comparatively strong (winter and spring are always somewhat quiet), but inflation and material availability add to uncertainty. The underlying improvement pace in H2 is still unclear especially when acquisitions have complicated the picture. We revise our adj. EBITDA estimates down by 17% for the remainder of the year while our revenue estimate is almost intact. The war and its effects may have a short-term negative effect on Enersense’s performance, but its long-term consequences are likely to be beneficial ones as governments accelerate e.g. wind power investments.

We consider current valuation neutral

Enersense’s multiples for the next few years are still low relative to peers, assuming profitability continues to improve, whereas the multiples for FY ’22 represent a slight premium. We therefore argue the current valuation is overall fair in the current high inflation environment. Successful execution and strong underlying profitability in H2 would be a likely upside driver. We retain our EUR 8 TP. Our rating is now HOLD (BUY).

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Exel Composites - Catching up with potential

02.05.2022 - 09.00 | Company update

Exel’s EBIT appears bound to improve more from the recent lows. We make only minor revisions to our estimates.

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Margins seem set to improve further during this year

Exel’s Q1 revenue grew 10% y/y to EUR 34.2m, compared to the EUR 37.1m/33.9m Evli/cons. estimates. All industries continued to grow except Wind power and Defense, where timing issues led to 8% y/y top line declines but for which long-term outlook has clearly improved in the past few months. The latter remains relatively small but has a lot more potential in markets such as India, while we believe China’s weakness also contributed to the decline of the former. Adj. EBIT amounted to EUR 2.2m vs the EUR 1.7m/1.4m Evli/cons. estimates. Product mix and variable cost inflation had a negative impact on profitability, masking some of the underlying positive development as Exel’s pricing adjusts with a lag of few months. Energy costs are also up, but Exel should be able to pass them on as well; we note Exel can also adjust already signed orders’ prices.

Guidance upgrade is much possible later this year

The US unit has now reached a break-even result; we estimate Exel’s EBIT margin continues to improve towards 7% and beyond during this year. We estimate 7.5% margin for H2’22, a level previously seen in H1’21 but with the difference that this year top line will be 15% higher. The Chinese restructuring will also produce EUR 0.7m in annual cost synergies. China’s virus situation pushed the Asia-Pacific region down 22% y/y in Q1; we believe there’s a good chance Exel will revise guidance upwards later this year, especially if Chinese demand normalizes and productivity further progresses in the US.

Valuation appears very conservative

We estimate EUR 10.2m adj. EBIT for this year, on which Exel is valued about 11x. Exel has additional profitability potential beyond that and is valued 8x EV/EBIT on our FY ’23 estimates. An 8.5% EBIT margin estimate doesn’t seem to be too high for next year, considering Exel reached a higher margin in FY ’20 while revenue will soon have grown by some 40% since then. There are no particularly relevant peers for Exel and hence valuation is a matter of judgment, but in our view Exel’s earnings-based multiples appear very undemanding in the short and long-term perspective. Our new TP is EUR 8.5 (9); we retain our BUY rating.

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Raute - Looking for more Western orders

02.05.2022 - 08.40 | Company update

Inflation hurt Raute’s Q1 EBIT more than we estimated, but the longer-term picture wasn’t changed all that much.

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Cost inflation was a greater challenge than we expected

Raute Q1 revenue grew 67% y/y to EUR 41m vs our EUR 34m estimate. Both projects (EUR 26m) and services (EUR 15m) came in higher than our respective EUR 21m and EUR 13m estimates. Raute delivered projects according to plan, without any major component issues, and recognized EUR 14m in Russian revenue (vs our EUR 12m estimate). Profitable execution in certain larger projects was challenged by cost inflation more than expected and the EUR -1.5m EBIT didn’t meet our EUR 0.2m estimate. The EUR 36m order intake topped our EUR 29m estimate as North American orders were EUR 15m, compared to our EUR 7m estimate, while the EUR 13m European order intake was close to our estimate. Modernizations contributed a significant share of order intake. Inflation may no longer be such a great challenge in the coming quarters, but Raute is not yet able to provide guidance for the year as there remains too much uncertainty around the delivery of the EUR 78m Russian order book.

Some encouraging signs on Western orders’ outlook

We now estimate EUR 38m Russian revenue for this year. We expect no big losses from the Russian deliverables, but neither do we estimate great profitability for the coming quarters. Raute’s established Western footprint helps it to withstand the loss of Russia; North America is a promising source for many additional smaller orders, including modernizations, while Europe could support larger mill projects in the years to come. The long-term demand outlook for Raute’s technology is sound as before, but the short-term capex picture is muddled by the war.

Western order levels will drive valuation over this year

We raise our FY ’22 revenue estimate to EUR 146m as we expect Europe, North America and Russia to contribute more than we previously did. Western orders will be a driver in the coming quarters as their level should shore up the following years’ revenue at least for a certain portion of the hole left by Russia. We expect no EBIT from Raute this year, but ca. EUR 6m could be possible next year if Western orders stay high over the course of FY ’22. Raute is then valued 7x EV/EBIT on our FY ’23 estimates. Our new TP is EUR 14 (15) as we retain our HOLD rating.

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Vaisala - Performance on track

30.04.2022 - 08.45 | Company update

The underlying demand for Vaisala’s applications continued strong. With the robust start of 2022, we upgraded our estimates. We retain our HOLD rating and adjust TP to EUR 45.0 (41.0).

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Revenue growth scaled nicely
With the strong Q4’21 order book, Vaisala’s Q1 topline topped our expectations by growing by 29% y/y to EUR 118.8m (Evli: 108.6m). The growth was driven by IM’s industrial instruments and life science as well as W&E’s renewable energy and meteorology. While aviation saw the demand and orders growing, its Q1 sales yet declined y/y. With improved gross margin, revenue growth scaled nicely and EBIT over doubled from the comparison period. Group EBIT amounted to EUR 17.5m (14.8% margin).

W&E’s aviation took a big step in orders received
Vaisala’s future seems bright as the order book broke another record at EUR 168.5m. Aviation took a big step in recovery towards the pre-pandemic level in terms of orders received. We expect aviation to be one of the revenue growth drivers of W&E during the next quarters. Strong order development continued also in renewable energy, industrial instruments, and life science. Vaisala, once again, managed to deliver all its orders and IM succeed in capturing market share with its delivery reliability. In Q1, freshly acquired SaaS company AerisWeather contributed Vaisala’s topline by EUR 0.6m and EBIT by some EUR 0.1m. The acquisition supports execution of W&E’s strategy to drive growth in DaaS and SaaS recurring revenue businesses.

Low visibility of component availability continues
The component shortage had an impact on Vaisala’s Q1 gross margin of which impact was eventually offset by revenue scalability. Gross margin impact was smaller than in previous quarters, less than 1%-p. However, in Q1, the company made a commitment on spot component purchases, most of which will be realized later. In our understanding, the gross margin impact might be more visible during the next quarters. In addition, COVID-19 lockdowns in China might cause some extra constraints in Vaisala’s supply chains, resulting in postponed product deliveries or forcing the company to place additional spot-component purchases.

HOLD with a target price of EUR 45.0 (41.0)
Vaisala held its guidance intact, and with the same performance continuing, we find the guidance quite cautious. However, the market possesses an increasing amount of uncertainty. We have revised our near-term estimates upwards based on the strong Q1 result and record-level order book. Now, we expect 22E revenue to land near the upper bound of the guidance, at EUR 490.4m (+12% y/y). Revenue growth is driven by both business units: we expect IM to grow by 17.7% y/y and W&E to grow by 7.9% y/y in 2022. Our 22E EBIT estimate amounts to EUR 64.5m (13.1% margin). While the Q1 growth pace was rapid, in Q2 we expect the slope of revenue growth to smoothen. On a group level, we expect the topline to grow by 7.9% y/y to EUR 118.1m. In our understanding, Q1 included some seasonality, and hence we expect Q2 revenue to be approx. flat q/q, while in previous years, Q1 has been the calmest quarter, especially in W&E. We expect the gross margin to be a bit softer than in the previous year, but scalability to improve the Q2 profitability y/y to EBIT of EUR 12.5m (10.6% margin). With our upgraded estimates, Vaisala (22E EV/EBITDA ~18x) is still trading with a premium to its peers (22E EV/EBITDA ~16x). We find the premium justified but still remind that valuation stretches. We retain our HOLD rating and raise our TP to EUR 45.0 (41.0).

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Enersense - Profit figures topped our estimates

29.04.2022 - 12.25 | Earnings Flash

Enersense’s Q1 profitability figures topped our estimates. The company reiterates its guidance, however Q2 profitability will be relatively weak this year due to project delays caused by the war.

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  • Q1 revenue was EUR 53.8m, compared to our EUR 54.2m estimate. Smart Industry amounted to EUR 16.6m vs our EUR 22.5m estimate, while Power was EUR 14.3m vs our EUR 11.2m estimate. Connectivity came in at EUR 9.3m, compared to our EUR 8.6m estimate, International Operations EUR 13.5m vs our EUR 11.9m estimate.
  • Adjusted EBITDA landed at EUR 5.5m vs our EUR 2.7m estimate. EBIT was EUR 3.2m, compared to our EUR 0.4m estimate.
  • Order backlog was EUR 295.5m at the end of Q1.
  • Enersense expects Q2 to be the weakest quarter this year in terms of profitability as the war has caused delays in projects during the spring. Inflation, material availability issues and virus infections can also delay projects and impair their profitability.
  • Enersense guides EUR 245-265m in revenue and EUR 15-20m in adjusted EBITDA for FY ’22 (unchanged).

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Raute - Low profitability, high orders

29.04.2022 - 10.00 | Earnings Flash

Raute’s Q1 revenue and order intake were above our estimates, however inflation had a larger negative effect than we had expected as EBIT clearly missed our estimate.

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  • Q1 revenue grew by 67% y/y and was EUR 41.3m, compared to our EUR 34.0m estimate. Russian revenue amounted to EUR 14m, compared to our EUR 12m estimate.
  • EBIT came in at EUR -1.5m, compared to our EUR 0.2m estimate. Inflation had a significant negative effect on the results.
  • Order intake amounted to EUR 36m during the quarter, compared to our EUR 29m estimate. The figure does not include any major mill projects. Project orders were EUR 16m vs our EUR 14m estimate. Service orders were EUR 20m vs our EUR 15m estimate. Especially North American orders, at EUR 15m, were high and topped our EUR 7m estimate.
  • Order book stood at EUR 152m at the end of Q1, of which EUR 78m is attributable to Russia.

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Vaisala - Excellent start for the year 2022

29.04.2022 - 09.55 | Earnings Flash

Vaisala’s Q1 result topped our expectations clearly. Both BUs saw double-digit growth and solid order intake indicates the growth to continue.

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•    Group results: Orders received were EUR 125m (18% y/y) and the order book totaled EUR 168.5m (8% y/y). Net sales grew by 29% y/y to EUR 118.8m (108.6m/104.5m Evli/cons.), driven by both BUs. Growth scaled nicely, and EBIT amounted to EUR 17.5m (9.6m/10.1m Evli/cons.), implying a 14.8% margin. 
•    Industrial Measurements (IM): Orders received increased by 19% to EUR 54.7m while the order book stood at EUR 35.1m (41% y/y). Order intake was strong in industrial instruments and life science. IM saw a 34% y/y growth, with net sales totaling EUR 53.1m (Evli: 49.1m). The topline growth was driven by all IM’s segments. Operating profit was EUR 14.6m, 27.5% of net sales. Increased fixed costs affected EBIT negatively.
•    Weather & Environment (W&E): Orders received increased by 17% y/y to EUR 70.3m. The order book was strong and grew by 2% y/y to EUR 133.4m. Order intake grew in renewable energy and aviation while ground transportation and meteorology decreased y/y. W&E delivered very strong growth of 26% y/y in Q1, net sales totaling EUR 65.7m, beating our estimates (Evli: 59.5m). Supported by ~50% gross margin EBIT amounted to EUR 2.9m, implying a 4.4% margin.
•    2022 guidance unchanged: Net sales between EUR 465–495m and EBIT between EUR 55–70m.
•    Market outlook: Markets for high-end industrial instruments, life science, power industry, and liquid measurements are expected to continue to grow while meteorology and ground transportation are expected to be stable. Aviation market is expected to recover towards pre-pandemic level. Renewable energy market is expected to continue to grow.

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Exel Composites - Profitability above estimates

29.04.2022 - 09.30 | Earnings Flash

Exel’s Q1 report showed the company is making progress in the US as the unit was back to black. Exel’s adjusted operating margin was considerably above our estimate even though there were certain other factors, namely product mix and higher variable costs, which negatively affected profit.

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  • Q1 revenue grew by 10.3% y/y and landed at EUR 34.2m, compared to the EUR 37.1m/33.9m Evli/consensus estimates. Growth stemmed from Europe and North America. The virus situation in China led to a revenue decline in the Asia-Pacific region.
  • Wind power amounted to EUR 6.8m, compared to our EUR 8.3m estimate, while Buildings and infrastructure was EUR 7.7m vs our EUR 8.5m estimate. Equipment and other industries came in at EUR 7.4m vs our EUR 7.1m estimate.
  • Adjusted EBIT was EUR 2.2m vs the EUR 1.7m/1.4m Evli/consensus estimates. The US unit no longer had a negative impact as employee turnover has decreased and production yield has improved. Product mix as well as higher raw material, energy and logistics costs had a negative impact on profitability, but Exel continues to adjust sales prices to catch up with costs.
  • Order intake amounted to EUR 37.6m, down by 10.5% y/y.
  • The war has not so far limited raw material availability from Exel’s perspective.
  • Exel guides revenue in 2022 to be at last year’s level and adjusted operating profit to increase compared to 2021 (unchanged).

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Company update - Continues to surprise positively

29.04.2022 - 09.30 | Company update

CapMan reported Q1 earnings clearly above our and consensus estimates. Despite current market uncertainty, we still see a good outlook for continued earnings growth. We retain our BUY-rating with a TP of EUR 3.4 (3.2).

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Record-level earnings in Q1 driven by investment returns
CapMan reported record-level Q1 earnings aided by strong investment returns. Turnover amounted to EUR 14.2m (EUR 19.6m/17.2m Evli/cons.) and EBIT to EUR 18.9m (EUR 10.7m/4.1m Evli/cons.). Despite the market uncertainty FV changes were at EUR 14.7m (Evli EUR 4.0m). No notable weakness was seen in any of the operating segments. Capital under management grew well to EUR 4.75bn, up some 5.2% q/q and 22.1% y/y. CapMan reported carried interest from the NRE I -fund.

Expectations for 2022 remain good across the board
We have revised our estimates upwards based on the strong Q1 and better than expected outlook for investment returns. We now expect an operating profit of EUR 61.8m (51.6m) in 2022. Headwind from the on-going war in Russia does not appear to have materialized in any notable way for CapMan apart from the write-downs of the remaining fund holdings and receivables in Q1. In the short-term investment returns are still under some uncertainty, while a deterioration of investor sentiment could have a longer-term impact through current fundraising projects. With the catch-up in NRE I our carry expectations are more strongly set for H2, with the Growth Equity fund also approaching carry. Growth in capital under management is providing good support for the recurring fee-based revenues and we expect CapMan to reach a EUR 10m+ quarterly management fee level in 2022.

BUY with a target price of EUR 3.4 (3.2)
Although there clearly is some market uncertainty present, the expected impact currently does not appear too be considerable. With our raised estimates, in no way challenging earnings multiples, and healthy dividend yields, CapMan in our view remains an attractive investment case. We raise our TP to EUR 3.4 (3.2) and retain our BUY-rating.

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Consti - Some softness in growth

29.04.2022 - 09.00 | Earnings Flash

Consti's net sales in Q1 amounted to EUR 59.8m, slightly below our and consensus estimates (EUR 63.3m/64.4m Evli/cons.), with growth of 0.9% y/y. EBIT amounted to EUR 0.4m, slightly above our estimates and in line with consensus (EUR 0.0m/0.4m Evli/cons.). Guidance reiterated: operating result in 2022 is expected to be EUR 9-13m.

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  • Net sales in Q1 were EUR 59.8m (EUR 59.3m in Q1/21), slightly below our and consensus estimates (EUR 63.3m/64.4m Evli/Cons.). Sales grew 0.9% y/y.
  • Operating profit in Q1 amounted to EUR 0.4m (EUR 0.1m in Q1/21), slightly above our estimates and in line with consensus (EUR 0.0m/0.4m Evli/cons.), at a margin of 0.6%.
  • The increase in construction materials prices had a somewhat higher impact than in the comparison period, COVID also had an impact primarily through increased sick leaves.
  • EPS in Q4 amounted to EUR 0.01 (EUR -0.02 in Q1/21), slightly below our estimates and in line with consensus (EUR -0.03/0.01 Evli/cons.).
  • The order backlog in Q1 was EUR 205.1m (EUR 196.5m in Q1/21), up by 4.4% y/y. Order intake was EUR 37.6m in Q1 (Q1/21: EUR 69.8m).
  • Free cash flow amounted to EUR -0.8m (Q1/21: EUR -2.9m).
  • Guidance for 2022 (reiterated): Operating profit is expected to be between EUR 9-13m.

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Verkkokauppa.com - Not the time to jump in yet

29.04.2022 - 08.40 | Company update

The market environment continued challenging and Verkkokauppa.com’s Q1 sales declined mainly driven by the consumer and export segments. With the company’s valuation stretched, we retain our HOLD rating and adjust TP to EUR 4.3 (4.7).

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EBIT fell short of expectations
Verkkokauppa.com’s Q1 net sales decreased by 6.9% y/y to EUR 124.8m beating our expectations (Evli: EUR 120.1m). As expected, the drivers behind the decline were the poor performance of core categories in the consumer segment as well as the exports segment. The company ended exports to Russia and the segment declined by ~30% y/y in Q1. Though market environment increased the price competition which correspondingly reduced the gross margin to 15.4%. In addition, the sales mix within core categories harmed the gross margin. Fixed costs saw an increase due to personnel investments and inflationary pressures in the other costs. The combination of lower gross margin and increased fixed costs downgraded adj. EBIT stronger than we expected to EUR 0.9m (Evli: EUR 2.1m), implying an adj. EBIT margin of 0.7%. Poor profitability pressed the bottom line near zero and EPS amounted to EUR 0.00 (Evli: EUR 0.03).

Evolving categories performed well
While core categories saw a decline of 7.9% y/y, the sales of higher-margin evolving categories evolved, and the product segment grew by 10.2% y/y, representing 12.4% of total Q1 sales. The growth of the evolving categories was driven by toys, baby & family, sports equipment, and luggage product categories. In Q1, online sales decreased by 4.8% y/y following lower total sales and represented 63 % of the total sales. The consumer segment represented 68% of total sales while with sales growth of 10.4% B2B segment was 26% of total sales. With Russian exports ended, the export segment represented only 5% of total sales.

Growth requires a recovery of the consumer segment
Although, evolving categories and B2B delivered double-digit sales growth in Q1, in order to achieve topline growth, Verkkokauppa.com needs the consumer segment to recover. Consumer trust in Finland further decreased in April which reflect in the company’s demand explicitly. The outlook for H2 is still blurred and it might take a while for a recovery of demand for durable goods. The company noted that it sees inflationary pressures stemming partly from personnel investment but increasingly from Verkkokauppa.com’s service providers. Logistics costs are set to rise, but on the other hand, commissioning of automated warehouse offset increased costs somewhat. The company also invested in its IT capabilities by recruiting ~10 new employees which increased the personnel costs in Q1. We expect 22E fixed costs to increase to 12.6% of net sales. We also expect material costs to increase due to global supply chain problems and inflationary pressures.

HOLD with a target price of 4.3 (4.7)
We revised our short-term estimates, reflecting increased cost pressures, uncertainty, and low visibility of H2’22. With the consumer segment’s poor performance in H1 and Q3, we expect Verkkokauppa.com‘s 22E revenue to decrease by 2.4% y/y to EUR 560.8m. Driven by increased fixed costs and low volumes, we expect EBIT to be near the lower bound of the company’s guidance, at EUR 12.7m (2.3% margin). In our estimates, the company faces topline growth of 6.5% and 8.3% during 2023-24. Driven by scalability and investment into efficiency, we expect the company to report EBIT margins of 3.4% and 4.1% during 2023-24. Furthermore, in Q2 we expect a good performance of evolving categories to soften the decline of consumer electronics. We also expect the B2B segment to continue double-digit revenue growth while expecting the export segment to decrease significantly due to the end of exports to Russia. We expect the Q2 topline to decrease by 5.2% y/y to EUR 123.7m. We expect Q2’22 gross margin (16.7%) to improve q/q but be below that of the comparison period. Q/q improvement is driven by an increased share of evolving categories. Our Q2 EBIT estimate lands at EUR 2.4m (2% margin). With our revised 2022 estimates, the company trades with a premium to its peers. With the EV/EBIT multiple taking balance sheet into account, Verkkokauppa.com’s valuation starts to seem moderate in 2023 (23E EV/EBIT of 8.6x), but we find no reason to hurry as long as the consumer market environment seem uncertain. With Verkkokauppa.com's valuation stretched and uncertainty concerning the near future, we retain our HOLD rating and adjust TP to EUR 4.3 (4.7).

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SRV - From one challenge to another

29.04.2022 - 08.30 | Company update

Main points in SRV’s Q1 report related to the write-downs of holdings relating to Russia and Fennovoima and the program to strengthen the financial position. Operationally, SRV fared rather decently. We lower our TP to EUR 0.35 (0.54) and retain our HOLD-rating.

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Write-downs on essentially all holdings related to Russia
SRV reported its Q1 results, with the main topic clearly being the write-downs to its operations in Russia and the announced program to strengthen the balance sheet. Operationally, Q1 was slightly better than expected. Construction revenue amounted to EUR 175.2m (Evli 186.7m) and operative operating profit 6.3m (Evli EUR 5.2m). The Group operating profit was clearly negative, at EUR -85.7m, as SRV wrote-down essentially all of its holdings in Russia and the Fennovoima project. The order backlog was at EUR 858m in Q1, down 19% y/y. SRV however says that it has 1.4bn worth of won contracts not yet in the order backlog.

Initiated program to strengthen balance sheet
SRV initiated a program to strengthen its balance sheet (illustrated in Figure 1 of this report), seeking to increase equity by around EUR 100m and reduce IB net-debt by the same amount, due to the impact of the write-downs on SRV’s equity and gearing. Operationally, we have made no significant changes to our estimates, expecting revenue of EUR 877.8m and operative operating profit of EUR 22.9m. The uncertainty relating to material prices and availability has increased due to the war in Ukraine, with some more bulk type construction material such as steel used in reinforcing concrete in particular being affected. So far, the impact does not appear to have limited SRV’s abilities to run current operations.

HOLD with a target price of EUR 0.35 (0.54)
Although SRV’s Russian assets still hold some value, due to the current uncertainty valuation relies primarily on construction operations. On 2022e EV/EBIT (using operative operating profit), SRV trades at 14.6x. We lower our TP to EUR 0.35 (0.54) and retain our hold rating. We will account for the impact of the financing program once details are finalized.

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Solteq - Steadily realizing potential

29.04.2022 - 08.15 | Company update

Solteq’s Q1 figures were well in line with expectations. Solteq in our view is continuing to steadily realize its scalability potential and we expect double-digit growth in 2022. We retain our BUY-rating and TP of EUR 5.0.

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Q1 well in line with expectations
Solteq reported Q1 result well in line with our expectations. Net sales were EUR 19.2m (Evli EUR 18.9m), with growth of 10.7%. Roughly a third of the growth was organic. The operating profit and adj. operating profit in Q1 amounted to EUR 1.4m and 1.6m respectively (Evli EUR 1.5m/1.5m). Solteq Software’s and Solteq Digital’s y/y growth and adj. EBIT figures were 5.6%/19.7% and EUR 1.5m/0.1m respectively, with both segments faring quite as expected. Solteq reiterated its guidance, expecting group revenue to grow clearly and the operating profit to improve.

Double-digit growth seen in 2022
We have made essentially no changes to our top-line and bottom-line figures. We expect revenue to grow 11.6% y/y in 2022e. Our growth estimates assume continued modest growth in Solteq Digital and over 20% growth in Solteq Software, in line with the long-term segment targets of over 5% and 20% growth. Solteq Software’s growth is clearly aided by the acquisition of Enerity Solutions, but we see organic growth picking up through good demand and ramp-up of recurring revenue. We expect EBIT to improve to EUR 7.7m (2021: 7.1m) through slight gains in both segments. We expect Solteq Digital’s margins to remain steady in the coming years. For Solteq Software we expect the scalability potential to start to show in the coming years.

BUY with a target price of EUR 5.0
Solteq’s valuation is currently slightly below the IT-services peer median, which in our view is unjustified given the healthy growth and profitability trend and expectations and increasing share of recurring revenue. We value Solteq at ~20x 2022e P/E. Our target price remains EUR 5.0 and rating BUY.

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Finnair - Weathering another major blow

28.04.2022 - 09.35 | Company update

The Q1 report didn’t contain many surprises, but we make some upgrades to our estimates as Finnair may be able to maneuver the situation a bit better than we expected.

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Network pivots to West and South Asia

Finnair’s EUR 400m Q1 revenue and EUR -133m adj. EBIT matched the respective EUR 397m/391m and EUR -128m/-141m Evli/cons. estimates. Air travel recovers and Omicron caused only a brief but sharp dip in volume. Finnair sees the ratio of bookings relative to capacity now above the pre-pandemic levels as available capacity has been reduced. Major North Asian hubs such as Tokyo, Seoul and Shanghai will remain on the schedule, but the Russian airspace closure will limit possibilities to smaller North Asian cities. South Asia’s weight will increase as it supports transfer flights to the US and hence Finnair’s network will also pivot to West, where demand is now robust.

Volume outlook prompts us to raise estimates

We raise our estimates as our previous view on volumes seems a bit low in the light of Finnair’s comments on capacity over the summer (we assume some 60-70% load factors for Q2 and Q3). Finnair has already signed leases and the comments on them indicate such deals are now profitable when many Western airlines have need for additional capacity. These can add other operating income some EUR 10-100m annually. Finnair also looks for EUR 60m in further permanent cost savings. The network adjustments, fleet redeployments (including potential aircraft sales) and cost measures didn’t come as a surprise, although these may help Finnair guard profitability better than we initially expected. We upgrade our revenue estimates by more than 10% while we also revise our EBIT estimates up a bit, but there remains a lot of uncertainty around volumes and costs.

Finnair will come through, but upside is still not evident

The EUR 400m hybrid between the State and Finnair will convert to a capital loan and thus supports equity. In our view high demand helps Finnair to successfully maneuver the challenges, but medium to long-term profitability potential remains unclear in the current high inflation environment. Finnair is valued a bit below 14x EV/EBIT on our FY ’24 estimates, still not a low level although our FY ’23 EBIT estimate could prove too conservative. We retain our EUR 0.43 TP; our rating is now HOLD (SELL).

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SRV - Write-downs burdened earnings

28.04.2022 - 09.30 | Earnings Flash

SRV's net sales in Q1 amounted to EUR 190.7m, quite in line with our consensus estimates (EUR 186.7m/179.0m Evli/cons.). Operative operating profit amounted to EUR 4.9m, above our estimates (EUR 3.2m Evli). EBIT was significantly burdened by write-downs relating to SRV’s holdings in Russia and amounted to EUR -85.7m.

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  • Revenue in Q1 was EUR 190.7m (EUR 187.1m in Q1/21), quite in line with our and consensus estimates (EUR 186.7m/179.0m Evli/Cons.). Growth was 2% y/y.
  • Operating profit in Q1 amounted to EUR -85.7m (EUR 5.2m in Q1/21), below our estimates and consensus estimates (EUR 3.2m/2.2m Evli/cons.), at a margin of -44.9%. SRV wrote-down the value of essentially all of its holdings in Russia, which had a clear negative affect on EBIT. Operative operating profit amounted to EUR 4.9m, above our estimate of EUR 3.2m.
  • EPS in Q1 amounted to EUR -0.51 (EUR 0.00 in Q1/21), clearly below our estimates and consensus estimates (EUR 0.00/0.00 Evli/cons.).
  • The order backlog amounted to EUR 858m, down 19.1% y/y.
  • Construction revenue in Q1 was EUR 175.2m vs. EUR 186.7m Evli. Operative operating profit in Q1 amounted to EUR 6.3m vs. EUR 5.2m Evli. 
  • Investments revenue in Q1 was EUR 1.1m vs. EUR 1.1m Evli. Operative operating profit in Q1 amounted to EUR -105.4m vs. EUR -1.0m Evli. 
  • Other operations and elim. revenue in Q1 was EUR 14.4m vs. EUR -1.1m Evli. Operative operating profit in Q1 amounted to EUR 13.4m vs. EUR -1.0m Evli. 
  • Guidance for 2022 (reiterated): Revenue is estimated to be EUR 800-950m and the operative operating profit is expected to improve compared with 2021

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Solteq - Well in line with expectations

28.04.2022 - 09.00 | Earnings Flash

Solteq’s Q1 was in line with our expectations, with revenue at EUR 19.2m (Evli EUR 18.9m) and adj. EBIT at EUR 1.6m (Evli EUR 1.5m). Guidance for 2022 reiterated: group revenue is expected to grow clearly and the operating profit to improve.

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  • Net sales in Q1 were EUR 19.2m (EUR 17.4m in Q1/21), in line with our estimates (Evli EUR 18.9m). Growth in Q1 amounted to 10.7% y/y, of which approximately a third was organic growth. 
  • The operating profit and adj. operating profit in Q1 amounted to EUR 1.4m and 1.6m respectively (EUR 2.2m/2.3m in Q1/21), in line with our estimates (Evli EUR 1.5m/1.5m). 
  • Solteq Digital: revenue in Q1 amounted to EUR 11.8m (Q1/21: EUR 11.2m) vs. Evli EUR 12.0m. Growth amounted to 5.6%. The adj. EBIT was EUR 1.5m (Q1/21: EUR 1.4m) vs. Evli EUR 1.5m. Demand in key areas, such as digital business and commerce solutions, is expected to remain good during the on-going quarter. 
  • Solteq Software: Revenue in Q1 amounted to EUR 7.4m (Q1/21: EUR 6.2m) vs. Evli EUR 6.9m. The adj. EBIT was EUR 0.1m (Q1/21: EUR 0.9m) vs. Evli EUR 0.0m. Growth was 19.7%. The business outlook is expected to remain positive.
  • Guidance for 2022 (reiterated): group revenue is expected to grow clearly and operating profit to improve.

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CapMan - Investment returns positive surprise

28.04.2022 - 08.30 | Earnings Flash

CapMan's turnover in Q1 amounted to EUR 14.2m, below our estimates and below consensus (EUR 19.6m/17.2m Evli/cons.). EBIT amounted to EUR 18.9m, clearly above our estimates and consensus estimates (EUR 10.7m/4.1m Evli/cons.). Pre-Q1 concerns relating to investment returns were unwarranted, with stellar FV changes of EUR +14.7m

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  • Turnover in Q1 was EUR 14.2m (EUR 11.3m in Q1/21), below our estimates and consensus estimates (EUR 19.6m/17.2m Evli/Cons.). Growth in Q1 amounted to 26% y/y.
  • Operating profit in Q1 amounted to EUR 18.9m (EUR 10.1m in Q1/21), clearly above our estimates and consensus estimates (EUR 10.7m/4.1m Evli/cons.), at a margin of 132.8%. Compared with our estimates, FV changes were significantly higher (14.7m/4.0m act./Evli), carried interest lower (6.5m/1.3m act./Evli).
  • EPS in Q1 amounted to EUR 0.09 (EUR 0.05 in Q1/21), above our estimates and consensus estimates (EUR 0.05/0.02 Evli/cons.).
  • Management Company business turnover in Q1 was EUR 11.7m vs. EUR 17.3m Evli. Operating profit in Q1 amounted to EUR 4.4m vs. EUR 7.2m Evli.
  • Investment business revenue in Q1 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q1 amounted to EUR 14.5m vs. EUR 3.8m Evli.
  • Services business revenue in Q1 was EUR 2.5m vs. EUR 2.3m Evli. Operating profit in Q1 amounted to EUR 1.4m vs. EUR 1.2m Evli.
  • Capital under management by the end of Q1 was EUR 4.75bn (Q1/21: EUR 3.9bn). Real estate funds: EUR 3.2bn, private equity & credit funds: EUR 1.1bn, infra funds: EUR 0.4bn, and other funds: EUR 0.1bn.

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Verkkokauppa.com - Challenging quarter

28.04.2022 - 08.20 | Earnings Flash

Verkkokauppa.com’s Q1 topline topped, but EBIT fell short of our expectations as well as consensus estimates. Volumes suffered from a weak demand stemming from lower consumer trust.

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•    Group result: Q1 revenue declined by 6.9% y/y to EUR 124.8m (EUR 120.1m/120.1m Evli/cons.) driven by the soft performance of the consumer segment. A challenging environment led the market to fierce price competition which can be seen in a drop in margins. Sales mix had also a negative impact on gross margin. Gross margin decreased from the comparison period to 15.4% (Q1’21: 16.2%). Lower gross margin, poor scalability through low volumes, and higher transportation costs had a negative impact on profitability, adj. EBIT totaling EUR 0.9m (EUR 2.1m/2.9m Evli/cons.), reflecting an adj. EBIT margin of 0.7%.
•    Online sales represented 63% (Q1’21: 64%) of total sales while the main categories were 87.6% (Q1’21: 89.5%) of total sales.
•    Consumer segment: Consumer segment suffered from a soft market environment mainly driven by consumer electronics, and the segment declined clearly from the comparison period. Consumer segment represented 68% of total sales (Q1’21: 72%). However, evolving categories saw a 10.2% y/y growth during Q1, driven by sports, kid’s supplies, bags & traveling, and toys.
•    B2B segment: B2B performed well and grew by 12% y/y, representing 26% of total sales (Q1’21: 22%).
•    Exports segment: end of Russia exports had a negative impact (-30.5% y/y) on exports that represented only 5% of total sales.
•    FY’22 guidance (revised on March 23rd): net sales between EUR 530-590m and EBIT between EUR 12-19m.

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Detection Technology - The focus shifts towards H2

28.04.2022 - 08.10 | Company update

DT’s supply chain issues continued, and the company’s Q1 result fell short of our expectations. IBU delivered strong topline growth while SBU’s and MBU’s growth was more moderate. We retain our HOLD rating and TP of EUR 22.5.

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IBU grew very strongly
In Q1, IBU faced a revenue growth of 45.2% y/y, the BU’s topline totaling EUR 3.5m (Evli: EUR 2.9m). The growth was driven by all IBU’s main segments: imaging solutions for the food, pharmaceutical, and mining industries. The BU was forced to postpone some of its deliveries due to low component availability. MBU’s growth drivers remained unchanged: Q1 revenue growth was mainly driven by CT applications in both developing and developed countries. Lockdowns in China and low component availability slowed down the development of MBU’s sales. MBU grew by 4.5% y/y to EUR 10.5m (Evli: EUR 10.9m). SBU’s Q1 revenue amounted to EUR 6.3m and the growth of 7.5% y/y was mainly driven by non-aviation applications. In total, group net sales grew by 10.9% y/y to EUR 20.3m (Evli: EUR 21.1m). 

Increased R&D investments and material costs cut margins
DT invested more heavily into R&D to mitigate the impacts of the component shortage. R&D costs were 14.5% of net sales in Q1 (Q1’21: 13.1%). In addition, component purchases made in spot markets increased DT’s material costs somewhat. Q1 EBIT faced a slight improvement from the comparison period and amounted to EUR 1.5m (7.4% margin). Earnings per share amounted to EUR 0.09 (Evli: EUR 0.08). As soon as the component availability improves, either through the product modernization program or increase of market supply, we expect the scalability to kick in. In history, DT has generated EBIT margins around 20%, but we find those levels far fetch nowadays as, at that time, the organization was quite thin compared to today. Our 25E EBIT margin estimate is ~17%.

The demand for detectors will continue strong
The demand DT faces is strong, and all factors indicate the trend to continue. With new order allocations, the TSA’s CT upgrade program has seen progression. However, in our understanding, the topline impact in 2022 is more moderate while most of the orders will be delivered in the coming years. The component availability is still low and a significant part of Q1 deliveries was postponed. In Q1, DT focused on the modification of its product portfolio so that the most rarely available components can be replaced by the components with more reliable availability. According to the company, the program starts to impact the figures in early Q3 and increasingly in Q4. With the program, the company achieves better availability and more reliable deliveries as well as the need of purchasing less spot-priced components. With the component availability improving in H2 through the product modification program, we expect the strong demand to actualize in H2.

HOLD with a target price of EUR 22.5
We slightly upgraded our topline estimates reflecting strong outlook in H2’22 while our 22E EBIT estimate saw only a minor negative revision due to increased cost pressures. In 2022, we expect group revenue to grow by 14.7% y/y to EUR 103m and EBIT to amount to EUR 14.8m (14.4% margin). In Q2, we expect, in line with DT’s outlook, MBU to face a slight decline of 2.7% y/y, net sales totaling EUR 13.2m. In our estimates, SBU and IBU will grow more strongly. SBU’s Q2 revenue amounts to EUR 8.8m, representing a growth of 27.9% y/y while IBU also sees strong growth of 33.8% y/y, net sales totaling EUR 4.1m. Group level Q2 topline amounts to EUR 26.1m (+11% y/y). Driven by increased material costs and R&D investments, we expect OPEX to grow and EBIT to amount to EUR 3.4m (13% margin) in Q2. DT’s valuation appears again quite elevated. With our 2022 estimates, the company trades with a premium to its peers, but in 2023 DT’s valuation drops near the peer group. In our view, DT’s business still faces short-term uncertainty given low component availability and lockdowns in China, country that is crucial to DT in terms of supply chain, production, and sales. We retain our HOLD rating and TP of EUR 22.5.

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Detection Technology - Good growth, some sales were postponed

27.04.2022 - 09.50 | Earnings Flash

DT’s Q1 result fell short of our expectations. All BUs grew, and total net sales experienced double-digit growth. The component shortage increasingly limited the growth, and part of the sales were postponed in all DT’s BUs.

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  • Group results: Q1 net sales grew by 10.9% y/y to EUR 20.3m (EUR 21.1m/21.7m Evli/cons.) driven by all DT’s business units. Operating profit improved and grew by 9% y/y to EUR 1.5m (EUR 1.9m/2.1m Evli/cons.), indicating an EBIT margin of 7.4%. Soft scalability was driven by increased material costs and stronger investments into R&D to tackle the component shortage. Operative cashflow was down 39% y/y, totaling EUR 0.7m. R&D costs were 14.5% of net sales (Q1’21: 13.1%).
  • Medical (MBU): medical segment grew by 4.5% y/y to EUR 10.5m (Evli: EUR 10.9m). Growth was strong in CT applications both in developing and developed countries.
  • Security (SBU): security experienced an increase of 7.5% y/y, net sales totaling EUR 6.3m (Evli: EUR 7.3m). Despite the demand for aviation solutions has increased significantly, Q1 growth was still driven by applications other than those used in the aviation sector.
  • Industrial (IBU): net sales came in strong and grew by 45.2% y/y to 3.5m (Evli: EUR 2.9m). The demand was strong in all IBU’s main segments: imaging solutions for the food, pharmaceutical, and mining industries.
  • The company had ongoing project to design product modifications to its entire product portfolio to mitigate the challenges in the availability of special materials and electronic components.
  • FY’22 outlook: IBU and SBU to show double-digit growth in Q2 and MBU to decrease in Q2. Group net sales to grow by double-digit figures in Q2, H1 and H2.

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Finnair - No big surprises

27.04.2022 - 09.30 | Earnings Flash

Finnair’s Q1 results landed very close to estimates. The report does not appear to contain any major surprises as demand continues to improve while Finnair also works on deploying some of its current capacity through leases and sales.

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  • Q1 revenue was EUR 399.8m, compared to the EUR 396.6m/390.9m Evli/consensus estimates.
  • Adjusted EBIT amounted to EUR -132.9m vs the EUR -128.2m/-141.4m Evli/consensus estimates.
  • Fuel costs were EUR 137m, compared to our EUR 115m estimate. Staff costs were EUR 102m vs our EUR 89m estimate. All other OPEX+D&A amounted to EUR 310m vs our EUR 333m estimate.
  • Cost per Available Seat Kilometer was 7.70 eurocents vs our estimate of 7.59 eurocents.
  • Finnair sees Q2’22 adjusted EBIT around the same level as that of Q4’21 (EUR -65m). Finnair expects to deploy, in the summer season of Q2 and Q3 this year, approximately 70% of the ASK it did during the comparison period of 2019. Leases to other airlines will raise the figure to almost 80%. The company also sees Q3 demand to be close to the pre-pandemic times in Europe, North America and South Asia (India, Singapore and Thailand).
  • Finnair seeks to find EUR 60m in additional permanent cost savings on top of the already achieved EUR 200m.

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Consti - Elevated material uncertainty

27.04.2022 - 09.30 | Preview

Consti reports its Q1 results on April 29th. Concerns relating to material pricing and availability have increased due to Ukraine crisis, although Consti through its renovation focus should be less affected than constructors. We retain our BUY-rating with a TP of EUR 13.0 (14.0).

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Growth picked up in H2/21 and is seen to continue
Consti reports its Q1 results on April 29th. Consti was able to turn to a clearer track of growth during H2/2021 and our expectations are for the growth to continue going into 2022. The growth was to a smaller part aided by the acquisition of RA-Urakointi Oy, specializing in renovations of apartment and row housing companies. The larger share of growth came from the improved order intake, with the order backlog up 22.9% at the end of 2021, aided also by Consti’s first projects within new construction. Profitability was to some degree affected by rising material prices, with the impact slightly larger in the latter half of the year.

Additional material pricing and availability concerns
The on-going Ukraine crisis has further affected the situation with construction material prices and availability. The renovation market is less dependent on larger quantities of construction materials and for instance the need for steel construction parts, which have seen prices increase above previous year levels, is low compared with new construction. Nonetheless, pricing and availability issues are being seen in areas that also affect the renovation market. For now, we have pre-emptively slightly lowered our Q1 profitability estimates. We see pressure on profitability going forward and seek to gain further clarity on the matter from the Q1 report.

BUY with a target price of EUR 13.0 (14.0)
With the uncertainty relating to material pricing and availability we slightly lower our target price to EUR 13.0 (prev. EUR 14.0). We continue to see that Consti through its renovation focus will be less affected but affected nonetheless. We retain our BUY-rating.

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Suominen - Improving after weak Q1

27.04.2022 - 09.00 | Preview

Suominen reports Q1 results on May 4. We revise our H1’22 profitability estimates down a bit due to higher raw materials and energy prices, yet we continue to expect significant improvement for H2’22.

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Q1 wasn’t great, but Q2 will already be much better

Suominen flagged in its Q4 report Q1 demand to be again on the low side as certain customers, particularly in the US, still suffer from destocking. We see no changes to this Q1 picture. Some logistics bottlenecks likely continue to persist, although in general pandemic disruptions are subsiding. We also believe wiping demand remains structurally above the pre-pandemic level, including in categories like hard surface disinfecting wipes and moist toilet tissue, and hence top line and margins should again improve after a muted Q1. Margins are to rebound from the recent lows as Suominen has in the past few years tilted towards mechanism pricing, which helps now when raw materials prices stay high. Suominen has had no meaningful Russian sales or sourcing, but the war affects the European plants’ profitability through higher energy costs. Suominen has implemented an energy surcharge on all European products (there have been no major energy issues in the US). This will not save Q1 results, but we understand the customers have accepted the surcharge well and it supports margins from Q2 onwards.

We estimate significant profitability improvement for H2

We make only small estimate changes on an annual level. We now expect FY ‘22 revenue to top the record FY ’20 figure; we however estimate profitability to be some EUR 20m below the respective figure especially due to muted H1. We revise our Q1 EBITDA estimate to EUR 4.8m (prev. EUR 5.8m) as Suominen’s mechanism pricing and energy surcharge lag the inflation seen early this year. We see H1’22 EBITDA down by 57% y/y, however we estimate H2’22 EBITDA to increase by 92% y/y and 75% h/h.

Valuation is by no means challenging on our estimates

Suominen is valued 5.5x EV/EBITDA and 11x EV/EBIT on our FY ’22 estimates. In our view these aren’t very high levels and would be down to about 4x and 6.5x in FY ’23 if profitability continues to improve as we expect. We revise our TP down to EUR 4 (5) as higher raw materials and energy prices have elevated uncertainty around the estimates, but we retain our BUY rating.

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Innofactor - Growth progress still challenging

27.04.2022 - 08.15 | Company update

Innofactor’s revenue development in Q1 was weakened by increased absences due to sickness, while profitability climbed back to rather healthy levels. Signs of clear pick-up in growth remain limited but potential exists.

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Revenue development affected by absences due to sickness
Innofactor’s Q1 results were two-fold. Revenue development was weaker than expected, declining 1.5% y/y in comparable terms to EUR 17.0m (Evli EUR 17.7m). Growth was affected by absences due to sickness as a result of the pandemic, which approximately doubled in Q1 from the previous year, and revenue in Finland and Sweden decreased. Despite the lower revenue profitability was still at a fairly good level, with EBITDA of EUR 2.0m (Evli EUR 1.8m) and a corresponding margin of 12.0%. The performance in Denmark and Norway was good according to management. The order backlog grew only 3.5% to EUR 71.3m, but Innofactor has received several significant orders not yet in the backlog and the growth could as such have been better.

Slight growth and profitability improvement in 2022
Innofactor expects revenue to grow y/y and EBITDA to improve from EUR 7.5m in 2022. Growth continues to be somewhat challenging, although the impact of sick leaves should reasonably decline going forward. Innofactor has had success in recruitments, namely within younger talents, and the headcount turned to a very slight growth. With minor estimates adjustments we now expect growth of 2.4% and an EBITDA of EUR 8.4m (12.4% of sales). In the near-term, being able to improve utilization rates could bring a boost to financials, while more rapid growth would in our view require M&A activity.

BUY with a target price of EUR 1.6
With our estimates largely intact we retain our target price of EUR 1.6 and BUY-rating. Innofactor’s growth outlook is currently admittedly rather lack-luster, but the market situation remains good, and growth and profitability improvement potential and rather healthy expected dividend yields support the case.

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Vaisala - Expecting a solid quarter

26.04.2022 - 11.25 | Preview

Vaisala reports its Q1 result on Friday, April 29th. We expect growth to continue, but low component availability to restrict profitability improvement. With our estimates intact, we retain our HOLD rating and TP of 41.0.

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Vaisala faces strong demand in Q1
Vaisala reported strong order book in its Q4’21 financial bulletin. W&E’s order book amounted to EUR 127m while IM’s order book was on a record level at EUR 33m. Q1 has typically been the quietest quarter for Vaisala, and we expect topline to grow by 18.1% y/y to EUR 108.6m driven by a strong demand for IM’s applications and W&E’s soft comparison period. In our estimates, W&E reports a revenue of EUR 59.5m (+14% y/y) while after successful Q1 IM achieves a topline of EUR 49.1m (+24% y/y), representing almost half of group net sales.

EBIT margin to remain flat
Despite ongoing component shortage, the company has been able to deliver all its orders so far. We expect the company to continue component purchases from spot markets and thereby material costs to stay at elevated level. However, the company has transferred some increased material costs to consumer prices in early 2022 and, hence, we expect gross and EBIT margin to remain approx. flat compared to Q1’21. Our W&E Q1 EBIT estimate lands to EUR -1.5m while we expect IM to report an EBIT of EUR 11.4m. In total, our Q1 EBIT estimate amounts to EUR 9.6m (8.8% margin).

HOLD with a target price of EUR 41.0
In our view, Vaisala’s valuation is quite elevated. Vaisala trades with 22E EV/EBITDA and EV/EBIT multiples of 17.7x and 24.1x while its peer group is valued with corresponding multiples of 16.2x and 18.3x. In short-term, we find no reason for an upside in Vaisala’s valuation, but given solid earnings growth, as a long-term investment, we find it reasonable to stay on Vaisala’s board ahead of Q1 result. With our estimates intact, we retain our HOLD rating and TP of EUR 41.0. 

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Raute - Focus shifts to Western markets

26.04.2022 - 09.30 | Preview

Raute reports Q1 results on Apr 29. We continue to expect only break-even EBIT for this year. In our view Europe and North America will now be Raute’s focus markets.

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Russia’s absence will be felt especially in the short-term

Raute will deliver its previously signed Russian orders to the extent feasible, case by case, and the company will not sign any new Russian orders for now. Raute has a staff of about 40 in Russia, but other than that no local assets. Raute is therefore not precisely exiting Russia, however we believe the Russian business will gradually shrink to zero and stay there for the foreseeable future. Russia has historically been a very important market for Raute as orders from the country averaged more than EUR 50m in recent years and there was good momentum until the end of last year; the Russian order intake amounted to EUR 79m in FY ’21 and we had estimated a similar amount of Russian revenue for this year. We cut this estimate down to some EUR 30m after the invasion. It remains unclear where the figure will land in the end, but we now expect around EUR 130m revenue for Raute vs the roughly EUR 175m estimate before the war.

Western markets’ strength is the best short-term remedy

In our view Europe and North America are the markets which could best help make up the Russian shortfall in the short-term. These established markets have historically belonged to the core of Raute’s strategy, and their order intakes also picked up last year after a few slower years. These markets’ strength could prove our short to medium term estimates too low. Latin America and Asia, especially China, also have long-term potential. Raute’s competitive positioning should in any case remain favorable, but we continue to see lots of uncertainty around financial performance and hence it’s hard to view current valuation particularly attractive.

We consider current valuation pretty much fair

In our view Raute’s financial profile hasn’t been altered much in the sense that the company should still be able to achieve EUR 10m EBIT with some EUR 150m revenue. Current valuation is cheap relative to this potential, but risks are related to e.g. Western orders’ strength in the short and medium term. Raute is now valued around 6x EV/EBITDA and 9x EV/EBIT on our FY ’23 estimates. We retain our EUR 15 TP and HOLD rating.

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Innofactor - Profitability back on track

26.04.2022 - 09.30 | Earnings Flash

Innofactor’s Q1 results were slightly better than expected. Although net sales of EUR 17.0m were below expectations (Evli EUR 17.8m), with sales having decreased in Finland and Sweden due to increased sick leaves, profitability was at good levels after some challenges during H2/21, with EBITDA amounting to EUR 2.0m (Evli EUR 1.8m).

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  • Net sales in Q1 amounted to EUR 17.0m (EUR 17.8m in Q1/21), slightly below our estimates (Evli EUR 17.7m). Net sales in Q1 declined 4.7% y/y and 1.5% in comparable terms. Net sales increased in Norway and Denmark but decreased in Finland and Sweden, affected by increased sick leaves due to the pandemic.
  • EBITDA in Q1 was EUR 2.0m (EUR 2.1m in Q1/21, excl. Prime business divestment), slightly above our estimates (Evli EUR 1.8m), at a margin of 12.0%. EBITDA was positive in all operating countries except in Sweden.
  • Operating profit in Q1 amounted to EUR 1.3m (EUR 1.3m in Q1/21, excl. Prime business divestment), above our estimates (Evli EUR 1.0m), at a margin of 7.8%. 
  • Order backlog at EUR 71.3m, up 26.5% y/y. Innofactor received a handful of significant orders in Q1, for instance from the Finnish Ministry of Social Affairs and Health (approx. EUR 1.2m), the Housing Finance and Development Centre of Finland (approx. EUR 0.7m), Finnvera (approx. EUR 1.0m) and a Norwegian non-profit organization (EUR 1.2m).
  • Guidance for 2022 (reiterated): Innofactor’s net sales is expected to increase from 2021 (EUR 66.4m) and EBITDA is expected to increase from EUR 7.5m, which would have been EBITDA without the proceeds of EUR 2.6m from the sale of the Prime business. 

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CapMan - Expect a softer start to the year 

26.04.2022 - 08.00 | Preview

CapMan reports its Q1 results on April 28th. We expect rather good results but have lowered our profitability estimates due to some expected softness in investment returns and potential write-downs relating to Russia. We retain our BUY-rating with a target price of EUR 3.2 (3.4)

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Market environment seen to impact Q1
CapMan will report Q1 earnings on April 28th. With the on-going Ukraine crisis and the impact on the market environment we expect some softness in the earnings. We anticipate seeing lower investment returns q/q given the weaker stock market development and resulting impact on valuation multiples. The direct impacts on investment objects however appear to be limited. As a reminder, CapMan has divested its market portfolio, which was a source of earnings weakness in the early stages of the pandemic. CapMan wrote-down the goodwill relating to its Russia business but still has some investments, commitments and receivables relating to the operations. We have pre-emptively assumed that some write-downs will be made. Our Q1 operating profit estimate is now EUR 10.7m (prev. EUR 16.7m).

Still set for clear earnings improvements y/y
Our 2022e estimates are down by 14% following the aforementioned adjustments and some further downward tweaks to our investment return estimates. Earnings are still set to improve considerably y/y, aided by carried interest, with the NRE I -fund expected to have entered carry during Q1. The uncertainty relating to the amount of carry is very high and the Q1 report should add needed visibility. We still see that CapMan is in a good position to achieve quarterly average earnings levels of EUR 10m+ in the near-term.

BUY with a target price of EUR 3.2 (3.4)
We have as mentioned made some adjustments to our estimates and accordingly finetune our target price to EUR 3.2 (prev. EUR 3.4). We retain our BUY-rating. Valuation based on multiples is still not challenging (2022e P/E <10x) and dividends continue to support the investment case.

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Scanfil - Earnings are to improve

25.04.2022 - 09.30 | Company update

Scanfil’s profitability is set to improve over the course of the year despite the still tight component market situation.

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Profitability should improve throughout this year

Scanfil’s Q1 revenue grew by 20% y/y to EUR 197m, compared to the EUR 170/179m Evli/cons. estimates, and was up by 10% y/y excluding the EUR 17m in transitory spot purchases; inflation added around 2-3% to top line, hence volume growth amounted to about 7%. Growth stemmed widely from all the five segments, including also new customer accounts within Advanced Consumer Applications (kitchen machines for professional as well as consumer use). The EUR 10.3m EBIT was a bit above the EUR 9.2m/9.7m Evli/cons. estimates and the 5.3% margin wasn’t a surprise. The margin would have been 5.7% without the spot purchases, a decent figure but still well short of the 7% long-term potential as component availability issues persisted.

M&A unlikely short-term as organic execution claims focus

Components will remain scarce at least until Q4, however Scanfil’s guidance and comments imply there will be meaningful profitability improvement throughout this year. Inflation isn’t a major issue for Scanfil, and neither is the war likely to have any direct impact. The Chinese virus situation is probably the most significant short-term risk as it could lead to local production halts, but so far this hasn’t happened for Scanfil. Chinese demand also remains strong. Scanfil’s inventory levels are still elevated as the company tries to manage high customer demand and limited component availability. We estimate Scanfil to touch EUR 800m top line already this year. Inorganic growth doesn’t now seem to be that high on the agenda, but M&A could happen in North America or Asia within the next 3-5 years.

Earnings growth is likely to continue next year as well

Scanfil’s valuation, 7.5x EV/EBITDA and 10x EV/EBIT on our FY ’22 estimates, isn’t too demanding. We expect EBIT margin to remain a bit modest 5.8% this year as component issues persist, however we see the margin improving to above 6% in H2’22. We estimate 6.4% margin for FY ’23, and hence we expect Scanfil to reach an above EUR 50m EBIT next year as we see growth continuing at an above 5% annual rate from late ’22 onwards. FY ’23 multiples are therefore only around 6.5x EV/EBITDA and 8x EV/EBIT on our estimates. We retain our EUR 8 TP and BUY rating.

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Scanfil - Q1 figures topped estimates

22.04.2022 - 08.30 | Earnings Flash

Scanfil’s Q1 top line continued to grow at a 20% annual rate while operating margin remained decent at 5.3%. Relative profitability was therefore close to estimates while the high revenue figure helped deliver a small earnings beat.

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  • Scanfil Q1 revenue grew by 20.4% y/y and was EUR 196.6m vs the EUR 170.0m/179.4m Evli/consensus estimates. Transient spot market component purchases amounted to about EUR 17m and excluding them revenue would have been EUR 179m.
  • Advanced Consumer Applications landed at EUR 55.0m, compared to our EUR 45.9m estimate, while Energy & Cleantech amounted to EUR 54.6m vs our EUR 45.5m estimate. Automation & Safety was EUR 42.6m vs our EUR 36.9m estimate.
  • Adjusted EBIT was EUR 10.3m, compared to the EUR 9.2m/9.7m Evli/consensus estimates. Component availability issues limited Q1 profitability. Profitability should improve throughout the year while spot market component purchases are to remain high at least in Q2 and Q3.
  • Scanfil guides FY ’22 revenue to be EUR 750-820m and adjusted EBIT EUR 43-48m. The war hasn’t had any significant financial impact on Scanfil, likewise with the Chinese virus situation so far.

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Finnair - Further challenges undermine EBIT

21.04.2022 - 09.45 | Preview

Finnair reports Q1 results on Apr 27. The focus will be on the responses to the change which alters the strategy’s viability; we view profitability potential hard to gauge.

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Finnair’s Asian strategy will now have to be reviewed

Q1 traffic was robust relative to expectations (the RPK metric was only 2% below our estimate) despite the lag due to slow Asian openings. South Korea opened only in the beginning of Q2, while Japan remains basically closed to foreigners and according to our understanding is unlikely to open before H2. China was previously set to open for H2, however even this conservative schedule may now be in question considering the very strict local virus policies. Asian flight volumes would thus remain subdued even without the closure of Russian airspace. The Siberian flightpath is unlikely to open in the foreseeable future and Finnair is revising its network plans in response to the fact that many Asian routes will not be profitable due to the added costs.

We make some further estimate cuts

Finnair is in the process of leasing out some of its resources which it cannot itself deploy under the circumstances. In our opinion some such deals, either leases or sales, seem inevitable given the scale of the problem as the Asian flights made more than 50% of Finnair’s pre-pandemic revenue. We cut our top line estimates by some 10% at this point; in the long-term Finnair may be able to employ some of its current idle capacity on new European and North American routes, but there may still be need for additional revenue estimate cuts. We revise our FY ’22 EBIT estimate to EUR -220m (prev. EUR -82m) and that for FY ’23 down to EUR 47m (prev. EUR 171m). Costs remain yet another issue as jet fuel prices have continued to surge to new records.

Profitability potential remains highly uncertain for now

Finnair had EUR 1.7bn in cash at the end of last year; the financial position and potential additional measures, be they leases or outright sales of aircraft, should help the company manage through the extraordinary period of challenge. Finnair was valued, before the war, in line with other carriers on FY ’23 estimates. It’s now very hard to say how Finnair’s next year will be like. Finnair is valued roughly 15x EV/EBIT on our FY ’24 estimates, but this still doesn’t seem like an attractive level. Our new TP is EUR 0.43 (0.60), and our rating is now SELL (HOLD).

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Verkkokauppa.com - Expecting softness to continue

20.04.2022 - 12.45 | Preview

Verkkokauppa.com publishes its Q1 result on April 28th. Transitory softness in the consumer segment will restrict the company’s growth during H1 and Q3’22. We retain our HOLD-rating and TP of EUR 4.7.

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Early guidance revision
In mid of March, the company downgraded its FY’22 guidance. Now the company guides a revenue of EUR 530-590m and an EBIT of EUR 12-19m, which implies a decline in the earnings. Demand for consumer goods has been soft since Q4’21 and Russia’s attack on Ukraine further lowered the consumer trust in Finland. Increased consumption of services has also diminished the demand for durable goods. In addition, the stop of Russian exports will cut approx. EUR 20m of Verkkokauppa.com’s annual sales.

Soft market cuts growth opportunities
The company’s management noted that the market environment hasn’t changed since the guidance revision. We expect the company to suffer from weak demand in H1 and Q3, but in our estimates, Verkkokauppa.com sees a clear upward drift in Q4 driven by a weak comparison period and improved demand in the consumer segment. In Q1, we expect revenue to decrease by 10.4% y/y to EUR 120.1m due to the weak performance of consumer and exports segments. Driven by increased price competition, we expect softer gross margin to be the main driver of weak profitability, an EBIT of EUR 2.1m (1.8% margin), alongside decreased net sales.


HOLD with a target price of EUR 4.7
Verkkokauppa.com’s peer groups’ valuation levels have continued the trend of decline and we see the valuations as quite modest given their solid EPS growth expectations; online-focused peers are now trading with 22-23E P/E and EV/EBIT multiples of 14-12x and 14x-11x respectively while omnichannel peers trade with corresponding multiples of 11-10x and 12-10x respectively. Meanwhile, Verkkokauppa.com trades with 22-23E P/E and EV/EBIT multiples of 19-14x and 12-9x. With the current valuation elevated, we retain our HOLD-rating and TP of EUR 4.7 ahead of the Q1.

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Detection Technology - Expecting a clear EBIT improvement

20.04.2022 - 11.50 | Preview

Detection Technology publishes its Q1 business review on April 27th. We expect the underlying demand to remain strong, but component shortage to postpone some deliveries also in Q1. We retain our HOLD-rating and adjust TP to EUR 22.5 (26.0).

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Clear double-digit growth in expectations 
After great Q4’21, we expect DT to continue strong development in all its business segments: in our estimates, MBU’s Q1 growth pace smoothens (7.8%) due to low availability of components while we expect IBU (19.3%) and SBU (25.2%) to grow significantly from the comparison period. We expect IBU’s freshly won customers to generate new topline growth in Q1. SBU growth is mainly driven by the recovery of the aviation segment. Q1 group topline increases by 15% y/y to EUR 21.1m while EBIT also improves by 39% y/y, driven by increased net sales, amounting to EUR 1.9m (9.2% margin). 


MBU to suffer the most from the component shortage 
In its Q4 review, DT noted that underlying demand remains strong, but low component availability restricts growth, especially in the medical segment. In our understanding, the availability of components used in industrial and partly in security detectors isn’t as limited as in medical applications. In addition, the war in Ukraine and the sanctions set for Russia have affected to semiconductor sector through increased material and production costs. We, however, remain to wait for the company’s comments on its supply chain development before adjusting our estimates. 


HOLD with a target price of EUR 22.5 (26.0)
DT’s current valuation (22E EV/EBIT of 21x) appears quite elevated compared to its peers (22E EV/EBIT of 17x) due to DT’s yet soft profitability. We now focus on emphasizing DT’s 2023 potential as the current year’s development is restricted by bottlenecks of the global supply chain, which we expect to ease during 2023-24. With our new target price, 23E valuation drops near peer median with DT’s earnings improvement. With the current valuation stretched compared to peers, we retain our HOLD-rating and adjust our target price to EUR 22.5 (26.0).

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Marimekko - Issuance of new shares without payment

13.04.2022 - 15.00 | Earnings Flash

Yesterday, the AGM approved the BoD’s dividend proposal and decided on a share split with a ratio of 5:1. With our estimates intact, we update our target price to EUR 15.8 (79) and retain HOLD-rating.

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  • The AGM approved the Board of Directors’ proposal to distribute a regular dividend of EUR 1.60 per share plus an extraordinary dividend of EUR 2.00 per share to be paid for the financial year 2021.
  • At the same time, the AGM decided that new shares will be issued to the shareholders without payment in proportion to their holdings so that four new shares are issued for each share. In total, 32,519,336 new shares will be issued, increasing Marimekko’s total number of shares from 8.1m to 40.6m.
  • Split has no effect on Marimekko’s fair value and hence we have made no changes to our estimates. We update our target price to EUR 15.8 (79) and retain HOLD-rating.
  • Marimekko publishes its Q1 result on 13 May 2022.

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Aspo - ESL continues to support EBIT

07.04.2022 - 09.30 | Company update

Aspo resumed guidance relatively fast due to ESL’s current strong positioning, however much uncertainty remains around Telko’s performance in the coming few quarters.

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ESL’s market outlook remains very favorable for now

Aspo reinstated guidance after a month-long hiatus. The war necessitated its withdrawal as the CIS countries generated a combined EUR 155m in FY ’21 revenue for Telko and Leipurin. The situation causes uncertainty around their physical operations, while the acceleration in inflation poses both risks and opportunities for the raw material distribution businesses. ESL’s outlook has however remained favorable, and we continue to expect EUR 29.9m EBIT for this year. The dry bulk cargo market doesn’t seem to soften despite talks of Western stagflation. Cargo volume outlook still appears robust while freight rates are improving. In our view Aspo can now base its new EUR 27-34m EBIT guidance on ESL’s strength, while uncertainty lingers especially around Telko in Russia and Ukraine as well as the Leipurin Russian business.

We cut our Telko EBIT estimate by EUR 2.7m to EUR 7.4m

We revise our top line estimate for this year down from EUR 558m to EUR 541m. Our EBIT estimate is down to EUR 32.4m from EUR 35.5m, and we also make some downward revisions for the coming years, roughly to the tune of EUR 2m. It’s unclear how much further ESL’s performance can improve in the short to medium term, but the company continues to focus on its small vessel strategy as before and is set to receive the new hybrid vessels in the coming years. Telko and Leipurin have increasingly focused on Western markets in the past few years; the Russian challenges will organically hasten this development, and Telko is also likely to add some Western operations through M&A.

Telko could potentially drive upside later this year

Aspo is valued closer to 11x EV/EBIT on our FY ’22 estimates. Telko’s implied value remains low while ESL shoulders a major part of estimated EBIT this year. Aspo’s current valuation still reflects considerable caution and could turn out to be too low if Telko manages to perform better than expected in the coming few quarters. We believe the EUR 7m difference between the lower and upper points of the guidance range is mostly due to Telko. We retain our EUR 8 TP; our new rating is HOLD (BUY).

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Administer - Time to accelerate growth

01.04.2022 - 09.00 | Company update

Administer reported H2 results and a gave a guidance that were well in line with our expectations and we as such see no need to revise our estimates or views. We retain our TP of EUR 4.7 and BUY-rating.

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H2 well in line with expectations
Administer reported H2 results well in line with expectations. Revenue grew 3.2% y/y to EUR 22.0m (Evli EUR 22.1m) driven by the acquisition of EmCe. EBITDA and EBIT amounted to EUR 1.7m and EUR 0.3m respectively (Evli EUR 1.6m/0.4m). Profitability was affected by the company’s investments into growth and technological development. With the net result affected by IPO related expenses and as such being clearly negative, the BoD proposed that no dividends be paid for FY 2021 (Evli EUR 0.00).

Seeking to clearly pick up growth
Administer reiterated the earlier communicated outlook for 2022, expecting revenue to grow to over EUR 51m and to achieve and EBITDA-margin of at least 8%. With the H2 results and the guidance corresponding to our expectations, along with no significant changes to our views on Administer’s potential, we make no notable changes to our estimates. We expect 2022 revenue of EUR 52.1m and an EBITDA-margin of 9.2%. Current estimate uncertainty mainly stems from growth expected to be driven by acquisitions, with Administer seeing 5-10 acquisitions being made during 2022. Near-term profitability improvements should mainly arise from a lesser impact of challenges faced during 2021, with expectations of measures to improve operational efficiency and synergies from acquisitions to start to show from 2023 onwards.

BUY-rating with a target price of EUR 4.7
With our views and estimates essentially intact we retain our BUY-rating and target price of EUR 4.7. On our estimates current valuation implies a 2022e EV/sales of 0.7x, which in our view does not account for the improvement potential, albeit we acknowledge that Administer has yet to prove its worth.

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Administer - Figures as expected

31.03.2022 - 10.00 | Earnings Flash

Administer’s H2 figures were well in line with our expectations, with revenue of EUR 22.0m (Evli EUR 22.1m) and EBITA of EUR 1.3m (Evli EUR 1.3m). Administer expects revenue in 2022 to grow to at least EUR 51m and an EBITDA-margin of at least 8%. The BoD proposes that no dividend be paid for FY 2021 (Evli EUR 0.00).

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  • Net sales in H2 amounted to EUR 22.0m (EUR 21.3m in H2/20), in line with our estimates (Evli EUR 22.1m). Net sales in H2 grew 3.2% y/y. Growth was mainly attributable to the acquisition of EmCe.
  • EBITDA and EBITA in H2 were EUR 1.7m (H2/20: EUR 2.9m) and EUR 1.3m (H2/20: EUR 2.6m) respectively, in line with our estimates (Evli EUR 1.6m/1.3m). The EBITA-margin amounted to 5.9%. Profitability was burdened by growth investments.
  • Operating profit in H2 amounted to EUR 0.3m (EUR 2.2m in H2/20), in line with our estimates (Evli EUR 0.4m).
  • During H2 Administer completed the acquisition of financial management software producer EmCe Solution Partner Oy and accounting firm Tilikamut Oy and its subsidiary Konnektor Oy. Administer has during Q1 announced two acquisitions, WaBuCo Financial Services Oy (2021 revenue EUR 0.9m) and the payroll services of Konjunktuuri Oy.
  • Guidance for 2022: Administer expects that its net sales will increase to at least EUR 51m and the EBITDA-margin to be at least 8%. The company further expects to make 5-10 acquisitions over the course of 2022.
  • Dividend proposal: Administer’s BoD proposes that no dividend be paid for FY 2021 (Evli EUR 0.00).

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Verkkokauppa.com - Weak market decelerates sales development

25.03.2022 - 08.50 | Company update

Verkkokauppa.com downgraded its 2022 guidance. Now, the company expects revenue of EUR 530-590m and adj. EBIT of EUR 12-19m. We retain our HOLD-rating and adjust our TP to EUR 4.7 (6.0).

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Weak market and war behind the guidance revision
Verkkokauppa.com downgraded its FY’22 guidance from expecting revenue of EUR 590-640m and adj. EBIT of EUR 19-25m to revenue of EUR 530-590m and adj. EBIT of EUR 12-19m. The start of the year 2022 has been tough and consumer demand has been lacking in durable goods. Russia’s military attack on Ukraine has further decelerated consumer activity. Furthermore, Verkkokauppa.com decided to stop export deliveries to Russia which in 2021 represented roughly EUR 20m, half of the Exports segment’s sales. According to the company’s management, B2B segment has continued its good performance, and in our understanding, the geopolitical situation hasn’t affected the business. Softness in the Finnish consumer electronics market has also infected the demand for evolving product categories, but we expect the evolving categories to recover faster than the main categories. The component shortage has continued and is expected to impact on product availability throughout the year. The company’s management has indicated that possible material cost increases could be shifted to consumer prices. If the uncertainty diminishes during H1 or early H2’22 and consumer demand picks a bit up, the guidance is, in our view, quite cautious.

Normalization of the demand in H2’22 seems uncertain
Before the profit warning, we expected H1’22 to be tough and the demand to recover during H2’22, but now the recovery seems uncertain and H1’22 is clearly weaker than we and markets were expecting. A wide guidance range also indicates the uncertainty among Verkkokauppa.com’s management. In addition to uncertainty, low attractivity of consumer goods is also explained by consumer demand’s shift to services. Moreover, during the pandemic, consumers invested in expensive electronics devices that drove strong sales development in that time.

We made significant downgrades to our estimates
As a result of the profit warning, we have downgraded our estimates. With the exit of Russian exports, the company expects the Export segment not to recover during 2022. Given the fact that B2B has performed well during 2022, the hardest hit was taken by the consumer segment. Thus, we expect a double-digit decline both in consumer and exports segments while B2B is expected to grow strongly during H1’22. We expect consumer demand to start to recover during Q3 and the topline to get back on a clear growth bath in Q4’22. In Q1’22 we expect net sales to decline by 10.4% to EUR 120.1m, driven by weak consumer demand and the end of Russian exports. In our estimates, Q1 operating profit is weak, totaling EUR 2.1m (1.8% margin). Weaker profitability is driven by decreased revenue and a relatively weak gross margin. 2021 full-year estimates lands to bit over the midpoint of the guidance, revenue to EUR 565.1m and EBIT to EUR 15.8m (2.8% margin). During 2023-24E, we expect Verkkokauppa.com’s topline to grow by 7.6% and 8% respectively as well as the company to reach an EBIT margin of 3.4% and 3.8% respectively.

HOLD with a target price of EUR 4.7 (6.0)
Our 22E EBIT estimate was downgraded by some 28% and 22E EPS by some 24%, and we find significant pressure to downgrade our target price after the company’s profit warning. Currently, Verkkokauppa.com trades with 22-23E P/E multiples of 20-15x while with our current target price of EUR 6.0 the corresponding multiple is 23-17x. At the same time, the company’s omnichannel peers are valued with 22-23E P/E multiples of 11-10x, indicating that the company is valued with ~70% premium over its peers. We find it difficult to accept a premium of 70%, given weak market conditions and uncertain near future. However, with a dividend yield of ~5%, it’s reasonable to stay on the company’s ride. In addition, the annual EPS growth of 24% (CAGR 2022-25) is supporting the long-run return potential. Our new target price implies 22-23E P/E multiples of 18-14x which are still quite stretched compared to peer group median. We retain our HOLD-rating and adjust our target price to EUR 4.7 (6.0).

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Verkkokauppa.com - Towards online driven department store

23.03.2022 - 13.05 | Company report

Online pioneer Verkkokauppa.com has shown strong growth figures over the years and with its new strategy, the company targets strong, profitable growth by expanding to new categories and utilizing its strong online platform.

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Strong track record
Finnish online retailer Verkkokauppa.com has grown at a CAGR of 11.5% (2010-21). The company has positioned well to the megatrend of online transition with its most visited and known webstore among Finns. By expanding its presence in low online penetration categories, the company aims to tap market share from the original brick-and-mortar stores. With a low OPEX base, the company is committed to executing price-driven business in price-sensitive consumer electronics markets while improving its gross margin through evolving product categories. With a strong brand, local warehousing, and fast deliveries the company aims to expand its 150,000+ active customer base.

Strategy execution has started well
Verkkokauppa.com renewed its strategy in 2021 and expects to reach a revenue of EUR 1bn and 5% EBIT margin by 2025. In Feb 2022, Verkkokauppa.com acquired a Finnish webstore e-ville.com. With the acquisition, the company gets an experienced sourcing team and new resources to develop its own brands. Moreover, the automated warehouse is in a testing phase and is expected to operate by the end of Q1’22. We expect to see some enhancements in efficiency during H2’22 since, with the new automated warehouse, the utilization rate of the rental warehouse decreases, and efficiency improves in Jätkäsaari warehouse.

HOLD with a target price of 6.0 (6.5)
Verkkokauppa.com’s peers have also experienced a decline in valuation multiples. Omnichannel peer group median is valued with a 22-23E P/E of 12-11x while Verkkokauppa.com is trading at 15-13x. We find the premium justified, given stronger earnings growth expectations. Even though we don’t see the war affecting Verkkokauppa.com’s business directly yet, the uncertainty limits potential returns in the short-term. We retain our HOLD-rating and adjust our TP to 6.0 (6.5).

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Netum - Solid performance seen to continue

09.03.2022 - 08.45 | Earnings Flash

Netum’s H2 results were well in line with expectations. Continued rapid and profitable growth is seen in 2022 despite some potential demand uncertainty.

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No surprises in H2 results
Netum reported H2 results in line with our estimates. Revenue grew 33.4% (18.6% organic growth) EUR 12.0m (Evli EUR 11.9m) and EBITA amounted to EUR 3.1m (Evli EUR 3.1m, pre-announced). Growth was driven by successful recruitments and new customer acquisition and also to some extent by higher pricing levels. Netum’s BoD proposes a dividend of EUR 0.11 per share (Evli EUR 0.09). In 2022 the company expects revenue to grow by over 30% from 2021 and the EBITA-margin to be above 14%.

Expecting over 30% growth in 2022
Netum’s growth guidance is above our previous estimates (22%) and adjusted for the impact of the Cerion Solutions acquisition implies continued clear double-digit organic growth, which given the growth in headcount (2020: 130 -> 2021: 217) should be well achievable should the demand situation not deteriorate. On our revised estimates we expect revenue of EUR 29.6m (+32% y/y) and an EBITA-margin of 14.3%. Margins have been at good levels, and we see limited near-term upside apart from a potential slight boost from frontloaded recruitments converting to revenue and thus higher revenue/employee. Netum updated its strategy and financial targets, seeking revenue of EUR 50m by 2025, implying annual growth of over 20%. The company seeks to maintain an EBITA-margin of over 14%. Netum noted that it is looking into expansion in the Nordics/Baltics, which could help in achieving the growth target, but such a move would in our view unlikely be seen before 2024.

HOLD with a target price of EUR 4.3
Demand uncertainty has increased due to the on-going conflict and peer multiples have also seen some further depreciation from our previous update. With our raised growth estimates, however, we retain our TP of EUR 4.3, valuing Netum at 13.7x 2022e adj. P/E.

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Netum - Seeing continued solid growth

08.03.2022 - 09.30 | Earnings Flash

Netum’s H2 was in line with our expectations. Net sales grew 33.4% to EUR 12.0m (Evli EUR 11.9m) while the comparable EBITA amounted to EUR 1.5m (Evli EUR 1.5m). Netum expects its revenue to grow at least 30% and an EBITA-margin of over 14% in 2022. Dividend proposal: EUR 0.11 per share (Evli EUR 0.09).

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  • Netum’s net sales in H2 amounted to EUR 12.0m (EUR 9.0m in H2/20), in line with our estimates (Evli EUR 11.9m). Net sales in H1 grew 33.4% y/y, of which 18.6% was organic growth. 
  • EBITDA in H2 was EUR 1.5m (EUR 1.7m in H2/20) and comparable EBITA EUR 1.5m (EUR 1.5m in H2/20) in line with our estimates of EUR 1.6m and 1.5m.
  • Operating profit in H2 amounted to EUR 0.7m (EUR 0.5m in H2/20), slightly below our estimates (Evli EUR 1.0m), at a margin of 5.8%. 
  • Comparable earnings per share was EUR 0.12 (H2/20: 0.12)
  • Personnel at the end of the period amounted to 217 (130).
  • Dividend proposal:  Netum’s BoD proposes a dividend of EUR 0.11 per share (Evli EUR 0.09). 
  • Guidance for 2022: Netum expects its revenue to grow by at least 30% and the EBITA-margin to be over 14%.

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Administer - Initiate coverage with buy-rating

04.03.2022 - 09.50 | Company report

Administer is one of the leading providers of financial management by revenue and HR & payroll services by number of pay slips in Finland seeking rapid growth and clear profitability improvements supported by M&A activity.

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Seeking rapid and profitable M&A supported growth
Administer is one of the leading providers of financial management and HR & payroll services in Finland. Founded in 1985, the company has grown rapidly in recent years through acquisitions and today employs around 600 employees. Administer is in its strategy seeking to continue growth inorganically as well as boosting organic sales growth through investments into its sales organization and looking to clearly improve its profitability through growth, synergies from acquired companies and through enhancing the efficiency of own operations. The company targets revenue of EUR 84m and an EBITDA-margin of at least 24% in 2024.

Set to return to rapid growth in 2022
Administer’s recent financial performance has been affected by the pandemic, a loss of several larger customers in its subsidiary Adner and growth investments and reported figures have so far during 2021 declined y/y. A clear pick-up in growth is seen in 2022, aided by the acquisition of financial administration SaaS solutions provider EmCe, with profitability also set to recover with a reduction in the impact of previously noted challenges. The company’s growth and profitability potential is in our view considerable but the potential realization is still a long way away.

Initiate coverage with buy-rating and TP of EUR 4.7
We initiate coverage of Administer with a target price of EUR 4.7 and BUY-rating. In deriving our target price for Administer we rely mainly on peer multiples and further compile a scenario analysis to illustrate the impact the company’s financial targets, should they materialize, could have on the value. Our target price values Administer at 1.2x 2022e EV/sales and 16.6x 2022e EV/EBITA, near the lower end of peer multiples, which we currently consider fair as Administer’s financial performance is still quite clearly sub-par.

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Aspo - Valuation leaves Telko very cheap

04.03.2022 - 09.30 | Company update

The war raises questions around Telko and Leipurin, but we view the recent sell-off a bit overdone despite the risks.

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The crisis affects Telko and Leipurin in various ways

Aspo withdrew guidance as the war in Ukraine and situation in Russia limit visibility. The uncertainty directly concerns Telko and Leipurin, while ESL ships only limited amounts of cargo from Russia and hence the situation affects the dry bulk business mostly indirectly. Russia and other CIS countries, including Ukraine, amounted to EUR 155m in FY ’21 Aspo revenue. Telko and Leipurin both distribute basic raw materials and have managed to navigate challenging market conditions before, but the full-scale war and dismal prospects for the Russian economy mean the hit is bound to be larger this time. Both companies are asset-light i.e. inventories and trade receivables constitute their assets. There is also no dependency on any large customer accounts. The Russian sanctions shouldn’t concern Leipurin that much as the company sources for the most part local raw materials; Telko is more vulnerable in this sense as it connects small local customers with Western principals.

We revise our FY ’22 EBIT estimate down by EUR 7.9m

We leave our FY ’22 estimates for ESL unchanged at this point, however we revise our revenue estimates for Telko and Leipurin down by a combined EUR 50m. In our view Leipurin will be especially affected by the Russian end-market challenges as the local consumers struggle with hyperinflation. The situation is a lot more unclear for Telko as e.g. elevated oil prices lift raw materials prices, which by itself should support margins. Our new FY ’22 EBIT estimate for Telko is EUR 10.1m (prev. EUR 16.8m) and EUR 1.1m for Leipurin (prev. EUR 2.3m). We note Telko also operates in 13 other countries besides Russia and Ukraine.

In our view Telko is now undervalued despite the risks

There are no very useful peer multiples as the strong global dry bulk earnings translate to multiples which we view too low to be applied to ESL. In our view ESL is worth close to EUR 350m, or some 11-12x EBIT. This would imply the current valuation puts very little value on Telko; there are risks, but the EUR 155m CIS revenue represents 41% of the FY ’21 combined Telko and Leipurin revenue. We thus view the recent sell-off somewhat overdone. Our new TP is EUR 8 (14); we retain our BUY rating.

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Raute - Russia spells trouble

03.03.2022 - 09.40 | Company update

Raute withdrew its guidance for the year due to the large Russian order book exposure. We downgrade our estimates.

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Others can’t make up the loss, at least in the short-term

The most acute uncertainty stems from the sanctions, including payment bans, and their effect on Russian deliveries. Russia was 39% of Raute’s FY ’21 order intake and 49% of revenue, an extension on the previous years’ similar high figures. Raute has in the past done good Russian business, without direct ruble exposure, despite the infamously stagnant economy. There are no other risk exposures, like major assets, other than the orders already booked. The Russian economy is to be decimated along with the ruble in the short and medium term while long term outlook remains grim with no historical precedent. Hyperinflation is imminent and many Russian customers will be unable to invest. We believe Raute’s Russian orders will begin to recover sometime in the future, but this may take long. In our view a recovery to previous levels might not happen very fast even with a more comprehensive regime and societal change, and such a scenario is on the rosy side. Other markets could help to shore up the loss of Russia, e.g. Europe has recently developed well, but at least some of the economic trouble may spill over.

We now downgrade only our Russian estimates

We have made changes only to our Russian revenue and order estimates. We previously estimated EUR 49m Russian order intake and EUR 79m revenue for this year. We cut these to respective EUR 14m and EUR 32m figures, noting a lot of uncertainty around the exact levels. It’s early to say much about how the crisis will affect Raute’s other customers, but Western stagflation is one prospect. We expect roughly break-even EBIT.

Potential is still high, but so is the present uncertainty

Raute’s valuation remained modest before the invasion as inflation was a major source of uncertainty. In our opinion no very useful peer multiples were available for Raute before the war, and this is now true even more so. Raute is valued ca. 6x EV/EBITDA and 9x EV/EBIT on our FY ’23 estimates, not challenging levels but the environment is extraordinary. Long-term potential is significant as Raute remains the leading player in its niche, however we consider the valuation neutral given the circumstances. Our new TP is EUR 15 (22); rating HOLD (BUY).

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Enersense - Favorable tailwinds set to continue

01.03.2022 - 09.50 | Company update

Enersense’s Q4 figures were a bit higher than we estimated, earnings guidance was softer, but the overall picture hasn’t changed much as renewables remain in high demand.

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No major surprises in connection with the report

Enersense’s Q4 top line declined by 3% y/y, mostly due to the sale of Staff Leasing business, to EUR 65.9m and was above our EUR 63.0m estimate. The revenue beat was largely due to International Operations, but Power was also above our estimates. Certain M&A related items, both positive and negative, affected results, but overall profitability was slightly above our estimates. Infections continued to bother in certain projects, however these are unlikely to be a major issue going forward. Long-term profitability improving investments in IT and offshore wind power business will burden results this year, and we revise our FY ’22 profitability estimates down by some EUR 3m.

Latest macro changes are more likely to be supportive

There is some inflation risk, especially in the Baltics as the local contracts are long, but the contracts tend to compensate for cost pressures as now seen to some extent in raw materials and wages. Enersense has expanded its value chain presence with two recent acquisitions, and these don’t involve any significant integration issues. Enersense will also update its long-term targets later in H1’22 (the current target is 10% EBITDA margin by 2025 whereas we estimate 7.3% margin for FY ’22). Offshore wind power is a major growth driver going forward as it is a relatively underdeveloped space compared to onshore. The latest shifts in geopolitics do not in our view pose significant risks for Enersense, rather they are bound to accelerate the European transfer away from hydrocarbons and major initiatives in e.g. Germany could yet play out favorably for Enersense’s strategy.

Valuation is not challenging in either short or long term

Our EUR 18.2m EBITDA estimate for FY ’22 lands a bit above the midpoint of the EUR 15-20m range, which we don’t view very challenging. The respective 5.5x EV/EBITDA and 12x EV/EBIT multiples aren’t high compared to peers, and valuation is even more attractive in the long-term perspective as Enersense should achieve relatively steep earnings growth. Peer multiples have, however, continued to decline in the past two months and we update our TP to EUR 8 (10). Our rating remains BUY.

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Enersense - Figures mostly in line

28.02.2022 - 12.30 | Earnings Flash

Enersense’s Q4 report was overall relatively close to our expectations. The Q4 figures came in a bit higher than we estimated, while guidance represents a small miss in terms of profitability. The BoD however proposes a dividend of EUR 0.1 per share to be paid, which we did not expect.

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  • Enersense Q4 revenue was EUR 65.9m vs our EUR 63.0m estimate. Smart Industry amounted to EUR 21.0m vs our EUR 21.5m estimate. Power was EUR 13.8m vs our EUR 12.5m estimate. Connectivity was EUR 13.2m, compared to our EUR 14.8m estimate, while International Operations was EUR 18.0m vs our EUR 14.2m estimate.
  • Adjusted EBITDA landed at EUR 7.5m, compared to our EUR 7.4m estimate. Adjusted EBIT was EUR 5.8m vs our EUR 5.1m estimate. Smart Industry EBITDA amounted to EUR 6.6m, while Power EBITDA was EUR 0.0m. Connectivity was EUR 0.7m and International Operations was EUR 0.3m.
  • Order backlog was EUR 291m at the end of Q4 (EUR 292m a year ago).
  • Enersense guides FY ’22 revenue to be between EUR 245-265m (vs our EUR 247m estimate) and adjusted EBITDA EUR 15-20m (vs our EUR 21.0m estimate). Investments in the new ERP system as well as in growing offshore wind power will burden results.
  • The BoD proposes EUR 0.1 per share dividend to be distributed, compared to our EUR 0 estimate.

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Endomines - Progress made but delays seen

28.02.2022 - 09.30 | Company update

Endomines met new challenges at Friday, with ore body irregularities mandating further underground drilling. We see renewed ramp-up efforts in mid-2022.

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Limited production with new challenges at Friday
Endomines reported weaker than expected results. At the company’s only producing site (in Q4/21), Friday, mining operations were halted due to irregularities in the ore bodies. Gold production as such was limited, at 460oz, with earlier guidance of ~1,200oz. Revenue amounted to SEK 3.2m (Evli SEK 17.3m) and EBITDA to SEK -41.6m (Evli SEK -28.0m). Due to the developments at Friday Endomines carried out impairments of SEK 73.8m and EBIT was thus also clearly below expectations, at SEK -121m (Evli SEK -33.7m).

Assuming renewed ramp-up at Friday in mid-2022
The halting of mining operations at Friday is unfortunately timed, as most preparations for achieving full production capacity has been set in place. With the needed underground drilling and analysis we for now assume a six month delay, seeing renewed ramp-up efforts during the summer. News on Pampalo were far more encouraging, with development so far essentially on schedule and budget and first gold concentrate deliveries in January. The Pampalo mine and mill are expected to achieve full production capacity during Q1/2022. When in full production, the annual gold production is estimated to be between 10,000-11,500oz. Endomines has considerably strengthened its financial position through several transactions after Q4. Cash flows from Pampalo will also begin to support financial development, with gold prices at renewed higher levels. In our view additional financing needs are however still on the table, as the company on the longer run will seek to bring more assets to production.

HOLD with a target price of SEK 2.3 (2.7)
Following adjustments to our SOTP-model and the delay at Friday we adjust our target price to SEK 2.3 (2.7) and retain our HOLD-rating. With the challenges at Friday, upside potential from bringing other assets to production is still distant.

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Endomines - Pampalo progress, Friday challenges 

25.02.2022 - 09.35 | Company update

Ramp-up of ore development and processing at Friday continues but mining was temporarily halted due to a need to conduct further underground definition drilling. Pampalo is progressing well, with the first batch of concentrate delivered and full production capacity seen in Q1/22.

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  • Revenue in Q4 amounted to SEK 3.2*m, below our estimate of SEK 17.3m. The company fell short of its earlier production guidance of around 1,200oz, with production of 460.3oz, at a head grade of 2.89g/t.
  • EBITDA in Q4 was at SEK -41.6m*, below our estimate of SEK -28.0m given the lower revenue.
  • EBIT in Q4 amounted to SEK -121.4m* (Evli SEK -33.7m), including larger write-downs on the Friday project.
    *Figures derived from Q1-Q3 and H1 figures
  • During Q4, at Pampalo, ore production from the mine reached mine development started. The decline reached target levels in September. The mill was refurbished and tested in December and the first concentrate was delivered in January.
  • Ramp up and ore processing continued at Friday. Ramp up was delayed by a need to conduct underground definition drilling due to ore irregularities. The production guidance for 2022 is as such under review and can be updated once new resource estimates have been completed.
  • Production guidance for 2022: The Pampalo mine and mill are expected to reach full production capacity during Q1/22. When in full production the annual gold production is expected to be 10,000 to 11,500oz. The production guidance for Friday is under review.

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Cibus Nordic - Positioned to expand

25.02.2022 - 09.30 | Company update

Cibus should have no trouble to execute on its growth targets, but valuation remains a bit high in the present situation with its extraordinary uncertainty around yields.

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Not many surprises in Q4 figures

Q4 NRI, at EUR 20.4m, topped the EUR 19.5m/19.7m Evli/cons. estimates. Operating income was EUR 18.7m vs our EUR 18.2m as there were EUR 0.1m in one-off admin costs. Not all deals closed by Cibus in Q4 were in our estimates, and this seems to have been the case also for the consensus, yet the report never held much potential for surprise as is always the case with Cibus.

We expect Cibus to be able to source and finance the deals

Cibus’ growth target for 2022-23 states the company is to add EUR 1.0-1.5bn in properties over the two years. Cibus seeks an IG credit rating and thus a new share class (D) is to be instituted. Two recent issues have already helped net LTV down a bit, but according to Cibus the ratio should further decline to around 50%. We calculate the targets to imply EUR 600-850m in equity issues. The sums are considerable, but we believe Cibus will be able to source the properties without bidding too high as the company’s current position in Finland, by far its biggest presence, amounts to no more than 10% of the market. Denmark is an obvious candidate for expansion as the country has a lot of small grocery stores and is in that sense comparable to Norway. Cibus sees some yield compression in Sweden, but Finnish yields appear to lag the Nordic market as the levels are still around 6% while they are closer to 5% in the other three countries.

Valuation continues to reflect underlying yield compression

In our view Cibus’ valuation has reflected yield compression expectations for a while now. We don’t see the current 1.2x EV/GAV too high if yield compression supports asset values going forward. Cibus traded around 1.4x EV/GAV in late December and the yield almost touched those of other listed Nordic property portfolios. Such a level yield wouldn’t by itself be too problematic for future returns, but in our opinion the 1.4x EV/GAV would be on the aggressive side considering properties’ inherent limited upside potential. Cibus’ portfolio performance is very stable, however the premium valuation combined with relatively high LTV means equity is sensitive to different assumptions. We retain our SEK 215 TP and HOLD rating.

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Fellow Finance - New phase of journey to start soon

24.02.2022 - 09.45 | Company update

Fellow Finance’s H2 result fell short of our estimates due to larger than anticipated merger related expenses declines in interest income. Fellow Finance will soon enter a new phase, with the merger anticipated to be carried out on April 2nd.

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H2 burdened by merger related non-recurring items
Fellow Finance’s H2 results fell short of our estimates, as interest income declined more than expected, causing a slight y/y revenue decline to EUR 5.2m (Evli EUR 5.8m). Fee income grew some 35% on a 59% increase in brokered financing. EBIT amounted to EUR -1.4m (Evli EUR -0.5m), with non-recurring items relating to the intended merger larger than expected along with an increase in personnel expenses. Fellow Finance’s BoD proposed that no dividend be distributed, and the company gave no guidance due to the merger.

Still sub-par but showing promising signs
In its current form Fellow Finance as a company is showing quite notable signs of improvement. The growth in brokered financing during 2021 is now also starting to show as revenue growth and the anticipated lower levels of interest income are to a larger extent offset by a decline in impairment losses and interest income from external debt, reducing the impact on profitability. We have still substantially lowered our estimates for 2022, anticipating some further non-recurring expenses and the increase in personnel expenses along with the lower interest income levels to impact on profitability. Fellow Finance anticipates formalizing the merger with the company carrying on Evli Bank’s banking operations on April 2nd, 2022. We continue to see the transaction in favourable light due to the potential in profitability gains from moving towards balance sheet lending.

BUY with a target price of EUR 3.3 (3.5)
Fellow Finance’s current valuation level is challenging and relies upon the potential benefits from the merger. The implied current valuation of Fellow Bank of near EUR 50m would indicate a P/B of below 1.5x. We lower our target price to EUR 3.3 (3.5) and retain our BUY-rating

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Cibus Nordic - High net rental income

24.02.2022 - 09.30 | Earnings Flash

Cibus’ Q4 figures were somewhat above estimates as the company closed many acquisitions towards the end of Q4 which the consensus didn’t seem to have fully reflected. Our estimates didn’t include the purchases which were included after the Q3 report.

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  • Q4 rental income amounted to EUR 21.6m, compared to the EUR 20.7m/20.8m Evli/consensus estimates.
  • Net rental income landed at EUR 20.4m vs the EUR 19.5m/19.7m Evli/consensus estimates.
  • Operating income was EUR 18.7m vs our EUR 18.2m estimate.
  • Net operating income came in at EUR 12.8m, compared to the EUR 12.5m/12.7m Evli/consensus estimates.
  • Annual net rental income capacity was EUR 85.8m at the end of Q4.
  • GAV amounted to EUR 1,500m while EPRA NAV was EUR 13.5 (12.4) per share.
  • Net LTV ratio stood at 57.8% (60.1%).
  • Occupancy rate was 94.4% (94.2%).
  • WAULT was 5.0 years at the end of Q4.
  • Annual total dividend per share is proposed at EUR 0.99, compared to the EUR 0.99/0.99 Evli/consensus estimates.

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Fellow Finance - Profitability burdened by one-offs

23.02.2022 - 09.45 | Earnings Flash

Fellow Finance’s H2/21 results fell short from our estimates. Revenue declined slightly to EUR 5.2m (Evli EUR 5.8m) despite a 59% increase in brokered financing, as interest income decreased clearly. EBIT amounted to EUR -1.4m (Evli EUR -0.5m), impacted by the one-offs relating to the intended merger and increase in personnel expenses.

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  • Revenue in H2 amounted to EUR 5.2m (EUR 5.3m in H2/20), below our estimates (Evli EUR 5.8m). Revenue declined 1.4% y/y. The amount of brokered financing during H2/21 grew 59% y/y while fee income grew 35%. Interest income decreased clearly more than expected to EUR 1.2m (H2/20: EUR 2.3m) vs. our expectation of EUR 2.1m.
  • Fellow Finance facilitated loans during H2 for a total of EUR 142.3m (EUR 84.3m in H2/20), growing 59%. Loan volumes continued on a good growth track also in H2, as seen throughout 2021, with volumes passing the EUR 20m mark on a monthly basis during the last months of 2021.
  • The EBIT in H2 amounted to EUR -1.4m (EUR 0.8m in H2/20), below our estimates (Evli EUR -0.5m). Profitability was burdened by one-off expenses relating to the intended merger and a growth in personnel expenses. Without the non-recurring items, the result for 2021 would have been slightly positive.
  • The EPS in H2 amounted to EUR -0.23 per share (EUR 0.02 in H2/20), below our estimate of EUR -0.12.
  • Dividend proposal: The BoD proposes that no dividends be paid for FY2021 (Evli EUR 0.0).
  • Guidance for 2022: Due to the significant changes in Fellow Finance’s business after the merger, the company does not currently provide a guidance.

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Scanfil - Steeper earnings accretion ahead

23.02.2022 - 09.30 | Company update

Scanfil’s Q4 report didn’t provide any big surprises as figures were slightly above estimates, while the guidance and long-term targets were pretty much as expected.

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High growth due to volumes and component inflation

The EUR 192m Q4 revenue, up 24.5% y/y, topped the EUR 183m/185m Evli/cons. estimates by a fair margin. The EUR 14.4m in spot purchases were spread even between the five segments, relative to their sizes. Energy & Cleantech grew the most also in Q4. It was known before that Q4 would fall short of Scanfil’s EBIT potential as component issues and infections limited productivity, but the EUR 10.2m adj. EBIT was a bit above the EUR 9.7m/9.6m Evli/cons. estimates. The Q4 issues are by their nature temporary; in our view Scanfil’s guidance and comments suggest the situation is improving, or at least has stabilized.

Performance is set to improve this year and beyond

All the segments grew last year. We expect Energy & Cleantech to contribute most growth this year as the segment benefits from many megatrends and includes customers such as TOMRA. Inventories grew EUR 90m last year due to high demand but also in response to the component challenges. Scanfil suggests spot purchases may be lower again in H2’22; we estimate margin improvement throughout the year. Scanfil mentioned possible expansion in Asia beyond China, and this would be likely in countries such as India, Vietnam, and Malaysia. In our view such an expansion would be more likely through M&A than greenfield. Scanfil has recently announced expansions to its plants in the US and Germany, and hence capex will be a bit above 2% of revenue this year. An expansion to the Suzhou plant might also follow.

Multiples have declined, favorable outlook is much intact

We make only marginal estimate revisions. Scanfil is valued 6.0-7.5x EV/EBITDA and 8.0-9.5x EV/EBIT on our FY ’22-23 estimates. In our view the medium to long-term demand and earnings outlook hasn’t changed much in the past 3-6 months, while valuation has declined by 15-20% (peer valuations have declined by roughly similar percentages). Scanfil’s multiples are now well in line with peers, but in our view a premium can be justified by the fact that Scanfil’s EBIT outlook remains somewhat higher than that of a typical peer. We revise our TP to EUR 8 (9) as the sector’s valuations have declined, but our rating remains BUY.

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Scanfil - A bit above the estimates

22.02.2022 - 08.30 | Earnings Flash

Scanfil’s Q4 top line grew by 24.5% y/y and was well above the estimates. We find the beat stemmed from many customer segments. The EUR 10.2m adjusted EBIT also topped estimates, while the guidance for this year should not prompt any major estimate changes. In our view the 5-7% organic CAGR target is also in line with expectations.

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  • Scanfil Q4 revenue grew by 24.5% y/y to EUR 191.7m, compared to the EUR 182.5m/184.8m Evli/consensus estimates.
  • Advanced Consumer Applications was EUR 52.9m vs our EUR 54.6m estimate, while Energy & Cleantech amounted to EUR 53.4m vs our EUR 47.1m estimate. Automation & Safety landed at EUR 41.1m, compared to our EUR 39.4m estimate.
  • Adjusted EBIT landed at EUR 10.2m vs the EUR 9.7m/9.6m Evli/consensus estimates. Adjusted EBIT margin was 5.3% vs our 5.3% estimate.
  • Scanfil guides FY ’22 revenue to be EUR 710-760m and adjusted EBIT of EUR 43-48m. The respective consensus estimates for the year stand at EUR 718.6m and EUR 45.3m. Semiconductor availability, pricing, and supply chain functioning, as well as the pandemic, continue to pose uncertainty.
  • Scanfil’s (updated) long-term target is to grow at a 5-7% organic CAGR and to reach 7% EBIT margin, in addition to paying a growing amount of dividend to the tune of a third of EPS.
  • The BoD proposes EUR 0.19 per share dividend to be distributed, compared to the EUR 0.18/0.19 Evli/consensus estimates.

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Pihlajalinna - Strategy execution set to continue

21.02.2022 - 09.45 | Company update

Pihlajalinna’s Q4 EBIT was soft relative to estimates, but in our view the issue is temporary; Pihlajalinna continues its strategy execution with the acquisition of Pohjola Hospital.

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We view the Q4 cost challenge as a temporary issue

Pihlajalinna’s top line grew at a 13% y/y rate. The EUR 155m figure was well in line with the EUR 156m/152m Evli/cons. estimates. Covid-19 services still amounted to a high EUR 10.1m, only a small q/q decline, but the level is set to fade this year. Q4 EBIT was hit by a spike in specialized care costs within complete outsourcing contracts, induced by Covid-19, and the effect amounted to some EUR 2m. The EUR 6.0m adj. EBIT therefore didn’t meet the EUR 9.2m/8.8m Evli/cons. estimates. Pihlajalinna has been negotiating for compensation for increased production costs before and expects to get favorable outcomes this year.

Growth and profitability targets set the bar high

Pohjola Hospital’s FY ’21 figures improved a bit, but EBIT was still EUR 7m red. Pihlajalinna sees EUR 5m in cost synergies and expects break-even during the year; H1 is still soft but H2 could already show results. The acquisition drives growth within private and insurance customers and thus helps margins as these areas are more profitable than public ones. Pihlajalinna revised its long-term financial targets accordingly: the new aim is above 9% EBITA margin and EUR 250m more revenue by the end of 2025 (compared to 2021), which in our view implies ca. 7.5% CAGR for the three years following the closing of the acquisition. Two thirds of the growth is to stem from corporate and private customers, segments where the acquisition is to prove useful. The profitability target can be seen as a small positive revision on the previous one; it will take some time for Pihlajalinna to reach that level, but we estimate by inferring from the guidance that Pihlajalinna could reach 7.5% EBITA margin already in H2’22. The company targets 4-6% margins within outsourcing, while other areas aim for levels comparable with those of Terveystalo.

Overall valuation picture hasn’t been altered

The acquisition limits profitability in H1’22, but Pihlajalinna is valued only around 6-8x EV/EBITDA and 12-18x EV/EBIT on our FY ’22-23 estimates. The multiples represent discounts to peers while our estimates remain moderate relative to long-term potential. We retain our EUR 14 TP and BUY rating.

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Vaisala - The growth story continues

19.02.2022 - 10.30 | Company update

Vaisala’s Q4 revenue grew strongly, but increased costs drove EBIT below the comparison period. Underlying demand was strong and Vaisala managed to deliver all its orders. We retain our HOLD rating and adjust TP to EUR 41 (43).

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Growth was strong, but increased costs tightened margins
Vaisala delivered strong Q4 figures with orders received totaling EUR 119m and order book at a record level of EUR 160m. Strong order intake was driven by IM, while W&E experience a 14% decline partly due to strong comparison figures. Group net sales grew by 17% y/y to EUR 125 driven by both BUs. IM grew by 26% y/y, driven by all its market segments. W&E experienced a 12% increase in net sales, driven by renewable energy and meteorology. Increased usage of spot-priced components decreased the gross margin to 53%. EBIT decreased by 3% y/y to EUR 11.9m, driven by lower gross margin and increased fixed costs. Q4 EBIT included one-time costs worth EUR 1.1m. EPS declined by 11% y/y to EUR 0.21. Board proposed a dividend of EUR 0.68. Despite losing some margins, Vaisala gained market share and “long-wanted” customers from its competitors with its ability to respond to the demand in a difficult environment.

We made some adjustments to our estimates
Despite the problems on the supply side, the underlying demand remains strong. We made minor adjustments to our estimates, reflecting a solid outlook, but also risks stemming from the component shortage. The order book is strong and thus we expect both BUs to grow also during 2022. We expect IM to grow by 16% y/y to EUR 209.8m in 2022, driven by all its market segments. In 2022, we estimate W&E to increase by 6.3% y/y to EUR 273.1m, mostly driven by renewable energy. 2022 group revenue amounts to EUR 482.9m, near the mid-point of the guidance. Vaisala’s management noted that some price increases have been made in Q1’22, but the visibility to component availability remains weak and we expect material costs to increase and gross margin to be a bit lower than in 2021. In our view, IM suffers less from the component shortage with its pricing power, while W&E’s gross margin falls more aggressively. Although the gross margin is a bit softer, we expect EBIT to rise to EUR 59.9m (12.4% margin), driven by scalability. IM contributes the EBIT with EUR 52.4m and W&E with EUR 9m.

HOLD with a TP of EUR 41 (43)
Vaisala’s valuation is quite stretched compared to its peers. With 22E EV/EBITDA of 19x, Vaisala trades with a ~20% premium. We, however, find a premium justified, given Vaisala’s technology leadership, increased market share, and growth outlook. Our new TP values Vaisala at 22-23E EV/EBITDA of 17.6-16.4x. With the acceptable valuation level decreased and uncertainties in component availability, we retain our HOLD rating and adjust our target price to EUR 41 (43).

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Solteq - Focusing on growth

18.02.2022 - 11.20 | Company update

Solteq's growth remained good in Q4, but investments impacted on profitability. With growth investments on the rise, we lower our profitability estimates for 2022 and our TP to EUR 5.0 (6.2), with our BUY-rating intact.

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Growth on track but investments burdened profitability
Solteq reported weaker Q4 results on the profitability side while growth still remained at a good pace. Revenue grew 11.4% to EUR 18.3m (EUR 18.0m Evli) and the operating profit amounted to EUR 1.3m (EUR 2.0m Evli). Compared with our estimates, profitability was weaker in Solteq Software, where adj. EBIT fell to EUR 0.0m (EUR 0.8m Evli). Profitability was impacted by growth investments as well as increases in subcontracting and general costs. Investments were made into software development and into international growth. Solteq’s BoD proposes a dividend of EUR 0.10 per share (EUR 0.11 Evli).

Estimates lowered as investments pick up
Solteq expects its revenue in 2022 to grow clearly and operating profit to improve compared with 2021. We have not made any significant changes to our revenue estimates but have lowered our profitability estimates by quite a bit, now expecting 2022 operating profit of EUR 7.8m (prev. 10.5m). Although it is unfortunate that profitability scaling in Solteq Software is not going as fast as we (in retrospect probably overoptimistically) had expected, prioritizing growth is still more beneficial with demand drivers in place and apart from cost growth from subcontracting the operational profitability still appears to be on track. We expect to see the growth investments weighing more heavily on H1 and with pick-up in growth and recurring revenue we expect to see figures improve towards the end of the year, creating good potential for the following years.

BUY-rating with a target price of EUR 5.0 (6.2)
With our estimates revisions we adjust our target price to EUR 5.0 (6.2), valuing Solteq at approx. 21x 2022e P/E. Solteq has likely been somewhat cautious in its profitability guidance, and we still see potential for some improvement during the year as visibility improves. We retain our BUY-rating.

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Vaisala - Topline met our expectations

18.02.2022 - 09.45 | Earnings Flash

Vaisala’s Q4 topline was in line with our expectations, but earnings fell short due to declined margins.

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  • Group results: Orders received was EUR 119.0m (+6% y/y) and order book totaled EUR 160.0m (+16% y/y). Net sales grew by 17% y/y to EUR 125m (125.5/123.5m Evli/cons.). EBIT decreased by -2.5% y/y to EUR 11.9m (16.4/16.8m Evli/cons.). Driven by soft EBIT the EPS was EUR 0.21 (0.39/0.40 Evli/cons.).
  • Industrial Measurements (IM): Orders received grew very strongly by 42% y/y to EUR 58.2m and order book was at record level EUR 32.9m (+83% y/y) after Q4. Revenue grew strongly by 26% y/y to EUR 50.1m (49.5/49.5m Evli/cons.). Revenue growth was driven by high-end industrial measurements, life science, liquid measurements, and power. More expensive components bought from spots markets (negative impact of 4%-p.) drove down the gross margin to 59.9% (prev. 63.3%).
  • Weather & Environment (W&E): Orders received declined by 14% y/y to EUR 60.8m and order book was at EUR 127.1m (+6% y/y). Net sales grew by 12% y/y to EUR 74.9m (76/74m Evli/cons.). Revenue grew in renewable energy and meteorology, while it was flat in aviation and transportation. Gross margin declined to 48.9% (prev. 51.1%) due to higher component prices (negative impact of 2%-p.).
  • 2022 guidance: Net sales between EUR 465-495m (2021: EUR 437.9m) and EBIT EUR 55-70m (2021: EUR 50.1m).
  • Dividend proposal: EUR 0.68 (0.63/0.64 Evli/cons.)
  • Market outlook: Markets for high-end industrial instruments, life science, power industry, and liquid measurements are expected to grow. Markets for meteorology and ground transportation are expected to be stable. Aviation market is expected to recover towards pre-pandemic level. Renewable energy market is expected to grow.

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Eltel - Organic progress continues

18.02.2022 - 09.30 | Company update

Eltel’s profitability continues to improve, but we find valuation still doesn’t leave that much upside.

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Positives, negatives, and one-off gains
Eltel’s Q4 revenue, at EUR 226m, topped the EUR 206m/207m Evli/cons. estimates while EBITA came in ca. EUR 2m above estimates. Finland performed much according to our expectations while Sweden topped our estimates; Norway and Denmark were a bit soft. The EUR 2.5m positive one-off in Poland, due to a real estate sale, drove the Other business segment to an EBITA of EUR 1.7m, clearly above our estimates even when excluding the one-off. Eltel’s earnings were, however, much in line with our estimates when adjusted for the one-off. Eltel’s turnaround continues and the company guides increasing operative EBITA margin for FY ’22. Q1, as happens to be the nature of the business, will represent a slow start for the year.


We now estimate a positive rate of growth for the year
Eltel continues to make progress, but there remains much uncertainty with respect to the gradient. Diesel prices, salaries, materials as well as logistics costs are headwinds. Inflation isn’t a problem for the Communication business (more than 60% of revenue), yet it affects Power. We make relatively small estimate revisions, but we now expect Eltel to reach a positive 2% growth this year, whereas we previously expected a 2% decline. Our new FY ‘22 revenue estimate is EUR 829.6m (prev. EUR 774.0m). Our margin estimates are up by only 10bps for the year, but they rise by some EUR 2m in absolute terms due to the growth revision. We however expect Q1 EBITA to remain slightly in the red and see most of the profitability gains accruing over the summer. We believe Eltel is still going to focus on turnaround for a while and thus e.g. M&A may have to wait for a while, but should it occur Denmark and Sweden are perhaps the most potential countries.


Valuation continues to stand neutral
Valuation still doesn’t seem to offer clear upside considering the uncertainty around the improvement pace. We find the 6x EV/EBITDA and 15x EV/EBIT multiples, on our FY ’22 estimates, to be neutral relative to peers. Eltel’s margins remain modest compared to peers; quicker than expected improvement can drive upside, but we wouldn’t expect much more than EUR 22m EBITA at this point. Our TP is now SEK 15 (17); retain HOLD.

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Finnair - Upside remains on the elusive side

18.02.2022 - 09.10 | Company update

Finnair’s Q4 report didn’t include that significant news. Finnair’s profitability is poised to rebound, yet valuation doesn’t seem to leave much upside given the uncertainties.

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The Q4 report didn’t deliver any major surprises

Finnair’s Q4 revenue grew to EUR 414m, compared to the EUR 452m/387m Evli/cons. estimates. Adj. EBIT landed at EUR -65m vs the EUR -95m/-90m Evli/cons. estimates. Q4 cargo revenue was very high, but Q1 losses are likely to be well above EUR 100m due to Omicron and ramp-up costs. Finnair sees some delay to the opening of most of Asia, which was to be expected.

The whole airline industry is staging rebound this year

Omicron doesn’t seem to be a major negative, only a short-term issue, but losses still loom in Q2. Meanwhile Finnair implements a EUR 200m investment in improved long-haul experience with refitted seats, and we also expect Finnair’s fixed costs savings will continue to come through; inflation relating to e.g. Helsinki airport charges is modest compared to those of larger hubs. Finnair’s long-term profitability potential is no worse considering the fleet renewal and cost positioning, but high jet fuel prices continue to limit the whole industry’s profitability potential.

Valuations continue to reflect surging earnings levels

We believe other airlines’ valuations will continue to drive Finnair’s multiples: Finnair’s profitability will materialize later due to the Asian reliance, but it will nevertheless come through at a certain level. In our view the most essential uncertainty, for Finnair as well as other airlines, now lingers around overall operating cost levels, particularly with respect to jet fuel prices. Higher ticket prices could compensate, but we view such increases still to be uncertain. Air traffic will continue to rebound across the globe, including Asia as well, and is set to reach the pre-pandemic levels sooner or later. We estimate Finnair’s FY ’22 EBIT is most likely to remain in the red, while some other airlines should be able to reach high profitability this year. We believe the anticipation and materialization of these profits will determine Finnair’s valuation over the course of this year. In our view Finnair’s current valuation, ca. 12x EV/EBIT on our FY ’23 estimates, is somewhat neutral relative to other airlines, however overall sector valuations may still stand on the optimistic side. We retain our EUR 0.60 TP; our rating is now HOLD (SELL).

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Innofactor - Moving on from recent challenges

18.02.2022 - 08.45 | Company update

Innofactor’s Q4 fell well short of our expectations as the company saw challenges relating to organizational changes and employee turnover. We have lowered our 2022 estimates and our TP to EUR 1.6 (2.1), BUY-rating intact.

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Challenging last quarter of 2021
Innofactor’s Q4 results fell well short of our estimates, as the company faced challenges with the organizational changes in Finland and employee turnover. Net sales amounted to EUR 17.5m (Evli EUR 18.6m), declining 4% y/y but in comparable terms on par with Q4/20. EBITDA was EUR 1.7m (EUR 2.6m Evli), falling from the Q4/20 adj. EBITDA level of EUR 2.6m. Profitability was effectively down solely due to the challenges noted, although EBIT included larger one-off amortizations. The order backlog was at EUR 72.8m, up 20.6% y/y.

Poised to improve but some concerns remain
Innofactor expects its revenue in 2022 to increase from 2021 while EBITDA is expected to increase from EUR 7.5m, which would have been 2021 EBITDA without proceeds from the Prime business divestment. We have lowered our estimates for 2022, now expecting net sales of EUR 69.0m (prev. EUR 70.1m) and EBITDA of EUR 8.1m (prev. 9.5m). The organizational changes were started during Q3 and should impact to a clearly lesser extent going forward and the employee turnover appears to have peaked in Q3, which led to a spillover in Q4. The situation was more towards the normal in Q4 and the headcount began to grow, but the recruitment market has however been challenging for a while and we see this as a continued concern. Fundamentally Innofactor is in our view in a good position to post improved profitability figures in 2022, with all countries also having posted clearly positive EBITDA figures in Q4.

BUY-rating with a target price of EUR 1.6 (2.1)
On our revised estimates and some uncertainty going into 2022 we cut our TP to EUR 1.6 (2.1), valuing Innofactor at approx. 17x 2022 P/E. We see reasonable potential for higher than estimated profitability with the good order backlog levels should challenges not persist. We retain our BUY-rating.

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Pihlajalinna - Outsourcing costs burdened EBIT

18.02.2022 - 08.30 | Earnings Flash

Pihlajalinna’s Q4 revenue grew as expected but profitability fell short of estimates due to the increased costs within total outsourcing arrangements.

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  • Q4 revenue grew by 12.8% y/y to EUR 154.7m, compared to the EUR 156.4m/152.1m Evli/consensus estimates. Private customer revenue was EUR 23.3m vs the EUR 26.4m/24.2m Evli/consensus estimates, while corporate customers contributed EUR 38.8m vs the EUR 40.8m/37.3m Evli/consensus estimates. Public sector customers were EUR 111.3m, compared to the EUR 107.2m/108.9m Evli/consensus estimates.
  • Covid-19 services amounted to EUR 10.1m.
  • Adjusted EBITDA landed at EUR 14.9m vs the EUR 18.0m/17.5m Evli/consensus estimates. Adjusted EBIT was EUR 6.0m, compared to the EUR 9.2m/8.8m Evli/consensus estimates. Higher costs within total outsourcing arrangements weighed down profitability. Negotiations concerning cost compensation had not produced desired outcomes by the end of the year. Pihlajalinna continues to negotiate with certain municipal clients.
  • Pihlajalinna expects FY ’22 revenue to increase substantially and adjusted EBITA to stay level. The integration of Pohjola Hospital means H1’22 profitability will be below that of the previous year. The acquisition will increase revenue by at least EUR 50m in FY ’22. Covid-19 services revenue is expected to decline.
  • The BoD proposes EUR 0.30 per share dividend to be distributed, compared to the EUR 0.35/0.31 Evli/consensus estimates.

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Finnair - Uncertainty extends through spring

17.02.2022 - 10.00 | Earnings Flash

Finnair’s Q4’21 losses were a bit lower than estimated, however the company expects the combination of Omicron and certain other operational expenses to lead to somewhat higher losses again in Q1’22. Finnair expects Omicron to postpone the opening of Asia to some extent.

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  • Q4 revenue grew by 305.5% y/y and amounted to EUR 413.5m, compared to the EUR 451.9m/387.4m Evli/consensus estimates.
  • Adjusted EBIT was EUR -65.2m vs the EUR -94.6/-90.1m Evli/consensus estimates.
  • Fuel costs were EUR 102m vs our EUR 126m estimate. Staff costs amounted to EUR 84m, compared to our EUR 95m estimate. All other OPEX+D&A amounted to EUR 305m vs our EUR 340m estimate.
  • Cost per Available Seat Kilometer was 7.75 eurocents vs our estimate of 8.84 eurocents.
  • Finnair sees Q1 losses due to Omicron notable but short-lived and as a result, in addition to increased fuel prices and incremental costs caused by the need to ramp up capacity for summer 2022, expects Q1’22 losses to be of a similar magnitude as in Q1’21 (EUR -143m in terms of EBIT). Finnair reiterates its previous estimate that the losses will continue during the entire H1’22. There’s prolonged uncertainty with respect to the opening of China and Hong Kong, while countries such as Japan and South Korea should open towards the end of Q2’22.
  • The EUR 200m cost savings programme’s full run-rate impact will be visible this year.

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Eltel - A clear estimate beat

17.02.2022 - 09.30 | Earnings Flash

Eltel’s Q4 report delivered a clear positive surprise after a disappointing Q3 report. Sweden was able to break even, and positive development continues this year as Eltel guides increasing operative EBITA margin.

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  • Eltel Q4 revenue landed at EUR 226.3m vs the EUR 206.1m/207.0m Evli/consensus estimates, a decrease of 1% y/y.
  • EBITDA came in at EUR 14.5m, compared to the EUR 13.2m/13.4m Evli/consensus estimates. Operative EBITA was EUR 7.0m vs our EUR 4.8m estimate, meaning operative EBITA margin was 3.1% vs our 2.3% estimate, while EBIT amounted to EUR 6.9m vs the EUR 4.6m/4.9m Evli/consensus estimates. The results were a positive surprise especially considering record-high sick leave rates as well as further project postponements which were caused by the pandemic. The current winter environment in the Nordics, however, will negatively affect Q1 results.
  • Profitability in Finland remained strong while Sweden was able to reach a positive result (operative EBITA margin was 1.4% vs our 0% estimate). Norway’s profitability was still decent while Denmark declined to a low 0.6% operative EBITA margin. Denmark’s decline was mainly due to a 35% y/y drop in revenue. Finnish top line declined a bit while Sweden and Norway both grew.
  • Eltel guides FY ’22 operative EBITA margin to increase.
  • The BoD proposes no dividend to be paid for the year.

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Innofactor - A softer end to the year

17.02.2022 - 09.30 | Earnings Flash

Innofactor’s Q4 results were below our expectations. Net sales amounted to EUR 17.5m (Evli EUR 18.6m), while EBITDA amounted to EUR 1.7m (Evli EUR 2.6m). Net sales in 2022 are expected to increase from 2021 and EBITDA from comparable 2021 EBITDA of EUR 7.5m. Dividend proposal EUR 0.08 per share (Evli EUR 0.06).

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  • Net sales in Q4 amounted to EUR 17.5m (EUR 18.3m in Q4/20), below our estimates (Evli EUR 18.6m). Net sales in Q4 declined 4.0% y/y but organically on par with Q4/20. Net sales increased in Norway and Denmark but decreased in Finland and Sweden.
  • EBITDA in Q4 was EUR 1.7m (EUR 1.6m in Q4/20), below our estimates (Evli EUR 2.6m), at a margin of 9.5%. EBITDA was positive by a clear margin in all operating countries.
  • Operating profit in Q4 amounted to EUR 0.5m (EUR 0.4m in Q4/20), clearly below our estimates (Evli EUR 1.8m), at a margin of 3.0%.
  • Order backlog at EUR 72.3m, up 31% y/y. Innofactor received several significant orders in Q4, for instance a EUR 1.2m contract with a large Finnish manufacturing industry company.
  • Guidance for 2022: Innofactor’s net sales is expected to increase from 2021 (EUR 66.4m) and EBITDA is expected to increase from EUR 7.5m, which would have been EBITDA without the proceeds of EUR 2.6m from the sale of the Prime business.
  • Dividend proposal: Innofactor’s BoD proposes a dividend of EUR 0.08 per share (Evli EUR 0.06).

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Solteq - Investments weakened profitability

17.02.2022 - 08.40 | Earnings Flash

Solteq’s Q4 was below our lowered pre-Q4 expectations, with revenue at EUR 18.3m (Evli EUR 18.0m) and adj. EBIT at EUR 1.4m (Evli EUR 2.0m). Guidance for 2022: group revenue is expected to grow clearly and the operating profit to improve. Dividend proposal EUR 0.10 per share (Evli EUR 0.11).

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  • Net sales in Q4 were EUR 18.3m (EUR 16.4m in Q4/20), in line with our estimates (Evli EUR 18.0m). Growth in Q4 amounted to 11.4% y/y, of which the larger part was organic growth.
  • The operating profit and adj. operating profit in Q3 amounted to EUR 1.3m and 1.4m respectively (EUR 1.8m/2.0m in Q4/20), below our estimates (Evli EUR 2.0/2.0m). Solteq Software’s profitability was below expectations due to investments into product development and internationalization.
  • Solteq Digital: revenue in Q4 amounted to EUR 11.7m (Q4/20: EUR 10.6m) vs. Evli EUR 11.4m. Growth amounted to 10.3%. The adj. EBIT was EUR 1.4m (Q4/20: EUR 0.9m) vs. Evli EUR 1.2m. Demand in key areas, such as digital business and commerce solutions, is expected to remain good during 2022.
  • Solteq Software: Revenue in Q4 amounted to EUR 6.6m (Q4/20: EUR 5.8m) vs. Evli EUR 6.6m. The adj. EBIT was EUR 0.0m (Q4/20: EUR 1.1m) vs. Evli EUR 0.8m. Growth was 13.3%. The business outlook is expected to remain positive.
  • Guidance for 2022: group revenue is expected to grow clearly and operating profit to improve.
  • Dividend proposal: Solteq’s BoD proposes a dividend of EUR 0.10 per share (Evli EUR 0.11).

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Aspo - High and resilient EBIT

17.02.2022 - 08.30 | Company update

Aspo’s Q4 adj. EBIT reached EUR 13.9m; we believe ESL’s and Telko’s results are resilient while the guidance doesn’t appear to set the bar very high either for H1 or H2.

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Q4 adj. EBIT was very high, outlook still favorable for H1’22

Aspo Q4 revenue grew by 27% y/y to EUR 160m, somewhat above the EUR 153m/148m Evli/cons. estimates. The EUR 13.9m adj. EBIT was clearly above the EUR 10.8m estimates. Aspo’s H2’21 involved, in essence, a couple of positive profit warnings as there were a few impairment losses which burdened the headline EBIT. The cargo market situation was well-known and hence another record ESL EBIT was in the cards; we expect some long-term pressure on the 16.5% ESL H2 EBIT margin, although based on Aspo’s comments there shouldn’t be any imminent negative factors. Forest, steel, and energy industries continue to drive robust cargo volumes also in H1’22. Telko’s EBIT was a bit soft relative to our estimate but still amounted to a very decent 6% margin. Leipurin recorded an impairment loss of EUR 4.3m, but other than that the results were much as we expected.

We estimate EBIT well above EUR 40m in the coming years

The spot market for large vessels has slipped a bit from the recent tops, yet ESL’s focus means results should be resilient even in the face of a marked drop. The geopolitical tensions, should they happen to escalate, would cast some uncertainty around the short-term performance of Telko and Leipurin, but in our view any major long-term adverse effects would be unlikely given the fact that both have a history of operating in challenging Eastern European countries. In our opinion the flat EBIT guidance appears conservative, especially considering the relatively undemanding H1’21 comparison figures and the fact that ESL’s strong H2’21 performance should extend itself well this year. We make only minor estimate revisions; our new FY ’22 EBIT estimate is EUR 43.4m (prev. EUR 42.4m).

Modest multiples given the guidance and LT positioning

We find Aspo’s current valuation level undemanding, not much more than 6x EV/EBITDA and 10x EV/EBIT on our FY ’22 estimates, especially when we view a positive profit warning much more likely than a negative one. We believe ESL can well beat our estimates and our 5.8% EBIT estimate for Telko isn’t that high either. We retain our EUR 14 TP and BUY rating.

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Aspo - ESL Q4 EBIT tops estimates

16.02.2022 - 10.00 | Earnings Flash

Aspo’s headline EUR 8.8m Q4 EBIT missed estimates, however the shortfall stemmed from Leipurin’s EUR 4.3m impairment loss. Telko’s EBIT was a bit soft relative to what we expected, but ESL topped our estimate by a considerable margin.

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  • Aspo Q4 revenue amounted to EUR 160.0m, compared to the EUR 153.2m/148.1m Evli/consensus estimates. EBIT, including Kauko, landed at EUR 8.8m vs the EUR 10.8m/10.8m Evli/consensus estimates.
  • ESL Q4 revenue was EUR 54.7m vs our EUR 49.3m estimate, while EBIT came in at EUR 9.8m vs our EUR 6.5m estimate.
  • Telko’s revenue amounted to EUR 73.6m, compared to our EUR 74.5m estimate. EBIT was EUR 4.4m vs our EUR 5.1m estimate. Telko’s short-term outlook remains positive but involves significant uncertainties due to the pandemic and the geopolitical situation in Eastern Europe.
  • Leipurin revenue was EUR 31.7m vs our EUR 29.4m estimate, while EBIT was EUR -3.6m vs our EUR 0.7m estimate. Leipurin recorded an impairment loss to the tune of EUR 4.3m. The foodservice business accounted for EUR 3.0m of the loss, while the remaining EUR 1.3m was attributable to machine manufacturing.
  • Other operations cost EUR 1.9m, compared to our EUR 1.5m estimate.
  • Aspo guides flat EBIT for FY ’22 (EUR 42.4m in FY ’21).
  • The BoD proposes EUR 0.23 per share dividend to be distributed, in addition to another distribution no more than EUR 0.22 per share at a later time, compared to the EUR 0.40/0.44 Evli/consensus estimates.

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Exel Composites - Long-term EBIT trajectory intact

16.02.2022 - 09.15 | Company update

Exel’s Q4 EBIT was soft relative to estimates, yet demand doesn’t seem to abate and in our view the US unit should, sooner or later, again reach the required performance level. Long-term earnings potential therefore remains significant.

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The EUR 1.0m Q4 adj. EBIT was soft relative to estimates

Q4 revenue grew 33% y/y to EUR 36.5m vs the EUR 32.0m/31.8m Evli/cons. estimates. Buildings and infrastructure grew to be the largest industry and the fact highlights how there are many industries besides Wind power driving growth. Order intake was moderated due to the difficulties in the US and inflation had some negative impact on Q4 EBIT, but Exel continues to lift its own pricing and hence raw material price increases are not a major issue, at least not in the long-term perspective. We gather Exel’s raw material inflation pace slowed down somewhat late last year, which is not surprising considering the rate seen earlier during the year. That said, raw material prices don’t seem to be declining either and so the environment can still cause some short-term drag on EBIT. We estimate most of the EUR 0.9m q/q profitability improvement was attributable to the US unit.

We still estimate meaningful growth for this year

The US labor situation remains extraordinarily challenging and thus it will take at least some additional quarters before Exel again reaches the high single-digit EBIT margins it used to enjoy before the problems in the US materialized. Exel is doing the best they can to hire and retain local employees. Meanwhile demand appears to remain very strong across basically all geographies and customer industries. We revise our FY ’22 revenue estimate to EUR 150.7m (prev. EUR 146.8m), while our new EBIT estimate for this year is EUR 10.6m (prev. EUR 12.0m).

Long-term earnings potential continues to stand out

We believe Exel should have no trouble hitting EUR 150m top line especially when the US unit continues to progress. Exel has previously been able to reach 10% EBIT on a quarterly level (long-term target is above 10%). We expect FY ’22 results to still fall a lot short of the implied EUR 15m mark, and hence long-term upside remains significant. Exel is valued around 5.5-7.0x EV/EBITDA and 8.0-11.0x EV/EBIT on our FY ’22-23 estimates. Uncertainty around the US limits upside in the short-term and we thus revise our TP to EUR 9 (10). We retain our BUY rating.

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Marimekko - Earnings growth smoothens

16.02.2022 - 09.15 | Company update

Marimekko delivered strong Q4 figures, outpacing our and consensus estimates. Net sales development was very good in both domestic and international markets. We downgrade our rating to HOLD (BUY) and adjust TP to EUR 79 (84).

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Solid quarter
Marimekko came in strong with Q4 net sales of EUR 48.1m (+29% y/y). The growth was driven by wholesale and retail sales in Finland as well as wholesale sales in the APAC region and Scandinavia, while the EMEA region declined due to the actions to control grey exports. Retail sales in North America developed very strongly. Higher logistical costs reduced the gross margin to 57.9% (prev. 58.9%). Driven by increased net sales, the adj. EBIT improved by 17% y/y to EUR 7.6m (15.9% margin). Increased personnel (one-time bonus) and other costs weakened the adj. EBIT margin from 17.4% to 15.9%. EPS amounted to EUR 0.72 and the BoD proposed a dividend of EUR 3.60 (including an additional EUR 2 dividend).

Confirmation for international growth
International sales got back on a growth path in Q4’21 and the company guided the segment’s largest market, the APAC region, to grow clearly in FY’22. Segment’s strong development speaks about the increased brand awareness, particularly seen in Asia. In FY’22, we expect int’l net sales to grow by 14% y/y, while expecting domestic growth to slow down to 8% y/y due to the lack of large one-time wholesale deliveries. In our estimates, group revenue amounts to EUR 167.9m, and driven by increased logistical costs the gross margin falls below the comparison period to 60%. Driven by reduced gross margin and increased fixed costs, the adj. EBIT margin of 19.3% (adj. EBIT EUR 32.4m) falls also short of the record high comparison period.

HOLD with a TP of EUR 79 (84)
With our revised estimates, Marimekko trades with a 22-23E EV/EBIT multiple of 19-18x. The company’s valuation has historically varied between EV/EBIT multiple of 17-21x. With the slowdown in the earnings growth within the next few years and the decline in the acceptable valuation level, we downgrade our rating to HOLD (BUY) and adjust TP to EUR 79 (84).

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Solteq - Some continued softness seen

15.02.2022 - 09.30 | Preview

Solteq reports Q4 results on February 17th. We foresee some continued softness due to the current environment but continue to expect earnings improvement in 2022. We retain our BUY-rating with a TP of EUR 6.2 (6.8).

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Some softness expected in Q4
Solteq reports Q4 results on February 17th. Solteq’s Q3 results were softer than anticipated, as deliveries for two large-scale retail customers were postponed as a result of the impact of the global component shortage. Revenue still grew by over 10%, mainly organically, and the adj. operating profit margin was at a fairly decent 8.1%. We had previously expected fourth quarter figures to turn back on track with the start-up of the postponed projects. With the macroeconomic uncertainties still present we anticipate some softness to still be seen in the fourth quarter and have slightly lowered our estimates, still expecting fairly good growth but slightly lower margins y/y.

Potential remains but market uncertainties a disturbance
Solteq in our view remains in a good position to continue revenue and earnings growth in 2022. We anticipate the recurring revenue from the implemented Utilities business projects to start to show. We see that the demand for Solteq’s solutions, in particular within utilities and ecommerce, should under normalized circumstances remain at a healthy level. The market environment has however been somewhat challenging and has not appeared to improve significantly going into 2022. With the current uncertainties we have lowered our 2022e EBIT estimates by some 9% but still see room for double-digit y/y growth in operating profit. We expect revenue of EUR 76.3m and an adj. operating profit margin of 13.8%.

BUY with a target price of EUR 6.2 (6.8)
With our estimates revisions and current uncertainties, we adjust our TP to EUR 6.2 (6.8) and retain our BUY-rating. Our TP values Solteq at ~17x 2022 P/E, which is still fairly low, and upside potential remains solid should the market environment not threaten the earnings growth track.

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Exel Composites - Lots of growth, softish profitability

15.02.2022 - 09.30 | Earnings Flash

Exel’s Q4 results extended recent earnings reports trends to a certain degree. Top line continued to grow a lot faster than was expected, but profitability was still a bit soft relative to estimates. Exel made some progress with the challenges in the US, but it remains unclear just how quick earnings will improve this year.

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  • Q4 revenue grew by 32.7% y/y and was EUR 36.5m vs the EUR 32.0m/31.8m Evli/consensus estimates. North America contributed by far the most to growth.
  • Wind power was EUR 8.3m vs our EUR 7.9m estimate while Buildings and infrastructure amounted to EUR 8.4m, compared to our EUR 8.5m estimate. Equipment and other industries landed at EUR 7.1m, clearly above our EUR 5.4m estimate.
  • Adjusted EBIT came in at EUR 1.0m vs the EUR 1.3m/1.4m Evli/consensus estimates. Exel USA’s profitability improved a bit q/q but continued to drag results.
  • Q4 order intake was EUR 30.5m, down by 8.8% y/y.
  • Exel guides flat revenue and increasing adjusted EBIT for FY ’22. In our view it is hard to guide increasing revenue this early in the year given the high comparison figure. Consensus estimates for FY ‘22 adjusted EBIT, at EUR 10.5m, are clearly above the EUR 6.0m comparison figure and we see it is likewise difficult to give any stronger wording this early in the year.
  • The BoD proposes EUR 0.20 per share dividend to be distributed, compared to the EUR 0.25/0.22 Evli/consensus estimates.

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Marimekko - Strong development continued in Q4

15.02.2022 - 09.10 | Earnings Flash

Marimekko’s Q4 result outpaced our estimates and the company grew very strongly. The guidance implies the trend to continue in 2022.

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Group net sales increased by 29% y/y to EUR 48.1m (41.6m/42.3m Evli/cons.). The growth was driven by wholesale and retail sales in Finland as well as wholesale sales in the APAC region and Scandinavia. Retail sales in North America developed very strongly.
Finland: Net sales grew by 32% and amounted to EUR 30.6m (26.8m/26.8m Evli/cons.). Non-recurring promotional deliveries supported the good development of wholesale sales.
International: Revenue increased by 23% y/y to EUR 17.4m (14.7m/15.5m Evli/cons.), representing 36% of total net sales. Sales development was strong in North America (+57%), Scandinavia (+40%), and the APAC region (+36%). The EMEA region (-21%) declined due to actions to control gray exports.
Gross profit totaled EUR 27.8m (25.1m Evli). The company reported a gross margin of 57.9% (60.3% Evli). The margin was affected by increased logistical costs.
Adj. EBIT improved by 35% y/y to EUR 7.6m (5.8m/6.0m Evli/cons.), meaning a 15.8% margin. The improvement in profitability was mainly driven by increased net sales.
EPS grew by 35.6% y/y to EUR 0.72 (0.54/0.55 Evl/cons.).
Dividend proposal: The BoD proposes FY’21 DPS of EUR 1.60 and extraordinary DPS of EUR 2.00 (1.60/1.60 Evli/cons.). In addition, the board has decided to pay FY’20 DPS of EUR 1.00.
Guidance 2022: Revenue is expected to be above that of the comparison period (2021: EUR 152.2m). Adj. EBIT margin is expected to be between 17-20% (2021: 20.5%).

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Vaisala - Expecting strong earnings growth

14.02.2022 - 14.45 | Preview

Vaisala reports its Q4 result on Friday. In Q4, we expect revenue growth to scale till bottom rows and earnings improvement of 60% y/y. We retain our HOLD-rating and TP EUR of 43.

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Expecting a clear earnings improvement in Q4’21
We expect solid net sales growth of 17.4% from a weak comparison period, topline totaling EUR 125.5m vs. 123.4m cons. The growth is driven by both BUs (W&E +13.4% & IM +24.1%). We expect group adj. EBIT to improve by 29.6% y/y to EUR 18.3m (14.6% margin) vs. 16.8m cons. In our estimates, W&E contributes the EBIT with EUR 7.8m (10.3% margin) and IM with EUR 10.9m (22% margin) respectively. With the profitability improvement, we expect clear 60% EPS growth. We estimate the BoD to propose a dividend of EUR 0.63 vs. 0.64 cons.

Strategy execution continued, but component shortage disturbs topline growth in 2022
The company has successfully continued its strategy execution by its solid revenue growth in both BUs. The company also acquired software company AerisWeather to strengthen its growth in DaaS and SaaS recurring revenue businesses during Q1’22. Vaisala obtains valuable data-service and software development capabilities through the acquisition in addition to a few million recurring revenue impact. In 2022, we expect the growth pace to slow a bit down to 8.3% mainly due to uncertainties regarding component availability. Despite the supply chain issues, we expect solid 16% earnings growth in 2022.

HOLD with a target price of EUR 43
Vaisala has historically been trading with EV/EBITDA multiple around 20x. Currently, with a 21-22E EV/EBITDA of 22-19x, the company trades with a slight premium compared to its peers, but given Vaisala’s quality and lower risk profile, we find the premium justified. With our estimates intact, we retain our HOLD-rating and TP of EUR 43.

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Raute - EBIT improves from a low base

14.02.2022 - 09.35 | Company update

Raute’s Q4 report didn’t provide that many news as recent profitability challenges are familiar. Demand stays high, but inflation means H1’22 EBIT is to remain well below potential. We continue to expect gradual improvement.

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Results will improve this year (and next)

Raute’s Q4 revenue grew 13% y/y to EUR 44m, while EBIT was EUR 0.5m vs our EUR -0.6m estimate; the gap was due to the allocation of cloud-based IT project costs, which were spread retroactively over many quarters. Raute’s Q4 EBIT was still a far cry from potential, but order momentum continued stronger than we expected and even Raute was surprised by the EUR 50m in Q4 orders. Q1 orders have remained robust, however not quite as high as in Q4, and we expect the figure to top EUR 30m. Raute can meet the current level of demand, but delivery times have naturally been prolonged. Raute guides improving EBIT, but various factors, including inflation, will make the precise gradient hard to gauge. The IT project also continues to burden short-term results yet will contribute to EBIT going forward.

Inflation will still burden near-term results

We make no significant changes to our estimates; we expect Raute to reach around 5% EBIT margin this year. H1’22 EBIT will still suffer from inflation as the orders signed earlier materialize, but the situation should improve somewhat throughout the year as the order book rolls forward and so catches up with higher component prices. We revise our FY ’22 EBIT estimate to EUR 8.6m (prev. EUR 9.0m), while our new FY ’23 estimate is EUR 11.3m (prev. EUR 11.0m). The inflationary environment’s precise impact on the order book’s unfolding remains to be seen, but in our view the current active order level means EBIT is set to improve for at least a few years.

We retain our EUR 22 TP and BUY rating

Raute’s valuation remains undemanding, around 5-6x EV/EBITDA and 6-8x EV/EBIT on our FY ’22-23 estimates, and in our view some caution is in order considering the uncertainty inflation imposes on near-term results. Yet we believe Raute is poised to again reach EUR 10m EBIT in the coming years. That mark would imply only around 6% EBIT margin, a level Raute has managed to top with some EUR 150m annual revenue, while current demand in our view can support a top line EUR 20-30m higher than that.

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Etteplan - Expectations set quite high for 2022

11.02.2022 - 09.40 | Company update

Etteplan’s Q4 figures were quite in line with expectations. The 2022 guidance implies solid growth, which we currently have some challenges in envisaging.

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Q4 quite in line with expectations
Etteplan reported Q4 results quite in line with expectations. Revenue grew some 21% to EUR 85.3m (EUR 82.9m/82.9m Evli/cons.), with organic growth of some 15%. EBIT amounted to EUR 7.8m (EUR 7.9m/8.1m Evli/cons.). Growth was particularly good in Software and Embedded solutions, although profitability suffered slightly from growth investments and the increased use of subcontracting due to the challenges with availability of professionals within certain areas.

Guidance implies solid growth
Etteplan gave a rather good guidance, in particular in terms of growth, with revenue expected to amount to EUR 340-370m and EBIT to EUR 28-32m, with pre-Q4 expectations of EUR 338.3m/326.9m (Evli/cons.) and 29.6m/29.6m (Evli/cons.) respectively. Taking into account the inorganic growth from the recent acquisitions of Cognitas and Syncore Technologies along with acquisitions made during 2021 the mid-range of the guidance would imply organic growth somewhere near 10%, which although certainly not unachievable, currently seems somewhat challenging due to the pandemic and some demand uncertainties. Growth could of course still be boosted by further acquisitions in line with the company’s strategy. The good organic growth in 2021 (8.9% y/y) was also skewed by the weak comparison period. We have made only slight changes to our 2022 estimates, expecting revenue of EUR 344.5m and EBIT of EUR 29.3m. Some weakness is seen during the start of 2022 due to the pandemic but we expect relative profitability and growth to pick up going forward.

HOLD with a target price of EUR 17.5 (17.0)
With only smaller changes to our estimates, we adjust our target price to EUR 17.5 (17.0), valuing Etteplan at approx. 20x 2022e P/E. Current valuation appears quite fair looking at peers and historical multiples. We retain our HOLD-rating.

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Raute - A very strong order intake

11.02.2022 - 09.30 | Earnings Flash

Raute’s Q4 figures didn’t include that many surprises as the company had already disclosed some preliminary info on FY ’21 results. The EUR 50m order intake was nevertheless a positive surprise considering Raute booked no big orders during the quarter.

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  • Q4 revenue grew by 13% y/y to EUR 44.1m. Project deliveries amounted to EUR 29.1m vs our EUR 27.0m estimate, while technology services stood at EUR 15.0m vs our EUR 17.0m estimate.
  • EBIT was EUR 0.5m, compared to our EUR -0.6m estimate. We see the difference was mostly due to the fact the IT project costs were booked over several quarters.
  • Order intake was EUR 50m vs our EUR 29m estimate. Project deliveries orders were EUR 36m, compared to our EUR 13m estimate, which we consider a very strong figure as there were no big orders. Technology services amounted to EUR 14m vs our EUR 16m estimate.
  • Order book stood at EUR 158m at the end of Q4 (EUR 94m a year ago).
  • Raute guides growing revenue and improving EBIT for FY ’22.
  • The BoD proposes a dividend of EUR 0.80 per share to be paid out vs our EUR 0.85 estimate.

Open report

Verkkokauppa.com - A small break for momentum of growth

11.02.2022 - 08.45 | Company update

The slowdown of consumer electronics market pushed Verkkokauppa.com’s Q4 net sales down by 4% y/y. We expect the softness in the market to continue also during H1’22. We retain our HOLD rating and TP of EUR 6.5.

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Tough quarter behind
The company’s net sales decreased by 4% y/y to EUR 168.9m driven by weak demand for its core categories. The growth was good in the B2B segment as well as in Computers, Games, Sports, and Toys products categories. The online transition continued and e-commerce represented 63% of total net sales. Despite tough market conditions, gross margin improved to 15.5% (15.1%), mainly driven by category mix and wise pricing decisions. Adj. EBIT declined by 14% y/y to EUR 5.3m (3.2% margin) due to lower sales. EPS amounted to EUR 0.09 and BoD proposed a dividend of EUR 0.246.

Guidance implies growth to continue
The company guides net sales growth and possible profitability improvement during 2022. Revenue is estimated to reach EUR 590-640m and EBIT EUR 19-15m. Driven by weakened visibility to the consumer electronics market, we have made some adjustments to our estimates. In 2022, we expect net sales of EUR 610.0m and EBIT of EUR 22.3m (3.7% margin). The growth is driven by online transition and good development of the evolving categories. In Q1’22, we expect the core categories to still suffer from weak demand and net sales amount to EUR 133.6m and EBIT totaling EUR 3.9m (2.9% margin). Jätkäsaari’s automated warehouse is estimated to be in production until the end of Q1’22 and we are expecting cost savings to kick in during H2’22 as the utilization rate of Vantaa rental warehouse will decrease.

HOLD with a target price of EUR 6.5
With our revised estimates, the company valuation is still slightly elevated. The company’s peers trade with 22E P/E 14-17x, while Verkkokauppa.com is trading at the upper bound of the range. We retain our HOLD rating and TP of EUR 6.5.

Open report

Etteplan - Quite as expected, good guidance

10.02.2022 - 13.45 | Earnings Flash

Etteplan's net sales in Q4 amounted to EUR 85.3m (EUR 82.9m/82.9m Evli/cons.) and operating profit to EUR 7.8m (EUR 7.9m/8.1m Evli/cons.). Dividend proposal: EUR 0.40 per share (EUR 0.40/0.40 Evli/Cons.). 2022 guidance: revenue EUR 340-370m and operating profit EUR 28-32m.

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  • Net sales in Q4 were EUR 85.3m (EUR 70.3m in Q4/20), slightly above our estimates and consensus estimates (EUR 82.9m/82.9m Evli/Cons.). Growth in Q4 amounted to 21% y/y, of which 15.2% organic growth.
  • Operating profit in Q4 amounted to EUR 7.8m (EUR 7.1m in Q4/20), in line with our estimates and slightly below consensus (EUR 7.9m/8.1m Evli/cons.), at a margin of 9.2%. EBITA amounted to EUR 9.0m vs. our estimate of EUR 8.9m.
  • EPS in Q4 amounted to EUR 0.26 (EUR 0.23 in Q4/20), above our estimates and consensus estimates (EUR 0.24/0.24 Evli/cons.).
  • Engineering Solutions net sales in Q4 were EUR 47.1m vs. EUR 47.6m Evli. EBITA in Q4 amounted to EUR 5.0m vs. EUR 4.9m Evli.
  • Software and Embedded Solutions net sales in Q4 were EUR 23.4m vs. EUR 21.5m Evli. EBITA in Q4 amounted to EUR 2.4m vs. EUR 2.8m Evli.
  • Technical Documentation Solutions net sales in Q4 were EUR 14.3m vs. EUR 13.6m Evli. EBITA in Q4 amounted to EUR 1.7m vs. EUR 1.5m Evli.
  • Dividend proposal: Etteplan’s BoD proposes a dividend of EUR 0.40 per share (EUR 0.40/0.40 Evli/Cons.).
  • Guidance for 2022: Revenue is estimated to be EUR 340-370m (EUR 338.3m/326.9m Evli/cons.) and the operating profit is estimated to be EUR 28-32m (EUR 29.6m/29.6m Evli/cons.).

Open report

Pihlajalinna - Strategy and EBIT on track

10.02.2022 - 09.35 | Preview

Pihlajalinna reports Q4 results on Fri, Feb 18. We make small positive revisions to our Q4 estimates as we expect Covid-19 services to have remained high due to Omicron, but we don’t expect Pihlajalinna to guide much more than flat EBIT for FY ’22 as M&A integration has barely begun.

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We make small upward revisions to our Q4 estimates

Pihlajalinna’s EBIT continued to improve in Q3 despite an increase in outsourcing costs for which the company hadn’t yet received much compensation. The Finnish virus situation worsened again in Q4, and we believe Omicron has had a slight positive net effect on Q4 top line and EBIT; we previously expected Covid-19 services revenue to decline some in Q4 but we now estimate it to have remained pretty much flat q/q. We update our Q4 revenue estimate to EUR 156.4m (prev. EUR 153.9m) and thus expect y/y growth to have remained around 14%. We estimate y/y EBIT improvement to have steepened a bit in Q4 and now estimate Q4 EBIT at EUR 9.2m (prev. EUR 8.9m).

The acquisition will limit EBIT guidance in H1’22

Pihlajalinna has just completed the acquisition of Pohjola Hospital, a chain with a focus on orthopaedics and some EUR 60m in revenue, which make it a target of reasonable size and complementary fit for Pihlajalinna. The target turned a loss of EUR 10m in terms of EBIT in FY ’20 due to a dip in volumes; the losses might have narrowed somewhat already in FY ’21, however this hadn’t happened during the first 4 months of the year, but we expect losses or at least margin dilutive impact in H1’22. Margin accretion should occur in FY ’23 as insurance customers drive volumes and Pihlajalinna achieves cost synergies. We expect more specific updates to financial targets either in connection with the Q4 report or later during the spring. We continue to expect meaningful EBIT upside beyond this year and last, although we believe Pihlajalinna will not guide much more than flat or slightly improving EBIT for FY ’22 at such an early point when the target’s integration has only started.

Both margins and multiples remain on the modest side

Our view is unchanged as Pihlajalinna trades ca. 6.5-8.0x EV/EBITDA and 13.0-16.5x EV/EBIT on our FY ’21-22 estimates. The multiples are well below peers’ while margins remain at relatively modest levels. We retain our EUR 14 TP and BUY rating.

Open report

Verkkokauppa.com - Tough Q4, acquisition caught the attention

10.02.2022 - 09.00 | Earnings Flash

Verkkokauppa.com’s Q4 topline fell short of our expectations. Net sales declined by 4% y/y to EUR 168.9m, while adj. EBIT amounted to EUR 5.3m (3.2% margin). The company acquired e-ville.com online store to strengthen its private label offering.

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• Q4 revenue declined by 4% y/y, totaling EUR 168.9m vs. 183.4m/183.7m Evli/cons. Growth was good in B2B, Computers, Games, Sports and Toys, while core categories suffered from weak demand. Gross margin improved to 15.5% (prev. 15.1%).
• Online sales represented 63% (prev. 62%) of total sales.
• Consumer segment represented 72% of total sales. B2B sales increased by 11% y/y, representing 20% of total sales. Exports segment is still lacking and represented 7% of total sales.
• Adj. EBIT amounted to EUR 5.3m (3.2% margin) vs. 5.5m/5.5m Evli/cons.
• EPS was EUR 0.09 vs. 0.09/0.12 Evli/cons.
• Board of Directors proposes dividend of EUR 0.246 vs. 0.25/0.25 Evli/cons.
• 2022 guidance: Net sales of EUR 590-640m and EBIT of EUR 19-25m.
• Last night, the company announced its acquisition of Finnish e-retailer e-ville.com. The acquisition supports Verkkokauppa.com's strategy to strengthen and expand its assortment in its own brands. E-ville.com generated net sales of EUR 10m and EBIT of EUR 0.5m (5% margin) during 4/2020-3/2021. The preliminary purchase price amounts to EUR 5.3m and is financed with cash (EUR 3.3m) and a special offering (EUR 2.0m). The parties have also agreed to additional purchase price installments of up to EUR 6.7m if certain sales-related terms are met. The preliminary purchase price is valued at approx. same multiples as Verkkokauppa.com is trading (EV/S: 0.5x vs. 0.5x and EV/EBIT: 11x vs. 14x). We will open the acquisition more in our company update (published tomorrow).

Open report

Finnair - Cost uncertainty surfaces

09.02.2022 - 10.00 | Preview

Finnair reports Q4 results Thu, Feb 17. In our view the latest pandemic twists do not stage any significant further operational challenges for Finnair, yet we believe valuation has inched ahead of itself amid cost uncertainty. Our TP is now EUR 0.60 (0.65); our new rating is SELL (HOLD).

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Finnair will continue to lag peers especially in H1’22

Q4 RPK was very close to what we had estimated despite the onset of Omicron; the latest variant(s) have indicated how there’s robust pent-up travel demand as traffic figures continued to grow in December despite uncertainty related to restrictions. Meanwhile Finnair’s flows continue to lag those of Western peers as Asian volume recovery is further delayed. We believe China is still set to open in H2’22, but we now expect Japan and South Korea not to contribute much before Q2’22. In our view the Asian lag isn’t a major issue for Finnair considering the measures taken to reinforce balance sheet as well as the fact that cash flow already turned positive in Q3. The short as well as long term effects of Omicron are hard to discern because the infection peak happens to play out over months which are very different in terms of seasonal demand, and it’s still too early to say whether the variant might accelerate the pandemic towards its end.

OPEX cuts help but jet fuel prices have continued to gain

Jet fuel prices have continued to soar, the spot rate up by some 15% in the past three months, meaning the achieved operating expenditure cuts will be valuable in securing profitability during the quarters and years ahead. We expect Q1’22 EBIT to remain in the red similarly as in Q4’21, roughly to the tune of EUR 100m, while we believe some improvement will happen in Q2 but not nearly enough to reach break-even. We make only very minor downward revisions to our volume and revenue estimates, but we revise our FY ’22 EBIT estimate down to EUR -11m (prev. EUR 30m) and that for FY ’23 down to EUR 164m (prev. EUR 232m).

Valuation seems to have turned dear amid cost uncertainty

Many carriers’ valuations have advanced in the past few months, and thus Finnair also arguably deserves some further boost. Finnair’s recovery will however take longer than those of peers; the company close 15x EV/EBIT on our FY ’23 estimates, a slight premium relative to a sector that seems itself fully valued. Our TP is now EUR 0.60 (0.65); our new rating is SELL (HOLD).

Open report

Etteplan - Set for continued good growth

08.02.2022 - 09.45 | Preview

Etteplan reports Q4 results on February 10th, with expectations of rather good growth and margins. Growth is set to continue in the double-digits in 2022 with the recent acquisitions.

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Rather good Q4 figures expected
Etteplan reports Q4 results on February 10th. Etteplan’s Q3 results were on the softer side due to the vacation season and a slower start to projects as well as the global component shortage. Etteplan’s organic growth investments also started to pick up, with the headcount up some 4% q/q (partly from acquisitions), which had a slight impact on profitability. We expect revenue growth of 17.9% to EUR 82.9m (cons. 82.9m), with pickup in demand from the weaker comparison period and made acquisitions. We expect a quite good level of profitability, although below the comparison period, with growth investments having picked up. We expect an EBIT of EUR 7.9m (cons. 8.1m). The company estimates 2021 revenue to be EUR 295-310m (Evli EUR 297.7m) and EBIT of EUR 25-28m (Evli 25.9m). Our Q4 estimates are intact ahead of the results.

Acquisitions boosting 2022 growth expectations
Etteplan recently acquired technical information lifecycle management company Cognitas GmbH and technology services company Syncore Technologies Ab, focusing on embedded systems. The combined historic revenue of the acquired companies is at around EUR 20m. We have adjusted our estimates for the acquisitions, expecting 2022 revenue of EUR 338.3m, for a y/y growth of 13.6%. We expect EBIT of EUR 29.6m at an 8.8% margin, on par with expected previous year levels. Margin uncertainty relating to growth investments and market environment is present but should the growth investments translate into organic growth as planned, then healthy margins should reasonably be expected.

HOLD with a target price of EUR 17.0
We retain our target price of EUR 17.0 and HOLD-rating. Current valuation on our estimates appears quite elevated compared with peers, with 2022E P/E of ~20x.

Open report

Raute - Order book will drive results

07.02.2022 - 09.30 | Preview

Raute reports Q4 results on Fri, Feb 11. Last year was another gap in terms of profitability, but Raute has managed to stack up a record-high order book in the past year or so. We make some estimate revisions but continue to expect steep earnings growth for this year and beyond.

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Q4 results were still burdened by various factors

Raute gave preliminary info on FY ’21 results, according to which EBIT remained negative. A large part of this negative revision was due to the agenda decision on cloud-based IT systems, which dictates Raute to expense EUR 2.9m of costs associated with a project capitalized earlier. EUR 2.0m will be booked for FY ’21 and EUR 0.9m retroactively for FY ’20. The booking decision is not a major issue from financial performance standpoint, but Q4 figures were also burdened by certain problems of varying acuteness, including infections which halted the main production plant’s operations. Labor issues exacerbated the problem during a busy season, and component availability challenges reduced top line while price inflation weakened EBIT.

We expect improving EBIT over the year and beyond

Raute’s order book reached a record EUR 150m in Q3 and hence the company is poised to turn a profit again this year. Just how much Raute’s profitability will improve in FY ’22 is by far the most important question because there’s not that much to discuss with respect to the adequacy of current demand and workload. Raute’s business model does not make very specific guidance practical and so we believe Raute will at this point guide only improving profitability. We would be surprised by any stronger wording this early in the year. We have made only relatively small revisions to our estimates. We now estimate FY ’22 revenue at EUR 164.0m (prev. EUR 162.2m) and EBIT at EUR 9.0m (prev. EUR 10.0m). This represents a steep gain from last year yet still well short of the company’s long-term potential.

Earnings multiples appear by no means demanding

Raute trades at multiples of some 6.0-7.5x EV/EBITDA and 8.5-10.5x EV/EBIT on our FY ’22-23 estimates. Raute is the leader in a cyclical niche and so there aren’t that relevant peers, but the multiples are low relative to Nordic capital goods names at a time when Raute’s profitability is expected to remain subdued. Our TP is now EUR 22.0 (26.5); we retain our BUY rating.

Open report

Consti - Steadily moving forward

07.02.2022 - 09.30 | Company update

Consti’s Q4 results were on the softer side, with some performance challenges in two regional business units. The guidance implies rather healthy margins in 2022. We retain our BUY-rating with a TP of EUR 14.0 (14.5).

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Q4 results on the softer side
Consti reported Q4 results that were on the softer side. Revenue amounted to EUR 82.6m (EUR 86.9m/86.4m Evli/Cons.), with growth of 5.8% y/y. Profitability declined y/y with EBIT amounting to EUR 3.0m (EUR 3.7m/3.4m Evli/cons.). Profitability was impacted by the performance of two regional business units, where corrective actions are ongoing. The order backlog development was on a good track, with new orders of EUR 66.9m and the order backlog up 28.4% y/y to EUR 275.1m. Consti’s BoD proposes a dividend of EUR 0.45 per share (EUR 0.35/0.41 Evli/cons.).

Expect revenue and earnings growth in 2022
Consti’s estimates that its operating result for 2022 will be EUR 9-13m, in line with our and consensus pre-Q4 estimates (EUR 11.0m/11.5m Evli/cons.). No guidance was given on revenue but activity is seen to be higher going into this year compared with the same time in the previous year. The acquisition of RA-Urakointi is also set to boost revenue. We have only made small tweaks to our 2022 estimates, expecting revenue of EUR 309.7m (prev. EUR 314.3m) and EBIT of EUR 10.9m (prev. EUR 11.0m). The situation with construction material prices and availability still pose some margin risks going into 2022, with prices still on elevated levels and material availability uncertainty. The market demand situation appears to be rather adequate, but uncertainties due to the pandemic continue to impact on demand from corporations

BUY with a TP of EUR 14.0 (14.5)
With only small estimate revisions we finetune our TP to EUR 14.0 (prev. 14.5) per share, valuing Consti at approx. 14.0x 2022 P/E, and retain our BUY-rating. Our target price puts valuation quite in line with both the Nordic construction company peer and building installations and services company peers.

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Verkkokauppa.com - Soft market weakens Q4 figures

04.02.2022 - 11.20 | Preview

Verkkokauppa.com reports its Q4 result next Thursday. We have made some revisions to our near-term estimates as a result of soft market condition in consumer electronics goods. We downgrade our rating to HOLD (BUY) and adjust TP to EUR 6.5 (10).

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Soft market environment seems to continue
After strong H1’21 the consumer electronics market turned soft and the market participants have indicated that the trend has continued also in Q4. Part of the consumer expenditure has moved from consumer goods to services as COVID restrictions were removed during H2’21 and Finland’s decreased consumer trust might indicate the lower attraction for consumption in general. In our understanding, market performance was below expectations during important campaigns and the new Omicron variant has increased the uncertainty during higher-margin Christmas sales.


Estimate revision ahead of Q4
Based on the weakened market conditions, we have tweaked our near-term estimates, expecting Q4 net sales of EUR 184.3m (prev. 194.5m) vs. 188m cons. and an EBIT of EUR 5.5m (prev. 6.5m) vs. 5.9m cons. Our Q4 growth estimate of 4.7% is driven by strong performance in B2B and evolving categories. The increased share of evolving categories partially offsets the decline in the margin caused by price-driven competition. In 2021, we expect net sales of 589.8m vs. 594m cons. and an EBIT of EUR 20.5m vs. 21m cons. For 2022-23E, we are expecting a net sales growth of 7.2% and 8.1% respectively as well as an EBIT margin of 3.7% and 4.2% respectively. We expect the soft market to continue, lowering the growth pace during H1’22. We estimate a dividend proposal of EUR 0.25 vs. 0.25 cons.

HOLD with a target price of EUR 6.5
With our revised estimates, the company is trading with a P/E multiple of 17.5x (22E), which is above its peer group median. Given the weakened market environment, we have taken more cautious stand. We don’t see room for upside in the valuation, and the expected return is not met with a 3.7% dividend yield. We downgrade our rating to HOLD (BUY) and adjust TP to EUR 6.5 (10).

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SRV - Downgrade to HOLD

04.02.2022 - 09.55 | Company update

SRV’s Q4 results were on the weaker side but operatively slightly above our estimates. With the current uncertainties we struggle to see realization of valuation upside and downgrade to HOLD (BUY) with a TP of EUR 0.54 (0.60).

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Operatively slightly better than expected
SRV reported Q4 results, which operatively in fact slightly beat our estimates. Revenue amounted to EUR 336.3m (EUR 316.0m/316.0m Evli/Cons.) while the operative operating profit amounted to EUR -4.6m (Evli EUR -5.5m). The operating profit however fell below expectations to EUR -11.5m (EUR -5.5m/-0.8m Evli/cons.). SRV also wrote down the entire value of its holdings and receivables relating to the shopping centre 4Daily, due to weak occupancy rates and profitability, which had an EUR 6.1m negative impact on financial expenses. The company estimates revenue in 2022 to amount to EUR 800-950m and operative operating profit to improve on 2021. The profitability guidance could have signalled more strength but reflects the current market uncertainties.

Profitability potential but also uncertainties
We now expect revenue of EUR 863.8m (prev. EUR 938.5m) and operative operating profit of EUR 21.0m (prev. 29.1m). We expect revenue to decline within housing construction given the still low number of developer contracted housing unit start-ups. Uncertainty relating to profitability development is quite high. Development could be substantial y/y, as the implied underlying profitability excl. the Tampere Areena project in 2021 would have been fair. The situation with construction material pricing and availability however still poses a risk. Lower volumes and fewer expected potentially higher margin developer contracted housing unit completions are also to be taken into consideration.

HOLD (BUY) with a target price of EUR 0.54 (0.60)
On our lowered estimates and the prevailing geopolitical uncertainties and additional shopping centre woes we see that the potential realization of valuation upside from exits and profitability improvement is currently beyond grasp. We lower our target price to EUR 0.54 (0.6) and rating to HOLD (BUY).

Open report

Suominen - Soft start for the year

04.02.2022 - 09.45 | Company update

Suominen’s Q4 performance didn’t meet estimates, at least in terms of profitability, and FY ’22 guidance also disappointed as the issues which surfaced last summer continue to trouble in the short-term.

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Certain customers still suffer from high inventories
Suominen’s Q4 revenue grew by 4% y/y to EUR 115.6m, ahead of the EUR 113.0m/113.3m Evli/cons. estimates. Europe amounted close to what we expected, while Americas was ahead, but gross profit was only EUR 8.4m vs our EUR 14.4m estimate. Suominen’s pricing improved but not to the extent we expected, and hence high variable costs ate margins. The pandemic also caused plant-level problems. The EUR 9.0m EBITDA benefited from cost cuts but didn’t meet the EUR 12.1m/12.6m Evli/cons. estimates. Some customers’ high demand resumed, but others continued to languish as inventories remained elevated. There’s now a short-term see-saw pattern in demand which manifests itself in y/y lower Q1’22 top line. The demand issues are very customer-specific but happen to impact Americas for the most part. There seem to have been no major changes in this respect. Suominen expects end consumer demand to remain above pre-pandemic levels, and the picture should again improve in Q2.
We cut especially H1’22 estimates
Raw materials prices have overall stabilized, but there’s been mixed development as e.g. pulp has declined while viscose has advanced. Meanwhile US logistics issues persist, and transportation costs remain high. The completed investments, on the other hand, pose no major ramp-up costs. We cut our FY ’22 revenue estimate to EUR 455m (prev. EUR 467m) and that for EBITDA to EUR 40.8m (prev. EUR 50.9m). We cut FY ’23 profitability estimates by ca. EUR 2-3m. The estimate cuts concern particularly H1’22, from where we expect improvement.
Margins and multiples are low relative to peers
Suominen’s multiples remained low before the report, but they still didn’t sufficiently reflect the persistent current uncertainty. Suominen is valued around 5.0-6.5x EV/EBITDA and 8.0-12.5x EV/EBIT on our FY ’22-23 estimates. The absolute multiples are not that low for this year, but we expect improvement over the year; Suominen remains valued below peers while margins are also low. Our new TP is EUR 5 (6); we retain our BUY rating.

Open report

Consti - Guidance in line with expectations

04.02.2022 - 09.00 | Earnings Flash

Consti's net sales in Q4 amounted to EUR 82.6m, below our and consensus estimates (EUR 86.9m/86.4m Evli/cons.), with growth of 5.8% y/y. EBIT amounted to EUR 3.0m, below our and consensus estimates (EUR 3.7m/3.4m Evli/cons.). The BoD proposes a dividend of EUR 0.45 per share (EUR 0.35/0.41 Evli/cons.). Operating result in 2022 is expected to be EUR 9-13m.

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  • Net sales in Q4 were EUR 82.6m (EUR 78.1m in Q4/20), below our and consensus estimates (EUR 86.9m/86.4m Evli/Cons.). Sales grew 5.8% y/y.
  • Operating profit in Q4 amounted to EUR 3.0m (EUR 3.0m in Q4/20), below our and consensus estimates (EUR 3.7m/3.4m Evli/cons.), at a margin of 3.6%. During Q4 the increase in construction costs had a somewhat greater impact than in the beginning of the year.
  • EPS in Q4 amounted to EUR 0.3 (EUR 0.27 in Q4/20), below our consensus estimates (EUR 0.35/0.32 Evli/cons.).
  • The order backlog in Q4 was EUR 218.6m (EUR 177.9m in Q4/20), up by 22.9%. Order intake was EUR 66.9m in Q4 (Q4/20: EUR 54.3m).
  • Free cash flow amounted to EUR 6.1m (Q4/20: EUR 3.6m).
  • Consti’s BoD proposes a dividend of EUR 0.45 per share (EUR 0.35/0.41 Evli/cons.).
  • Guidance for 2022: Operating profit is expected to be between EUR 9-13m. The guidance is well in line with our estimate of EUR 11.0m and EUR 11.5m consensus estimates.

Open report

CapMan - Earnings outlook still very favourable

04.02.2022 - 08.30 | Company update

CapMan’s Q4 profitability beat expectations to finish an overall solid year. Earnings are set to pick up further in 2022 driven by carried interest and our views on CapMan remain clearly positive.

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2021 was a solid year overall
CapMan reported solid Q4 results, rounding of a year of clear earnings improvement. The operating profit amounted to EUR 12.2m, beating both our and consensus estimates (EUR 10.7m/9.4m Evli/cons.). Y/y the operating profit improved by 262%. The Management Company business saw good continued growth, aided by a ~EUR 700m net increase in AUM during 2021, with management fees surpassing EUR 10m during the last quarter. The Services business also continued good growth, with CaPS showing profitable growth and JAY Solutions profitability seen to start to pick up. The Investment business returns were strong also in the final quarter and the main driver behind CapMan’s 2021 earnings. CapMan as expected proposes a dividend of EUR 0.15 per share (0.15 Evli/cons.).

Carried interest expected to boost earnings further
We have not made any substantial revisions to our estimates post-Q4. We expect continued growth in the Management Company and Service businesses, with the former expected to pick up clearly in earnings due to carried interest as the NRE-I fund is set to enter carry and the outlook for further funds entering carry also appearing to be quite favourable. We are still somewhat cautious to investment returns compared with the strong 2021 figures but still expect to see a good level. Should the pace continue CapMan would be well set to continue on an over EUR 40m annual operating profit track excluding carry. In 2022 we expect a y/y increase in operating profit of some 30% driven largely by the expected carried interest.

BUY with a target price of EUR 3.4
Absolute valuation on our estimates is very affordable and even excl. the highly unpredictable carried interest is not too challenging. Dividend yields also continue to support the investment case. We retain our BUY-rating and TP of EUR 3.4.

Open report

Suominen - EBITDA outlook lower than expected

03.02.2022 - 10.00 | Earnings Flash

Suominen’s Q4 revenue topped expectations, but profitability didn’t reach estimates. Suominen also guides decreasing EBITDA for FY ’22, particularly due to challenging Q1, while we had expected flat development.

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  • Q4 revenue was EUR 115.6m vs the EUR 113.0m/113.3m Evli/consensus estimates. Top line grew by 4% y/y. Europe amounted to EUR 46.7m vs our EUR 47.0m estimate, while Americas was EUR 68.9m vs our EUR 66.0m estimate.
  • Gross profit was EUR 8.4m, compared to our EUR 14.4m estimate. Gross margin was therefore 7.3% vs our 12.7% estimate.
  • EBITDA amounted to EUR 9.0m vs the EUR 12.1m/12.6m Evli/consensus estimates. EBIT was EUR 3.9m vs the EUR 7.1m/7.1m Evli/consensus estimates. Nonwovens’ sales prices were higher y/y, but sales volumes were lower and raw material, freight and energy prices also increased. Manufacturing and SG&A cost savings actions had a positive impact on the result. Other operating income and expenses were positively impacted by insurance compensations and adjustments to certain previous year accruals. Currencies impacted EBITDA negatively by EUR 0.5m.
  • Suominen guides comparable EBITDA to decrease in FY ’22 (EUR 47.0m in 2021). Inventory levels remain high at certain customers, and the entire supply chain still faces operational issues due to the pandemic. These factors continue to have a negative impact on the result especially in Q1. We had estimated EUR 50.9m EBITDA for FY ’22.
  • The BoD proposes EUR 0.20 per share dividend to be distributed.

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SRV - Guidance appears lackluster

03.02.2022 - 09.35 | Earnings Flash

SRV's net sales in Q4 amounted to EUR 336.3m, above our estimates and above consensus estimates (EUR 316.0m/316.0m Evli/cons.). EBIT amounted to EUR -11.5m, below our and consensus estimates (EUR -5.5m/-0.8m Evli/cons.). Group revenue in 2022 is expected to be EUR 800-950m and the operative operating profit is expected to improve on 2021.

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  • Revenue in Q4 was EUR 336.3m (EUR 292.5m in Q4/20), above our and consensus estimates (EUR 316.0m/316.0m Evli/Cons.). Growth in Q4 amounted to 15% y/y.
  • Operating profit in Q4 amounted to EUR -11.5m (EUR -8.0m in Q4/20), below our estimates and consensus estimates (EUR -5.5m/-0.8m Evli/cons.), at a margin of -3.4%. The operative operating profit in Q4 amounted to EUR -4.6m, slightly above our estimate of EUR -5.5m.
  • The order backlog in Q4 was EUR 872.3m (EUR 1153.4m in Q4/20), down by -24.4 %.
  • Construction revenue in Q4 was EUR 335.8m vs. EUR 315.9m Evli. Operating profit in Q4 amounted to EUR -1.3m vs. EUR -3.0m Evli.
  • Investments revenue in Q4 was EUR 0.6m vs. EUR 1.1m Evli. Operating profit in Q4 amounted to EUR -8.6m vs. EUR -1.0m Evli.
  • Other operations and elim. revenue in Q4 was EUR -0.2m vs. EUR -1.0m Evli. Operating profit in Q4 amounted to EUR -1.5m vs. EUR -1.5m Evli.
  • Dividend proposal: The BoD proposes that no dividend be paid for FY 2021 (EUR 0.00/0.00 Evli/Cons.).
  • Guidance for 2022: Group revenue is expected to be EUR 800-950m and the operative operating profit is expected to improve on 2021

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CapMan - Better than expected finish to year

03.02.2022 - 08.45 | Earnings Flash

CapMan's net sales in Q4 amounted to EUR 14.7m (EUR 14.5m/15.0m Evli/cons.) and EBIT to EUR 12.2m (EUR 10.7m/9.4m Evli/cons.). CapMan proposes a dividend of EUR 0.15 per share (EUR 0.15/0.15 Evli/Cons.).

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  • Revenue in Q4 was EUR 14.7m (EUR 13.4m in Q4/20), in line with our estimates and consensus estimates (EUR 14.5m/15.0m Evli/Cons.). Growth in Q4 amounted to 10% y/y.
  • Operating profit in Q4 amounted to EUR 12.2m (EUR 9.7m in Q4/20), above our estimates and consensus estimates (EUR 10.7m/9.4m Evli/cons.), at a margin of 83.2%.
  • EPS in Q4 amounted to EUR 0.06 (EUR 0.04 in Q4/20), slightly above our estimates and consensus estimates (EUR 0.05/0.05 Evli/cons.).
  • Management Company business revenue in Q4 was EUR 11.8m vs. EUR 11.7m Evli. Operating profit in Q4 amounted to EUR 3.2m vs. EUR 3.1m Evli.
  • Investment business revenue in Q4 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q4 amounted to EUR 9.6m vs. EUR 8.9m Evli.
  • Services business revenue in Q4 was EUR 2.4m vs. EUR 2.2m Evli. Operating profit in Q4 amounted to EUR 1.2m vs. EUR 0.7m Evli.
  • Revenue in Other in Q4 was EUR 0.5m vs. EUR 0.6m Evli. Operating profit in Q4 amounted to EUR -1.7m vs. EUR -1.9m Evli.
  • Dividend proposal: CapMan proposes a dividend of EUR 0.15 per share (EUR 0.15/0.15 Evli/Cons.).
  • Capital under management by the end of Q4 was EUR 4.5bn (Q4/20: EUR 3.8bn). Real estate funds: EUR 3.1bn, private equity & credit funds: EUR 1.0bn, infra funds: EUR 0.4bn, and other funds: EUR 0.1bn.

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Detection Technology - Underlying demand remains strong

03.02.2022 - 08.35 | Company update

Detection Technology came in strong with topline growth in all its BUs, but the growth pace was restricted by issues in the supply chain. The demand was strong in medical and industrial applications, while security saw the demand to pick up. We retain our HOLD-rating and adjust TP to EUR 26 (28).

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Strong growth but some sales were postponed in H2’21
In Q4’21, underlying demand continued strong and DT saw a topline increase of 24.3% y/y, totaling EUR 24.7m. Driven by strong demand for high-end CT devices and investments in health care, the medical business grew by 24% y/y to EUR 13.6m. IBU continued strong performance in all its segments and with new customers, the segment grew by 21.7% y/y to EUR 3.4m. SBU faced strong growth figures and net sales increased by 26.5% y/y to EUR 7.8m, driven by all segments except aviation. DT’s management noted that over EUR 3m of sales were postponed due to the lack of components. EBIT improved by 26% y/y to EUR 3.0m (12% margin), falling short of the company’s and our expectations. The profitability was lower than expected due to increased fixed costs.

Demand for detectors continues strong
The underlying demand in all BUs continues strong, but component shortages seem to restrict and postpone some of the H1’22 deliveries. Risks regarding component availability have increased, which might in the worst case lead to customer outflow. We have adjusted our estimates, now expecting revenue growth of 13.3% y/y in 2022, driven by a strong performance of SBU (22.1%) and IBU (16.2%), while MBU’s growth pace (7.6%) sees a slight slowdown due to component shortage. We estimate EBIT to improve to EUR 15.0m (14.8%) but fall slightly short of the company’s medium-term target of 15% margin in 2022.

HOLD with a target price of EUR 26 (28)
With our revised estimates, DT is trading above its peer group and we don’t find the premium justified given the uncertainties regarding component availability. In our view, now it’s not the time to increase the position, rather wait for the supply chain issues to ease. We retain our HOLD-rating and adjust TP to EUR 26 (28).

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Detection Technology - Component shortage reduced the growth pace

02.02.2022 - 09.45 | Earnings Flash

DT’s Q4 result fell slightly short of our estimates. Growth accelerated in all BUs, but the component shortage had an impact on sales. Demand was strong in the medical and industrial applications, while the security segment also grew and saw the demand picking up.

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Group results: Q4 net sales grew by 24% y/y to EUR 24.7m vs. 25.8m/25.6m Evli/cons. Profitability improved and adj. EBIT grew by 28% y/y, totaling EUR 3m (12% margin) vs. 3.9m/3.9m Evli/cons. R&D costs amounted to EUR 2.9m and were 11.8% of net sales (Q4’20: EUR 2.2m, 11.3%).
Medical (MBU): net sales came in strong and grew by 24% y/y to EUR 13.6m vs. 14.2m (Evli). The growth was driven by investments in healthcare and strong demand for high-end CT devices.
Security (SBU): the demand picked up and the topline grew by 26.5% y/y to EUR 7.8m vs. 8m (Evli). The growth was seen in all segments except aviation, but the demand for aviation solutions has evolved positively.
Industrial (IBU): net sales increased by 22% y/y, totaling EUR 3.4m vs. 3.6m (Evli). The demand was strong in DT’s all main IBU segments.
Dividend proposal: EUR 0.35 (0.38/0.35 Evli/cons.)
• DT reported that the risks of component shortage have increased and the company has started actions to enhance operative efficiency and find other components suppliers.
FY’22 outlook: demand will continue to be strong in all of the company’s main markets. The company expects double-digit growth in total net sales both in Q1 and Q2’22.
No changes in medium-term targets: at least 10% net sales growth and an EBIT-margin at or above 15%.

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Consti - Profitable growth track in place

02.02.2022 - 09.30 | Preview

Consti reports its Q4 results on February 4th. We expect double-digit growth, with some margin uncertainty due to the situation with construction materials. Growth is set to continue in 2022 supported by the order backlog and previous acquisition, with some potential for margin improvement depending on the market situation.

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Expecting double-digit growth, some margin uncertainty
Consti will report its Q4 results on February 4th. Q3 saw growth accelerate to double-digit figures compared with growth of 1.4% during H1/21. Growth has been supported by the strengthened order backlog, up 15% y/y at the end Q3. The order backlog has received support from the first projects within new construction services, were Consti signed its first projects after the addition to being part of the company’s strategy. Consti also made its first acquisition in a long time, that of RA-Urakointi Oy, a company specializing in the repair of apartments and row houses. We expect growth in Q4 to have remained at a good pace supported by the order backlog and expect a net sales growth of 11.3%. We expect the adjusted operating profit to be slightly below previous year levels due to uncertainties related to construction material prices and availability, at a margin of 4.2%.

Seeing continued good growth in 2022
We expect growth to continue in 2022 supported by the order backlog and acquisition of RA-Urakointi, with our growth estimate at 7.3%. Consti has typically only given a guidance for operating profit, and we expect for Consti to estimate an improvement in operating profit during 2022 compared with 2021. We currently estimate adjusted operating profit margins on par with 2021e, at 3.5%. There is potential for improvement, and we will be keeping an eye on management comments relating to the situation with construction material.

BUY with a target price of EUR 14.5
We have made no changes to our estimates ahead of Q4. On our estimates Consti currently trades at a 2022e P/E of 12.3x, which we do not see as overly challenging. We retain our target price of EUR 14.5 and retain our BUY-rating.

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CapMan - Strong year behind, more to come

01.02.2022 - 09.45 | Preview

CapMan is set to finish a year of solid performance. With the news on CapMan’s NRE fund we have shifted our end of the year carry expectations to 2022 but our views on CapMan remain unchanged.

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CapMan’s NRE fund set to enter carry early 2022
CapMan will report its Q4 results on February 3rd. We expect to see a steady q/q earnings trend and overall good finish to a year of solid performance. CapMan announced in early January that the CapMan Nordic Real Estate fund had made exits in several properties, with the fund set to start distributing carry after the completion of those transactions. After the transactions the fund will have four assets remaining in Denmark and Sweden. As such, we have shifted most of the carry we had estimated in Q4/21 to Q1/22. Apart from that, our estimates remain essentially intact. We expect an operating profit of EUR 10.7m. During 2021 CapMan has seen y/y comparable earnings improvement across the board, most notably within Investment services due to the weak comparison year. We expect a dividend proposal or EUR 0.15 per share (2020: EUR 0.14), for an implied dividend yield of 5.1%..

Room for further earnings improvement in 2022
CapMan does not give a numeric guidance and we do not expect one to be given for 2022. We expect carried interest to be a key driver in further earnings improvement, with the NRE fund moving into carry. Growth in AUM is expected to contribute to continued growth in fee-based earnings, with several on-going and planned fundraising projects. Investment returns have been strong during 2021, and we remain more modest in our expectations for 2022.

BUY with a target price of EUR 3.4
Apart from the shift in carried interest we have made no notable changes to our estimates ahead of the Q4 results. The recent market uncertainty potentially presents some headwind but at the same time the news on carried interest provides an additional confidence factor. We retain our BUY-rating and target price of EUR 3.4.

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Suominen - Flattish profitability from Q4 on

01.02.2022 - 09.35 | Preview

Suominen reports Q4 results on Thu, Feb 3. We leave our Q4 estimates unchanged but make small upward revisions to our FY ’22 estimates due to FX changes.

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Q4 figures should improve a lot from the Q3 lows

Suominen’s Q3 figures fell a lot more than was expected, but the report provided encouraging comments on outlook; performance should improve significantly already in Q4, and we continue to expect about EUR 8m q/q gain in Q4 EBITDA. We estimate the figure at EUR 12.1m, while we see top line grow 2% y/y and close to 15% q/q from the Q3 lows. We expect European revenue to reach new highs, while we see Americas still somewhat down from the peak levels but up 16% q/q. The relatively modest and completed investments in Italy and the US support growth this year, and we expect revenue to surpass the record set in FY ’20, but profitability is unlikely to reach the recent peaks during the next few years.

We expect only marginal profitability improvement from Q4

We find Suominen’s key raw materials prices basically flatlined q/q in Q4; this supports our view according to which incremental margin gains continue from Q4 onwards. USD has strengthened some 5% in the past three months and thus we raise our FY ’22 revenue estimate to EUR 467m (prev. EUR 455m). We continue to expect 6.5% EBIT margin for this year and hence flat absolute profitability, in other words EUR 50.9m in EBITDA. We expect Suominen to loosely guide flat profitability for FY ’22; negative wording seems unlikely considering the softness of Q3’21, while any commitment to positive development appears premature as many key variables remain much in flux.

Peer margins are expected to gain some 200bps in FY ‘22

Suominen’s valuation and estimates haven’t changed much in the past few months. The company continues to trade around 5.5x EV/EBITDA and 9x EV/EBIT on our FY ’21-22 estimates. The FY ’21 multiples are significantly below those of peers because the group is expected to gain some 200bps in FY ‘22 EBIT margin. Meanwhile we estimate Suominen’s FY ’22 EBIT margin down a bit due to the high figures seen in early FY ’21. Suominen’s multiples discount narrows this year due to the peers’ earnings accretion. We retain our EUR 6 TP and BUY rating.

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Detection Technology - Expecting strong growth figures

27.01.2022 - 09.45 | Preview

Detection Technology will report its Q4 results next Wednesday. Driven by robust topline growth, we expect the company to see strong earnings improvement. We retain our HOLD-rating and adjust our TP to EUR 28.0 (30.5).

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Expecting high double-digit growth
Driven by strong double-digit growth in all BUs, we expect Q4 revenue of EUR 25.8m (cons. 25.6m), meaning an increase of 30.1% y/y. We expect MBU to grow by 30.3% y/y, driven by strong demand for CT-scan devices. We estimate the earlier growth in SBU’s order book to realize and expect topline increase of 30.5% y/y, totaling EUR 8m. With new customerships, we estimate IBU to grow by 28.5% y/y to EUR 3.6m. Despite the issues in the supply chain, we expect the revenue growth to scale and EBIT to improve by 66% y/y to EUR 3.9m (cons. 3.9m).

Strong earnings growth despite the cost pressures
We expect the increased volume of air passengers and the growth of cross-border e-commerce to support the growth in the number of SBU’s orders. We estimate the security market to exceed pre-COVID levels within the next few years. The company and other players expect the component shortage to continue also in 2022. To reach its EBIT-margin target of 15%, the company must be able to enhance operative efficiency and show some pricing power. We expect the company to be able to shift some of the increased costs to customer prices during the new pricing period. Regarding the outlook, we remain waiting for the management's comments on the pace of recovery in the security markets and clarification of the company's earlier guidance for H1’22 (expecting double-digit growth).

HOLD with a target price of EUR 28.0 (30.5)
The fundaments of DT’s business haven’t changed and we made no changes to our estimates ahead of Q4. Market drivers remain bright, but the recovery of aviation still includes some uncertainty in the short-run. With recent market turbulence and depreciation of peer group valuation, we adjust our TP to EUR 28.0 (30.5) and retain our HOLD-rating.

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Netum - Growth track confirmed

26.01.2022 - 09.45 | Company update

Netum made some smaller adjustments to its guidance, with our main takeaway being the continued solid growth pace. We adjust our TP to EUR 4.3 (4.6) following recent market turbulence and peer multiple depreciation.

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Some smaller tweaks to guidance
Netum specified its guidance for 2021 on January 24th, with the revisions appearing to be rather small in relation to our expectations. The company now expects revenue for FY 2021 to amount to slightly over EUR 22m, having previously expected EUR 20-22m. The comparable EBITA is expected to be EUR 3.1m (prev. EUR 3.1m-3.5m). The revised revenue forecast is due to the integration of Cerion Solutions (as of 1.10.2021) and stronger than expected organic growth. Netum’s profitability has been affected by new recruitments, with around 90 new employees during 2021 (12/2020: 130 employees), along with weaker margins in a single fixed-price customer project.

Solid growth prospects
We noted in conjunction with the Cerion Solutions acquisition, that the revenue guidance being kept intact despite the expected EUR 1m positive impact on 2021 revenue was somewhat surprising. Fortunately, with the revised guidance the concerns of implied slower growth are clearly reduced. The comparable EBITA was somewhat below our previous EUR 3.4m expectations, with the project challenges not accounted for. Considering the challenging recruiting environment, the rapid growth in personnel is commendable and sets the foundation for continued strong growth, and we expect a growth of 22% in 2022. We see some need for caution in profitability improvement expectations due to the rapid growth and for now expect similar unadj. margins as in 2021.

HOLD with a target price of EUR 4.3 (4.6)
The guidance revision was overall slightly positive news, should the noted project challenges not impact further. However, with the recent market turbulence and peer multiple depreciation we adjust our target price to EUR 4.3 (prev. EUR 4.6) and retain our HOLD-rating, valuing Netum at approx. 16x 2022e adj. P/E.

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Enersense - Some more green to come

04.01.2022 - 09.45 | Company update

Enersense’s Q3 report was soft and left doubts with respect to the FY ’21 guidance. The company has now made upgrades to the guidance, but these seem to have been to a large extent driven by acquisition-related revaluations. Enersense nevertheless continues to progress with long-term strategy and is about to close two investments.

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We make some updates to our Q4 adj. EBIT(DA) estimates

Enersense revised its FY ’21 earnings guidance upwards. Enersense still expects EUR 215-245m in revenue, but now sees adj. EBITDA over EUR 19m (prev. EUR 17-20m) and adj. EBIT over EUR 11m (prev. EUR 8-11m). We leave our revenue estimate unchanged, update our Q4 adj. EBITDA estimate to EUR 7.4m (prev. EUR 5.6m) and that for adj. EBIT to EUR 5.1m (prev. EUR 3.3m). The underlying performance remains somewhat unclear because the guidance update was driven by revaluations related to the Enersense Offshore Oy acquisition.

Long-term earnings growth outlook should solidify

Enersense is about to expand its renewable energy solutions scope with the closure of two acquisitions in a month or so. The company will buy a significant stake in a green hydrogen producer called P2X and acquire an onshore wind farm developer in an all-share transaction. The latter target will be earnings accretive already in FY ’22; the acquisition of Megatuuli will contribute a cumulative EUR 20-40m in EBIT by 2025. Meanwhile an ERP investment will burden results this year along with a process related to the integration and development of Enersense Offshore, however the latter initiative should contribute to results in FY ’23. We leave our estimates for FY ’22 and ’23 unchanged for now, but Enersense will update its long-term financial targets in Q1.

Valuation remains undemanding

Enersense’s peer multiples have stayed pretty much unchanged over the past few months. Enersense continues to trade at modest multiples relative to peers. We believe Enersense’s vertical integration within the renewables value chain beyond construction and maintenance activities will help balance business risks, and hence long-term upside remains significant. Meanwhile short-term visibility isn’t still that great and thus we lower our TP to EUR 10 (11). Our rating remains BUY.

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SRV - Project risks materialized

14.12.2021 - 09.30 | Company update

SRV issued a profit warning due to the materialization of cost risks in the Tampere Arena project and postponement of the expected Pearl Plaza divestment, creating a dent in the improved progress so far during 2021.

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Profitability guidance lowered
SRV issued a profit warning on Monday, December 13th. The company now expects its operative operating profit to be positive (prev. EUR 16-21m). The revenue guidance of EUR 900-1,000 remains unchanged. The guidance revision is mainly due to cost risk materialization in the Tampere Arena project. The impact on 2021 figures has been approx. EUR -20m, of which EUR -13m was already included in Q3/2021 figures. Further affecting the guidance revision is the postponement of the sale of the Pearl Plaza shopping centre, which was earlier expected to be finalized during 2021.

Project risks continue to materialize
SRV has previously had challenges in managing certain projects of significant size, with these risks unfortunately materializing again. The project has been completed and further risks should be limited to certain final cost calculations. The P&L impact is unfortunate but shouldn’t cause financial risks, especially with the completion of the Loisto tower project and subsequent cash flows during Q4. The significant negative impact of the Tampere Arena project does continue to highlight that the underlying construction profitability is actually at rather good levels, but this is unfortunately of little consolation when risks in single major projects continue to materialize. We have lowered our 2021 operative operating profit estimate to EUR 4.4m (prev. EUR 17.2m) but apart from that our estimates remain largely unchanged.

BUY with a target price of EUR 0.6 (0.7)
With the risks to the company’s turnaround at elevated levels we lower our target price to EUR 0.6 (0.7). Upside potential is in our view still clearly in place but appears more remote with the postponement of expected Pearl Plaza divestment. Our rating remains BUY.

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Scanfil - Q4 EBIT will remain a bit modest

13.12.2021 - 09.30 | Company update

Scanfil’s earlier guidance suggested Q4 to be highly profitable, and we had estimated 6.9% EBIT margin, but well-known challenges have proved persistent for now.

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The fresh guidance implies some 5.1% Q4 EBIT margin

Scanfil issued a negative profit warning. Plants’ productivity has suffered due to continued component availability challenges, and the worsened Covid-19 situation has also bothered production. Q4 EBIT is further hit by the FX exposure due to the relatively high inventories, which the company build up earlier this year to be better able to meet demand by anticipating needs early on. Scanfil’s previous guidance suggested EUR 166-206m in Q4 revenue and EUR 11-14m EBIT. The new range implies EUR 176-196m top line and EUR 8-11m EBIT. We don’t view the news as a major issue in the long-term context because the challenges are to a large extent transitory in nature, although the pandemic and component shortage situations will persist at least during the early part of next year. Scanfil however doesn’t have to struggle with cost inflation since the contracting logic covers component purchases. Customer demand has also remained strong in Q4.

We continue to expect strong performance for next year

We make only small revisions to our top line estimates, but we revise our Q4 EBIT estimate down to EUR 9.7m from EUR 12.5m. We revise our FY ’22 EBIT estimate down to EUR 46.3m (prev. EUR 48.5m). The Hamburg restructuring measure by itself should help some EUR 2.5m in terms of cost savings; we hence expect 17% EBIT improvement for next year as the component and Covid-19 issues will begin to ease. Scanfil is set to achieve a robust double-digit top line growth this year, and we continue to estimate 7% growth for FY ’22. In our opinion 7% EBIT margin remains very much an appropriate long-term profitability target for Scanfil, and the company is unlikely to make any changes around that specific figure.

Earnings multiples are not expensive relative to peers

Scanfil is valued 9.5x EV/EBITDA and 13x EV/EBIT on our FY ’21 estimates. The levels aren’t particularly low, but in our view both demand and earnings growth outlook remain robust enough to warrant a longer perspective. The multiples are 8.5x and 11x on our FY ’22 estimates. We retain our EUR 9 TP and BUY rating.

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Fellow Finance - Short-term burdens

09.12.2021 - 09.30 | Company update

Fellow Finance lowered its guidance, with transaction costs relating to the planned merger a key part. Loan volumes have continued to grow but the relative growth of lower margin business financing and reduction of Lainaamo’s loan portfolio limit revenue growth.

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Lowered its 2021 guidance
Fellow Finance issued a profit warning on Thursday, December 2nd. The company now expects revenue in 2021 to be at previous year levels and the result to be clearly unprofitable. Previously the company expected slight growth compared to 2020 and for the result to be slightly unprofitable. The lowered revenue guidance is driven by the relative growth in lower margin business financing and lower interest income from a reduction of the Company’s subsidiary’s, Lainaamo’s, loan portfolio. The profitability is greatly affected by transaction costs relating to the combination agreement with Evli Bank Plc, which are estimated to be around EUR 950,000 in 2021. Profitability is further affected by growth investments.

Loan volumes continuing steady growth
In relation to our earlier estimates, the main change is due to the expected transaction costs, which are clearly higher than we had anticipated, while our 2021 revenue growth estimates are down by a few percentage points. Although profitability is affected by the non-recurring transaction costs the underlying business appears to be performing quite decently. Monthly facilitated loan volumes have surpassed EUR 20m in the past few months, although fee income growth has been slower due to stronger growth in business financing. Should the merger be completed as planned and focus shift to balance sheet lending, the growth would also start to show in profitability figures.

BUY with a target price of EUR 3.5 (3.8)
Excluding the one-off costs, Fellow Finance is showing rather good progress and exhibits profitability upside, should the merger be completed as planned. In light of the near-term challenges, however, we adjust our TP to EUR 3.5 (3.8) with our BUY-rating intact.

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Aspo - CMD notes

02.12.2021 - 09.30 | Company update

Aspo held its CMD, where the key message was that focus is more towards add-on M&A as opposed to exits (except for the sale of Kauko and Leipurin’s Vulganus machines).

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EBIT margin target raised to 8% from the previous 6%

Aspo’s EBIT has gained a lot in the past year. Telko already had a strong ‘20, while the recovery has come through in ESL’s figures this year. The revised ESL and Telko EBIT targets, both up by 200bps to 14% and 8% respectively, are thus not very surprising. Aspo introduced a 5-10% p.a. growth target, and we view this the major update because it signals a commitment to hold and grow Telko. We make upward estimate revisions to reflect the targets. ESL reached a 15% EBIT in Q3, and while demand remains strong, we believe the next quarters will see some softening since AtoB@C time charter costs are growing. ESL’s performance is otherwise solid (e.g. contracts are better optimized from a logistics POV), and it has retained an advisor to source investors for a portion of the hybrid vessel capex. Leipurin retains its 5% EBIT target. There’s still way to go until the target is reached, but Leipurin has a profit boost initiative (e.g. category management) while the Food Industry is a good growth driver.

Aspo remains very committed to Telko and exit is unlikely

Aspo’s new 5-10% growth target reflects especially Telko add-on M&A potential. There’s no major change in the sense that Eastern performance is to rely on organic growth, but it seems Telko is now ready for somewhat larger deals should a fitting target come up for sale. Telko’s own profitability is already running so high that not every acquisition will provide an immediate boost to EBIT margin. The geographic scope has also been expanded a bit westward beyond the Nordics and Baltics. Aspo remains committed to the current three segments within logistics (ESL) and trade (Telko & Leipurin), however a new stand-alone subsidiary with an EV of some EUR 20-50m is also likely (B2C targets are not off the table). Aspo’s focus is still to hold and grow its segments without any definite exit plans/schedules.

Earnings growth outlook is attractive

We now expect FY ’22 EBIT margin at 7.0%, or EUR 42.4m (prev. EUR 40.9m). This represents an EV/EBIT of only about 11x, and there’s still further earnings potential in the following years. We retain our EUR 14 TP. Our rating is now BUY (HOLD).

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Cibus Nordic - Starving for more yield

12.11.2021 - 09.45 | Company update

Cibus continued to perform as expected. Our view doesn’t change much as valuation appears tight unless further yield compression continues to drive more upside potential.

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Not many surprises in Q3 performance and figures

Cibus’ Q3 was a bit better than expected due to lower-than-estimated costs. Net rental income was EUR 19.3m vs our EUR 19.0m estimate and the difference was due to lowish property expenses. The EUR 18.0m operating income was marginally above the EUR 17.8m/17.9m Evli/cons. estimates, while the EUR 12.5m net operating income topped our EUR 11.9m estimate as net financial costs were EUR 0.4m lower than we estimated (there was a EUR 0.2m positive FX item).

The organization is competitive and continues to scale up

Cibus entered Norway through an acquisition of 8 small grocery properties, most of them located in the vicinity of Oslo; the EUR 27.6m price is high in terms of per sqm but is explained by high rents and the properties’ condition. The characteristics are otherwise similar across the Nordics and we assume the Norwegian portfolio yields almost 6%, in other words close to Cibus’ other recent acquisitions. Cibus is now set to complete more than EUR 160m in add-ons this year and a few more deals could materialize by the year-end (we are yet to include the AB Sagax deal in our estimates as it involves an issue of 2m shares). Annual admin costs will increase by only EUR 0.4m by the end of this year and hence will decrease a bit relative to the higher net rental income. In our view this testifies to Cibus’ organizational efficiency and the operation will scale even better once the Norwegian portfolio grows. Danish entry is also likely sometime.

1.3x EV/GAV continues to limit further upside potential

Nordic property sector valuations have remained pretty much unchanged in the past few months; we continue to view Cibus’ book value a major limitation to further upside from the current levels. Cibus’ equity is sensitive to yield assumptions due to the 60% LTV ratio; if Nordic property yields continue to compress, not to mention possible advances in the grocery property market, then Cibus’ shares follow up in the wake, but there would be a major equity-level headwind in a widened Nordic yield scenario even when the portfolio continues to perform as expected. Our TP is now SEK 215 (205) and we retain our HOLD rating.

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Endomines - Short-term concerns remain

12.11.2021 - 09.45 | Company update

Endomines is set to start showing serious production figures in the coming quarters, with Friday having started up and Pampalo set to follow during the start of 2022. Cash flows remain crucial, as the company’s financial position remains weak.

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Friday restarted; full capacity seen to be reached in 2021
Endomines reported its Q3 results which, as production was still starting up, were not particularly eventful in terms of production. Revenue* amounted to SEK 1.7m (Evli 0.0m) and EBIT* to SEK -38.2m (Evli -33.0m) *not reported, derived from Q1-Q3 and H1. At Friday initial production started up during the quarter, with most of the technical challenges that have faced the commissioning of the mill having been addressed. The planned production capacity of 150 tons per day is expected to be reached the end of Q4. The re-opening of Pampalo has gone largely as planned. According to current schedules ore production will start in December 2021. Ore processing at the mill is expected to commence early 2022.

Financial position remains challenging
As a result of refocusing the Pampalo production schedule to Q1 2022 from previously planned Q2 2022 Endomines adjusted its short-term Q4 2021 production guidance to 1,200 oz (prev. 1,500oz) and we have adjusted our short-term estimates accordingly. Production should pick up clearly during 2022, with our estimates for Friday and Pampalo at approx. 8,300oz and 6,300oz respectively (co’s mid-term full production goals 7,800-9,000oz and 10,000-11,500oz respectively). The cash flows remain essential, as Endomines has been without production the last 12 months and has had to seek financing several times. The liquid assets at the end of the period were only SEK 8.4m.

HOLD with a target price of SEK 2.7 (2.8)
We have made some adjustments to our SOTP-model relating to share issues and changes in the financial position, based on which we adjust our target price to SEK 2.7 (2.8). Financing remains a key concern but the company is steadily nearing decent production figures, which would sort out some concerns.

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Endomines - Initial production started

11.11.2021 - 09.45 | Earnings Flash

Initial production at Friday commenced during Q3, with planned milling capacity seen to be reached at the end of Q4. The Pampalo startup is progressing well, ore production at the mine and ore processing at the mill are expected in Q4 2021 and Q1 2022 respectively.

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  • Revenue in Q3 amounted to SEK 1.7*m, with our estimates at SEK 0.0m. Revenue in Q3 was still as expected not significant, as the Friday mine and mill are only just re-starting production.
  • EBITDA in Q3 was at SEK -36.3m*, below our estimate of SEK -28.0m.
  • EBIT amounted to SEK -38.2m* (Evli SEK -33.0m).
    *Figures derived from Q1-Q3 and H1 figures
  • During Q3 the Pampalo mine decline was driven down to a new production area. Work remains within budget and timeline. At Friday, the technical challenges relating to the mill have mostly been resolved. An underground core drilling program is being carried out, to be completed during Q4.
  • The Orogrande processing facility is under commenced production and is forecasted to reach planned milling capacity (150 tons/day) by the end of Q4 2021. Ore production at the Pampalo mine will start in Q4 2021 and ore processing at the mill will begin early Q1 2022.
  • Liquid assets amounted to SEK 8.4m at the end of Q3.
  • Due to the refocusing of the Pampalo production schedule from previously planned Q2 2022 to Q1 2022, the short-term Q4 2021 gold production guidance for the operations has been amended to approximately 1,200 oz by year end.

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Cibus Nordic - A minor earnings beat

11.11.2021 - 09.30 | Earnings Flash

Cibus’ Q3 report served no big surprises, however net operating income ended up being EUR 0.6m higher than we had estimated as both property expenses and net financial costs were a bit lower than expected.

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  • Cibus’ Q3 rental income came in at EUR 20.2m, compared to our EUR 20.2m estimate.
  • Net rental income was EUR 19.3m vs our EUR 19.0m estimate. Property expenses were a bit lower than estimated.
  • Operating income amounted to EUR 18.0m vs the EUR 17.8m/17.9m Evli/consensus estimates.
  • Net operating income was EUR 12.5m, compared to our EUR 11.9m estimate. Net financial costs were EUR 0.4m lower than we estimated.
  • Annual net rental income capacity now stands at EUR 76.25m and will be EUR 82.5m by the end of the year as certain previously announced transactions close.
  • GAV amounted to EUR 1,336m and therefore EPRA NAV was EUR 12.4 (12.3) per share.
  • Net LTV ratio amounted to 60.1% (60.1%).
  • Occupancy rate was 94.2% (94.8%).
  • WAULT was 5.0 years at the end of Q3.

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Exel Composites - Profitability is already improving

05.11.2021 - 09.30 | Company update

Exel’s Q3 EBIT fell way more than estimated, but guidance implies improvement is already happening and we expect Exel to be back on its earlier EBIT track soon enough.

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Q3 EBIT was weak but Q4 will already be a lot better

Q3 revenue grew 28% y/y to EUR 33.4m vs the EUR 30.4m/30.6m Evli/cons. estimates. Buildings and infrastructure, the most significant contributor, grew 64% but positive top line development was broad; Exel also sees stabilization in Transportation, where the pandemic hit demand. Inflation had only a limited impact as Exel was able to transfer the effect of higher raw material prices forward, and Exel’s pricing continues to advance. Profitable growth thus continued excluding the US unit, where a high-volume Wind power product’s ramp-up costs ate all other EBIT. Exel’s Q3 adj. EBIT was EUR 0.1m vs the EUR 1.9m/1.7m Evli/cons. estimates. The US labor market challenges exacerbated the production problem. The US unit’s performance is expected to improve already in Q4, but in our view it will not perform according to requirements at least before Q2’22.

We make relatively small revisions to our FY ’22 estimates

Exel announced its long-planned Indian expansion. We view the Indian JV a practical step to serve existing global customers in a new growth geography and a chance to sign new accounts. We reckon the Indian plant (which we expect to be driven by Wind power but not entirely) has an output smaller than that of Exel’s existing assets. We expect the JV to add ca. EUR 5m in annual revenue starting next year, considering Exel owns 55% of the entity, and we believe valuation is below 1x EV/S. Exel’s FY ’21 adj. EBIT margin is to remain a modest 5%, but profitability should already improve by 400bps q/q in Q4. We raise our FY ’22 revenue estimate to EUR 147m (prev. EUR 139m) due to the continued strong outlook as well as the Indian contribution.

In our view annual EBIT is to rebound above EUR 10m soon

FY ’21 EBIT isn’t meaningful since Exel has managed above EUR 2.5m quarterly EBIT many times with a significantly lower top line than what will be seen next year. In our view Exel is unlikely to reach the 10% target margin in FY ’22 as the US unit probably doesn’t fully perform in the early part of the year. We don’t view Exel’s 7x EV/EBITDA and 10x EV/EBIT multiples (on our FY ’22 estimates) challenging. We retain our EUR 10 TP and BUY rating.

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Pihlajalinna - Potential continues to realize

05.11.2021 - 09.00 | Company update

Top line drove EBIT as higher outsourcing costs remained a drag on relative profitability. Corporate and private volumes were still below pre-pandemic levels, meaning business normalization is set to support further gains.

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Adj. EBIT gained EUR 1.3m y/y despite outsourcing costs

Revenue grew 13% y/y in Q3; the EUR 141m figure topped the EUR 136m/138m Evli/cons. estimates. Public sector revenue grew 18%, more than estimated. Corporate and private customer revenues were a bit soft relative to estimates; the former was up 11% y/y while the latter was down 5%. Adj. EBIT improved to EUR 10.0m vs the EUR 10.6m/9.0m Evli/cons. estimates despite the mix being tilted more towards the public sector than expected while the outsourcing EBIT margin declined by 330bps y/y to 3.5% (higher service care requirements raised costs). We also gather Pihlajalinna is making progress on this front to receive better compensation in the future. Q3 adj. EBIT margin improved only by 10bps y/y to 7.1% due to the outsourcing cost drag; going forward there should be good scope for meaningful improvement as private volumes continue to improve and Pihlajalinna gets more compensation for outsourcing costs.

Organic improvement in addition to the Pohjola acquisition

Q3 is the most profitable quarter and the EUR 11.8m in Covid-19 services revenue was an additional help. We believe Covid-19 revenue will decline a bit q/q in Q4 but should still reach a meaningful level. Pihlajalinna continues to make additions to its facility network but capex levels are to remain modest while focus is more towards digital services. The Pohjola Hospital acquisition is set to close early next year and Pihlajalinna will provide an update on financial targets near the completion. Pihlajalinna expects to realize sizable cost synergies while insurance co-operation drives volumes. The target’s revenue fell in part due to the pandemic, but size was also diminished because of the decision to divest occupational health activities.

Good earnings as well as multiple expansion potential

We make minor estimate revisions. Our FY ’21 EBIT estimate stands almost unchanged at EUR 32.1m. Valuation is undemanding relative to peers in the short-term (8x EV/EBITDA and 16x EV/EBIT on our FY ’21 estimates) while margin potential underpins further upside. Our TP is EUR 14.0 (13.5); rating is BUY.

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Exel Composites - Q3 profit hit harder than estimated

04.11.2021 - 09.30 | Earnings Flash

Exel’s top line continued to grow very fast in Q3, while the ramp-up of a Wind power product in the US impacted profitability more than estimated. Exel expects profitability improvement already for Q4 and specifies guidance.

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  • Q3 revenue grew by 28.2% y/y and amounted to EUR 33.4m, compared to the EUR 30.4m/30.6m Evli/consensus estimates. Europe and North America drove growth in Q3.
  • Wind power was EUR 8.6m vs our EUR 9.0m estimate. Buildings and infrastructure amounted to EUR 8.1m, compared to our EUR 6.8m estimate.
  • Adjusted EBIT was EUR 0.1m vs the EUR 1.9m/1.7m Evli/consensus estimates. EBIT margin amounted to 0.3% vs our 6.3% estimate. The low profitability was due to the ramp-up of a specific high-volume carbon fiber Wind power product. The current US labor market situation also poses its own challenges, and the poor profitability seen in the US masks profitable growth in the other regions.
  • Q3 order intake was EUR 24.6m and increased by 0.2% y/y. There were some cancelled orders.
  • Exel guides FY ’21 revenue to increase significantly and adjusted operating profit to decrease (unchanged). Exel specifies FY ’21 revenue to amount to EUR 125-135m and adjusted operating profit EUR 5.8-7.0m. The midpoints imply EUR 32.1m revenue and EUR 1.4m adj. EBIT for Q4 (vs the respective EUR 31.7m and EUR 2.3m estimates).

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Eltel - Not improving quite that fast

04.11.2021 - 08.55 | Company update

Eltel’s long-term earnings growth continues, however we make big cuts to our estimates following the Q3 report as the pace doesn’t seem nearly as quick as we had estimated. Our TP is now SEK 17.0 (29.5) and new rating HOLD (BUY).

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The Q3 report produced mostly negative surprises

Eltel Q3 revenue fell 14% y/y and was EUR 194m vs the EUR 224m/214m Evli/cons. estimates. The top line miss stemmed from all the reporting units and caused margin pressure, resulting in a EUR 4.0m EBIT vs the EUR 9.0m/8.3m Evli/cons. estimates. The 80bps y/y decline in operative EBITA margin was also due to challenges in the Polish High Voltage business and cost inflation as steel prices have doubled. The cost increases had a negative EUR 2m effect on Polish profitability. Low Danish customer volumes hit local profitability, while Norwegian EBITA margin remained good. Another positive was the narrowing of losses in Sweden, and Finland reached a strong result despite cost inflation (seen especially in Power while not in Communication).

Earnings growth continues, but not as quick as estimated

Eltel remains set for long-term earnings growth, however the gradient now seems to be much less steep than we had estimated before. We cut our Q4 EBITA estimate from EUR 8.3m to EUR 4.8m. We revise the following years’ EBITA estimates down by some EUR 7-8m. In our view Eltel is set to reach above 2% EBITA margins going forward, but we revise our FY ’22 estimate down to 2.6% from 3.3%. We expect soft development for Denmark until next year; we see the Norwegian situation a bit better as the local fiber market should bounce back. We expect Sweden to break even soon enough, while Finland should continue to perform strong (street lighting being one area of interest). There’s no fixed timeframe for the possible Polish exit and so any decision will likely have to wait until next year.

Improving performance seems to be fully valued for now

We cut our TP to SEK 17.0 (29.5) as earnings improvement continues to materialize at a slower pace than we had estimated prior to the Q3 report. Margin improvement potential should remain solid as Eltel’s margins are still considerably below those of peers. Multiples are lower than peers’ in terms of EV/EBITDA (7x on our FY ’22 estimate) and higher in terms of EV/EBIT (around 18x). Our rating is now HOLD (BUY).

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Pihlajalinna - Good margin development continued

04.11.2021 - 08.30 | Earnings Flash

Pihlajalinna’s Q3 report produced a top line beat while profitability was close to our estimates and above the consensus. The revenue surprise was attributable to public sector customers while Covid-19 services grew a lot y/y but also meaningfully q/q.

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  • Q3 revenue grew by 13.5% y/y to EUR 140.6m, compared to the EUR 136.4m/137.8m Evli/consensus estimates. Private customer revenue amounted to EUR 18.9m vs the EUR 20.9m/20.5m Evli/consensus estimates, while corporate customers were EUR 31.2m vs the EUR 34.5m/33.1m Evli/consensus estimates. Public sector customers’ top line was EUR 108.1m, compared to the EUR 99.0m/101.5m Evli/consensus estimates.
  • Covid-19 services contributed EUR 11.8m in Q3 revenue. The figure increased by EUR 8.4m y/y and EUR 3.7m q/q, which in our view in part helped the revenue beat.
  • Adjusted EBITDA was EUR 18.8m (13.4% margin) vs the EUR 19.4m/17.7m Evli/consensus estimates. Adjusted EBIT was EUR 10.0m (7.1% margin) vs the EUR 10.6m/9.0m Evli/consensus estimates. Normal seasonal profitability variation as well as Covid-19 services helped profitability, in addition to a customer volume recovery at the company’s private clinics.
  • Pihlajalinna’s FY ‘21 guidance remains unchanged; revenue is expected to increase while adjusted EBIT is expected to improve clearly.

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Marimekko - Valuation still favorable

04.11.2021 - 08.25 | Company update

Marimekko released strong Q3 figures that overall outpaced our estimates. Development was strong in its domestic market, but Int’l business was sluggish due to temporal challenges and seasonality. We made only minor adjustments to our estimates.

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Strong domestic growth and a record EBIT

Marimekko’s Q3 result came in strong compared to our expectations. Net sales growth of 11% y/y was driven by strong wholesale sales in Finland (+25% y/y). Controls of grey exports and lower licensing revenue decreased international net sales by 10% y/y. Despite the increased fixed costs, the company delivered its record EBIT, totaling EUR 13.3m (31.3% margin). Profitability was boosted by improved gross margin and increased net sales.

 

Int’l sales to get back on a growth path

We see the decline in international sales to be temporal and expect the company to get back on a growth path in Q4’21. Although the int’l revenue declined, the brand sales increased by 40% y/y in Q3 which indicates that the popularity of the brand is still up and keeps growing. Marimekko has positioned well in its domestic market, but we also expect that new and ongoing brand collaborations are set to increase brand awareness abroad, which eventually grows the share of int’l business. Like most of companies, Marimekko is also facing some challenges in logistics and material availability. Cost inflation has woken up and is raising its head. Due to relatively large inventories, the cost inflation shows in figures with a lag. After considering above mentioned factors, we made only minor adjustments to our estimates, now expecting 21E net sales of EUR 145.7m and adj. EBIT of EUR 30.2m (20.7% margin). During 2022-23, we expect Marimekko to grow by 10.8% and 8.5% respectively as well as reach an adj. EBIT margin of 18.9% and 17.8% respectively.

 

BUY with a target price of EUR 84.0

In our view, Marimekko has room for an upside as it's valued with a 22E EV/EBIT multiple of 19.8x, reflecting a 20% discount to its luxury peers. We retain our BUY-rating and TP of EUR 84.0.

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Marimekko - Estimates were beaten

03.11.2021 - 09.30 | Earnings Flash

Marimekko’s Q3 result outpaced our expectations. Net sales grew by 11% y/y to EUR 42.4m and adj. EBIT amounted to EUR 13.3m (31.3% margin). The company reiterated its FY’21 guidance.

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Group result: net sales topped our estimates by growing 11% y/y to EUR 42.4m vs. 40.9m/42.3m Evli/cons. The growth was driven by a favorable trend in wholesales in Finland. Adj. EBIT improved to EUR 13.3m vs. 8.1m/10.1m Evli/cons. with a 31.3% margin. EPS totaled EUR 1.30 and grew by 32% y/y.
Finland: Marimekko brand’s popularity seemed to continue in Finland and net sales increased by 25% y/y to EUR 28.8m (Evli: 25.3m). The growth was driven by a favorable trend in wholesale sales (+65% y/y).
International: One of Marimekko’s strategy’s backbones, international sales, fell short of our expectations and was a bit disappointment. Net sales decreased by 10% y/y to EUR 13.6m (Evli: 15.6m). Sales development was weak in the EMEA and APAC regions, but Scandinavia and North-America managed to increase their revenue y/y.
Adj. EBIT: Adj. EBIT was very strong, totaling EUR 13.3m (31.3% margin) vs. 8.1m/10.1m Evli/cons. Profitability was boosted by net sales growth and improved gross margin. Worth to notice is that fixed costs increased in Q3 and the trend is expected to continue in Q4.
No changes in FY’21 guidance (revised on Sep 23rd): expecting net sales and adj. EBIT margin to be above that of the comparison period.
• Marimekko’s strong performance in Finland provides continuity, but international sales especially in the APAC region cause some concerns. Our aim is to find more information for the weak performance of international sales in Marimekko’s Q3 webcast (today at 2 pm Finnish time).

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Eltel - Earnings miss estimates

03.11.2021 - 09.30 | Earnings Flash

Eltel’s Q3 results were burdened by lower top line, continued challenges in the Polish High Voltage business and cost inflation. Operative EBITA declined y/y while our and consensus estimates expected improvement. Eltel retains its FY ‘21 guidance and expects operative EBITA margin to improve y/y.

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  • Eltel Q3 revenue declined by 14% y/y and was EUR 193.8m, compared to the EUR 223.9m/214.0m Evli/consensus estimates. Finland amounted to EUR 77.9m vs our EUR 86.3m estimate. Softness in volumes, relative to estimates, was seen across the board.
  • EBITDA came in at EUR 11.9m vs the EUR 17.6m/16.5m Evli/consensus estimates. Operative EBITA was EUR 4.1m, compared to our EUR 9.2m estimate, meaning operative EBITA margin was 2.1% vs our 4.1% estimate. EBIT was EUR 4.0m vs the EUR 9.0m/8.3m Evli/consensus estimates.
  • Finnish profitability remained at a strong level and increased y/y from EUR 4.3m operative EBITA to EUR 4.8m (6.2% margin). The loss in Sweden also declined from EUR -0.8m to EUR -0.2m. Meanwhile operative EBITA levels in both Norway and Denmark declined by around EUR 1m as the areas had challenges with volumes. Losses in other businesses grew by more than EUR 1m y/y. Group function costs also increased by EUR 0.4m y/y.
  • The Polish operation has cost Eltel EUR 7.6m in operative EBITA this year and Eltel re-evaluates strategic options for the business.
  • Eltel guides FY ’21 operative EBITA margin to improve y/y (unchanged).

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Enersense - Earnings multiples are undemanding

03.11.2021 - 08.45 | Company update

Enersense Q3 figures didn’t meet our estimates, but the company retained its guidance, and we see the Q3 softness was to a large extent attributable to project timing issues.

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Q3 figures were not as strong as we had expected

Enersense Q3 revenue was EUR 58.3m, compared to our EUR 63.8m estimate. The softness was due to Smart Industry, where top line was EUR 18.7m vs our EUR 23.9m estimate. July was slow and pretty much according to the company’s own expectations, as certain projects did not start until later. Power continued to reach good profitability, while Connectivity still has some work ahead on that front. International Operations’ profitability was burdened by challenges in the Baltic states, where e.g. inflation is more of a problem than in Finland. Enersense Q3 adj. EBITDA was EUR 4.4m vs our EUR 6.5m estimate. The company retained its guidance, which implies relatively strong Q4. In our view Enersense continues to progress well and according to their own plan, and the Q3 softness was to a large extent attributable to project timing issues.

Q4 estimates up a bit, some downward annual revisions

Enersense sees Q4 margin gains to be driven by Finland and we expect improved results already from Connectivity. The Baltic countries are a market where Enersense will find more attractive projects long-term, however we don’t expect alleviation to short-term profitability challenges during Q4. We now estimate Q4 adj. EBITDA at EUR 5.6m (prev. EUR 5.3m) and Q4 adj. EBIT at EUR 3.3m (prev. EUR 3.1m), and hence our FY ‘21 adj. EBITDA estimate is down to EUR 17.3m (prev. EUR 19.2m) and that for adj. EBIT to EUR 9.5m (prev. EUR 10.8m). The recent small acquisition of Pori Offshore Constructions got off to a good start as the company won a contract for a port of HaminaKotka project. Enersense still looks for additional smaller or larger M&A targets, and the company had some EUR 27m in cash at the end of Q3.

Peer group discount remains significant

We revise our FY ’21 profitability estimates down by some 10%, while we downgrade our FY ’22-23 estimates by only a few percentage points. Enersense’s peers’ earnings multiples have decreased by around 5% in the past few months, and thus we update our TP to EUR 11 (13). Enersense’s earnings-based valuation remains unchallenging; we retain our BUY rating.

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Enersense - Soft Q3 but guidance intact

02.11.2021 - 13.20 | Earnings Flash

Enersense Q3 figures came in soft compared to our estimates, but the company nevertheless retains its FY ’21 guidance, which implies stronger than expected Q4. The Q4 tilt is due to project cycles and the result is a more balanced quarterly performance since Q3 is often the strongest quarter.

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  • Enersense Q3 revenue amounted to EUR 58.3m, compared to our EUR 63.8m estimate. Smart Industry was EUR 18.7m vs our EUR 23.9m estimate, while Power amounted to EUR 12.5m vs our EUR 12.7m estimate. Connectivity top line was EUR 12.3m, compared to our EUR 13.7m estimate. International Operations was EUR 14.6m vs our EUR 13.5m estimate.
  • Adjusted EBITDA came in at EUR 4.4m vs our EUR 6.5m estimate, while adjusted EBIT was EUR 2.6m vs our EUR 4.2m estimate. Smart Industry EBITDA amounted to EUR 2.2m. Meanwhile Power EBITDA was EUR 1.1m and that for Connectivity EUR 0.8m. International Operations posted EUR 0.3m, where Latvian projects’ weak margin development was a drag.
  • Order backlog was EUR 272m at the end of Q3 (EUR 160m a year ago).
  • Enersense guides FY ’21 revenue in the EUR 215-245m range, while adjusted EBITDA is expected to be EUR 17-20m and adjusted EBIT EUR 8-11m (unchanged). The midpoints imply EUR 56.8m revenue, EUR 6.8m adj. EBITDA and EUR 3.4m adj. EBIT for Q4, compared to our respective EUR 63.9m, EUR 5.3m and EUR 3.1m estimates.

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Pihlajalinna - Earnings accretion set to continue

01.11.2021 - 09.35 | Preview

Pihlajalinna releases Q3 results on Nov 4. Our estimates remain intact for now. We continue to see good upside potential due to earnings growth and multiple expansion.

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Solid Q2 gains represented a minor earnings beat

Pihlajalinna’s Q2 figures were pretty much in line with estimates. Top line grew 24% y/y from a soft comparison period. Private customer volumes recovered but remained below pre-pandemic levels. Private revenue fell 18% in FY ’20, but corporate and public sector revenues held up. Q2’20 was nonetheless a bit soft for the two as well and thus the corporate and public sector groups were able to post respective 31% and 18% y/y growth rates in Q2’21. The Q3 comparison base is higher but we still expect 10% y/y growth. Q2 profitability improved by some EUR 6m y/y and was a bit better than estimated. Q3 is seasonally the most profitable quarter due to low public sector costs and our EUR 10.6m EBIT estimate is ahead of the EUR 9.0m consensus.

EBIT potential to materialize in the short and long term

Covid-19 services added EUR 8.1m in Q2 revenue and the Q3 level should remain high (with some cost uncertainty), yet it will be of interest to hear to what extent Pihlajalinna expects the level to decline from Q4 onwards as the Finnish vaccination rate reaches 80%. The fading will cause its own top line headwind but the private volume normalization as well as the public side handling of queues, further stretched by the pandemic, should compensate. There’s more profitability potential going forward even with current volume levels. We reckon the Pohjola Hospital acquisition advances pretty much as planned, and thus should be completed by the end of the year or early next year at the latest. We have already added the EUR 60m revenue target to our FY ’22 estimates. The smallish target has been loss-making, but Pihlajalinna seemed confident with respect to achieving rapid results. We hence expect earnings accretion for next year as well.

Current valuation is by no means challenging

Pihlajalinna hasn’t completed significant acquisitions for a while; we estimate 13% growth for FY ’21. We see FY ’21 EBIT at EUR 31.9m and on this basis the multiples stand at ca. 8x EV/EBITDA and 16x EV/EBIT. Both profitability estimates and multiples remain well below those of peers: we continue to consider valuation attractive. We retain our EUR 13.5 TP and BUY rating.

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SRV - Work still to be done

29.10.2021 - 09.55 | Company update

SRV reported weaker than estimated Q3 results, as project margin woes pushed EBIT into the red. Progress is however being made and Q4 completions and potential Pearl Plaza divestment should further strengthen the balance sheet. We adjust our TP to EUR 0.7 (0.8), BUY-rating intact.

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Q3 results well below our estimates
SRV reported Q3 results below our estimates. Revenue amounted to EUR 191.1m (EUR 261.1m/235m Evli/cons.), falling below our estimates due to the timing of recognization of income of the Loisto-project but also due to the lower activity in business construction showing more clearly. The operating profit fell to EUR -1.6m (EUR 5.3m/4.6m Evli/cons.), as the weak financial development of the Tampere Areena project and construction material costs and availability impacted on profitability. Actions to strengthen the balance sheet saw the IB net-debt decrease further by almost EUR 53m. In light of the weak Q3 SRV revised its guidance, expecting 2021 revenue of EUR 900-1,000m (prev. 900-1,050) and operative operating profit of EUR 16-21m (prev. 16-26m).

Further strengthening of balance sheet seen
Our revenue estimates for 2021 remain rather unchanged, now at EUR 912.2m, as we were already near the lower end of the guidance range. Q4 will see a clear increase in housing construction revenue with the completion of Loisto. Our revised estimates put 2021 operative operating profit at EUR 17.2m (prev. 21.1m) with the weaker profitability in Q3. SRV targets to close a deal in regards to the divestment of Pearl Plaza during 2021, which together with housing completions in Q4, namely Loisto, would free up a considerable amount of capital and further strengthen the balance sheet.

BUY with a target price of EUR 0.7 (0.8)
With the setback in margins in Q3 and uncertainty from construction material availability and prices we lower our target price to EUR 0.7 (0.8) but retain our BUY-rating.

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Suominen - Volumes and margins recover in Q4

29.10.2021 - 09.30 | Company update

Suominen’s Q3 gross margin was hit hard, but the guidance and comments on Q4 volumes prompt us to make some positive estimate revisions for next year.

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Q3 figures were hit hard, but situation is already improving

Q3 revenue fell by 14% y/y to EUR 99m vs the EUR 96m/100m Evli/cons. estimates. Americas’ top line declined by 21% y/y and that for Europe 4%. There weren’t that many surprises in terms of volumes, but the decline hit gross margin more than expected as the figure fell to 5.5% (vs our 12.0% estimate). Q3 EBITDA thus came in at EUR 4.2m, compared to the EUR 9.5m/9.0m Evli/cons. estimates. Certain (mostly) transient cost measures helped to the tune of EUR 1-2m. According to Suominen there is considerable variation within US customer accounts’ demand, which in our view reflects the local logjam situation where certain non-branded wipes inundated the retail channels and thus blocked many Suominen’s brand wipe customers’ sales.

Our new FY ’22 revenue estimate is EUR 455m (EUR 431m)

We estimate Q4 revenue at EUR 113m (prev. EUR 95m); Suominen sees Q4 volumes a bit lower than in Q2’21, and we expect the respective revenue figures to be similar as nonwovens pricing adjusts to higher raw material prices. Underlying wiping demand remains robust, but there’s still a lot of uncertainty regarding short as well as long term financial performance. Pricing adjusts up in Q4 and we believe margins will continue to improve also early next year. The guidance implies Q4 EBITDA will be roughly in the EUR 9-15m range. The midpoint suggests EUR 48m annual EBITDA, and in our view the figure has a good chance of landing in the EUR 45-50m range: we expect continued q/q improvement from Q4, meaning FY ’22 EBITDA should be well above EUR 40m even if Q4 EBITDA lands at the low end of the range. We previously estimated FY ’22 EBITDA at EUR 48.5m and our revised estimate stands at EUR 50.1m.

We expect annual EBITDA to stabilize around EUR 50m

The volume recovery also means the completed Cressa line as well as the other two projects will not have to suffer from low utilization rates. Suominen is valued around 5.5x EV/EBITDA and 9.5x EV/EBIT on our FY ’21-22 estimates as we expect flat annual profitability development and meaningful volume improvement from the Q3 lows. We retain our EUR 6 TP and BUY rating.

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Solteq - Bumps on the road

29.10.2021 - 09.00 | Company update

Solteq’s Q3 was weaker than expected due to two project postponements. Uncertainty has increased but Solteq is still well on its way toward solid growth and profitability.

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Two project postponements drove weaker Q3 figures
Solteq’s Q3 results took an unfortunate turn from the solid development trend so far during 2021. Net sales grew slower than expected by 12.2% y/y to EUR 14.9m (Evli EUR 16.4m). The adj. operating profit declined slightly to EUR 1.2m (Evli EUR 2.0m). Solteq Digital grew 4.3% to EUR 9.5m (Evli EUR 10.4m) and the adj. EBIT improved slightly to EUR 0.9m (Evli EUR 1.1m) while Solteq Software grew 29.7% to EUR 5.4m (Evli EUR 6.0m) and the adj. EBIT declined slightly to EUR 0.3m (Evli EUR 1.0m). The Q3 results were mainly impacted by the postponement of two larger customer deliveries in the retail-segment due to the prevailing component shortage situation and to some extent by an increase in subcontracting costs due to a lack of specialists in the IT-sector.

Larger part of Q3 concerns look to be temporary
At least on paper the challenges faced in Q3 appear to be of temporary nature. The postponements should have a clearly smaller impact on Q4. The prevailing demand uncertainty due to the pandemic, the component shortage and lack of industry specialists, however, are a concern, but to our understanding no new postponements are seen right now. The share of subcontracting is relatively low but has been increasing and future growth could come at the cost of margins and vice versa. Potential cost increases may in the future ultimately end up being absorbed by the customer. We have made some minor downward tweaks to our Q4 estimates but no larger changes to our coming year estimates.

BUY with a target price of EUR 6.8 (8.0)
We see good potential for Solteq returning back on its H1 track but with our minor estimates and higher uncertainty we lower our target price to EUR 6.8, with our BUY-rating intact. Our TP values Solteq on a slight premium to IT-services peers on 2021e P/E and on par with peers on 2022e P/E.

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Vaisala - Will achieve its targets

29.10.2021 - 08.45 | Company update

Vaisala’s 3rd quarter was in our view well-executed considering issues Vaisala is facing in the supply chain. With our revised estimates, we retain our HOLD-rating and raise our target price to EUR 43.0 (42.0).

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Well-executed Q3
Vaisala received a fair number of orders (EUR 109.9m, +29% growth y/y) and the order book was on a record level at EUR 164.8m (+22% growth y/y). Topline growth was strong (+19% y/y), totaling EUR 111.5m (Evli: 111.5m). Industrial instruments, life-science, and power industry segments drove the IM to grow by 35% y/y, totaling EUR 47.1m (Evli: 48.1m). W&E grew by 9% y/y to EUR 64.4m (Evli: 63.4m), driven by renewable energy and aviation. Gross margin remained flat and was on a good level at 57.7%. Vaisala’s EBIT margin weakened from 20.7% to 17.3% due to exceptional costs relating to old M&A activities and settlement payments. EBIT ultimately amounted to EUR 19.2m. In Q3, Vaisala invested EUR 12.5m in R&D (11% of net sales).

Some segments are still in recovery mode
The demand in Vaisala’s target segments is one after another brightening up, but there are still some segments stalling. W&E’s meteorology in developing countries is expected to take a longer time to recover. After crawling for a while, IM’s liquid measurements are expected to continue to recover. The good news is that aviation has given some signs of life and the segment is expected to recover gradually. There are still some uncertainties regarding component availability and the company has noted that the visibility has weakened. Vaisala expects the component shortage to last at least to H1’22. So far, Vaisala has been capable to compensate the additional costs of spot priced components by revenue scalability. However, the growth outlook is improved and therefore we have raised our Q4’21 estimates so that the FY’21 figures add up to the upper limit of the company’s guidance. We expect FY’21 revenue to grow by 15.5% y/y to EUR 438.5m and an EBIT margin of 12.5%. During 2022-23, we expect revenue to grow by 8.3% and 6.8% respectively. We estimate the company to reach an EBIT margin of 12.8% and 13.9% respectively.

HOLD with a target price of EUR 43.0 (42.0)
We made minor adjustments to our 2021-23 estimates, based on target markets’ outlook and the company’s recent performance which gives a ground for a target price revision. On our new target price and a 22E P/E multiple of 29.3x, Vaisala is trading approx. in line with its peer group. Given Vaisala’s strong performance during difficult times, technology leadership, and IM’s growth potential, we find a premium to peer group justified during less uncertain times. We raise our TP to EUR 43.0 (42.0) and retain our HOLD-rating.

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Etteplan - Investing into future growth

29.10.2021 - 08.30 | Company update

Etteplan’s Q3 fell slightly short of our estimates. Investments into growth should bear fruition in 2022 but near-term cost and demand uncertainty is seen.

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Added softness to seasonally slower quarter
Etteplan reported its Q3 results, which overall were slightly softer than our already somewhat cautious estimates. Revenue grew 21% on the weaker comparison period to EUR 66.9m (EUR 69.3m/71.0m Evli/cons.), of which organic growth some 14%. The operating profit amounted to EUR 4.6m (EUR 5.2m/5.6m Evli/cons.). Compared to our estimates the softness was seen in Engineering Solutions, while Technical Documentation Solutions and Software and Embedded Solutions were quite in line with our estimates. The softness was affected by the vacation season and thereto related slower start of projects and the prevailing global component shortage also start to show. Etteplan also invested into growth, with the company’s headcount clearly on the rise.

Some uncertainty but ingredients for good growth
We have made only minor adjustments to our estimates, mainly from the lower than expected Q3 results. Our 2021 revenue and EBIT estimates remain within the lower half of the guidance range (revenue EUR 295-310m and EBIT 25-28m) at EUR 297.7m and 25.9m respectively. We remain somewhat cautious in Q4 our estimates due to some demand uncertainty and expected cost increases in returning to the new normal after the hiatus caused by the pandemic. Industry views on the component shortage issues varies but we expect to see challenges continue into H1/2022. We currently expect Etteplan to grow 8.2% in 2022. Should the component shortage not have a more material impact and acquisitions continue, growth should be poised to remain double-digit.

HOLD with a target price of EUR 17.0 (17.5)
With the slight increase in uncertainty we adjust our target price to EUR 17.0 (17.5), valuing Etteplan at a slight premium to peers. Etteplan is clearly investing more into future growth, which bodes well for 2022 should the market conditions not deter.

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Consti - Good growth, minor margin concerns

28.10.2021 - 10.50 | Company update

Consti reported good Q3 results, with growth picking up better than anticipated and profitability improving y/y. Construction material costs and availability cause some concern for margins in coming quarters but overall, the outlook still remains favourable. We retain our target price of EUR 14.5 and BUY-rating.

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Overall better than expected Q3 results
Consti reported overall good Q3 results and the anticipated pick up in growth was clearly visible. Revenue grew 11.4% to EUR 76.0m (EUR 73.3m/73.0m Evli/cons.), with clear growth in housing companies’ revenue. Profitability also beat our expectations, with EBIT of EUR 3.1m (EUR 2.7m Evli/cons.) and a 0.2pp y/y increase in the EBIT-margin. The order backlog continued to develop favourably, up 15% y/y at EUR 217.9m. Consti reiterated its 2021 EBIT guidance of EUR 4-8m.

Growth picking up, some margin uncertainty
We have slightly raised our estimates in light of the accelerated growth in Q3. We expect an average annual growth of approx. 7% during 2021-2022 (prev. ~3.5%). Growth is driven by the improved order backlog and activity levels and also by the acquisition of RA-Urakointi during the quarter. Demand in the housing market appears to be at healthy levels again, while demand within commercial premises is still seeing recovery. In terms of margins we still remain somewhat on the cautionary side, expecting similar levels during 2021-2022 as seen in 2020 (adj. EBIT-%: 3.4%). The impact of construction material costs and availability did not significantly impact Q3 but will according to the company have a larger impact in Q4. We assume that the impact could also be visible at least during the first quarter of 2022.

BUY with a target price of EUR 14.5
With our estimates revisions ultimately relatively small, we retain our target price of EUR 14.5 and BUY-rating. Our target price values Consti at 14.1x 2022E P/E, roughly on par with the construction peers.

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Vaisala - No big surprises

28.10.2021 - 10.00 | Earnings Flash

Vaisala had given preliminary figures ahead of Q3 and as such contained no surprises on group level. Net sales grew by 19% y/y to EUR 111.5m and EBIT amounted to EUR 19.2m. Order received grew by 29% y/y and order book remained on a record level.

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  • Group results: As expected, net sales grew by 19% y/y to EUR 111.5m vs. 111.5/111.5m Evli/cons. and EBIT amounted to EUR 19.2m (17.3% margin) vs. 19.2/19.2m Evli/cons. EPS was slightly below our expectations, EUR 0.44 vs. 0.46/0.47 Evli/cons.
  • Orders received and order book: Orders received grew by 29% y/y, totaling EUR 109.9m. Order book was on a record level and grew by 22% y/y, totaling EUR 164.8m. Aviation over doubled its orders received, while industrial measurement, life-science, and renewable energy received strong number of orders.
  • Weather & Environment (W&E): W&E grew by 9% y/y to EUR 64.4m (Evli: 63.4m). Growth was driven by renewable energy and aviation. EBIT totaled to EUR 5.3m (8.2% margin).
  • Industrial Measurements (IM): IM grew by 35% y/y to EUR 47.1 (Evli: 48.1m), driven by industrial measurement, life-science, and power industry. EBIT totaled to EUR 14.2m (30.2% margin).
  • No change in FY’21 guidance (revised on Oct 19th): net sales of EUR 425-440m and an EBIT of EUR 48-58m.
  • Market outlook: High-end industrial instruments, life science, and power industry markets is expected to continue to grow. Liquid measurements market is expected to continue to recover. Meteorology market in developed countries is expected to remain flat, while in developing countries demand is expected to continue to suffer and recovery is expected to take longer. Aviation market is expected to recover gradually. Ground transportation market is expected to be stable. Renewable energy market is expected to continue to grow.

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Suominen - Q3 EBITDA weaker than expected

28.10.2021 - 10.00 | Earnings Flash

Suominen’s Q3 revenue was close to estimates, but gross margin plunged 5.5%. EBITDA therefore fell to EUR 4.2m, way below estimates. Suominen nonetheless sees demand recovery is already underway. Suominen’s guidance implies Q4’21 EBITDA will roughly triple q/q.

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  • Q3 revenue fell by 14.5% to EUR 98.7m, compared to the EUR 96.0m/100.0m Evli/consensus estimates. Americas’ top line was EUR 57.0m vs our EUR 55.0m estimate, whereas Europe came in at EUR 41.6m vs our EUR 41.0m estimate. Suominen sees volume recovery is already happening as it began in late Q3, even a bit earlier than expected. Suominen expects Q4’21 volumes to be a bit lower than in Q2’21 but clearly above the pre-pandemic levels.
  • Gross profit amounted to EUR 5.5m vs our EUR 11.5m estimate. Gross margin was 5.5%, compared to our 12.0% estimate.
  • Q3 EBITDA was EUR 4.2m vs the EUR 9.5m/9.0m Evli/consensus estimates, while EBIT was EUR -0.8m vs the EUR 4.5m/4.0m Evli/consensus estimates. There were some cost savings measures.
  • Suominen guides comparable FY ’21 EBITDA to decrease and sees it landing at EUR 47-53m (EUR 60.9m in FY ’20). The range’s midpoint suggests Q4 EBITDA will be EUR 11.9m, compared to our EUR 10.1m estimate. The current FY ’21 consensus EBITDA estimate is EUR 53.1m.

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Etteplan - Slightly below expectations

28.10.2021 - 09.50 | Earnings Flash

Etteplan's net sales in Q3 amounted to EUR 66.9m, slightly below our estimates and below consensus (EUR 69.3m/71.0m Evli/cons.). EBIT amounted to EUR 4.6m, below our consensus estimates (EUR 5.2m/5.6m Evli/cons.). Guidance specified: Etteplan expects revenue to amount to EUR 295-310m (prev. EUR 295-315m) and operating profit (EBIT) to amount to EUR 25-28m.

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  • Net sales in Q3 were EUR 66.9m (EUR 55.2m in Q3/20), slightly below our estimates and below consensus estimates (EUR 69.3m/71.0m Evli/Cons.). Growth in Q3 amounted to 21% y/y, of which 13.8% organic growth.
  • Operating profit in Q3 amounted to EUR 4.6m (EUR 4.3m in Q3/20), below our estimates and consensus estimates (EUR 5.2m/5.6m Evli/cons.), at a margin of 6.9%.
  • EPS in Q3 amounted to EUR 0.14 (EUR 0.13 in Q3/20), below our estimates and consensus estimates (EUR 0.16/0.17 Evli/cons.).
  • Engineering Solutions net sales in Q3 were EUR 36.9m vs. EUR 39.5m Evli. Operating profit in Q3 amounted to EUR 3.0m vs. EUR 3.6m Evli.
  • Software and Embedded Solutions net sales in Q3 were EUR 18.1m vs. EUR 17.8m Evli. Operating profit in Q3 amounted to EUR 1.6m vs. EUR 1.8m Evli.
  • Technical Documentation Solutions net sales in Q3 were EUR 11.8m vs. EUR 11.8m Evli. Operating profit in Q3 amounted to EUR 1.2m vs. EUR 1.0m Evli.
  • Guidance specified: Etteplan expects revenue to amount to EUR 295-310m (prev. EUR 295-315m) and operating profit (EBIT) to amount to EUR 25-28m.

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SRV - Profitability burdens

28.10.2021 - 09.20 | Earnings Flash

SRV's net sales in Q3 amounted to EUR 191.1m, below our estimates and below consensus (EUR 261.1m/235m Evli/cons.). EBIT amounted to EUR -1.6m, below our estimates and below consensus (EUR 5.3m/4.6m Evli/cons.).

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  • Revenue in Q3 was EUR 191.1m (EUR 209.8m in Q3/20), below our estimates and consensus estimates (EUR 261.1m/235m Evli/Cons.). Growth in Q3 amounted to -9% y/y.
  • Operating profit in Q3 amounted to EUR -1.6m (EUR 1.7m in Q3/20), below our estimates and consensus estimates (EUR 5.3m/4.6m Evli/cons.), at a margin of -0.8%. Profitability affected by material costs and availability and weak financial development of the Tampere Areena project.
  • The order backlog in Q3 was EUR 1038m (EUR 1280m in Q3/20), down by -18.9 %.
  • Construction revenue in Q3 was EUR 188m vs. EUR 261m Evli. Operating profit in Q3 amounted to EUR 1.6m vs. EUR 7.2m Evli.
  • Investments revenue in Q3 was EUR 4.2m vs. EUR 1.1m Evli. Operating profit in Q3 amounted to EUR -2.6m vs. EUR -1m Evli.
  • Other operations and elim. revenue in Q3 was EUR -1.1m vs. EUR -1m Evli. Operating profit in Q3 amounted to EUR -0.6m vs. EUR -0.9m Evli.
  • Guidance specified: revenue to amount to EUR 900-1,000m (prev. EUR 900-1,050m) and operative operating profit (EBIT) to amount to EUR 16-21m (prev. EUR 16-26m).

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Aspo - EBIT is headed above EUR 40m

28.10.2021 - 09.10 | Company update

Aspo’s Q3 EBIT was EUR 12.8m without the one-offs. Valuation is still not very high as we see scope for well above EUR 40m EBIT next year, but we consider multiples neutral. Our TP is EUR 14.0 (12.5), rating HOLD (BUY).

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There were some EUR 5.2m in one-off Q3 items

ESL posted a record EUR 7.1m Q3 EBIT vs our EUR 4.5m estimate. The market is very favorable as cargo volumes grew by 26% y/y and freight rates are now good across the entire fleet. In our view the Supramaxes are already generating very high margins, while smaller vessels’ pricing should continue to advance from here on. Leipurin results were a bit better than we expected, while Telko achieved EUR 5.9m EBIT (vs our EUR 4.9m estimate) excl. the EUR 3.4m Kauko impairment. There was also the EUR 1.75m one-off item due to the CEO change-related costs.

Strong performance should continue for quite some time

We revise our estimates and now see EUR 10.8m in Q4 EBIT (prev. EUR 9.8m). The guidance constitutes in essence a positive revision and we wouldn’t be surprised to see Aspo upgrade the range more in the coming months (Q4 hasn’t historically paled in comparison to Q3). Port logistics challenges may limit ESL’s Q4 potential, but we view our EUR 6.5m EBIT estimate conservative. ESL and Telko now enjoy very favorable markets, therefore some softening could be due next year. Both subsidiaries nonetheless continue to progress strategy-wise. ESL’s new EUR 70m investments (financing will be some combination of own cash and external pooled funds) are to be ready in ’23 and we view the six small hybrid vessels a good strategy fit. Meanwhile Telko continues to focus on higher margin solutions with its latest acquisition of a small Estonian lubricant distributor.

FY ’22 EBIT should have no trouble topping EUR 40m

Our new FY ’22 EBIT estimate is EUR 40.9m (prev. EUR 39.7m), and on this basis Aspo is valued ca. 13x EV/EBIT. The level is not that high considering cash flow generation and further value creation potential yet reflects present strong conditions. We view our EUR 40.9m estimate a bit conservative as we model only flat EBIT for ESL: we see a reasonable chance for a well above EUR 25m ESL FY ‘22 EBIT. Telko has continued to surprise but for now we don’t expect much more than EUR 18m EBIT going forward. Our new TP is EUR 14.0 (12.5), and our rating is now HOLD (BUY).

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Solteq - Some challenges faced

28.10.2021 - 08.45 | Earnings Flash

Solteq’s Q3 was below our expectations, with revenue at EUR 14.9m (Evli EUR 16.4m) and adj. EBIT at EUR 1.2m (Evli EUR 2.0m). Figures were affected by customer project postponements due to the on-going component shortage. Guidance intact: group revenue in 2021 is expected to grow clearly and the operating profit to improve clearly.

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  • Net sales in Q3 were EUR 14.9m (EUR 13.3m in Q3/20), below our estimates (Evli EUR 16.4m). Growth in Q3 amounted to 12.2% y/y, of which the larger part was organic growth. 22.6% of sales came from outside of Finland.
  • The operating profit and adj. operating profit in Q3 amounted to EUR 1.1m and 1.2m respectively (EUR 1.4m/1.4m in Q3/20), below our estimates (Evli EUR 2.0/2.0m). Profitability was affected by the postponement of two larger customer projects in the retail sector due to the on-going component shortage as well higher subcontracting prices due to a shortage of IT-sector specialists.
  • Solteq Digital: revenue in Q3 amounted to EUR 9.5m (Q3/20: EUR 9.2m) vs. EUR Evli 10.4m. Growth amounted to 4.3%. The adj. EBIT was EUR 0.9m (Q3/20: EUR 0.8m) vs. Evli EUR 1.1m. Recurring revenue 37.6% of the segment’s revenue. The segment is expected to continue to develop favourably.
  • Solteq Software: Revenue in Q3 amounted to EUR 5.4m (Q3/20: EUR 4.1m) vs. Evli EUR 6.0m. The adj. EBIT was EUR 0.3m (Q3/20: EUR 0.5m) vs. Evli EUR 1.0m. Growth was 29.7%. Recurring revenue 31.5% of the segment’s revenue. The segment is expected to continue to develop favourably.
  • Guidance for 2021 intact: group revenue is expected to grow clearly and operating profit to improve clearly.

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Detection Technology - Performance is improving

28.10.2021 - 08.15 | Company update

Despite the issues in the supply chain, Detection Technology grew in all of its BUs and achieved double-digit growth rates in Q3. Net sales grew by 12.5% driven by strong demand in medical and industrial applications, while security took the first steps towards growth. We retain our HOLD-rating and adjust the target price to EUR 30.5 (32.5).

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Q3 fell short of our expectations

DT’s Q3 net sales grew by 12.5% y/y to EUR 23.2m (Evli: 21.7% y/y, 25.1m). Healthcare investments continued globally and demand for high-end CT equipment drove the MBU’s growth of 18.8% y/y. IBU scored record sales in Q3 by growing 21.5% y/y and managed to win new strategic customers and projects. Despite challenges in the availability of materials, SBU sales were ultimately positive and the market has taken an upward turn towards growth. SBU grew by 0.2% y/y from a weak comparison period. Adj. EBIT improved by 26.5% to EUR 3.3m (14.1% margin) and was below our estimates (Evli: 3.7m).

 

We made some adjustments

Despite the weaker Q3 result than expected, the growth outlook has brightened up and the company expects double-digit growth from all of its BUs in Q4. However, the component shortage is postponing revenue through prolonged delivery times and increasing cost pressures that eventually might narrow the margins. After considering such issues, we have decided to adjust our FY’21 and long-term estimates, now expecting FY’21 net sales of EUR 90.9m and an EBIT margin of 12.7%. During 2022-23, we expect DT to grow by 16.3% and 12.9% respectively as well as reach an EBIT margin of 16.3% and 17% respectively.

 

HOLD with a target price of EUR 30.5 (32.5)

Given the estimate revision, the current target price (EUR 32.5) doesn’t reflect the fair value of DT. On our new target price, the company is still traded with a premium (22E EV/EBIT 11% premium to peer median), but on our view, it’s justified given the brightened outlook and growth potential. We retain our HOLD-rating and adjust TP to EUR 30.5 (32.5).

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CapMan - Growth momentum intact

28.10.2021 - 08.15 | Company update

CapMan reported solid quarterly figures once again. Our estimates remain largely intact, with expected near-term carry set to boost profit levels further.

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A strong quarter
CapMan reported its Q3 results, which on group level were slightly better than expected. Revenue grew 67% to EUR 14.9m (EUR 12.2m/12.6m Evli/cons.). Operating profit amounted to EUR 10.9m (EUR 10.7m/8.9m Evli/cons.). Business area figures corresponded rather well with our estimates, the largest differences deriving from the EUR 2.2m carried interest from CapMan’s Mezzanine V fund and the Investment business operating profit coming in below our estimates (EUR 5.9m/7.9m act./Evli). Capital under management remained on par with previous quarter levels at EUR 4.3bn, but with EUR 250m raised in October and on-going fundraising growth is well set to pick up. In terms of new products CapMan launched the CWS Investment Partners investment programme in co-operation with AlpInvest, with some USD 90m committed to the first programme and more scheduled for 2022.

Small estimate tweaks
Our estimates have seen only small tweaks post-Q3, for FY 21 a slight increase in management fees in light of the good fundraising progress, seeing >EUR 10m quarterly levels within grasp. Based on management comments we remain fairly confident in a clear increase in carry during the coming quarters, as multiple funds are expected to enter carry in the next six months. For 2022 we expect to see continued growth in management fees and Management company operating profit through carry and >10% growth in the Services business. The fair value changes of own funds (1-9/2021: 26%) has been exceptionally good, and as such we expect a smaller profit contribution in 2022.

BUY-rating with a target price of EUR 3.4
With only smaller estimates revision we retain our target price of EUR 3.4, BUY-rating intact. Q3 in our view continued to prove CapMan’s potential and the outlook remains very promising.

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Detection Technology - Double-digit growth

27.10.2021 - 10.00 | Earnings Flash

Detection Technology’s Q3 result delivered some double-digit growth, but the result fell short of our expectations. The company expect to see double-digit growth in all of its BUs during Q4’21.

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Group level results: Q4 net sales grew by 12.5% y/y to EUR 23.2m vs. EUR 25.1m/25.2m Evli/cons. Adj. EBIT grew by 26.5% y/y and amounted to EUR 3.3m (14.1% margin) vs. EUR 3.7m/3.9m Evli/cons. R&D costs totaled to 2.6m and were 11.2% of net sales (Q3’20: EUR 2.3m, 11.1%)
Medical (MBU): sales growth of the MBU was mainly generated by next-generation CT products and net sales grew by 18.8% y/y, totaling EUR 11.9m (Evli: 35.3% y/y, 13.6m).
Security (SBU): the normalization of demand has started in all segments, and demand has taken an upward turn also in the aviation. Net sales increased by 0.2% y/y from weak comparison period and amounted to EUR 7.5m (Evli: 7.5% y/y, 8m).
Industrial (IBU): demand was strong in all of the company’s main segments and net sales grew by 21.5%, totaling EUR 3.8 (Evli: 11.6%, 3.5m).
• Component shortage has been affecting DT’s sales and margins throughout the year and was also postponing product deliveries during 3rd quarter of 2021.
FY’21 outlook: DT expects the demand to continue strongly both in the medical and industrial applications, and the double-digit growth of the MBU and IBU will be greater in Q4 than in Q3 of 2021. The demand in security applications will improve, and the company expects the SBU to have double-digit growth in net sales in Q4 of 2021. DT expects double-digit growth in its total net sales also in H1 2022.
No changes in medium-term targets: at least 10% net sales growth and an EBIT margin at or above 15%.

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Aspo - Very strong underlying performance

27.10.2021 - 10.00 | Earnings Flash

Aspo’s headline EUR 7.6m Q3 EBIT didn’t meet estimates, but the figure includes a EUR 3.4m Kauko impairment loss. Both ESL and Telko recorded new profitability highs.

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  • Aspo Q3 revenue was EUR 148.0m, compared to the EUR 143.1m/141.0m Evli/consensus estimates. Q3 EBIT amounted to EUR 7.6m vs the EUR 8.5m/9.0m Evli/consensus estimates. The EBIT figure includes Telko’s EUR 3.4m Kauko impairment.
  • ESL Q3 revenue came in at EUR 47.3m (a 50% y/y increase) vs our EUR 43.6m estimate, while EBIT amounted to EUR 7.1m vs our EUR 4.5m estimate. ESL achieved the record-high 15% EBIT margin despite extensive dockings as cargo volumes grew by 26% y/y.
  • Telko’s top line was EUR 73.0m, compared to our EUR 71.6m estimate. EBIT was EUR 2.5m vs our EUR 4.9m estimate. EBIT margin was thus 3.4% but would have been 8% without the EUR 3.4m Kauko impairment. Telko’s own operating result represents a record high. Plastics and chemicals prices remained high.
  • Leipurin Q3 revenue amounted to EUR 27.7m vs our EUR 27.9m estimate, while EBIT was EUR 0.6m vs our EUR 0.4m estimate.
  • Other operations cost EUR 2.6m, compared to our EUR 1.3m estimate.
  • Aspo guides EUR 30-36m in FY ’21 operating profit. The guidance includes the EUR 3.4m impairment loss.

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Finnair - Still some way until profitable levels

27.10.2021 - 09.10 | Company update

Finnair’s Q3 results and updated outlook didn’t provide major surprises considering the persistent uncertainty around long-haul air travel, however the operating loss guidance until the end of H1’22 was a minor negative.

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Some initial steps towards profitability

Q3 revenue amounted to EUR 199m, compared to the EUR 264m/247m Evli/cons. estimates. Passenger revenue came in lower than we estimated, but cargo continued to support operations and in our view the freight performance explains a large part of the narrowing in Q3 operating loss. Q3 EBIT was EUR -109m vs the EUR -149m/-144m Evli/cons. estimates. Demand is right now focused on European leisure travel, while business travel has taken some tentative initial steps in Northern Europe. Finnair’s operating cash flow already turned positive in Q3, the first time since Q4’19. The company has built a EUR 1.2bn cash position; the buffer stands high in part to meet loan repayments due next year. Finnair doesn’t expect any major narrowing in Q4 operating loss. Our updated Q4 EBIT estimate is EUR -76m (prev. EUR -65m).

Profitable RPK levels will still have to wait many quarters

Finnair opens routes to Thailand and the US in November, while Japan and South Korea should follow around year-end. China may not open before H2’22; China is an important destination for Finnair and thus decent profitability will probably have to wait until H2’22. Q1’22 at least will remain in the red, but we would expect losses to narrow considerably already in Q2’22 if destinations excluding China are able to support adequate volumes. Q2’22 is still likely to result in an operating loss. Finnair’s updated outlook wasn’t a huge surprise as it was well known Asian passenger volume recovery will lag those of Western routes. We revise our FY ’22 RPK estimate down by 12%. We now estimate FY ’22 EBIT at EUR 30m (prev. EUR 75m), however we make only minor revisions to our FY ’23 estimates.

We consider FY ’23 multiples to be in line with peers’

Finnair is valued high relative to peers on our FY ’22 estimates (6x EV/EBITDA and 70x EV/EBIT) due to slow Asian route recovery, but on our FY ’23 estimates the multiples narrow to 4x EV/EBITDA and 10x EV/EBIT. We find the levels to be, overall, in line with peers. We retain our EUR 0.65 TP and HOLD rating.

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Consti - Growth picking up nicely

27.10.2021 - 09.10 | Earnings Flash

Consti's net sales in Q3 amounted to EUR 76.0m, slightly above our and consensus estimates (EUR 73.3m/73.0m Evli/cons.), with growth picking up clearly to 11.4% y/y. EBIT amounted to EUR 3.1m, above our and consensus estimates (EUR 2.7m Evli/cons.). The order backlog continued to grow well, up 15.0% to EUR 217.9m.

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  • Net sales in Q3 were EUR 76.0m (EUR 68.2m in Q3/20), slightly above our and consensus estimates (EUR 73.3m/73.0m Evli/Cons.). Sales grew 11.4% y/y.
  • Operating profit in Q3 amounted to EUR 3.1m (EUR 2.5m in Q3/20), above our and consensus estimates (EUR 2.7m Evli/cons.), at a margin of 4.1%. Relative profitability improved slightly y/y, with the adjusted EBIT-margin up 0.2 percentage points. Construction material price increases and material availability did not have a significant impact.
  • EPS in Q3 amounted to EUR 0.29 (EUR 0.22 in Q3/20), above our consensus estimates (EUR 0.25 Evli/cons.).
  • The order backlog in Q3 was EUR 217.9m (EUR 189.4m in Q3/20), up by 15%. Order intake was EUR 40.0m in Q3 (Q3/20: EUR 31.0m).
  • Free cash flow amounted to EUR 3.6m (Q3/20: EUR 4.6m).
  • During the reporting period Consti acquired RA-Urakointi Oy, a company specialising in the repair of apartments and row houses.
  • Guidance for 2021 (intact): Operating profit is expected to be between EUR 4-8m.

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Scanfil - Performance is unlikely to falter

27.10.2021 - 08.50 | Company update

Scanfil’s Q3 EBIT faced some headwinds, but Q4 EBIT is set to improve and outlook for FY ‘22 doesn’t seem bad either.

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We expect the Q3 margin softness will prove temporary

Scanfil’s Q3 revenue grew by 18.5% y/y and amounted to EUR 167.8m vs the EUR 165.5m/171.2m Evli/cons. estimates. The growth was for the most part attributable to Advanced Consumer Applications and Energy & Cleantech segments, while Medtech & Life Science continued to grow at a 12% y/y pace. Advanced Consumer Applications had to make many spot components purchases and excluding all such transitory items top line grew by 10.2% y/y. Component availability issues limited Scanfil’s ability to meet customer demand and the challenges also hurt relative profitability. We understand the component scarcity situation limited profitability to the tune of EUR 1.0-1.5m. Q3 EBIT amounted to EUR 9.5m (5.7% margin), compared to the EUR 10.8m/10.9m Evli/cons. estimates. The challenging component situation will not fade away for quite some time, however Scanfil’s comments indicate there should be no major earnings drag going forward.

Spot purchases’ margin dilution is likely to be transient

Inventories increased by 63% y/y and 24% q/q as Scanfil wanted to secure necessary components to meet strong customer demand. This had a negative impact on cash flow, but Scanfil sees the situation is under control and inventories should not grow much more from here on. The new normal, in terms of component availability challenges, might mean revenue streams related to component spot sourcing will begin to generate adequate margins already during the next few quarters.

In our view earnings growth is set to continue next year

We expect Scanfil’s Q4 EBIT to improve q/q and y/y; our EUR 12.5m estimate translates to a very good 6.9% margin. The company’s comments on customer demand and component pricing dynamics suggest favorable outlook for next year’s earnings. We expect organic growth to continue in FY ’22 at a 7% pace; we see Scanfil reaching a 6.6% EBIT margin then, which would translate to EUR 48.5m in EBIT. The Hamburg restructuring also supports earnings growth going forward. Scanfil is valued 7.8-8.6x EV/EBITDA and 10.1-11.7x EV/EBIT on our FY ’21-22 estimates. We retain our EUR 9 TP and BUY rating.

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CapMan - Strong figures once again

27.10.2021 - 08.40 | Earnings Flash

CapMan's net sales in Q3 amounted to EUR 14.9m, above our estimates and above consensus estimates (EUR 12.2m/12.6m Evli/cons.). EBIT amounted to EUR 10.9m, in line with our estimates and above consensus estimates (EUR 10.7m/8.9m Evli/cons.).

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  • Revenue in Q3 was EUR 14.9m (EUR 8.9m in Q3/20), above our estimates and consensus estimates (EUR 12.2m/12.6m Evli/Cons.). Growth in Q3 amounted to 67% y/y. The difference to our estimates was largely due to EUR 2.2m carried interest in the Management Company business from the Mezzanine V fund.
  • Operating profit in Q3 amounted to EUR 10.9m (EUR 4.5m in Q3/20), in line with our estimates and above consensus estimates (EUR 10.7m/8.9m Evli/cons.), at a margin of 73%. The Investment business operating profit was below our expectations but compensated by the carried interest.
  • EPS in Q3 amounted to EUR 0.06 (EUR 0.02 in Q3/20), above our estimates and consensus estimates (EUR 0.05/0.04 Evli/cons.).
  • Management Company business revenue in Q3 was EUR 12.9m vs. EUR 10.3m Evli. Operating profit in Q3 amounted to EUR 5.1m vs. EUR 2.9m Evli.
  • Investment business revenue in Q3 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q3 amounted to EUR 5.9m vs. EUR 7.9m Evli.
  • Services business revenue in Q3 was EUR 1.9m vs. EUR 1.8m Evli. Operating profit in Q3 amounted to EUR 1.1m vs. EUR 1.0m Evli.
  • Capital under management by the end of Q3 was EUR 4.3bn (Q3/20: EUR 3.6bn). Real estate funds: EUR 2.9bn, private equity & credit funds: EUR 1.1bn, infra funds: EUR 0.4bn, and other funds: EUR 0.03bn.

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Innofactor - Some challenges with growth

27.10.2021 - 08.15 | Company update

Innofactor’s Q3 profitability remained at good levels but growth was not quite as good as expected due to organizational restructuring causing a sales dip in Finland. Recruitments pose some concerns for future growth but all in all the Q3 report did not change much.

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Some weakness in sales but profitability remained good
Innofactor reported its Q3 results, which fell slightly short of our expectations. Revenue declined 2.0% y/y but grew 3.0% organically to EUR 13.7m (Evli 14.5m). Revenue growth was affected by organizational restructuring in Finland, which led to a slight dip in domestic sales. EBITDA and EBIT amounted to EUR 1.7m (Evli 1.8m) and EUR 0.9m (Evli EUR 1.0m) respectively, with all other countries except Sweden showing positive EBITDA. With no significant new orders, the order backlog growth halted q/q, but was still up 24% y/y at EUR 72.0m. Innofactor reiterated its guidance, expecting revenue and EBITDA to increase compared to 2020. The Q3 report was in our view slightly more on the negative side, as although profitability remained on good levels the slower sales growth and lower headcount (-9.0% y/y) adds some pressure to growth expectations going forward.

Expect modest growth, new recruitments a slight concern
We have made some minor downward tweaks to our estimates but overall no notable changes. We expect growth of 1.9% and some 5-6% organically (excl. Prime divestment) in 2021. We expect EBITDA (excl. NRI’s) to improve to EUR 8.3m (2020: 7.2m), at a sound margin of around 12%. Our growth estimates for 2022-2023 remain quite low, at 4% and 3% respectively, given the company’s 20% long-term growth target. The lower headcount in Q3 and the noted challenges in the recruitment market raises some additional concerns for growth and is something that we will be monitoring during the coming quarters.

BUY with a target price of EUR 2.1 (2.2)
With the slight additional pressure on growth we adjust our TP to EUR 2.1 (2.2) and retain our BUY-rating. Our target price values Innofactor at approx. 19x 2021e adj. P/E.

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Innofactor - No major surprises

26.10.2021 - 10.45 | Earnings Flash

Innofactor’s Q3 results were close to our expectations. Net sales amounted to EUR 13.7m (Evli EUR 14.5m), while EBITDA amounted to EUR 1.7m (Evli EUR 1.8m). The order backlog growth halted due to a lack of new significant orders but was still up 24% y/y at EUR 72.0m.

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• Net sales in Q3 amounted to EUR 13.7m (EUR 14.0m in Q3/20), slightly below our estimates (Evli EUR 14.5m). Net sales in Q3 declined 2.0% y/y but grew 3.0% organically. Revenue growth in Finland saw a minor negative impact caused by organizational restructuring.
• EBITDA in Q3 was EUR 1.7m (EUR 1.6m in Q3/20), in line with our estimates (Evli EUR 1.8m), at a margin of 12.3%. EBITDA was positive in Finland, Norway and Denmark.
• Operating profit in Q3 amounted to EUR 0.9m (EUR 0.4m in Q3/20), in line with our estimates (Evli EUR 1.0m), at a margin of 6.7%.
• Order backlog at EUR 72.0m, up 24% y/y. Q3 saw no new significant orders received and as such the order backlog remained on previous quarter levels.
• At the end of August, Innofactor decided to renew its strategy to support growth even more strongly, tightening its offering according to the growth areas in question: Digital Services, Business Solutions, Information and Case Management, Data and Analytics, Cloud Infrastructure and Cybersecurity.
Guidance reiterated: Innofactor’s net sales and EBITDA in 2021 are estimated to increase compared to 2020 (net sales and EBITDA EUR 66.3m and EUR 7.2m respectively).

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Etteplan - Seasonal slowness ahead

26.10.2021 - 10.30 | Preview

Etteplan reports its Q3 results on October 28th. We expect to see solid growth figures on the weak comparison period and continued good profitability, with some reservation for potential cost inflation. We retain our HOLD-rating and target price of EUR 17.5.

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Growth on weak comparison figures in H1
Etteplan’s H1 started off on quite positively, with revenue growing 10.3%, albeit on weaker comparison period figures due to the impact of the pandemic. Growth was supported by recovery in demand but largely by inorganic growth. Good operational efficiency kept the group EBITA-margin above the target 10% level at 10.5%. Etteplan raised its revenue guidance range to EUR 295-315m (prev. EUR 285-305m), with the EUR 25-28m EBIT guidance range intact. Etteplan has during Q2-Q3 made several mainly smaller acquisitions, F.I.T. (DE) and Skyrise.tech (PL) in Q2 and BST Buck Systemtechnik (DE) and Adina Solutions (FI), strengthening especially the company’s Technical Documentation Solutions and Software and Embedded Solutions service areas and the company’s presence in Europe.

Potential minor cost inflation concerns
Etteplan is set to grow well on the weak comparison period figures, with our Q3 growth estimate at 25.4%. We estimate a group EBIT of EUR 5.2m, at a 7.6% margin. We remain slightly more on the conservative side in particular in regard to profitability in comparison to previous quarters, as some potential triggers for cost inflation were seen in Q2 from new recruitments and own growth initiatives picking up. Q3 is also seasonally slower which will have an impact on figures compared to previous quarters. For the full year we estimate revenue of EUR 300m and an EBIT of EUR 26.4m, quite near the mid-point of the guidance.

HOLD-rating with a target price of EUR 17.5
We have made no significant changes to our estimates ahead of the Q3 report and retain our HOLD-rating and target price of EUR 17.5. Our TP values Etteplan at ~20x 2022e P/E.

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Finnair - Losses will continue for now

26.10.2021 - 10.00 | Earnings Flash

Finnair’s Q3 operating loss was smaller than estimated despite certain top line softness. Slow Asian traffic recovery nevertheless continues to limit potential and losses will not subside in Q4. Finnair might not be back to black before H2’22.

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• Q3 revenue grew by 105% y/y and was EUR 199.4m vs the EUR 263.7m/246.7m Evli/consensus estimates.
• Adjusted EBIT amounted to EUR -109.1m, compared to the EUR -149.3m/-144.0m Evli/consensus estimates.
• Fuel costs were EUR 48m vs our EUR 77m estimate. Staff costs were EUR 58m vs our EUR 72m estimate. All other OPEX+D&A combined amounted to EUR 212m, compared to our EUR 275m estimate.
• Cost per Available Seat Kilometer was 9.37 eurocents vs our estimate of 12.50 eurocents.
• Finnair expects Q4 operating loss to be of similar magnitude as in Q3. This is not a major surprise compared to the EUR -65.5m/-59.8m Evli/consensus estimate for Q4. Finnair estimates positive operating cash flow for Q4.
• Finnair estimates operating losses will continue during H1’22 due to the slow recovery of Asian traffic. Finnair doesn’t expect return to pre-pandemic traffic levels before 2023, although the H2’22 operational environment could be already closer to that era.

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Scanfil - Guidance implies strong Q4 EBIT

26.10.2021 - 09.45 | Earnings Flash

Scanfil’s Q3 revenue landed close to expectations, but the EUR 9.5m EBIT fell a bit short of estimates. Scanfil’s FY ’21 guidance, however, implies Q4 EBIT will be considerably higher.

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• Q3 revenue grew by 18.5% y/y to EUR 167.8m, compared to the EUR 165.5m/171.2m Evli/consensus estimates. EUR 11.7m of revenue amounted to transitory separately agreed low-margin customer invoicing due to component availability issues. Most of this transitory revenue was located within Advanced Consumer Applications. Revenue growth excluding the transitory items was 10.2% y/y.
• Advanced Consumer Applications’ top line was EUR 55.4m, while we expected EUR 46.7m. Energy & Cleantech amounted to EUR 43.5m vs our EUR 41.7m estimate. Automation & Safety was EUR 32.5m, compared to our EUR 38.1m.
• Scanfil Q3 adjusted EBIT amounted to EUR 9.5m vs the EUR 10.8m/10.9m Evli/consensus estimates. EBIT margin was 5.7% vs our 6.5% estimate. According to Scanfil material constraints and the Hamburg factory closure caused about a EUR 2m negative EBIT impact for the quarter. Scanfil’s guidance midpoint also suggests Q4 EBIT will be some EUR 3m higher q/q.
• Scanfil guides FY ’21 revenue at EUR 670-710m and adjusted EBIT at EUR 41-44m (unchanged).
• Scanfil retains its long-term financial targets for now (EUR 700m revenue on an organic basis in FY ’23 with a 7% EBIT margin).

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Verkkokauppa.com - Growing in a soft market

25.10.2021 - 10.00 | Company update

With strong growth figures, Verkkokauppa.com achieved its 33rd consecutive quarter of growth, but the competitive environment pressed margins below our estimates. We retain our BUY-rating and adjust target price to EUR 10 (10.8).

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Sales mix and increased costs pressed the margins
Verkkokauppa.com delivered strong growth figures, but decreased gross margin, additional warehousing, and marketing costs pressed the profitability below our estimates. Top line grew by 9.1% y/y to EUR 141m (Evli: 139.7m). Online sales grew at an 18.7% y/y pace, while B2B sales were up 22% y/y. Export business returned to the growth path with a sales increase of 4.5% y/y. Gross profit remained even y/y and amounted to EUR 20.9m (Evli: 23m). Gross margin weakened to 14.8% (Evli: 16.5%) and was affected by stronger sales in lower-margin categories. Increased price competition pressed the margins further down. EBIT fell short of our expectations (EUR 6.8m) and decreased by 17% to EUR 4.7m (margin of 3.3%).

We made minor adjustments
While core categories performed well, growth was also seen in evolving categories. Despite the softened markets, the company also gained some market share in traditional consumer electronic markets. The Q4 has usually been price-driven, meaning that coming campaigns might have an impact on the company’s margins. Considering the increased cost pressures, marketing investments, and changes in warehousing, we made only minor adjustments to our FY’21-22 estimates.

BUY with a target price of EUR 10 (10.8)
Verkkokauppa.com reiterated its FY’21 guidance and expects revenue of EUR 570-620m and adj. EBIT of EUR 20-26m. We expect revenue of EUR 600.1m and an adj. EBIT of EUR 21.4m (3.6% margin). Our view on the company’s growth path remains bright, but increased competition made us tweak the profitability down for 21-22E. On our adjusted target price, the company’s valuation is approximately in line with its peer group. We retain our BUY-rating and adjust TP to EUR 10 (10.8).

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Raute - Positioned for earnings recovery

25.10.2021 - 09.30 | Company update

Raute’s profitability already improved. There’s uncertainty as to how much more margins will improve in the short-term, but we remain confident Raute’s positioning is favorable while the next expansion cycle has now begun.

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Still shy of long-term profitability potential

Q3 top line was EUR 38m vs our EUR 36m estimate. Russia drove projects’ 28% y/y growth, while services grew 50% y/y from a low comparison base. Raute has booked many modernization orders in recent quarters and the pace didn’t falter, in fact Q3 modernization orders helped services’ intake to a record high of EUR 21m. EBIT improved to EUR 1.9m, vs our EUR 1.4m estimate, a reasonable level but still short of long-term potential. Other operating costs remained high, at EUR 4.6m, as Raute continued to invest in R&D, digitalization, and marketing. These efforts should help Raute’s emerging markets presence in the long-term.

Strong growth supports improving profitability estimates

We expect FY ’21 orders to top the record seen in ’18. Raute’s advanced markets (Europe, North America & Russia) now drive activity, and there are two big potential Russian projects to further secure outlook for the coming years. Pandemic restrictions still limit potential within maintenance services, and the pandemic has postponed emerging markets prospects, but we view Raute’s long-term position favorable and there’s reason to conclude competitiveness has improved due to the acquisition of Hiottu (a small vendor of e.g. machine vision solutions). We don’t expect Q4 EBIT to be yet that great, but we see Raute is set to achieve EBIT margins clearly above 5% in the coming years.

We make only marginal adjustments to our estimates

Raute has plenty of workload and outlook for further orders remains strong. Project execution and margins are hence major short-term focus areas. Raute had certain project execution issues in ’18, but this time the challenges will be different and not Raute-specific. We expect Raute to reach EUR 10m in FY ’22 EBIT. There’s still uncertainty regarding how much Raute’s EBIT will improve in the short-term (cost inflation is a risk), but we believe the company to be able to achieve more than EUR 12m in FY ’23 (for now we estimate the figure at EUR 11.8m). Raute is valued 6.2-7.5x EV/EBITDA and 8.4-10.1x EV/EBIT on our FY ’22-23 estimates. We retain our EUR 26.5 TP and BUY rating.

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Consti - Eyeing pick-up in growth

25.10.2021 - 09.30 | Preview

Consti will report its Q3 results on October 27th. We expect to see growth to start picking up supported by the good order intake during H1 and for profitability to remain at healthy levels. We retain our BUY-rating and TP of EUR 14.5.

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Slight growth and healthy profitability (excl. NRI’s) in H1…
Consti’s first half of 2021 got off to a decent start. Revenue grew y/y, albeit at a minor pace of 1.4%, with slight pick-up in the second quarter. The order intake improved well, up 30.5% to EUR 168m. As a result, the order backlog was also up y/y by 11.5% at 236.2m. Q2 saw an unfortunate hit to profitability due to the unfavourable outcome of the Hotel St. George arbitration proceedings resulting in a one-off loss of EUR 3.4m. Nonetheless the H1 adj. EBIT-margin remained on par with previous year levels of 2.6% and improved slightly in Q2. Consti lowered its guidance due to the arbitration proceedings ahead of Q2, expecting an EBIT of EUR 4-8m in 2021 (prev. EUR 7-11m).

… with expectations of pick-up in growth during H2
We expect growth to pick up in H2 supported by the good order intake during the first half of the year and a good activity level. Consti’s order intake was aided by its first new construction projects and although demand in certain commercial areas still remain affected by the pandemic, the housing company market has been recovering well and should support demand going forward. We expect growth of 7.5% in Q3 and 4.3% for FY 2021. In regard to profitability Consti achieved rather decent margins already during the previous year and with minor uncertainty due to the recent fluctuations in construction material costs we expect little improvement in margins during H2. We expect Q3 EBIT of EUR 2.7m and FY 2021 EBIT of EUR 5.9m, at the mid-point of Consti’s guidance range.

BUY-rating with a target price of EUR 14.5
We have made no adjustments to our estimates ahead of the Q3 report. We retain our BUY-rating and target price of EUR 14.5 Our target price values Consti at approx. 17x 2021 P/E (excl. arbitration proceedings items).

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Verkkokauppa.com - Struggling with margins

22.10.2021 - 10.00 | Earnings Flash

Verkkokauppa.com’s Q3 earnings fell short from our estimates, while revenue growth topped the estimates. Top line grew by 9.1% to EUR 141m, gross profit remained steady y/y at EUR 20.9m and adj. EBIT amounted to EUR 4.7m.

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• Net sales topped our estimates (EUR 139.7m) and grew by 9.1% y/y to EUR 141m, driven by all business segments.
• The strategic growth area, B2B, grew strongly by 22% in quarter. Growth came from the customer segments of large as well as small and medium sized enterprises. The export business returned to the growth path once travel restrictions were relieved, and export sales increased 4.5% during the period, representing 6% of total sales. The company succeeded well in converting many online visitors to regular buying customers during the comparison period, with an improvement of conversion rate.
• Gross margin was 14.8% and fell below our estimates (16.5%). Gross profit ultimately amounted to EUR 20.9m and was on the same level as in comparison period. Gross margin was affected by tightened competition in lower-margin categories like phones, computers, and home appliances. Also, the share of low-margin products was increased in Q3.
• Adj. EBIT was below our estimates (EUR 6.8m) and was mostly affected by tightened gross margin. The EBIT saw a decline of 17% and amounted to EUR 4.7m (margin of 3.3%).
• Adj. EPS amounted to EUR 0.08 (Evli: EUR 0.12) and saw a decline of 15%.
• The company guides EUR 570-620m revenue and EUR 20-26m adj. EBIT for FY ’21 (unchanged)

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Detection Technology - Growth is expected to pick up in Q3

22.10.2021 - 09.45 | Preview

Detection Technology will report its Q3 result on October 27th. We have made no changes to our estimates ahead of Q3, expecting revenue to grow by 21.7% to EUR 25.1m and an EBIT margin of 14.7%.

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Q2 included some seasonality
The Q2 result was good on a group level, but there were deviations between BUs. The company expected and saw pick-up in SBU’s growth towards the end of the quarter, but with the sluggish performance of aviation SBU’s top line still declined by 11.7% y/y. MBU had a strong quarter and saw a growth of 37% y/y while IBU faced some short-term seasonality and declined by 10.4% y/y. The company grew by 11.4% y/y to EUR 23.5m driven by MBU. The EBIT margin improved from 12.3% to 12.6% y/y and
EBIT ultimately amounted to EUR 3m.

Medical expected to be in the driver’s seat
We expect Q3 net sales to grow from a pretty weak comparison period by 21.7% y/y to EUR 25.1m. We estimate MBU to grow by 35.3% driven by strong demand for CT equipment. We expect IBU to recover from the seasonal decline in Q2 and grow by 11.6% while we expect SBU to reverse the sales decline trend
and grow by 7.5%. We expect EBIT to improve to EUR 3.7m (margin of 14.7%) driven by stronger revenue growth. The component shortage is still tightening the margins as
component prices have increased. To our understanding, the shortage has affected DT’s sales volumes. Depending on the source, the shortage is expected to last at least until H1’22.

HOLD with a target price of EUR 32.5
We have made no changes to our estimates ahead of Q3. With 22E EV/EBIT 24.8x and P/E 33.7x, DT’s premium to peer median is 15% and 25% respectively. The stock is not cheap, but we see long-term potential in the business as the security market growth kicks in and still emerging technologies develop and commercialize. We retain our HOLD-rating and TP of EUR 32.5.

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Raute - Profitability improved

22.10.2021 - 09.30 | Earnings Flash

Raute reached an already reasonable EUR 1.9m EBIT in Q3. Both revenue and profitability beat our estimates. Q3 order intake did not quite reach our estimate, but Raute’s order book touched an all-time high of EUR 150m.

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  • Raute’s Q3 revenue grew by 36% y/y to EUR 37.9m vs our EUR 36.0m estimate. Project deliveries amounted to EUR 23.1m, compared to our EUR 21.5m estimate. Technology services’ top line was EUR 14.8m vs our EUR 14.5m estimate. Raute estimates maintenance service sales to have been even higher without the pandemic travel restrictions.
  • Q3 EBIT amounted to EUR 1.9m, compared to our EUR 1.4m estimate. The 5.1% operating margin topped our 3.9% estimate. The result was also weakened by a few unexpected cost items, including a large expense related to the repair of an important machine tool at Raute’s Nastola plant.
  • Order intake was EUR 58m vs our EUR 63m estimate. Project deliveries orders amounted to EUR 37m while we expected EUR 46m. Technology services orders were EUR 21m, compared to our EUR 17m estimate. Modernization projects helped services’ order intake.
  • Order book amounted to EUR 150m at the end of Q3 (EUR 62m a year ago).
  • Raute guides revenue to increase and operating profit to improve this year (unchanged).

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Suominen - Improvement potential beyond H2’21

21.10.2021 - 09.40 | Preview

Suominen releases Q3 results on Oct 28. The company issued a negative profit warning just before the release of its Q2 report; we make no changes to our lowered estimates ahead of the Q3 report.

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We leave our estimates unchanged for now

Suominen’s Q2 was still good in terms of revenue and profitability, although the US inventory pile-up already began to have an effect and led to some top line softness. Americas’ Q2 revenue declined by 13% y/y and thus Suominen’s EUR 114m top line fell short of the EUR 120m estimates (Europe still grew by 3% y/y). Suominen’s gross margin however remained a strong 14.7%, which helped the company to reach EUR 15.3m in EBITDA, in other words somewhat above estimates. We revised our H2’21 as well as FY ’22 estimates down, and we leave our estimates unchanged ahead of the report. We still expect Americas’ Q3 revenue to have dipped by 24% y/y; we estimate 6% y/y drop for Europe. We estimate Q3 EBITDA at EUR 9.5m.

Focus will be on the US volume recovery from Q4 onwards

We see Suominen H2’21 revenue down by 16% y/y. The effect, when combined with our estimated ca. 400bps y/y softening in gross margin, is a EUR 12m y/y decrease in H2’21 EBITDA to EUR 19.6m. We find raw materials prices relevant for Suominen did not gain that much during Q3, at least compared to the surge seen in Q2. The Q3 report’s focus will be on how the US inventory situation looks now and to what extent the supply jam can be expected to dissolve by the end of Q4. We also expect Suominen to have either completed or to be near completing the announced investments in Italy and the US.

Some y/y softness in FY ’22 EBITDA due to strong H1’21

We estimate FY ’22 revenue at EUR 431m, which implies on average 13% higher quarterly revenue going forward from H2’21. We expect this growth to help operating margins up by ca. 100bps from our estimated Q4’21 levels, and we therefore estimate FY ’22 EBITDA at EUR 48.5m, down by some EUR 5m y/y. Suominen is now valued around 5.5x EV/EBITDA and 9x EV/EBIT on our FY ’21-22 estimates. We consider these levels very modest despite the uncertainties related to volumes and gross margins. We retain our EUR 6 TP and BUY rating.

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Vaisala - Signs of stronger growth

20.10.2021 - 09.45 | Company update

Vaisala revised its guidance for FY 2021 and disclosed preliminary figures for Q3’21. The company is now expecting revenue of EUR 425-440m (prev. 400-420m) and an operating profit (EBIT) of EUR 48-58m (prev. 40-50m).

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Strong 3rd quarter
Preliminary orders received and net sales were strong, EUR 109.9m (growth 29% y/y) and EUR 111.5m (growth 19% y/y) respectively. Preliminary EBIT was a bit weaker at EUR 19.2m (19.5m), 17.3% (20.7%) of net sales. To our understanding, the profitability was burdened by increased material costs. The company had a robust Q3 and demand for Vaisala’s offering continued strongly in both BUs, especially in Industrial Measurements. Despite the component shortage, Vaisala found solutions to most availability issues together with suppliers and by purchasing higher-priced components from the spot market.

The component shortage is expected to continue
The global shortage of components is expected to continue during the fourth quarter and the first half of next year. Vaisala estimates, that component shortages will continue to generate additional material costs during the fourth quarter of 2021. We have revised our net sales and EBIT estimates for 2021-23E to reflect the company’s strong performance and a solid outlook. We expect the company to grow by 14.5% to EUR 434.5m driven by 26.1% growth in IM, while we expect W&E to grow by 7.4% in 2021. We estimate the company to reach an EBIT margin of 12.6% in 2021. For 2022-23E we expect Vaisala to grow by 8.3% and 6.8% respectively.

TP of EUR 42 (prev. EUR 38) with HOLD-rating
On our revised FY 22 estimates, Vaisala trades at a premium compared to its peers. Vaisala has performed well during FY 21 but considering the uncertainties relating to component shortage and availability, we do not find the valuation overly stretched (premium of 27% and 9% to 2022E EV/EBIT and P/E peer median). With our raised estimates, we adjust our TP to EUR 42 (prev. EUR 38) and retain our HOLD-rating.

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Finnair - Still waiting for Asian passengers

20.10.2021 - 09.25 | Preview

Finnair reports Q3 results on Oct 26. Losses remain large and focus is on narrowing them from Q4 onwards. We expect Finnair to achieve break-even EBIT in H1’22 even if traffic still continues to normalize throughout H2’22.

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Q3 losses are going to be steep like before

Q3 traffic figures show revenue passenger kilometers doubled y/y and tripled q/q but were still only 13% of Q3’19 levels. The Q3 passenger volumes were also significantly below our estimates and hence we revise our revenue estimate down to EUR 264m (prev. EUR 332m). We now expect EUR 149m Q3 operating loss (prev. EUR 132m). Jet fuel prices have also advanced by some 25% during the past three months (average prices increased by about 10% q/q in Q3). We still expect losses will begin to narrow in Q4, however we don’t see the recovery quite as fast as before and now estimate Q4 operating loss at EUR 65m (prev. EUR 13m). Somewhat slower-than-anticipated recovery should not be a major issue for Finnair, considering e.g. the recent sale-and-leaseback transaction which untied more than USD 400m.

We expect FY ’23 RPK to be 95% of FY ’19 levels

Important destinations like Japan and South Korea have progressed with vaccinations, but Finnair’s Asian passenger volumes remain low for now. Asian Q3 RPK was only 4% of Q3’19 levels, while European RPK had already reached 21% of similar comparable levels. North American RPK also progressed to 19%, however Finnair does only marginal volumes on those routes. The Asian reliance means Finnair’s volume recovery takes at least a bit longer than that for many other Western airlines. We expect Finnair to reach break-even EBIT in H1’22, and decent profitability should be possible during H2’22. The company could therefore achieve modest profitability next year, but more significant annual EBIT may have to wait until FY ’23. We cut our FY ’22 EBIT estimate from EUR 150m to EUR 75m, while our FY ’23 estimate remains basically unchanged at around EUR 200m.

The inevitable passenger volume recovery is fully valued

Finnair is bound to make a strong operational recovery sooner or later, but in our view this outlook is pretty much fully valued already. Finnair is valued ca. 30x and 11.5x EV/EBIT on our FY ’22-23 estimates, a level we find to be well in line with primary European peers. We retain our EUR 0.65 TP and HOLD rating.

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Verkkokauppa.com - Growth is expected to continue

19.10.2021 - 09.40 | Preview

Verkkokauppa.com reports its Q3 results on Fri, the 22nd of Oct. Preliminary figures show a solid third quarter and our attention will concentrate on the comments regarding end of the year as crucial campaign season arrives and temporary supply chain problems still exist.

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Q2 figures topped estimates

Verkkokauppa.com’s strong Q2 result topped estimates. Top line grew by 6% y/y to EUR 131m, driven by strong B2B sales and online transition. Growth in consumer sales was moderate and export sales decreased due to COVID-19 restrictions. The pandemic restrictions still strengthened online sales share, not to mention the positive effects of consumer purchase behavior. Profitability was boosted by increased gross margin through strong sales in higher margin evolving categories like Sports, Home & Lighting, and BBQ & Cooking. EBIT eventually amounted to EUR 5.1m (EBIT margin of 3.9%).

Waiting for further evidence on strategy execution

The company guides EUR 570-620m revenue and EUR 20-26m adj. EBIT for FY ‘21. We expect Q3 net sales to grow by 8% y/y to EUR 139.7m (EUR 138.6m cons.) and an adj. EBIT margin of 4.8% (4.5% cons.). Our FY ‘21 net sales estimate is approx. at the midpoint of the company’s guidance, at EUR 599m (EUR 592m cons.), and adj. EBIT estimate at the upper bound of the guidance, at EUR 24.8m (EUR 23.5m cons.). Verkkokauppa.com’s CMD elaborated on its strategy execution. The execution plans sound reasonable on paper, but further evidence is needed before we raise our estimates nearer the company’s long-term targets.

Current valuation leaves long-term upside potential

Verkkokauppa.com’s absolute valuation has slightly increased since our last update, but the company is still valued at a discount compared to its Nordic and European online-focused peers. On our FY ‘22 estimates the company trades at an EV/EBIT of 12.6x (12% discount to online-focused Nordic and European peers). We retain our TP of EUR 10.80 and BUY-rating.

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Raute - Order book reaches a record high

19.10.2021 - 09.15 | Preview

Raute reports Q3 results on Oct 22. We make only minor revisions to our estimates to reflect recent new orders and continue to expect strong earnings growth from here on.

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We estimate Q3 order intake at EUR 63m

Raute’s environment showed considerable signs of improvement already in Q2. The company booked one large EUR 30m Lithuanian order back then and the flow continued in Q3 with two meaningful Russian orders worth a total of EUR 34m. It will be of interest to hear Raute’s comments on current Russian and Eastern European activity levels, not to mention the pace of potential recovery in other geographies, but the fact is Raute now has enough workload for the foreseeable future. The three mentioned orders will all be delivered next year and thus it’s very clear both top line and profitability will continue to improve.

We make only minor order intake updates to our estimates

Raute began Q3 with an already very high EUR 129m order book and we estimate the figure to have increased further to EUR 156m by the end of the quarter. We understand this would be a new record high (Raute had a EUR 142m order book at the end of Q1’18) and thus the company is in an excellent position to achieve steep earnings growth during the next few years. We expect Raute to post EUR 1.4m in Q3 EBIT; this level is still far below potential since in our view Raute should be able to reach at least EUR 2-3m EBIT per good quarter. The company was able to post some EUR 3-4m quarterly levels during its previous boom cycle (Q3’18 was a record with EUR 5.6m in EBIT). We expect profitability will continue to improve from here on and estimate FY ’22 EBIT at EUR 10.5m.

Valuation is modest at a point where figures are improving

In our view Raute is now valued at undemanding multiples after a period of few years during which both new orders and profitability came under pressure. There are still uncertainties e.g. to what extent the pandemic might bother business, but we reckon our steep earnings estimates for the coming years are reasonable considering Raute was able to achieve EUR 11-15m EBIT in FY ’17-18. On this basis next year’s multiples can be described on the low side, at around 7x EV/EBITDA and 9x EV/EBIT, and even more attractive beyond that point. We retain our EUR 26.5 TP and BUY rating.

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Scanfil - Further acceleration in H2 growth

14.10.2021 - 09.35 | Company update

Scanfil made a minor guidance update and by implication organic growth rate will reach well into the double digits this year. We upgrade our FY ’21 growth estimate by 4% and expect the positive momentum to spill over to next year as well. We retain our EUR 9 TP; our new rating is BUY (HOLD).

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FY ’21 revenue guidance midpoint increases by 5%

Scanfil issued a small guidance update. The new range is EUR 670-710m in FY ’21 revenue and EUR 41-44m in adj. EBIT, while the previous guidance was respectively EUR 630-680m and EUR 41-46m. Most important recent trends, namely strong customer demand and climbing component prices, have persisted. Scanfil continues to flag the supply chain risk related to semiconductor availability and the guidance update is not in our view that big news. Our previous estimates for this year were EUR 658m in revenue and EUR 43m in adj. EBIT. Our updated revenue estimate stands at EUR 681m; we make no changes to our absolute FY ‘21 adj. EBIT estimates.

Strong growth supports absolute profitability estimates

Scanfil H1’21 growth amounted to 12% y/y; we previously estimated H2’21 y/y growth at above 8% and now expect more than 16%. We reckon the positive surprise extends beyond this year and we have updated our FY ’22 growth estimate to 7.0% (prev. 5.8%). The improved growth outlook supports our absolute profitability estimates for the coming years to the tune of EUR 1-2m. The updated outlook also means the EUR 700m organic revenue target for FY ’23 is now pretty much irrelevant as the company might well break through that threshold already this year. We expect Scanfil to communicate a new long-term target at some near future date, however we don’t expect the company to make any revisions to its long-term 7% EBIT margin target.

In our view valuation has now turned more attractive

Scanfil’s share price has slipped a bit since the previous update while growth outlook has improved an additional notch. On our updated estimates for FY ’21-22 Scanfil is now valued 8.0-8.6x EV/EBITDA and 10.3-11.8x EV/EBIT. The multiples remain slightly above those of a typical peer, but we continue to view the premium warranted. We retain our EUR 9 TP; our rating is now BUY (HOLD).

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Verkkokauppa.com - CMD notes

01.10.2021 - 09.30 | Company update

In its first-ever Capital Markets Day, Verkkokauppa.com presented details on its new (revealed in Feb 2021) strategy’s implementation. The company’s target is to achieve EUR 1bn revenue, EUR 50m operative profit (>5% EBIT margin), and to lower its fixed costs to <10% of revenue by the end of 2025. We retain our TP of EUR 10.80 and BUY-rating.

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New sources for growth and improved margins

The management introduced factors to accelerate growth rate: a focus on the assortment (core, evolving, and untapped categories), improved customer experience, the capture of shift to online, and new business through acquisitions or new private label products. Moreover, the company aims to speed up delivery performance to maintain its market-leading position and offer new financial, near-product, and standalone services to generate more profitable growth.

By improving its gross margin and lowering fixed costs the company expects to reach EUR 50m in operative profit by the end of 2025. According to the company, the focus on increasing the amount of the evolving and untapped categories in its assortment is set to contribute to higher gross margins. Fixed costs will be lowered through the enhancement of logistics, the automation of supply chain and product management, in addition to the improvement in marketing performance as well as segmentation. These initiatives are also set to deliver better operational efficiency and scalability.

No changes in the big picture

The CMD revealed further details on strategy execution, but the process is still in the early stages and the event didn’t change the big picture. Outlook remains bright and the management has confidence on strategy implementation. We keep our estimates intact, expecting revenue in 21E-22E to reach EUR 599m and EUR 644m respectively, and an adj. EBIT margin of 4.1% and 4.3% respectively. With our estimates intact we retain our TP of EUR 10.80 and BUY-rating.

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Marimekko - Expected guidance improvement

23.09.2021 - 13.45 | Earnings Flash

Marimekko specified its outlook for FY 2021, now expecting adj. EBIT margin to be above that of the comparison period (2020: 16.3%). Revenue guidance remains intact and is expected to grow from the previous year (2020: EUR 123.6m). Our estimates were already in line with the new guidance; we make no changes to our estimates or recommendation.

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  • Marimekko specified its guidance today, now expecting the comparable operating profit margin to be higher than in the previous year (2020: 16.3%). The company previously expected the comparable operating profit margin to be on par with or above the comparison period. Marimekko expects revenue to exceed the comparison period (2020: EUR 123.6m). The uncertainties related to the pandemic situation concerning the rest of the year have been reduced from previous expectations, thus contributing to the guidance improvement.
  • Based on the guidance revisions we see no need for changes to our estimates. Our estimates already reflected growth and margin improvement, expecting the company to grow by 16% and reach an adjusted EBIT margin of 17.1% in FY 2021, and as such remain in line with the company’s new outlook.
  • As our estimates remain intact and our expectations for the H2 outlook already were quite positive we retain our target price of EUR 84 and BUY-rating. Valuation remains at a higher level compared with both peers and the company’s own historic multiples, which is justifiable by the good outlook and higher profitability levels.

 

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Vaisala - Ambitious profitable growth

23.09.2021 - 09.15 | Company update

In its Capital Markets Day, Vaisala presented its revised strategy and financial targets for 2021-2024. Revenue growth and EBIT-margin targets were raised to 7% (5%) and 15% (12%) respectively.

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Continuity by increasing growth ambition
According to the company’s management Vaisala’s strategy has so far been successful and thus the renewed strategy saw no significant changes. What is new in the strategy, is the increased ambition to grow and scale the businesses. The company will continue investing in R&D, maintain a leading position in flagship markets, grow in growth markets and generate new business in emerging markets. The company’s management noted some factors to create synergies between BUs and scale the business such as: units using common software and hardware modules and platforms in their products, continuously developing the company’s production system, and improvement of processes, tools, and competences.

Targets are set relatively high
During 2021-2024, Vaisala aims for an average annual revenue growth rate of 7% (prev. 5%). The profitability target is to achieve a 15% EBIT-margin (prev.12%) during the strategy period. During 2015-2020 Vaisala has achieved an annual growth rate of ~3% and achieved an EBIT-margin of ~10% on average. The new target is set relatively high, which reflects a higher ambition level. The company’s management highlighted that increases in revenue will scale and improve the EBIT-margin. According to the company’s management, the target growth rate doesn’t include inorganic growth, and thus our focus is on organic performance of IM and W&E’s capabilities to generate new businesses such as renewable energy and air quality. In fact, IM has grown relatively well in past few years and there is potential in W&E’s new emerging markets and applications, such as renewed energy and Data/Software as a service (DaaS/SaaS). We see the targets to be achievable should the company continue to perform well in its flagship markets and growing and generating new growth/emerging markets.

HOLD with a TP EUR 38.0 (36.0)
We increased our estimates for FY 2022 and 23 and expect the company to grow 7.7% and 6.8% respectively. We expect the EBIT-margin to gradually improve towards the long-term target level and estimate a 13.9% EBIT-margin in FY 2023 driven by scalability and revenue growth in both business units. Vaisala’s valuation is quite stretched compared to peers. We still accept a premium to Vaisala’s valuation due to the company’s technology leadership, good market position, and increased growth and profitability outlooks. We retain our HOLD recommendation and increase our target price to EUR 38.0 (36.0).

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Exel Composites - Temporary profitability challenges

17.09.2021 - 09.45 | Company update

Exel’s margins take a hit this year, but we see Exel’s favorable positioning will remain intact and next year’s results should more than make up for the interim dip.

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The negative factors have been discussed earlier

Exel issued a negative profit warning yesterday. The company’s earlier outlook guided revenue as well as adj. EBIT to increase, whereas the updated guidance says revenue is to increase significantly while adj. EBIT is to decrease. We don’t view the revenue update a major surprise but the FY ‘21 profitability downgrade is negative news. According to Exel raw material availability has weakened, and both material as well as logistics costs have increased. Exel also says certain high volume carbon fiber Wind power customer applications have generated low margins during their ramp-up phase. These negative factors were discussed already over the spring and summer, but we expected margin improvement in H2 after some softness seen in Q2.

We expect profitability back to high levels in FY ‘22

We already expected strong top line growth for this year and thus we revise our estimate only a bit, from EUR 124.9m to EUR 125.8m. Our previous adj. EBIT estimate for FY ’21 was EUR 10.8m, which we now revise down to EUR 8.9m. We estimate 17% y/y revenue growth for Q3 (Exel grew 23% y/y in Q2). We now expect EUR 1.9m in Q3 adj. EBIT (prev. EUR 2.7m), a bit below the EUR 2.0m comparison figure. We therefore estimate Q3 EBIT margin to have softened to 6.3%. We now expect 6.8% margin for Q4, in other words EUR 2.1m EBIT (prev. EUR 3.2m). In our view Exel’s composites pricing will adjust to higher raw materials prices going forward and hence the company should be able to make up for the interim profitability drop next year when the raw materials and logistics markets have normalized.

We still consider valuation not very demanding

Our FY ’22 revenue estimate is EUR 139.0m (prev. EUR 137.4m), while we revise our EBIT estimate down to EUR 12.4m (prev. EUR 13.5m). The 8.9% EBIT margin estimate is in line with the figure seen last year while our corresponding top line estimate is 28% above the EUR 108.6m in FY ’20 revenue. Exel is valued 9x EV/EBITDA and 15x EV/EBIT on our FY ’21 estimates. These levels are not that low but turn attractive at ca. 7x and 10x on our FY ‘22 estimates. Our new TP is EUR 10.0 (11.5); retain BUY rating.

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Scanfil - CMD notes

15.09.2021 - 09.30 | Company update

Scanfil hosted its first-ever CMD yesterday, during which the company elaborated on customer service and internal processes. Long-term financial targets were left unchanged.

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The focus was on Scanfil’s positioning and latest trends

The CMD added color on Scanfil’s comprehensive manufacturing service model and value chain positioning. Scanfil’s service has over the years evolved to cover the entire life cycle for many high-mix low-volume industrial electronics products. Scanfil’s own processes now appear well harmonized across the factory network. Scanfil can take care of the final product’s delivery to end-use location, as highlighted in the case of TOMRA’s reverse vending machines and grocery stores. Established OEM customers amount to 85% of accounts (95% of revenue) while start-ups make up the rest. Each factory has its own P&L and Scanfil monitors their strategic position as well as financial performance. The divested plant in Hangzhou was performing well in financial terms but no more seemed a great fit strategy-wise, whereas in the Hamburg closure case the reverse was true. According to Scanfil the Connectivity segment should have the highest relative growth potential, not a big surprise considering it is still by far the smallest of the five. Semiconductor sourcing challenges seem set to last at least until 2022 and affect accounts across all the segments. Scanfil doesn’t see any internal bottlenecks an issue; business has mostly managed to stay on course thanks to extended planning and demand forecasts.

Organic growth potential is strong for the coming years

Scanfil recently announced the EUR 6m planned investment in Suzhou to double the current plant’s production capacity. We consider this an efficient way to address organic growth opportunities driven by Chinese demand. Scanfil has also added new staff in China and the US to help capitalize on local sales potential. We continue to expect ca. 7% organic CAGR going forward, a strong figure in the EMS context.

The overall valuation context has not changed

Scanfil left its long-term financial targets intact for now and we make no changes to our estimates. Valuation hasn’t changed much since the last update; Scanfil trades around 8.5-9.0x EV/EBITDA and 11-12x EV/EBIT on our FY ’21-22 estimates. We retain our EUR 9.0 TP and HOLD rating.

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Fellow Finance - Return to growth within reach

30.08.2021 - 09.35 | Company update

Fellow Finance’s H1 revenue fell short of our expectations as a result of the business financing driven growth. We expect a return to growth in H2 but have lowered our 2022-2023 growth expectations by some ~10%. We adjust our TP to EUR 3.8 (4.0) and retain our BUY-rating.

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Loan mix driven revenue decline in H1
Fellow Finance reported somewhat twofold H1 results. With the loan mix having shifted more towards business financing and the relative fee income to loan volume lower than anticipated revenue was below our estimates, declining 5.3% y/y to EUR 5.5m (Evli EUR 6.2m), despite the 31% y/y growth in intermediated loan volume. EBIT of EUR 0.5m was still in line with our estimate (Evli EUR 0.5m) as a result of reduced costs from lower broker fees and credit losses from Lainaamo as well as a downsizing of Fellow Finance’s own balance sheet stock. Costs did see some additional burden from growth investments, with new and up-coming product launches and slight growth in personnel.

Set to return to growth but pace still somewhat lackluster
We have slightly lowered our 2021 estimates, now expecting revenue of EUR 11.7m (prev. 13.1m) and EBIT of EUR 1.0m (EUR 1.4m) and lowered our 2022-2023 revenue estimates by ~10%. We expect double-digit growth in H2 but for costs increases due to growth investments and the announced combination agreement to keep bottom-line figures at similar levels as in H1. We expect intermediated loan volumes to rebound to 2019 levels but a lower revenue level with the growth in business financing. The easing of temporary regulations domestically and abroad provides support for continued growth in fee income in the near-term, while interest income should see declines with the downsizing of the balance sheet lending.

BUY-rating with a target price of EUR 3.8 (4.0)
In light of our slightly lowered estimates, mainly on the growth side, we adjust our target price to EUR 3.8 (4.0). With the new growth initiatives and loan volume rebounds Fellow Finance is set for a return to growth. We retain our BUY-rating.

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Fellow Finance - Earnings flash - Revenue growth not there yet

27.08.2021 - 09.15 | Earnings Flash

Fellow Finance’s H1/21 results fell short from our estimates on the growth side, with revenue of EUR 5.5m (Evli EUR 6.2m), driven by the loan mix due to growth in lower margin business financing. EBIT amounted to EUR 0.5m (Evli EUR 0.5m). The guidance for 2021 remains intact, expecting growth in 2021 but for the result to remain slightly unprofitable due to growth investments.

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  • Revenue in H1 amounted to EUR 5.5m (EUR 5.8m in H1/20), below our estimates (Evli EUR 6.2m). Revenue declined 5.3% y/y in H1. The 31% growth in loan volumes as expected did not translate into similar revenue growth due to the loan mix but the impact was larger than we had expected. Compared with H1/20 commission fees declined by 8% and interest yields declined by 2%.
  • Fellow Finance facilitated loans during H1 for a total of EUR 91m (EUR 69.1m in H1/20), growing 31%. Loan volumes rebounded well from the weak comparison period levels. Growth was strong in business financing, but growth was also seen in Finnish consumer financing. International operations are still seeing challenges, with focus on relaunching the Polish and German operations and running down operations in Sweden and the Czech Republic, in line with Fellow Finance’s strategy.
  • The EBIT in H1 amounted to EUR 0.5m (EUR -0.1m in H1/20), in line with our estimates (Evli EUR 0.5m).
  • The EPS in H1 amounted to EUR -0.01 per share (EUR -0.1 in H1/20), in line with our estimate of EUR -0.01.
  • Guidance for 2021 (reiterated): Fellow Finance expects revenue growth compared to 2020 but for the result to remain slightly unprofitable due to investments in new products and growth.

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Netum - Growth in good shape

25.08.2021 - 09.30 | Company update

Netum grew faster than expected in H1 but otherwise showed little other surprises. Deal flow and growth in headcount provide good support for continued clear double-digit growth. We retain our HOLD-rating and adjust our target price to EUR 4.6 (4.4).

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Growth surpassed expectations, no larger surprises
Netum reported its H1 results, which all in all were slightly better than expected. Revenue grew organically at a good pace of 21.7% to EUR 10.4m (Evli EUR 9.8m). The comparable EBITA grew to EUR 1.6m (Evli EUR 1.5m). The comp. EBITA-margin declined slightly y/y to 15.4% (H1/20: 17.2%), which can be largely explained by significant new recruitments. The company’s IPO had a negative impact of EUR 0.9m on earnings figures and the comparable EPS was at EUR 0.12 (H1/20: 0.15).

Growth prospects looking good
Netum has been very successful in new recruitments and the personnel grew by nearly 50% y/y to 171. As such the company has been able to manage profitability well given the quite minor dip in relative profitability. The deal flow has been good, including several significant long-term contracts, which with the success in recruitments should support growth remaining well in the double-digits in the near-term. The for Netum strategically important cyber security business was made a separate business area at the start of the year and has according to the company performed well, which in terms of relative growth has been a driver in our growth estimates. We have made minor, relatively insignificant upwards adjustments to our near- to mid-term estimates. Our 2021 estimates for net sales and comp. EBITA of EUR 21.6m and EUR 3.4m remain quite near the top of the company’s guidance of 2021 net sales and comp. EBITA of EUR 20-22m and EUR 3.1-3.5m respectively.

HOLD with a target price of EUR 4.6 (4.4)
In light of our minor estimates revisions and the good first half of 2021 we adjust our target price to EUR 4.6 (4.4). Our target price values Netum at approx. 20x 2021 adj. P/E (excl. IPO expenses and goodwill amortization). We retain our HOLD-rating.

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Netum - Good profitable growth

24.08.2021 - 09.35 | Earnings Flash

Netum’s H1 was slightly above our expectations. Net sales grew 21.7% organically to EUR 10.4m (Evli EUR 9.8m) while the comparable EBITA amounted to EUR 1.6m (Evli EUR 1.5m). Netum reiterated its 2021 guidance, expecting net sales and comparable EBITA in 2021 to amount to EUR 20-22m and EUR 3.1-3.5m respectively.

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  • Netum’s net sales in H1 amounted to EUR 10.4m (EUR 8.6m in H1/20), slightly above our estimates (Evli EUR 9.8m). Net sales in H1 grew 21.7% y/y, of which all was organic growth.
  • EBITDA in H1 was EUR 1.9m (EUR 1.5m in H1/20) and comparable EBITA EUR 1.6m (EUR 1.5m in H1/20) in line with our estimates of EUR 1.8m and 1.5m.
  • Operating profit in H1 amounted to EUR 1.3m (EUR 0.9m in H1/20), slightly above our estimates (Evli EUR 1.1m), at a margin of 12.0%.
  • Comparable earnings per share was EUR 0.12 (H1/20: 0.15)
  • Personnel at the end of the period amounted to 171 (116).
  • Netum completed its IPO in June and was listed on the Nasdaq First North Growth Market Finland marketplace. Listing expenses affecting comparability amounted to EUR 0.9m.
  • Guidance reiterated: Netum expects its net sales to grow to EUR 20-22m and its comparable EBITA to amount to EUR 3.1-3.5m in 2021.

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Endomines - Road to production long and bumpy

20.08.2021 - 09.45 | Company update

Endomines’ Q2 was focused on production start-up and with delays at Friday serious production figures will have to wait until 2022. We adjust our target price to SEK 2.8 (2.9) with our rating now HOLD (BUY).

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Working on production start-up
Endomines reported its Q2 results. With Friday still under care and maintenance during Q2, Endomines as expected did not produce any new gold concentrate and no revenue. Costs were higher than anticipated as the ramp-up of operations progressed and with significant D&A, relating largely to the Friday mine, Q2 EBIT of SEK -76.9m was clearly below our expectation of SEK -20.0m. Endomines continued its efforts to bring the Friday-mine back into production, having invested one million USD on upgrading the Orogrande Processing facility and enhancing the production capacity of the mine. Endomines has also begun n exploration surface drilling program for the Montana gold assets, a fundamental part of Endomines’ long-term value creation potential.

Seeing Friday + Pampalo production of ~20k oz in 2023
Endomines updated its mid-term goals for the Friday and Pampalo assets, expecting annual gold production of 7,800-9,000 oz and 10,000-11,500 oz respectively, at full production. Full production for Friday is expected by Q4 2021/Q1 2022 and Q2/Q3 2022 for Pampalo. The new Friday estimate is slightly softer than the previous 9,000 oz initial production target but future capacity expansion could still be viable. We have now also included estimates for Pampalo, expecting production to rise to some 20k oz in 2023 as both sites should have reached target capacity by then. With further near-term delays in the start-up of the mill at Friday (expected in late August) the 2021 production estimate was lowered to 1,500 oz (prev. 3,000-4,000 oz), which given pre-Q2 news was not completely surprising.

HOLD (BUY) with a target price of SEK 2.8 (2.9)
We have made some adjustments to our SOTP-model, based on which we adjust our target price to SEK 2.8 (2.9). With the recent share price increases we lower our rating to HOLD (BUY).

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Marimekko - Only getting warmed up

20.08.2021 - 09.35 | Company update

Marimekko’s Q2 figures came in above estimates. The company is still only laying out the foundation for sustained international expansion, and we believe this underpins earnings growth potential for years to come.

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EBIT margin potential will not fully materialize this year

Finland’s 61% y/y growth drove Q2 top line to EUR 32.7m, up 40% and above the EUR 29.3m/29.3m Evli/cons. estimates (last year’s store closures softened the comparison period). Both Finnish Retail and Wholesale advanced a lot while International, up 20% y/y, was mainly driven by Wholesale. Home wares continued to sell well and in our opinion the offering’s breadth is one point that testifies to Marimekko’s strengths. Q2 EBIT was EUR 5.5m vs the EUR 2.9m/4.0m Evli/cons. estimates; we find the positive surprise relative to our estimates stemmed from the EUR 2.4m gross profit beat. Digital and omnichannel customer experience projects will add to costs in H2 and Marimekko’s guidance moderates estimates for the rest of the year.

We see there is a long earnings runway ahead

Collaborations like the Adidas one show how the strategy works as the Marimekko brand is enjoying a rejuvenation period. We understand the Adidas deal generated ca. EUR 1m in revenue and profits in Q1; we expect license revenue will remain below EUR 3m this year, but the brand benefits extend beyond direct financial gains. Marimekko doesn’t have that much more growth potential in Finland but is still very modest in the global fashion & apparel context; upside potential remains considerable and from this perspective the long-term 10%+ CAGR target doesn’t seem very challenging. Marimekko began to gather pace towards long-term ambitions a few years before the pandemic and has already been able to post above 15% EBIT margins. In our view the company should be able to sustain long-term profitability at least a few percentage points above the stated target level.

Valuation remains reasonable considering the potential

Marimekko’s earnings-based multiples, roughly in the 19-25x EV/EBIT range on our FY ’21-23 estimates, have continued to climb and are now near those of luxury goods peers. Multiples are also high relative to their own historical levels, but we view this justified since the company’s profile now stands on a whole new level. Our new TP is EUR 84 (63); we retain our BUY rating.

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Endomines - Production delayed but en route

19.08.2021 - 11.00 | Earnings Flash

Due to some delays and changes the production guidance for 2021 was lowered to around 1,500 oz (prev. 3,000-4,000 oz). Production is set to start again in Q3 after a 12-month halt.

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  • Revenue in Q1 amounted to SEK 0.0*m, with our estimates at SEK 0.0m. The Friday mine was put into care and maintenance during Q3/20 and no significant new gold concentrate production took place during Q2.
  • EBITDA in Q2 was at SEK -25.9m*, below our estimate of SEK -16.0m, with costs in the second quarter larger than estimated.
  • EBIT amounted to SEK -76.9m* (Evli SEK -20.0m). Depreciations and write-downs of SEK 51.2m were clearly higher than expected.
    *Figures derived from Q1 and H1 figures
  • During Q3 2021 gold production will restart at the Orogrande Processing facility. Restaffing at both mine and the mill has taken slightly longer than Endomines expected due to market conditions caused by COVID-19, which along with delays in delivery of some vital mill equipment and components has caused a slight delay to the mill start-up from July to late August.
  • Liquid assets amounted to SEK 28.0m at the end of Q2.
  • The gold production guidance for the remainder of the year is now expected to be approx. 1,500 oz (prev. 3,000-4,000 oz).
  • Friday: When in full production Endomines expects the annual gold production from the Friday mine to reach 7,800-9,000 oz. Full production estimated by Q4 2021/Q1 2022.
  • Pampalo: When in full production Endomines expects the annual gold production from the Pampalo mine to reach 10,000-11,500 oz. Full production estimated by Q2/Q3 2022.

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Cibus Nordic - A premium for the premier

19.08.2021 - 09.15 | Company update

Cibus’ strategy proceeds according to plan and further Nordic expansion seems inevitable. We find Cibus’ premium justified, while gains beyond the current point seem unlikely without additional property market revaluations. Our TP is now SEK 205 (195); our rating is HOLD (SELL).

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Portfolio performance was again very close to estimates

Cibus’ portfolio continued to perform as expected and there were very little changes to key metrics. Q2 net rental income amounted to EUR 18.5m, the same as our and consensus’ estimates. Administration expenses were EUR 1.8m, as we estimated, and included EUR 0.4m in one-offs (for the most part related to the Nasdaq Stockholm transition). Net financial costs were EUR 5.9m, a bit higher than our EUR 5.4m estimate.

We view Cibus the premier Nordic grocery property owner

The Nasdaq Stockholm switch has, among other developments, rendered Cibus’ shares more liquid and attractive for acquisitions. We consider Cibus the leading owner for Nordic daily-goods properties and thus the company is in a great position to gain further property mass within selected markets. We would expect Cibus to expand to either Norway or Denmark (or both) next year at the latest. This would be straightforward in the sense that the Nordic markets are all quite similar. Meanwhile acquisitions within Finland and Sweden should continue and Cibus has already announced more than EUR 130m in add-ons this year. Cibus was able to purchase these at a 6% yield. Cibus sees the price level remains stable for now and expects to make many more small deals in addition to possible larger portfolio acquisitions, for which it can tap equity and debt.

We find valuation full barring further property revaluations

In our opinion a premium to book is justified, but we consider Cibus’ 1.25x EV/GAV already significant, and at least any additional big gains would seem hard from these levels. We view Cibus’ shares pretty much fully valued, but we note the Nordic property sector’s revaluation could continue to drive further gains also for Cibus’ shares. Cibus already has a competitive organization for managing the leading Nordic grocery property portfolio, however we find Cibus’ valuation has in the past followed other Nordic property portfolios’ yields very closely. Our TP is now SEK 205 (195) and our new rating is HOLD (SELL).

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Marimekko - Great figures

19.08.2021 - 08.30 | Earnings Flash

Marimekko’s Q2 results came in above our and consensus’ estimates. Top line was driven by 61% growth in Finland and gross margin was also some 120bps above our estimate. Marimekko thus reached high absolute and relative profitability. The company however left its guidance intact, which moderates H2 estimates.

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  • Q2 revenue grew by 40% y/y to EUR 32.7m, compared to the EUR 29.3m/29.3m Evli/consensus estimates. Finland came in at EUR 18.4m vs the EUR 15.1m/14.9m Evli/consensus estimates, helped by a favorable trend in retail and wholesale revenue. Total Retail revenue was EUR 15.1m vs our EUR 13.9m estimate while Wholesale amounted to EUR 17.1m vs our EUR 15.2m estimate.
  • Gross profit amounted to EUR 20.4m vs our EUR 17.9m estimate. Gross margin was 62.3% vs our 61.1% estimate.
  • Adjusted EBITDA was EUR 8.5m, compared to our EUR 6.2m estimate. Adjusted EBIT was EUR 5.5m vs the EUR 2.9m/4.0m Evli/consensus estimates. Strong growth and gross margin helped profitability, while an increase in fixed costs had a weakening impact on earnings.
  • Marimekko left its guidance unchanged and expects 2021 revenue to be higher than previous year and adjusted EBIT margin to be approximately on a par with or higher than in the previous year. In our opinion the guidance now appears a bit on the cautious side, especially considering Marimekko has indicated the majority of its revenue and earnings this year will be generated in H2.

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Cibus Nordic - Close to estimates

18.08.2021 - 09.30 | Earnings Flash

Cibus’ property portfolio performance once again matched estimates as net rental income amounted to EUR 18.5m in Q2. Administration costs were as we expected, while net financial costs were slightly higher than expected.

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  • Cibus’ Q2 rental income was EUR 19.8m vs the EUR 19.6m/19.7m Evli/consensus estimates.
  • Net rental income was EUR 18.5m, compared to the EUR 18.5m/18.5m Evli/consensus estimates.
  • Operating income came in at EUR 16.7m, the same as our EUR 16.7m estimate, as administration costs were EUR 1.8m.
  • Net operating income amounted to EUR 10.8m vs the EUR 11.3m/11.5m Evli/consensus estimates. The EUR 5.9m net financial costs were a bit higher than estimated.
  • Annual net rental income capacity is now EUR 76.0m.
  • GAV amounted to EUR 1,331m, meaning EPRA NAV was EUR 12.3 (12.2) per share.
  • Net LTV ratio was 60.1% (61.6%).
  • Occupancy rate stood at 94.8% (94.7%).
  • WAULT remained 5.2 years at the end of Q2.

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Cibus Nordic - Expensive liquidity

17.08.2021 - 09.30 | Preview

Cibus reports Q2 results on Wed, Aug 18. We make estimate revisions to include the already closed deals. We view Cibus as the leading ownership structure for Nordic grocery properties, but we consider valuation too steep. Our TP is now SEK 195 (175) and our rating is SELL (HOLD).

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Very busy deal-making in Q2

Cibus has announced, after the release of Q1 report, a total of EUR 124m in acquisitions. The total comprises 88 properties and so the average lot is small even by Cibus’ standards. Only some EUR 32m of these were closed so that they had time to generate rental income during Q2 (we estimate the contribution to have been EUR 0.2m), and an additional EUR 20m will add to Q3 numbers. We assume Cibus has been able to purchase all the EUR 124m at a 6% yield and so estimate together they will add some EUR 7.4m to next year’s net rental income. We expect Cibus’ Q2 admin costs to have been elevated, at EUR 1.8m, due to the busy deal-making. We thus see Q2 operating income at EUR 16.7m.

Cibus is a great home for small grocery store properties

The latest announced large acquisition, valued at EUR 72m (or 5% of Cibus’ GAV), is set to close in Q4 and involves an equity issue of 2m shares to the seller, AB Sagax; we are yet to include this portfolio in our estimates (Cibus has already issued a EUR 30m hybrid bond). The AB Sagax deal comprises 72 small grocery stores across Finland. The average asset is less than 600sqm in size and all but one feature Kesko as the tenant. Cibus’ typical Kesko property has been a 3,000sqm supermarket store, but Cibus is also a natural owner for such smaller properties.

A high price to pay for public market liquidity

Cibus’ valuation has been driven up, in our opinion, to a large extent in the wake of other Nordic property companies. Cibus’ 4% yield is still competitive relative to the 3.25% level seen around the wider property sector, but in our view Cibus’ current 1.3x EV/GAV and 1.9x P/NAV multiples limit further upside potential. The Nordic grocery property market’s potential revaluation could begin to lift book value, however we view Cibus’ 4% yield simply too tight and ahead of the underlying market as long as the company is still able to acquire additional assets at a 6% yield. Our SEK 195 (175) TP values Cibus at some 1.2x EV/GAV and 1.6x P/NAV. Our rating is now SELL (HOLD).

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Gofore - Faring well despite minor headwind

16.08.2021 - 09.45 | Company update

Gofore continued to grow profitably and despite some minor bumps on the road EBITA was quite as expected at EUR 6.8m (Evli EUR 7.0m). We continue to expect above 30% in 2021. We retain our HOLD-rating and target price of EUR 21.

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Continued profitable growth in H1
Gofore reported its H1 results, continuing on a track of profitable growth. Revenue grew 38 % to EUR 51.7m driven mainly by inorganic growth, as organic growth fell short of the around 10% long-term target. Gofore’s EBITA and adj. EBITA in H1 amounted to EUR 6.8m and EUR 6.9m respectively, rather in line with our estimates (Evli EUR 7.0m/7.2m). Billing rates were slightly weaker mid-H1 due to the transition between agreement periods with one of Gofore’s largest customers but improved towards the end of the first half of the year. Gofore also experienced an increase in personnel turnover during H1. Profitability in H1 was still at a good level although below the 15% EBITA margin target.

Some uncertainty from increased personnel turnover
We have made smaller downward revisions to our 2021 profitability estimates while our revenue estimate remains quite intact at over 30% y/y growth driven mainly by inorganic growth. Some uncertainty is present from the sector-wide increase in personnel turnover, as the wariness of switching jobs during the pandemic has started to decrease. Gofore is in our view still well positioned in the labour-market as an employer. Although an increase in turnover may be unavoidable, Gofore should still fare well in new recruitments in the rather challenging environment. Short-term this may still cause some pressure on growth and margins.

HOLD-rating with a target price of EUR 21
In our view the H1 report didn’t really change much in Gofore’s investment case and the noted increase in employee turnover is something we currently don’t view as a major risk but will keep an eye on. We reiterate our target price of EUR 21 and retain our HOLD-rating.

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Suominen - A volume setback

16.08.2021 - 09.00 | Company update

Suominen’s earnings will now correct to a lower level from their recent peak. We believe, despite the setback and increased uncertainty, that Suominen’s value chain positioning is still good, and decent margins will remain.

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US delivery volumes will take a big hit in H2’21

Q2 revenue fell 7% y/y to EUR 114m and missed the estimates, which were at EUR 120m. In our view the softness was due to Americas; the US supply chain has lately been saturated with wipes as the local retailers sourced as much product as possible, including unbranded wipes which then didn’t move forward from the shelves and thus blocked volumes for many brand wipes. Suominen’s US brand name customers were pushing for max delivery volumes as late as May and June, and by the end of Q2 stocks began to pile up. Suominen says the logjam hasn’t for the most part spread beyond the US; LatAm has continued to develop as before while there has been some jamming in Europe. In our view the 14.7% GM was an encouraging sign, considering the metric also benefits from high volumes, as revenue was soft compared to estimates. Suominen thus reached EUR 15.3m in Q2 EBITDA, compared to the EUR 14.8m/13.5m Evli/cons. estimates.

We believe GM will remain near 13% going forward

Suominen’s nonwovens pricing is now to a large extent locked into mechanisms and so we believe gross margin will remain at a decent level going forward, at around 13% or so. We estimate Q3 revenue to decline by 17% y/y as we see Americas down by 24%. We expect gross margin to decline to 12%, which translates to EUR 9.5m in EBITDA. We expect some stabilization already in Q4, but we revise our FY ’22 revenue estimate down to EUR 431m (prev. EUR 473m) and that for EBITDA to EUR 48.5m (prev. EUR 56.0m). It is now clear earnings have peaked and Suominen may not reach EUR 15m quarterly EBITDA for a while. We however believe Suominen can achieve above EUR 10m quarterly EBITDA again soon enough.

The sell-off already neutralized earnings multiples

Suominen’s earnings multiples were low already before the profit warning, at about 6x EV/EBITDA and 9x EV/EBIT. We find the net effect of the sell-off and our earnings downgrade has been a marginal increase in multiples. We consider these levels very reasonable. Our TP is now EUR 6 (6.8). We retain our BUY rating.

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Enersense - According to plan

16.08.2021 - 09.00 | Company update

Enersense’s Q2 was much as expected. Margins are already decent, and we see plenty of scope for long-term gains.

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Q2 figures did not reveal many surprises

Enersense’s Q2 revenue amounted to EUR 61.6m, compared to our EUR 57.5m estimate. We find the top line beat was for the most part due to International Operations (EUR 14.8m vs our EUR 11.5m estimate) as the other three segments were all close to our estimates. The positive surprise was in our view due to strong development in the Baltics, but France also contributed. Connectivity faced challenging winter conditions in Q2, but the segment’s revenue was nonetheless a bit above our estimate. There are no meaningful comparison figures due to the Empower acquisition, however Q2 profitability was as we expected. Adj. EBITDA came in at EUR 4.8m vs our EUR 4.7m estimate, while adj. EBIT was EUR 2.8m vs our EUR 2.6m estimate.

We make limited updates to our estimates

Empower integration proceeds according to plan and add-on acquisitions are possible already near-term. Enersense reiterated its current guidance and sees EUR 215-245m in revenue while adj. EBITDA should be in the EUR 17-20m range (adj. EBIT EUR 8-11m). We have made only minor revisions to our estimates and expect Enersense to land near the upper end of the guidance range. Enersense has a long-term EBITDA margin target of 10% (by 2025); we see the company is headed close to 8% already this year and 8.5% doesn’t seem that challenging to achieve in the year following. We continue to expect 4.6% organic growth in FY ’22, meaning Enersense should reach at least EUR 21m in EBITDA and EUR 12m in EBIT then.

Organic performance and low multiples underpin upside

Enersense is valued 5x EV/EBITDA and 9x EV/EBIT on our FY ’22 estimates. We find the earnings multiples imply a sizeable discount relative to peers while Enersense’s organic growth outlook and profitability are, in our view, in line with the general sector estimates. Our EBITDA margin estimates are also on the conservative side compared to Enersense’s 10% target and we expect only some 3.5% organic CAGR for the coming years, whereas Enersense’s own EUR 300m long-term organic top line target implies a CAGR many percentage points above our estimates. We retain our EUR 13 TP and BUY rating.

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Pihlajalinna - Catching up with the larger rivals

16.08.2021 - 08.45 | Company update

Pihlajalinna’s Q2 served a small positive surprise relative to estimates. We are confident operating margin and multiple expansion potential enable solid long-term upside.

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Small earnings beat as profitability continued to improve

Pihlajalinna’s Q2 revenue grew 24% to EUR 142.5m, compared to the EUR 140.7m/139.4m Evli/cons. estimates. There were no major surprises in terms of customer group revenues; we find the small revenue beat was due to the public sector. Private customer revenue recovered 44% from last year’s dip, but appointments remained 24% below 2019 levels, while within corporate customers visits were already close to pre-pandemic levels. Higher costs continued to limit outsourcing’s profitability y/y, but there was improvement q/q. Q2 operating margin excluding outsourcing improved by almost 700bps y/y. The combination of higher volumes and COVID-19 services drove profitability, but there’s still potential for further gains, depending on the type of service, even on current volume levels. Pihlajalinna reached EUR 6.5m adj. EBIT vs the EUR 5.6m/6.2m Evli/cons. estimates. The company retained its guidance.

We make only minor revisions to our estimates

Oral care is one practice area where profitability can be improved even without any increase in capacity utilization rates. COVID-19 services will remain high in Q3, while there’s some associated cost uncertainty. Overall clinical seasonality patterns should remain intact, but the current virus situation probably limits standard services’ volume potential for now. We now estimate FY ’21 growth at about 13% and adj. EBIT at EUR 31.9m.

Significant long-term upside potential is on the horizon

The Pohjola acquisition adds capacity and improves Pihlajalinna’s ability to compete with the two larger Finnish rivals. The focus will initially be on private customers, but public sector growth is also likely long-term. The target had by itself too limited scale to be profitable. Pihlajalinna will return with more details on the deal, but in our view the target seems a good fit and synergies should materialize already next year. Pihlajalinna remains valued 8x EV/EBITDA and 16x EV/EBIT on our FY ’21 estimates. These are below peers’, and Pihlajalinna also has more margin expansion potential considering its relatively modest profitability. Our new TP is EUR 13.5 (13.2); we retain our BUY rating.

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Enersense - Profitability as expected

13.08.2021 - 12.30 | Earnings Flash

Enersense’s Q2 report didn’t offer many surprises. Enersense’s operations and strategy seem to proceed pretty much according to plan.

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  • Enersense Q2 revenue was EUR 61.6m vs our EUR 57.5m estimate. Smart Industry top line was EUR 23.5m, compared to our EUR 23.5m estimate. Power came in at EUR 12.0m (vs our EUR 11.5m estimate), while Connectivity was EUR 11.4m (vs our EUR 11.0m estimate).
  • Adjusted EBITDA was EUR 4.8m vs our EUR 4.7m estimate. Meanwhile adjusted EBIT amounted to EUR 2.8m vs our EUR 2.6m estimate. Smart Industry EBITDA amounted to EUR 5.1m. Power and Connectivity respectively reached EUR 0.9m and EUR 0.5m in EBITDA. Connectivity saw relatively challenging weather conditions in Q2.
  • Order backlog stood at EUR 301m at the end of Q2 (EUR 292m at Q4’20).
  • Enersense retains its guidance and expects to see 2021 revenue in the EUR 215-245m range, adjusted EBITDA at EUR 17-20m and adjusted EBIT at EUR 8-11m.

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Suominen - Inventory-induced negative revision

13.08.2021 - 10.00 | Earnings Flash

Suominen’s Q2 margins remained strong, but focus is now on the color Suominen provides on demand slowdown and inventory build-up in North America. The issue prompted the company to revise down its FY ’21 profitability outlook just ahead of the report.

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  • Suominen Q2 revenue was EUR 113.6m vs the EUR 120.0m/120.0m Evli/consensus estimates. Top line decreased by 7.0% y/y. Americas was EUR 67.4m vs our EUR 75.0m estimate, while Europe amounted to EUR 46.3m vs our EUR 45.0m estimate.
  • Gross profit amounted to EUR 16.7m, compared to our EUR 16.8m estimate. Gross margin was 14.7% vs our 14.0% estimate.
  • EBITDA was EUR 15.3m vs the EUR 14.8m/13.5m Evli/consensus estimates. EBIT came in at EUR 10.3m vs the EUR 9.8m/8.5m Evli/consensus estimates.
  • Suominen now expects its comparable FY ‘21 EBITDA will decrease due to the nonwovens demand slowdown seen in H2’21. Continued volatility in the raw material and transportation markets also plays a role. Suominen reached EUR 60.9m in FY ’20 EBITDA, while our latest FY ’21 estimate was EUR 59.8m.
  • Suominen sees that especially North American customers have started to experience demand slowdown. This has had a negative impact on Suominen’s orders as there has also been some inventory pile-up throughout the supply chain. Suominen expects the imbalance to clear out in Q4 and sees favorable long-term demand drivers intact.
  • In our view the profit warning also exerts at least some downward pressure on our FY ’22 estimates (we had estimated EUR 56.0m in EBITDA).

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Gofore - Solid growth and good profitability

13.08.2021 - 09.40 | Earnings Flash

Gofore’s EBITA/adj. EBITA of EUR 6.8m/6.9m in H1 were rather in line with expectations (Evli 7.0m/7.2m). Revenue grew 38.3% to EUR 51.7m in H1 (pre-announced). Revenue and adj. EBITA in 2021 are expected to grow compared with 2020.

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  • Gofore’s H1/21 net sales amounted to EUR 51.7m (pre-announced), with sales growth of 38.3% compared to H1/20 figures. The growth was primarily attributable to increased volumes as a result of corporate acquisitions and organic growth, but the average hourly price of services sold also increased slightly. Private sector sales increased substantially, by almost 92 per cent, to EUR 18.4m. Gofore’s international business grew by 10 per cent y/y to EUR 4.5m.
  • EBITA and adj. EBITA in H1 amounted to EUR 6.8m and EUR 6.9m respectively, rather in line with our estimates (Evli EUR 7.0m/7.2m), at margins of 13.1%/13.4%. EBIT amounted to EUR 5.7m (Evli EUR 6.3m), at a 11.0% EBIT-margin.
  • Guidance for 2021: Gofore estimates that its revenue and adj. EBITA in 2021 will grow compared to 2020.
  • The number of employees at the end of the period was 803 (H1/20: 610).

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Solteq - Good performance across the board

13.08.2021 - 09.15 | Company update

Solteq grew faster than expected in Q2, with Solteq Digital returning to clear growth. The outlook is now looking even better with the pick-up in demand in Solteq Digital and we expect good performance across the board. We raise our TP to EUR 8.0 (7.2), BUY-rating intact.

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Rapid growth in Q2, Solteq Digital surprised positively
Solteq reported Q2 figures above our estimates. Revenue growth was clearly faster than expected, with growth of 23% to EUR 18.5m (Evli EUR 17.1m). Solteq Software as expected continued at a very rapid growth pace of 43%, while to our surprise Solteq Digital moved to double-digit growth, aided by good demand in retail, after having posted lower growth figures for the past year. The adj. EBIT was quite in line with our estimates at EUR 2.5m (Evli EUR 2.3m). Our overestimation of Solteq Software’s profitability was compensated by the over 15% EBIT-margin (target >8%) in Solteq Digital supported by the growth in the quarter.

Poised for double digit growth and margins in 2021
We have slightly raised our 2021 estimates for revenue and EBIT to EUR 71.4m (prev. 68.3m) and EUR 9.6m (prev. 9.2m). We expect Solteq Software to continue to grow very rapidly supported by the backlog of Utilities project deliveries. With the large projects sizes the recurring revenue should start to show more strongly in 2022 and we estimate only minor EBITDA-margin improvement in 2021. We expect the good demand in Solteq Digital to continue to show throughout the year and for the growth also to be reflected positively in the segment’s profitability. Positive signs were also seen in the commercialization of the Solteq Robotics solutions through a few pilot projects, with the pandemic having slowed down development in the near past.

BUY-rating with a target price of EUR 8.0 (7.2)
On our minor estimates revisions and overall good progress we raise our target price to EUR 8.0 (7.2). Valuation of ~17x 2022 P/E is not particularly challenging given the growth and profitability. We retain our BUY-rating.

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Pihlajalinna - Above estimates

13.08.2021 - 08.30 | Earnings Flash

Pihlajalinna’s revenue and profitability continued to improve and were slightly above estimates. The company reiterates its existing guidance.

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  • Pihlajalinna’s Q2 revenue grew by 24.3% y/y to EUR 142.5m, compared to the EUR 140.7m/139.4m Evli/consensus estimates. Public sector customers amounted to EUR 104.6m and grew by 17.5% y/y. Private customers grew by 44.1% y/y to EUR 21.7m. Meanwhile corporate customers grew by 30.7% y/y to EUR 34.7m.
  • COVID-19 related services contributed EUR 8.1m of revenue in Q2.
  • Adjusted EBITDA was EUR 15.2m vs the EUR 14.4m/14.8m Evli/consensus estimates. Adj. EBITDA margin was 10.7%.
  • Adjusted EBIT was EUR 6.5m vs the EUR 5.6m/6.2m Evli/consensus estimates. Adj. EBIT margin was 4.5%.
  • Pihlajalinna guides 2021 revenue to increase clearly and adjusted EBIT to improve clearly compared to last year (unchanged).

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Etteplan - Sights set on growth

12.08.2021 - 09.30 | Company update

Etteplan’s Q2 results were quite in line with expectations. Growth is set to return to double digits this year and Etteplan is taking steps to keep the momentum going. Etteplan also raised its 2021 revenue guidance on the positive H1 development to EUR 295-315m (285-305m).

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Q2 quite in line with expectations
Etteplan reported its Q2 results, which overall were quite in line with expectations. Revenue grew 19% y/y to EU 75.0m (EUR 73.7m/73.6m Evli/cons.). EBIT amounted to EUR 6.7m (EUR 6.5m/7.3m Evli/cons.). Good operational efficiency kept the group EBITA-margin above the target 10% level at 10.4% (Evli 10.2%). On our estimates the stronger performers of the quarter were the Technical Documentation Solutions and Software and Embedded Solutions service areas, which both surpassed expectations on growth and profitability. Customer order intake has continued favourably and although the pandemic still causes uncertainty, Etteplan raised its revenue guidance range to EUR 295-315m (prev. EUR 285-305m), with the EUR 25-28m EBIT guidance range intact.

Preparing for continued growth
We have made only minor revisions to our estimates. For 2021 we have slightly raised our expectations for the Technical Documentation Solutions and Software and Embedded Solutions service areas in light of the good traction in Q2. We now expect revenue of EUR 299.8m (prev. 294.9m) and EBIT of EUR 26.3m. The number of employees has increased by over 200 since the end of 2020 to 3,491 and recruitment is actively on-going, which together with other growth ambitions will cause some cost inflation on H2 but also support organic growth going forward given a continued healthier demand situation. Double-digit growth also in 2022 is most certainly within grasp but will require continued M&A activity.

HOLD-rating with a target price of EUR 17.5
We have made no significant changes to our estimates and retain our HOLD-rating and target price of EUR 17.5. Our TP values Etteplan at ~20x 2022e P/E.

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Aspo - Some more results to be accrued

12.08.2021 - 09.25 | Company update

Aspo’s Q2 group-level EBIT was known before the report. We make minor upward revisions to our estimates, and we see Aspo on a firm track towards full profitability potential.

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H1’21 results display a solid foundation to build on

Aspo’s Q2 revenue grew 24% y/y to EUR 142.9m vs the EUR 133.6m/134.5m Evli/cons. estimates. ESL’s top line was up 40% y/y; the EUR 5.4m EBIT was a bit above our estimate as utilization and rates continued to improve throughout the fleet. That said, there should be more potential as efficiency obstacles like port congestion, varying loading demand, virus measures and high dockings limited Q2 profitability. We expect ESL’s EBIT to decline by EUR 0.9m q/q in Q3 as dockings will be roughly double of those seen in Q2. We believe ESL’s EBIT has now reached a firm foundation since cargo volumes were still not abnormally high (some 8% lower than in Q2’19 but up 19% y/y). Meanwhile the Baltic Dry Index has reached multi-year highs and we believe the Supramax vessels’ freight rates are now stabilizing. Telko’s revenue topped our estimate and the 7.7% EBIT margin also marked another record. Strategy work at Leipurin continues but Q2 figures remained soft compared to our estimates. We understand admin costs were a bit elevated e.g. due to the CEO recruitment; Aspo’s long-time CEO Mr Aki Ojanen is retiring and the successor, Mr Rolf Jansson, will begin his work next week.

The EUR 30-36m EBIT guidance moderates H2’21 estimates

We wouldn’t be very surprised to see Aspo top the current EBIT guidance range set for this year. There’s still some uncertainty regarding Q4 results, but we believe ESL’s contribution will then help Aspo reach another record quarterly EBIT. We make minor revisions to our estimates; we remain at the upper end of the FY ‘21 range while we now estimate FY ’22 EBIT at EUR 39.7m (prev. EUR 38.9m). Telko may find it hard to achieve further margin gains (in our view some softness is to be expected), but growth could help sustain high absolute profitability going forward.

Progression and cash flow generation back up valuation

Aspo is valued around 8x EV/EBITDA and 14x EV/EBIT on our FY ’21 estimates. We don’t view these levels challenging considering the profitability potential that is not yet quite fully realized. Our TP is now EUR 12.5 (11.5); we retain our BUY rating.

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Solteq - Growing faster than expected

12.08.2021 - 08.30 | Earnings Flash

Solteq’s Q2 was slightly above expectations, with revenue at EUR 18.5m (Evli EUR 17.1m) and adj. EBIT at EUR 2.5m (Evli EUR 2.3m). Guidance intact: group revenue in 2021 is expected to grow clearly and the operating profit to improve clearly.

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  • Net sales in Q2 were EUR 18.5m (EUR 15.1m in Q2/20), slightly above our estimates (Evli EUR 17.1m). Growth in Q2 amounted to 22.6% y/y, of which around four fifths was organic growth. 21.4% of sales came from outside of Finland.
  • The operating profit and adj. operating profit in Q1 amounted to EUR 2.4m and 2.5m respectively (EUR 1.5m/1.5m in Q2/20), in line with our estimates (Evli EUR 2.3/2.3m).
  • Solteq Digital: revenue in Q2 amounted to EUR 11.9m (Q2/20: EUR 10.5m) vs. EUR Evli 10.5m. The adj. EBIT was EUR 1.9m (Q2/20: EUR 1.1m) vs. Evli EUR 1.1m. The segment is expected to develop steadily during the rest of the year.
  • Solteq Software: Revenue in Q2 amounted to EUR 6.6m (Q2/20: EUR 4.6m) vs. Evli EUR 6.6m. The adj. EBIT was EUR 0.6m (Q2/20: EUR 0.4m) vs. Evli EUR 1.2m. Growth was 44.6%. Recurring revenue 28.8% of the segment’s revenue. The Partiture Oy acquisition had a slight positive impact on growth. The business outlook for the segment is expected to remain positive
  • Guidance for 2021 intact: group revenue is expected to grow clearly and operating profit to improve clearly.

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Etteplan - Figures in line, guidance specified

11.08.2021 - 13.30 | Earnings Flash

Etteplan's net sales in Q2 amounted to EUR 75.0m, in line with our and consensus estimates (EUR 73.7m/73.6m Evli/cons.). EBIT was also quite in line with our estimates and slightly below consensus, at EUR 6.7m (EUR 6.5m/7.3m Evli/cons.). Guidance specified: Etteplan expects revenue to amount to EUR 295-315m (prev. EUR 285-305m) and operating profit (EBIT) to amount to EUR 25-28m.

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  • Net sales in Q2 were EUR 75.0m (EUR 62.9m in Q2/20), in line with our estimates and consensus estimates (EUR 73.7m/73.6m Evli/Cons.). Growth in Q2 amounted to 19% y/y, organic growth 12.4%.
  • EBIT in Q2 amounted to EUR 6.7m (EUR 5.4m in Q2/20), in line with our estimates and slightly below consensus estimates (EUR 6.5m/7.3m Evli/cons.).
  • Compared to our expectations, the Technical Documentation Solutions and Software and Embedded Solutions service areas exceeded expectations on growth and relative profitability.
  • EPS in Q2 amounted to EUR 0.20 (EUR 0.16 in Q2/20), in line with our estimates and consensus estimates (EUR 0.20/0.20 Evli/cons.).
  • Engineering Solutions net sales in Q2 were EUR 42.0m vs. EUR 42.5m Evli. EBITA in Q2 amounted to EUR 4.2m vs. EUR 4.3m Evli.
  • Software and Embedded Solutions net sales in Q2 were EUR 19.9m vs. EUR 18.6m Evli. EBITA in Q2 amounted to EUR 2.2m vs. EUR 2.0m Evli.
  • Technical Documentation Solutions net sales in Q2 were EUR 13.0m vs. EUR 12.4m Evli. EBITA in Q2 amounted to EUR 1.6m vs. EUR 1.3m Evli.
  • Guidance specified: Etteplan expects revenue to amount to EUR 295-315m (prev. EUR 285-305m) and operating profit (EBIT) to amount to EUR 25-28m.

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Aspo - A record Q2 profitability

11.08.2021 - 10.00 | Earnings Flash

Aspo released preliminary information regarding Q2 results already last week and so the Q2 report was no news event in terms of group-level EBIT. Telko’s profitability was higher than we expected.

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  • Aspo’s Q2 revenue was EUR 142.9m vs the EUR 133.6m/134.5m Evli/consensus estimates. Q2 EBIT was EUR 9.6m.
  • ESL’s top line was EUR 46.0m, compared to our EUR 38.9m estimate, while EBIT amounted to EUR 5.4m vs our EUR 5.2m estimate. Market freight rates improved significantly y/y in all vessel categories, while there were strong fluctuations in loading demand. High dockings also limited profitability potential.
  • Telko recorded EUR 71.1m in revenue vs our EUR 67.3m estimate. EBIT was EUR 5.5m, compared to our EUR 4.9m estimate. EBIT margin was 7.7% and prices remained high. The availability situation now seems to be normalizing, which would cause price decreases on the one hand and help Telko’s volumes up on the other.
  • Leipurin revenue was EUR 25.8m while we expected EUR 27.4m. EBIT stood at EUR 0.3m, compared to our EUR 0.6m estimate.
  • Other operations cost EUR 1.6m vs our EUR 1.1m estimate.
  • Aspo guides EUR 30-36m in FY ’21 EBIT.

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Pihlajalinna - Strategy progress continues

10.08.2021 - 09.35 | Preview

Pihlajalinna reports Q2 results on Fri, Aug 13. Our FY ’21 estimates remain intact, but we note the latest announced acquisition which is set to be closed by the end of this year.

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COVID-19 testing probably plays a big role also in Q3

Q1 top line grew 5% y/y, driven by public sector and corporate customers. COVID-19 testing contributed a major share of the revenue increase within the two groups. Meanwhile private customer revenue fell by 10% y/y, although COVID-19 testing had a small positive contribution there as well. COVID-19 testing added a total of EUR 8.2m in revenue, while overall net revenue growth was EUR 6.9m. We expect the tests to have played a similar important role in Q2 as the acute situation restrains other volumes. Finnish vaccination coverage was negligible in Q1 but improved a lot in Q2; testing levels might otherwise begin to fade in Q3 were it not for the fact that the virus situation has once again turned for the worse over the summer. We believe the testing business does not in any case reach abnormal margins and thus the back and forth with other services should have a neutral effect on Pihlajalinna’s profitability going forward.

On track towards higher profitability levels

The Q2 comparison figures are very low because the onset of the pandemic cut non-urgent healthcare demand a year ago. We estimate Q2 revenue to be up 23% y/y as there has been a rebound in private and corporate customer volumes. We expect EBIT to have gained by EUR 5.0m y/y to EUR 5.6m. For FY ’21 we estimate 12% y/y growth and some EUR 10m gain in EBIT.

Low multiples and profitability levels imply solid potential

Pihlajalinna is again active in M&A since the bid by Mehiläinen was curbed. The latest target is Pohjola Sairaala, for which Pihlajalinna pays EUR 32m in cash. The acquisition will add some EUR 60m in revenue next year and so the 0.5x EV/S valuation looks modest relative to Pihlajalinna’s 0.9x multiple. The target has been lately generating negative EBITDA and Pihlajalinna will provide more color on its development in the coming months. Pihlajalinna is valued 8x EV/EBITDA and 17x EV/EBIT on our FY ’21 estimates. The company has plenty more profitability potential and thus the multiples should decrease to 6.5x and 13x already next year. Both earnings multiples and margin levels are clearly below those of peers. We retain our EUR 13.2 TP and BUY rating.

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Etteplan - Improving on weak comparison figures

09.08.2021 - 09.45 | Preview

Etteplan reports Q2 results on August 11th and we expect notable improvement from the weak comparison period. Etteplan has continued its growth strategy, acquiring three smaller companies since Q1. We adjust our TP to EUR 17.5 (16.0) on elevated peer multiples, HOLD-rating intact.

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Expect clear improvement from weak comparison period
Etteplan reports its Q2 results on August 11th. Q1 results were still somewhat mixed, with group revenue turning back to slight growth but organic growth still negative at 4%. Relative profitability was well above comparison period levels, with cost cutting measures made due to the pandemic having a notable impact. As Q2/20 was the first quarter to bear the brunt of the impact of the pandemic we expect clearly higher growth figures in Q2/21 from the weak comparison period. We expect revenue to grow some 17% to EUR 73.7m, of which we expect some 6% inorganic growth. We expect EBITA to remain above the 10% target level at 10.2%.

Several smaller acquisitions to continue growth strategy
Etteplan has made two acquisitions during Q2, software development company Skyrise.tech and technical documentation specialist F.I.T. Fahrzeug Ingenieurtechnik GmbH, and Adina Solutions after the review period, specialized in planning and implementation of technical documentation of software. The revenue impact on group level in 2021 should be rather marginal but we have made minor tweaks to our estimates to account for the acquisitions. We now expect 2021 revenue of EUR 294.9m and EBIT of EUR 26.3m, quite in the middle of company guidance (revenue EUR 285-305m and EBIT EUR 25-28m). We expect relative profitability to improve y/y in H1 but to revert back to comparison period levels in H2 as previously implemented cost savings measured are eased.

HOLD-rating with a target price of EUR 17.5 (16.0)
Etteplan’s valuation has risen clearly since our previous update, now trading well above historical levels. Peer multiples have also increased quite a bit and we raise our TP to EUR 17.5 (16.0), valuing Etteplan at ~20x 2022e P/E and retain our HOLD-rating.

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Scanfil - Outlook is valued well enough

09.08.2021 - 09.30 | Company update

Scanfil’s Q2 top line was close to estimates while EBIT didn’t quite reach expected levels. We make only minor estimate revisions. Our rating is now HOLD (BUY).

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Some softness in Q2 EBIT margin, but nothing major to flag

Q2 revenue, incl. transitory invoicing, grew 11% y/y to EUR 173m. The figure was EUR 166m excl. the component-related items and can be compared to the EUR 165m/169m Evli/cons. estimates. Automation & Safety top line remained flat while both Advanced Consumer Applications and Energy & Cleantech grew by more than 30%. Advanced Consumer Applications had account ramp-ups and high demand persisted for familiar favorably positioned customers. Energy & Cleantech performed strong even without big ramp-ups as the customers’ markets expand, and we believe Scanfil has gained share within attractive accounts like TOMRA. Component availability challenges remain, but the shortage situation didn’t have any big negative effect on Q2 performance; the situation may now be improving or at least isn’t worsening. The EUR 10.6m Q2 EBIT was a tad soft compared to the EUR 10.9m/11.1m Evli/cons. estimates. In our view the Hamburg plant closure costs explain a large part of the shortfall.

Our FY ’21 estimates remain close to the guidance midpoint

We make only very small revisions to our estimates. In our view cost inflation is not an issue for Scanfil, while component availability is for now a challenge for pretty much all EMS companies. Scanfil will host its first ever CMD in September and we wouldn’t be surprised to see an upgrade to the current organic growth target. We now see Scanfil is headed for the EUR 700m figure a year in advance. Scanfil can top the 7% EBIT margin target at least on a quarterly level, but we would view any upgrade to this target ambitious because growth in the EMS business often doesn’t scale that much in terms of relative profitability. This is one of the major factors that limit valuation.

We view current valuation picture neutral

Scanfil is now valued ca. 9x EV/EBITDA and 12x EV/EBIT on our FY ’21 estimates. We believe growth continues to drive absolute earnings up in the coming years and so the multiples should be down to around 8x and 11x already next year. The valuation represents a premium relative to peers, but in our opinion is warranted. We retain our EUR 9.0 TP; rating now HOLD (BUY).

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CapMan - On track towards new profitability levels

06.08.2021 - 09.30 | Company update

CapMan reported higher than expected profitability figures due to solid investment returns. Operating profit remains well on track towards a whole new level. We raise our TP to EUR 3.4 (3.1) with our BUY-rating intact.

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Q2 operating profit beat driven by investment returns
CapMan reported better than expected Q2 results mainly due to higher than anticipated operating profit in the Investment business. Revenue was in line with expectations at EUR 11.9m (EUR 11.7m/11.8m Evli/Cons.), growing some 36% y/y. Growth in the Management company business and Services business (excl. Scala) was clearly in the double digits during the first half of the year. The operating profit amounted to EUR 11.3m, clearly beating expectations (EUR 9.4m/7.5m Evli/cons.). Compared with our expectations the clear positive was the Investment business operating profit (EUR 9.4m/5.9m Act./Evli). On the other hand personnel expenses increased clearly more than expected, and Management company business operating profit was lower than expected (EUR 2.4m/3.1m Act./Evli) despite higher revenue (EUR 9.9m/9.1m Act./Evli).

Operating profit pushing towards new levels
Q2 brought further good news in AUM growth, up 1.2bn y/y to EUR 4.3bn driven mainly by Real estate, supporting continued healthy revenue growth in coming years. We expect some EUR 45-50m in operating profit in the coming years, with Investment business returns expected to decline somewhat from the anticipated strong 2021 but operating profit increases in the other segments to largely make up for the expected decrease. We have made some smaller changes to our 2021 estimates to account for cost inflation and higher investment returns, expecting an operating profit of EUR 48.5m and a clear increase in EPS from the weak comparison period to EUR 0.24 (0.03).

BUY-rating with a target price of EUR 3.4 (3.1)
Valuation upside is supported by peer multiples and the dividend yield, with the solid financial performance and financial position potentially enabling faster dividend growth in coming years. We raise our target price to EUR 3.4 (3.1), BUY-rating intact.

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Scanfil - EBIT margin a bit below estimates

06.08.2021 - 08.30 | Earnings Flash

Scanfil’s Q2 didn’t offer many surprises. Top line was close to expectations while there was a small shortfall in operating margin relative to estimates.

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Scanfil Q2 revenue was EUR 172.9m, compared to the EUR 165.3m/168.6m Evli/consensus estimates. Top line grew by 11% y/y and included EUR 7.4m of transitory separately agreed, low margin customer invoicing. This was related to the ongoing component shortage situation and excluding these items revenue grew by 6.4% y/y to EUR 165.5m.

Advanced Consumer Applications’ revenue amounted to EUR 53.4m vs our EUR 47.7m estimate. Meanwhile Energy & Cleantech was EUR 44.8m, compared to our EUR 40.9m estimate. Automation & Safety top line stood at EUR 36.8m vs our EUR 39.5m estimate.

Q2 EBIT stood at EUR 10.6m vs the EUR 10.9m/11.1m Evli/consensus estimates. EBIT margin was 6.1% vs our 6.6% estimate. According to Scanfil the production transfer and planned closure of the Hamburg factory, which will happen by the end of September, generated additional costs.

Scanfil guides EUR 630-680m revenue and EUR 41-46m adjusted operating profit for FY ’21 (issued on Jun 11). Especially semiconductor availability continues to create uncertainty around the outlook.

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Aspo - Sailing towards EUR 40m EBIT

05.08.2021 - 09.15 | Company update

Aspo specified guidance and told Q2 EBIT was headstrong. In our view the latest update dispels any remaining doubts about ESL’s and Telko’s financial performance.

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Aspo now guides EUR 30-36m in FY ’21 EBIT

The guidance range midpoint is a positive surprise compared to the EUR 31.2m/30.9m Evli/cons. estimates before the release, not by that much but the guidance appears on the conservative side considering Aspo achieved EUR 9.6m in Q2 EBIT. This record quarterly EBIT topped the EUR 7.1m/7.0m Evli/cons. estimates by a mile and in our opinion Aspo seems poised towards the upper end of the new guidance range. Steel and forest industry customers in particular drive high cargo volumes for ESL. We also believe Telko has once again reached an above 7% EBIT margin; there might still be some long-term downward pressure on such a high profitability level, but nonetheless the prolonged strong performance makes the long-term 6% target seem a bit modest.

Both ESL and Telko are hitting long-term margin targets

We estimate EUR 35.7m in FY ’21 EBIT. We see H2 EBIT at EUR 18.2m and so only a bit above the EUR 17.5m H1 figure. H2 EBIT has tended to be meaningfully higher than that for H1, and perhaps Telko’s recent high profitability faces some headwinds going forward. ESL’s dockings this summer will dent Q3 EBIT, but Q4 is shaping up to be another record and in our view the carrier’s Q4 EBIT could touch EUR 6m. We estimate ESL to reach its 12% long-term EBIT target this year, thus see ESL FY ’21 EBIT at EUR 20.1m (prev. EUR 18.3m) and estimate another EUR 1.5m gain next year. We expect Telko to reach EUR 18.4m (prev. EUR 16.2m) in FY ’21 EBIT. Telko may find it hard to improve from such levels, at least in terms of margin expansion, as it has already reached the 6% long-term EBIT margin target level.

Stable performance and cash flow turn valuation attractive

Aspo could reach EUR 40m annual EBIT in a few years. We expect EBIT to gain some further EUR 3m next year. Going forward we see relatively stable performance for ESL and Telko, while it remains to be seen how much Leipurin can improve. Aspo is valued ca. 7x EV/EBITDA and 13x EV/EBIT on our FY ’21 estimates; we see further earnings growth and deleveraging, thanks to cash flow generation, helping the multiples lower in the years to come. Our TP is now EUR 11.5 (10.5), retain our BUY rating.

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CapMan - Earnings flash - Earnings beat, solid AUM growth

05.08.2021 - 09.00 | Earnings Flash

CapMan's net sales in Q2 amounted to EUR 11.9m, in line with our estimates and consensus (EUR 11.7m/11.8m Evli/cons.). EBIT amounted to EUR 11.4m, above our estimates and above consensus estimates (EUR 9.4m/7.5m Evli/cons.). Capital under management grew strongly to EUR 4.3bn, up 1.2bn y/y.

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  • Revenue in Q2 was EUR 11.9m (EUR 8.7m in Q2/20), in line with our estimates and consensus estimates (EUR 11.7m/11.8m Evli/Cons.). Growth in Q2 amounted to 36.6% y/y.
  • Operating profit in Q2 amounted to EUR 11.4m (EUR 4.1m in Q2/20), above our estimates and consensus estimates (EUR 9.4m/7.5m Evli/cons.), at a margin of 95.5%. The deviation compared to our estimates was mainly due to higher than estimated fair value changes (EUR 9.6m/6.0m Act./Evli).
  • EPS in Q2 amounted to EUR 0.06 (EUR 0.02 in Q2/20), above our estimates and consensus estimates (EUR 0.05/0.04 Evli/cons.).
  • Management Company business revenue in Q2 was EUR 9.9m vs. EUR 9.1m Evli. Operating profit in Q2 amounted to EUR 2.4m vs. EUR 3.1m Evli.
  • Investment business revenue in Q2 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q2 amounted to EUR 9.4m vs. EUR 5.9m Evli.
  • Services business revenue in Q2 was EUR 2.0m vs. EUR 2.6m Evli. Operating profit in Q2 amounted to EUR 0.7m vs. EUR 1.3m Evli.
  • Capital under management by the end of Q2 was EUR 4.3bn (Q2/20: EUR 3.2bn). Real estate funds: EUR 2.8bn, private equity & credit funds: EUR 1.1bn, infra funds: EUR 0.4bn, and other funds: EUR 0.03bn.

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Detection Technology - Returning to growth

04.08.2021 - 09.30 | Company update

DT’s Q2 results were quite in line with our expectations. Growth is picking up, with double-digit growth seen in all BU’s during H2, which should push H2 profitability close to the 15% target level. We raise our TP to EUR 32.5 (30.0) and retain our HOLD-rating.

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Group results quite in line with our expectations
Detection Technology reported its Q2 results, which were broadly in line with our expectations. Net sales grew 11.5% to EUR 23.5m (EUR 23.8m Evli/cons.). SBU net sales were still in decline but less so than in Q1 and security sales started to grow in late Q2. DT has seen good traction in order intake from its customers, in particular in security CT applications. Quarterly fluctuations saw IBU sales growth turned negative, but the overall market remained stable. MBU continued its strong growth supported by the demand situation in healthcare infrastructure and CT equipment. EBIT In Q2 amounted to EUR 3.0m (EUR 3.0m/3.3m Evli/cons.).

Double-digit growth seen in all BU’s in H2
DT’s business outlook has improved, and double-digit growth is expected in all BU’s in H2. IBU and MBU are expected to grow double-digit in Q3 while SBU is seen to take a turn towards growth in Q3 but demand uncertainty remains at elevated levels. On group level we have made minor upward tweaks to our estimates, expecting growth of 26% in H2. We are somewhat cautious to H2 profitability given the situation with component availability, but still expect improvements due to the higher sales and estimate a H2 EBIT-margin of 14.3%. DT is nearing its 15% target level and a stronger than estimated sales growth could rather easily push margins above the target during the latter half of the year.

HOLD with a target price of EUR 32.5 (30.0)
With the minor estimates revisions and improved H2 outlook and visibility we raise our target price to EUR 32.5 (30.0), valuing DT at 35x 2022 P/E. Valuation is not cheap but DT still exhibits a nice amount of potential in EPS growth considering target and pre-COVID profitability levels. Our rating remains HOLD.

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Suominen - Profitability remains very decent

04.08.2021 - 09.30 | Preview

Suominen reports Q2 results on Fri, Aug 13. We make only small adjustments to our estimates and continue to view valuation not too demanding.

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There’s downward pressure from the late profitability peak

Suominen’s Q1 marked a record high profitability despite raw materials and logistics challenges. Raw materials prices began to spike in Q1, but inventories and nonwovens pricing dynamics meant the negative effect was not yet large. Raw materials prices however continued to surge in Q2, and we now expect Suominen’s Q2 gross margin to have declined by 350bps q/q to 14%. We estimate Q2 revenue at EUR 120m, down by 2% y/y, and EBITDA at EUR 14.8m. Raw materials prices have shown some cooling signs over the summer and we continue to expect gross margin to settle around 13.5% going forward.

Additional investments appear forthcoming

Suominen’s business has received a pandemic boost, but high demand seems to persist. The company has also sharpened its own operational performance. Suominen recently issued a EUR 50m bond to be used for general corporate purposes. In our opinion the company had more than ample liquidity already before the transaction, and thus we see the extended financing hinting at growth plans. Suominen may be planning organic investments, but M&A is not off the table and we believe new geographies, in particular Asia, are now on the radar screen.

We still see some upside to current valuation multiples

Glatfelter, which in our view is the most relevant listed Suominen peer, has just announced the acquisition of Jacob Holm for an EV of USD 308m. Glatfelter estimates Jacob Holm’s Jun-21 LTM EBITDA of USD 45m includes pandemic demand benefit to the tune of USD 10-15m and expects to realize some USD 20m in annual cost synergies within 24 months of closing. These figures suggest, in the most optimistic scenario where the pandemic benefits persist and synergies are fully realized, an EV/EBITDA as low as 4.7x. If the benefits vanish the synergized multiple settles between 5.6x and 6.2x. Suominen is now valued around 6x EV/EBITDA and 9x EV/EBIT on our estimates; these levels are somewhat below those of Glatfelter and other peers. In our opinion Suominen’s valuation still appears conservative. Our new TP is EUR 6.8 (6.5) per share; we retain our BUY rating.

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Detection Technology - In line with our expectations

03.08.2021 - 09.30 | Earnings Flash

DT’s Q2 result was broadly in line with our estimates. The net sales grew 11.5% on a group level to EUR 23.5m (EUR 23.8m/23.8m Evli/cons.). The operating profit grew to EUR 3.0m (EUR 3.0m/3.3m Evli/cons.). DT’s business outlook for the end of the year has improved, and the company expects double-digit growth in all business units in H2.

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  • Q2 result: Q2 net sales amounted to EUR 23.5m (11.5% y/y) vs. EUR 23.8m/23.8m Evli/cons. estimates. Q2 EBIT was EUR 3.0m (12.6% margin) vs. EUR 3.0m/3.3m Evli/cons. R&D costs amounted to EUR 2.6m or 10.9% of net sales (Q2’20: 2.7m, 12.7%).
  • Security Business Unit (SBU) net sales decreased 11.7% to EUR 6.9m vs. EUR 7.0m Evli estimate. The security market is recovering slowly, and SBU sales decreased at the beginning of Q2, but took an upward turn at the end of the review period. Detection Technology has received a good number of orders from customers, in particular in security CT applications.
  • Industrial Business Unit (IBU) net sales decreased 10.4% to EUR 3.1m vs. EUR 3.4m Evli estimate. IBU sales continue to grow although year-on-year sales decreased due to a quarter-over-quarter fluctuation.
  • Medical Business Unit (MBU) net sales increased 37.4% to EUR 13.6m which was broadly in line with our estimate of EUR 13.4m. Investments in healthcare infrastructure, globally and in particular in China, as well as the demand in higher-end CT equipment, boosted sales to grow strongly.
  • Detection Technology’s business outlook for the end of the year has improved, and the company expects double-digit growth in all business units in H2.

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Talenom - A gift that keeps on giving

03.08.2021 - 09.00 | Company update

Talenom reported Q2 figures quite in line with expectations. With the on-going solid momentum, we have raised our 2022-2023 sales growth estimates, expecting continued solid double-digit growth. We adjust our target price to EUR 15.0 (13.3) and retain our HOLD-rating.

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No major surprises in Q2 figures
Talenom reported its Q2 results, which were quite in line with expectations. Revenue grew 29.6% to EUR 21.4m (EUR 21.0m Evli/cons.). Of the growth during H1/21 around two-thirds were inorganic and the rest organic growth. The operating profit improved 15% y/y to EUR 4.1m but was slightly below expectations EUR 4.3m/4.4m Evli/cons.). Guidance remains intact, with net sales expected to amount to EUR 80-84m and operating profit to amount to EUR 14-16m. During the review period Talenom announced its expansion to Spain through the acquisition of accounting firm Avail Services SL and continued to grow through acquisitions in Finland and Sweden.

Growth prospects looking as good as ever
Growth in Q2 continued strong and a positive remark was the continued sign of improvement in organic growth, with new customer acquisitions having recovered to pre-pandemic levels. Talenom has also seen good traction in the new small customer concepts, which we expect to pick up further once all steps have been taken to enable acceleration of growth. Our 2021 estimates remain mostly intact, but we have raised our 2022 and 2023 revenue estimates by 8% and 13% respectively, expecting continued inorganic growth and improved organic growth supported by accelerated new customer sales and sales from consulting work. We expect revenue of EUR 82.4m and EBIT of EUR 15.0m respectively (co’s guidance 80-84m and 14-16m).

HOLD-rating with a target price of EUR 15.0 (13.3)
With the solid momentum in sales growth, we raise our target price to EUR 15.0 (EUR 13.3) and retain our HOLD-rating. Valuation remains a challenge, with 2022e P/E of ~52x, but a case like Talenom is hard to come by and the outlook in terms of profitable growth remains clearly positive.

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Talenom - Figures quite as expected

02.08.2021 - 13.45 | Earnings Flash

Talenom's net sales in Q2 grew 29.6% to EUR 21.4m, in line with our and consensus estimates (EUR 21.0m Evli/cons.). EBIT amounted to EUR 4.1m, slightly below our and consensus estimates (EUR 4.3m/4.4m Evli/cons.).

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  • Net sales in Q2 amounted to EUR 21.4m (EUR 16.5m in Q2/20), in line with our and consensus estimates (EUR 21.0m Evli/Cons.). Growth in Q2 amounted to 29.6% y/y. Around two-thirds of the growth during H1/21 was inorganic growth and the remainder organic growth.
  • Operating profit in Q2 amounted to EUR 4.1m (EUR 3.6m in Q2/20), slightly below our and consensus estimates (EUR 4.3m/4.4m Evli/cons.), at a margin of 19.4%.
  • EPS in Q2 amounted to EUR 0.07 (EUR 0.06 in Q2/20), in line with our and consensus estimates (EUR 0.07/0.08 Evli/cons.).
  • Talenom’s new customer acquisition recovered to pre-pandemic levels in late spring. The coronavirus pandemic no longer had a significant impact on Talenom’s business during the review period.
  • Net investments during H1/21 amounted to EUR 23.5m (H2/2020: EUR 9.0m).
  • Piloting of the KontoKalle service – a similar service to the TiliJaska small customer concept in Finland – began in Sweden in the summer.
  • Guidance intact (updated 15.4.2021): Net sales in 2021 are expected to amount to EUR 80-84m and operating profit to EUR 14-16m.

Open report

Detection Technology - Expect return to growth

30.07.2021 - 09.45 | Preview

Detection technology will report is Q2 results on August 3rd. Q1 started off rather slow and expectations are for growth to pick up in the coming quarters. We expect the trend of net sales decline to be reversed in Q2 and sales to grow 12.8% y/y. We retain our target price of EUR 30.0 and HOLD-rating.

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Q1 started off rather slow
Detection Technology will report its Q2 results next Tuesday on August 3rd. In Q1 net sales in MBU and IBU saw double-digit growth y/y while SBU saw net sales decline with the continued challenging situation in the security market. MBU showed good momentum in sales growth driven by investments in healthcare infrastructure and increased demand for CT applications. Group net sales overall declined 8.0% y/y. Relative profitability increased y/y to a 7.5% operating margin (Q1/20: 5.9%) but remained clearly below pre-COVID levels.

Growth seen to pick up in coming quarters
Detection Technology noted in Q1 that although the beginning of the year was slow, the worst challenges are seen to have been left behind and growth is expected to pick up again during 2021. MBU is seen to grow more in Q2 and H2 than in Q1 while IBU should turn to growth during H2. SBU is seen to head for growth in late Q2 and grow in H2 but demand is characterized by uncertainty. We estimate group net sales of EUR 23.8m for a growth of 12.8% y/y. We expect growth to be driven by MBU (35.4% y/y) and a clearly smaller y/y growth decline in SBU (-10.1% y/y). We expect group operating margins to remain quite on par with previous year levels.

HOLD with a target price of EUR 30.0
We have made no changes to our estimates ahead of Q2. Valuation is quite elevated, with 2022E P/E of ~36x, and growth recovery is still coupled with uncertainty. Potential is however still large, with good market growth expectations. We retain our HOLD-rating with a target price of EUR 30.0.

Open report

Eltel - Long-term margin potential

28.07.2021 - 09.35 | Company update

Eltel’s margins continued to gain in Q2 y/y. The report had no big surprises; Eltel makes progress according to plan. We make some downward revisions to our revenue estimates while we are a bit more positive on margins.

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The 2.1% operative EBITA margin met our estimate

Q2 revenue declined by 14% y/y to EUR 210m, vs the EUR 228m/223m Evli/cons. estimates. Other business made up 9% of top line, while Communication still drove growth in Finland. Revenue declined in all other countries, and Swedish EBITA didn’t improve as the comparison period had a positive EUR 0.9m one-off item. The pandemic delayed Norwegian fiber activity, and together with tough winter produced some softness in local results. Meanwhile Denmark saw a positive EUR 0.8m one-off in profitability. Q2 EBIT landed at EUR 4.3m vs the EUR 4.4m/4.1m Evli/cons. estimates. Operative EBITA margin was 2.1% vs our 2.0% estimate. Q3 tends to be the most profitable quarter and we see the respective ‘21 margin at 4.1%, up 110bps y/y. We estimate FY ’21 EBITA margin improving by 130bps to 2.5%.

FI & NO drive short-term, SE & DK hold long-term promise

We moderate our Norwegian estimates a bit but still see the business similarly important for near-term results as Finland. Denmark is for now the smallest of the four but already achieves good margins and probably has the best long-term growth prospects. In our view traffic lighting presents a solid source of business for all four (Finnish street lighting in particular). Finland, Norway and Denmark also offer fiber opportunities, while in Sweden that market is more challenging. There’s scope for M&A, but we believe it probably takes many quarters before anything materializes. We expect Sweden to weigh figures at least in Q3. Eltel is however making progress there, and we see group-level growth turning positive in Q4 thanks to Finnish and Norwegian strength. We estimate Eltel’s Q3 growth to remain negative.

Current valuation leaves solid upside potential

Eltel is valued ca. 7.5x EV/EBITDA and 16x EV/EBIT on our FY ’22 estimates. We see the respective FY ‘23 multiples at 6.5x and 13x. These are somewhat neutral levels compared to peers, but we continue to view valuation attractive as Eltel advances towards its long-term 5% EBITA margin target (we estimate 3.9% for FY ’23). We retain our SEK 29.5 TP and BUY rating.

Open report

Eltel - Profitability as expected

27.07.2021 - 09.30 | Earnings Flash

Eltel’s Q2 produced a sixth consecutive annual improvement in operative EBITA and the result was close to estimates. Eltel maintains its previous guidance and expects similar development for the rest of the year.

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  • Q2 group revenue amounted to EUR 210.4m, down by 14% y/y and compared to the EUR 228.4m/223.1m Evli/consensus estimates.
  • EBITDA was EUR 12.7m vs the EUR 13.0m/13.0m Evli/consensus estimates. Operative EBITA improved to EUR 4.4m (EUR 2.8m in Q2’20) vs our EUR 4.6m estimate. Operative EBITA margin was therefore 2.1%. EBIT amounted to EUR 4.3m vs the EUR 4.4m/4.1m Evli/consensus estimates.
  • Profitability margins in Finland and Denmark were above our estimates (Denmark was exceptionally good this time), while the Swedish operative EBITA margin remained in the red. The Norwegian margin was a bit below our estimate, but Eltel expects volume pick-up there towards the end of the year. Eltel sees the restructuring in Sweden working out long-term.
  • Eltel guides operative EBITA margin to improve in 2021 compared to 2020 (unchanged).

Open report

Fellow Finance - Interesting times ahead

26.07.2021 - 09.35 | Company update

Fellow Finance signed a combination agreement with Evli Bank to merge with Evli’s banking services, intended to be carried out during H1/2022. In the more near-term, Fellow Finance has seen a healthy rebound in loan volumes during H1/2021, looking to get back on a growth trajectory.

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Signed combination agreement to create “Fellow Bank”
Fellow Finance and Evli Bank signed a combination agreement, by which Evli Bank will demerge through a partial demerger and Fellow Finance will merge with the company that will carry on Evli Bank’s banking services and form “Fellow Bank”. A main idea behind the merger is to combine Evli’s banking and risk management expertise with Fellow Finance’s expertise in lending and assessment of creditworthiness. The combination would in our view create clear synergies and provide a sturdier foundation but with the shift to balance-sheet lending Fellow Finance’s original idea of a scalable lending platform would be less valid. The arrangement is intended to be carried out during the first half of 2022.

Good loan volume growth during H1
H1 has seen loan volumes rebound quite nicely, with the monthly average during H1 at around EUR 15m compared with EUR 11m during H2/20, and most recent months nearing all-time high. We have raised our 2021 estimate to EUR 201m (prev. EUR 160m). The growth should not translate as well into revenue given the growth being driven by lower-margin business lending, but we still expect growth of 18.6% from the weak comparison period. The business lending driven growth should also not burden costs as much, but earnings are still expected to remain low due to growth investments.

BUY with a target price of EUR 4.0 (3.8)
The combination agreement could value Fellow Bank at EUR 50.8m (FF 25.2m, Evli banking serv. 13.9m and 11.7m added capital through share issue), and with at least EUR 30m equity would give a max 1.7x P/B. We will treat Fellow Finance as is for now. On our revised estimates we raise our target price to EUR 4.0 (3.8) and retain our BUY-rating.

Open report

Raute - Steep EBIT climb remains imminent

26.07.2021 - 09.30 | Company update

Raute’s Q2 profitability was still weak, but in our opinion the mix of stabilizing costs and very high order book are bound to drive steep earnings growth going forward.

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Demand is improving somewhat faster than we expected

The EUR 35.5m in Q2 revenue was close to our EUR 36.0m estimate and had a favorable tilt towards services (EUR 16.3m vs our EUR 12.0m estimate), but EBIT nonetheless remained EUR -1.0m (vs our EUR 1.6m estimate). Employee costs grew by EUR 2.8m y/y and EUR 1.0m q/q, while other operating expenses grew by EUR 1.8m y/y and EUR 0.9m q/q (due to e.g. a proprietary marketing event). The EUR 65m order intake surpassed our estimate by EUR 10m. The higher-than-expected order intake stemmed, in geographic terms, across the board and so there were no major individual surprises. Both project deliveries and technology services orders topped our estimates. Modernizations drove services orders again to a high EUR 18m figure. Demand is overall improving a bit faster than we expected, order book is already a lofty EUR 129m and we expect it to swell further during the remainder of this year. The book is also now less dependent on large projects than it used to be just a while ago.

Traditional important markets now drive results

Raute’s guidance remains unchanged. Employee costs should stabilize going forward and we also believe other expenses have now peaked. The big order book will thus begin to drive higher profitability. Raute sees potential supply chain challenges in H2, but in our view components and logistics issues are not a major long-term topic in the context of Raute considering the company’s strong value chain position. We make only small estimate revisions. We see Raute reaching EUR 163m in FY ‘22 revenue with a 6.5% EBIT margin, whereas we previously estimated a 7% margin, and further potential from there on.

Valuation is not stretched given the long-term potential

We continue to expect steep earnings climb for FY ’22. We make a small moderation in our profitability estimates, on which Raute now trades some 8x EV/EBITDA and 10x EV/EBIT; we see the FY ‘23 multiples contracting to about 7x and 9x. In our view these are attractive levels considering Raute’s leading position in advanced markets as well as long-term emerging markets opportunities. We retain our EUR 26.5 TP and BUY rating.

Open report

Consti - Upgrade to buy

26.07.2021 - 09.05 | Company update

Consti reported rather good Q2 results on an adj. basis, with both growth and underlying profitability slightly better than expected. The solid order intake also bodes well for continued growth during the latter half of the year. We raise our target price to EUR 14.5 (13.0) and upgrade our rating to BUY (HOLD).

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Q2 better than expected on adj. basis
Consti reported overall slightly better than expected Q2 results. Revenue grew 2.3% y/y (5.9% excl. IAC) to EUR 70.9m (EUR 68.5m/69.2m Evli/cons.). The operating profit and adj. operating profit amounted to EUR -0.5m (EUR -0.4m/-0.7m Evli/cons.) and EUR 2.9m (EUR 2.6m Evli) respectively. The operating profit included EUR 3.5m of IAC’s relating to the Hotel St. George project arbitration proceedings, which should no longer materially affect costs during H2. The order backlog was back to growth, up 11.5% y/y to EUR 236.2m, supported by a solid order intake of EUR 98.5m.

Growth picking up
We have made minor upward revisions to our estimates, now expecting 2021 revenue of EUR 286.4m (prev. EUR 278.0m) and operating profit of EUR 5.9m (prev. 5.7m). The growth exceeded our expectations in Q2 and with the solid order intake Consti is poised to continue the growth during the latter half of the year. The increases in building material costs could potentially affect costs during H2 and we for now assume a very minor impact as prices have been going recently. With the new construction venture having gotten off to a good start with the recently signed deals we expect continued growth of some 3% p.a. during 2022-2023 with relatively stable margins on adjusted basis.

BUY (HOLD) with a target price of EUR 14.5 (13.0)
With the signs of pick-up in growth and slightly better than estimated underlying profitability (excl. IAC’s) we raise our target price to EUR 14.5 (13.0) and upgrade our rating to BUY (HOLD). Our TP values Consti at a quite reasonable 14.7x 2022 P/E.

Open report

Vaisala - Solid quarter, some uncertainty ahead

26.07.2021 - 08.30 | Company update

Vaisala reported its Q2 results which came with little surprises as preliminary figures had been given, although the underlying profitability did exceed expectations. We have made some upwards revisions to our estimates and adjust our target price to EUR 36.0 (35.0) with our HOLD-rating intact.

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Solid growth driven by Industrial Measurements
Vaisala reported its Q2 results, which with the preliminary figures given ahead of the quarter did not come as a larger surprise. Revenue growth was at a solid 20% and the operating result also improved clearly y/y to EUR 10.9m (Q2/20: EUR 7.9m). Both BU’s posted double-digit growth figures, with IM growth at 31% and W&E at 14%. Orders received grew 25% to EUR 120.1m and the order backlog as a result was up 14% to EUR 165.3m. Vaisala updated its guidance ahead of Q2, expecting revenue of EUR 400-420m and EBIT of EUR 40-50m. Vaisala will hold its Capital Markets Day on September 21st.

Underlying profitability better than expected
We have raised our estimates slightly, now expecting revenue of EUR 418.4m (prev. EUR 409.9m) and an operating result of EUR 48.2m (prev. EUR 45.0m). Vaisala’s Q2 result included an additional of EUR 2.2m relating to an update of the valuation of contingent considerations and the underlying profitability as such was clearly better than the reported operating result figures. The availability and cost of components was highlighted as a potential concern for H2, which we have reflected also in our estimates. Should the impact turn out to be small or negligible, the current guidance would appear to be rather conservative.

HOLD with a target price of EUR 36.0 (35.0)
On our revised estimates we adjust our target price to EUR 36.0 (35.0) and retain our HOLD-rating. Vaisala’s performance in Q2 was solid, but the already stretched valuation (30.3x 2022 P/E) and uncertainty relating to component cost and availability is something to consider.

Open report

Vaisala - Solid figures across the board

23.07.2021 - 09.35 | Earnings Flash

Vaisala had given preliminary figures ahead of Q2 and as such contained no surprises on group level. Orders received and revenue grew well in both BU’s, but more strongly in Industrial Measurements. Faster than expected recovery from the pandemic had a positive effect on demand, in particular in APAC and Europe.

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  • Group level results: Q2 net sales increased by 25% to 109.5 MEUR (pre-announced). Q2 EBIT came in at 10.9 MEUR (pre-announced), resulting in a 10.0% EBIT-margin (Q2’20: 7.9 MEUR, 8.7% EBIT-margin)
  • Gross margin was 55.3% vs. 54.5% last year.
  • Orders received were 120.1 MEUR vs. 95.9 MEUR last year. Orders received grew by 25%; 17% in W&E and 41% in IM. Order book was 165.3 MEUR vs. 145.3 MEUR in Q2’20.
  • Weather & Environment (W&E) net sales increased by 14% to 65.4 MEUR vs. 65.9 MEUR our expectation. W&E EBIT was 1.0 MEUR (1.7 MEUR Evli). W&E’s orders received grew by 17%. Orders received growth was very strong in the meteorology market segment and increased also in renewable energy and aviation market segments. Net sales grew in meteorology and renewable energy market segments, whereas net sales in ground transportation and aviation market segments decreased. Industrial Measurements (IM) net sales grew 31% to 44.1 MEUR vs. 43.6 MEUR our expectation. IM EBIT was 10.5 MEUR (9.6 MEUR Evli), resulting in a 23.7% EBIT-margin (Q2’20: 20.9%). IM order intake growth was 41%. Orders received increased very strongly in life science and industrial instruments market segments. Net sales growth was strong in industrial instruments and life science market segments, and good in power industry market segment.
  • Vaisala raised its business outlook for 2021 ahead of Q2, expecting net sales to be in the range of 400–420 MEUR and EBIT in the range of 40–50 MEUR.

Open report

Raute - High orders, low profitability

23.07.2021 - 09.30 | Earnings Flash

Raute’s Q2 order intake grew even more than we expected, while profitability remained weak.

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  • Q2 revenue grew by 45.5% y/y and amounted to EUR 35.5m, compared to our EUR 36.0m estimate. Project deliveries top line was EUR 19.2m (vs our EUR 24.0m estimate) while technology services was EUR 16.3m (vs our EUR 12.0m estimate).
  • EBIT was EUR -1.0m vs our EUR 1.6m estimate, meaning EBIT margin was -2.9% while we expected 4.4%. The comparison period had exceptionally low payroll costs, in addition to which marketing and digitalization efforts were continued, and thus the result remained in the red.
  • Q2 order intake amounted to EUR 65m, while we expected EUR 55m. Project deliveries orders were EUR 47m, compared to our EUR 42m estimate, while technology services amounted to EUR 18m vs our EUR 13m estimate.
  • Order book stood at EUR 129m at the end of Q2 (EUR 80m a year ago).
  • Raute guides revenue to grow and operating profit to improve in 2021 (unchanged).

Open report

Consti - Rather upbeat report

23.07.2021 - 09.00 | Earnings Flash

Consti's net sales in Q2 amounted to EUR 70.9m, in line with our and consensus estimates (EUR 68.5m/69.2m Evli/cons.). EBIT amounted to EUR -0.5m, in line with our and consensus estimates (EUR -0.4m/-0.7m Evli/cons.). The order backlog was up 11.5% to EUR 236.5m. Excluding one-offs the report was in our view rather upbeat, in particular on order intake.

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  • Net sales in Q2 were EUR 70.9m (EUR 69.3m in Q2/20), in line with our and consensus estimates (EUR 68.5m/69.2m Evli/Cons.). Sales grew 2.3% y/y.
  • Operating profit in Q2 amounted to EUR -0.5m (EUR 2.4m in Q2/20), in line with our and consensus estimates (EUR -0.4m/-0.7m Evli/cons.), at a margin of -0.7%. Consti recognized a non-recurring loss of EUR 3.4m as a result of the arbitral award relating to the Hotel St. George project. Adj. EBIT was EUR 2.9m (Q2/20: EUR 2.7m). On adj. basis EBIT was better than expected as we had expected EBIT excl. St. George items to amount to EUR 2.6m.
  • EPS in Q2 amounted to EUR -0.09 (EUR 0.21 in Q2/20), below our estimates and above consensus estimates (EUR -0.07/-0.12 Evli/cons.).
  • The order backlog in Q2 was EUR 236.5m (EUR 211.8m in Q2/20), up by 11.5%. Order intake was at a very healthy EUR 98.5m in Q2 (Q2/20: EUR 66.8m).
  • Free cash flow amounted to EUR -1.4m (Q2/20: EUR 8.1m).
  • Guidance for 2021 (intact): Operating profit is expected to be between EUR 4-8m.

Open report

Innofactor - Continued steady performance

23.07.2021 - 08.30 | Company update

Innofactor’s Q2 results were well in line with expectations. We have made essentially no changes to our estimates and continue to expect modest growth and notable profitability improvement. We retain our BUY-rating and target price of EUR 2.2.

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Q2 well in line with our expectations
Innofactor reported its Q2 results, which were well in line with our expectations. Revenue grew 3.2% y/y, 7.6% organically, to EUR 17.3m (Evli 17.3m). Revenue growth turned positive again in all countries. EBITDA and EBIT amounted to EUR 2.1m (Evli 2.2m) and EUR 1.3m (Evli EUR 1.4m) respectively, with all other countries except Sweden showing positive figures. The order backlog continued to grow nicely, up 28% y/y to EUR 72.7m. Innofactor reiterated its guidance, expecting revenue and EBITDA to increase compared to 2020. Innofactor made an early repayment of loans for EUR 2.7m, improving the equity ratio and net gearing to 49.9% and 30.5% respectively, while still leaving the cash position on par with 2020 year-end figures. All in all, the Q2 report was quite neutral and held little significant new information.

No notable changes to our estimates
We have made essentially no changes to our estimates. We expect revenue in 2021 to grow 3.4% EUR 68.4m and EBIT (excl. PPA and Prime divestment) to improve to EUR 6.0m (2020: EUR 4.4m). We expect slight pick-up in growth during H2 accounting for the impact of COVID-19 on 2020 comparison figures supported by the solid order backlog. Positive signs in the other Nordic countries speak for a potential pick-up in the growth pace, with growth recently having been driven to a larger extent by Finland.

BUY with a target price of EUR 2.2
With no essential changes to our estimates or view on Innofactor as an investment case we retain our BUY-rating and target price of EUR 2.2. Our target price values Innofactor at a slight discount to peers on adj. multiples, which we still consider fair given the lower growth pace.

Open report

Innofactor - Figures as expected

22.07.2021 - 09.30 | Earnings Flash

Innofactor’s Q2 results were as expected. Net sales amounted to EUR 17.3m (Evli EUR 17.3m), while EBITDA amounted to EUR 2.1m (Evli EUR 2.2m). The order backlog continued to grow well, up 28% y/y to EUR 72.7m.

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  • Net sales in Q2 amounted to EUR 17.3m (EUR 16.8m in Q2/20), in line with our estimates (Evli EUR 17.3m). Net sales in Q2 grew 3.2% y/y and 7.6% organically. Revenue grew in all countries.
  • EBITDA in Q2 was EUR 2.1m (EUR 2.0m in Q2/20), in line with our estimates (Evli EUR 2.2m), at a margin of 12.1%. EBITDA was positive in Finland, Norway and Denmark.
  • Operating profit in Q2 amounted to EUR 1.3m (EUR 0.9m in Q2/20), in line with our estimates (Evli EUR 1.4m), at a margin of 7.4%.
  • Order backlog at EUR 72.7m, up 28% y/y. Innofactor succeeded well in sales during the second quarter and received several significant orders.
  • Innofactor expects that the COVID-19 pandemic will not cause significant harm to Innofactor’s business in 2021.
  • Innofactor made an early repayment of loans for EUR 2.7m, improving the company’s equity ratio to 49.9% and net gearing to 30.5%.
  • Guidance reiterated: Innofactor’s net sales and EBITDA in 2021 are estimated to increase compared to 2020 (net sales and EBITDA EUR 66.3m and EUR 7.2m respectively).

Open report

SRV - Still on track

22.07.2021 - 09.00 | Company update

SRV’s Q2 results were fairly in line with expectations and held little new information. Progress is being made slowly but steadily and the company is quite well on track to regain decent profitability levels. We retain our BUY-rating and target price of EUR 0.8.

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No surprises in Q2
SRV reported Q2 results that were fairly well in line with expectations. Revenue declined some 18% y/y to EUR 218.0m (EUR 232.1m/243.0m Evli/cons.) mainly due to lower business construction revenue. The operating profit was fairly good, at EUR 6.3m (EUR 5.8m/5.0m Evli/cons.), and the operative operating profit stood at EUR 5.7m (Evli 5.8m). The order backlog was down 21% y/y at EUR 1,048m. The guidance for 2021 of EUR 900-1,050m in revenue and operative operating profit of EUR 16-26m remains intact. The second quarter was rather limited in new information content, one highlight being the completed financing arrangements that clearly improved the maturity structure.

Estimates largely intact, potential minor headwind in H2
We have made some smaller adjustments to our 2021 estimates, now expecting revenue of EUR 907.2m (prev. 904.3m) and operating profit of EUR 22.1m (23.9m). Revenue in H2 is expected to improve clearly on H1 with for instance the completion of the second Kalasatama tower, Loisto, but relative profitability is expected to be weaker due to lower margins in key projects. Elevated building material costs and availability could cause some headwind in the latter half of 2021 but so far, the impact does not appear to be material. Start-ups of developer-contracted housing units continued on a slight positive trend, with the financing arrangements opening up potential for accelerated pace given sufficient demand.

BUY with a target price of EUR 0.8
Q2 was quite neutral and did not affect our view of SRV as an investment and SRV’s potential is being unlocked, although slowly. We retain our target price of EUR 0.8 and BUY-rating.

Open report

Vaisala - Solid Q2 results incoming

21.07.2021 - 09.35 | Preview

Vaisala reports its Q2 results on July 23rd. Preliminary figures show a solid second quarter and our attention will be drawn toward the rest of the year and comments regarding the impact of component availability/costs.

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Guidance upgraded pre-Q2 after solid quarter
Vaisala reports its Q2 results on July 23rd. Vaisala issued a guidance upgrade last week and posted preliminary figures for sales, operating results and orders received. The previous guidance range for 2021 net sales (EUR 380-400m) and operating result (EUR 35-45m) was raised to EUR 400-420m and EUR 40-50m respectively. The guidance upgrade appears to be driven largely by a solid second quarter. Preliminary figures show Group sales growth of 20% to EUR 109.5m in Q2 and operating result of EUR 10.9m (Q2/20: 7.9m). Vaisala’s preliminary orders received in Q2 grew by 25% to EUR 120.1m. Vaisala did not specify figures per segment but noted that pick-up in demand was reflected especially in the Industrial Measurements business area.

Minor estimate changes based on preliminary Q2 figures
We have only revised our estimates for 2021 based on the preliminary figures for Q2. Our estimates were already clearly in the upper end of the previous guidance and the impact as such is relatively small on full year figures. Our sales estimate is now at EUR 409.9m (prev. 396.9m) and operating result estimate at EUR 45.0m (44.6m), in the middle of the guidance ranges. Vaisala noted that the shortage of components has increased material and transportation costs, which will have a negative impact on operating result in H2/2021, and we will be following any comments on the potential magnitude of the impact in the upcoming earnings report.

HOLD with a target price of EUR 35.0 (33.0)
Based on the more favourable outlook we have adjusted our target price to EUR 35.0 (33.0). The current rather stretched valuation and potential headwind from component availability/cost limits upside potential. We retain our HOLD-rating.

Open report

Exel Composites - Extended heady growth

21.07.2021 - 09.30 | Company update

Exel Q2 margins were close to what we expected, while the growth extension turns us overall more positive. In our view the company isn’t that far from 10% annual EBIT margins.

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Q2 margins declined pretty much as expected

Sales mix (tilt to carbon fibers) as well as volumes continued to improve and Q2 top line grew by 23% y/y. The EUR 33.5m figure surpassed our EUR 30.4m estimate despite certain quarterly softness in Wind power, which in our view testifies to Exel’s extended wide positive development. Buildings and infrastructure, a highlight customer industry, was driven by the conductor core application and reached EUR 8.7m top line (vs our EUR 5.9m estimate). Q2 gross margin declined by almost 400bps y/y and 200bps q/q to 56.3%, which wasn’t a surprise per Exel’s comments in connection with the Q1 report. Higher raw materials costs and certain growth category products’ ramp-up had a negative margin impact, but Exel’s 7.3% adj. EBIT margin was in fact a bit above our 7.2% estimate. The resulting EUR 2.5m adj. EBIT topped our EUR 2.2m estimate thanks to the high revenue. Exel retained its previous FY ‘21 guidance.

Prolonged high growth further lifts profitability potential

Order intake didn’t show any signs of cooling and leaped by 90% y/y. The Q2 comparison figure was soft, but nevertheless the latest EUR 43.5m figure gained another 4% q/q and can be compared to the EUR 30m quarterly levels that used to be common. We now expect Exel to reach 15% growth this year. In our view H2 growth is bound to top 10% and thus we estimate H2 EBIT margins to increase by ca. 100bps y/y. We still expect Exel’s composites pricing to adjust for higher raw materials costs and see annual EBIT margin reach close to 10% already next year. It’s a bit early to say much about FY ’22, but the recent order intake levels suggest Exel might then grow another 10% or so. We therefore see EBIT gaining almost another EUR 3m.

We now estimate EUR 13.5m FY ’22 EBIT (prev. EUR 12.7m)

Exel’s valuation has turned, in our view, more attractive now that recent strong growth outlook has been extended. Exel is now valued ca. 9x EV/EBITDA and 14x EV/EBIT on our FY ‘21 estimates. These are still somewhat high in the historical context, but we expect them to contract to around 7.5x and 11x in one year’s time. Our TP is now EUR 11.5 (11.0), new rating BUY (HOLD).

Open report

SRV - Quite in line with expectations

21.07.2021 - 09.00 | Earnings Flash

SRV's net sales in Q2 amounted to EUR 218.0m, below our and consensus estimates (EUR 232.1m/241.0m Evli/cons.). EBIT amounted to EUR 6.3m, above our and consensus estimates (EUR 5.8m/5.0m Evli/cons.).

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  • Revenue in Q2 was EUR 218.0m (EUR 265.1m in Q2/20), below our and consensus estimates (EUR 232.1m/241.0m Evli/Cons.). Revenue declined 18% y/y in Q2.
  • Operating profit in Q2 amounted to EUR 6.3m (EUR 3.3m in Q2/20), above our estimates and above consensus estimates (EUR 5.8m/5.0m Evli/cons.), at a margin of 2.9%. The operative operating profit amounted to EUR 5.7m (Evli EUR 5.8m).
  • EPS in Q2 amounted to EUR 0.01 (EUR 0.02 in Q2/20), above our and consensus estimates (EUR 0.00 Evli/cons.).
  • The order backlog in Q1 was EUR 1,048m (EUR 1,332m in Q2/20), down by -21%.
  • Construction revenue in Q2 was EUR 218.5m vs. EUR 231m Evli. Operating profit in Q2 amounted to EUR 7.0m vs. EUR 8.0m Evli.
  • Investments revenue in Q2 was EUR 1.0m vs. EUR 1.1m Evli. Operating profit in Q2 amounted to EUR 0.1m vs. EUR -1.3m Evli.
  • Other operations and elim. revenue in Q2 was EUR -1.5m vs. EUR 0.0m Evli. Operating profit in Q2 amounted to EUR -0.8m vs. EUR -0.9m Evli.
  • Guidance intact: Consolidated revenue for 2021 is expected to amount to EUR 900-1,050m and operating profit is expected to improve on 2020 and amount to EUR 16-26m.

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Consti - One-off to burden Q2 results

21.07.2021 - 08.00 | Preview

Consti reports its Q2 results on July 23rd. The Q2 figures will be burdened by the outcome of the Hotel St. George renovation project arbitration proceedings but operational performance should remain steady. The venture into new building construction has gotten off to a good start with the signing of a larger office construction project.

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Arbitration proceedings outcome to burden Q2 results
Consti will report its Q2 results on July 23rd. Profitability figures are expected to be rather grim due to the unfavourable outcome of the arbitration proceedings relating to the Hotel St. George renovation project but apart from that no larger deviations should be expected. The impact of the arbitration proceedings on the operating result should be some EUR 3.0m and we expect an operating result of EUR -0.4m. The impact is partly reflected also in revenue, due to which we expect a slight decline in revenue y/y to EUR 68.5m (Q2/20: EUR 69.3m). Excluding the impact our estimates reflect slight improvement in both revenue and operating result.

Promising start to new construction venture
Apart from the news regarding the arbitration proceedings, the other notable news during the quarter was the announcement of Consti’s first significant new building construction project. The project, consisting of two new office buildings, is valued at approx. EUR 30m. New building construction was implemented as part of Consti’s revised strategy, with the aim for 10-15% of revenue to come from such projects in 2023, and the signing of a deal of such size provides a solid foundation for achieving the target. With Consti having implemented steps to improve profitability, our sights have been turned toward the unfavourable revenue development, and revenue from new construction could well be a driver in Consti’s investment case.

HOLD-rating with a target price of EUR 13.0
We have made no adjustments to our estimates ahead of the Q2 report. We retain our HOLD-rating and target price of EUR 13.0. Our target price values Consti at approx. 16.6x 2021 P/E (excl. arbitration proceedings items).

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Exel Composites - Figures above our estimates

20.07.2021 - 10.30 | Earnings Flash

Exel Composites’ Q2 report was throughout better than we expected. Absolute profitability remained higher than we estimated as top line development was once again very strong. Relative profitability was close to what we expected, while order intake reached a new high.

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  • Q2 revenue was EUR 33.5m, compared to our EUR 30.4m estimate. Top line growth was 23% y/y. Customers in Europe and North America drove growth.
  • Wind power amounted to EUR 7.8m vs our EUR 8.9m estimate, while Buildings and infrastructure was EUR 8.7m (we expected EUR 5.9m). Defense continued to grow very fast while Equipment and other industries was also very strong.
  • Q2 adjusted EBIT was EUR 2.5m vs our EUR 2.2m estimate. Adjusted EBIT margin was 7.3%, compared to our 7.2% estimate.
  • Order intake amounted to EUR 43.5m in Q2 and grew by 90% y/y. The Q2 figure was thus some 4% higher than that seen in Q1.
  • Exel retains the previous guidance, expects revenue and adjusted EBIT to increase in FY ’21 compared to FY ’20.

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Verkkokauppa.com - Capitalizing on strengths

19.07.2021 - 09.45 | Company update

Verkkokauppa.com’s Q2 marked a sixth consecutive earnings improvement. In our opinion the company remains well positioned to improve plenty more long-term.

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Earnings a small positive surprise, retains FY ’21 guidance

Verkkokauppa.com’s Q2 revenue increased by 6% y/y to EUR 131m, compared to the EUR 130m/130m Evli/cons. estimates. Growth was driven by wide positive development as traditional product categories like computers and cameras sold well but evolving categories such as sports and home & lighting were also popular. Online sales grew at a 15% y/y pace while B2B sales were up by 38% and thus made up 22% of total revenue. Overall top line, excluding export sales, advanced some 160bps faster than the market and in our view highlights the strength of the Verkkokauppa.com brand. The 17.2% gross margin topped our 16.8% estimate, and the resulting EUR 0.6m difference in gross profit helped the EUR 5.1m Q2 adj. EBIT beat our EUR 4.6m estimate (same as the consensus) and reach a record high.

We believe strong positioning will deliver further results

Verkkokauppa.com has performed strong and steady for a while. Export sales have been the only soft area, due to the pandemic, and according to the company will probably not bounce back sharp this year. The company has recently built inventories to buffer up for the busy autumn season and important Q4. Verkkokauppa.com retains a strong position in the Finnish B2C channel but has also gained traction in B2B, where volumes stem from many SME customers. The EUR 4m small-item logistics investment is relatively small and will only have a negligible operative impact in H2’21 when inventories have to be moved to accommodate the Jätkäsaari construction phase. We make small revisions to our estimates and expect Verkkokauppa.com to achieve 8% growth and 4.1% EBIT margin this year. We also make some upward revisions to our long-term estimates.

Overall valuation picture is still attractive

In our opinion Verkkokauppa.com’s valuation remains attractive considering the steady performance and long-term potential. We see solid high single-digit CAGR performance for the coming years and potential for positive surprises. We continue to view current valuation picture overall very reasonable against this backdrop. We retain our EUR 10.8 TP and BUY rating.

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Finnair - Further cost savings help recovery

16.07.2021 - 09.10 | Company update

Finnair’s Q2 report didn’t contain major news, considering the big picture. We revise our volume estimates down, however additional cost savings support our EBIT estimates.

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No big surprises, but Q3 profitability will not much improve

Finnair’s Q2 revenue amounted to EUR 112m, below the EUR 142m/145m Evli/cons. estimates. Passenger, ancillary and cargo revenues were all soft compared to our estimates, but travel is resuming as passenger revenue topped that for cargo in June. Working capital situation is beginning to improve due to growing bookings and Finnair expects monthly OCF to turn positive by the end of this year. The situation, however, remains challenging from profitability perspective. Finnair’s Q2 adj. EBIT was EUR -151m, compared to the EUR -144m/-144m Evli/cons. estimates. Finnair sees similar losses for Q3 as well. We revise our Q3 adj. EBIT estimate to EUR -132m (prev. EUR -91m).

Cost savings support profitability amid volume challenges

Finnair turned more cautious regarding the following years’ travel rebound, not a big surprise considering the latest developments. Asian vaccination rates have begun to pick up and important Northeast Asian countries are expected to have fully vaccinated 70% of their population during Q4. Finnair’s passenger volume rebound will lag those of Western short-haul focused carriers, but meaningful recovery should begin to materialize during the next few quarters. We now expect Finnair to reach ca. 90% of FY ’19 business levels (in terms of ASK & RPK) in FY ’23. We revise these estimates down a few percentage points and now expect EUR 2.8bn top line for FY ’23 (prev. EUR 3.0bn). Meanwhile Finnair’s upsized permanent cost savings projection supports our EBIT estimates. In our view the company could achieve healthy EBIT margins already next year and we see potential for 7% profitability in FY ’23. We have made only very small revisions to our absolute profitability estimates.

In our view profitability potential has been fully valued

In our opinion Finnair is set to return to good profitability levels, however this potential has been appreciated for a while. Finnair is valued roughly 15x EV/EBIT on our FY ’22 estimates, not an unreasonable level compared to other airlines but nonetheless fully valued given the persistent level of uncertainty. Our TP is now EUR 0.65 (0.7) and we retain our HOLD rating.

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Verkkokauppa.com - Profitability continued to hold up

16.07.2021 - 08.30 | Earnings Flash

Verkkokauppa.com reported Q2 results that were overall somewhat above estimates. Top line was close to the expected levels, while the strong gross margin helped adj. EBIT to surpass estimates by some EUR 0.5m.

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  • Q2 revenue amounted to EUR 130.5m vs the EUR 129.8m/130.1m Evli/cons. estimates. Top line increased by 6.1% y/y, while online sales grew 15.1% and B2B sales 38.4%. Product categories like computers and cameras as well as sports equipment and home & lighting were popular.
  • Gross profit was EUR 22.4m (17.2% margin), compared to our EUR 21.8m (16.8% margin) estimate. Product mix continued to move in a favorable direction.
  • Adj. EBIT was EUR 5.1m (3.9% margin) vs the EUR 4.6m/4.6m (3.5% margin) Evli/cons. estimates.
  • Verkkokauppa.com guides EUR 570-620m revenue and EUR 20-26m adj. EBIT for this year (unchanged).
  • Verkkokauppa.com will host its first CMD on Sep 29, 2021.

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Finnair - Q3 will not bring much relief

15.07.2021 - 09.30 | Earnings Flash

Finnair’s Q2 losses were pretty much as expected. The company estimates Q3 operating loss will also be roughly EUR 150m, in other words comparable to recent quarters.

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  • Q2 revenue amounted to EUR 111.8m, compared to the EUR 142.1m/145.0m Evli/cons. estimates. Top line grew by 63% y/y.
  • Available Seat Kilometers grew 312% y/y in Q2, while Revenue Passenger Kilometers increased by 281%. Passenger Load Factor was thus 30.6% and decreased by 2.4pp y/y. Cargo tonnes grew by 101% y/y and 8% q/q.
  • Q2 adjusted EBIT was EUR -151.3m vs the EUR -143.9m/-144.2m Evli/cons. estimates. Q2 comparable EBITDA was EUR -70.0m vs the EUR -58.9m/-58.0m Evli/cons. estimates.
  • Fuel costs were EUR 31m vs our EUR 38m expectation. Meanwhile staff costs amounted to EUR 54m, compared to our EUR 55m projection. All other OPEX+D&A combined were EUR 186m vs our EUR 205m estimate.
  • Cost per Available Seat Kilometer was 18.55 eurocents, compared to our estimate of 20.09 eurocents.
  • Finnair expects Q3’21 operating loss to be of similar magnitude compared to the previous quarters despite gradual increase in revenue (we had estimated EUR -91m Q3 EBIT). Finnair estimates monthly operating cash flow to turn positive by the end of this year.
  • Finnair now targets EUR 200m (prev. EUR 170m) in permanent cost savings by 2022 based on 2019 operational volumes. Some EUR 125m are volume-driven and EUR 75m are fixed costs.

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Raute - Profitability gains going forward

14.07.2021 - 09.35 | Preview

Raute’s environment has improved faster than we expected, as seen in the recent signing of two large orders. We don’t expect the ongoing year to be that great, but from here on profitability gains appear inevitable. In our view FY ‘22 results could already touch the previous record levels.

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EUR 46m in larger disclosed orders set the stage for FY ‘22

Raute has disclosed two new orders over the past couple of months, in total some EUR 46m worth of business for FY ’22. Raute knows both customers well. The EUR 30m Lithuanian LVL mill order will be delivered before the end of Q3’22. The delivery schedule looks much the same for the EUR 16m Russian order. The projects didn’t arrive as a complete surprise since we had already expected meaningful improvement in H2’21 orders, however we now see solid profitability potential for FY ’22 and beyond. We do not expect Q2’21 to have been that great yet, what with EUR 36m in revenue and EUR 1.6m EBIT, but we see profitability can only improve from the recent lows.

We expect about EUR 160m top line for next year

The new orders will not affect Raute’s FY ’21 results. The previous guidance, according to which both top line and operating profit will improve, remains valid. We have made only minor revisions to our FY ’21 profitability estimates. In our opinion annual operating profit will still not be great this year as revenue stays at a somewhat modest level while pandemic restrictions also remain a nuisance. The business is, for now, reliant on a large Russian order and the associated low margin profile limits profitability. We believe, however, that Raute is set to top EUR 10m in EBIT once again next year as the recent negative factors will remain no more. We revise our FY ’22 revenue estimate from EUR 141m to EUR 159m, while our respective EBIT margin estimate increases from 5.6% to 7.0%. We thus see Raute reaching EUR 11m in EBIT, a figure close to that of FY ’17.

Multiples turn attractive with EBIT north of EUR 10m

Our EUR 160m revenue estimate and corresponding 7% EBIT margin imply EBIT in the EUR 11-12m range, which translates to around 7x EV/EBITDA and 9x EV/EBIT multiples for FY ’22-23. We also note Raute reached EUR 15m EBIT in FY ’18, although that level would be difficult to pull off in a steady fashion. Our TP is now EUR 26.5 (21). Our new rating is BUY (HOLD).

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Verkkokauppa.com - Plenty of upside potential remains

13.07.2021 - 09.30 | Preview

Verkkokauppa.com reports Q2 results on Fri, Jul 16. We leave our estimates unchanged ahead of the report and continue to view current valuation levels attractive.

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Q1 met expectations, FY ‘21 growth seen around 7-8%

Verkkokauppa.com had a strong Q1. Top line grew by 7% y/y, in line with estimates, and was driven by many product categories. Online sales grew by 33% while B2B sales advanced by 12%. Gross margin amounted to a strong 16.2% (a bit above our 15.9% estimate), driven by good contribution from higher margin categories. The company thus achieved a small profitability beat with its EUR 5.2m adj. EBIT (3.9% margin), compared to the EUR 5.0m/4.8m Evli/cons. estimates. We made only minor revisions to our Q2 estimates following the Q1 report and we leave our estimates unchanged for now. We expect Verkkokauppa.com to post EUR 130m in Q2 revenue (5.5% y/y growth) and EUR 4.6m in EBIT (3.6% margin).

Strategy is ambitious, but initial moves have been laid out

Verkkokauppa.com reiterated its FY ’21 guidance in connection with the Q1 report. The company guides EUR 570-620m top line and EUR 20-26m adj. EBIT. Our EUR 594m revenue estimate touches the midpoint and thus we see the company reaching above 7% growth this year. Our EUR 24m EBIT estimate (4% margin) is a bit above the respective midpoint. The company has also announced a EUR 4m investment in fully automated small item warehouse in Jätkäsaari, Helsinki. In our opinion the plan seems a relatively low risk and efficient way to help organic expansion. We expect Verkkokauppa.com will continue to grow at a high single-digit rate for years to come, however the company’s own very ambitious target is to achieve EUR 1bn top line and 5% EBIT margin by ’25.

12-15x EV/EBIT for FY ’21-23 isn’t high given the potential

Verkkokauppa.com trades ca. 15x EV/EBIT on our FY ’21 estimates. This level represents a 25% discount compared to the Nordic & European online peer group. The 14x EV/EBIT level on our FY ’22 estimates however turns into a 10% peer premium and reflects the fact that we have taken a conservative approach to our long-term estimates. We view the overall valuation picture undemanding given the company’s growth potential. We retain our EUR 10.8 TP and BUY rating.

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Finnair - Long bumpy runway ahead

12.07.2021 - 09.30 | Preview

Finnair reports Q2 results on Jul 15. Capacity is being scaled up while passenger numbers have bottomed out, but there’s a lot of uncertainty with regards to a meaningful recovery. The rebound will arrive in the years to come, however in our view valuation doesn’t leave much upside. Our TP is now EUR 0.7 (0.75); we retain our HOLD rating.

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Recovery may materialize somewhat slower than expected

Finnair’s Q2’21 passenger figures show strong recovery relative to the exceptional halt witnessed in Q2’20, but in the big picture the volumes remained very modest. International volumes increased towards the quarter’s end, however they remained at only around 5% of those seen in e.g. Q2’19 (in terms of RPK). Western passenger flows may pick up further in Q3, but strategically important Asian flights will in our view have to wait at least until Q4’21, if not even beyond that. Slow Asian vaccination rates may not matter that much because the delta variant now seems to act as an additional speed bump on the path to recovery. In our view Finnair’s EBIT is likely to remain in the red until the end of this year. It’s unclear how quick the pent-up passenger flight demand will materialize, but airlines are unlikely to return to normal before next year. We don’t expect Finnair to see pre-pandemic EBIT levels before the year 2023.

We make some downgrades to our long-term estimates

Finnair’s Q2 passenger numbers were somewhat below our expectations as the pandemic situation has proved very resilient. Cargo volumes, nonetheless, were higher than we estimated. We thus make only small revisions to our Q2 estimates. We expect EUR 142m in revenue and EUR 144m in operating losses. We revise our long-term estimates down a bit due to the continued uncertainty that stems from the latest pandemic updates. We also note jet fuel spot prices increased another 13% q/q in Q2.

Valuation recognizes Finnair’s long-term potential

In our opinion Finnair continues to hold a solid long-term strategic position as an airline that connects Europe with Northeast Asia. This seems well recognized as current valuation is not cheap. Finnair trades ca. 15x EV/EBIT on our FY ’22 estimates. We believe Finnair’s EBIT has plenty of room to improve beyond that, however the pandemic is unlikely to alter the inherent competitive nature of the airline industry.

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Enersense - Growth strategy proceeds

22.06.2021 - 15.40 | Company update

Enersense completed its directed share issue and thus raised some EUR 16m in gross proceeds. The company is looking into some growth initiatives that would deploy the capital. These could involve organic growth prospects but in our opinion M&A is also high on the agenda. We have made small adjustments to our estimates. Our TP is now EUR 13 (11) and we retain our BUY rating.

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Current markets offer both organic and M&A potential

Enersense already had a healthy balance sheet with a positive net cash position and there wasn’t any acute pressing need to raise additional cash. The company had some EUR 23m in cash at the end of Q1. This suggests there will now be close to EUR 40m in available funds plus possible additional debt facilities. In our opinion such an amount could enable Enersense to acquire targets with around EUR 100m in revenue, considering the relatively low EV/S multiples seen across the relevant sectors. At this point it remains unclear which segment Enersense might be looking to bolster. In our view Enersense has wide M&A opportunities in both Finland and abroad. The Finnish Power market is currently driven by e.g. wind power investments, while 5G will remain a major driver for Connectivity for years to come. Enersense is already a big Finnish player in these two related construction and maintenance markets, and there remain some smaller service suppliers the company might be contemplating to acquire. The Finnish smart industry market, by contrast, represents a much wider opportunity set, not to mention the potential overseas scope.

Long-term financial target amounts to EUR 30m in EBITDA

We make small adjustments to our estimates following the transaction. We understand Empower synergies continue to materialize well and we see the company is on track to reach annual EUR 20m run-rate EBITDA in the near-term, while the long-term target implies EUR 30m.

Valuation remains undemanding relative to potential

Enersense still trades at modest multiples, and the ca. 6x EV/EBITDA and 11x EV/EBIT on our estimates for next year represent meaningful discounts compared to peers. Our new TP is EUR 13 (11) and we retain our BUY rating.

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Consti - Unfortunate one-off earnings hit

15.06.2021 - 09.15 | Company update

The arbitration proceedings relating to the Hotel St. George project unfortunately came to a for Consti unfavourable conclusion. As a result, Consti lowered its 2021 operating result estimate to EUR 4-8m (EUR 7-11m). Our 2021 estimate is now EUR 5.7m (EUR 8.7m), TP of EUR 13.0 and HOLD-rating intact.

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Arbitration proceedings to an end
The arbitration proceedings between Consti’s subsidiary Consti Korjausrakentaminen Oy and Kiinteistö Oy Yrjönkatu 13 relating to the Hotel St. George construction project came to a conclusion. Compensations amounted to EUR 0.7m for the former and EUR 0.9m for the latter, along with penalty interest. The net receivable related to the project in Consti’s balance sheet was approximately EUR 3m at the end of Q1/2021. Costs relating to the arbitral award will be recorded in Consti’s Q2/2021 results. The positive impact on cash flow is approximately EUR 2m. As a result of the arbitral award Consti lowered its operating result estimate range for 2021 to EUR 4-8m from the previous 7-11m.

Operating result estimate for 2021 down by EUR 3m
With the net compensation close to even the impact on the operating result will be around EUR 3m due to the cancellation of receivables in Consti’s balance sheet. The income statement will be partly effected through revenue and partly costs and we have revised our Q2/2021 estimate for revenue and operating result to EUR 68.5m (EUR 70.5m) and EUR -0.4m (EUR 2.6m). Our revisions solely reflect the outcome of the arbitration proceedings, as operational performance appears to have remained in line with expectations. The outcome, although unfortunate, is essentially a one-off item and ultimately did have a positive cash flow impact.

HOLD with a target price of EUR 13.0
We make no adjustments to our target price or rating based on the outcome of the arbitration proceedings due to the one-off nature. Our target price of EUR 13.0 values Consti at 16.6x 2021 P/E (excl. arbitration proceedings items).

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Scanfil - Organic growth justifies multiples

14.06.2021 - 09.20 | Company update

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

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Not a big surprise, but hints at extended strong demand

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

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

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

In our view some further multiple expansion is justified

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

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Netum - Initiate coverage with HOLD

08.06.2021 - 09.00 | Company report

Netum is a Finland-based strongly growing and profitable IT services company with over 20 years of experience of demanding IT projects. The company seeks to grow sales to EUR 30m by 2023 (20% p.a. implied) while maintaining an EBITDA margin of above 15%. We initiate coverage with HOLD and a target price of EUR 4.4, valuing Netum at approx. 18.4x 2021e adj. P/E.

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Strong track record of profitable growth
Netum has been growing strongly in the past years, through both organic growth and M&A, with a CAGR of 22% in 2016-2020. Strong growth has been coupled with high margins as the average EBITA and EBIT margins between 2016-2020 have been 16.7% and 11.4% respectively. Both growth and profitability have been above the average level of Finnish competitors.

Proceeds from the IPO will be used to accelerate growth
Netum aims to grow rapidly organically and according to its financial targets, the company aims to achieve net sales of EUR 30m in 2023, which corresponds to 20% annual organic growth. In addition to organic growth, the company is actively looking for opportunities for inorganic growth and seeks to grow through selective acquisitions, aided by funds raised in the recently completed IPO. A core part of Netum’s strategy is to continue to achieve a good level or profitability while growing, and the target is to achieve an EBITDA margin of at least 15%.

HOLD with a target price of EUR 4.4
We initiate coverage of Netum with a HOLD-rating and target price of EUR 4.4. The share price rose clearly after the IPO and current valuation multiples are rather in line with the Finnish peers. In our view, Netum’s strong track record of growth, relatively high net sales/employee ratio and above-average profitability could even warrant a premium to our peer group. On the other hand, Netum’s smaller size, competition for skilled employees, concentrated customer base, and intensifying competition are factors to be taken into consideration when looking at valuation.

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Marimekko - 70 years old and still in fashion

21.05.2021 - 09.45 | Company update

Marimekko showed its strengths once again and delivered very strong Q1 figures. Development was good internationally but also in Finland. Adj. EBIT was clearly above expectations at EUR 5.6m. We have increased our FY21E-23E estimates and keep our rating “BUY” with TP of EUR 63 (58.2).

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Clear estimates beat in Q1

Marimekko delivered a very strong Q1 result. Net sales increased by 17% y/y to EUR 29.1m vs. EUR 27.7m/27.6m Evli/cons. Sales were boosted by good wholesale sales development in APAC region, Finland and Scandinavia as well as increased licensing income in EMEA. Net sales in Finland amounted EUR 14.5m (7% y/y) vs. our EUR 14.0m and international sales were EUR 14.6m (29% y/y) vs. our EUR 13.7m. The continuing pandemic situation continued to hamper customer flows in stores, but retail sales were supported by good growth in online sales. Marimekko’s adj. EBIT was 130-140% above expectations at EUR 5.6m. Profitability was supported by increased net sales, improved relative sales margin and reduced fixed costs. EPS was EUR 0.55 vs. EUR 0.21/0.18 Evli/cons.

Aiming to accelerate international growth

Marimekko has constantly been able to deliver solid results, even during times like this. The company has a strong positioning in Finland, but its brand awareness has increased internationally as well which was shown also in Q1 figures. Marimekko plans to accelerate its long-term international growth in 2021 and to invest especially in digital business, seamless omnichannel customer experience, sustainability and brand awareness. This year, the company turns 70 years old, and this should increase brand visibility even more. Despite the strong performance in Q1, we expect a peak in sales once the vaccination coverage increases and restrictions are being lifted. Even though Marimekko had an excellent start of the year, the company indicated that majority of its net sales and earnings will be generated during H2’21E.

“BUY” with TP of EUR 63 (58.2)

Marimekko expects 2021E adj. EBIT margin to be approx. on a par with last year or higher. Net sales are expected to increase from last year. We expect revenue growth of 12% in 21E and 8% in 22E and adj. EBIT margins of 16.7% and 17.0%. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 19.9x and 17.9x which is 40-50% discount compared to the luxury peers. We keep our rating “BUY” with TP of EUR 63 (58.2).

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Endomines - Upgrade to buy

21.05.2021 - 09.15 | Company update

No major surprises were seen in Endomines Q1 results and operations startup appears to be progressing according to plans. We raise our target price to EUR 2.9 (2.7) and upgrade our rating to BUY (HOLD).

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No major surprises in figures
Endomines revenue was as expected insignificant (Act/Evli SEK 0.1m/0.0m), as operations were still at a halt. Costs were somewhat higher than expected and EBITDA of SEK -14.5m lower than our estimate (Evli SEK-11.0m). Focus during the year has so far been on ramp-up of operations and strengthening the organization through key recruitments. To our understanding the startup of operations has proceeded quite according to plans and the issues with the tailings dewatering system at the Orogrande processing facility have reportedly been addressed.

2021 production guidance 3,000-4,000oz
Endomines gave a production guidance for 3,000-4,000oz during 2021, above our previous estimate of 2,869oz. Our revised estimate puts production at 3,061oz, not yet including estimates for Pampalo, which given the likely startup in late 2021 and the low-grade development ore should be quite limited. With the mill at Friday seen to reach full capacity by year end the production figures are expected to pick up clearly in 2022. Cash flow from operations was at SEK -63.0m but around half of it was due to transactions relating to the US Grant and Kearsarge projects. Liquid assets stood at SEK 68.0m. The financing package with LDA Capital (subject to AGM approval) could bring a further EUR 14m, which should cover financing needs until sufficient own cash flows are achieved.

BUY (HOLD) with a TP of SEK 2.9 (2.7)
We have not made larger changes to our estimates or SOTP model apart from the slightly increased production figures for 2021. With the anticipated lower financial risk from the LDA Capital financing package (not yet included in our estimates) and favourable gold price development we adjust our target price to SEK 2.9 (2.7) and upgrade our rating to BUY (HOLD), noting however the significant risks relating to junior gold miners.

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Marimekko - Clear estimates beat

20.05.2021 - 08.50 | Earnings Flash

Marimekko’s Q1 result was very strong and it clearly outpaced the expectations. Net sales increased by 17% and were EUR 29.1m vs. EUR 27.7m/27.6m Evli/cons. Sales were driven by good wholesale sales development in APAC region, Finland and Scandinavia as well as increased licensing income in EMEA. Adj. EBIT was EUR 5.6m vs. EUR 2.4m/2.3m Evli/cons.

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  • Finland: revenue was EUR 14.5m vs. EUR 14.0m Evli view. Revenue increased by 7% y/y and was driven by good wholesale sales development. Nonrecurring promotional deliveries in particular contributed to an increase in wholesale sales in Finland.
  • International: revenue increased by 29% y/y and was EUR 14.6m vs. EUR 13.7m Evli view. Sales were driven by good wholesale sales development in APAC region and Scandinavia as well as increased licensing income in EMEA. Sales growth in APAC region was partly due to the transfer of some of the wholesale deliveries for Q4’20 to Q1’21.
  • Q1 adj. EBIT was clearly above expectations at EUR 5.6m (19.3% margin) vs. EUR 2.4m/2.3m (8.7%/8.3% margin) Evli/cons. Profitability was boosted by increased sales, improved relative sales margin as well as reduced fixed costs.
  • Q1 adj. EPS was EUR 0.55 vs. EUR 0.21/0.18 Evli/cons.
  • 2021E guidance: net sales are expected to increase from last year. Adj. EBIT margin is expected to be approx. on a par with last year or higher.

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Marimekko - Improved outlook

17.05.2021 - 09.45 | Preview

Marimekko upgraded its 21E earnings guidance last week as sales outlook for the full year has improved. The company said that Q1 has been very strong. We have increased our 21E adj. EBIT estimate by ~9% and keep our rating “BUY” with TP of EUR 58.2 (57). Marimekko reports its Q1 result on this week’s Thursday.

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Upgraded guidance due to improved sales outlook

Marimekko upgraded its 21E earnings guidance last week. The company now expects 21E adj. EBIT margin to be similar compared to last year (2020: 16.3%) or higher. Sales guidance remains unchanged and the company expects 21E sales to be higher than last year. Based on the earlier guidance given in February, the company expected 21E adj. EBIT margin to be in line with the company’s long-term target of 15%. According to Marimekko, the upgrade is due, in particular, to improved sales outlook for the full year, supported by a very strong Q1’21. Despite the strong figures in Q1, the company still estimates that the major portion of net sales and earnings are generated during H2’21 due to the seasonality of Marimekko’s business.

We have increased our 21E adj. EBIT estimate by ~9%

We would have hoped more detailed information about the improved sales outlook, but we expect to get more color on this during the Q1 result. Earlier, we expected 21E sales growth of 9.5% y/y and adj. EBIT margin of 15.2% (EUR 20.5m). As a result of the guidance upgrade, we have increased our estimates, especially our Q1’21E estimates. We increased our Q1E sales expectation by ~2% and expect sales of EUR 28m while we have more than doubled our adj. EBIT expectation. We now expect Q1’21E adj. EBIT of EUR 2.4m (8.7% margin). We have increased our FY21E adj. EBIT estimate by ~9% and we expect it to be EUR 22.4m (16.5% margin) while we expect sales growth of ~10% y/y.

“BUY” with TP of EUR 58.2 (57)

Marimekko reports its Q1 result on this week’s Thursday, 20th of May. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 19.0x and 17.1x which is ~50% discount compared to the luxury peers. We keep “BUY” with TP of EUR 58.2 (57) ahead the Q1 result.

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Cibus Nordic - Digesting premium to book value

14.05.2021 - 09.25 | Company update

Cibus’ portfolio continued to perform as expected. Nordic daily-goods properties remain valued at attractive levels, which in our view highlights the underlying assets’ illiquid and idiosyncratic nature. Our new TP is SEK 175 (170).

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Q1 was uneventful like so many other quarters

Cibus’ EUR 18.2m Q1 net rental income was in line with our EUR 18.1m estimate. Admin costs were EUR 1.7m (vs our EUR 1.3m estimate) as some EUR 0.1m related to the Nasdaq Stockholm main list transfer added to costs, in addition to certain seasonal variation. Net financial costs were only EUR 4.9m, compared to our EUR 5.4m estimate, as there was a EUR 0.5m FX gain. Net operating income, at EUR 11.6m, was therefore a bit above our EUR 11.4m estimate. Q1 was not unlike all other Cibus quarters despite the pandemic and somewhat extraordinary economic developments. Cibus also didn’t close new acquisitions in Q1.

Relatively few buyers help maintain the markets cool

Cibus has made a couple of small acquisitions after Q1. The four properties (three ICA and one Tokmanni) amounted to a total purchase price of EUR 8.7m. We assume a 6% yield and thus update our estimates accordingly. We understand Cibus’ acquisition pipeline remains plentiful beyond these few small deals. Cibus will have no problem financing even larger portfolio acquisitions as credit is available through various channels and equity can be accessed with a directed share issue (an exercise completed twice last year) or by a hybrid bond. Cibus also continues to act with restraint and is wary of paying a lot more than the levels it has gotten used to in the past few years.

1.2x EV/GAV begins to beg some underlying asset inflation

There has been no marked heating in the Nordic daily-goods property markets; the Swedish market shows some modest yield compression while Finland has remained much the same. We wouldn’t be surprised to see some acceleration in yield compression over the year, but in our view Cibus’ valuation already reflects such expectations to an extent. Cibus is valued almost 1.2x EV/GAV and 1.5x P/NAV, and in our opinion the levels don’t leave further upside even though Cibus’ absolute yield remains competitive relative to other listed Nordic properties. We update our TP to SEK 175 (170) as Swedish yield compression still provides additional minor support for Cibus’ valuation.

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Cibus Nordic - Additional acquisitions to come

12.05.2021 - 09.30 | Earnings Flash

Cibus’ Q1 was quiet in terms of completed acquisitions but preparations continued for the Nasdaq Stockholm main list move as well as the long pipeline of potential property purchases. Meanwhile Cibus’ property portfolio performed according to expectations.

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  • Cibus’ Q1 rental income amounted to EUR 19.4m vs our EUR 19.1m estimate.
  • Net rental income was EUR 18.2m, compared to our EUR 18.1m estimate.
  • Operating income was EUR 16.5m while we estimated EUR 16.8m. Administration expenses were a bit higher than we estimated.
  • Net operating income stood at EUR 11.6m vs our EUR 11.4m estimate. Net financial costs were a bit lower than we estimated.
  • Annual net rental income capacity now amounts to EUR 72.6m.
  • The portfolio was valued at EUR 1,270m, translating to an EPRA NAV of EUR 12.2 (12.1) per share.
  • Net LTV ratio was 61.6% (61.3%).
  • Occupancy rate was 94.7% (95.6%).
  • WAULT amounted to 5.2 years at the end of Q1.

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Enersense - Updated estimates due to transition to IFRS reporting

11.05.2021 - 09.25 | Company update

On Thursday, Enersense announced the transition to IFRS reporting and new guidance. Enersense expects net sales to amount to EUR 215-245m, adj. EBITDA of EUR 17-20m, and adj. EBIT of EUR 8-11m in 2021. We have updated our estimates in accordance with IFRS reporting and retain our TP of EUR 11 and BUY-rating.

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Staff Leasing segment will be discontinued
Enersense announced the transition to IFRS reporting and published consolidated financial statements for 2020 and 2019. With the transition, the company updated its guidance and expects net sales to amount to EUR 215-245m, adj. EBITDA of EUR 17-20m, and adj. EBIT of EUR 8-11m in 2021. Enersense also announced that it has agreed to sell the entire share capital of its subsidiary Värväämö Oy to Citywork Oy. Staff Leasing segment will be discontinued and it will be reported as part of Smart Industry. Thus, the company will report its revenue in the future based on four segments; Power, Smart Industry, Connectivity, and International Operations.

We expect net sales of EUR 235.1m, adj. EBITDA of EUR 18.8m and adj. EBIT of EUR 10.4m in 2021E
We have adjusted our estimates with the transition to IFRS. Due to the divestment of Värväämö, we have decreased our net sales estimate for 2021E to EUR 235.1 million (prev. EUR 242m). Our growth estimates of 4.6% and 3.9% for 2022E-23E are unchanged. In 2021E, we expect adj. EBITDA of EUR 18.8m (8% margin) and adj. EBIT of EUR 10.4m (4.4% margin), respectively. We note that Enersense has not provided IFRS figures for Q1/21 and Q1/21 figures below are our estimates.

No changes to our recommendation
Based on our updated estimates, we have not made changes to our recommendation. We retain our TP of EUR 11 and BUY-rating.

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Pihlajalinna - High hopes for H2

10.05.2021 - 08.55 | Company update

Pihlajalinna - High hopes for H2 Equity Research Read full report here → Pihlajalinna’s Q1 result outpaced the expectations. Revenue increased by ~5% and adj. EBIT by ~59% y/y. We have slightly increased our 21E estimates and keep our rating “BUY” with TP of EUR 13.2 (13.0).

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Q1 earnings outpaced expectations

Pihlajalinna’s Q1 result outpaced the expectations. Revenue increased by 5.2% y/y to EUR 140m which was in line with the Factset consensus estimates but above our EUR 137m. Revenue was once again supported by COVID-19 testing (revenue increase of EUR 8.2m). Testing volumes increased by 65% q/q. On the other hand, customer volumes of private clinics remained in a lower level. Revenue of corporate customer group increased by ~12% y/y while revenue of private customers was down by ~10% y/y. Revenue of public sector customer group increased by ~8% y/y. Adj. EBITDA amounted EUR 15.2m vs. EUR 14.4m/14.7m Evli/cons. and adj. EBIT was EUR 6.7m vs. EUR 5.6m/6.1m Evli/cons. EPS improved clearly to EUR 0.20 (Q1’20: EUR 0.06) vs. EUR 0.15/0.17 Evli/cons.

High hopes for H2’21

Pihlajalinna’s margin improvement in the private sector is right on track. The company has successfully renewed its sales strategy, and this was shown in Q1 figures. In the public sector, Pihlajalinna transitioned from the outsourcing market to the service sales market, in which the impact of the planned SOTE reform is low. The virus situation worsened towards the end of the first quarter and nearly all Pihlajalinna’s fitness centers were closed during April which will continue to hamper private customer segment in Q2. The situation has since improved and the vaccination coverage is gradually increasing. We expect the situation to normalize during H2’21 and the pent-up demand starting to release in late summer.

“BUY” with TP of EUR 13.2 (13.0)

Pihlajalinna reiterated its 2021 guidance and expects revenue and adj. EBIT to increase clearly compared to 2020. We have increased our 21E adj. EBIT expectation by ~7%. We expect 2021E revenue to grow by ~12% y/y and adj. EBIT of EUR 30.7m (5.4% margin). In 22E-23E, we expect adj EBIT margins of 5.6%. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.8x and 13.5x which is ~15-20% discount compared to the peers. We keep “BUY” with TP of EUR 13.2 (13.0).

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Pihlajalinna - Better than expected

07.05.2021 - 08.45 | Earnings Flash

Pihlajalinna’s Q1 figures beat our estimates. Q1 revenue amounted EUR 140m (+5.2%) vs. EUR 137m/140m Evli/cons, while adj. EBIT landed at EUR 6.7m vs. EUR 5.6m/6.1m Evli/cons estimates. COVID-19 testing volumes continued to grow during Q1 but customer volumes of private clinics are still lagging behind.

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  • Q1 revenue was EUR 140m vs. EUR 137m/140m Evli/cons estimates. Revenue increased by 5.2% y/y. COVID-19 testing volumes increased by 65% compared to the previous quarter. Customer volumes of private clinics were ~13% lower than in the comparison period.
  • Q1 adj. EBITDA was EUR 15.2m (10.9% margin) vs. EUR 14.4m/14.7m Evli/cons estimates.
  • Q1 adj. EBIT was EUR 6.7m (4.8% margin) vs. EUR 5.6m/6.1m Evli/cons estimates.
  • Q1 EPS was EUR 0.20 vs. EUR 0.15/0.17 Evli/cons.
  • The company reiterated its guidance and expects 2021 revenue to increase clearly and adj. EBIT to improve clearly compared to 2020.

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Aspo - Long-term EBIT potential solidifies

06.05.2021 - 09.15 | Company update

ESL and Telko extended recent quarters’ strong figures. In our view Aspo now warrants more long-term valuation perspective. Our TP is EUR 10.5 (9.5), rating BUY (HOLD).

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Aspo already reached 6% long-term EBIT target in Q1

Aspo’s EUR 132m Q1 revenue was in line with estimates while the EUR 7.9m EBIT represented a record high and topped the EUR 6.8m/6.2m Evli/cons. estimates. In our view the positive surprise was for the most part due to ESL, but Telko also once again reached a record high EBIT. ESL managed a record Q1 EBIT despite the cold winter, which caused challenges especially for the smaller vessels. Cargo volumes remained flat y/y while shipping freight rates increased for smaller and larger vessels alike. Supply challenges in plastics and chemicals limited Telko’s revenue prospects but contributed to sharp price increases and so helped profitability (in addition to mix improvement). The pandemic continued to limit foodservice as well as machinery potential and thus Leipurin’s profitability remained muted.

Vague guidance for now but long-term potential remains

The vague guidance is warranted by the chaotic conditions in the raw materials and logistics markets. Historically H2 has been the more profitable part of the year but now the effect may be more muted. ESL’s demand continues to look good for the summer months while high docking levels will have a negative effect on Q2 and Q3 EBIT. We expect Telko to reach a 6% EBIT margin going forward (vs the 7.4% Q1 EBIT margin) as the environment begins to normalize. We are now more confident towards ESL’s and Telko’s long-term profitability levels and see how Aspo’s EUR 7.9m Q1 EBIT hints at some EUR 35m annual potential.

ESL’s peer multiples now undervalue the niche carrier

In our view Aspo’s SOTP valuation doesn’t fully reflect ESL’s FV as the dry bulk carrier has a special value chain position compared to a typical peer. In Telko’s case the situation is more nuanced as the peers are large global players. It’s nonetheless clear Telko’s FV has risen a lot in the past few years. Leipurin also has plenty of yet to be realized potential. We saw ESL’s EV at ca. EUR 300m before the pandemic and view that figure still relevant. Meanwhile Telko’s EV has increased from some EUR 150-175m to above EUR 200m. We see Aspo’s EV now at around EUR 500m. Our TP is now EUR 10.5 (9.5), our new rating is BUY (HOLD).

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Etteplan - Looking better and better

06.05.2021 - 09.15 | Company update

Etteplan reported better than expected Q1 figures and raised its sales and EBIT guidance. The market situation has continued to develop favourably and Etteplan is seen to move towards a new normal during the latter half of the year. We adjust our TP to EUR 16.0 (13.9) and upgrade our rating to HOLD (SELL).

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Better than expected start to the year
Etteplan reported better than expected Q1 figures. Revenue grew slightly y/y to EUR 73.0m (EUR 71.1m/71.3m Evli/cons.) but decreased 4% organically. EBIT amounted to EUR 6.6m, above our and consensus estimates (EUR 5.4m/5.5m Evli/cons.), with the EBITA-% at 10.5% (co’s fin. target 10%). Demand across Etteplan’s markets continued to develop favourably, with China unaffected by the pandemic and hours sold up 121% y/y from the weak comparison period. With the strong start to the year and confidence in continued improvement in the market situation throughout the year Etteplan also raised its guidance for 2021, expecting revenue of EUR 285-305m (280m-300m) and EBIT of EUR 25-28m (23-26m).

Moving towards a new normal
We have slightly raised our 2021 sales estimate to EUR 292.6m and our EBIT estimate by approx. 7% to EUR 26.1m, mainly due to the stronger than expected Q1. Margins in the past two quarters have been exceptionally good due to the strict cost control and with operations shifting back towards a new normal cost will be on the rise and we as such expect weaker margins y/y in H2. Organic growth is still somewhat of a concern but with market conditions improving and the company actively recruiting as well as having increased usage of subcontracting, the already begun more positive trend should pick up.

HOLD (SELL) with a target price of EUR 16.0 (13.9)
Looking at the solid start of the year we have been too bearish on Etteplan and the development of the overall market situation. This being said, we still see limits in valuation upside with Etteplan already trading rather clearly above peers. We adjust our target price to EUR 16.0 (13.9) and upgrade to HOLD (SELL).

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Etteplan - Solid figures and guidance upgrade

05.05.2021 - 13.30 | Earnings Flash

Etteplan's net sales in Q1 amounted to EUR 73.0m, in line with our estimates and consensus (EUR 71.1m/71.3m Evli/cons.). EBIT amounted to EUR 6.6m, above our estimates and above consensus estimates (EUR 5.4m/5.5m Evli/cons.). Guidance specified: Etteplan expects revenue to amount to EUR 285-305m (280-300m) and operating profit (EBIT) to amount to EUR 25-28m (23-26m).

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  • Net sales in Q1 were EUR 73.0m (EUR 71.3m in Q1/20), in line with our estimates and consensus estimates (EUR 71.1m/71.3m Evli/Cons.). Growth in Q1 amounted to 2.3% y/y.
  • EBIT in Q1 amounted to EUR 6.6m (EUR 5.7m in Q1/20), above our estimates and consensus estimates (EUR 5.4m/5.5m Evli/cons.), at a margin of 9%.
  • EPS in Q1 amounted to EUR 0.21 (EUR 0.17 in Q1/20), above our estimates and consensus estimates (EUR 0.17/0.17 Evli/cons.).
  • Engineering Solutions net sales in Q1 were EUR 41.4m vs. EUR 40.7m Evli. EBITA in Q1 amounted to EUR 4.4m vs. EUR 3.8m Evli. The MSI-% in Q1 was 63% compared to 56% in Q1/20.
  • Software and Embedded Solutions net sales in Q1 were EUR 18.8m vs. EUR 17.8m Evli. EBITA in Q1 amounted to EUR 2.1m vs. EUR 1.6m Evli. The MSI-% in Q1 was 51% compared to 53% in Q1/20.
  • Technical Documentation Solutions net sales in Q1 were EUR 12.5m vs. EUR 12.4m Evli. EBITA in Q1 amounted to EUR 1.4m vs. EUR 1.1m Evli. The MSI-% in Q1 was 82% compared to 79% in Q1/20.
  • Guidance specified: Etteplan expects revenue to amount to EUR 285-305m (280m-300m) and operating profit (EBIT) to amount to EUR 25-28m (23-26m).

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Aspo - Profitability far above estimates

05.05.2021 - 10.30 | Earnings Flash

Aspo’s Q1 profitability was a clear positive surprise relative to estimates. EBIT reached a record high and both ESL and Telko topped our expectations.

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  • Aspo Q1 revenue was EUR 132.3m vs the EUR 131.3m/132.4m Evli/consensus estimates.
  • Aspo Q1 EBIT amounted to EUR 7.9m, compared to the EUR 6.8m/6.2m Evli/consensus estimates. Markets continued to improve during Q1.
  • ESL’s revenue was EUR 43.4m vs our EUR 41.6m estimate. EBIT amounted to EUR 4.5m while we expected EUR 3.6m. The EBIT was the best such Q1 figure ever for ESL. Shipping freight rates have improved but development is hard to predict for the rest of the year.
  • Telko’s revenue stood at EUR 61.0m, compared to our EUR 64.3m estimate. Meanwhile EBIT was EUR 4.5m vs our EUR 3.9m expectation. Raw materials prices are expected to remain high at least for the next few months. Prices may begin their decline in H2’21, and a rapid decline would hurt Telko’s profitability.
  • Leipurin revenue was EUR 27.9m vs our EUR 25.3m estimate. EBIT amounted to EUR 0.3m while we estimated EUR 0.4m.
  • Other operations cost EUR 1.4m, compared to our EUR 1.1m estimate.
  • Aspo restates the previous guidance and expects FY ’21 operating profit to be higher than in FY ’20 (EUR 19.3m). The guidance didn’t seem that informative in February and now even less so. In our view, however, Aspo now appears poised to reach EUR 30m in EBIT this year.

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Enersense - Good start to the year

05.05.2021 - 09.30 | Company update

Enersense reported a better-than-expected Q1 result and 9% increase in the order backlog compared to the end of Q4/20. The company also announced that it has concluded negotiations on a new financing package. We have made upward revisions to our estimates and raise our TP to EUR 11 (9.7), BUY-rating intact.

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Orders increased especially in Power and the Baltics
Enersense’s Q1 net sales and profitability beat our expectations. Net sales amounted to EUR 52.4m (Evli EUR 44.5m) and adj. EBITDA was EUR 1.7m (Evli EUR 0.5m). Order backlog increased by 9% from EUR 292m at the end of 2020 to EUR 319m at the end of Q1. Orders increased especially in the Power segment and the Baltics. Enersense also announced that it has concluded negotiations on a new financing package, which will be used to develop operations and manage working capital.

Our revised estimates are at the upper end of the guidance
Q1 is typically a challenging quarter for Enersense due to the weather conditions, and revenue and profitability are expected to increase towards the end of the year. The order backlog continued to grow rapidly in Q1 and according to the management, the market outlook is very positive as demand is expected to remain strong especially in Power and Smart Industry. Supported by increased orders and good outlook, we have raised our 2021E net sales estimate to EUR 242m (prev. EUR 230m). We have also made upward revisions to 2022-23E sales estimates, and forecast 4.6% and 3.9% growth, respectively. We expect adj. EBITDA to increase from EUR 8.9m to EUR 14.4m in 2021E. Both our net sales and adj. EBITDA estimates are at the upper end of guidance for 2021 (net sales: EUR 215-245m, adj. EBITDA: EUR 12-15m).

BUY with a target price of EUR 11 (9.7)
On our estimates for 2022E, Enersense is trading at EV/EBITDA of 5.6x and adj. P/E of 10.8x, which translate into discount of 23-30% to our peer group median. Better-than-expected results in Q1, renegotiated short-term financing and continued growth in the order backlog increase our confidence in the investment case, and we raise our TP to EUR 11 (9.7), BUY-rating intact. Our TP values Enersense at EV/EBITDA of 6.3x and adj. P/E of 12.3x for 2022E, which are still at 13-21% discount to peer group, reflecting Enersense’s currently lower profitability profile. If Enersense manages to increase net sales and improve margins in line with the midterm financial targets, we see further upside potential in valuation.

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Enersense - Strong Q1 beat our expectations

04.05.2021 - 12.30 | Earnings Flash

Enersense’s Q1 net sales and profitability beat our expectations. Net sales amounted to EUR 52.4m (Evli EUR 44.5m) and adj. EBITDA was EUR 1.7m (Evli EUR 0.5m). Enersense also announced that it has concluded negotiations on a new financing package.

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  • Net sales in Q1 amounted to EUR 52.4m, beating our estimates (Evli EUR 44.5m).
  • Adjusted EBITDA also exceeded our expectations and was EUR 1.7m (Evli EUR 0.5m).
  • Order backlog at the end of the first quarter amounted to EUR 319m, growing by 9% from EUR 292m at the end of 2020.
  • Guidance reiterated: Enersense expects net sales to be EUR 215-245 million in 2021. EBITDA excluding non-recurring costs related to integration is estimated to be EUR 12-15 million in 2021.
  • Enersense also announced that it has concluded negotiations on a new financing package. The company will replace the existing EUR 12.7 million short-term financing facilities with two senior loans, totaling EUR 12m. Each senior loan amounts to EUR 6m and will mature in 2026. Enersense also replaces a part of its previous bank guarantee facilities with the new bank guarantee facilities. Enersense has bank guarantee facilities totaling EUR 36.9m and invoice financing facilities totaling EUR 41.5m.

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Fellow Finance - Growth pace picking up

04.05.2021 - 09.35 | Company update

Fellow Finance’s intermediated loan volumes have picked up nicely in past months, supported by improved availability of financing and less aggressive competition. We now expect growth of 18.1% in 2021. We raise our target price to EUR 3.8 (2.8) and upgrade to BUY (HOLD).

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Favourable loan volume development
Fellow Finance has been seeing intermediated loan volumes developing favourably since the second half of 2020, with the growth pace having picked up clearly in recent months. The average monthly volumes in March-April were up close to 100% compared to the volume seen during the early stages of the pandemic. The increase in volumes has to our understanding been largely due to an increased availability of financing and an increase in institutional investor volumes. Within consumer loans the competition also appears to have eased and the competitiveness of Fellow Finance’s offering improved as the more aggressive competitors have taken less aggressive approaches.

Growth seen to pick up to double digits
We have raised our 2021 intermediated loan volume estimate to EUR 186m (prev. 160m), for a 40% y/y growth, and our sales growth estimate to 18.1% (prev. 7.5%). Our profitability estimates remain mostly intact, with the company having estimated for growth projects to keep net earnings slightly negative, which is looking to materialize for instance through the expansion to credit card solutions in cooperation with Enfuce.

BUY (HOLD) with a target price of EUR 3.8 (2.8)
Current valuation puts the intermediation business 2021e EV/Sales at ~1.3x (assuming Lainaamo at BV). Near-term earnings multiples are challenging but with growth picking up, shifting the 2023 targets (sales ~EUR 23m and 15% EBIT-margin) more within grasp, we still see a higher valuation being justified. We raise our target price to EUR 3.8 (prev. 2.8) and upgrade our rating to BUY (HOLD).

Open report

Exel Composites - Multiples are rerating

03.05.2021 - 09.40 | Company update

Exel’s record Q1 orders surprised. In our view the next quarters’ orders determine how much forward-look the multiples warrant. Our TP is EUR 11, now rate HOLD (BUY).

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The EUR 42m order intake sets a new benchmark level

Exel’s Q1 revenue grew 11% y/y to EUR 31m and was a bit above our EUR 30m estimate. Customer industries performed close to our expectations while Asia-Pacific contributed most of the growth. Adj. EBIT was EUR 2.5m vs our EUR 2.4m estimate. Strong demand was to be expected, yet the EUR 42m order intake (up 22% y/y from a high comparison figure) is a record and can be compared to the EUR 30m level Exel has averaged in the recent past. The orders stemmed from many industries and no large orders drove the intake. Operations ran almost as usual despite the pandemic, raw materials, and logistics issues. Exel managed to balance its raw material pool across the eight plants.

Organic CAGR outlook now closer to 10% than 5%

Exel already saw some raw materials inflation affecting Q1 margins. We expect a more pronounced negative effect in Q2 (we now estimate 7.2% Q2 EBIT vs our prev. 10.4% estimate), but also see EBIT margins bounce back to ca. 9-10% levels in H2. Exel has been able to pass raw materials inflation forward before and this is to be expected again considering the value chain position. Profitability slope remains attractive especially if the Q1 order levels continue to persist over the summer. We don’t consider the EUR 42m figure just a fluke and even if Exel may not quite reach such high orders in the coming quarters we nevertheless see the company is now positioned for high single-digit organic CAGR for years to come. In our view Exel might well reach double-digit top line growth this year and we see such growth rates driving long-term EBIT margins meaningfully above 10%.

Earnings multiples have already rerated for a valid reason

Exel is valued ca. 9.5x EV/EBITDA and 15x EV/EBIT on our FY ’21 estimates. The multiples are a bit high compared to the historical respective averages of 8x and 13x but in our view warranted by the current growth prospects. Top line growth continues to drive profitability and the multiples are some 8.5x and 12x on our FY ’22 estimates. In our opinion the next few quarters’ orders will determine how much forward into the future the multiples may lean. We retain our EUR 11 TP, rating now HOLD (BUY).

 

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Consti - On a slow but steady track forward

03.05.2021 - 09.00 | Company update

Consti reported Q1 results slightly below our estimates, with EBIT below our estimates driven by legal costs relating to the St. George arbitration proceedings. We continue to expect minor growth and margin improvement in 2021. We retain our HOLD-rating and target price of EUR 13.0.

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Legal costs clearly affected profitability
Consti reported Q1 results that were slightly below our estimates. Revenue grew slightly to EUR 59.3m (EUR 60.2m/60.2m Evli/cons.) while EBIT fell y/y to EUR 0.1m (EUR 0.5m/0.6m Evli/cons.). EBIT was affected by legal costs relating to the St. George arbitration proceedings of EUR 0.4m (0.1m), without which relative profitability would have been close to previous year levels. The coronavirus pandemic also had an impact, with more worksite interruptions despite a lower number of cases. Consti had a positive start to the year in terms of order intake, with new orders of EUR 69.8m in the quarter, although the order backlog was still down slightly y/y.

Expect minor growth and margin improvement
Apart from adjustments due to the lower than expected Q1 figures, we make no changes to our estimates. The demand situation in general does not appear to have shown clear improvements yet and was at a reasonable level in Q1. Consti still sees that a higher share of the order backlog will be recognized during the on-going financial year compared to the same time last year and as such we continue to expect minor growth of 1.9%. We expect slight improvement in relative profitability and a 2021 EBIT of EUR 8.7m.

HOLD with a target price of EUR 13.0
The Q1 report did not in any material way affect our view of Consti in the near-term. Valuation in our view continues to appear fair given current limited growth prospects and valuation upside drivers. With our estimates largely intact we retain our HOLD-rating and target price of EUR 13.0.

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Pihlajalinna - Expecting fairly good Q1 figures

30.04.2021 - 09.50 | Preview

Pihlajalinna reports its Q1 report on next week’s Friday, 7th of May. Despite the worsened COVID-19 situation during Q1, we expect fairly good quarterly figures. We keep our rating “BUY” with TP of EUR 13.

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We expect revenue to increase by 3%

We expect Pihlajalinna to report relatively good Q1 result, with sales growth of 3% y/y (EUR 137m). We expect the COVID-19 testing is once again boosting sales. However, as the virus situation worsened towards the end of Q1 and new restrictions came into force, we expect private demand is still in lower levels than normally. As we saw at the end of last year, the company’s efficiency improvement actions have paid off and we expect Q1’21E profitability to improve from Q1’20. We foresee Q1 adj. EBIT of EUR 5.6m, resulting in adj. EBIT margin of 4.1% (Q1’20: 3.2%).

Market drivers offer new opportunities

Pihlajalinna held its CMD in late March where it highlighted its strategic priorities for the upcoming years as the market is changing in many ways. The company aims to continue to strengthen its already strong partnership with the public side and to engage in close cooperation with the future wellbeing services counties. In addition, Pihlajalinna will make renewals to its private services with new service concepts and digital innovation. Further, the company will continue to strengthen digitalization. The market drivers have remained unchanged (aging population, digital solutions, individuals’ interest in their own health etc.) offering many new opportunities to Pihlajalinna.

“BUY” with TP of EUR 13

We have included the acquisition of Työterveys Virta to our estimates from Q2’21E onwards. We expect 21E sales growth of ~11% (EUR 564m) and adj. EBIT of 28.8m (5.1% margin). We expect Pihlajalinna’s profitability to improve further in 22E-23E and adj. EBIT margin of 5.6% in both years. With our estimates, the company trades with 21E-22E EV/EBIT multiple of 17.8x and 13.4x which is 8-20% discount compared to the peers. We keep our rating “BUY” with TP of EUR 13.

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CapMan update - Upgrade to BUY

30.04.2021 - 09.50 | Company update

CapMan reported better than expected Q1 results. Q1 EBIT was clearly above our estimates driven by investment returns. We have raised our 2021 EBIT estimate to EUR 46.8m (prev. 38.2m). Improvement is being seen across the board but 2021 earnings look to be driven less by recurring profits and more by investment returns and carry. We raise our TP to EUR 3.1 (2.7) and upgrade to BUY (HOLD).

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Estimates beat on profitability figures
CapMan posted better than expected Q1 results. Revenue was slightly below expectations at EUR 11.3m (EUR 12.5m/11.9m Evli/cons.) but the EBIT of EUR 10.1m clearly beat expectations (EUR 7.8m/7.6m Evli/cons.). The EBIT beat was driven by higher that expected fair value changes (EUR 8.2m/3.5m Act./Evli) while the Management Company business EBIT was lower than expected (EUR2.5m/3.9m Act./Evli). Capital under management stood at EUR 3.9bn, up 20% y/y. The Buyout XI fund held a final close at EUR 190m, with a new Real Estate product of for CapMan significant size in the pipeline.

Expect clear earnings improvement in 2021
CapMan’s development continues to look bright after the challenges faced in the previous year. In terms of absolute profits, the Investment business has in the near past been the clear driver, but good progress can be seen more or less across the board. The performance of the own funds has during the start of the year surpassed the collective return target. We have raised our 2021 operating profit estimate to EUR 46.8m (prev. 38.2m), noting that some two-thirds consists of the more unpredictable investment returns and carried interest.

BUY (HOLD) with a target price of EUR 3.1 (2.7)
Following adjustments to our estimates we raise our target price to EUR 3.1. Compared with the Finnish peers the 2021e P/E is certainly not challenging, but on our estimates a high share of the profit is from more uncertain sources and thus remain somewhat on the cautious side.

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Exel Composites - Pretty much as expected

30.04.2021 - 09.30 | Earnings Flash

Exel’s Q1 report was close to our expectations in terms of top line and profitability. Order intake was very high. Exel also highlights the risk that global raw materials challenges may hurt short-term profitability.

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  • Exel Composites’ Q1 revenue amounted to EUR 31.0m vs our EUR 30.0m estimate. Top line thus grew by 11.3% y/y. Asia-Pacific drove growth (increased Wind power and Defense deliveries).
  • Wind power top line was EUR 7.4m, compared to our EUR 7.5m estimate. Meanwhile Buildings and infrastructure was EUR 7.0m vs our EUR 6.9m estimate.
  • Exel Q1 adj. EBIT was EUR 2.5m vs our EUR 2.4m estimate. Adjusted operating margin was 7.9%.
  • Q1 order intake amounted to EUR 42.0m and grew by 21.7% y/y. This is a very high figure and suggests, should similar momentum continue, upward revisions to full-year revenue and profitability estimates.
  • Exel retains the previously stated guidance and expects revenue as well as adjusted operating profit to increase in 2021 compared to 2020. In our view this is understandable, despite the high order intake, as it is still very early in the year.
  • According to Exel global raw material and logistics challenges have not so far had a significant impact on profitability. There is nevertheless an elevated risk that raw materials price inflation, as well as shortages, will have a short-term negative impact on profit margin.

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Vaisala - A perfect storm in many ways

30.04.2021 - 09.00 | Company update

Vaisala’s Q1 result beat our and consensus expectations thanks to a better than expected and solid performance in both BU’s. The improved market environment and strong order book attributed to net sales growth and profitability improved thanks to higher sales and lower OPEX level due to Covid-19. We have increased our estimates for 2021-23E to reflect the expected market improvement. Based on our renewed estimates and improved outlook, we raise our target price to €33 (prev. €32), our rating is now HOLD (prev. SELL).

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Strong start to the year

Vaisala’s Q1 result beat our and consensus expectations thanks to solid performance in both BU’s. Q1 net sales increased by 5% to 92 MEUR (86.5 Evli / 85.7 cons). Q1 EBIT came in at 8.1 MEUR (5.9 Evli / 5.0 cons), resulting in 8,8% EBIT-margin (Q1’20: 5.2 MEUR, 6% EBIT-margin). Orders received grew by 18% to 106.1 MEUR (Q1’20: 88.7 MEUR). As a result of strong order intake, order book was record high at 155.4 MEUR (Q1’20: 141.6 MEUR). IM continued its strong performance; net sales grew 12% to 39.7 MEUR (39.5 MEUR Evli). IM EBIT was 9.4 MEUR (8.9 MEUR Evli), resulting in 23,8% EBIT-margin (Q1’20: 21,4%). IM net sales growth was strong in life science and power industry market segments and good in industrial instruments, but net sales declined in liquid measurements. IM’s order intake growth was 22% coming from all market segments and boosted by the economic recovery in China. W&E net sales increased by 1% to 52.2 MEUR (47 MEUR Evli). W&E EBIT was -0.9 MEUR (-2.6 MEUR Evli). W&E net sales grew in renewable energy, ground transportation, and meteorology market segments, but decreased in aviation, where market is still weak due to Covid-19. W&E’s orders received grew nicely by 15%. W&E orders received increased in renewable energy and ground transportation market segments, whereas meteorology market segment was flat, and aviation decreased compared to previous year.

Outlook updated, more positive outlook upgrades likely to follow

As a result of strong start to the year, Vaisala raised the lower limits of its business outlook for 2021; net sales are expected to be between 380–400 MEUR and EBIT between of 35–45 MEUR (earlier net sales 370-400 and EBIT 30-45). The outlook update did not come as a surprise given the strong orders received and order book end of last year. We see further positive guidance improvements likely given the strong order intake and order book, improving market environment, and deliveries proceeding well.

Target price €33 (prev. €32) with HOLD rating

We have increased our net sales and EBIT estimates for 2021-23E to reflect the expected market improvement. In 2021E, we expect +4,6 net sales growth driven by +7% growth in IM, while we expect W&E growth to be around 3%. We expect EBIT of 44.6 MEUR (11,2 % margin), driven by good performance in IM. Both our net sales and EBIT estimates are at guidance upper range. For 2022-23E we expect similar net sales growth and Vaisala to achieve above 12% EBIT margins as IM continues strong and W&E’s profitability improves. On our renewed estimates, Vaisala is still trading at clear premiums compared to our peer group and we continue to see valuation stretched given Vaisala’s weaker financial performance compared to peer group. Based on our renewed estimates and improved outlook, we raise our target price to €33 (prev. €32), our rating is now HOLD (prev. SELL). Our TP values Vaisala at 22-23E EV/EBIT multiples of 22x and 21x which is above the peer group, reflecting Vaisala’s technology leadership position, strong sustainability profile, healthy dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

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Raute - Improving earnings are in the cards

30.04.2021 - 08.50 | Company update

Raute’s environment is improving a bit faster than we expected, but FY ’21 profitability will still not be great. Valuation reflects earnings gains for many years to come. In our view further upside appears elusive for now.

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New capacity projects are yet to materialize

Raute’s Q1 order intake was EUR 30m, a 20% y/y increase and way above our EUR 22m estimate. There were no big orders. Project deliveries’ EUR 11m figure was close to what we expected while the EUR 19m in services orders beat our EUR 12m estimate due to high North American modernization orders. Pent-up US demand drove the figure and thus we see cautious extrapolation is in order, but mills’ utilization rates are improving worldwide. Raute sees European demand to be at a normal level. Russian order intake was muted in Q1 while demand potential remains in place. Q1 revenue amounted to EUR 25m vs our EUR 34m estimate. Raute foresaw Q1’s relative slowness. Pandemic restrictions also remain a nuisance. The low top line also meant EBIT was EUR -2.5m, compared to our EUR 1.6m estimate.

Orders are picking up, albeit from low levels

Raute also highlighted potential component shortages, however the company is addressing the challenge and in our view the issue is not that meaningful given Raute’s long-term story and overall competitive positioning. We make some revisions to our estimates, however the overall valuation picture remains unaltered. It’s clear Raute’s business is now picking up from the recent lows and the favorable order intake development also begins to support FY ’22, for which we now expect ca. 5% growth. It nevertheless seems the approximately EUR 160m revenue figure (of which some EUR 100m projects and EUR 60m services) that helped Raute to achieve above EUR 10m EBIT in the past remains many years in the future.

In our view valuation still doesn’t leave meaningful upside

The pick-up in orders turns us more confident towards next year. We expect Raute to reach only some EUR 2m in EBIT this year, compared to the potential that is many times the number. We estimate the figure to rise close to EUR 8m next year, however Raute is already trading about 9x EV/EBITDA and 13x EV/EBIT on those estimates. Full long-term earnings potential in our view remains too many years away. Our TP is EUR 21, retain HOLD.

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Consti - Slightly softer than expected start

30.04.2021 - 08.45 | Earnings Flash

Consti's net sales in Q1 amounted to EUR 59.3m, in line with our and consensus estimates (EUR 60.2m/60.2m Evli/cons.). EBIT amounted to EUR 0.1m, below our and consensus estimates (EUR 0.5m/0.6m Evli/cons.). 2021 operating profit guidance of EUR 7-11m intact.

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  • Net sales in Q1 were EUR 59.3m (EUR 59.0m in Q1/20), in line with our and consensus estimates (EUR 60.2m/60.2m Evli/Cons.). Sales grew 0.4% y/y.
  • Operating profit in Q1 amounted to EUR 0.1m (EUR 0.5m in Q1/20), below our and consensus estimates (EUR 0.5m/0.6m Evli/cons.), at a margin of 0.2%.
  • EPS in Q1 amounted to EUR -0.02 (EUR 0.02 in Q1/20), below our and consensus estimates (EUR 0.02/0.03 Evli/cons.).
  • The order backlog in Q1 was EUR 196.5m (EUR 202.2m in Q1/20), down by -2.8%. Order intake EUR 69.8m in Q1 (Q1/20: EUR 62.1m).
  • Free cash flow amounted to EUR -2.9m (Q1/20: EUR 2.0m).
  • Guidance for 2021 (intact): Operating profit is expected to be between EUR 7-11. The guidance range is large due to uncertainty factors brought by the COVID-19 pandemic.

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Solteq - Steaming ahead

30.04.2021 - 08.30 | Company update

Solteq posted solid Q1 figures, clearly above our estimates. We have made clear upward revisions to our estimates with on better than expected growth and profitability. We adjust our target price to EUR 7.2 (4.5), BUY-rating intact.

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Clear earnings beat across the board
Solteq reported solid Q1 figures, clearly beating our estimates. Net sales grew 10.9% to EUR 17.4m (Evli 16.5m) and EBIT improved to EUR 2.2m (Evli EUR 0.9m). A clear highlight for the first quarter was the mainly organic 43.1% growth of Solteq Software, aided by deliveries of the orders received within the Utilities business. The profitability figures of Solteq Digital were surprisingly good, with EBIT doubling compared to the comparison period, to our understanding mainly driven by high utilization rates and streamlining of operations. Solteq upgraded its profitability guidance ahead of Q1, now also expecting the operating profit to grow clearly (prev. grow). This was not too surprising, as we had already in conjunction with Q4 questioned the guidance softness.

Estimates raised quite a bit
We have clearly raised our estimates after the solid first quarter figures. We now expect revenue growth of 13.0% (prev. 8.9%), driven mainly by Solteq Software and customer deliveries in the Utilities business. We expect pick-up in growth of Solteq Digital in the latter half of the year, as easing of the pandemic should increase demand in some of the harder hit sectors. We have also raised our EBIT estimate to EUR 9.2m (prev. 6.7m). We see limited margin upside potential going forward in the less scalable Solteq Digital segment while Solteq Software still has a lot more potential once the recurring revenue from the deliveries now being made start ramping up.

BUY with a target price of EUR 7.2 (4.5)
Solteq has seen a rather hefty share price rally in the past year, being up over 400%. On our revised estimates valuation for the “new” Solteq still does not appear overly challenging. We raise our target price to EUR 7.2 (4.5), valuing Solteq at 24x 2021 P/E and retain our BUY-rating.

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SRV - Margins improving, volumes lacking

30.04.2021 - 08.00 | Company update

SRV’s Q1 revenue was slightly below expectations but profitability beat our estimates. The continued positive margin development is essential while we remain rather dubious about construction volumes during 2021. We raise our target price to EUR 0.80 (0.64), BUY-rating intact.

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Revenue slightly below estimates but good profitability
SRV’s Q1 results were somewhat in line with expectations, as although revenue came in a bit short at EUR 187.1m (EUR 205.7m/196.0m Evli/Cons.), EBIT amounted to a rather solid EUR 5.2m (EUR 4.4m/3.2m Evli/cons.). The order backlog stood at EUR 1,061m (Q1/20: EUR 1,362m). Order intake was quite weak at EUR 85.4m but on a positive note these included new developer contracted housing units, with start-ups picking up again after the break during Q1-Q3/2020. The most positive news in our view was the continued improvement in the Construction segments EBIT-margins (Q1/21: 3.7%, Q1/20: 3.0%) and the already earlier announced approx. EUR 730m Laakso Joint Hospital alliance project, to which SRV was chosen to develop and build (not yet final).

Favourable margin development, volumes a slight concern
With the lower than expected revenue and rather meager order development we have lowered our 2021 sales estimates near the lower bound of the EUR 900-1,050m sales guidance. Although SRV anticipates improved order intake in Q2 along with the increase in completion of developer contracted housing units later on in 2021 a more conservative approach still appears warranted. On the current profitability track and even if revenue were to decline clearly the upper bound of the profitability guidance is well within reach assuming no major surprises in the Investments-segment.

BUY with a target price of EUR 0.80 (0.64)
Although construction volumes are a slight concern going forward, the main thing for SRV is that margins have continued to develop positively and even better than we had expected. We raise our target price to EUR 0.80 (0.64), BUY-rating intact.

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Raute - Order intake above our estimates

29.04.2021 - 09.30 | Earnings Flash

Raute’s Q1 remained low in terms of revenue and profitability but order intake grew by some 20% y/y due to mid-size production line and modernization orders.

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  • Raute Q1 revenue was EUR 24.8m vs our EUR 34.0m estimate.
  • Q1 EBIT amounted to EUR -2.5m, compared to our EUR 1.6m expectation.
  • Order intake amounted to EUR 30m vs our EUR 22m estimate. Project deliveries’ orders were EUR 11m (EUR 14m a year ago), compared to our EUR 10m estimate. Meanwhile technology services orders were EUR 19m (EUR 11m a year ago) vs our EUR 12m estimate. Technology services’ order intake grew by 83% y/y thanks to modernization orders.
  • Order book stood at EUR 98m at the end of Q1, compared to EUR 92m a year ago.
  • Raute’s full-year outlook remains unchanged as net sales is to increase and operating profit to improve.

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Vaisala - Strong start to the year and outlook update

29.04.2021 - 09.30 | Earnings Flash

Vaisala’s Q1 result beat our and consensus expectations. Both Bu’s performed better than expected thanks to good market environment. As a result of strong start to the year, Vaisala raises lower limit of its business outlook for 2021: net sales will be in the range of 380–400 MEUR and EBIT in the range of 35–45 MEUR (earlier was net sales 370-400 and EBIT 30-45). Outlook update did not come as a surprise and our 2021e estimates were already within new guidance.

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  • Group level results: Q1 net sales increased by 5% to 92 MEUR (86.5 Evli / 85.7 cons). Q1 EBIT came in at 8.1 MEUR (5.9 Evli / 5.0 cons), resulting in 8,8% EBIT-margin (Q1’20: 5.2 MEUR, 6% EBIT-margin)
  • Gross margin was 54,8% vs. 56,4% last year.
  • Orders received were 106.1 MEUR vs. 88.7 MEUR last year. Orders received grew by 18%; 15% in W&E and 22% in IM. Order book was 155.4 MEUR vs. 141.6 MEUR in Q1’20.
  • Weather & Environment (W&E) net sales increased by 1% to 52.2 MEUR vs. 47 MEUR our expectation. W&E EBIT was -0.9 MEUR (-2.6 MEUR Evli). W&E’s orders received grew by 15%. Orders received increased in renewable energy and ground transportation market segments, whereas orders received in meteorology market segment were at previous year’s level. Aviation market improvement has stalled, and orders received in this segment decreased compared to previous year.
  • Industrial Measurements (IM) net sales grew 12% to 39.7 MEUR vs. 39.5 MEUR our expectation. IM EBIT was 9.4 MEUR (8.9 MEUR Evli), resulting in 23,8% EBIT-margin (Q1’20: 21,4%). IM order intake growth was 22%. Increase in orders received was strong in all market segments. Relative growth was strongest in power industry applications, although its share of orders received was still below 10%.
  • As a result of strong start to the year, Vaisala raises lower limit of its business outlook for 2021: net sales will be in the range of 380–400 MEUR and EBIT in the range of 35–45 MEUR (earlier was net sales 370-400 and EBIT 30-45).

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Eltel - Expecting improvement in Q2-Q4

29.04.2021 - 09.30 | Company update

Eltel’s Q1 results fell short of our expectations. Q1 is typically a weaker quarter due to seasonality and we expect net sales and profitability to increase towards the end of the year. We retain our BUY-rating but adjust TP to SEK 29.5 (30).

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Profitability improved y/y despite the decline in net sales
Eltel reported a Q1 result that was below our expectations. Net sales decreased by 23.1% to EUR 182m (Evli EUR 209.9m), while operative EBITA improved y/y from EUR -2.1m to EUR -0.7m (Evli EUR 1.0m). Net sales continued to decline due to the divestments made last year (EUR -15m), lower activity and postponements among customers as a result of COVID-19 and harsh winter conditions. Q1 was good in Finland (+3.2%), while last year’s loss of a major agreement affected the volumes in Sweden and the ramp-up phase of the Telenor frame agreement was reflected in lower sales in Norway. Good resource and production planning, increased efficiency and better project management supported profitability, while the effect of divestments was EUR -0.9m.

Sales and EBITA are expected to grow towards the end of the year
Eltel’s business is subject to seasonality and Q1 is typically a weaker quarter. Net sales and profitability are expected to increase towards the end of the year and according to management, the order backlog looks good, especially in Finland and Norway. Based on the report, we have cut our net sales estimate for 2021E from EUR 916.8m to EUR 890.6m. We see the targeted growth rate of 2-4% in the Nordics achievable from 2022 onwards. In 2022-23E, we forecast net sales to grow by 1.7% and 2.0%. Currently, the focus is on profitability and Eltel has managed to increase its operative EBITA (y/y) for five consecutive quarters. We expect Eltel to continue its efforts to improve operational efficiency and in line with the guidance, we forecast operative EBITA margin to grow from 1.2% in 2020 to 2.4% (prev. 2.6%) in 2021E.

BUY with a target price of SEK 29.5 (30)
Despite lower-than-expected Q1 results, there have been no changes in the big picture. Eltel has continued its transformation journey with a focus on improving operational efficiency, profitability, financial position, and restructuring of non-performing businesses, which will be negatively reflected in this year’s sales. On our updated estimates for 2022-23E, Eltel is trading at EV/EBITDA of 7.9x and 7.0x, which translate into discount of 4-10% to our peer group median. On our revised estimates, we adjust our target price to SEK 29.5 (30) and retain our BUY-rating, which still values Eltel slightly below peers, reflecting Eltel’s lower profitability profile and as we look for more signs of further transformation progress.

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SRV - Profitability shaping up

29.04.2021 - 09.10 | Earnings Flash

SRV's net sales in Q1 amounted to EUR 187.1m, below our estimates and slightly below consensus (EUR 205.7m/196.0m Evli/cons.). EBIT amounted to EUR 5.2m, above our and consensus estimates (EUR 4.4m/3.2m Evli/cons.).

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  • Revenue in Q1 was EUR 187.1m (EUR 208.1m in Q1/20), below our estimates and slightly below consensus estimates (EUR 205.7m/196.0m Evli/Cons.). Growth in Q1 amounted to -10.1% y/y.
  • Operating profit in Q1 amounted to EUR 5.2m (EUR 4.5m in Q1/20), above our estimates and consensus estimates (EUR 4.4m/3.2m Evli/cons.), at a margin of 2.8%. The operative operating profit amounted to EUR 4.8m (Evli EUR 4.4m).
  • EPS in Q1 amounted to EUR 0.00 (EUR -0.04 in Q1/20), below our and consensus estimates (EUR -0.01/-0.01 Evli/cons.).
  • The order backlog in Q1 was EUR 1,061m (EUR 1,361m in Q1/20), down by -22 %.
  • Construction revenue in Q1 was EUR 187.1m vs. EUR 204.6m Evli. Operating profit in Q1 amounted to EUR 5.2m vs. EUR 6.6m Evli.
  • Investments revenue in Q1 was EUR 1.0m vs. EUR 1.1m Evli. Operating profit in Q1 amounted to EUR -0.4m vs. EUR -1.3m Evli.
  • Other operations and elim. revenue in Q1 was EUR -1.7m vs. EUR 0.0m Evli. Operating profit in Q1 amounted to EUR -1.3m vs. EUR -0.9m Evli.
  • Guidance intact: Consolidated revenue for 2021 is expected to amount to EUR 900-1,050m and operating profit is expected to improve on 2020 and amount to EUR 16-26m.

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Suominen - Another record amid turbulence

29.04.2021 - 08.50 | Company update

Suominen reached very high margins once again. We expect margins to settle in H2’21 and continue to view earnings multiples attractive on such stabilized levels.

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Suominen once again topped previous profitability records

Suominen’s EUR 115.3m Q1 revenue was close to expectations while the EUR 18.5m EBITDA topped the EUR 15.3m/15.2m Evli/cons. estimates. Gross margin hit a record due to high volumes and improved production as well as raw materials efficiency. Favorable sales mix helped pricing levels to improve a bit y/y. There were some raw materials and logistics challenges, especially in the US, which had a negative impact on production. The Texan winter disrupted oil-based raw materials’ supply, but in our view the effect on overall results wasn’t that big. Suominen carries some raw materials inventories, which in part explains why the raw materials price spike didn’t yet have any notable negative effect on profitability.

Suominen has increased its mechanism pricing exposure

The pandemic led to a wipes demand bump on both sides of the Atlantic; although the US is ahead of Europe in vaccination rates the higher demand shows very little signs of abatement. The raw materials inflation picture also looks similar on both continents. Suominen increased its share of mechanism pricing clauses already last year to protect itself against raw materials price inflation. These measures, coupled with strong wiping demand and improved sales mix, enhance our confidence regarding H2’21 gross margin, which we now expect to settle around 13-14%. Suominen expects to complete the three announced investments in H2’21. Two of these will add capabilities to existing lines while one restarts and modernizes an idle line and so adds capacity.

We expect gross margin to settle around 13-14% in H2’21

Suominen is set to reach EUR 60m EBITDA this year even when raw materials inflation begins to erode margins. This year is also proving extraordinary in its own way as the raw material and logistics markets have been outright chaotic. In our view H2’21 results should show stable gross margin levels. We estimate ca. 14% GM for H2’21 that translates to some 12% EBITDA and 7.5% EBIT margins. We expect Suominen to reach such figures in FY ’22. Suominen is valued below 6x EV/EBITDA on our FY ’21-22 estimates. We retain our EUR 6.5 TP as well as our BUY rating.

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CapMan - Investment returns drive EBIT beat

29.04.2021 - 08.50 | Earnings Flash

CapMan's net sales in Q1 amounted to EUR 11.3m, below our and consensus estimates (EUR 12.5m/11.9m Evli/cons.). EBIT amounted to EUR 10.1m, clearly above our estimates and above consensus estimates (EUR 7.8m/7.6m Evli/cons.).

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  • Revenue in Q1 was EUR 11.3m (EUR 12.0m in Q1/20), below our estimates and consensus estimates (EUR 12.5m/11.9m Evli/Cons.). Growth in Q1 amounted to -5.3% y/y.
  • Operating profit in Q1 amounted to EUR 10.1m (EUR -6.0m in Q1/20), clearly above our and consensus estimates (EUR 7.8m/7.6m Evli/cons.), at a margin of 89.4%. Compared with our estimates the largest difference was in fair value changes (Act./Evli EUR 8.2m/3.5m).
  • EPS in Q1 amounted to EUR 0.05 (EUR -0.05 in Q1/20), above our and consensus estimates (EUR 0.04/0.04 Evli/cons.).
  • Management Company business revenue in Q1 was EUR 9.0m vs. EUR 9.4m Evli. Operating profit in Q1 amounted to EUR 2.5m vs. EUR 3.9m Evli.
  • Investment business revenue in Q1 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q1 amounted to EUR 7.9m vs. EUR 3.4m Evli.
  • Services business revenue in Q1 was EUR 2.3m vs. EUR 3.1m Evli. Operating profit in Q1 amounted to EUR 1.2m vs. EUR 1.3m Evli.
  • Capital under management by the end of Q1 was EUR 3.9bn (Q1/20: EUR 3.2bn). Real estate funds: EUR 2.5bn, private equity & credit funds: EUR 1.0bn, infra funds: EUR 0.4bn, and other funds: EUR 0.03bn.

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Solteq - Stellar start to the year

29.04.2021 - 08.30 | Earnings Flash

Solteq’s Q1 was clearly above expectations, with revenue at EUR 17.4m (Evli EUR 16.5m) and comp. EBIT at EUR 2.2m (Evli EUR 0.9m). Solteq raised its guidance ahead of Q1, expecting that Group revenue in 2021 will grow clearly and that the operating profit will improve clearly.

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  • Net sales in Q1 were EUR 17.4m (EUR 15.7m in Q1/20), slightly above our estimates (Evli EUR 16.5m). Growth in Q1 amounted to 10.9% y/y. 21.6% of sales came from outside of Finland.
  • The operating profit and adj. operating profit in Q1 amounted to EUR 2.2m and 2.3m (EUR 0.7m/0.9m in Q1/20), clearly above our estimates (Evli EUR 0.9/0.9m).
  • Solteq Digital: revenue in Q1 amounted to EUR 11.2m (Q1/20: EUR 11.3m) vs. EUR Evli 11.1m. The comp. EBIT was EUR 1.3m (Q1/20: EUR 0.7m) vs. Evli EUR 0.5m. The segment is expected to develop steadily during the current quarter.
  • Solteq Software: Revenue in Q1 amounted to EUR 6.2m (Q1/20: EUR 4.3m) vs. Evli EUR 5.4m. The comp. EBIT was EUR 0.9m (Q1/20: EUR 0.2m) vs. Evli EUR 0.5m. Growth was 43.1% and mainly organic. Recurring revenue 29.1% of the segment’s revenue. The Partiture Oy acquisition has a slight positive impact on growth. The business outlook for the segment is expected to remain positive
  • Guidance for 2021 (updated 27.4.): group revenue is expected to grow clearly and operating profit to improve clearly (added).

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Etteplan - Demand and growth in focus

29.04.2021 - 08.15 | Preview

Etteplan reports Q1 results on May 5th. We expect a relatively decent start to the year and our focus will be less on current figures and more on demand development and future growth drivers. We retain our target price of EUR 13.6 and SELL-rating.

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Expect a decent start to the year
Etteplan reports Q1 results on May 5th. 2020 was a challenging year for Etteplan due to the Coronavirus pandemic, with the organic decrease in revenue at 8.3%. Due to rapid and efficient cost savings measures Etteplan was still able to maintain solid profitability, with the EBITA-margin at 10.1% (2019: 9.9%). To our understanding the customer demand during the beginning of the year has continued to move in the right direction, with customer companies having adapted to operating under the current environment. We have made no changes to our estimates ahead of the Q1 results, expecting revenue of EUR 71.1m and EBITA of EUR 6.4m.

Demand situation and growth drivers’ key themes
Going into 2021 key themes will be the development of customer demand and pick up in Etteplan’s internal growth initiatives, with quite some work left to reach the target of EUR over 500m in revenue in 2024. As earlier mentioned, customer demand has been developing positively and has for instance been at a good level in China, while demand in other countries could still see notable improvement. We expect growth of 11.2% in 2021, aided largely by the Tegema and TekPartner acquisitions. Our organic growth assumptions remain rather modest and an improvement in the demand situation could warrant higher estimates. We expect the EBITA-margin to remain near previous year levels at 9.9% (2020: 10.1%).

SELL with a target price of EUR 13.6
We have made no changes to our estimates and retain our target price of EUR 13.6 and SELL-rating. Etteplan currently trades above peers and with the prevailing uncertainty due to the pandemic and growth pick-up we find the >21x 2021 P/E multiples hard to justify.

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Suominen - Clear Q1 profitability beat

28.04.2021 - 10.00 | Earnings Flash

Suominen’s Q1 profitability remained very strong and the quarter was actually better, in terms of EBITDA and EBIT, than the previous record seen in Q3’20. Suominen retains its full-year outlook.

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  • Suominen Q1 revenue amounted to EUR 115.3m vs the EUR 117.0m/114.5m Evli/consensus estimates. Top line grew 5% y/y and currencies had a negative impact of EUR 8.1m.
  • European top line was EUR 43.4m whereas we estimated EUR 45.0m. Americas recorded EUR 71.9m, compared to our EUR 72.0m estimate.
  • Gross profit was EUR 20.2m vs our EUR 17.0m estimate. Gross margin was thus 17.5% vs our 14.5% expectation.
  • Q1 EBITDA was EUR 18.5m, compared to the EUR 15.3m/15.2m Evli/consensus estimates. EBIT amounted to EUR 13.6m vs the EUR 9.8m/9.8m Evli/consensus estimates. SGA and R&D were also a bit lower than we expected.
  • Suominen retains the previously stated outlook and expects FY ‘21 comparable EBITDA to remain in line with FY ’20 (EUR 60.9m).

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Innofactor - Good start to the year

28.04.2021 - 09.30 | Company update

Innofactor reported Q1 results well in line with our estimates. We expect sales growth to pick up during the year in comparable terms supported by the healthy order backlog and expect to see continued margin improvement. We retain our BUY-rating and TP of EUR 2.2.

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Q1 well in line with our estimates
Innofactor reported Q1 results that were well in line with our expectations. Revenue grew 3.8% to EUR 17.8m (Evli EUR 17.9m) while EBITDA amounted to EUR 4.7m (Evli EUR 4.8m). EBITDA included the EUR 2.6m one-off relating to the Prime business divestment and the adj. EBITDA of EUR 2.1m showed growth of 7.3% y/y. The order backlog in Q1 was at a record level of EUR 68.9m (+27.4% y/y), aided by the biggest individual deal in Innofactor’s history signed with the Finnish Tax Administration. The report overall did not hold any material negative news in our view. Management comments on the impacts of the COVID-19 pandemic and sales development outside Finland, were sales have been more challenging, were modestly upbeat.

No notable changes to our estimates
Our estimates remain essentially intact apart from minor adjustments due to lower than estimated acquisition amortizations in Q1. We expect sales in 2021 to grow 3.4% y/y (comparable growth 6.3%) to EUR 68.4m and EBITDA (excl. Prime div.) to amount to EUR 8.7m. In relation to the past years performance our growth assumptions appear unmerited and the company still has quite a lot to prove in terms of growth. With the record-high order backlog and management comments on the impacts of the pandemic and sales development outside Finland, pick-up in sales growth should certainly be within grasp.

BUY with a target price of EUR 2.2
With no major changes to our estimates or the investment case we retain our target price of EUR 2.2 and BUY-rating. Our TP values Innofactor slightly below peers, which we see justified given its track-record in previous years.

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Finnair - Heavy turbulence continues

28.04.2021 - 09.30 | Company update

There were no surprises with Finnair’s Q1 result. The company expects Q2 comparable operating loss to be similar compared to the previous quarters and gradual recovery to start from late summer. Finnair also increased its cost savings target to EUR 170m. We keep “HOLD” with TP of EUR 0.75.

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Restrictions continued to hamper Q1 figures

Finnair’s Q1 result was relatively similar compared to the previous quarters. Tight travel restrictions remained, and Finnair operated with limited network and frequencies in January-March (approx. 75 daily passenger flights). Revenue decreased by ~80% y/y to EUR 114m vs. EUR 96m/103m Evli/consensus. Once again, revenue was supported by strong cargo demand (cargo revenue represented ~54% of total revenue). ASK was down by ~88% y/y and PLF was 25.5% (-47.1pp). Adj. EBIT amounted EUR -143m and was slightly better than expectations (EUR -155m/-159m Evli/cons.).

Increased cost savings target

Previously, Finnair was targeting permanent costs savings of EUR 140m by 2022 (compared to 2019 levels) but as the savings program is proceeding well the company increased the target to approx. EUR 170m. This is good news as it is extremely important to be well positioned in the post COVID-19 world. Despite the blurry outlook regarding the recovery of air travel, there are positive signs in the market as the vaccination coverage is gradually increasing. Finnair starts to accept vaccination certificates from mid-May onwards and will be adding destinations and frequencies towards the summer. In summer, the company’s plan is to operate over 60 destinations. However, we note that it is important that European countries lift travel restrictions at a same pace but also that traveling from non-EU countries becomes easier.

“HOLD” with TP of EUR 0.75

Due to the week visibility, Finnair did not provide a full year guidance but expects Q2’21E comparable operating loss to be similar compared to the previous four quarters. The company expects gradual recovery to start in late summer. As the company has additional funding available if needed (e.g. hybrid loan from the State of Finland) we expect the company is rather well positioned once the market reopens. We expect 21E revenue of EUR ~1287m and adj. EBIT of EUR -372m. Profitability should quickly improve once the recovery starts due to the cost savings. We keep our rating “HOLD” with TP of EUR 0.75.

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Eltel - Results below our expectations

28.04.2021 - 09.30 | Earnings Flash

Eltel’s Q1 results were below our expectations. Net sales amounted to EUR 182m (Evli 209.9m). Operative EBITA improved y/y to EUR -0.7m (EUR -2.1m in Q1/20) but was also below our expectations. (Evli EUR 1.0m)

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  • Net sales in Q1 decreased by 23.1% to EUR 182m (EUR 236.6m in Q1/2020) and were below our estimates (Evli EUR 209.9m). Net sales continued to decline partly due to the divestments made last year and partly due to lower activity among customers as a result of COVID-19. Last year’s loss of a major service agreement in Sweden also affected the volumes.
  • Operative EBITA improved y/y to EUR -0.7m (EUR -2.1m in Q1/20) but was below our expectations (Evli EUR 1.0m). The operative EBITA margin was -0.4% (-0.9% in Q1/20). Eltel has succeeded in adjusting the organization to meet the volume changes, which has contributed to the improved profitability.
  • Operating profit in Q1 amounted to EUR -0.8m (EUR -2.2m in Q1/20, Evli EUR 0.8m).
  • Guidance reiterated: Eltel expects the full-year 2021 operational EBITA margin to improve compared to 2020.

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Detection Technology - Slowish start, but things are picking up

28.04.2021 - 09.00 | Company update

DT believes that worst challenges in SBU are behind and security will head toward growth starting in Q2. As the security market is slowly starting to recover and demand in medical market remains strong, we remain positive towards the investment case given both the market drivers as well as DT’s strategy and execution capabilities. Based on increased confidence in security market recovery and strong outlook in medical, we raise our target price to €30 (prev. €28.5) but maintain HOLD recommendation.

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A slow start to the year

DT’s Q1 result was broadly in line regarding net sales, but EBIT clearly missed ours and consensus expectations, although EBIT improved somewhat y/y. Q1 net sales amounted to EUR 18.3m (-8% y/y) vs. EUR 19.2m/19.2m Evli/consensus estimates. Q1 EBIT was EUR 1.4m (7,5% margin) vs. EUR 2.2m/1.94m Evli/cons. R&D costs amounted to EUR 2.4m or 13% of net sales (Q1’20: 2,6m, 13%). SBU net sales decreased -37,7% to EUR 5.8m vs. EUR 6.0m Evli estimate. Decrease was mainly due to COVID-19 situation continuing to affect the security market. IBU net sales increased +11% to EUR 2.4m vs. EUR 2.7m Evli estimate. MBU net sales increased +20% to EUR 10.1m which was broadly in line with our estimate of EUR 10.5m. Growth was driven by continued good demand for medical CT applications, especially in China.

 Strong medical to continue, security also starting to recover

The increased investments in healthcare infrastructure and demand for CT applications have kept momentum for MBU strong. As a result, DT expects MBU sales to grow over 20% in Q2 and H2. DT is also seeing early positive signals in the security market after a difficult year. DT believes that worst challenges in SBU are behind and security will head toward growth starting in Q2 and continue to grow in H2. IBU sales is expected to be at the same level as in the comparison period in Q2 but to grow in H2. In total, DT expects total net sales to grow double-digit in Q2 and in H2 of 2021 driven mainly by the strong medical demand.

 Target price of €30 (prev. €28.5), HOLD rating

Our estimates are broadly unchanged after the report. As the security market is slowly starting to recover and demand in medical market remains strong, we remain positive towards the investment case given both the market drivers as well as DT’s strategy and execution capabilities. We expect both net sales and EBIT growth to recover in 2021E, but accurately predicting the slope of the recovery is challenging. We expect 2021E to be a year of recovery, and DT to resume above 15% margins from 2022E onwards. Based on increased confidence in security market recovery and strong outlook in medical, we raise our target price to €30 (prev. €28.5) but maintain HOLD recommendation.

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Consti - Eyes on demand development

28.04.2021 - 08.45 | Preview

Consti will report Q1 results on April 30th. Our attention is drawn towards any comments on demand development. Following share price increase we downgrade to HOLD (BUY), target price of EUR 13.0 intact.

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Looking for signs of growth
Consti will report Q1 results on April 30th. Consti posted stable profitability figures throughout 2020 after challenges in previous years and with the pandemic focus has shifted towards order intake and growth. The order backlog development has been on a slightly declining throughout 2020, while order intake development was essentially flat. With the housing company General Meeting season kicking off any comments thereto could give some indication of demand development within housing companies. In terms of top and bottom line figures Q1 is typically the seasonally slowest quarter and we expect sales of EUR 60.2m and EBIT of EUR 0.5m.

Expect slight growth and profitability improvement in 2021
Consti has not given a sales guidance for 2021 while the guidance for EBIT is at EUR 7-11, a wider range due to still present COVID-19 uncertainties. Consti indicated in conjunction with Q4 that the activity level going forward is expected to be higher compared with the same period a year ago despite no clear growth in the order backlog. Our estimates assume only a rather minor growth of 2.3%, quite in line with historic pre-COVID market growth. Focus has in the past been on organizational improvements and profitability, but we expect Consti to increasingly adding attention towards sales growth. In terms of profitability we expect a slight improvement in EBIT-margins, 20bps y/y, to 3.2%.

HOLD (BUY) with a target price of EUR 13.0
Consti’s valuation is currently rather in line with peers although still lower compared to building installations and services peers. Consti is a solid case in terms of cash conversion but on current growth outlook valuation appears quite fair. We have not made changes to our estimates and retain our target price of EUR 13.0. With Consti’s share price up slightly over 10% since our previous update we downgrade to HOLD (BUY).

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Finnair - Nothing new with Q1 result

27.04.2021 - 09.45 | Earnings Flash

Finnair’s Q1 result was similar compared to the previous quarters. Q1’21 adj. EBIT was EUR -143m vs. our expectation of EUR -155m and consensus of EUR -159m. Revenue decreased by ~80% y/y and was EUR 114m vs. our expectation of EUR 96m and consensus of EUR 103m.

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  • Q1 revenue was EUR 114m (-79.8% y/y) vs. EUR 96m/103m Evli/cons. Revenue was supported by strong cargo demand.
  • ASK decreased by ~88% y/y in Q1. PLF was 25.5% (-47.1pp). Strict travel restrictions continued to limit traveling in many countries and Finnair had to operate with limited network and frequencies during Q1.
  • Q1 adj. EBIT was EUR -143m vs. EUR -155m/-159m Evli/cons. Q1 comparable EBITDA was EUR -61m vs. EUR -71m our view and consensus of EUR -67m.
  • Absolute costs in Q1: Fuel costs were EUR 30m vs. EUR 28m our view. Staff costs were EUR 53m vs. EUR 41m our view. All other OPEX+D&A combined were EUR 183m vs. EUR 193m our view.
  • Unit costs: CASK was 21.37 eurocents vs. 20.76 eurocents our view.
  • The company will continue to operate with limited network during Q2 and it expects Q2 comparable loss to be of a similar magnitude as in the previous quarters.
  • Finnair targets to reach permanent cost savings of approx. EUR 170m (prev. 140m) by 2022 (compared to 2019 levels).

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Detection Technology - Heading towards better times

27.04.2021 - 09.30 | Earnings Flash

DT’s Q1 result was broadly in line regarding net sales, but EBIT clearly missed ours and consensus expectations, although EBIT improved somewhat y/y. Most importantly, DT is seeing early positive signals in the security market. DT believes that worst challenges in SBU are behind and company will head toward growth starting in Q2 of 2021. DT expects total net sales to grow double-digit in Q2 and in H2 of 2021 driven mainly by the strong medical demand.

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  • Q1 result: Q1 net sales amounted to EUR 18.3m (-8% y/y) vs. EUR 19.2m/19.2m Evli/consensus estimates. Q1 EBIT was EUR 1.4m (7,5% margin) vs. EUR 2.2m/1.94m Evli/cons. R&D costs amounted to EUR 2.4m or 13% of net sales (Q1’20: 2,6m, 13%).
  • Security Business Unit (SBU) net sales decreased 37,7% to EUR 5.8m vs. EUR 6.0m Evli estimate. Decrease was mainly due to COVID-19 situation affecting demand. Despite international passenger travel still stagnating, DT sees that domestic air transport has recovered in many countries close to the pre-pandemic levels and cargo transport is increasing. DT expects SBU sales will start to increase in late Q2 and continue to grow in H2, but demand is characterized by uncertainty.
  • Industrial Business Unit (IBU) net sales increased 11% to EUR 2.4m vs. EUR 2.7m Evli estimate. IBU sales is expected to be flat in Q2 and to grow in H2, but demand may fluctuate.
  • Medical Business Unit (MBU) net sales increased 20% to EUR 10.1m which was broadly in line with our estimate of EUR 10.5m. Growth was driven by good demand for medical CT applications, especially in China. DT expect demand in medical CT applications to increase and MBU sales to grow even more in Q2 and H2 than in Q1.
  • No change in medium-term targets; at least 10% net sales growth, EBIT margin at or above 15%.

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Innofactor - Well in line with expectations

27.04.2021 - 09.30 | Earnings Flash

Innofactor’s Q1 results were in line with our expectations. Net sales amounted to EUR 17.8m (Evli EUR 17.9m), while EBITDA amounted to EUR 4.7m (Evli EUR 4.8m). EBITDA included a one-off of approx. EUR 2.6m related to the Prime business divestment.

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  • Net sales in Q1 amounted to EUR 17.8m (EUR 17.2m in Q1/20), in line with our estimates (Evli EUR 17.9m). Net sales in Q1 grew 3.8% y/y. The growth was fully attributable to Finland but Innofactor expects to achieve growth also outside Finland from Q2 onwards.
  • EBITDA in Q1 was EUR 4.7m (EUR 2.0m in Q1/20), in line with our estimates (Evli EUR 4.8m), at a margin of 26.2%. EBITDA included a one-off of approx. EUR 2.6m relating to the Prime business divestment. EBITDA excl. NRI’s would have been EUR 2.1m, 7.3% higher y/y.
  • Operating profit in Q1 amounted to EUR 3.8m (EUR 0.8m in Q1/20), in line with our estimates (Evli EUR 3.6m), at a margin of 21.4%. EBIT excl. NRI’s would have been EUR 1.3m, 53% higher y/y.
  • Order backlog at EUR 68.9m, up 27.4% y/y. Innofactor succeeded well in sales during the first quarter and also received its largest order in history from the Finnish Tax Administration.
  • Innofactor expects that the COVID-19 pandemic will not cause significant harm to Innofactor’s business in 2021.
  • Guidance reiterated: Innofactor’s net sales and EBITDA in 2021 are estimated to increase compared to 2020 (net sales and EBITDA EUR 66.3m and EUR 7.2m respectively).

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Talenom - Realizing further growth potential

27.04.2021 - 09.00 | Company report

Talenom is more strongly seeking to supplement its organic growth strategy with inorganic growth, supported by the favourable market conditions. Near-term margin upside appears limited due to the increased M&A activity, but margins are set to remain healthy. We retain our HOLD-rating and adjust our target price to EUR 13.3 (12.0).

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Organic growth supplemented by acquisitions
Talenom has in the past years focused clearly on organic growth and achieved double-digit growth figures in doing so. With favourable conditions for acquisitions Talenom is now clearly seeking to supplement the organic growth, which has slowed down slightly due to the pandemic, with inorganic growth. With the acquisitions made so far during 2021 we expect growth of 25.2% y/y and a sales CAGR of 16% during 2020-2023E, not including any likely new acquisitions.

Healthy margins but M&A limits near-term upside
Talenom has invested heavily in improving the efficiency of its bookkeeping production line. Through digitalization and automation of bookkeeping tasks and processes the company has been able to better allocate personnel resources, resulting in sizeable improvements in margins. We expect further development to be limited in the near-term due to the increased M&A activity, with the typically lower margins of acquirees and integration costs burdening profitability. Likely future efficiency improvements and thus profitability should also be of smaller magnitude, with a larger share of actions already taken.

HOLD with a target price of EUR 13.3 (12.0)
We retain our HOLD-rating and adjust our target price to EUR 13.3 (12.0). Our target price values Talenom at 50x 2021E P/E. Valuation is certainly not on the cheaper side but the multi-year track of rapid growth and profitability improvement along with the very defensive nature of the business and pick-up in M&A activity in our view justify the high valuation.

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Talenom - In line with expectations

26.04.2021 - 13.45 | Earnings Flash

Talenom's net sales in Q1 grew 17.0% to EUR 20.3m, in line with our and consensus estimates (EUR 19.9m/20.3m Evli/cons.). EBIT amounted to EUR 4.4m, in line with our and consensus estimates (EUR 4.4m/4.3m Evli/cons.).

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  • Net sales in Q1 amounted to EUR 20.3m (EUR 17.4m in Q1/20), in line with our and consensus estimates (EUR 19.9m/20.3m Evli/Cons.). Growth in Q1 amounted to 17.0% y/y.
  • Operating profit in Q1 amounted to EUR 4.4m (EUR 3.7m in Q1/20), in line with our and consensus estimates (EUR 4.4m/4.3m Evli/cons.), at a margin of 21.7%.
  • EPS in Q1 amounted to EUR 0.08 (EUR 0.07 in Q1/20), in line with our and consensus estimates (EUR 0.08 Evli/cons.).
  • The development of the organic growth and profitability of the accounting business in Finland during Q1, without the effect of acquisitions, was according to Talenom once again excellent.
  • Net investments during Q1/21 amounted to EUR 9.8m (Q1/2020: EUR 4.1m).
  • Guidance intact (updated 15.4.2021): Net sales in 2021 are expected to amount to EUR 80-84m and operating profit to EUR 14-16m.

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Verkkokauppa.com - Strategy implementation going well

26.04.2021 - 09.45 | Company update

Verkkokauppa.com’s Q1 result was as expected. Strategy implementation has started well, and the outlook remains bright. We have made only small adjustments to our estimates and keep our rating “BUY” with TP of EUR 10.80 (10.5).

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Q1 result in line with expectations

Verkkokauppa.com delivered a solid Q1 result which was in line with expectations. Q1 revenue increased by 7% y/y to EUR 134m (vs. EUR 135m/134m Evli/cons.). Growth was good especially in major domestic appliances, small domestic appliances, office & supplies, gaming & entertainment and sports. Online sales (excl. export) increased by 33%, representing 64% of total sales. Further, sales to B2B customers increased by 12%. Export continued to be in a lower level due to the travel restrictions (6% of sales). Gross profit totaled EUR 21.7m (16.2% margin) vs. our EUR 21.4m (15.9% margin). Gross margin was driven by increased share of higher margin categories in total sales. Adj. EBIT amounted EUR 5.2m (3.9% margin) vs. our EUR 5.0m (3.7% margin) and consensus of EUR 4.8m (3.6% margin).

Everything is right on track

The market has continued to be favorable for Verkkokauppa.com as the COVID-19 situation has prolonged and consumer behavior is changing (shift to online). In early 2021, the company published its refined, rather ambitious strategy for 2021-2025. The company targets a giant leap in revenue while improving profitability. As a part of the strategy, the company will invest in the logistics automation of the warehouse located in Jätkäsaari. The first stage of the investment is to build a fully automated small item warehouse and the building process will start this summer and is expected to be completed in early 2022. The total investment is expected to be completed by the end of 2022 and the estimated capex is approx. EUR 4m.

“BUY” with TP of EUR 10.80 (10.5)

Verkkokauppa.com reiterated its guidance and expects revenue of EUR 570m-620m and adj. EBIT of EUR 20m-26m in 2021. We have made only minor adjustments to our estimates after the result and expect 21E revenue of EUR 594m and adj. EBIT of EUR 24.0m (4% margin). Implementation of the strategy has started well, and the outlook remains positive. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.8x and 15.8x which is 15% discount compared to the Nordic & European online peers in 21E and 16% premium in 22E. We keep “BUY” with TP of EUR 10.80 (10.5).

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Scanfil - Sound demand outlook fully valued

26.04.2021 - 09.25 | Company update

Scanfil’s Q1 featured very few surprises. The company remains well-positioned and many customer megatrends continue to drive demand in the short as well as long term perspective. Our TP is now EUR 8.5 (8), rating HOLD (BUY).

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All five segments have developed positive since Q3’20

Scanfil’s EUR 163m Q1 revenue was above the EUR 152m/151m Evli/cons. estimates even when excluding the discontinued trade in Hangzhou. Organic growth was 7% y/y when excluding the discontinued business. Scanfil renewed its segment structure as the previous Industrial segment had become too diverse. Advanced Consumer Applications and Energy & Cleantech, the two largest segments, both grew rapid. The former’s demand stemmed e.g. from elevators (as well as new customers) while the latter was driven by e.g. reverse vending machines. The other three segments have also continued to develop well since Q3’20, demand overall improved throughout Q1 and March was especially strong and profitable. Scanfil posted EUR 10.0m in Q1 EBIT, in line with the EUR 10.5m/10.0m Evli/cons. estimates.

Strategy and day-to-day execution continue to work

In our view Scanfil is headed for the upper end of its FY ’21 revenue guidance range. Demand outlook supports Scanfil’s long-term organic growth target and implies 5-6% CAGR in the years ahead. The accounts are unlikely to build up inventories, rather there seems to be solid demand that stems from many megatrends. Component bottlenecks are possible but so far these haven’t had a negative impact on Scanfil. The company takes proactive measures to better anticipate demand and so secure relevant components early on. Scanfil also reports no gross margin pressure and remains able to pass price inflation forward to customers. M&A options remain relevant in the long-term.

In our view further upside is not found in the short-term

Scanfil is valued ca. 9x EV/EBITDA and 12x EV/EBIT on our FY ‘21 estimates. In terms of EBITDA the share trades at a peer premium while the EBIT multiples are in line. Scanfil is thus valued at a small premium and we see this well justified. Scanfil’s and peers’ multiples have alike rerated recently. EMS companies used to be valued very low, and in our view the current higher multiples are warranted at least in Scanfil’s case. We view Scanfil’s valuation now neutral. Our new TP is EUR 8.5 (8) and rating HOLD (BUY).

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Innofactor - Divestment secures a solid start

23.04.2021 - 09.40 | Preview

Innofactor is set to post solid Q1/21 figures with the one-off from the Prime business divestment. With a solid cash position and ambitious long-term growth targets we expect to start seeing measures to boost growth. We retain our BUY-rating with a target price of EUR 2.2 (1.75).

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Q1 boosted by divestment one-off
Innofactor will publish its Q1 results on April 27th. Innofactor earlier announced that it had agreed to sell its resource management software solution business, Innofactor Prime, to Total Specific Solutions. The transaction is to have a positive impact of approx. EUR 2.6m on Q1/21 EBITDA and a negative impact of approx. EUR 2.0m on 2021 sales. As such, Innofactor should report exceptionally strong EBITDA in Q1/21, with our estimate at EUR 4.8m. We expect sales to continue on the modest growth trend seen in late 2020 and expect sales to grow 4.4% to EUR 17.9m. Growth is supported by the positive development of the order backlog, which at the end of 2020 was up some 21% y/y.

Expecting to see measures to boost growth
With the divestment of Innofactor Prime we have lowered our 2021 sales estimates and slightly lowered our profitability figures (excl. Prime div.). We now expect sales of EUR 68.4m (2020: 66.2m) and EBITDA (excl. Prime div.) of EUR 8.9m (2020: EUR 7.2m). Innofactor expects net sales and EBITDA in 2021 to grow compared with 2020. Innofactor’s cash position was at a healthy level already at the end of 2020, now further strengthened by the proceeds from the Prime divestment, and it is likely only a matter of time until acquisitions start picking up again to speed up growth.

BUY with a target price of EUR 2.2 (1.75)
Innofactor’s share price has now recovered from the dip in previous years and valuation is no longer quite as cheap. Compared to peers, valuation is still not too stretched. We expect to start seeing measures to boost growth further, which would further warrant higher multiples. We adjust our TP to EUR 2.2 (1.75) and retain our BUY-rating.

Open report

Scanfil - Clear top line beat

23.04.2021 - 09.30 | Earnings Flash

Scanfil’s Q1 was a clear positive surprise in terms of revenue. Profitability was more in line with expectations. Scanfil did not revise its guidance but updated the segment structure.

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  • Scanfil Q1 revenue was EUR 163m vs the EUR 152m/151m Evli/consensus estimates. Top line grew by 13% y/y.
  • Scanfil updated its segment structure. The new five segments are called Advanced Consumer Applications, Automation & Safety, Connectivity, Energy & Cleantech, and Medtech & Life Science. Q1 growth was strongest in Advanced Consumer Applications, the largest segment that also includes elevators business. Energy & Cleantech, the second largest (includes e.g. reverse vending machines), also developed well.
  • Scanfil Q1 EBIT amounted to EUR 10.0m, compared to the EUR 10.5m/10.0m Evli/consensus estimates. Operating margin was therefore 6.1% (6.0% a year ago).
  • Scanfil guides EUR 600-640m in revenue and EUR 40-44m in adjusted EBIT for FY ’21 (unchanged). Uncertainty continues with respect to the availability of certain materials, especially semiconductors. The pandemic may also have a negative impact on customer demand and supply chain delivery capability.
  • Scanfil says there was scarcity in certain materials, however this did not have any major impact.

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Verkkokauppa.com - No surprises with Q1 result

23.04.2021 - 08.35 | Earnings Flash

Verkkokauppa.com’s Q1 result was in line with expectations. Q1’21 revenue grew by 7% y/y and was EUR 134m vs. Evli EUR 135m and consensus of EUR 134m. Adj. EBIT was EUR 5.2m vs. EUR 5.0m/4.8m Evli/consensus. EPS was EUR 0.09 vs. EUR 0.08 Evli and consensus. Verkkokauppa.com reiterated its guidance.

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  • Q1 revenue was EUR 134m (7% y/y) vs. EUR 135m Evli view and EUR 134m consensus. Growth was good especially in major domestic appliances, small domestic appliances, office & supplies, gaming & entertainment and sports. Online sales increased by 33%. Also, sales to B2B customers increased by 12%.
  • Q1 gross profit was EUR 21.7m (16.2% margin) vs. EUR 21.4m (15.9% margin) Evli view. Gross margin was driven by increased share of product categories with higher profit margins.
  • Q1 adj. EBIT was EUR 5.2m (3.9% margin) vs. EUR 5.0m (3.7% margin) Evli view and EUR 4.8m (3.6% margin) consensus.
  • Q1 eps was EUR 0.09 vs. EUR 0.08/0.08 Evli/cons.
  • The company also decided on a quarterly dividend of EUR 0.057 per share.
  • 2021E guidance: revenue of EUR 570-620m and adj. EBIT of EUR 20-26m.

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Finnair - Slowly towards better times

22.04.2021 - 09.35 | Preview

Finnair reports its Q1 result on next week’s Tuesday, 27th of April. We expect Q1’21E to be relatively similar compared to the previous quarters. We keep our rating “HOLD” with TP of EUR 0.75 (0.60).

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Quiet quarter, as expected

In Q1, Finnair carried 259k passengers which is 90% decline compared to Q1’20. Average Seat Kilometers (ASK) decreased by 87.6% y/y and Revenue Passenger Kilometers (RPK) decreased by 95.6% y/y. Passenger Load Factor (PLF) declined by 47.1%-points y/y and was 25.5%. The pandemic situation worsened during the first quarter of the year and strict travel restrictions remained. We expect Q1E revenue of EUR 96m (-83% y/y) and adj. EBIT of EUR -155m.

Towards better times

Even though the coronavirus situation has continued severe in the beginning of the year, there is light at the end of the tunnel as the vaccination pace has slowly improved. However, it is still unclear when traveling can start to normalize and how to make it safe. Possible vaccination certificates could be a crucial solution to this as it is important that European countries, including Finland lift travel restrictions at the same pace. Currently, it is estimated that majority of Finnish people have been received the first vaccine dose by the late summer thus air travel is expected to remain in a low level also during April-June. Therefore, we have cut our Q2’21E estimates. Our H2’21E and 22E-23E estimates are largely unchanged at this point.

“HOLD” with TP of EUR 0.75 (0.60)

The hybrid loan by the State of Finland to Finnair (max. of EUR 400m) was approved by the EU Commission in March. Approx. EUR 350m of the loan can be used by Finnair if its cash or equity position drop below specific limits. The remaining approx. EUR 50m share needs the Commission’s approval at a later stage. The interest rate of the hybrid loan has not been specified. We expect the recovery of air travel to begin in H2’21 but highlight that there are still significant uncertainties due to the changing pandemic situation. We expect 21E revenue to increase by 72% y/y and adj. EBIT of EUR -336m. We keep our rating “HOLD” with TP of EUR 0.75 (0.60) ahead the Q1 result.

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Raute - Orders are bound to pick up

22.04.2021 - 09.25 | Preview

Raute reports Q1 results on Thu, Apr 29. We haven’t made changes to our estimates. We continue to expect gradual improvement in Raute’s operating environment. We retain our EUR 21 TP. Our rating is now HOLD (SELL).

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The improvement gradient remains unclear

Recent news flow has been very encouraging across many sectors, and we believe the improving conditions also apply to Raute at least to some extent. This assumption is by no means a stretch given how meagre levels project deliveries’ small order intake reached in H2’20. Raute’s business environment is bound to improve this year. There is even a relevant chance for an order boom in the coming years, given the fact that Raute’s customers’ (plywood and LVL mills) demand is mostly driven by the construction industry. We however continue to estimate Q1’21 to have been relatively muted, albeit with some definite improvement in small project orders relative to the few previous quiet quarters.

Pickup may prove fast, but we see this year as another gap

We leave our previous estimates unchanged. We estimate smaller equipment orders to have been EUR 10m in Q1’21. The figure implies improvement on the EUR 3m Q4’20 number that excludes the EUR 55m Russian mill order but remains below the EUR 14m seen in Q1’20. We expect order book to have remained at a decent EUR 82m level and revenue to have amounted to a likewise good EUR 34m. These relatively strong figures reflect reliance on big Russian projects in an otherwise still weak demand environment. We also expect Raute to climb back to black this year in terms of EBIT and see the Q1 figure at EUR 1.6m. Raute’s global competitive position means plenty more potential in the long-term perspective, but we believe FY ’21 results will still be somewhat modest in the historical context.

In our view valuation now lands within a neutral range

The current context might warrant some stretch in valuation multiples considering the potential for a rapid improvement in orders, not to mention Raute’s strong competitive positioning. We nevertheless do not see upside on the current ca. 8-10x EV/EBITDA and 12-16x EV/EBIT multiples on our estimates for FY ’21-22. We retain our EUR 21 TP. Our rating is now HOLD (SELL).

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Suominen - Earnings multiples are undemanding

22.04.2021 - 09.05 | Preview

Suominen reports Q1 results on Wed, Apr 28. We leave our operative estimates unchanged ahead of the report and retain our EUR 6.5 TP and BUY rating.

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Demand remains strong but costs are also rising

Suominen’s FY ’21 outlook, issued in February, guides flat comparable EBITDA development y/y. We didn’t find this guidance surprising and revised our FY ’21 EBITDA estimate up only a tad from EUR 55.3m to EUR 56.5m (Suominen posted EUR 60.9m in FY ’20 EBITDA). The guidance however contained a disclaimer with respect to the present uncertainty in the raw materials and cargo markets. Suominen had assumed pricier raw materials going forward, but the recent ca. 20% quarterly level gains seen in inputs such as pulp, polyester and polypropylene may have been larger than the company expected. It’s also unclear how e.g. the Suez Canal blockage might have disrupted the relevant supply chains.

We expect gross margin declines over the year

The recent raw materials price gains exert clear negative pressure on Suominen’s gross margin for their part, but on the other hand the company should still be able to defend its own nonwovens pricing to some extent. The pricing dynamics will also register with a certain lag. We leave our operative estimates unchanged ahead of the Q1 report. We continue to expect gradual decrease in gross margin throughout the year. We estimate Q1’21 gross margin at 14.5% and arrive at EUR 15.3m EBITDA with our revenue and operative cost assumptions. Suominen recently announced the sale of its minority stake in Amerplast, a plastic packaging business, and the transaction will have a positive EUR 3.7m impact on financial items. The sale is not all that meaningful in the big picture given the fact that Suominen divested the majority share already in 2014 to focus on nonwovens. It will however further strengthen the already strong balance sheet.

Cautious earnings multiples following the record year

Suominen remains valued at modest multiples of around 6x EV/EBITDA and 10x EV/EBIT on our estimates for this year. We continue to see upside on these levels as Suominen’s earnings are stabilizing and cash flow generation is strong. We retain our EUR 6.5 TP and BUY rating.

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Detection Technology - Looking for signs of recovery in SBU

21.04.2021 - 08.58 | Preview

Detection Technology will report its Q1 result next Tuesday, April 27th, at 9:00 EET. As usual, we look forward to hearing the latest developments and outlook regarding the security, industrial and medical imaging markets. We expect DT to return to net sales and EBIT growth path this year, with the help of continued good performance in MBU and a recovery in SBU. We maintain our previous target price of €28.5 ahead of the earnings report, our recommendation is now HOLD (prev. BUY).

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Light in the end of the SBU tunnel

In its Q4 report, DT was cautiously optimistic that SBU growth is turning a corner. SBU sales will still decrease in Q1 y/y, but start growing in Q2, although demand is still uncertain, as for example China’s critical infrastructure and rail transport recovery projects have progressed slowly. MBU sales are expected to grow double digit in H1/2021. DT’s total net sales are expected to decrease in Q1 and grow in H1 of 2021. We expect Q1 net sales to decline 4% to 19.2 MEUR (19.1 MEUR cons) and Q1 EBIT of 2.2 MEUR (1.9 MEUR cons).

 SBU split into two separate segments: SBU and IBU (Industrial Solutions Business Unit)

DT announced in conjunction with its Q4 result that it is splitting SBU into two separate business units to better boost both BU’s development. The new SBU focuses solely on security application sales, while the newly launched Industrial Solutions Business Unit (IBU) focuses on the industrial segment. In 2020, IBU accounted for EUR 11.6m (27%) of SBU sales and 14% of total sales. As a result of the new segment, MBU currently represents the biggest segment with approximately 50% of sales thanks to strong momentum in MBU and pandemic headwinds in SBU. Industrial market is categorized as higher margin, but smaller volumes, a more fragmented customer base, and a variety of end applications. DT has said it aims to complement its industrial portfolio with software and algorithms. DT expects IBU sales to grow in H1. We have incorporated the new segment data with 2020 comparison figures into our models.

 We maintain our previous target price of €28.5

Based on the new segment data, we have slightly calibrated our estimates upwards, but overall picture looks the same. We expect both net sales and EBIT growth to recover in 2021e with the help of continued good performance in MBU and a recovery in SBU. We maintain our previous target price of €28.5 ahead of the earnings report, our recommendation is now HOLD (prev. BUY).

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Gofore - Slight weakness but still looking good

20.04.2021 - 09.30 | Company update

Gofore’s Q1 showed slight weakness y/y due to working day differences and lower billing rates due to changes in a customer’s deliveries, but overall progress remains good. With the recent share price rally, we lower our rating to HOLD (BUY), with a TP of EUR 21.0.

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Slight weakness in relative profitability
Gofore reported Q1/21 net sales of EUR 25.2m (Evli EUR 23.5m), for a growth rate of 34.1% y/y, and adj. EBITA of EUR 3.5m (Evli 3.7m). The relative profitability was slightly lower than expected and lower than in the comparison period, with an adj. EBITA-% of 13.9% (Q1/20: 16.8%). This was due to the lower number of working days and changes in project deliveries relating to Gofore’s largest customer, which led to a lower than expected billing rate. On a general level, apart from the slightly weaker relative profitability, the Q1 report did not contain any noteworthy negatives, and customer demand appears to have continued to be at a healthy level.

Growth pace still set to continue strong
We expect net sales of EUR 103.2m and an adj. EBITA of EUR 14.3m in 2021, a y/y sales and adj. EBITA growth of 32.4% and 31.0% respectively. According to Gofore’s guidance the net sales and adj. EBITA are expected to grow in 2021 compared to 2020. Growth is mainly driven by the Qentinel Finland acquisition in September 2020 and the CCEA + Celkee acquisition in March 2021. Furthermore, we expect for Gofore to continue on its track of good organic growth and aided by a good order intake achieve double-digit organic growth figures. With the slight weakness in relative profitability in Q1 and potential further weakness in Q2 from the project delivery changes of Gofore’s largest customer we expect full-year margins to decrease slightly compared with 2020.

HOLD (BUY) with a TP or EUR 21.0
Gofore’s share price has rallied some 20% since our previous update in March. With our estimates and the investment case overall intact we retain our target price of EUR 21.0. With valuation pushing clearly above 30x 2021 P/E and ahead of peers we downgrade our rating to HOLD (BUY).

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Verkkokauppa.com - Expecting good Q1 figures

19.04.2021 - 09.40 | Preview

Verkkokauppa.com reports its Q1 result on this week’s Friday, 23rd of April. We have made small estimate adjustments and expect Q1 sales to grow by 7.5% y/y to EUR 135m. We expect adj. EBIT of EUR 5m. We retain our rating “BUY” with TP of EUR 10.5 (9.5).

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We expect sales growth of 7.5% in Q1

We expect Verkkokauppa.com to report strong Q1 figures on Friday. The coronavirus situation remained severe during the first quarter and due to the restrictions people have stayed more at home. This should continue to support online sales, benefiting Verkkokauppa.com. Additionally, most of Finland had a proper winter which we expect to boost sales of sport and outdoor equipment. Lower level of wholesale sales should also have a positive impact on gross margin. We have slightly increased our H1’21E estimates ahead the Q1 result. We expect Q1’21E sales to grow by 7.5% y/y to EUR 135m (cons. EUR 134m) while we expect adj. EBIT of EUR 5.0m (cons. EUR 4.8m).

Domestic purchases are expected to remain high during ‘21

The coronavirus situation has prolonged and even though the Finnish population is currently being vaccinated the pace is slow and it will take a while to get back to normal life. We expect the situation to normalize towards the end of the year, but we expect that for instance traveling abroad will remain in a low level throughout 2021. Thus, consumption will continue to be more focused on domestic purchases, supporting 2021 sales. The company introduced its refined strategy for 2021-2025 earlier this year and it targets to reach sales of EUR 1bn and EBIT margin of 5% by the end of 2025. We expect the company’s good momentum to continue with 21E-23E sales growth of 6-7% and adj. EBIT margin of ~4%. We however highlight that the competition is likely to continue tight after the pandemic thus profitable growth doesn’t come easy.

We keep our rating “BUY” with TP of EUR 10.5 (9.5)

We expect 21E sales to grow by ~7% to EUR 594m (cons. EUR 592m) and adj. EBIT of EUR 23.6m (cons. EUR 23m). On our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.8x and 15.6x, which is 17% discount compared to the online-focused Nordic and European peers in 21E and 11% premium in 22E. We keep our rating “BUY” with TP of EUR 10.5 (9.5).

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Talenom - Continuing rapid acquisition pace

16.04.2021 - 09.30 | Company update

Talenom acquired Balance-Team Oy, a specialist in financial management for associations, and raised its 2021 sales guidance to EUR 80-84m (prev. EUR 78-82m). We now expect growth of 24.6% in 2021. We retain our HOLD-rating with a target price of EUR 12.0 (11.5).

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Acquired Balance-Team Oy and raises sales guidance
Talenom expands its operations in Finland by acquiring Helsinki-based Balance-Team Oy, a specialist in financial management for associations. The acquisition will make Talenom a leading provider of financial management services for nonprofit organisations in Finland. The sales and EBITDA in 2020 of the transferring operations were EUR 2.7m and EUR 1.0m respectively. The share capital of the transferring operations was transferred to Talenom on April 15th. The transaction price is EUR 5.3m, implying an approx. price of 5.0x EV/EBITDA on 2020 figures, to be paid 50/50 in cash and shares. Due to the acquisition Talenom raises its sales guidance for 2021 from EUR 78-82m to EUR 80-84m. The EBIT guidance (EUR 14-16m) remains intact.

Rapid growth in 2021 with our estimate at 24.6%
The guidance revisions did not come as a major surprise given the guidance being raised already in March due to acquisitions, while the EBIT guidance quite as expected remains intact. The pace of acquisitions has been rapid so far during H1 and a further guidance revision is not completely unlikely if the pace continues. We have adjusted our 2021 sales estimate to EUR 81.2m, implying a growth of 24.6%, with our EUR 15.3m EBIT estimate intact. Talenom reports Q1 results on April 26th, with our sales and EBIT estimates at EUR 19.9m and EUR 4.4m respectively.

HOLD with a target price of EUR 12.0 (11.5)
In light of the accelerating growth pace we adjust our target price to EUR 12.0 (11.5) and retain our HOLD-rating. Our target price values Talenom at approx. 45x 2021 P/E, which we see as justifiable given the stability of the business and the rapid profitable growth.

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Exel Composites - Many sustained tailwinds add up

16.04.2021 - 09.25 | Company report

Exel continued to perform despite the pandemic. In our view the company remains positioned for strong organic growth in the years to come. The strategic priorities now work solid. Our TP is EUR 11 (10); retain BUY rating.

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The strategic priorities have already delivered results

In our view Exel Composites is a competitively positioned player in the materials value chain and operates in a niche that has a strong long-term growth outlook. The company manufactures composites for demanding industrial applications. Strategy execution paid off in 2019-20 as adjusted operating profit almost doubled to EUR 9.7m in FY ’20 from the level seen in FY ’18. The excellent financial performance was due to a pick-up in organic growth as well as successful cost reduction measures, both of which helped the company to scale the relatively high fixed cost base. Exel seems to have found an advantageous positioning within the Wind power customer industry but also in areas like Buildings and infrastructure, among many others.

Growth outlook continues to support profitability gains

Exel posted a 5% organic top line growth last year despite the pandemic. Wind power was a big driver but there were other notable positives such as Machinery and electrical. Transportation and Telecommunications were the only two customer industries, out of the seven, with revenue declines. The pandemic may still hurt Transportation demand this year but in our view the area has good long-term outlook. Telecommunications is the one industry with a bit muted outlook but even there the situation may improve with the rollout of 5G. Exel guides increasing revenue and adjusted EBIT for this year. We estimate 7% growth and an additional EUR 1m EBIT gain. We view Exel positioned for ca. 5-6% CAGR in the years to come.

We see more room for earnings-based multiple expansion

Exel has been historically valued around 8x EV/EBITDA and 0.9x EV/S. The current valuation is ca. 8.5x EV/EBITDA on our estimates for this year, in other words not that high in the historical context even though the shares have appreciated a lot. Profitability gains have justified the rally. The valuation is now historically rich in terms of EV/S, but we also find this justified since the strategy is poised to deliver more in the years to come. Our TP is now EUR 11 (10) per share. We retain our BUY rating.

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Pihlajalinna - CMD notes

31.03.2021 - 09.15 | Company update

Pihlajalinna held its CMD yesterday, 30th of March. The focus of the event was on the company’s strategic priorities and the future of the social and healthcare market. Financial targets remained unchanged. Thus, there were no changes in the big picture. We keep our rating “BUY” with TP of EUR 13.0 (12.0).

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New opportunities in both, public and private side

Pihlajalinna highlighted its strategic priorities for the upcoming years as the market is changing in many ways (SOTE-reform, aging population etc.). The company aims to strengthen its already strong partnership with the public side and to engage in close cooperation with the future wellbeing services counties. In addition, Pihlajalinna will make renewals to its private services with new service concepts and digital innovation. Further, the company will continue to strengthen digitalization. The company has already had a strong focus on this and the importance of developing new digital solutions has only increased during the pandemic. The long-term financial targets (EBIT margin of over 7% and net debt/EBITDA under 3x) remained unchanged.

Big picture is unchanged

The main market drivers are unchanged as the Finnish population is rabidly aging which increases social and healthcare expenditures. Digitalization offers new opportunities and can improve efficiency. In addition, individuals’ interest in their own health is increasing which creates new opportunities in the preventive social and health care. The company seemed to be relatively positive about the future wellbeing services counties and cooperation opportunities stemming from these. However, Pihlajalinna has also strengthened its positioning e.g. in the occupational healthcare market and has widened its cooperation with insurance companies which reinforces our view that the company can grow in both, public and private side. Expanding the service network should also provide support for future partnerships.

“BUY” with TP of EUR 13 (12)

We have kept our estimates intact and expect 21E revenue growth of ~10% and adj. EBIT of EUR 27.3m (adj. EBIT margin of 4.9%). In 22E and 23E, we expect revenue growth of 5% and 3%. We expect profitability improvement to continue and expect adj. EBIT margin of 5.4% in 22E and 5.6% in 23E. With our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.3x and 13.8x which is 14% discount compared to the peers. We keep our rating “BUY” with new TP of EUR 13 (12).

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Eltel - Divests its High Voltage business in Germany

22.03.2021 - 17.45 | Analyst comment

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Eltel has signed an agreement to divest its German High Voltage business to ENACO, a German service provider in the energy sector. Eltel classified its German High Voltage business as assets held for sale at the end of 2020 and the revaluation had EUR -5.7 million impact on Group EBIT in Q4/2020. The transaction is estimated to have negative cash flow effect of EUR 3.8 million. Eltel will as part of the divestment engage ENACO as a subcontractor for the completion of certain projects, which are expected to be completed during 2021 and 2022. The divestment is subject to customary approvals, and the transaction is expected to close during Q2/2021.

The divestment is in line with Eltel’s strategy and strengthens Eltel’s focus on the Nordic countries in which it has a market-leading position and the business model is more stable and repetitive. In 2020, Eltel’s German High Voltage business had about 75 employees and net sales of about EUR 10 million. After the divestments of the High Voltage and Communication business (in Q2/2020), Eltel has only the Smart Grids business left in Germany, which accounted for a smaller share of German net sales in 2020.

The divestment is relatively small and therefore has no effect on our current forecasts. In our estimates, we have already forecast the net sales of other business to decrease by EUR 26.9 million and we expect the share of other business to be ~10% of group net sales in 2021E. We maintain our TP of SEK 30 with BUY.

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Talenom - Further growth in Sweden

19.03.2021 - 08.30 | Company update

Talenom announced the acquisition of two accounting firms in Sweden and raised its net sales guidance to EUR 78-82m (prev. EUR 75-80m). We retain our HOLD-rating and target price of EUR 11.5.

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Two acquisitions in Sweden, net sales guidance raised

Talenom continues to expand in Sweden by acquiring accounting firms Crescendo AB and Progredo AB and raised its net sales guidance for 2021. The acquired businesses had combined net sales of EUR 2.3m in 2020 and operating profit of EUR 0.3m. With the acquisitions Talenom expands to two new municipalities in Sweden, Östersund and Åre. As a result of the acquisitions Talenom raised its net sales guidance to EUR 78-82m (prev. 75-80m). The acquired businesses will be transferred to Talenom on April 1st, 2021. The acquisitions will not increase operating profit in the short term due to integration costs and the depreciation of the transaction and the operating profit guidance remains intact at EUR 14-16m. The purchase price at maximum corresponds to 1.1x and 8.0x net sales and EBIT respectively.

Minor increase to sales estimates

We have raised our 2021 net sales estimate to EUR 78.9m (prev. 76.7m) due to the acquisition and an overall minor increase in net sales expectations, with our operating profit estimate intact at EUR 15.3m. With the net sales guidance being revised this early on in the year, potential further acquisitions could likely prompt further revisions later on during the year, although the impact on earnings would likely not be as significant. The increased growth through the acquisitions, however, provide an additional base for continued organic growth and ramp up of operations in Sweden in the coming years.

HOLD-rating and target price of EUR 11.5

With only rather minor revisions to our estimate revisions we retain our target price of EUR 11.5 and HOLD-rating. Our target price values Talenom at approx. 43.5x 2021e P/E.

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Enersense - Initiating coverage with BUY

17.03.2021 - 09.25 | Company report

We initiate coverage of Enersense with a BUY rating and a TP of EUR 9.7. Enersense’s turnaround in profitability progressed well in 2020 and, in our view, the valuation looks moderate considering Enersense’s increased and healthier order backlog as well as potential synergies of the Empower acquisition.

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2020 was a big year for Enersense
Enersense International Oyj is a service provider of emission-free energy solutions in the industry, energy, telecommunication, and construction sectors. In 2020, Enersense’s business changed significantly. Enersense acquired Empower, thus expanding its business from recruiting and resource management services to a solution provider for the Smart industry, Power, and Connectivity markets. Enersense also managed to improve its EBITDA from EUR -0.8m in 2019 to EUR 7.2m in 2020. The focus in 2021 is on improving profitability, growing in domestic and selected international markets, and continuing the integration of the Empower acquisition.

Our estimates for 2021E are at the midpoint of the guidance
In 2021E, we expect Enersense’s net sales to grow strongly as Empower’s figures are included in net sales for the full year. The order backlog has increased significantly from EUR 130m in August 2020 to EUR 300m at the end of 2020 and we expect this strong order inflow to support Enersense in reaching net sales of EUR 230m. In 2022-23E, we forecast the group revenue to grow by 3.2% and 3.0%, respectively. We estimate adj. EBITDA to increase from EUR 8.9m (6.2% margin) to EUR 13.5m (5.9% margin) in 2021E driven by the consolidation of Empower’s full-year figures, a healthier project portfolio, and streamlining of operations. We expect the synergies of the Empower integration to be more visible in Enersense’s profitability from 2022 onwards and EBITDA margin to increase to 6.5% in 2022E and 6.8% in 2023E.

BUY with a target price of EUR 9.7
In our view, the valuation looks moderate considering Enersense’s increased and healthier order backlog as well as potential synergies of the Empower acquisition. On our estimates for 2022E, Enersense is trading at EV/EBITDA of 5.5x and adj. P/E of 10.7x, which translate into discount of 21-28% to our peer group median. We initiate coverage with a BUY-rating and a target price of EUR 9.7. Our TP values Enersense at EV/EBITDA of 6.1x and adj. P/E of 11.8x for 2022E, which are still at 13-21% discount to peer group, reflecting Enersense’s lower profitability profile and as we look for more signs of further margin improvement and faster organic growth. If Enersense manages to increase net sales and improve margins in line with the midterm financial targets, there is further upside potential in valuation.

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Gofore - Upgrade to BUY

08.03.2021 - 09.30 | Company update

Gofore’s H2 results showed little signs of weakness and with the more recent acquisitions the growth pace is set to continue well into double-digit figures. We upgrade our rating to BUY (HOLD) with a target price of EUR 21.0 (16.0).

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Strong organic growth in 2020 despite pandemic
Gofore reported H2 revenue of EUR 40.6m (pre-announced) and EBITA and adj. EBITA figures of EUR 5.0m/5.1m respectively (Evli EUR 4.8m/5.5m). The BoD proposes a dividend distribution of EUR 0.24 per share (Evli EUR 0.25). In 2021 Gofore expects that its revenue and adj. EBITA in 2021 will grow compared to 2020. Despite the pandemic, Gofore posted solid organic growth figures of 15.5% for the full-year 2020 and total growth of 21.7%.

Rapid growth to continue
Gofore completed the acquisition of change execution consulting specialist CCEA and its fully owned subsidiary Celkee, expected to have a revenue impact of approx. EUR 6m in 2021. With the newest acquisition and the Qentinel Finland acquisition in the latter half of 2020 as well as expectations of around 10% organic growth we now expect revenue growth of 28% in 2021, rapidly closing in on over EUR 100m annual sales. We expect adj. EBITA margins to remain relatively flat near the 15% adj. EBITA-% target, with the low scalability of the business model providing little further upside. Gofore had a healthy cash position of EUR 21m at the end of 2020, supporting potential further acquisitions. Overall demand appears to have remained at good levels after the initial dip in the early stages of the pandemic and the outlook remains favourable.

BUY (HOLD) with a target price of EUR 21.0 (16.0)
On our revised estimates we adjust our target price EUR 21.0 (16.0), valuing Gofore at approx. 30x 2021 P/E, and raise our rating to BUY (HOLD). Compared to peers, near-term valuation is quite stretched, but the solid performance and expectations of rapid growth along with further M&A potential certainly merits a higher valuation.

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Gofore - Expectations fairly well met

05.03.2021 - 09.30 | Earnings Flash

Gofore’s EBITA/adj. EBITA of EUR 5.0m/5.1m in H2 were somewhat in line with expectations (Evli 4.8m/5.5m). Revenue grew 32.5% to EUR 40.6m in H2 (pre-announced). Revenue and adj. EBITA in 2021 are expected to grow compared with 2020. Gofore’s BoD proposes a dividend of EUR 0.24 per share (Evli EUR 0.25).

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  • Gofore’s H2/20 net sales amounted to EUR 40.6m (pre-announced), with sales growth of 32.5% compared to H2/19 figures. Q4 was particularly strong, with growth of 40%, of which roughly half was attributable to organic growth and the other half to inorganic growth from the Qentinel Finland acquisition.
  • EBITA and adj. EBITA in H2 amounted to EUR 5.0m and EUR 5.1m respectively, somewhat in line with our estimates (Evli EUR 4.8m/5.5m), at margins of 12.3%/12.7%. EBIT amounted to EUR 4.3m (Evli EUR 4.3m), at a 10.5% EBIT-margin.
  • Guidance for 2021: Gofore estimates that its revenue and adj. EBITA in 2021 will grow compared to 2020.
  • Dividend proposal: Gofore’s BoD proposes a dividend distribution of EUR 0.24 per share (Evli EUR 0.25).
  • The number of personnel at the end of the period was 724 (H2/19: 582).

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Cibus Nordic - Still some yield in store

26.02.2021 - 09.30 | Company update

Cibus’ Q4 report didn’t serve surprises. Our view on Cibus remains to a large extent unchanged, however we update our TP to SEK 170 (165) to reflect minor yield compression in the Swedish market. We retain our HOLD rating.

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Transfer to the Nasdaq Stockholm main list happens in H1

Cibus’ EUR 16.7m Q4 net rental income was in line with our EUR 16.6m estimate. Administration expenses amounted to EUR 1.8m vs our EUR 1.5m estimate (there were non-recurring costs to the tune of EUR 0.5m). The planned switching to the Nasdaq Stockholm main list, to be completed in H1’21, as well as costs for conducting an inventory of fittings and equipment in the Swedish portfolio elevated administration expenses temporarily. Operating income was therefore EUR 14.8m vs our EUR 15.1m estimate. Net financial costs amounted to EUR 5.5m, compared to our EUR 5.2m estimate. There was a negative EUR 0.5m charge due to currency exchange rates. Net operating income then amounted to EUR 9.3m while we expected EUR 9.9m.

Still plenty of smaller property deals in the pipeline

Portfolio net rental income performance remains stable. Cibus has some small-scale plans to develop e.g. parking lots attached to the properties. The company also says it has plans for some adjacent residential developments in the Swedish portfolio. We understand these would entail only limited balance sheet risks. Cibus sees the Finnish market values stable and slight yield compression in the Swedish market. Last year was a banner for Cibus in terms of acquisition volume. The EUR 386m spree however doesn’t eat from this year’s target; Cibus is confident about completing another EUR 50-100m of add-ons in 2021.

There is upside if the underlying market yields compress

Cibus remains valued at 1.12x EV/GAV and 1.35x P/NAV. We view this premium level appropriate as Cibus still delivers high yields in comparison to other listed Nordic property portfolios. In our opinion the Nordic grocery and daily-goods store property space has some additional yield compression potential, considering the attractive 6% valuation levels where Cibus has been lately able to transact even relatively large (above EUR 100m) portfolios. We update our TP to SEK 170 (165) in anticipation of modest Swedish yield compression. We retain our HOLD rating.

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Solteq - Continued solid performance seen

26.02.2021 - 09.30 | Company update

Solteq reported slightly better than expected Q4 results. The solid performance is set to continue, and we see clear potential for a doubling of EPS in the coming years. We retain our BUY-rating with a target price of EUR 4.5.

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Q4 slightly above expectations
Solteq reported slightly better than expected Q4 results. Revenue amounted to EUR 16.4m (Evli EUR 16.1m) and comp. EBIT to EUR 2.0m (Evli EUR 1.7m). Comp. growth amounted to 9.3%. The BoD proposed a dividend distribution of EUR 0.15 per share (Evli EUR 0.06). To our understanding the high payout ratio is due to no dividend payment in 2019, as such corresponding to an accrued two-year distribution, and we do not expect as high relative payout in the future.

2021 outlook favourable
In 2021 Solteq expects Group revenue to grow clearly and operating profit to improve. The profitability guidance sounds soft but with the on-going pandemic and the related uncertainties the guidance is understandably more cautious this early on in the year. We expect sales growth of 8.9% (prev. 3.7%) and an approx. 14% improvement in comp. EBIT to EUR 6.6m (prev. 5.5m). Growth and profitability is on our estimates largely attributable to Solteq Software, in particular due to project implementations and thereafter following accrual of recurring revenue from the Utilities-sector orders received in 2020. We see clear potential for a doubling of EPS during 2021-2022 compared with 2020, noting that 2020 was affected to some extent by non-recurring financial expenses.

BUY with a target price of EUR 4.5 (1.9)
Solteq’s share price has over doubled since our previous update. Compared with the Nordic software peers, valuation is still not very challenging. With Solteq Software on our revised estimates contributing more clearly to growth and earnings along with overall higher earnings estimates higher multiples are certainly justifiable. We raise our TP to EUR 4.5 (1.9), valuing Solteq at approx. 23x 2021 P/E, BUY-rating intact.

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Eltel - Initiating coverage with BUY

26.02.2021 - 09.25 | Company report

We initiate coverage of Eltel with BUY rating and a TP of SEK 30. We see that Eltel has the potential to succeed in its turnaround and, as such, we expect Eltel’s profitability to improve in the coming years and net sales to turn to growth in H2/2021. In our view, the margin improvement potential is not fully reflected in the current share price.

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Eltel is in the midst of its turnaround journey
Eltel is the leading Nordic field service provider for critical power and communication networks. Eltel’s development since the IPO in 2015 did not meet expectations, and following a strategic review in 2017, Eltel has focused on its core businesses, Power and Communication in the Nordics, and the company is currently in the midst of a turnaround journey. The focus is on improving profitability, restructuring non-performing businesses, and strengthening its financial position, with first signs of operational improvement already visible.

We expect the recovery in margins to continue
In 2021E, we expect that net sales will decrease by 2.3% to EUR 916.8 million due to the focus on improving profitability and restructuring non-performing businesses. We expect net sales to turn to growth in H2/2021 and we see the targeted growth rate of 2-4% in the Nordics achievable from 2022 onwards. In 2022-23E, we forecast net sales to grow by 1.6% and 1.9% driven by growing 5G demand in the Nordics, as well as new frame agreements and contract expansions. Eltel has continued to take measures to improve operational efficiency and its exposure to risky and unprofitable projects has reduced over the past couple of years. In line with the guidance, we forecast operative EBITA margin to grow from 1.2% in 2020 to 2.6% in 2021E. Despite the right actions, we are more cautious in our profitability estimates compared to Eltel’s 5% EBITA margin target by 2023 and expect operative EBITA margins to be 3.3% and 3.8% in 2022-23E.

BUY with a target price of SEK 30
Eltel is currently moving in the right direction thanks to a healthier balance sheet, better quality of the order book with a focus on stable Nordic countries and a reduced risk-level of projects. On our estimates for 2022-23E, Eltel is trading at EV/EBITDA of 7.7x and 7.0x, which translate into discount of 11-14% to our peer group median. In our view, Eltel has potential to improve its profitability and the margin improvement potential is not fully reflected in the current share price. We initiate coverage of Eltel with a BUY-rating and a TP of SEK 30. Our TP values Eltel at EV/EBITDA of 8.3x and 7.6x for 2022-23E, which are still slightly (~7%) discount compared to our peer group, reflecting Eltel’s lower profitability profile and as we look for more signs of further transformation progress.

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Cibus Nordic - Rental performance as expected

25.02.2021 - 09.30 | Earnings Flash

Cibus’ Q4 report was unsurprising, although administration and financial expenses were slightly higher than we estimated.

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  • Cibus Q4 rental income was EUR 17.6m, compared to our EUR 18.0m estimate.
  • Net rental income amounted to EUR 16.7m vs our EUR 16.6m estimate.
  • Operating income was EUR 14.8m while we expected EUR 15.1m. Administration expenses, at EUR 1.8m, were a bit higher than our EUR 1.5m estimate.
  • Net operating income stood at EUR 9.3m vs our EUR 9.9m estimate. The EUR 5.5m financial expenses were higher than our EUR 5.2m estimate.
  • Annual net rental income capacity is now EUR 72.6m.
  • The portfolio was valued at EUR 1,273m and thus EPRA NAV was EUR 12.1 (11.8) per share.
  • Net LTV ratio amounted to 61.3% (61.3%).
  • Occupancy rate was 95.6% (95.7%).
  • WAULT was 5.5 years at the end of Q4.
  • Annual dividend is proposed at EUR 0.94 per share, compared to our EUR 0.93 estimate. The dividend is to be divided into twelve monthly installments.

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Solteq - Solid finish to 2020

25.02.2021 - 09.15 | Earnings Flash

Solteq’s Q4 was slightly above expectations, with revenue at EUR 16.4m (Evli EUR 16.1m) and comp. EBIT at EUR 2.0m (Evli EUR 1.7m). Solteq expects that Group revenue in 2021 will grow clearly and for the operating profit to improve. Dividend proposal EUR 0.15 (Evli EUR 0.06).

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  • Net sales in Q4 were EUR 16.4m (EUR 157m in Q4/19), in line with our estimates (Evli EUR 16.1m). Growth in Q4 amounted to 4.5% y/y. Comparable growth amounted to 9.3%. Comparable growth was attributable to both segments. 20.6% of sales came from outside Finland.
  • The operating profit and comparable operating profit in Q4 amounted to EUR 1.8m and 2.0m (EUR 1.7m/1.7m in Q4/19), slightly above our estimates (Evli EUR 1.7/1.7m). Capitalized product development investments during 2020 amounted to EUR 3.0m. Investments in 2021 are expected to amount to EUR 2.5m.
  • Solteq Digital: Comparable revenue in Q4 amounted to EUR 10.6m (Q4/19: EUR 10.2m) vs. EUR Evli 10.9m. The comp. EBIT was EUR 0.9m (Q4/19: EUR 0.3m) vs. Evli EUR 1.0m.
  • Solteq Software: Revenue in Q4 amounted to EUR 5.8m (Q4/19: EUR 4.8m) vs. Evli EUR 5.2m. The comp. EBIT was EUR 1.1m (Q4/19: EUR 0.6m) vs. Evli EUR 0.7m.
  • Guidance for 2021: group revenue is expected to grow clearly and operating profit to improve.
  • Dividend proposal: EUR 0.15 (Evli EUR 0.06)

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Tokmanni - The era of discount retailing

24.02.2021 - 09.45 | Company report

Tokmanni - The era of discount retailing Equity Research Read full report here → Tokmanni’s 2010-2020 revenue CAGR was 5.4%. At the end of 2020, Tokmanni had 192 stores across the country and it is the largest general discount retailer in Finland. We expect 21E revenue growth of 1.5% and adj. EBIT margin of 9%. We keep our rating “BUY” with TP of EUR 20.

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Largest general discount retailer in Finland

Tokmanni is the largest general discount retailer in Finland. Tokmanni’s revenue CAGR in 2010-2020 was 5.4%. Tokmanni reached its targeted EUR 1bn in sales in 2020 with further store network expansion and strong LFL growth. Revenue grew by 13.6%. The company also reached its adj. EBIT margin target of ~9% (9.3%) last year. The company had 192 stores across Finland at the end of 2020 and 98.8% of Tokmanni’s revenue came from physical stores.

2020 was a record year

2020 was exceptional year due to the coronavirus and the company clearly benefited from the changed environment and consumer behavior as LFL revenue increased by 12.3%. It is also noteworthy that the company has been able to attract new customers with broad product assortment and affordable prices as the share of new customers was 20% in 2020. The company targets to increase its retail selling space annually by 12,000m2 which means approx. 5 new stores per year. Additionally, Tokmanni’s long-term target is to achieve low single digit LFL revenue growth. The company will set its refined strategic targets in connection with the CMD which takes place in March.

“BUY” with TP of EUR 20

We expect 21E revenue to increase by 1.5% to EUR 1089m. In 22E-23E we expect revenue to grow by 3.5% and 3.4%, respectively. We expect 21E adj. EBIT to be on a par with last year and adj. EBIT margin of 9%. In 22E, we expect adj. EBIT margin of 9.2% and in 23E, 9.3%. We approach Tokmanni’s valuation through our scenario analysis and valuation multiples. Our scenario analysis consists of three scenarios: base case, optimistic and pessimistic. The scenario analysis yields a fair value of EUR 20. On our estimates, Tokmanni trades with 21E-22E EV/EBIT multiple of 13.8x and 12.9x, which is 6-7% discount compared to the Nordic non-grocery peers and 17-18% discount compared to the int. discount peers. We keep our rating “BUY” with TP of EUR 20.

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Fellow Finance - Time to head back on a growth track

24.02.2021 - 09.15 | Company update

Fellow Finance reported H2 results in line with our expectations. Growth is expected in 2021, with investments into growth and new products seen to keep net earnings negative. We retain our HOLD-rating and target price of EUR 2.8.

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H2 results in line with expectations
Fellow Finance reported H2 results quite in line with our expectations. Revenue amounted to EUR 5.3m (Evli EUR 5.5m) and adj. EBIT to EUR 0.7m (Evli EUR 0.7m). Adj. EPS amounted to EUR -0.02 (Evli EUR -0.01). Commission fees declined 44% y/y while interest income increased 16%. Facilitated loan volumes declined some 30% y/y. The BoD as expected proposes that no dividend be paid for FY2020. Fellow Finance expects revenue growth in 2021 compared with 2020 and to remain slightly unprofitable on net earnings level due to investments into new products and growth.

Supportive factors for growth in place
We expect growth of 7.5% in 2021 and adj. EBIT and adj. EPS of EUR 0.9m and EUR -0.04 respectively. We expect growth to be supported by a good traction in business financing, invoice funding in particular, and easing of temporary regulations on consumer financing in key markets. Investor sentiment also appears better compared with mid-2020 and new co-operation agreements such as the recently announced co-operation with Dynamic Credit also aid loan funding concerns. The new strategic initiatives within payment and e-commerce financing will also aid growth but the impact on 2021 will likely not yet be significant.

HOLD-rating and target price of EUR 2.8
We have made some larger downward revisions to our near-term estimates based on the new guidance. Without clearer signs of Fellow Finance moving towards its targets of around EUR 23m revenue and 15% EBIT-margin in 2023 we currently do not see clear upside potential to valuation. We retain our HOLD-rating and target price of EUR 2.8.

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Cibus Nordic - Hungry for more

23.02.2021 - 09.25 | Preview

Cibus reports Q4 results on Feb 25. We update our estimates to include the latest purchase. We see no big picture changes; we retain our SEK 165 TP, rating HOLD.

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Cibus’ GAV grew by 43% last year

2020 was an extraordinary year for Cibus only in the sense that the company was very busy with acquisitions. Cibus acquired about EUR 375m worth of properties in Finland and Sweden, financed in part by two equity issues that raised a combined EUR 125m. The first large Swedish portfolio acquisition was completed in March just before the pandemic lockdown. Cibus completed another large Finnish portfolio acquisition in December, and we update our estimates accordingly before the Q4 report. The latest deal adds some EUR 7m in annual net rental income capacity but will only contribute around EUR 0.3m in Q4. Cibus’ quarterly administration expenses are budgeted at EUR 1.1m; we estimate the Q4 figure a bit higher at EUR 1.5m due to the acquisition. We thus see operating income at EUR 15.1m. There should be no major extraordinary financial expenses and so our bottom-line Q4 estimate, before taxes, is EUR 9.9m.

Some more acquisitions are to be expected

The pandemic has had very limited impact on Cibus. Portfolio performance is unchanged. Cibus still has a long pipeline and is likely to add another EUR 50-100m of assets through smaller transactions this year. Cibus will probably expand to either Norway or Denmark (or both) in the coming years. The expansion is somewhat unlikely to happen this year as Cibus would prefer to inspect the properties on location. Vaccination progress now suggests travel remains difficult until at least the end of the year. Meanwhile Cibus has plenty of prospects in Finland and Sweden. The recent EUR 116m in Finnish additions imply 6% net rental yield. The figure represents some 100bps extra on Cibus’ similar metric, meaning add-ons are attractive. These relatively low valuations however limit Cibus’ shares current upside potential.

We continue to view valuation neutral

Cibus is valued at 1.13x EV/GAV and 1.37x P/NAV. The premium on book value is warranted considering Cibus’ still attractive ca. 4.75% yield, compared to the below 4% yield seen in the wider Nordic property sector. We continue to consider Cibus’ current valuation neutral. We retain our SEK 165 TP and HOLD rating.

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Fellow Finance - In line with expectations

23.02.2021 - 09.15 | Earnings Flash

Fellow Finance’s H2/2020 results were quite in line with expectations, with revenue of EUR 5.3m (Evli EUR 5.5m) and an adj. EBIT of EUR 0.7m (Evli EUR 0.7m). Fellow Finance expects growth in 2021 but for the result to remain slightly unprofitable due to growth investments. The BoD proposes that no dividend be paid for FY2020 (Evli EUR 0.00).

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  • Revenue in H2 amounted to EUR 5.3m (EUR 7.0m in H2/19), slightly below our estimates (Evli EUR 5.5m). Revenue declined 24.4% in H2. Compared with H2/19 commission fees declined by 44% and interest yields increased by 16%.
  • Fellow Finance facilitated loans during H2 for a total of EUR 64m (EUR 92m in H2/19), a decrease of 30%. Loan volumes were affected by uncertainty caused by the coronavirus pandemic, which interrupted new investments, along with temporary regulations in Finland and Poland, which limited loan intermediation possibilities.
  • Business financing volumes grew 48% compared to H2/19, with invoice funding products in particular faring well during the uncertain times.
  • The adj. EBIT in H2 amounted to EUR 0.7m (EUR 1.0m in H2/19), in line with our estimates (Evli EUR 0.7m).
  • The adj. EPS in H2 amounted to EUR -0.02 per share (EUR 0.01 in H2/19), in line with our estimate of EUR -0.01.
  • Guidance for 2021: Fellow Finance expects revenue growth compared to 2020 but for the result to remain slightly unprofitable due to investments in new products and growth.
  • Dividend proposal: The BoD proposes that no dividend be paid for the FY2020 (Evli EUR 0.00).

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Pihlajalinna - Upgraded to “BUY”

22.02.2021 - 09.45 | Company update

Pihlajalinna’s Q4 result and dividend proposal outpaced the expectations. We have increased our 21E estimates and expect revenue growth of 10% and adj. EBIT margin of 4.9%. We upgrade to “BUY” (“HOLD”) with TP of EUR 12 (10.5).

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Positive surprise with Q4 result

Pihlajalinna’s Q4 result outpaced the expectations. Revenue increased by 2.6% y/y to EUR 137.2m (135.2m/135.5m Evli/cons). Revenue growth was driven by increased COVID-19 testing volumes which increased by 67% compared to the previous quarter. At the same time, customer volumes in private clinics locations were 10% lower compared to the comparison period. Adj. EBIT improved by ~31% to EUR 7.3m (5.3m/4.8m Evli/cons). 2020 dividend proposal of EUR 0.20 beat also clearly the expectations (0.12/0.09 Evli/cons).

Revenue streams from several sources

Pihlajalinna’s measures taken towards improved profitability have worked and we expect the company is able to increase its profitability further. Pihlajalinna has growth opportunities in several markets and the company has strengthened its positioning e.g. in the occupational healthcare market (e.g. Työterveys Virta). The company has expanded its operations in the public side as the services of Selkämeren Terveys Oy began in the beginning of the year. The Huhtasuo health center outsourcing started in December. Additionally, Pihlajalinna won a significant proportion of a competitive bidding process for the outpatient clinic, surgery, and inpatient services of the Northern Ostrobothnia Hospital District in early 2021.

“BUY” (“HOLD”) with TP of EUR 12 (10.5)

Pihlajalinna expects 2021 revenue to increase clearly and adj. EBIT to improve clearly compared to 2020. The company will introduce its updated strategy soon and we expect to get more color on that in connection with the CMD which takes place in late March. We expect 21E revenue growth of ~10% (EUR 559m) and adj. EBIT margin of 4.9% (EUR 27.3m). On our estimates, the company trades with 21E-22E EV/EBIT multiple of 15.6x and 13.2x which translates into 12-13% discount compared to the peers. We upgrade to “BUY” (“HOLD”) with TP of EUR 12 (10.5).

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Next Games - Ingredients for growth in place

22.02.2021 - 09.30 | Company update

Next Games H2 results were overall rather neutral, with the highlight being the continued good publishing operations profitability. The new games appear to be well on the way but larger scale ramp-up will likely have to wait until H2/2021. We retain our SELL-rating with a target price of EUR 1.8 (1.6).

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Rather neutral H2, good publishing operations profitability
Next Games H2 revenue was EUR 12.8m (Evli 13.6m) and adj. EBIT EUR -0.2m (Evli 0.5m). Apart from an overly optimistic view on the contribution of the new projects on our part the H2 figures were quite as expected, with the gross bookings of the NML and Our World games in line with our expectations. NML continued on a rather steady trajectory while Our World metrics continued on a declining trend. Publishing operations EBITDA was at a good level of EUR 3.0m (Evli EUR 3.4m) and FY2020 publishing operations EBITDA-% was at a commendable 24%.

New games key factor in 2021
Next Games expects revenue in 2021 to amount to over EUR 40m and for EBITDA to remain positive. Based on the comments for the plans to scale the new games (Blade Runner Rogue, Stranger Things: Puzzle Tales) we see that in our former estimates our scaling assumptions may have been too optimistic. The Blade Runner Rogue game is set for launch in its main market the US in Q1. The Stanger Things game was launched in certain markets in December 2020 and is set for certain feature updates before larger scale up. We have adjusted our 2021 revenue estimate to EUR 44.2m (prev. 50.5m) and EBITDA estimate to EUR 2.1m (1.7m). We expect larger ramp-up in scaling of games during H2.

SELL with a target price of EUR 1.8 (1.6)
Next Games remains a growth company, with yet little proof of growth on group level in previous years. Success of new games is crucial, both for growth and improvements in cash flows, with the proportionately high share of R&D affecting profitability and cash position. On our new estimates and with increases in peer multiples we raise our TP to EUR 1.8 (1.6), SELL-rating intact.

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Vaisala - Cautious outlook

22.02.2021 - 08.54 | Company update

Vaisala’s Q4 missed expectations, but overall Vaisala managed to perform well in 2020 despite the pandemic affecting especially W&E. IM’s performance was once again strong, even in difficult environment. Vaisala’s guidance for 2021 was cautious, despite Vaisala seeing market starting to gradually recover and new orders picking up nicely. Based on the report, we’ve lowered our 2021-23E estimates and continue to see valuation expensive, thus we maintain our TP of 32€ and SELL rating.

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Q4 orders received picked up nicely in both BU’s

Vaisala’s Q4 result missed ours and consensus expectations, but strong order intake growth for both BU’s surprised positively and order book remains at good level. Q4 net sales decreased by -10% to 106.9 MEUR (109.5 Evli /108 cons). Q4 EBIT came in at 12.2 MEUR (14 Evli / 13.6 cons), resulting in 11,4% EBIT-margin (Q4’19: 17.7 MEUR, 15% EBIT-margin). Orders received grew +8% to 111.9 MEUR vs. 103.3 MEUR last year. Orders received grew +7% in W&E and +11% in IM. Order book was 137.8 MEUR vs. 139 MEUR in Q4’19. W&E fell short of our expectations; net sales decreased by -16% to 67 MEUR vs. 73.5 MEUR our expectation. W&E EBIT was 5.2 MEUR (7.3 MEUR Evli), resulting in 7,8% EBIT-margin (Q4’19: 14,7%). After a few weaker quarters, IM continued its strong performance, beating our estimates; net sales grew 10% to 39.9 MEUR vs. 36 MEUR our expectation. IM EBIT was 8.3 MEUR (6.8 MEUR Evli), resulting in 20,8% EBIT-margin (Q4’19: 15,1%). Dividend proposal is 0.61 (0.63 Evli / 0.63 cons).

 Despite solid performance and expected market recovery, outlook remained cautious

Looking at 2020, Vaisala managed to perform well despite the pandemic affecting especially W&E and creating uncertainties regarding deliveries. IM’s performance was once again strong, even in difficult environment. While W&E 2020 net sales and EBIT declined -10% and -17,5% respectively (on high comparison figures), IM 2020 net sales and EBIT grew 1% and 22%. In addition, IM is currently seeing strong growth led by pharmaceutical customer segment which includes COVID-19 vaccine suppliers. Despite continued uncertainties due to the pandemic, Vaisala sees market gradually recovering in 2021, except for meteorology market in developing countries. Vaisala issued 2021 guidance expecting net sales between 370–400 MEUR and EBIT between 30–45 MEUR. Pre-Q4, both we and consensus 2021E expectations were above the EBIT guidance. The outlook was a disappointment, given the decent performance last year, new orders picking up, lower opex level and expected market recovery.

Maintain target price of 32 euros and SELL recommendation
 
Based on the report and new guidance, we have lowered our estimates for 2021-23E. In 2021E, we expect +1,6 net sales growth driven by +7% growth in IM, while we expect W&E growth to be slightly negative. We expect EBIT of 41 MEUR (10,6 % margin) which is above guidance mid-point, driven by good performance in IM. On our renewed estimates, Vaisala is still trading at clear premiums compared to our peer group and we continue to see valuation stretched given the weaker financial performance compared to peer group. We maintain our TP of 32€ and SELL rating due to lowered estimates and expensive valuation. Our TP values Vaisala at 21-22e EV/EBIT multiples of 28x and 22x which is still above the peer group, reflecting Vaisala’s strong sustainability profile, healthy dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

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Endomines - Funding secured, production ahead

19.02.2021 - 13.00 | Company update

With the rather successful completion of the rights issue, raising some SEK 214m, Endomines is now looking to restart production, with first significant production likely to be seen in H2. We retain our HOLD-rating with a target price of SEK 2.7 (2.9).

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Earnings clearly short of estimates
Endomines as expected did not report any significant revenue in Q4 (SEK 0.7m/0.5m act.*/Evli), as Friday has been under care and maintenance. EBIT fell clearly short of our estimates (SEK -99.0m/SEK -16.9m act.*/Evli) due to payments for claims of the US Grant project and write-downs of assets performed at the year-end. As expected, no dividend distribution was proposed. *Figures not reported, derived from Q1-Q3 and 2020 figures.

Production to ramp-up in H2
Endomines did not give a production guidance for 2021, aiming to give a guidance in connection with the Q1 release. Deepening of the Pampalo is expected to start mid-H1 while the goal is to have the first gold production by the end of the year. Production start at Friday will be somewhat dependent on how long the spring thaw will last but Endomines expects to be able to ramp-up production by early summer. Endomines completed its rights issue in January, raising approx. SEK 214m, which is a much-needed support to the previously very tight liquidity situation. Although the proceeds fell short of the target, the outcome is in our view still quite decent given the pressed financial situation the company has been facing. The Coronavirus pandemic is still causing some stir in supply chains but should not have any major short-term impact given the time the company has had to prepare for restarting production at Friday.

HOLD with a target price of SEK 2.7 (2.9)
We have made changes to our estimates, with the outcome of the rights issue vs. the assumed full subscription causing the largest changes to our SOTP model, along with the slight pressure to gold prices in Q1. We adjust our target price to SEK 2.7 (2.9) with our HOLD-rating intact.

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Marimekko - Solid performance continues

19.02.2021 - 09.45 | Company update

Marimekko’s Q4 result met the expectations with revenue growth of 8% y/y. Adj. EBIT improved by ~90%. The outlook remains good despite the uncertainties related to the pandemic. We keep our rating “BUY” with TP of EUR 57 (50).

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Q4 result met the expectations

Marimekko’s Q4 result was somewhat in line with the expectations. Revenue increased by 8% y/y to EUR 37m (38m/38m Evli/cons.). Revenue was driven by good wholesale sales development in Finland, EMEA and Scandinavia. Customer numbers in stores declined as the pandemic situation worsened towards the end of the year. This impacted negatively on retail sales. On the other hand, retail sales were supported by strong growth in online sales. Adj. EBIT amounted EUR 5.8 (+90% y/y) vs. 5.0m/4.7m Evli/consensus. Profitability was boosted by increased sales and decreased fixed costs but at the same time, gross margin declined, resulting from increased online sales. 2020 dividend proposal is EUR 1.0 (1.2/1.1 Evli/cons.).

The outlook remains bright

Fashion industry has faced enormous losses due to the pandemic but despite the situation, the management of Marimekko has shown good capabilities of being able to adjust to the current environment. This reinforces our view of the company’s ability to grow profitably in the future as well. Marimekko is also benefiting from the changed consumer behavior where sustainability plays a big role. Marimekko expects sales in Finland and APAC-region to grow in 2021. Domestic wholesale sales will be boosted by nonrecurring promotional deliveries and a vast majority of those will take place in H2’21. Marimekko expects to open ~5-10 new stores and shop-in-shops in 2021 of which most openings will be in Asia.

“BUY” with TP of EUR 57 (50)

The ongoing pandemic situation is still impacting on Marimekko’s sales and we expect the situation to normalize in H2E. Marimekko expects 21E sales to increase from 2020 and adj. EBIT margin to be on a par with the long-term target of 15%. We have slightly increased our estimates and expect 21E sales of EUR 135m (+10% y/y) and adj. EBIT of EUR 20.5m (15.2% margin). On our estimates, the company trades with 21E-22E EV/EBIT multiple of 20.1x and 16.9x which is 50-70% premium compared to the premium peers. We see the premium acceptable due to the strong revenue and profitability development. We keep our rating “BUY” with TP of EUR 57 (50).

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Exel Composites - Sharp appreciation is justified

19.02.2021 - 09.30 | Company update

Exel beat estimates; we see the share is still not expensive all considered. Our TP is now EUR 10.0 (7.25), rating BUY.

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Broad positive development continued

Exel recorded EUR 27.5m in Q4 revenue, up 4% y/y. The figure was a bit above the EUR 27.2m/26.5m Evli/cons. estimates. Wind power’s order timings meant the segment’s EUR 6.6m top line, down 6% y/y, didn’t meet our EUR 8.9m estimate. Relative strength in other segments nevertheless helped to make up. Buildings and infrastructure developed especially strong and Exel continues to see potential in the segment due to e.g. cable core rods. The segment’s EUR 7.0m Q4 revenue (up 22% y/y) was way above our EUR 5.1m estimate. Favorable mix and further efficiency gains helped Exel to EUR 2.7m EBIT in Q4 vs the EUR 2.2m/1.8m Evli/cons. estimates. Operating margin was thus again in line with the above 10% long-term target. Order intake also grew by 6% y/y, which indicates brisk start for the year and is notable considering the high comparison figure.

We estimate EBIT at EUR 10.7m this year

Exel is positioned for 5-6% top line growth in the coming years. There are now other segments rising with Wind power. Wind however remains important and we see no reason why it wouldn’t contribute growth also this year. Global wind capacity grows by big numbers and we expect the Exel segment to post double-digit growth also in FY ’21 (up 19% in FY ’20). The Austrian plant is up and ready to serve European accounts across many segments, perhaps with a tilt towards Machinery and electrical, a segment we understand has relatively high gross margins. Exel already achieved high operating margin last year, and we estimate good potential for further gains. Since the EUR 8.5m Austrian investment has now been completed we see a solid organic growth outlook with relatively low EUR 5m annual capex levels. We make only small adjustments to our estimates.

Valuation is still not demanding all things considered

Exel is valued at ca. 8x EV/EBITDA and 12x EV/EBIT on our FY ’21 estimates. In our opinion Exel is making solid progress towards long-term targets; we see the company reaching an annual 10% EBIT margin already in FY ‘22. This achievement would help the respective earnings multiples to decrease to around 7x and 10x levels next year. Our TP is now EUR 10.0 (7.25), retain BUY rating.

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Scanfil - Outlook remains robust

19.02.2021 - 08.50 | Company update

Scanfil’s Q4 didn’t serve any major surprises, but the overall picture turned even more encouraging. Our new TP is EUR 8.0 (6.5). Our rating is now BUY (HOLD).

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Q4 figures as well as FY ’21 guidance in line with estimates

Scanfil Q4 revenue, flat y/y at EUR 154m, met the estimates. The Communication segment’s top line remained a bit soft. This wasn’t big news as the Hangzhou divestment and low base station product sales were known. The pick-up in Consumer Applications’ demand was a positive surprise given that the segment had been underperforming already before the pandemic. Energy & Automation posted a respectable 18% organic growth. Industrial and Medtec & Life Science performed close to estimates. We view these two the most stable segments and positioned for ca. 5% growth in the coming years (it should be noted Medtec & Life Science hasn’t gained any meaningful demand due to the pandemic). Scanfil thus posted EUR 10.4m Q4 EBIT, compared to the EUR 10.0m/9.9m Evli/cons. estimates.

Both guidance and comments are encouraging

We revise our estimates up a bit as the guidance implies demand holds even in an environment best described as extraordinary. Our previous EUR 617m FY ’21 revenue estimate was close to the EUR 620m midpoint; we revise the figure up to EUR 625m. We continue to expect the same EBIT margin as before and so our EBIT estimate only increases from EUR 41.6m to EUR 42.2m. This is not a big quantitative difference, but the report adds confidence. Scanfil says outlook is perhaps a bit better now than a few months ago, in addition to which gross margin improved slightly in Q4. It thus seems unlikely the guidance will fail, particularly considering Scanfil’s history. The company’s balance sheet is ready for M&A, although any deal is not imminent. Relatively low capex needs also help the overall valuation picture, even if the share price has gained a lot in recent months.

Performance and outlook warrant higher valuation

In our opinion Scanfil’s extended track record and robust outlook justify higher multiples. Our updated EUR 8.0 (6.5) TP values Scanfil at about 8.5x EV/EBITDA and 12x EV/EBIT on our estimates for this year. Earnings growth would help to decrease the multiples to respective 8x and 10.5x levels next year. Our TP is now EUR 8.0 (6.5). Our new rating is BUY (HOLD).

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Next Games - No major surprises

19.02.2021 - 08.45 | Earnings Flash

Next Games' net sales in H2 amounted to EUR 12.8m, slightly below our estimate (EUR 13.6m Evli). The adj. EBIT was below our expectations at EUR -0.2m (EUR 0.5m Evli). Publishing operations profitability improved to EUR 3.0m (Evli EUR 3.4m) compared with EUR 1.5m in H2/19.

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  • Net sales in H2 amounted to EUR 12.8m (EUR 15.5m in H2/19), slightly below our estimate (EUR 13.6m Evli). Net sales in H2 declined 17% y/y. Compared to our estimates, gross bookings of published games were quite in line with expectations while the new games did not yet contribute as anticipated.
  • The adj. operating profit in H2 amounted to EUR -0.2m (EUR -2.2m in H2/19), below our expectations (EUR -0.2m Evli). The EBITDA of publishing operations in H2 amounted to EUR 3.0m (Evli EUR 3.4m).
  • EBIT amounted to EUR -1.7m (H2/19: -3.9m), slightly below our estimate of EUR -1.3m.
  • TWD: NML (Q3/Q4) - DAU 146k/142k (163k/183k), MAU 456k/429k (479k/651k), ARPDAU EUR 0.34/0.31 (0.21/0.25).
  • TWD: OW (Q3/Q4)- DAU 66k/62k (127k/114k), MAU 246k/231k (529k/591k), ARPDAU EUR 0.43/0.43 (0.36/0.38).
  • Games in development: Blade Runner Rogue is planned to be launched in the main market the US during early 2021. The Stranger Things game was launched in the first selected markets in December 2020.
  • Outlook for 2021: Revenue is expected to grow to at least EUR 40m and full-year EBITDA is expected to be positive.
  • Next Games’ BoD proposes that no dividends be distributed (Evli EUR 0.00).

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Pihlajalinna - Q4 outpaced the expectations

19.02.2021 - 08.40 | Earnings Flash

Pihlajalinna’s Q4 result outpaced the expectations. Q4 revenue amounted EUR 137.2m (+2.6%) vs. EUR 135.3m/135.5m Evli/cons, while adj. EBIT landed at EUR 7.3m vs. EUR 5.3m/4.8m Evli/cons estimates. Dividend proposal is EUR 0.20 vs. EUR 0.12/0.09 Evli/cons. 2021 revenue is expected to increase clearly and adj. EBIT is expected to improve clearly compared to 2020.

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  • Q4 revenue was EUR 137.2m vs. EUR 135.3m/135.5m Evli/cons estimates. Revenue increased by 2.6% y/y. COVID-19 testing volumes increased by 67% compared to the previous quarter. Customer volumes of private clinic locations were ~10% lower than in the comparison period.
  • Q4 adj. EBITDA was EUR 15.7m (11.5% margin) vs. EUR 14.1m/14.0m Evli/cons estimates.
  • Q4 adj. EBIT was EUR 7.3m (5.3% margin) vs. EUR 5.3m/4.8m Evli/cons estimates.
  • Q4 EPS was EUR 0.15 vs. EUR 0.08/0.12 Evli/cons.
  • Dividend proposal is EUR 0.20 vs. EUR 0.12/0.09 Evli/cons.
  • Guidance for 2021E: the company expects revenue and adj. EBIT to improve clearly compared to 2020.
  • Pihlajalinna will publish new strategy during the beginning of 2021.

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Finnair - Waiting for better times

19.02.2021 - 08.05 | Company update

Finnair - Waiting for better times Equity Research Read full report here → Finnair’s Q4 figures were ugly, as expected. As the pandemic situation prolongs, we expect slow recovery to start during the summer but better improvement is expected to start in late 2021. We keep our rating “HOLD” with TP of EUR 0.60.

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Revenue declined by 87% y/y

Once again, Finnair reported ugly quarterly figures, as the coronavirus situation is not showing any signs of abating. Strict travel restrictions remained, and there was an overall lack of demand during Oct-Dec. Finnair’s Q4 revenue decreased by 87% y/y to EUR 102m (94m/101m Evli/cons.). Adj EBIT was EUR -163m (-172m/-167m Evli/cons.). Q4 ASK decreased by 89% and PLF was 29.2% (-49.8pp). No dividend is distributed for 2020.

Recovery expected to start during the summer

According to the company, the comparable operating loss in Q1 will be of a similar magnitude as in Q2-Q4’20. The company continues to fly with limited network during Q1 and estimates that the travel begins to recover from summer 2021 onwards as the vaccination coverage increases and countries start lifting travel restrictions. However, the visibility remains weak and therefore the company is not giving revenue guidance for 2021. The company expects that traffic will recover to 2019 levels in 2023 (measured in ASKs). We expect Finnair is well positioned once the recovery starts and the profitability should improve notably due to the permanent cost savings target of EUR 140m from the beginning of 2022 (compared to 2019).

“HOLD” with TP of EUR 0.60

The State of Finland and Finnair are preparing an unsecured hybrid loan of up to EUR 400m which is expected to be finalized during the first quarter of 2021. As the company still has available funding, we are not concerned even if the pandemic situation continues throughout the summer. We expect H1’21E to remain extremely weak but slightly better recovery is expected to start in Q3E. We expect 2021E revenue of EUR 1545m and adj. EBIT of EUR -312m. We highlight that there are still significant uncertainties with our estimates. We keep our rating “HOLD” with TP of EUR 0.60.

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Innofactor - On a path of solid progress

19.02.2021 - 08.00 | Company update

Innofactor reported solid Q4 figures, adjusted for one-offs, and proposed the first dividend distribution in company history. We expect a pick-up in growth and continued margin improvement in 2021. We retain our BUY-rating with a target price of EUR 1.75 (1.45).

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One-offs hampered otherwise solid figures
Innofactor reported in our view solid Q4 earnings. Although EBITDA was below our estimates at EUR 1.6m (Evli EUR 2.1m), a one-off of approx. EUR 1.0m relating to a final write-down and cost item of a customer project in Sweden was included, without which EBITDA would have clearly exceeded expectations. Net sales were also slightly above our estimates at EUR 18.3m (Evli EUR 17.6m), showing modest growth of 4.7% y/y. A dividend distribution of EUR 0.04 per share was proposed (Evli EUR 0.03), with authorization being sought for a further potential extra dividend of max 0.04 per share, which if granted and utilized in full would translate to a dividend yield of 5.6%.

Growth and improved profitability expected
Innofactor followed its usual line of guidance, expecting net sales and EBITDA to increase in 2021 compared with 2020. We expect sales growth of 6.4% and EBITDA-margins to improve to 13.1% (2020: 10.8%). With the good order backlog and a balance sheet supportive of acquisitions growth could pick up more clearly, but uncertainty, especially given the on-going pandemic, is still at higher levels and as such we are still wary of assuming higher growth figures. Innofactor is still quite some way from its 20% growth and EBITDA-% target but the targets do not appear to be quite as out of grasp as earlier.

BUY-rating with a target price of EUR 1.75 (1.45)
On our revised estimates we raise our target price to EUR 1.75 (1.45), valuing Innofactor at ~14x 2021 PPA adj. P/E, with our BUY-rating intact. Further upside potential compared to peer multiples still exists, but we consider further evidence of growth pick-up and earnings improvement mandated to justify a higher valuation.

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Endomines - Production looking to pick up in H2

18.02.2021 - 11.00 | Earnings Flash

Revenue in Q4 was as expected very limited, with Friday in care and maintenance. Profitability figures were burdened by US Grant payments and write-downs.

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  • Revenue* in Q4 amounted to SEK 0.7m, with our estimates at SEK 0.5m. The Friday mine was put into care and maintenance during Q3 and as such no significant new gold concentrate production took place during Q4.
  • EBITDA* in Q4 was at SEK -39.6m, below our estimate of SEK -14.0m. Adj. EBITDA* excl. payments for claims of the US Grant project amounted to SEK -9.7m, slightly better than expected.
  • EBIT* amounted to SEK -99.0m (Evli SEK -16.9m). EBIT was affected by a clear increase in depreciations and write-downs due to write-downs performed at year-end.
    *Figures not reported, derived from Q1-Q3 and 2020 figures
  • At Pampalo, deepening of the mine is expected to start in late March/early April after mining contractor has been selected and mobilized to the site and mining to start later in the year. At Friday the technical problems at the mill are being addressed and production is expected to start as soon as weather conditions permits in late spring.
  • Liquid assets amounted to SEK 11.3m at the end of the quarter.
  • During January 2021 Endomines carried out its rights issue, raising approximately SEK 214m.
  • Endomines has not given a production guidance for 2021 but aims to specify its production guidance in connection with the Q1 release.

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Finnair - The suffering continues

18.02.2021 - 09.35 | Earnings Flash

The pandemic continued to hamper Finnair operations during Q4. Finnair’s Q4’20 adj. EBIT was EUR -163m vs. our expectation of EUR -172m and consensus of EUR -167m. Revenue decreased by ~87% y/y and was EUR 102m vs. our expectation of EUR 94m and consensus of EUR 101m.

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  • Q4 revenue was EUR 102m (-87% y/y) vs. EUR 94m/101m Evli/cons.
  • ASK decreased by ~89% y/y in Q4. PLF was 29.2% (-49.8 points). Strict travel restrictions globally and overall lack of demand forced also Finnair to operate with limited network.
  • Q4 adj. EBIT was EUR -163m vs. EUR -172m/-167m Evli/cons. Q4 comparable EBITDA was EUR -72m vs. EUR -85m our view.
  • Absolute costs in Q4: Fuel costs were EUR 27m vs. EUR 31m our view. Staff costs were EUR 42m vs. EUR 56m our view. All other OPEX+D&A combined were EUR 209m vs. EUR 190m our view.
  • Unit costs: CASK was 21.10 eurocents vs. 21.02 eurocents our view.
  • No dividend is distributed for 2020.
  • The company expects similar comparable operating loss in Q1’21 as in Q2-Q4’20. In Q1, Finnair continues to operate with limited network. As the visibility thereafter is weak, the company does not provide a full year revenue guidance.

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Innofactor - Write-down burdened profitability

18.02.2021 - 09.30 | Earnings Flash

Innofactor’s Q4 results were on an adj. basis above our expectations. Net sales amounted to EUR 18.3m (Evli EUR 17.6m), while EBITDA amounted to EUR 1.6m (Evli EUR 2.1m). EBITDA included one-offs of EUR 1.0m and adj. figures were better than expected. Dividend proposal EUR 0.04 per share (Evli EUR 0.03). Net sales and EBITDA in 2021 are estimated to increase compared to 2020.

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  • Net sales in Q4 amounted to EUR 18.3m (EUR 17.4m in Q4/19), slightly above our estimates (Evli EUR 17.6m). Net sales in Q4 grew 4.7% y/y.
  • EBITDA in Q4 was EUR 1.6m (EUR 1.6m in Q4/19), below our estimates (Evli EUR 2.1m), at a margin of 8.7%. EBITDA included a write-off of approx. EUR 1.0m relating to a customer project in Sweden. EBITDA excl. NRI’s would have been EUR 2.6m, at a margin of 14.0%.
  • Operating profit in Q4 amounted to EUR 0.4m (EUR 0.5m in Q4/19), below our estimates (Evli EUR 1.0m), at a margin of 2.2%. EBIT excl. NRI’s would have been EUR 1.4m.
  • Order backlog at EUR 60.4m, up 21.4% y/y. Innofactor received several significant orders during Q3, which boosted the order backlog in Q4.
  • Guidance for 2021: Innofactor’s net sales and EBITDA in 2021 are estimated to increase compared to 2020.
  • Dividend proposal: Innofactor’s BoD proposes a total distribution of EUR 0.04 per share (Evli EUR 0.03).

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Exel Composites - Strong profitability once again

18.02.2021 - 09.30 | Earnings Flash

Exel Composites’ Q4 top line was slightly above estimates, but the strong profitability was a clear positive surprise. The overall impression is very solid.

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  • Exel Q4 revenue was EUR 27.5m, compared to the EUR 27.2m/26.5m Evli/consensus estimates. Revenue grew by 3.5% y/y. Q4 growth was strong in Europe and Asia-Pacific.
  • Wind power revenue was EUR 6.6m vs our EUR 8.9m estimate (down by 6% y/y). Strongness in other segments, notably Buildings and infrastructure, helped compensate for this weakness relative to our estimate. Wind power’s relatively low share may have also helped the earnings beat.
  • Exel Q4 adj. EBIT amounted to EUR 2.7m vs the EUR 2.2m/1.8m Evli/consensus estimates. Adjusted operating margin was therefore a very strong 9.9%.
  • Q4 order intake was EUR 33.4m and thus increased by 5.7% y/y.
  • Exel guides revenue and adjusted operating profit to increase in 2021 compared to 2020.
  • The Board of Directors proposes EUR 0.20 per share dividend distribution, the same as our estimate.

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Marimekko - Good result despite the uncertainties

18.02.2021 - 08.35 | Earnings Flash

Marimekko’s Q4 result was somewhat in line with expectations. Net sales were EUR 37m (8% y/y) vs. EUR 38m/38m Evli/cons. Adj. EBIT was EUR 5.8m vs. EUR 5.0m/4.7m Evli/cons. 2020 dividend proposal is EUR 1.0 vs. EUR 1.20/1.10 Evli/cons.

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  • Finland: revenue was EUR 23.2m vs. EUR 24.9m Evli view. Revenue increased by 6% y/y. Wholesale sales developed favorably and were boosted by non-recurring promotional deliveries.
  • International: revenue increased by 11% y/y and was EUR 14.1m vs. EUR 13.2m Evli view. Wholesale sales developed well also in EMEA and Scandinavia.
  • Q4 adj. EBIT was EUR 5.8m (15.5% margin) vs. EUR 5.0m/4.7m (13.1%/12.4% margin) Evli/cons. Profitability was boosted by increased sales and decreased fixed costs. On the other hand, relative sales margin declined due to higher logistics costs resulting from an increase in online sales.
  • Q4 adj. EPS was EUR 0.51 vs. EUR 0.46/0.43 Evli/cons.
  • 2020 dividend proposal is EUR 1.0 vs. EUR 1.20/1.10 Evli/cons. Dividend from 2019 is EUR 0.90.
  • 2021E guidance: net sales are expected to be higher than in the previous year. Adj. EBIT margin is expected to be approx. on a par with the long-term goal of 15%.

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Scanfil - No negative surprises

18.02.2021 - 08.30 | Earnings Flash

Scanfil capped 2020 strong and we didn’t find notable negatives from the Q4 report. Scanfil enters this year with confidence and the guidance is in line with the long-term organic growth targets.

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  • Scanfil Q4 revenue amounted to EUR 154.1m, compared to the EUR 153.7m/152.1m Evli/consensus estimates. The y/y top line change was -0.4%.
  • Communication top line amounted to EUR 19.5m vs our EUR 22.8m estimate.
  • Consumer Applications was EUR 27.5m vs our EUR 22.6m expectation. The positive surprise is encouraging given that the segment has been a soft performer recently. Scanfil says a new customer also contributed to the result.
  • Energy & Automation revenue stood at EUR 34.6m, compared to our EUR 30.3m estimate. According to Scanfil the 18% y/y growth stemmed broadly from the segment’s customer base.
  • Industrial was EUR 43.2m while we expected EUR 48.2m.
  • Medtec & Life Science revenue was EUR 29.3m, compared to our EUR 29.7m estimate.
  • Scanfil Q4 EBIT was EUR 10.4m vs the EUR 10.0m/9.9m Evli/consensus estimates.
  • Scanfil guides FY ’21 revenue to be EUR 600-640m, adjusted EBIT EUR 40-44m. The guidance is in line with our estimates and thus backs the long-term organic EUR 700m revenue and 7% operating margin targets for FY ’23.
  • The Board of Directors proposes EUR 0.17 per share dividend distribution, compared to our EUR 0.15 estimate.

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Pihlajalinna - Revenue supported by COVID-19 testing

17.02.2021 - 09.25 | Preview

Pihlajalinna reports its Q4 result on this week’s Friday, 19th of February. We have made only small adjustments to our estimates and keep our rating “HOLD” with TP of EUR 10.5 (9.5).

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Expecting ~1% revenue growth in Q4

Despite the COVID-19 situation worsened towards the end of the year we expect a fairly good Q4 result. We expect Pihlajalinna’s Q4E revenue to grow by ~1% y/y to EUR 135m (cons. EUR 136m), supported by increased volumes of COVID-19 testing. On the other hand, as the virus situation has prolonged, we expect the demand of private services (e.g. fitness centers) is still lagging behind. We expect adj. EBIT of EUR 5.3m (cons. EUR 4.9m). We expect 20E dividend of EUR 0.12 (cons. EUR 0.09).

The virus is still hampering private services

The outlook of many private services e.g. fitness centers remains weak as the pandemic shows no signs of abating and the vaccinations haven’t started as quickly as first anticipated due to the delays in the vaccine supply. On the other hand, we expect the COVID-19 testing to continue strong, supporting revenue. The company started negotiations for the purchase of all shares in Työterveys Virta at the end of 2020 which gives Pihlajalinna almost 30 % share of the occupational healthcare market in the Oulu region. Revenue of Työterveys Virta in 2019 was approx. EUR 13.6m. The Due Diligence review has been completed, and the procurement has now advanced to the contract phase and approval of bills of sale. The total price of the shares with cash reserve is EUR 17.6m (meaning EV/Sales multiple of 1.3x). The acquisition is not yet included to our estimates.

“HOLD” with TP of EUR 10.50 (9.5)

We expect FY20E revenue of EUR 507m (-2.3% y/y) and adj. EBIT of EUR 18.8m. On our estimates, the company trades with 20E-21E EV/EBIT multiple of 23.3x and 15.9x. Which is 1-12% discount compared to the peers. We keep our rating “HOLD” with TP of EUR 10.5 (9.5).

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Verkkokauppa.com - Ambitious plans for growth

15.02.2021 - 10.10 | Company update

Verkkokauppa.com delivered a strong Q4 result which was in line with expectations. The company introduced its refined strategy for 2021-2025 and targets EUR 1bn of sales and EBIT margin of 5% by the end of 2025. We keep our rating “BUY” with TP of EUR 9.5 (8.3).

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Solid Q4 result

Verkkokauppa.com’s Q4 result was strong, as expected. Revenue grew by 10% y/y to EUR 176m (171m/170m Evli/cons.). Revenue was boosted by good growth in mid-sized categories (especially MDA and sport equipment). Gross margin (15.1% y/y vs. our 14.6%) was driven by strong performance of mid-sized, higher margin categories. Adj. EBIT amounted EUR 6.2m (6.6m/6.3m Evli/cons.). 2020 dividend proposal of EUR 0.45 (0.23 plus additional dividend of 0.22) was clearly above expectations (0.23 Evli & cons.).

Targeting sales of EUR 1bn by the end of 2025

The company introduced its refined strategy for 2021-2025 and highlighted five pillars on what the growth will be built. These pillars are: excellent customer experience & strong brand, efficient fulfilment, superior technology backbone, extensive assortment and cost competitiveness. The company targets to reach sales of EUR 1bn and EBIT margin 5%. Growth is sought e.g. through core product categories and new categories with attractive margin potential, especially online. Further, the company aims to double its B2B and private label business by 2025. Also, new business and M&A opportunities are on the table. However, the growth will mainly be organic and stem from the transition from brick-and-mortar to e-commerce. The company is also investing to its warehouse in Jätkäsaari. The automation investment program (capex of EUR ~4m) is expected to be completed by the end of 2022. The investment supports further growth and creates cost efficiencies, boosting profitability development.

“BUY” with TP of EUR 9.5 (8.3)

The company expects 21E sales of EUR 570m-620m and adj. EBIT of EUR 20m-26m. Improved brand image, high customer satisfaction and investments into growth and more efficient operations reinforce our view of the company’s ability to grow profitably. We have increased our 21E-22E sales expectations by 4-7% and expect 21E sales of EUR 592m. Our adj. EBIT expectation is EUR 22m. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.0x and 14.2x, which translates into a discount compared to the peers. We keep our rating “BUY” with TP of EUR 9.5 (8.3).

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Tokmanni - Towards new milestones

15.02.2021 - 09.25 | Company update

Tokmanni’s Q4 result outpaced the expectations. The company was also able to reach its adj. EBIT margin target of 9% and sales target of EUR 1bn in 2020. New strategic targets are introduced in March. We keep our rating “BUY” with TP of EUR 20 (18.4).

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Result outpaced the expectations
Tokmanni reported extremely strong Q4 figures. Revenue increased by 14.6% y/y to EUR 327m (vs. 315m Evli & cons.). LFL growth was 13.4% y/y. Sales development was at good level in all product categories. Online sales grew by 134% y/y and accounted for 1.4% of total revenue. Adj. gross profit amounted EUR 120m (36.8% margin) vs. EUR 110m Evli & consensus. Adj. EBIT totaled EUR 45m (38m/37m Evli/cons.). Dividend proposal was also clearly above expectations as it was EUR 0.85 per share vs. EUR 0.78 our view and EUR 0.74 consensus.

Financial targets met – new ones to come
Tokmanni’s target was to reach adj. EBIT margin of 9% which was exceeded last year. The company also exceeded sales of EUR 1bn. Tokmanni will introduce its revised strategic targets in connection with the CMD which takes place in March. We see that there is still gross margin improvement potential as the company aims constantly to increase the share of direct import and private labels. This boosts profitability development. We expect further growth in online sales, though the share is still expected to remain relatively low compared to the total sales (online sales grew by 124% in 2020). The company’s low price image combined with broad product assortment has paid off and the company has been able attract new customers. The share of new customers was 20% in 2020. Tokmanni has also launched a review on the possibilities of expanding the logistics center in Mäntsälä and we hope to get more color on that later during the year.

“BUY” with TP of EUR 20 (18.4)
Tokmanni expects slight growth in revenue in 2021. Adj. EBIT is expected to be at the same level as in the previous year. We have increased our 21E sales expectation by ~4% and expect sales of EUR 1089m (+1.5% y/y). We expect adj. EBIT of EUR 99m (9.1% margin). On our estimates the company trades with 21E-22E EV/EBIT multiple of 13.7x and 12.8x which is 7-8% discount compared to the Nordic non-grocery peers. We keep our rating “BUY” with TP of EUR 20 (18.4).

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Raute - Potential is valued too steep

15.02.2021 - 09.15 | Company update

Raute’s Q4 was uneventful compared to preceding ones, not counting the large Russian order. Raute seems to be doing correct things from a strategic perspective, but we view the multiples simply too high given the current weak market environment. Our TP is EUR 21 (20), retain SELL.

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Still no marked improvement in smaller project orders

Raute’s EUR 39m Q4 revenue was known before. The EUR 0.8m EBIT didn’t meet our EUR 2.0m estimate as the mix was tilted more towards projects than we expected. Inventory write-downs and pandemic restrictions were further headwinds. Order intake was EUR 70m (vs our EUR 74m estimate). Small project deliveries were booked only to the tune of EUR 3m (vs our EUR 7m estimate), excluding the EUR 55m Russian order. The figure can be compared to the EUR 2m seen in Q3’20 and EUR 4m in Q4’19. Technology services orders were EUR 12m as we expected, down by 8% y/y but improvement from the previous pandemic lows.

Results will improve in FY ‘21, we estimate EBIT at EUR 6m

Raute’s FY ’20 EBIT was negative due to low top line, unfavorable mix (low services share but also the fact that projects were tilted towards a large low-margin order), pandemic restrictions and high R&D investments. Revenue will be higher this year and services outlook is improving. The most acute phase of the pandemic has been passed and restrictions should fade away towards the end of the year, but FY ’21 EBIT potential remains limited due to the continued reliance on a large Russian order. The focus on R&D also remains. Raute’s strong Russian traction and the strategic focus on developing more competitive technology for emerging markets are long-term positives, but in the short-term perspective profitability outlook is still muted relative to the recent years’ avg. EUR 11m EBIT. European mill orders are also unlikely to reach the levels of recent high years.

Potential exists, but we view the multiples too steep

In our opinion Raute’s valuation still requires patience as there has not been, so far, any concrete sign of smaller orders picking up. Raute is now valued ca. 10x EV/EBITDA and 16x EV/EBIT on our FY ’21 estimates. The multiples could decrease to around 8x and 11x in the coming years. The outlook might well improve fast, but right now this doesn’t seem to be the case. Our new TP is EUR 21 (20). We retain our SELL rating.

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Raute - No major pickup in smaller orders

12.02.2021 - 09.30 | Earnings Flash

Raute’s Q4 EBIT didn’t meet our estimate and order intake was also a bit soft, excluding the big new Russian project. In our view significant improvement in business conditions still waits.

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  • Raute Q4 revenue was EUR 38.9m vs our EUR 39.0m estimate. Project deliveries amounted to EUR 28.6m, compared to our EUR 26.0m estimate. Meanwhile technology services’ top line was EUR 10.3m vs our EUR 13.0m estimate.
  • Q4 EBIT came in at EUR 0.8m, compared to our EUR 2.0m estimate.
  • Order intake in Q4 stood at EUR 70m vs our EUR 74m estimate. Project deliveries’ new orders were EUR 59m, while we expected EUR 62m. Technology services booked EUR 11m vs our EUR 12m estimate. This means there was no significant improvement in order intake from the previous quarters, excluding the EUR 55m Russian project.
  • Order book stood at EUR 94m, compared to EUR 88m a year ago.
  • Raute expects net sales to increase in 2021 compared to the level of the previous year. Raute expects the operating result to improve from the previous year due to growth in net sales.
  • The Board of Directors proposes EUR 0.80 per share dividend distribution vs our EUR 1.47 expectation.

Open report

Etteplan - Moving towards better conditions

12.02.2021 - 09.15 | Company update

Etteplan reported better than expected profitability figures in Q4. The guidance for 2021 is in line with our expectations and we make no larger changes to our estimates. Uncertainty in demand pick-up is still present and we expect a sluggish start to 2021. We retain our SELL-rating and target price of EUR 13.6.

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Better than expected profitability in Q4
Etteplan reported solid profitability figures in Q4, with EBIT at EUR 7.1m (EUR 6.5m/6.6m Evli/cons.) and EBIT (excl. NRI’s) of EUR 7.4m. Revenue was slightly below expectations, at EUR 70.3m (EUR 71.8m Evli/cons.). Etteplan proposes a dividend distribution of EUR 0.34 per share (EUR 0.33 Evli/cons.). Positive news on the rollout of Coronavirus vaccines aided demand in Q4. In 2021 Etteplan expects revenue to amount to EUR 280-300m and EBIT to amount to EUR 23-26m.

Demand pick-up uncertainty but acquisitions boost growth
We have made only minor revisions post-Q4, with our estimates still near the mid-point of the guidance range (revenue EUR 288.9m and EBIT EUR 24.5m). Growth is aided by the Tegeman and TekPartner acquisitions and we expect double-digit growth. 2021 should start of somewhat sluggish but we expect demand to pick up going into mid-2021. Cost expansion after the strict cost discipline in 2020 and recruitments in 2021 should limit margin upside and we expect to see margins similar to 2020. The outlook for 2021 is looking brighter but we still see uncertainty in organic growth capabilities. Lockdowns and restrictions are continuing to impact the overall economy and the first half of the year in that regard appears challenging, but we are carefully optimistic going forward.

SELL with a target price of EUR 13.6
With no larger changes to our estimates we retain our target price of EUR 13.6 and SELL-rating. Our target price values Etteplan at 18x 2021 P/E, which we consider justified given the still present uncertainty.

Open report

Tokmanni - Q4 result outpaced the expectations

12.02.2021 - 09.15 | Earnings Flash

Tokmanni’s Q4 revenue increased by 14.6 % y/y (LFL growth of 13.4%) and was EUR 327m vs. EUR 315m/315m Evli/cons. Tokmanni’s adj. EBIT was EUR 45m vs. EUR 38m/37m Evli/cons. Dividend proposal was EUR 0.85 vs. EUR 0.78/0.74 Evli/cons. The company expects slight growth in revenue in 2021. Adj. EBIT is expected to be on the same level as last year.

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  • Q4 revenue growth outpaced the expectations as revenue increased by 14.6% y/y and was EUR 327m vs. our EUR 315m and consensus of EUR 315m. LFL growth was 13.4%.
  • Q4 adj. gross profit was EUR 120m (36.8% margin) vs. EUR 110m (34.9%) Evli and consensus.
  • Q4 adj. EBITDA was EUR 62m vs. EUR 54m our view.
  • Q4 adj. EBIT was EUR 45m (13.9% margin) vs. EUR 38m (12.1%) our expectation and EUR 37m (11.8%) consensus.
  • Q4 eps was EUR 0.57 vs. EUR 0.48/0.47 Evli/consensus.
  • Divided proposal for 2020 is EUR 0.85 vs. EUR 0.78/0.74 Evli/consensus.
  • Tokmanni expects slight revenue growth in 2021. Adj. EBIT is expected to be on the same level as last year.

Open report

Aspo - Performance is now appreciated

12.02.2021 - 08.45 | Company update

ESL helped Aspo Q4 EBIT top estimates. Both ESL and Telko now perform, but we see valuation already appreciates this fact. Our TP is now EUR 9.5 (8.75), rating HOLD (BUY).

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ESL and Telko have now performed around target levels

Aspo’s EUR 133.5m Q4 revenue was in line with estimates (EUR 129.3m/132.9m Evli/cons.) while the EUR 7.6m EBIT was a positive surprise relative to the EUR 7.0m/7.1m Evli/cons. estimates. The EBIT beat was driven by ESL. The Q4 improvement in ESL’s operating environment didn’t come as a surprise, but in our opinion the EUR 4.8m Q4 EBIT was significantly better than expected (we estimated EUR 3.2m) considering the EUR -0.1m Q3 figure and the fact that top line and cargo volumes were still down from a year ago. ESL’s EBIT was indeed up from the EUR 4.4m comparative figure thanks to cost savings measures. Telko continued to perform close to expectations and posted a strong 6.2% operating margin. Meanwhile Leipurin EBIT declined to EUR 0.2m from the EUR 1.1m comparison figure.

Aspo didn’t issue numerical EBIT guidance range for FY ‘21

ESL’s strong Q4 profitability (already close to the 12% long-term margin target) is encouraging as there’s now sound evidence Aspo’s two main cylinders are firing and can perform close to their long-term target levels. In our view the recent performance levels indicate ESL and Telko should by themselves help Aspo reach EUR 30m EBIT this year. Aspo however didn’t give any numerical EBIT guidance range. According to the guidance EBIT will be higher this year, and as such the statement isn’t very informative. In our view ESL’s EBIT will improve a lot this year but is probably not going to reach EUR 20m yet. We revise our FY ’21 EBIT estimate for ESL only from EUR 16.3m to EUR 16.4m as environmental equipment installations mean there’ll be more lay-ups than usual. We expect Telko FY ’21 EBIT to grow by 9%.

We consider current valuation to land within a neutral area

We revise our Aspo FY ’21 EBIT estimate up only a bit to EUR 29.7m. This means ca. EUR 10m annual gain and in terms of EBITDA 25% y/y growth. In our opinion Aspo’s valuation, at least in terms of SOTP, already reflects significant earnings growth for this year. There’s likely to be more potential beyond ’21, however we don’t see these gains should be fully valued right now. Our new TP is EUR 9.5 (8.75) per share, rating HOLD (BUY).

Open report

Verkkokauppa.com - Strong quarter, as expected

12.02.2021 - 08.45 | Earnings Flash

Verkkokauppa.com’s Q4’20 revenue grew by 10% y/y and was EUR 176m vs. Evli EUR 171m and consensus of EUR 170m. Adj. EBIT was EUR 6.2m vs. EUR 6.6m/6.3m Evli/cons. Dividend proposal was EUR 0.45 (incl. additional dividend of EUR 0.22) vs. EUR 0.23/0.23 Evli/cons.

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  • Q4 revenue was EUR 176m (10% y/y) vs. EUR 171m Evli view and EUR 170m consensus. Growth was good especially in mid-sized product categories, especially in major domestics appliances (MDA) and sports equipment.
  • Q4 gross profit was EUR 26.7m (15.1% margin) vs. EUR 25.0m (14.6% margin) Evli view. Gross margin was driven by strong performance of mid-sized, higher margin categories.
  • Q4 adj. EBIT was EUR 6.2m (3.5% margin) vs. EUR 6.6m (3.9% margin) Evli view and EUR 6.3m (3.7% margin) consensus.
  • Q4 eps was EUR 0.10 vs. EUR 0.11/0.10 Evli/cons.
  • 2020 dividend proposal is EUR 0.45 (EUR 0.23 in quarterly installments and an additional dividend of EUR 0.22) vs. EUR 0.23/0.23 Evli/cons.
  •  2021E guidance: revenue of EUR 570-620m and adj. EBIT of EUR 20-26m.

Open report

Finnair - No signs of relief

12.02.2021 - 08.15 | Preview

Finnair reports its Q4 result on next week’s Thursday, 18th of February. We expect Q4E revenue to decline by 88% y/y to EUR 94m and adj. EBIT of EUR -172m. We retain “HOLD” and TP of EUR 0.60 ahead the result.

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Expecting Q4E revenue to decline by 88% y/y

In Oct-Dec, Finnair carried 278k passengers which is 92% decline compared to Q4’19. Average Seat Kilometers (ASK) decreased by 89% y/y and Revenue Passenger Kilometers (RPK) decreased by 96% y/y. Passenger Load Factor (PLF) declined by 49.8%-points y/y and was 29.2%. The pandemic situation worsened towards the end of the year and strict travel restrictions remained. We expect Q4E revenue of EUR 94m (-88% y/y) and adj. EBIT of EUR -172m.

New virus variants increasing fears

During Q4, Finnair finalized a sale and leaseback arrangement for one of its A350 aircrafts. The immediate positive cash effect is in excess of EUR 100m. The total positive net impact of the amendments to the terms of Finnair pension fund as well as pilots’ early retirement is EUR 133m on Q4 operating result (not affecting comparable operating result). According to the company, the comparable operating loss in Q4 will be similar to Q2-Q3’20. Despite the vaccine optimism the catastrophic situation threatens to continue at least throughout H1’2021 and deepen distress in the aviation sector as new virus variants are increasing fears and there are delays in the vaccine supply for Europe. Therefore, we have cut our H1’21E estimates and expect better improvement to start in the latter half of the year.

“HOLD” with TP of EUR 0.60

We expect FY20E revenue of EUR 821m (-74% y/y) and adj. EBIT of EUR -604m. We expect the situation to improve during 21E, but better improvement is seen later in 22E. However, there are still significant uncertainties with our estimates as visibility remains extremely weak. We keep our rating “HOLD” with TP of EUR 0.60 intact ahead the Q4 result.

Open report

Etteplan - Profitability better than expected

11.02.2021 - 13.30 | Earnings Flash

Etteplan's net sales in Q4 amounted to EUR 70.3m, slightly below our and consensus estimates (EUR 71.8m/71.8m Evli/cons.). EBIT amounted to EUR 7.1m, above our and consensus estimates (EUR 6.5m/6.6m Evli/cons.). Etteplan proposes a dividend of EUR 0.34 per share (EUR 0.33/0.33 Evli/Cons.).

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  • Net sales in Q4 were EUR 70.3m (EUR 71.6m in Q4/19), slightly below our estimates and consensus estimates (EUR 71.8m/71.8m Evli/Cons.). Growth in Q4 amounted to -2.1% y/y and -6.3% organic.
  • EBIT in Q4 amounted to EUR 7.1m (EUR 5.6m in Q4/19), above our estimates and consensus estimates (EUR 6.5m/6.6m Evli/cons.), at a margin of 10.1%.
  • EPS in Q4 amounted to EUR 0.23 (EUR 0.16 in Q4/19), above our estimates and consensus estimates (EUR 0.20/0.20 Evli/cons.).
  • Engineering Solutions net sales in Q4 were EUR 40.6m vs. EUR 40.1m Evli. EBITA in Q4 amounted to EUR 4.2m vs. EUR 4.0m Evli. The MSI-% in Q4 was 59% compared to 55% in Q4/19. 
  • Software and Embedded Solutions net sales in Q4 were EUR 17.7m vs. EUR 18.3m Evli. EBITA in Q4 amounted to EUR 2.4m vs. EUR 2.1m Evli. The MSI-% in Q4 was 51% compared to 58% in Q4/19. 
  • Technical Documentation Solutions net sales in Q4 were EUR 11.9m vs. EUR 13.2m Evli. EBITA in Q4 amounted to EUR 1.3m vs. EUR 1.3m Evli. The MSI-% in Q4 was 80% compared to 79% in Q4/19. 
  • Dividend proposal: Etteplan proposes a dividend of EUR 0.34 per share (EUR 0.33/0.33 Evli/Cons.).
  • Guidance for 2021: Etteplan expects revenue to amount to EUR 280-300m and operating profit (EBIT) to amount to EUR 23-26m (Evli 2021E EUR 290.3m and EUR 24.4m respectively).

 

Open report

Aspo - ESL drove a sharp rebound

11.02.2021 - 10.30 | Earnings Flash

Aspo’s Q4 EBIT topped estimates thanks to ESL’s strong profitability. It is clear EBIT is set to improve this year, however Aspo did not disclose numerical EBIT guidance range.

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  • Aspo Q4 revenue amounted to EUR 133.5m, compared to the EUR 129.3m/132.9m Evli/consensus estimates. Top line therefore declined by 9% y/y.
  • Aspo Q4 EBIT was EUR 7.6m vs the EUR 7.0m/7.1m Evli/consensus estimates.
  • ESL Q4 revenue was EUR 41.2m, whereas we estimated EUR 40.8m. EBIT was EUR 4.8m vs our EUR 3.2m estimate. EBIT increased from the EUR 4.4m comparative figure despite a small decline in cargo volumes (from 4.0mt to 3.8mt). The result was thus already close to the 12% long-term EBIT margin target. Demand for loading and unloading operations was very high in Q4.
  • Telko’s top line stood at EUR 65.7m, compared to our EUR 60.9m estimate. Meanwhile EBIT was EUR 4.1m vs our EUR 4.3m estimate.
  • Leipurin Q4 revenue amounted to EUR 26.6m, while we expected EUR 27.6m. EBIT was recorded at EUR 0.2m vs our EUR 0.6m estimate.
  • Other operations cost EUR 1.5m vs our EUR 1.0m estimate.
  • Guidance: according to Aspo operating profit in 2021 will be higher than in 2020 (EUR 19.3m). The guidance as such has very limited informational value.
  • The Board of Directors proposes EUR 0.35 per share dividend distribution, compared to our EUR 0.44 expectation.

Open report

Vaisala - A champion with a hefty price tag

10.02.2021 - 08.45 | Company report

Vaisala’s R&D leadership focused strategy and bolt-on acquisitions have paid off well during the last years. Dark clouds are currently hanging over W&E, but thanks to its strong financial position, and growing share of more profitable IM sales, we see Vaisala on track to targeted above 5% growth and above 12% EBIT margins. However, we continue seeing Vaisala’s valuation too expensive given the expected financial performance. We maintain our target price of 32€ and our SELL recommendation.

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Maneuvering pass a challenging 2020

Vaisala has managed to maneuver pass the corona pandemic rather unscathed. Due to lowered operating expenses caused by the pandemic and good order book & deliveries, performance has been good in both BU’s. Currently, W&E is weighed down by the weakened outlook for aviation and lack of larger infra projects, especially in developed countries. IM on the other hand, is expected to be less affected by COVID going forward.

 Profitable growth with R&D leadership strategy

Looking at the coming years, we see Vaisala’s targeted above 5% sales growth and >12% margins achievable despite current gloomy outlook for aviation. We expect the growing share of more profitable IM sales to continue supporting Vaisala’s growth and operating margin. In 2021E-22E, we estimate Vaisala’ net sales to grow by 4.5% and 5.3%, and EBIT margins of 12.2% and 12.6% respectively. We expect W&E market to begin to gradually recover in 2021E-22E with an annual growth rate of approximately 3% and W&E’s EBIT margins to gradually improve towards 7% in 2022E. For IM, we expect 2021E-22E continued profitable growth at 7% and 9.6% annual growth rates, respectively. We expect IM’s EBIT margins to stay above 20% in 2021-22E.

 Maintain SELL as valuation is expensive

Vaisala’s share price has rallied in last few years and is currently around all time high levels. The share price rally is also visible in Vaisala’s valuation multiples, which have increased strongly since around mid-2019, resulting in a clear sustained valuation premium of 20-60% during this period. As peer group multiples have rerated as of late, Vaisala’s EV/EBIT and P/E valuation premium is now around 20-30% on our 2021-22E estimates. Despite recent surge in valuation multiples, we see valuation too expensive given Vaisala’s weaker growth rates and margins compared to our technology peer group. Thus, we maintain our target price of 32€ and our SELL recommendation. Our target price values Vaisala at 21-22e EV/EBIT multiples of 23x and 21x which is above peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

Open report

Talenom - Continued double-digit growth

09.02.2021 - 09.30 | Company update

Talenom’s Q4 was rather well in line with our expectations and with our 2021 estimates corresponding well with the guidance our estimates remain largely intact. Preparations for continued growth remain on the agenda. Our target price remains unchanged at EUR 11.5, our rating is now HOLD (SELL).

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Q4 report rather well in line with expectations
Talenom’s Q4 report all in all was rather well in line with our expectations. Net sales amounted to EUR 16.5m (Evli EUR 16.8m) and operating profit to EUR 2.4m (Evli EUR 2.6m). The BoD proposes a dividend distribution of EUR 0.15 per share (Evli EUR 0.15). In 2021 the company expects net sales to amount to EUR 75-80m and operating profit to amount to EUR 14-16m (Evli prev. est. EUR 77.3m and EUR 15.5m respectively). Further acquisitions during 2021 could still see net sales grow past the guidance range, while the typically lower profitability of acquisition objects should limit earnings growth potential.

Preparations and build up for future growth
We have made only minor revisions to our estimates. The year 2021 will to quite some extent be a year of preparing and building up the new growth avenues. Organic growth figures should still be somewhat weaker, but the company sees potential for sales efforts in 2021 to pave the way for better figures in 2022. The small customer concept rollout has progressed quite as planned and the launch in Sweden during 2021 also remains on schedule. We see a limited impact of the new concept on sales in 2021. No new relevant information on the plans to further expand internationally was given.

HOLD (SELL) with a target price of EUR 11.5
Our estimates at large remain intact post-Q4 and we make no adjustment to our target price of EUR 11.5. Our TP values Talenom at approx. 43x 2021 P/E. After the minor share price correction our rating is now HOLD (SELL).

Open report

Etteplan - Eyeing growth pick-up in 2021

09.02.2021 - 08.30 | Preview

We expect Etteplan to report solid Q4 figures and propose a dividend distribution of EUR 0.33 per share. With the acquisition of TekPartner we now expect double-digit growth in 2021. With valuation now at levels that we find hard to justify, we lower our rating to SELL (HOLD) with a target price of EUR 13.6 (12.4)

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Solid fourth quarter expected
Etteplan reports Q4 results on February 11th. We expect Etteplan to report solid figures, with the guidance update given in December implying better figures than in the comparison period. Our Q4 net sales and EBIT estimates are at EUR 71.8m and 6.5m respectively. The fourth quarter development is seen to have been aided by a pick-up in customer investment activity following positive news on Coronavirus vaccine rollout. We expect Etteplan to propose a dividend distribution of EUR 0.33 per share.

Expecting return to double-digit growth
We have made adjustments to our estimates after the acquisition of TekPartner and expansion to Denmark. TekPartner’s revenue in 2019 amounted to approx. EUR 8m. We now expect growth of 11.2% in 2021. Growth is supported by the Tegeman and TekPartner acquisitions. The 2021 guidance will be of key interest. We would expect to see a guidance reflecting clear growth in revenue and possibly also EBIT, although with the uncertainties a more careful approach may be taken this early on in 2021. We have assumed relatively flat margin development in 2021, expecting the strict cost savings measures in 2020 to be phased out during the year and growth and internal project investments to pick up.

SELL (HOLD) with a target price of EUR 13.6 (12.4)
Etteplan’s share price has picked up clearly, now trading quite clearly above peers. Although we could find justification for valuation above that of peers, we have a hard time justifying current absolute valuation levels given the still present uncertainty. We adjust our target price to EUR 13.6 (12.4) on our revised estimates but downgrade our rating to SELL (HOLD).

Open report

Verkkokauppa.com - Expecting sales boost from campaigns

09.02.2021 - 08.15 | Preview

Verkkokauppa.com reports its Q4 result on Friday, 12th of February. We have slightly increased our Q4E estimates ahead the result and keep our rating “BUY” with new TP of EUR 8.3 (6.5).

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Expecting sales growth of 7% in Oct-Dec
Year 2020 has so far been an excellent year for Verkkokauppa.com and it has benefited from the changed environment and customer behavior (rapid shift into online). The final quarter is normally the most important one for Verkkokauppa.com in terms of both, sales and profitability and we expect the company to reach strong figures in Oct-Dec, driven by campaigns and Christmas. We have increased our Q4E sales expectation by ~1% and our adj. EBIT expectation by ~6%. We expect Q4E sales of EUR 171m (+7% y/y) and adj. EBIT of EUR 6.6m (+47% y/y). We expect 20E dividend of EUR 0.23.

Well positioned for the future
Last year was eventful not only due to the COVID-19 and its impacts on the consumer behavior but also due to Amazon which launched its operations in Sweden at the latter half of the year. In our view, the impacts of the launch on Finland were negligible but it is clear that the presence of the online giant will increase in Finland in the long run. Online sales have grown significantly which has benefited Verkkokauppa.com but the company has also taken right actions towards better profitability which reinforces our view that the company is able reach profitable growth even after the pandemic.

“BUY” with TP of EUR 8.3 (6.5)
We expect 20E sales of EUR 549m (+9% y/y) and adj. EBIT of EUR 20.8m (3.8% margin). Thus, our expectations are at the higher end of the given guidance (sales of EUR 525-550m and adj. EBIT of EUR 17-21m). On our estimates, the company trades with 20E-21E EV/EBIT multiple of 14.5x and 15.2x which translates into 40-50% discount compared to the peers. We keep our rating “BUY” with TP of EUR 8.3 (6.5).

Open report

Earnings flash - Quite in line with expectations

08.02.2021 - 14.00 | Earnings Flash

Talenom's net sales in Q4 grew 10.4% to EUR 16.5m, in line with our and consensus estimates (EUR 16.8m Evli/cons.). EBIT amounted to EUR 2.4m, slightly below our and consensus estimates (EUR 2.6m Evli/cons.). Net sales for 2021 are expected to amount to EUR 75-80m and operating profit to EUR 14-16m.

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  • Net sales in Q4 amounted to EUR 16.5m (EUR 14.9m in Q4/19), in line with our and consensus estimates (EUR 16.8m Evli/Cons.). Growth in Q4 amounted to 10.4% y/y.
  • Operating profit in Q4 amounted to EUR 2.4m (EUR 1.5m in Q4/19), slightly below our and consensus estimates (EUR 2.6m Evli/cons.), at a margin of 14.7%.
  • EPS in Q4 amounted to EUR 0.04 (EUR 0.02 in Q4/19), in line with our and consensus estimates (EUR 0.04/0.05 Evli/cons.).
  • Net investments during 2020 amounted to EUR 20.3m (2019: EUR 15.4m).
  • Talenom’s BoD proposes a dividend distribution of EUR 0.15 per share (O.15 Evli/cons.).
  • Guidance for 2021: Net sales in 2021 are expected to amount to EUR 75-80m and operating profit to EUR 14-16m. Our 2021 net sales and operating profit estimates are EUR 77.3m and EUR 15.5m respectively.

Open report

Consti - Good and steady performance

08.02.2021 - 08.45 | Company update

Consti reported slightly better than expected Q4 results. We continue to expect minor sales growth in 2021 and improvement in operating margins. We adjust our target price to EUR 13.0 (12.0), BUY-rating intact.

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Q4 slightly above expectations
Consti reported slightly better than expected Q4 results. Net sales amounted to EUR 78.1m (EUR 71.6m/71.1m Evli/cons.), with sales decline slowing down clearly compared to previous quarters and Q4 net sales down only 0.2% y/y. EBIT amounted to EUR 3.0m (EUR 2.7m Evli/cons.). A dividend distribution of EUR 0.40 per share is proposed (EUR 0.35 Evli/cons.). The order backlog was now down only 4.3% y/y, at EUR 177.9m, after a relatively decent Q4 order intake of EUR 54.3m.

Expecting margin improvement and minor growth
Consti expects an operating profit of EUR 7-11m in 2021, with our estimate unchanged at EUR 9.1m. Activity is seen to increase slightly y/y in 2021 and our net sales estimate is up some 3% to 281m, expecting minor growth of 2.3%. COVID-19 induced uncertainty is still at elevated levels, thus also the wider guidance range. Consti updated its strategy for 2021-2023, with clear focus on the customer focused organization. Perhaps most unexpected was the ambition to expand operations to new construction projects. This approach however appears to be more of a complementary offering to serve existing customers and the share of new construction projects could be seen to be some 10-15% of net sales at the end of the strategy period. In our view Consti now appears to be seeking to take more initiative after having focused on organizational changes and profitability improvement.

BUY with a target price of EUR 13.0 (12.0)
Consti’s valuation has continued to approach that of peers but is still not too stretched and with the good development and solid cash generation we see continued upside potential. We adjust our target price to EUR 13.0 (12.0), valuing Consti at 8.8x 2021 EV/EBITDA, our BUY-rating remains intact.

Open report

SRV - Still looking fairly good

05.02.2021 - 09.30 | Company update

SRV’s Q4 results were quite in line with our expectations. 2021 guidance is slightly softer than anticipated but the wide range leaves room for solid figures in 2021. We have made minor downwards revisions to our estimates but good order intake during H1/2021 could swing our expectations more towards the upper half of the guidance range.

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Results quite in line with expectations
SRV’s Q4 results were rather well in line with our estimates. Net sales in Q4 amounted to EUR 292.5m, quite in line with our and consensus estimates (EUR 294.1m/299.6m Evli/cons.). EBIT amounted to EUR -8.0m, slightly below our and consensus estimates (EUR -6.6m/-6.9m Evli/cons.). Although full-year EBIT was quite weak due to the booked negative changes in the value of investments in Q4, 2020 operating cash flow was at a commendable EUR 46.3m. SRV as expected proposed that no dividend be distributed for 2020.

Guidance slightly soft but room for solid figures in 2021
In SRV’s outlook for 2021 revenue is expected to amount to EUR 900-1,050m and operative operating profit to EUR 16-26m. Our earlier estimates (EUR 999m and EUR 23.8m) were slightly above the mid-point of the guidance range. The guidance is somewhat soft, but the upper points of the range still leaves room for a solid 2021. We have made minor downward revisions to our estimates, as we are not fully convinced on sales development given the order backlog and order intake. Solid order intake during H1/21 could still swing expectations more strongly towards the upper half of the guidance range. We now expect revenue of EUR 962.1m and operative operating profit of EUR 22.0m.

BUY-rating with a target price of EUR 0.64
SRV’s Q4 results and the outlook for 2021 all in all were quite as expected and although earnings remained quite weak more importantly cash flows were at good levels. We reiterate our target price of EUR 0.64 and BUY-rating.

Open report

Suominen - Attractive stabilizing multiples

05.02.2021 - 09.20 | Company update

Suominen’s Q4 figures were close to what we expected, but the report turned our overall view a bit more positive. Our TP is now EUR 6.5 (6.0) and we retain our BUY rating.

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Q4 was a strong ending for an extraordinary record year

Suominen’s Q4 revenue grew by 18% y/y to EUR 111m (vs our EUR 106m estimate). Europe grew by 37%, albeit from a very low base. Americas still managed to grow a decent 7%. The 15.6% GM was a tad above our 15.0% estimate. SGA were slightly above our estimate and certain non-recurring expenses, such as bad debts, weighed the bottom line a bit. The EUR 8.5m EBIT thus didn’t top our EUR 8.7m estimate. Suominen sees nonwovens demand will remain on a high level. In our view the 12% y/y revenue growth for FY ’20 makes further gains hard to achieve in FY ’21. We expect Suominen to post flat top line this year.

In our opinion outlook and comments were encouraging

Suominen expects FY ’21 EBITDA to remain in line with FY ’20 (EUR 61m). We view this outlook to be close to what we estimated prior the report. We revise our FY ’21 EBITDA estimate up only a bit, from EUR 55m to EUR 57m. The revision is not big in quantitative terms, yet we see the outlook improves confidence with respect to this year’s results. In our opinion there was a small risk Suominen might have guided declining FY ’21 EBITDA. There remains considerable gross margin uncertainty as raw material and transportation costs appear bound to trend upward, but all in all we view Suominen’s comments to indicate the nonwovens pricing environment is still relatively strong. In other words, gross margin is unlikely to plunge.

We view current valuation attractive on stabilizing earnings

Suominen trades 6x EV/EBITDA and 10x EV/EBIT on our FY ’21 estimates. Recent developments mean a high level of uncertainty persists around profitability margins going forward, however we are now more confident on earnings stabilization. Performance has improved with regards to plant-level efficiency, although the pandemic boost makes it hard to quantify how much these own measures have impacted figures. Suominen has announced certain small investments to upgrade some of its existing production lines, and we see the company is now in a strong position for possible larger investments, be they organic or inorganic. Our new TP is EUR 6.5 (6.0). We retain our BUY rating.

Open report

Tokmanni - Strong tailwind expected to continue

05.02.2021 - 09.10 | Preview

Tokmanni reports its Q4 result on next week’s Friday, 12th of Feb. Despite the weakened COVID-19 situation, we expect a strong quarter. We have increased our Q4E estimates and keep our rating “BUY” with TP of EUR 18.4.

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Expecting sales growth of ~10%

Despite the weakened COVID-19 situation and new regional restrictions, we expect Tokmanni to reach strong figures in Q4E, driven by campaigns and Christmas sales as well as new store openings. We have increased our Q4’20E sales expectation by ~5% and our adj. EBIT expectation by ~10%. We expect Oct-Dec sales to grow by 10.4% y/y to EUR 314.5m and adj. EBIT of EUR 38m (margin of 12.1%). We expect 20E dividend of EUR 0.78 per share.

The final quarter is driven by campaigns and Christmas

The household consumption has been focused on domestic purchases during the pandemic which has benefited Tokmanni throughout the year. Even though the virus situation weakened towards the end of the year and fears of the new virus variants rose we expect only limited impacts on customer flows. As consumers have continued to spend more time at home, we expect the demand of e.g. leisure, sport, and home products has been strong. The company’s increasing online presence should also boost sales during campaigns such as Black Friday. We don’t expect similar discount sales as seen in Q3 with apparel sales which should support gross margin.

“BUY” with TP of EUR 18.4 intact

We expect FY20E sales of EUR 1061m (12.4% y/y) and adj. EBIT of EUR 92.9m. We haven’t made significant changes to our 21E-22E estimates. On our estimates, the company trades with 20E-21E EV/EBIT multiple of 14.4x and 14.3x, which is similar compared to the Nordic non-grocery peers and ~20% discount compared to the int. discount peers. We keep our rating “BUY” with TP of EUR 18.4 intact ahead the Q4 result.

Open report

Consti - Good finish to the year

05.02.2021 - 09.00 | Earnings Flash

Consti's net sales in Q4 amounted to EUR 78.1m, above our estimates and consensus estimates (EUR 71.6m/71.1m Evli/cons.). EBIT amounted to EUR 3.0m, slightly above our and consensus estimates (EUR 2.7m/2.7m Evli/cons.). Dividend proposal EUR 0.40 per share (0.35 Evli/cons.). 2021 EBIT guidance EUR 7-11m.

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  • Net sales in Q4 were EUR 78.1m (EUR 78.3m in Q4/19), above our and consensus estimates (EUR 71.6m/71.1m Evli/Cons.). Sales declined -0.2% y/y.
  • Operating profit in Q4 amounted to EUR 3.0m (EUR 2.8m in Q4/19), slightly above our and consensus estimates (EUR 2.7m/2.7m Evli/cons.), at a margin of 3.8%.
  • EPS in Q4 amounted to EUR 0.27 (EUR 0.25 in Q4/19), slightly above our and consensus estimates (EUR 0.23/0.23 Evli/cons.).
  • The order backlog in Q4 was EUR 177.9m (EUR 185.8m in Q4/19), down by -4.3%. Order intake EUR 54.3m in Q4 (Q4/19: EUR 46.8m). New orders in 2020 EUR 214.3m, down 0.2% y/y.
  • Free cash flow amounted to EUR 3.6m (Q4/19: EUR -5.1m) and 2020 cash flow amounted to a stellar EUR 18.3m (2019: EUR 4.0m).
  • Consti’s BoD proposes a dividend distribution of EUR 0.40 per share (0.35 Evli/cons.).
  • Guidance for 2021: Operating profit is expected to be between EUR 7-11. The guidance range is large due to uncertainty factors brought by the COVID-19 pandemic. Our 2021 estimate is EUR 9.1m.
  • Strategy updated for 2021-2023, long-term financial targets remain unchanged.

Open report

CapMan - Strong Q4 bodes well for 2021

05.02.2021 - 08.15 | Company update

CapMan posted strong and clearly better than expected Q4 results, ending the slightly challenging year on a clear positive note. In our view most importantly management fees increased clearly, providing good support for fee-based profitability in 2021. We have raised our 2021-2022E EBIT estimates by some 20%.

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Strong fourth quarter beating our expectations
CapMan’s Q4 results were strong and clearly better than expected. Revenue amounted to EUR 13.4m (Evli/cons. EUR 10.6m/10.7m) and the operating profit to EUR 9.7m (Evli/cons. 4.4m/5.1m). The earnings beat was mainly attributable to higher than expected fair value changes (act./Evli EUR 7.0m/3.4m). More importantly and frankly also quite surprisingly management fees also grew clearly from previous quarters. Management fees grew to EUR 9.7m (Evli EUR 7.5m) and the Management Company business EBIT as such beat our expectations (act./Evli EUR 3.6m/2.0m). CapMan expectedly proposed a dividend distribution of EUR 0.14 per share, to be paid in two instalments.

2021-2022E EBIT estimates raised by some 20%
We have made larger revisions to our estimates and raised our 2021-2022E EBIT estimates by some 20%. We have clearly raised our estimates for management fees, with clear momentum being gained, and as such also fee-based profitability. Our investment business return estimates remain somewhat conservative given the solid Q4 returns (without larger exits), as we are not yet convinced of a clear level shift. We still assume that carried interest will be earned during 2021E, although COVID-19 has had a dent on the progress and timing is still highly uncertain. On Group level in 2021 we expect CapMan to post much stronger results than in 2020 with across the board improvements. Our 2021 EBIT estimate is at EUR 38.2m (2019: EUR 12.3m).

HOLD with a target price of EUR 2.70 (2.40)
Based on our estimates revisions we adjust our target price to EUR 2.70 (2.40). Current valuation still leaves some upside potential, but we still see some need for more evidence on higher earnings levels. We retain our HOLD-rating.

Open report

Suominen - No very big surprises

04.02.2021 - 10.00 | Earnings Flash

Suominen’s Q4 EBIT landed very near our estimate, but all considered the report was perhaps a bit better than we expected.

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  • Suominen Q4 revenue amounted to EUR 111.1m vs our EUR 106.0m estimate. Top line therefore grew by 18% y/y.
  • European revenue was EUR 44.3m vs our EUR 38.0m estimate. Americas recorded EUR 66.8m, compared to our EUR 68.0m estimate.
  • Gross profit stood at EUR 17.3m, while we expected EUR 15.9m. Gross margin thus amounted to 15.6% vs our 15.0% estimate.
  • Suominen Q4 EBIT amounted to EUR 8.5m, compared to our EUR 8.7m estimate. SGA and other expenses were higher than we estimated, and thus Suominen did not top our EBIT estimate despite bringing in revenue and gross margin higher than we expected.
  • Suominen guides FY ’21 comparable EBITDA to be in line with FY ’20. In our opinion the guidance sits well with our latest estimate and we don’t see scope for big estimate revisions. Suominen expects nonwovens demand to remain strong, however volatile raw material and transportation prices increase uncertainty.
  • The Board of Directors proposes EUR 0.10 per share dividend distribution for FY ’20, compared to our EUR 0.07 expectation. An additional EUR 0.10 per share return of capital is also proposed.

Open report

CapMan - Surprisingly good results

04.02.2021 - 09.15 | Earnings Flash

CapMan's net sales in Q4 amounted to EUR 13.4m, above our consensus estimates (EUR 10.6m/10.7m Evli/cons.). EBIT amounted to EUR 9.7m, above our and consensus estimates (EUR 4.4m/5.1m Evli/cons.). Dividend proposal: CapMan proposes a dividend of EUR 0.14 per share (EUR 0.14/0.14 Evli/Cons.).

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  • Revenue in Q4 was EUR 13.4m (EUR 16.6m in Q4/19), above our estimates and consensus estimates (EUR 10.6m/10.7m Evli/Cons.). Growth in Q4 amounted to -19.2% y/y.
  • Operating profit in Q4 amounted to EUR 9.7m (EUR 3.4m in Q4/19), above our estimates and consensus estimates (EUR 4.4m/5.1m Evli/cons.), at a margin of 72.5%. Fair value changes were clearly higher than expected (Act./Evli EUR 7.0m/3.4m) and Management Company business EBIT also exceeded our expectations (Act./Evli EUR 3.6m/2.0m).
  • EPS in Q4 amounted to EUR 0.04 (EUR 0.02 in Q4/19), above our estimates and consensus estimates (EUR 0.02 Evli/cons.).
  • Management Company business revenue in Q4 was EUR 10.3m vs. EUR 7.9m Evli. Operating profit in Q4 amounted to EUR 3.6m vs. EUR 2.0m Evli.
  • Investment business revenue in Q4 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q4 amounted to EUR 7.0m vs. EUR 2.9m Evli.
  • Services business revenue in Q4 was EUR 2.6m vs. EUR 2.4m Evli. Operating profit in Q4 amounted to EUR 1.0m vs. EUR 0.6m Evli.
  • Dividend proposal: CapMan proposes a dividend of EUR 0.14 per share (EUR 0.14/0.14 Evli/Cons.).
  • Capital under management by the end of Q4 was EUR 3.8bn (Q4/19: EUR 3.2bn). Real estate funds: EUR 2.4bn, private equity & credit funds: EUR 1.0bn, infra funds: EUR 0.4bn, and other funds: EUR 0.03bn.

Open report

SRV - Quite in line with expectations

04.02.2021 - 08.45 | Earnings Flash

SRV's net sales in Q4 amounted to EUR 292.5m, quite in line with our and consensus estimates (EUR 294.1m/299.6m Evli/cons.). EBIT amounted to EUR -8.0m, slightly below our and consensus estimates (EUR -6.6m/-6.9m Evli/cons.).

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  • Revenue in Q4 was EUR 292.5m (EUR 403.9m in Q4/19), in line with our and consensus estimates (EUR 294.1m/299.6m Evli/Cons.). Growth in Q4 amounted to -27.5% y/y.
  • Operating profit in Q4 amounted to EUR -8.0m (EUR -86.9m in Q4/19), slightly below our and consensus estimates (EUR -6.6m/-6.9m Evli/cons.), at a margin of -2.8%. The operative operating profit was in line with our estimates at EUR -6.8m (Evli EUR -6.6m). Profitability was affected by negative changes in the value of investments totaling EUR 12.3m.
  • EPS in Q4 amounted to EUR -0.05, in line with our estimates and consensus estimates (EUR -0.04/-0.05 Evli/cons.).
  • Construction: Revenue in Q4 was EUR 292.0m vs. EUR 293.5m Evli. Operating profit in Q4 amounted to EUR 8.7m vs. EUR 8.9m Evli.
  • Investments: Revenue in Q4 was EUR 0.9m vs. EUR 1.1m Evli. Operating profit in Q4 amounted to EUR –15.4m vs. EUR -13.5m Evli.
  • Other operations and elim.: Revenue in Q4 was EUR –0.3m vs. EUR -0.5m Evli. Operating profit in Q4 amounted to EUR -1.3m vs. EUR -2.0m Evli.
  • The order backlog amounted to EUR 1,153m, down 14.2% y/y. Order intake in Q4 was EUR 140.7m, at similar levels as in the comparison period.
  • The BoD proposes that no dividend be paid for 2020.
  • Guidance 2021: Revenue is expected to be EUR 900-1,050m and operative operating profit EUR 16-26m (2020: EUR 15.8m adj.)

Open report

Talenom - Solid case, valuation stretched

04.02.2021 - 08.00 | Preview

Talenom’s Q4 results should not contain any major surprises and our sights are set on information on 2021 expectations. Recent acquisitions support continued growth in 2021, with our growth estimate at 18%.

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Good finish to year expected
Talenom will report Q4 results on February 8th. We expect revenue of EUR 16.8m (Q4/19: 14.9m) and EBIT of EUR 2.6m (Q4/19: 1.5m). Our respective FY2020 estimates are EUR 65.5m and EUR 13.1m, with co’s guidance at EUR 64-68m and 12-14m respectively. With the predictability in revenue streams and the CMD held in November we do not expect any major surprises and the guidance for 2021 will be of most interest. We expect Talenom to propose a dividend distribution of EUR 0.15 per share (2019 EUR 0.125 adj.).

Acquisitions providing growth boost for 2021
Talenom announced the acquisitions of two accounting firms in Sweden earlier on in Q4 and of acquisitions in Finland in February. The total combined net sales of these acquisitions amounted to roughly EUR 4.5m, providing a good start for growth in 2021. We had already assumed a pickup in inorganic growth and have made only minor adjustments to our estimates. We expect revenue growth of 18.0% in 2021, driven to a larger extent by acquisitions. Talenom has noted that organic growth domestically has been more challenging, and the current environment and digitalization needs offer opportunities for growing inorganically.

SELL (HOLD) with a target price of EUR 11.5 (10.2)
Talenom’s share price has increased some 16% since our previous update and on our estimates now trades at 2021 P/E of close to 50x. Talenom has a solid multiyear track of rapid profitable growth, but with some uncertainty in the somewhat different growth approach and organic growth slowdown we find the current valuation hard to justify. We adjust our target price to EUR 11.5 (10.2), valuing Talenom at 43x and 38x 2021E and 2022E P/E respectively and downgrade our rating to SELL (HOLD).

Open report

Consti - Steady finish to year expected

03.02.2021 - 09.30 | Preview

Consti will report Q4 results on February 5th. We expect the steady development seen during earlier quarters to continue and a first good year in a while after previous year challenges. On our estimates Consti is set to double its EBIT-margin in 2020 compared to 2019. We also expect dividend distribution to pick up to EUR 0.35 per share (2019: EUR 0.16).

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Expect a good finish to a year of improvement
Consti will report Q4 results on February 5th. We do not expect any major deviations from the steady progress during earlier quarters in 2020 and expect Q4 EBIT of EUR 2.7m. Consti has for FY2020 estimated that its operating result will improve compared to 2019, which was achieved already by Q3. The second wave of the coronavirus pandemic has had an impact on the construction industry during Q4, with reports of temporary worksite shutdowns due to virus exposures. To our understanding Consti has not been significantly affected, with some very minor additional costs having been incurred already from earlier on in the year.

Cash generation supporting increased dividend distribution
We expect that Consti will propose a dividend of EUR 0.35 per share (2019: EUR 0.16), now being well back on track on profitability and cash generation after challenges faced in previous years. The cash flow during 1-9/2020 was an exceptionally solid EUR 14.7m (1-9/2019: EUR -1.1m). The outlook for 2021 remains somewhat weakened by demand uncertainty in particular among corporate customers and we expect only limited growth. Room for some margin improvement still exists, with supplier pricing power having impacted on the construction industry during recent boom years.

BUY with a target price of EUR 12.0 (10.0)
We have not made any revisions to our estimates ahead of Q4. Valuation compared to construction and building installations and services company peers is still not challenging. With peer multiples also up since our previous update we adjust our target price to EUR 12.0 (EUR 10.0) with our BUY-rating intact.

Open report

Detection Technology - Security segment turning a corner

03.02.2021 - 09.00 | Company update

DT’s Q4 report was broadly in line with expectations. After a challenging year, especially for the security segment, a gradual improvement is expected. Although it’s difficult to estimate the slope of the recovery, improvement is still ahead, and we see DT back on the road towards +10% growth and above 15% margins. Based on the increased confidence in improving security demand coupled with DT’s potential for better growth and profitability metrics than our peer group, we raise our TP to 28.5 euros (prev. 26.5€) with BUY recommendation (prev. HOLD).

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A decent Q4 and 2020 given challenging market situation

DT’s Q4 figures were broadly in line with expectations. Q4 net sales amounted to EUR 19.9m (-20,4% y/y) vs. EUR 22.2m/22.2m Evli/consensus estimates. Q4 EBIT was EUR 2.3m (11,8% margin) vs. EUR 2.7m/2.75m Evli/cons. R&D costs amounted to EUR 2.2m or 11,2% of net sales (Q4’19: 2.6m, 10,6%). SBU net sales were EUR 9.0m vs. EUR 11.3m Evli estimate. SBU sales declined -45,5% y/y, mainly due the COVID-19 pandemic affecting security investments and challenging comparison figures. MBU net sales were EUR 10.9m which was in line with our estimate of EUR 10.9m. Dividend proposal is 0.28 (0.28/0.25 Evli/cons), which is at upper end of distribution policy of 30-60%.

 Cautiously optimistic outlook

After a challenging year, especially for SBU, DT is cautiously optimistic that the worst for SBU is soon behind. Demand in the security market is expected to head for growth in Q2 of 2021 at the earliest. SBU sales will decrease in Q1 y/y, but will start to grow in Q2, although demand is still subject to uncertainty. DT sees growth in industrial sales and double-digit growth in MBU sales in H1 of 2021. Total net sales are expected to decrease in Q1 and grow in H1 of 2021. DT sees predictability of the company's target markets still lower than usual due to the extraordinary uncertainty caused by the pandemic. As of Q1/21, DT will report three business segments; MBU, SBU and new Industrial Solutions Business Unit (IBU), which previously was part of SBU. Industrial sales accounted for over EUR 10m (25%) of SBU sales in 2020. Industrial market is categorized as higher margin, but smaller volumes, more fragmented customer base, and a variety of end applications.

 BUY with target price 28.5 euros (prev. 26.5€)

We have made slight calibrations to our estimates based on the report. We continue to expect DT to return to sales and profit growth path this year. We estimate 2021e net sales growth of 12,4 % and an EBIT of EUR 12.4m (13,5% margin), as SBU will start contributing to growth from Q2/21 onwards. Although it’s difficult to estimate the slope of the recovery, improvement is still ahead, and we see DT back on the road towards +10% growth and above 15% margins. On our 2022e estimates, DT is trading at 20.6x EV/EBIT, in line with peer group. Despite valuation being in line with peer group, we’re willing to take a more proactive stance based on the increased confidence in improving security demand coupled with DT’s potential for better growth and profitability metrics than peer group. We raise our TP to 28.5 euros (prev. 26.5€ with BUY recommendation (prev. HOLD).

Open report

Detection Technolgy - Cautious outlook

02.02.2021 - 09.30 | Earnings Flash

DT sees growth in IBU sales and double-digit growth in MBU sales in H1 of 2021. Demand in the security market is expected to head for growth in Q2 of 2021 at the earliest. SBU sales will decrease in Q1 year-on-year, but will start to grow in Q2, although demand is still subject to uncertainty. Total net sales are expected to decrease in Q1 and grow in H1 of 2021. DT sees predictability of the company's target markets still lower than usual due to the extraordinary uncertainty caused by the pandemic.

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  • Group level results: Q4 net sales amounted to EUR 19.9m (-20,4% y/y) vs. EUR 22.2m/22.2m Evli/consensus estimates. Q4 EBIT was EUR 2.3m (11,8% margin) vs. EUR 2.7m/2.75m Evli/cons. R&D costs amounted to EUR 2.2m or 11,2% of net sales (Q4’19: 2.6m, 10,6%).
  • Security and Industrial Business Unit (SBU) had net sales of EUR 9.0m vs. EUR 11.3m Evli estimate. SBU sales declined -45,5% y/y, mainly due the COVID-19 pandemic affecting security investments. DT does not expect demand in the security market to improve before Q2 2021.
  • Medical Business Unit (MBU) delivered net sales of EUR 10.9m which was in line with our estimate of EUR 10.9m. Net sales of MBU increased by 27,7% y/y due continued strong demand in healthcare. DT expects double-digit growth in MBU sales in Q1 and Q2 2021.
  • Dividend proposal is 0.28 (0.28/0.25 Evli/cons).
  • Number of active customers increased by almost 20% in 2020 to reach 330
  • New segment; as of Q1/21, DT will report three business segments; MBU, SBU and new Industrial Solutions Business Unit (IBU), which previously was part of SBU. Industrial sales accounted for over EUR 10m (25%) of SBU sales in 2020.
  • No change in medium-term targets; at least 10% net sales growth, EBIT margin at or above 15%.

Open report

CapMan - Downgrade to hold

02.02.2021 - 09.05 | Preview

We expect CapMan to report rather good Q4 results, with our previous slight concerns of investment returns having been alleviated since Q3. We expect CapMan to propose a dividend distribution of EUR 0.14 per share, implying a dividend yield of 5.6% (1.2.2021 closing price).

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Expecting a rather good last quarter
CapMan will report Q4 results on February 4th. Post-Q3 we saw slight concerns in fair value changes of investments mainly in real estate due to the revaluation time frames. These concerns now do not appear to be substantial and we have as such raised our Q4/2020 estimates for the Investment Business. The lack of significant success fees and carried interest will limit the earnings but with a lower share of bonuses in personnel expenses (vs. Q4/2019) CapMan should still post rather good earnings figures. We have adjusted our EBIT estimate to EUR 4.4m (prev. 2.9m) mainly due to the raised fair value change estimate.

Continued DPS growth expected
We expect CapMan to propose a dividend of EUR 0.14 per share, in line with the target of paying an annually increasing dividend (2019: EUR 0.13 per share). With the financing decisions made during Q4 the liquidity situation will remain healthy despite the weaker earnings this year. We expect earnings figures to improve clearly in 2021 driven by higher fee-based profitability from the growth in AUM, higher investment returns after the weak 2020 and growth in the services business. We expect 2021E EBIT of EUR 32.0m compared with EUR 7.0m 2020E.

HOLD (BUY) with a target price of EUR 2.40 (2.20)
Current valuation is after the share price increase since on our previous update (+~28%) on our estimates somewhat higher than that implied by our SOTP-model and peer multiples, but the anticipated dividend yield is still clearly supportive. Following our estimates and multiples adjustments we raise our target price to EUR 2.40 (EUR 2.20) but downgrade our rating to HOLD (BUY).

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SRV - Construction margins shaping up

02.02.2021 - 08.45 | Preview

Given the previously specified outlook the Q4 profitability is largely known, with the Investments segment overshadowing good construction progress. The Q4 report should bring a lot to the table, especially in regards of previous communication of restoring profitability back to 2017 levels, clearly above the 2020 guidance.

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Good construction development burdened by investments
SRV will report Q4 results on February 4th. SRV specified its guidance earlier on, expecting the operative operating profit for 2020 to be in the range of EUR 3-6m. The Q4 results will be affected by changes in the value of the Investment segment’s balance sheet items for a total negative impact of EUR 12m. Although the negative impact casts a shadow on the good operative operating profit development during earlier quarters these items should to our understanding be non-cash, and the guidance still implies continued healthy construction margin development. Our estimate for the Construction segment’s operative operating profit margin in 2020 is at 2.9% (2019: 0.7%) and Group operative operating profit estimate at EUR 6.0m.

Expectations of a better year in 2021
We do not expect a dividend distribution for FY2020. Although the company’s cash flows have improved clearly through divestments and financial measures taken, the company still has a rather strained balance sheet given current operating cash flows. The guidance for 2021 will be of key interest, as SRV has previously communicated intentions to restore the operative operating profit in 2021 to levels seen in 2017 (EUR 27.0m). SRV will also release its updated strategy and financial targets in conjunction with the Q4 results.

BUY with a target price of EUR 0.64
Apart from the changes to the Investments segment’s balance sheet item changes, our estimates remain intact. We retain our BUY-rating and target price of EUR 0.64.

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Suominen - Additional improvement is not easy

28.01.2021 - 09.25 | Preview

Suominen reports Q4 results on Feb 4. Our Q4 estimates are intact but we make small revisions due to changes in EUR/USD. In our view Suominen can achieve flat top line in FY ‘21 while profitability faces headwinds after an extraordinary year. We retain our EUR 6 TP and BUY rating.

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We expect gross margin to decline somewhat from now on

We estimate Americas and Europe to have continued to grow by 9% and 18% y/y respectively in Q4. These rates are very similar to the ones seen in Q3. We expect Q4 gross margin to have declined from the very high 17.1% Q3 figure to 15%, and thus estimate EBITDA down by EUR 4m q/q. USD has weakened by ca. 3% relative to EUR in the past three months and we update our estimates to incorporate the approximately EUR 10m headwind this represents to FY ’21 Americas revenue. We consequently estimate EBITDA down by about EUR 6m in FY ’21 due to pressure on gross margin. We would be surprised if Suominen guides profitability development to be better than flat.

Wipes demand is strong while input prices are recovering

Raw materials prices found their lows in Q4; there wasn’t yet any major spike. Prices have continued to climb so far this year, and this raises uncertainty regarding Suominen’s H1’21 gross margins. There was already negative nonwovens pricing pressure in Q4’20, following the weak H1’20 raw materials prices with a lag. In a more ordinary environment such developments would represent a clear hit on Suominen’s gross margin, however we see there’s still a chance these adverse forces will be somewhat muted by the current extraordinary wipes demand situation. Double-digit top line y/y growth is on the cards for Q4’20 and Q1’21, but beyond that the respective comparison periods turn challenging. We expect only flattish development beyond Q1’21.

Earnings multiples are still very reasonable

Last year has left the bar very high. We estimate Suominen to have recorded more than EUR 60m in FY ‘20 EBITDA and some EUR 40m in EBIT. We don’t see the company reaching such figures again any time soon, yet we expect EBITDA and EBIT to stabilize around ca. EUR 55m and EUR 35m during the next few years. On these estimates Suominen now trades around 6x EV/EBITDA and 10x EV/EBIT, a level which we continue to view attractive. We retain our EUR 6 TP and BUY rating.

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Detection Technology - Outlook brightened by vaccine optimism and Chinese recovery

27.01.2021 - 09.00 | Preview

Detection Technology will report its Q4 next Tuesday, February 2nd, at 9:00 EET. We look forward to hearing the latest developments and outlook regarding the security and medical imaging markets, especially now with the backdrop of global vaccine optimism and Chinese economic recovery. We expect DT to return to net sales and EBIT growth path this year, and based on the increased confidence in market improvement, we raise our target price to €26.5 (prev. €22) but maintain HOLD recommendation.

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A challenging year coming to an end

We expect Q4 net sales of 22.2 MEUR (22.2 MEUR cons) and EBIT of 2.7 MEUR (2,75 MEUR cons), meaning a decline of -11% and -16% respectively compared to last year. 2020 has been challenging with the pandemic negatively affecting DT’s Security Business Unit, which represents roughly 60% of total net sales. With our estimates, DT’s FY20 net sales are down -18% to 84 MEUR and EBIT is down -46% to 9.1 MEUR (10,8% EBIT margin). As a result, we expect DT to distribute 0.28 dividend compared to 0.38 last year. Our dividend estimate is at upper end of DT’s dividend distribution policy of 30-60%. Dividend could prove to be smaller, but we see this as immaterial as DT in our view is more a growth case than a dividend case.

 Global vaccine optimism and China brightening outlook

The key take from the upcoming Q4 result will be hearing management’s view on the security and medical imaging markets. DT stated in its Q3 report that it expects SBU sales to decrease in Q4, but to start improving in H1/21 driven by Chinese demand. China’s economy has recovered swiftly from the pandemic with Chinese’s GDP reaching pre-COVID levels at end of last year. China’s GDP accelerated 6,5% y/y in Q4 (Q3: 4,9% y/y), which is the fastest pace in last two years. The recovery in China coupled with the improved outlook for the battered aviation segment thanks to vaccine optimism, should provide DT with good grounds to improve on. MBU is expected to continue growing, albeit more slowly than in 2020.

 HOLD with new target price of €26.50 (prev. €22)

We expect DT to return to both revenue and EBIT growth in 2021 but estimating the pace of recovery remains challenging due to low visibility. We have not made any changes to our estimates before the Q4 report, but based on the increased confidence in market improvement, we raise our target price to 26.5 euros (prev. 22 euros) reflecting both growth and earnings improvement potential, at or above our peer group. Our target price values DT at 21-22E EV/EBIT of 27x and 19x respectively, in line with our peer group as we look for more signs of security market recovery.

Open report

Raute - Anticipation seems overdone

22.01.2021 - 09.20 | Company update

Raute has good potential to perform strong in the coming years, however in our opinion valuation is now stretched too high. Our TP is now EUR 20 (18), rating SELL (HOLD).

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We make some upward revisions to our estimates

Raute said it expects FY ’20 revenue to amount to some EUR 115m. This implies Q4’20 top line at approximately EUR 39m. Raute previously expected the FY ’20 figure to decrease y/y, and now the update guides a clear decrease. We don’t view the update as substantial negative news and the preliminary ca. EUR 39m Q4’20 revenue figure is in fact somewhat above our previous EUR 33m estimate. We now estimate Q4 project deliveries revenue at EUR 26m (up 8% y/y) and that for technology services at EUR 13m (down 14% y/y). Raute didn’t update profitability guidance. We previously estimated EUR 1.7m in Q4 EBIT and we revise the estimate up a bit to EUR 2.0m.

FY ’21 EBIT yet unlikely to reach the highs seen in the past

We now expect Q4 order intake at EUR 19m when excluding the large EUR 55m Russian project. We estimate the smaller project deliveries orders at EUR 7m, a figure which is clearly above the very low benchmark figures. We expect technology services order intake at EUR 12m, in other words slightly down y/y but meaningful improvement q/q. The past few reports have painted an overall muted business picture, however there is a decent chance the outlook is already improving. We nevertheless think the recent share price gains have made near-term multiples too dear as the overall uncertainty level remains very much elevated.

In our view recent gains make downside relatively likely

We expect Raute’s top line to grow meaningfully, by ca. 15% y/y, in FY ’21. We make small revisions to our FY ’21 EBIT estimate, and now see the figure at EUR 6.4m (previously EUR 6.0m). This would still be far from the ca. EUR 11m EBIT that Raute averaged annually in 2016-19. Significant earnings potential remains for the coming years, but in our opinion the share has appreciated too steep considering all the uncertainty. We don’t see upside on the current 8x EV/EBITDA and 13x EV/EBIT multiples on our FY ’21 estimates. The valuation doesn’t look that expensive relative to long-term potential and in terms of the respective FY ’22 7.5x and 10x multiples, but we think this potential remains too far in the future. Our new TP is EUR 20 (18), rating SELL (HOLD).

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Gofore - Growth narrative remains intact

18.01.2021 - 09.15 | Company update

Gofore held its Capital Markets Day on January 14th, which for us acted mainly as a confidence boost, as updated financial targets and strategy had been communicated earlier. The company remains well on its track of profitable and rapid growth, with little obstacles to be seen. We retain our HOLD-rating and target price of EUR 16.0.

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CMD mostly a confidence booster for us
Gofore held its Capital Markets Day on January 14th. With the company having updated its strategy and long-term financial targets earlier, new information in that regard was limited. From a financial perspective, focus in our view was rather clearly on the commitment to continued rapid and profitable organic and inorganic growth, with an increased focus on international operations and the usage of subcontracting. The CMD increased our confidence in Gofore’s international growth capabilities, which arguably has been one of the company’s more challenging areas, as well as Gofore’s overall delivery capabilities.

Growth target well in sight
Gofore also published its December net sales figures, with full-year net sales at EUR 78.0m, slightly beating our EUR 77.3m estimate. We have made slight adjustments to our estimates but no major changes overall. Based on the inorganic growth from the Qentinel Finland acquisition along with an organic uplift we expect growth of 18.5% in 2021, with any potential acquisitions quite easily being able to push growth over the 20% target. We expect relatively flat margin development going forward given the already excellent levels and limited scalability.

HOLD with a target price of EUR 16.0
Current valuation remains clearly above peers, which to a larger extent is warranted given the solid growth and profitability, which in the long-term could provide upside potential, while near-term potential remains rather limited. Our target price of EUR 16.0 implies a 2021 P/E of 27.0x. We retain our HOLD-rating.

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Endomines - Still quite a lot to prove

15.01.2021 - 09.30 | Company report

Endomines currently holds sizeable assets in the United States, looking to increase gold production to 40k oz p.a. within four years. Existing infrastructure and the high gold price provide support for pick-up in production volumes but given the track record in recent years the company still has quite a lot to prove.

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Previous years have not gone quite as planned
Endomines established operations in the United States in 2018, after having been active only in Finland throughout the majority of the 2010’s. The past years have seen focus being on bringing the first asset, Friday, to production. The company has been met with challenges along the way, relating both to technical and financial challenges, but production commenced at the site in 2020. Continued technical challenges and a tight liquidity situation, however, forced the company to put the site under care and maintenance towards during the latter half of 2020.

Seeking 40k oz p.a. production within four years
Endomines is seeking to bolster its financial position to be able to restart production. With the high gold prices, plans have also been made for restarting production at Pampalo in Finland, as production was halted due to the then unfavourable gold price levels. Financial challenges have unfortunately been an inherent feature in the past years, as the company has not been able to create reliable cash flows. Now with assets that can be rapidly brought to production due to existing infrastructure and the favourable gold price levels Endomines is looking to improve production figures, targeting a production of 40k oz p.a. within four years. With the recent year track-record, however, the company in our view still has quite a lot to prove.

HOLD with a target price of SEK 2.9 (3.5)
We lower our target price to SEK 2.9 (3.5) following adjustments to our assumptions with the information provided regarding the rights issue and production plans. We retain our HOLD-rating.

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Scanfil - A most resilient performer

08.01.2021 - 09.20 | Company report

We remain confident towards Scanfil’s long-term value chain positioning, however in our opinion recent share price gains have largely neutralized valuation. Our new TP is EUR 6.5 (6.25) and our rating is now HOLD (BUY).

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The performance amid the pandemic testifies to strengths

Scanfil’s business has remained robust to macroeconomic shocks throughout its 40+ year history. ‘20 is another testament to this resilience as the pandemic hasn’t considerably affected Scanfil’s performance. The company has had to make only very small revisions to FY ’20 guidance; the latest revenue and EBIT outlook figures are down by respective 2% and 5% compared to the initial figures issued before the pandemic broke out. We now expect Scanfil to achieve some 3% top line growth for FY ’20; the increase is due to the 2019 HASEC acquisition. Profitability has remained strong. The Energy & Automation, Industrial and Medtec & Life Science segments have extended their good figures, while Communication and Consumer Applications have been softer. Consumer Applications’ revenue is down by ca. EUR 40m since FY ’18, however we view the segment still has good long-term outlook. We aren’t estimating rapid rebound for the segment yet see Scanfil should be able to post a 4% organic CAGR in the coming years thanks to its three largest ones.

We expect stellar performance to continue

We see Scanfil remains in top shape overall and is probably one of the best performing decent-sized contract electronics manufacturers globally. In our opinion Scanfil is unlikely to encounter profitability issues going forward and long-term organic growth outlook still appears good despite the pandemic. The company is also in a strong position to do more M&A and we are confident any potential deal, small or large, is likely to further improve Scanfil’s competitiveness.

Multiple expansion was overdue, yet visibility is limited

Scanfil’s share has appreciated significantly, and in our view some multiple expansion was long overdue given the company’s strong track record. Scanfil now trades in the range of 7-8x EV/EBITDA on our estimates for ’20-21, a level we don’t consider that challenging, but also view to be enough to curb meaningful additional gains for now since revenue visibility is limited even in the best of times. Our TP is EUR 6.5 (6.25), rating HOLD (BUY).

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Etteplan - Signs of improved demand activity

21.12.2020 - 09.30 | Company update

Etteplan raised its revenue and EBIT guidance for 2020, as investment demand has been picking up on the positive news on Coronavirus vaccines, with the fourth quarter set to show solid figures. We have raised our 2020-2022 EBIT estimates by some 6-9%. We retain our HOLD-rating with a target price of EUR 12.4 (9.3)

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2020 revenue and EBIT guidance raised
Etteplan issued a positive profit warning, raising its revenue and EBIT guidance. Revenue in 2020 is now expected to be at same levels as in the previous year (prev. decrease slightly or same levels as previous year) and operating profit to decrease slightly or be at previous year levels (prev. decrease clearly). According to Etteplan the positive news on Coronavirus vaccines has had a favourable impact on investments and as such aided revenue during the last quarter of the year. The impact has been seen across the board but in particular within software and digitalization related solutions.

Moving in a better direction
The revised guidance implies solid results in the fourth quarter and is a clear confidence boost after the demand weakness in previous quarters. We have raised our 2020-2022 EBIT estimates by some 6-9%. We still remain somewhat cautious to revenue growth, as demand pick-up visibility is still rather limited, expecting a growth of 6.9% in 2021. We could certainly see potential for growth returning to double-digit figures if demand activity continues to improve. The Tegeman acquisition will also provide an inorganic boost to growth in 2021 and continued M&A activity is likely, although hard to predict.

HOLD with a target price of EUR 12.4 (9.3)
On our estimates Etteplan trades quite in line with historic valuation and on peer median multiples. The positive news has certainly raised our confidence levels but with the still present uncertainty higher valuation for now appears unwarranted. We adjust our TP to EUR 12.4 (9.3), valuing Etteplan at 18x 2021e P/E, and retain our HOLD-rating.

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Gofore - Good things going on

18.12.2020 - 09.35 | Company update

Gofore announced its updated strategy and new long-term financial targets, seeking over 20% annual growth and a 15% adj. EBITA-margin. With continued good signs of rapid profitable growth and recent solid order intake we adjust our TP to EUR 16.0 (12.1) and retain our HOLD-rating.

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Seeking above 20% long-term growth
Gofore announced its updated strategy and gave and gave new long-term financial targets. Gofore will continue to seek to grow profitably both domestically and internationally while creating a positive impact on the society, customers and employees. Approximately half of the growth in the coming years is targeted through acquisitions and the aim for the international business is to achieve a similar growth pace as the Group. The long-term aim is to achieve above 20% annual net sales growth. The target for profitability is an adjusted EBITA-margin of 15%. Gofore also announced that it aims to transfer to the Nasdaq Helsinki Main Market during the first quarter of 2021.

Very promising signs from recent order intake
The new growth target is clearly above our previous expectations, with the organic growth having become more challenging in previous years for the market as a whole. Gofore has also grown to a size at which maintaining the relative growth pace should become more challenging. The order intake during the last quarter of 2020 has however been extremely promising, with the potential value of new orders corresponding to around 2019 net sales. Gofore is also in a solid position to continue inorganic growth, with a clear net cash position also after the Qentinel Finland acquisition. We have raised our growth estimates, expecting ~17% annual growth during 2021-2022 (prev. ~12%), and made adjustments with the transition to IFRS.

HOLD with a target price of EUR 16.0 (12.1)
On current multiples valuation is certainly not cheap, but with notable signs of continued rapid and profitable growth there is certainly merit in staying on for the ride. We adjust our TP to EUR 16.0 (12.1) and retain our HOLD-rating.

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Marimekko - Strong momentum continues

11.12.2020 - 09.40 | Company update

Marimekko issued a positive profit warning yesterday. The company expects 2020E net sales to be approx. at the same level or slightly lower compared to 2019. Adj. EBIT is expected to be higher compared to last year. We have increased our estimates and keep our rating “BUY” with TP of EUR 50 (44).

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New guidance due to better than expected sales trend

Marimekko raised its 2020E guidance in particular due to better than expected trend and improved outlook in the retail sales in Finland. The company now expects 20E net sales to be approx. at the same level or slightly lower compared to last year (2019: EUR 125m). Adj. EBIT is expected to be higher compared to the previous year (2019: EUR 17.1m). Previously, Marimekko expected 20E net sales to be lower compared to the previous year and adj. EBIT to be approx. at the same level or lower compared to last year. We expected 20E sales to decline by 3.5% y/y to EUR 121m and adj. EBIT of EUR 17.3m.

Appealing to consumers despite the uncertain times

The profit warning didn’t come as a total surprise as the company has constantly been able to appeal to consumers, even despite the uncertain times. The company indicated that most of the earnings for H2’20E were generated during Q3. The net sales accrual in H2E is expected to be more balanced between the third and the final quarter. We expect the campaign season has boosted especially Marimekko’s domestic sales. In addition, the Christmas season is ongoing, and the household consumption is more focused on domestic purchases this year. We expect this to have a positive impact on Marimekko’s domestic sales and expect good demand especially in home décor products. However, there are still uncertainties related to the pandemic situation and the customer flows in retail stores. It is also essential to maintain the operational reliability of the distribution centers and logistics.

“BUY” with TP of 50 (44)

We have increased our 20E sales expectation by ~3% and our adj. EBIT expectation by ~12%. We now expect 20E sales of EUR 124.4m (-0.8% y/y) and adj. EBIT of EUR 19.4m. On our estimates, the company trades with 20E-21E EV/EBIT multiples of 18.7x and 18.0x which is a clear discount compared to the luxury peers. We keep our rating “BUY” with TP of EUR 50 (44).

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Aspo - Sailing towards EUR 30m EBIT

10.12.2020 - 09.15 | Company update

Aspo revised FY ’20 guidance, which prompts us to update estimates particularly for ESL and Telko. Our TP is now EUR 8.75 (8) per share, BUY rating remains intact.

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We raise our total Q4’20 EBIT estimate by EUR 2.9m

Aspo states especially steel and energy industry cargo volumes have developed strong and so ESL has performed better than expected before. The upgrade is thus not due to e.g. additional cost savings but driven by improving business conditions. Aspo previously guided EUR 14-16m in FY ’20 EBIT and the revised range is EUR 18-20m. The positive outlook revision was not such a big surprise since the previous guidance seemed to us quite cautious with respect to Telko’s development. We now estimate ESL to post EUR 3.2m in Q4 EBIT (prev. EUR 1.7m) and Telko to improve slightly further to EUR 4.3m (prev. EUR 2.8m). The new range suggests Aspo will achieve about EUR 7m in Q4 EBIT, which implies the company is well on track towards more than EUR 30m annually in the coming years.

The upgrade is incrementally positive for our overall view

Only last year Aspo’s profitability development appeared to rely mostly on ESL. There was potential in Telko that always waited for its materialization. Earlier this year the roles reversed in a way when Telko delivered very strong Q2 and Q3 results while ESL was clearly suffering the pandemic’s adverse effects. It has now become more apparent that ESL has not been left nursing any permanent wounds. Given ESL’s intact prospects and Telko’s gains Aspo’s overall development towards long-term financial targets can even be considered positive in 2020 (despite that FY ’20 EBIT will likely decline a bit y/y). EBIT thus seems bound towards the EUR 30m ballpark in the coming years, compared to the EUR 20m level before the pandemic.

Current valuation still leaves good upside potential

The recently reaffirmed long-term financial targets now look maybe more relevant than ever. There’s strong potential in all three segments, however 2020 also raises macroeconomic uncertainty and thus the operational upside prospects should still be valued somewhat cautiously. In our opinion Aspo’s equity value per share could easily top EUR 10 in the future if ESL and Telko continue to perform well next year. Our new TP is EUR 8.75 (8) and we retain our BUY rating.

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Fellow Finance - New strategic initiatives

09.12.2020 - 09.15 | Company update

Fellow Finance held a strategy event, with sights set on launching new payment and e-commerce products in 2021, for both SMEs and consumers. International operations are being focused on current markets, with new openings unlikely. We retain our HOLD-rating and TP of EUR 2.8.

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New product launches expected in 2021
Fellow Finance held a strategy event on December 8th. Focus is being set on new payment and e-commerce products for SMEs and consumers, which include credit cards and invoice payment services. With the challenging consumer lending environment and potential extension of the temporary cap on consumer credit interest rates (credit cards excluded) the services could offer more recurring and higher margin fees. The rollouts of the new products are planned for 2021. The company has also restricted its international expansion plans, now focusing on selected existing international markets and new openings in the coming years are unlikely.

Rapid growth still expected
Fellow Finance set its 2023 financial targets, seeking EUR 23m in revenue, of which a significant share from business finance and international markets, and an EBIT-margin of 15%. In 2020 the company expects revenue of approx. EUR 11m and earnings to be negative (H2/2020 close to zero). Our revenue estimates remain largely intact while our 2020 EBIT estimate is up by EUR 0.5m and our 2021-2023 EBIT-margin estimates down by 2-6pp.

HOLD with a target price of EUR 2.8
Although we have lowered our mid-term profitability estimates, the new initiatives appear rather appealing and raise our confidence in Fellow Finance’s ability to navigate the challenging consumer lending environment. Performance in business lending has also been better than anticipated, and loan volumes are picking up nicely. We retain our HOLD-rating and TP of EUR 2.8.

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Marimekko - Outlook remains bright

02.12.2020 - 09.45 | Company report

Marimekko is a Finnish design and lifestyle company founded in 1951. The company’s largest market area is Finland followed by the APAC region. As we expect further earnings improvement potential via profitable, global growth, we keep our rating “BUY” with TP of EUR 44 (43).

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A Finnish design and lifestyle company

Marimekko, founded in 1951 is a Finnish design and lifestyle company. The company is known for its unique colors and prints. The company’s product portfolio includes high-quality clothing, bags and accessories as well as home décor items ranging from textiles to tableware. The company aims to gain profitable growth via broader target audience. The company has approx. 150 stores across the world. Marimekko’s revenue CAGR in 2013-2019 was ~4.9 percent.

20E hampered by the pandemic but outlook remains good

Year 2020 started well but the Covid-19 quickly spread across the world and Marimekko was forced to close its retail stores temporarily in Finland as well as in other market areas. Despite of the challenging times, Marimekko performed relatively well during the lockdown. The company has benefited of having different product segments (i.e. consumers have spent more time at home which has increased the demand of home décor products while fashion sales have dropped). We expect Marimekko’s sales to decline by ~4 percent y/y in 20E. Given the circumstances, we consider this fairly good performance. We expect adj. EBIT to be on a par with last year, totaling EUR 17.3m. We expect revenue to grow by ~8 percent in 21E and ~6 percent in 22E. We expect Marimekko is set to reach its EBIT margin target of 15 percent by 22E.

“BUY” with TP of EUR 44 (43)

We value Marimekko by using valuation multiples. On our estimates, the company trades with 20E P/E multiple of 24.8x and EV/EBIT multiple of 17.9x. Hence the company trades with a discount compared to the premium and luxury peers. Correspondingly, the company trades with 21E P/E multiple of 20.7x and EV/EBIT multiple of 15.6x, which translates into a clear discount compared to the luxury peers. We keep our rating “BUY” with TP of EUR 44 (43).

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Endomines - Driven into a tight spot

02.12.2020 - 09.15 | Company update

Endomines Q3 figures were weaker than expected, as a tight funding situation forced the company to put operations at Friday into care and maintenance. The company is now seeking to bolster up its financial position through a series of measures, seeking SEK 281m through a rights issue for ramp-up at Friday and for other projects. We adjust our TP to SEK 3.5 (5.5), rating now HOLD (SELL)

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Friday operations put under care and maintenance
Endomines reported weaker than expected Q3 results, as the operations at Friday were put under care and maintenance due to a very tight financial situation. Ramp-up at Friday was previously delayed by problems with the tailings dewatering system and although solving the problems would not have been a large investment, the limited cash flows and very tight cash position (Q3/20: SEK 12.0m) forced the company to take more drastic measures. Q3 revenue and EBITDA of SEK 1.9m and SEK -23.1m were as such clearly below our estimates (Evli SEK 11.1m and -15.6m respectively).

Taking measures to improve financial position
Endomines announced intentions to initiate a SEK 281m rights issue, at a subscription price of SEK 2.5 per share, along with possible directed share issues of near SEK 75m to cover guarantee undertakings and bridge financing claim set-offs. With some 60 percent of the rights issue covered by subscription undertakings and guarantee commitments Endomines should in our view be able to secure enough funding to restart operations at Friday and potentially also Pampalo if the gold price remains at >1,800 USD/oz levels. We estimate a six to eight month delay in ramp-up of Friday due to the funding challenges.

HOLD (SELL) with a TP of EUR 3.5 (5.5)
With the estimated impact of the rights issue on share amounts and net debt we adjust our TP to SEK 3.5 (5.5), assuming that the rights issue is subscribed in full. The gold price remains at beneficial levels and is continuing to see upwards pressure despite minor short-term declines. We raise our rating to HOLD (SELL).

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Aspo - CMD notes

02.12.2020 - 09.10 | Company update

Aspo reaffirmed its long-term financial targets for FY ’23. The CMD didn’t disclose any drastic news but we are slightly more positive than before regarding the earnings rebound. Our TP is now EUR 8.00 (7.25), retain BUY rating.

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ESL’s long-term 12% EBIT margin potential is still there

While the dry bulk cargo market has been hit by the pandemic ESL has not lost market share. Large vessel operations have been especially challenging due to a lack of cargo demand, however smaller vessel types, such as those of AtoB@C, have performed better. ESL in fact reports the business has won market share in e.g. wood-based products shipments. The fleet can also serve e.g. the Baltic wind power industry in the effort to scale up renewable energy production in the area. In the long-term the Arctic area (incl. Russia) holds strong cargo volume potential for larger vessels. Such vessels’ cargo volumes began to increase in late Q3. ESL’s capacity is now fully in use. In our opinion dry bulk cargo markets are already on track to normalize in tandem with many industrial sectors even if the pandemic is yet to fade away from more everyday life. ESL also says it has achieved admin costs reductions that are not just one-offs in nature.

Telko already achieved long-term margin targets

Telko’s recent working capital management and pricing control measures have already produced significant results in cash conversion cycle, and there remains some more room for improvement relative to certain benchmarks. Telko now has established the lubricants business besides the plastics and chemicals ones. We believe lubricants is an area that can deliver more good results in the long-term as the business is still quite small relative to plastics and chemicals. We see Telko’s reinforced core is now better positioned to capture profitable volumes. Telko has indeed already managed to top the 6% EBIT margin target during the last two quarters. Leipurin however is yet to deliver gains towards its 5% EBIT margin target.

Significant EBIT improvement appears possible next year

Although the long-term financial target confirmation is good news as such focus nevertheless remains on more short-term profitability development. Our TP is now EUR 8.00 (7.25); we retain our BUY rating since profitability continues to improve and SOTP valuation supports further upside potential.

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Endomines - Rights issue to secure funding

01.12.2020 - 09.15 | Earnings Flash

Endomines announced that the operations at Friday have been put under care and maintenance due to funding challenges and has resolved on a rights issue of SEK 281m.

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  • Total revenue* in Q3 amounted to SEK 1.9m, with our estimates at SEK 11.1m. Gold production during 1-9/2020 amounted to 538.1.1oz (Evli 986oz), with a head grade of 3.52g/t (Evli 3.39g/t). Gold concentrate was produced from pre-production development material, thus resulting in low head grades.
  • EBITDA* in Q3 was at SEK -23.1m, below our estimate of SEK -15.6m.
  • *Figures not reported, derived from Q1-Q3 figures
  • Due to challenges with the tailings dewatering system and as a result a faster than anticipated use-up of working capital, as production and revenues were delayed, the operations at Friday were put under care and maintenance in August. The start-up will be dependent on securing the required financing.
  • Liquid assets amounted to SEK 12.0m at the end of the quarter.
  • The BoD of Endomines has resolved on a rights issue of SEK 281m, at a subscription price of SEK 2.50. The rights issue is covered by subscription undertakings and guarantee commitments up to SEK 168m. Dilution for existing shareholders choosing not to participate in the rights issue will be approximately 46 percent assuming full subscription.
  • Endomines has not given a production guidance for 2020.

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Next Games - A lot to expect in the near future

26.11.2020 - 00.15 | Company update

Next Games held its CMD on November 25th, releasing what in our view are very ambitious financial targets. The CMD confirmed continued commitment to publishing IP based games and a more sound and calculated approach to scaling games. The revised guidance for 2020 brought some good news for profitability expectations.

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Ambitious mid-term financial targets
Next Games held its Capital Markets Day on November 25th. The most surprising content was the mid-term (our interpretation 3-5 years) financial targets of achieving annual revenue of EUR 250m and EBITDA and EBIT-margins of over 23% and 18% respectively. Given current financial performance we consider these targets very ambitious. The Stranger Things -game is set to launch in selected markets during the end of the year and Blade Runner Rogue during Q1/2021. Growth expectations are clearly set on the former, while the latter is quite as expected looking to be more of a niche game.

Guidance revised, positive news on profitability
Next Games also revised its guidance for 2020, now expecting revenue of EUR 26-28m and to be EBITDA positive. The revenue guidance is below our previous estimate (EUR 30.7m) but the profitability expectation was a positive surprise. We had assumed a slightly larger contribution of new games and also expect that Our World is continuing to face challenges. We adjust our 2020 revenue and EBITDA estimates to EUR 28m and EUR 1.1m respectively. We expect growth of 80% in 2021 driven primarily by the Stranger Things -game but note that visibility is extremely limited.

SELL with a target price of EUR 1.6 (1.2)
On our estimates Next Games trades at a clear discount to peers on 2021-2022 EV/sales multiples. Risks are however substantial, as 62% of our estimated 2021 revenue stems from not yet published games. On the positive profitability news and increased confidence in a more careful and sustainable scaling approach we raise our TP to EUR 1.6 (1.2), SELL-rating intact.

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Finnair - Dim light at the end of the tunnel

25.11.2020 - 09.25 | Company report

Aviation industry has faced the worse ever crisis in 2020 due to the COVID-19. Finnair has been forced to scale down its traffic and the ramp-up is expected to start next summer. We expect heavy losses in 20E but also in H1/21E. We keep our rating “HOLD” with TP of EUR 0.60 (0.38).

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Strategy focuses on the traffic between Asia and Europe

Finnair’s strategy focuses on the growing traffic between Asia and Europe. The strategy is based on the geographic location of the Helsinki hub: the shortest route from (North-East) Asia to Europe goes over Helsinki. Additionally, the distance between Helsinki and most Asian destinations is such that Finnair is able serve most routes in 24h rotations, which enables high utilization rate of planes and reduces the need for additional crew. The most direct route to Asia is enabled by having Russian overflight rights. Flights through the Siberian corridor from Asia to Europe via Helsinki save ca. 2h on flight time compared to one-stop flights via European hubs and ca. 4h compared to routes via the Middle East.

COVID-19 caused the worst ever crisis

The aviation industry faced the worst ever crisis in 2020 as the COVID-19 pandemic spread from China across the world in early 2020. Global lockdowns and travel restrictions forced also Finnair to scale down its traffic. Finnair estimates that the passenger numbers will recover in 2-3 years. The company continues to operate with a significantly limited network also in Q1/21E and the ramp-up is expected to start in the summer 2021. However, the visibility is extremely weak not only due to the pandemic situation itself but due to different travel restrictions. The company expects 20E revenue and capacity (ASK) to decrease more than 70%.

“HOLD” with TP of EUR 0.60 (0.38)

We expect Finnair’s 20E ASK to decline by 72% y/y and revenue to decrease by 73% y/y while comparable operating loss is expected to be EUR 602m. We expect significant losses also during H1/21E. We expect air travel to recover relatively well in 2022E but passenger numbers are still expected to remain below 2019 levels. Due to Finnair’s targeted annual cost savings of EUR 140m from 2022 onwards, we expect good profitability development after the crisis. Finnair’s share price recently took off due to the optimistic vaccine news. The news are promising but we note that there are no effective vaccines in the global distribution yet. We retain “HOLD” with TP of EUR 0.60 (0.38).

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Gofore - Continued profitable growth

16.11.2020 - 09.40 | Company report

Gofore has a proven track-record of profitable growth, having grown and seeking to grow faster than its target market. Supported by M&A activity and high public sector exposure, growth is in our view set to continue in the double-digits, with margins not looking to be under any major threat. We adjust our target price to EUR 12.1 (8.6) and retain our HOLD-rating.

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Seeking above target market growth
Gofore is one of the fastest-growing yet profitable public IT-services companies in Finland, seeking to profile itself more towards a digitalization consultancy company. Gofore aims to grow faster than the target market, new digitalization services, while at the same time seeking to generate an EBITA-margin of 15%. Gofore has a solid track-record, having achieved a net sales CAGR of 47.5% between 2014-2019, while adj. EBITA-margins have remained well in double-digit figures. Relative organic growth has slowed down from recent peak years, but M&A activity supports continued double-digit growth.

Continued good growth and profitability outlook
Aided by the acquisition of Qentinel Finland we expect Gofore to grow 14.5% in 2021. The uncertainty brought by the coronavirus pandemic poses some risks to customer activity, but the high share of revenue from public sector clients has so far mitigated a lot of the potential impact, as private sector demand has during the year been more affected. Apart from a potential impact of the recent increased share of subcontracting, we do not see significant risks to margins going forward and expect a 13.8% average adj. EBITA-margin during 2020E-2022E, slightly below the target 15%.

HOLD with a target price of EUR 12.1 (8.6)
We value Gofore at 17.5x 2021 adj. P/E (excludes goodwill amortization), implying a 26% premium to our peer group and a 34% premium to the finnish peers. We adjust our target price to EUR 12.1 (8.6) and retain our HOLD-rating.

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Cibus Nordic - Long-term strategy is in place

13.11.2020 - 09.25 | Company update

Cibus’ Q3 was uneventful. We make small revisions to our estimates, our TP is now SEK 165 (160), rating HOLD (BUY).

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No major property acquisitions were completed in Q3

Cibus reported EUR 17.0m in Q3 rental income (vs our EUR 17.5m estimate) and EUR 16.6m in net rental income (vs our EUR 16.2m estimate). Operating income was EUR 14.9m and slightly lower than our EUR 15.3m estimate as Swedish management costs were reclassified from property expenses to administration costs. The management agreement with Sirius has been terminated and Q4 will be clean in terms of cost structure. Q3 net financial costs were EUR 5.4m i.e. somewhat higher than our EUR 5.0m estimate due to an EUR 0.6m cost attributable to bond and bank loan fees. Cibus’ annual net rental income capacity was updated only a bit and we revise our estimates accordingly.

The long-term strategy is proceeding as planned

Cibus’ organization is developing as planned and the company sees some potential to generate more income from the existing asset base through additional services like car washes and parking lots. Cibus continues to focus on the Finnish and Swedish markets for now, however entry to other Nordic markets remains likely in the long-term. Cibus also upped the annual acquisition target from EUR 50m to EUR 50-100m. Q3 was quiet in terms of new acquisitions, yet Cibus remains well on track on the deal front this year after acquiring some EUR 70m in Finnish properties besides the more extraordinary EUR 180m Swedish market entry. Cibus reports very little changes in the daily-goods property markets’ transaction dynamics, with deal flow and valuations basically unchanged throughout the pandemic.

We see current valuation landing within a fair spot

While Cibus still trades at an attractive yield relative to other Nordic public properties we however see the shares’ upside potential limited by the daily-goods property market’s flat valuations. In other words, further meaningful Cibus yield compression would need to be backed by a pricing pick-up in the private markets. Cibus is valued 1.12x EV/GAV and 1.35x P/NAV, hence additional gains would stretch the valuation premium rather large. Considering the relatively high 4.75% yield and the premium to book and private markets valuations we view Cibus’ valuation now fair. Our TP is SEK 165 (160), rating HOLD (BUY).

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Cibus Nordic - Markets remain unchanged

12.11.2020 - 09.30 | Earnings Flash

Cibus Nordic’s property portfolio continued to perform well in Q3 as net rental income exceeded our estimate, however administration and financial costs were higher than we expected.

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  • Cibus’ Q3 rental income amounted to EUR 17.0m vs our EUR 17.5m estimate.
  • Net rental income was EUR 16.6m, compared to our EUR 16.2m expectation.
  • Operating income was EUR 14.9m vs our EUR 15.3m estimate since administration expenses were clearly higher than we expected.
  • Net operating income stood at EUR 9.5m, while we estimated EUR 10.3m. Financial expenses were some EUR 0.4m higher than we expected.
  • Annual net rental income capacity is now EUR 65.6m (previously EUR 65.1m).
  • The portfolio was valued at EUR 1,143m, translating to an EPRA NAV of EUR 11.8 (11.8) per share.
  • Net LTV ratio stood at 61.3% (60.5%).
  • Occupancy rate was 95.7% (95.2%).
  • WAULT remained at 5.4 years at the end of Q3.

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Talenom - CMD notes

12.11.2020 - 08.15 | Company update

Talenom’s CMD provided an all-around update with limited new information given the announcements in Q3. The core business continues to perform well, and further automation of the accounting production line is sought, while domestic growth is increasingly driven by acquisitions.

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Largely business as usual
Talenom held its Capital Markets Day on November 11th. Having already announced the new small customer concept and potential plans to expand in Europe in conjunction with the Q3 report the CMD in our view offered rather limited new information, mainly adding some more details to the aforementioned matters. Focus is being set on further increasing the degree of automation in the accounting production line, with a target of over 90% in 2023, currently slightly over 70%. The performance of the core business remains solid and customer acquisition is holding up quite well given the circumstances. Talenom is domestically clearly adding emphasis on inorganic growth, with the digitalization challenges faced by small accounting firms providing opportunities for acquisitions.

New growth avenues with the long-term in mind
Talenom gave some insight into its approach for a potential expansion in Europe and has clearly given it some serious thought. The plans are clearly intended for continued growth in the long-term and any notable revenue during 2021-2022 would most likely be due to acquisitions in a similar manner to the Swedish market entry. The TiliJaska small customer concept is expected to leave beta and add on bank services in Finland during February-March 2021 and enter beta in Sweden in mid-2021. The interest for the system has to our understanding so far clearly exceeded expectations.

HOLD with a target price of EUR 10.2
We have not made revisions to our estimates based on the CMD. We expect 2020 revenue and EBIT of EUR 65.5m and 13.1m respectively (co’s guidance EUR 64-68m and EUR 12-14m respectively). We retain our HOLD-rating and target price of EUR 10.2.

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Pihlajalinna - Private demand lags behind

05.11.2020 - 09.45 | Company update

Pihlajalinna’s Q3 result was in line with our expectations. Revenue increased by 1% y/y to EUR 124m. Adj. EBIT was EUR 8.7m. Guidance for 20E was not given due to the uncertainties caused by the pandemic. We keep our rating “HOLD” with TP of EUR 9.5 intact.

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Result in line with our expectations

Pihlajalinna’s Q3 result was in line with our expectations. Revenue increased by 1% y/y to EUR 123.9m vs. EUR 125.0m/122.2m Evli/cons. Revenue was boosted by the COVID-19 testing which increased revenue by EUR 3.4m. The recovery of the private demand has been weaker than what we anticipated. Among private customers, the demand for private clinic services declined by 6% and for dental care services by 8%. The fitness centers have lost ~6000 member customers due to the coronavirus restrictions. Adj. EBITDA was EUR 17.2m vs EUR 17.3m/16.0m Evli/cons and adj. EBIT totaled EUR 8.7m vs. EUR 8.4m/7.2m Evli/cons.

Private demand hampered by the prolonging virus situation

Even though the pent-up demand has started to release, the private demand is still lagging behind. We expect the demand to continue to normalize during the final quarter, but the prolonging pandemic situation is still likely to have a negative impact on demand. Especially the outlook of fitness centers remains weaker due to the restrictions. At the same time, the COVID-19 testing has grown significantly which should benefit Pihlajalinna in the future as well. The company is targeting to strengthen its occupational healthcare services and has started negotiations for the purchase of all shares in Työterveys Virta. The transaction would give Pihlajalinna almost 30% share of the occupational healthcare market in the Oulu region and it would be strategically very important for the company.

“HOLD” with TP of EUR 9.5 intact

The FCCA has proposed the market court to prohibit the merger between Mehiläinen and Pihlajalinna. The tender offer will run until 20th of Nov. We have therefore returned to see Pihlajalinna as an independent service provider also in the future. We have slightly decreased our estimates and expect 20E revenue of EUR 507m (-2.3% y/y) and adj. EBIT of EUR 18.9m. On our estimates, the company trades at 20E-21E EV/EBITDA multiple of 7.9x and 6.4x, which translates into 17-23% discount compared the peers. We keep our rating “HOLD” and TP of EUR 9.5.

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Marimekko - Fights victoriously against the virus

05.11.2020 - 08.35 | Company update

Marimekko’s Q3 result outpaced the expectations as net sales increased by 10% y/y despite of the challenging times. Adj. EBIT increased by ~35% y/y and totaled EUR 10.5m. We have slightly increased our 20E-22E estimates and keep our rating “BUY” with TP of EUR 43 (42).

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Strong growth in Q3

Marimekko delivered extremely strong Q3 result despite of the challenging times. Net sales were EUR 38.0m (+10% y/y) vs. EUR 36.0m/35.3m Evli/cons. Sales growth was driven by good development in wholesale sales in Finland and EMEA. In Finland, wholesale sales included nonrecurring promotional deliveries. Also, retail sales included unrecognized sales from Q2 (EUR ~1m). Further, online sales continued to perform well. Marimekko’s Q3 adj. EBIT totaled EUR 10.5m vs. EUR 9.1m/8.4m Evli/cons. Profitability was boosted by good sales growth and decreased fixed costs. Fixed costs were also reduced by subsidies granted in various countries to mitigate the negative business impacts of the COVID-19.

Fighting against the pandemic

Fashion industry has been suffering from the COVID-19 but so far Marimekko has survived relatively well in the turbulence. The company benefits of having different product lines as the growth in home decor products has been strong in Q3 (+44% y/y) which has compensated the drop in sales in fashion and bags & accessories. The final quarter is important for Marimekko as several sales campaigns take place during the quarter. We expect fairly good development in Finland as currently the household consumption is more focused on domestic purchases. However, sales are dependent on the pandemic situation and the trend in customer numbers in retail stores. International sales are also heavily impacted by the development of the pandemic.

“BUY” with TP of EUR 43 (42)

Marimekko expects 20E net sales to be lower than in the previous year. Adj. EBIT is expected to be approx. at the same level or lower than in 2019. We have made small adjustments to our estimates after the result and expect 20E sales of EUR 121m (-3.5% y/y). We expect adj. EBIT to be in line with last year (EUR 17.3m). In 21E, we expect revenue growth of ~8% y/y and profitability to further improve. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 18.4x and 15.9x which is a clear discount compared to the luxury peers. We keep our rating “BUY” with TP of EUR 43 (42).

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Pihlajalinna - Q3 in line with our expectations

04.11.2020 - 08.55 | Earnings Flash

Pihlajalinna’s Q3 result was broadly in line with our expectations. Q3 revenue amounted to EUR 123.9m vs. EUR 125m/122.2m Evli/cons, while adj. EBIT landed at EUR 8.7m vs. EUR 8.4m/7.2m Evli/cons estimates. EPS was EUR 0.20 vs. our EUR 0.20.

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  • Q3 revenue was EUR 123.9m vs. EUR 125.0m/122.2m Evli/cons estimates. Revenue increased by 1.0% y/y.
  • Q3 adj. EBITDA was EUR 17.2m (13.9% margin) vs. EUR 17.3m/16.0m Evli/cons estimates.
  • Q3 adj. EBIT was EUR 8.7m (7.0% margin) vs. EUR 8.4m/7.2m Evli/cons estimates.
  • According the company, the demand for healthcare services recovered but the pandemic and restrictions reduced customer flows the most in fitness centers, private clinics and dental clinics. Revenue from corporate customers increased by 9.4% and revenue from the public sector was stable.
  • The volume of COVID-19 testing began to grow significantly in August and testing operations grew Q3 revenue by EUR 3.4m.
  • The company didn’t provide a guidance for 20E at this point, due to the weak visibility caused by the virus.

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Marimekko - Q3 result outpaced expectations

04.11.2020 - 08.45 | Earnings Flash

Marimekko’s Q3 result outpaced the expectations. Net sales were EUR 38.0m (10% y/y) vs. EUR 36.0m/35.3m Evli/cons. Adj. EBIT was EUR 10.5m vs. EUR 9.1m/8.4m Evli/cons. Marimekko expects 20E net sales to be lower than in the previous year and comparable operating profit is estimated to be approx. at the same level or lower than in the previous year.

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  • Finland: revenue was EUR 23.0m vs. EUR 21.7m Evli view. Revenue increased by 17% y/y. Revenue was boosted by increased wholesale sales. The increase in wholesale sales was partly due to nonrecurring promotional deliveries.
  • International: revenue increased by 2% y/y and was EUR 15.0m vs. EUR 14.3m Evli view. Wholesale sales developed well also in EMEA.
  • Q3 adj. EBIT was EUR 10.5m (27.7% margin) vs. EUR 9.1m/8.4m (25.3%/23.8% margin) Evli/cons. Profitability was boosted by increased sales and decreased fixed costs. Fixed costs were also reduced by subsidies granted in various countries to mitigate the negative business impacts of the coronavirus pandemic. On the other hand, relative sales margin declined.
  • Q3 EPS was EUR 0.98 vs. EUR 0.86/0.81 Evli/cons.
  • 2020E guidance: group net sales are expected to be lower than in the previous year and comparable operating profit is estimated to be approx. at the same level or lower than in the previous year.

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Exel Composites - Long-term story on track

02.11.2020 - 09.15 | Company update

Exel Composites’ Q3 results were overall quite neutral relative to expectations, however we are now more confident top line will continue to grow going forward. Our new TP is EUR 7.25 (6.25) while we retain our BUY rating.

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Overall outlook appears strong despite the pandemic

Exel’s EUR 26m Q3 revenue grew by 10% y/y and so topped the flat estimates. The Wind power customer industry supports high volumes and grew by 37% y/y after growing 52% in Q2. We now expect a 27% y/y increase for Q4. Defense is also developing well, and there’s plenty of long-term potential (now only some 5% of LTM revenue). Cable core rods remain one high potential application in the long-term, although the Buildings and infrastructure customer industry continued to develop soft for now due to the pandemic (which also undermined Transportation demand). Exel progressed in areas outside Europe as Asia-Pacific grew by 58% y/y, driven by Wind power.

We are now more confident towards next year

Although top line was strong, Exel had pandemic-related issues in Q3 which affected bottom line and so the company was unable to reach similarly high profitability as in Q2 (which was close to long-term targets). The 7.8% EBIT margin was thus soft relative to our 9.5% estimate. We expect the Q3 US operational efficiency hiccup to pass. Demand has developed positive since Q2 and based on Exel’s comments we are now more confident revenue continues to grow in Q4 and next year alike. The Austrian investment is proceeding as planned and Exel is also ready to readdress its capacity for different end-markets with small capex. We see Exel has good handle on long-term customer account management, arguably the single most important consideration given the business model and strategy.

We see some more upside even with cautious multiples

The share has appreciated a lot lately, now close to the pre-pandemic highs. The strong Q2 profitability development, driven especially by the US unit, and good volumes justify higher multiples for their part. On the other hand, the growing pandemic uncertainty limits multiple potential even if outlook is still positive. Our new EUR 7.25 (6.25) TP values Exel roughly within the 7-8x EV/EBITDA and 11-13x EV/EBIT ranges on our estimates for FY ’20 and ’21. We retain our BUY rating.

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Pihlajalinna - Expecting slight revenue growth in Q3

30.10.2020 - 09.45 | Preview

Pihlajalinna reports its Q3 result on next Wednesday, 4th of November. As the coronavirus situation is prolonging, we have slightly cut our estimates. We keep our rating “HOLD” with TP of EUR 9.5 (11.0) ahead of the result.

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Expecting revenue growth of 1.8% y/y in Q3E

The coronavirus situation eased in the beginning of the summer but in the late summer the infection waves started to increase again, and the situation has gotten worse during the autumn. Therefore, we have slightly cut our estimates. We expect that the pent-up demand has continued to release during Q3 but on the other hand people have spent more time at home and in summer houses which might have an impact on demand. We expect Q3E revenue to grow by 1.8% y/y to EUR 125.0m (prev. estimate of EUR 127.5m) and adj. EBIT of EUR 8.4m (prev. estimate of EUR 9.9m).

Returned to see Pihlajalinna as an independent company

The Finnish Competition and Consumer Authority (FCCA) has proposed the market court to prohibit the merger between Mehiläinen and Pihlajalinna. According to the FCCA, the merger would significantly impede effective competition in the Finnish health services market as there would be only two nationwide healthcare companies (Mehiläinen and Terveystalo) in the market post-merger. Thus, we see that the likelihood of the acquisition being completed has decreased significantly and therefore we have returned to see Pihlajalinna as an independent service provider also in the future. We also note that the political uncertainties in Finland have increased.

“HOLD” with TP of EUR 9.5 (11.0)

We have cut our 20E-21E revenue expectation by ~1% and our adj. EBIT expectation by ~10-11%. We expect 20E revenue to decline by 1.2% y/y (EUR 512m) and adj. EBIT of EUR 19.8m. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 20.3x and 13.2x, which translates into 1-20% discount compared to the peers. We keep our rating “HOLD” with TP of EUR 9.5 (11.0) ahead of the Q3 result.

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Exel Composites - Decent results

30.10.2020 - 09.30 | Earnings Flash

Exel Composites’ Q3 top line exceeded expectations while operating margin remained at a good level and absolute profitability increased y/y.

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  • Exel Composites’ Q3 revenue was EUR 26.0m (up 10% y/y) vs the EUR 24.1m/23.4m Evli/consensus estimates.
  • Wind power recorded EUR 7.8m in revenue, compared to our EUR 6.5m estimate. Asia-Pacific developed strong, where Q3 revenue increased to EUR 6.8m from EUR 4.3m.
  • Adjusted EBIT amounted to EUR 2.0m, in comparison to the EUR 2.3m/2.0m Evli/consensus estimates. Adjusted operating margin was thus 7.8% vs our 9.5% estimate. According to Exel profitability was negatively impacted by the uneven distribution of revenues across business units, and together with the pandemic production efficiency and profitability were impaired especially in the US business unit.
  • Q3 order intake declined by 10% to EUR 24.5m mainly due to a partial cancellation of a large order in the US booked in Q1. Exel nevertheless says underlying demand across all customer industries has slightly improved recently.
  • Exel reinstates FY ’20 guidance and expects revenue to increase or to remain at previous year’s level, while adjusted operating profit is set to increase. In our view the guidance is rather unsurprising.

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Etteplan - Shroud of uncertainty

30.10.2020 - 08.45 | Company update

Etteplan posted better than expected profitability figures in the challenging circumstances. The uncertainty due to the second wave of the pandemic is causing an increasing lack of visibility. The outlook at least for the first half of 2021 does not appear favourable but we continue to expect growth aided by the recent acquisition.

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Earnings beat in challenging quarter
Etteplan posted good profitability figures in the seasonally slower quarter and challenging environment. EBIT amounted to EUR 4.3m, beating expectations (EUR 2.9m/3.1m Evli/cons.). Revenue declined 10.3% y/y (organic decrease 13.3%) to EUR 55.2m (EUR 55.6m/55.3m Evli/cons.). Etteplan also updated its guidance, expecting revenue for the year 2020 to decrease slightly or be at the same level as in the previous year and operating profit (EBIT) to decrease clearly compared to 2019. Demand uncertainty continued and the second wave brought further uncertainty especially after the summer holidays.

Uncertainty on the rise with the second wave
The increased uncertainty brought by the second wave reduces the already low visibility going into 2021. Etteplan has so far fared well given the circumstances, having adopted substantial cost savings measures. Compared with Q2, lockdowns and restrictions are not affecting customer industries to the same extent, but customers are still cautious in making investment decisions. We assume the demand uncertainty to continue to impact on activity at least during the first half of the year. We still expect recovery compared with 2020 and supported by the Tegeman acquisition expect a 6.5% growth in 2021. We expect margins to remain at 2020e levels.

HOLD with a target price of EUR 9.3
Peers’ multiples have been under pressure with the second wave uncertainty and governments seeking to increase restrictions and the fwd. 12m median EV/EBITDA for the selected peer group has dropped by some 9% in the past few days to 8.3x, while Etteplan trades at 7.6x. With the uncertainty possibly still on the rise we retain our HOLD-rating and target price of EUR 9.3.

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Tokmanni - Christmas is almost here

30.10.2020 - 08.40 | Company update

Tokmanni delivered relatively good Q3 result. Revenue growth of 13% y/y outpaced our and the consensus estimates but adj. EBIT (EUR 24.0m) fell short of expectations due to decline in gross margin. We have made only small adjustments into our estimates and keep our rating ”BUY” with TP of EUR 18.4.

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Strong growth in revenue but decrease in adj. gross margin

Tokmanni’s Q3 revenue outpaced the expectations but adj. EBIT was below our and consensus estimates. Revenue grew by ~13% y/y, amounting to EUR 262m (vs. EUR 253m/255m Evli/cons). Growth was good especially in sales of yard and garden furniture, sports and leisure, detergents and home cleaning, paper products and groceries. Apparel sales have faced headwind due to the coronavirus and the company decided to boost apparel sales with discount sales in Q3. This impacted negatively on adj. gross margin which was 34.0% (35.4% in Q3’19). Tokmanni’s Q3 adj. EBIT totaled EUR 24.0m vs. EUR 25.8m/27.3m Evli/cons. Adj. EBIT was weighed down by weakened gross margin but on the other hand, strong revenue growth and strict cost control had a positive impact on profitability.

Towards the most important quarter

Tokmanni has benefited from the uncertain times as low prices and broad product assortment attract consumers. Despite of the current situation, customer numbers have increased in stores (LFL, Jan-Sep’20: +2.8%) and at the same time the size of average basket has increased (LFL, Jan-Sep’20: +8.7%). During Q3, Tokmanni’s online sales increased by ~155%, though the share of online sales is still marginal (~1% of revenue). We expect the growth in online sales to continue during Q4E, driven by the campaign season. The final quarter is the most important for Tokmanni in terms of both, revenue and profitability. In retail, the Christmas season has started earlier than normally this year and Tokmanni is also well prepared for the upcoming season as the Christmas products have arrived and some of those are already in stores.

“BUY” with TP of EUR 18.4 intact

Tokmanni expects strong growth in revenue and LFL revenue in 20E. Adj. EBIT margin is expected to improve from ‘19. We have made only small adjustments into our estimates. We expect 20E revenue to grow by 11% y/y (EUR 1046m) and adj. EBIT of EUR 89m. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 13.0x and 12.4x which translates into ~30% discount compared to the int. discount peers. We keep our rating “BUY” with TP of EUR 18.4.

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Aspo - Upside still more likely

30.10.2020 - 08.25 | Company update

Aspo’s earnings beat estimates, and even if the guidance doesn’t hint at a particularly rapid q/q Q4 EBIT recovery in our view profitability has already bottomed out. We retain our EUR 7.25 TP and BUY rating.

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Telko delivered another earnings surprise in a row

Aspo’s EUR 3.6m Q3 EBIT clearly beat the EUR 1.7m/1.1m Evli/cons estimates. The surprise was largely due to Telko, which extended its Q2 performance by posting a similar EUR 4.2m in EBIT. Yet Telko’s market outlook remains cautious and Aspo’s new guidance in our view manages expectations slightly downwards. The results nevertheless do showcase sound long-term potential. ESL fell to red as expected and Leipurin’s profitability remained subdued. In terms of Q4 results it should be noted that demand for ESL’s larger vessels began to improve in late Q3. We see the implication of the earnings beat and Aspo’s specified guidance to be that Q3 marks out the low point in Aspo’s profitability, however the q/q dip was relatively small and thus Q4 results are unlikely to recover as sharply q/q as we estimated before.

We now see H2 EBIT EUR 1.2m higher than before

With respect to Q4 EBIT we revise our estimates down for ESL (from EUR 2.8m to EUR 1.7m) and Leipurin (from EUR 0.9m to EUR 0.5m) while we now expect Telko to reach EUR 2.8m (prev. EUR 2.3m). In our view Aspo’s guidance seems a bit conservative considering Telko’s recent development (that is unless we are overestimating the q/q profitability recovery rates for ESL and Leipurin). Although the pandemic continues to worsen some more, this spring’s initial shock is now history and supply chains are better prepared. In this sense we see it highly plausible that Aspo’s segments, essentially industrial logistics services providers, can show some meaningful improvement next year as well.

A lot of uncertainty remains but we view upside more likely

We still see Aspo’s valuation attractive in terms of SOTP, however we note especially ESL’s valuation is hard in such extraordinary times when dry bulk carriers are off their normal earnings levels. Aspo’s segments still have plenty to go before reaching their long-term financial targets, but we have grown more confident that this year marks the bottoming out for Aspo’s overall profitability. We thus view upside scenarios more likely than downside ones. We retain our EUR 7.25 TP and BUY rating.

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CapMan - Ramping up recurring revenue

30.10.2020 - 08.15 | Company update

CapMan’s Q3 was slightly below expectations but still overall neutral. Newly raised capital pushed AUM to ATH levels and the outlook for fee-based growth is favourable. Although market uncertainty is on the rise, with the dividend story intact we retain our BUY-rating and TP of EUR 2.2.

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Slightly below expectations, AUM at all-time high
CapMan’s Q3 results came in slightly below expectations, with turnover of EUR 8.9m (EUR 9.6m/9.9m Evli/cons.) and EBIT of EUR 4.5m (EUR 5.0m Evli/cons.). The report in our view was all in all rather neutral. Low transaction-based fee volumes still caused weakness in the Services business while the Management Company business saw a boost from recent fundraising projects, albeit not quite as much as we had anticipated. AUM grew to an all-time high mainly through the first closing of the NRE III fund, having raised EUR 313m, with the target of EUR 500m still seen to be reached in the not too distant future. No major carried interest was received, and fair value changes were as expected.

Outlook for fee-based growth still favourable
CapMan’s recurring turnover continued to grow but at a slower pace. With the newly raised funds and on-going fundraising as well as the overall relatively new AUM the outlook for accelerating growth again is promising. The new CapMan Wealth Services model was also launched recently, aiming to further boost fee-based growth. The clear weakness currently continues to be the transaction-based fees, where volumes have declined due to the pandemic and with the recent increased uncertainty the near-term continues to look challenging. Realization of carried interest is still looking more distant and we no longer expect significant carry in 2020.

BUY with a target price of EUR 2.2
The market uncertainty is causing some stir to the near-term development and justifying upside potential in relation to current valuation seems more challenging, but the dividend yield and healthy financial position continue to speak for CapMan. We retain our BUY-rating and target price of EUR 2.2.

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Raute - Extended uncertainty for now

30.10.2020 - 08.00 | Company update

Raute’s Q3 results didn’t meet our estimates as the pandemic continued to interfere with business more than we expected. Our new TP is EUR 18 (20), rating still HOLD.

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The pandemic continued to hurt top line and order intake

Raute reported EUR 27.9m in Q3 revenue, down by 17% y/y and up 14% q/q, missing our EUR 34.0m estimate. The 4.8% operating margin also fell short of our 6.2% estimate. Although revenue grew q/q order intake nevertheless continued to slide, and the EUR 11m Q3 figure missed our EUR 21m estimate largely because project orders touched a low of EUR 2m, whereas we expected some recovery to EUR 10m. Services orders, at EUR 9m, were also lower than our EUR 11m estimate.

We revise our estimates slightly down

We still wait for signs of acceleration in smaller equipment as well as relatively large-sized modernization orders (the latter are recognized under services). Europe was digesting investments in new production capacity already before the pandemic, and right now it’s quite unclear when actual orders might begin to pick up again. Russia remains an important market and Raute describes local demand still active, however uncertainty continues to plague decision making there as well. It’s still early to talk much about China, although the market seems to be maturing and thus developing favorably from Raute’s point of view. The market is a big opportunity for Raute, however in our opinion the prospect should be valued cautiously. We revise our top line estimate for FY ’21 down to EUR 132m from EUR 139m and EBIT estimate down to EUR 6.0m from EUR 6.6m.

It seems profitability is unlikely to be high next year either

Raute’s competitive positioning remains intact and earnings are bound to gain significantly in the coming years from this year’s low point. However, next year’s profitability outlook still appears quite modest and hence earnings multiples seem to be on the high side of the acceptable range. In our view Raute’s valuation is now full unless there’s imminent recovery in smaller equipment orders and services. Such a pick-up in orders could happen quickly but we are cautious towards this prospect as uncertainty currently shows no signs of fading. Raute is trading at 6.8x EV/EBITDA and 11.4x EV/EBIT on our updated estimates for next year. Our TP is now EUR 18 (20), rating still HOLD.

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Solteq - Steady as she goes

30.10.2020 - 07.45 | Company update

Solteq reported clearly better profitability figures than we had expected, with comp. EBIT of EUR 1.4m (Evli 0.7m). We expect the good traction to show also in 2021 but remain slightly cautious on growth figures given the uncertainty. We adjust our TP to EUR 1.90 (1.65), BUY-rating intact.

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Our profitability estimates clearly beat
Solteq reported Q3 results that were clearly better than we had expected. Revenue grew 8.5% in comparable terms to EUR 13.3m (Evli 13.0m) and the comparable operating profit to EUR 1.4m (Evli 0.7m). Profitability was better than expected in both segments. The pandemic has had some effect on sales but has not impacted the group’s performance as a whole so far. Solteq Software is clearly gaining traction with the order backlog that has been building up, with particular success in gaining new projects in the utilities-sector and positive development is seen during the rest of the year. Solteq Digital has seen continued good demand in core areas the outlook remains rather stable.

Solteq Software gaining traction
The good development in profitability, brought by previously taken measures and sales growth, is showing a positive effect on the company’s cash generation despite the interest expense burden and product development investments. We do not expect Solteq to go completely unscathed through the pandemic and have clearly lower growth expectations for Solteq Digital in 2021 while the good order intake and the build-up of recurring revenue from long-term contracts will support growth in Solteq Software. We also maintain margin estimates for 2021 at similar levels as in 2020 for now given the uncertainty but see potential for improvement in Solteq Software as the share of own products increases. On group level we estimate growth of 3.7% and an EBIT-margin of 8.8% in 2021.

BUY with a target price of EUR 1.90 (1.65)
Current valuation implies a 2020e EV/EBITDA of 6.4x. Even when comparing solely with the Nordic IT-service peers, valuation still appears attractive. We retain our BUY-rating and raise our target price to EUR 1.90 (1.65) following our revised estimates.

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SRV - Progress being made

30.10.2020 - 07.15 | Company update

SRV’s Q3 results were fairly neutral and most importantly construction profitability was rather good. Supported by construction cost declines, the target of improving the 2021 operative operating profit to 2017 levels appears feasible. We retain our BUY-rating, TP EUR 0.64 (0.66).

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Decent results, construction margins held up
SRV reported somewhat two-fold Q3 results. Revenue was below our expectations (EUR 223.6m/234.0m Evli/cons.) despite more developer-contracted housing units being recognized as income than we had expected. Operating profit was below expectations at EUR 1.7m (EUR 2.9m/3.0m Evli/cons.) while the operative operating profit amounted to EUR 7.1m (Evli EUR 2.9m), with the cancellation of a EUR 3.1m provision for expenses that were recognized due to a ruling by a Russian court impacting positively. Relative profitability in the Construction segment held up well and corresponded to our expectations.

Margin improvement supported by cost decline
Visibility is somewhat weakened going into 2021. The housing prices recovered well from the dip in H1/20 and activity has been at healthy levels. The order backlog has been relatively stable in the past four quarters and with the current project portfolio we see potential for minor growth in 2021, expecting a slight sales decline in business construction and growth in housing construction. The sales development is currently however clearly of secondary importance as improvement in profitability to offset the interest expense burden is essential. We expect margins to improve in 2021, as margins in 2020 have been pressed by high construction costs and the situation should ease going forward.

BUY with a target price of EUR 0.64 (0.66)
The uncertainty has particularly affected the shopping centres in Russia and exits continue to appear more distant. The construction outlook remains relatively decent, although demand within certain business construction areas is being affected by the pandemic. We adjust our target price to EUR 0.64 (0.66) with our BUY-rating intact.

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Etteplan - Good results given the circumstances

29.10.2020 - 13.25 | Earnings Flash

Etteplan's net sales in Q3 amounted to EUR 55.2m, in line with our estimates and consensus (EUR 55.6m/55.3m Evli/cons.). EBIT amounted to EUR 4.3m, above our and consensus estimates (EUR 2.9m/3.1m Evli/cons.). Guidance updated: revenue in 2020 is expected to decrease slightly or be at the same level as in 2019 and EBIT to decrease clearly compared to 2019.

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  • Net sales in Q3 were EUR 55.2m (EUR 61.5m in Q3/19), in line with our and consensus estimates (EUR 55.6m/55.3m Evli/Cons.). Revenue declined 10.3% y/y in Q3, organic decrease 13.3%.
  • EBIT in Q3 amounted to EUR 4.3m (EUR 5.7m in Q3/19), above our and consensus estimates (EUR 2.9m/3.1m Evli/cons.), at a margin of 7.7%.
  • EPS in Q3 amounted to EUR 0.13 (EUR 0.19 in Q3/19), above our and consensus estimates (EUR 0.08/0.10 Evli/cons.).
  • Engineering Solutions net sales in Q3 were EUR 31.0m vs. EUR 30.7m Evli. EBITA in Q3 amounted to EUR 2.8m vs. EUR 2.1m Evli. The MSI-% in Q3 was 58% compared to 59% in Q3/19.
  • Software and Embedded Solutions net sales in Q3 were EUR 13.8m vs. EUR 14.5m Evli. EBITA in Q3 amounted to EUR 1.4m vs. EUR 1.2m Evli. The MSI-% in Q3 was 52% compared to 55% in Q3/19.
  • Technical Documentation Solutions net sales in Q3 were EUR 10.2m vs. EUR 10.3m Evli. EBITA in Q3 amounted to EUR 1.0m vs. EUR 0.7m Evli. The MSI-% in Q3 was 80% compared to 78% in Q3/19.
  • Guidance updated: Revenue for the full year 2020 will decrease slightly or be at the same level as in the previous year, operating profit (EBIT) will decrease clearly compared to 2019.

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Aspo - Q3 EBIT clearly above expectations

29.10.2020 - 10.30 | Earnings Flash

Aspo’s Q3 EBIT meaningfully topped expectations as Telko continued to perform strong.

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  • Aspo Q3 revenue was EUR 118.4m vs the EUR 117.7m/122.3m Evli/consensus estimates.
  • Aspo Q3 EBIT stood at EUR 3.6m, compared to the EUR 1.7m/1.1m Evli/consensus estimates. The expectations implied quite steep q/q EBIT drop for Q3, and now we see the overall H2 development will be rather flat.
  • ESL Q3 top line amounted to EUR 31.6m, compared to our EUR 33.8m estimate. EBIT was EUR -0.1m while we expected EUR -0.2m.
  • Telko revenue was EUR 62.5m vs our EUR 56.8m estimate. Meanwhile EBIT amounted to EUR 4.2m vs our 2.3m estimate. The continued strong performance (of which a lot are due to internal measures) looks promising, however there are still many macro uncertainties.
  • Leipurin posted EUR 24.3m in Q3 revenue, while we expected EUR 27.2m. EBIT was EUR 0.3m, compared to our EUR 0.7m estimate.
  • Other operations cost EUR 0.8m vs our EUR 1.1m estimate.
  • Aspo specifies guidance to the new range of EUR 14-16m for FY ’20, compared to the earlier EUR 12-16m range.

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Finnair - Navigating through the storm

29.10.2020 - 09.35 | Company update

The third quarter wasn’t any better for Finnair and was heavily impacted by strict travel restrictions. Revenue declined by 89% y/y and was EUR 97m while adj. EBIT was EUR -167m. We have further cut our estimates and keep our rating “HOLD” and TP of EUR 0.38 intact.

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Strict travel restrictions hampered Finnair’s operations

As expected, Finnair’s Q3 result was heavily weighed down by the coronavirus pandemic and the strict travel restrictions especially in Finland. Therefore, the company had to deviate from the previous plans and to continue to operate with a limited network. Capacity (ASK) was down by 87% compared to last year and PLF was 38.7% (-47.5pp). Revenue decreased by ~89% y/y, amounting to EUR 97m vs. EUR 157m/145m Evli/cons. Adj. EBIT was EUR -167m vs. EUR -191m/-179m Evli/cons. By the end of the quarter, Finnair had paid out over EUR 400m of COVID-19 related refunds (some EUR 40m left).

Winter season is expected to remain dark

Due to the prolonged pandemic situation and strict travel restrictions it is likely that the better recovery of air travel isn’t starting anytime soon. Finnair continues to fly with a limited network during the winter season. The company informed earlier that it is aiming to fly approx. 75 daily flights to ~50 destinations during the winter season (~350 flights per day in ‘19). The ramp-up is estimated to start from summer’21. According to the company, comparable operating loss in Q4 will be of a similar magnitude than in Q2 and Q3. The company also expects both, revenue and capacity (ASK) to decrease more than 70% in 2020 compared to 2019. Further, the company raised its savings target to EUR 140m (prev. EUR 100m) starting from the beginning of 2022 (compared to 2019).

“HOLD” with TP of EUR 0.38

Finnair has a fully undrawn EUR 175m revolving credit facility and a EUR 200m short-term commercial paper program, which was unused at the end of September. In addition, the remaining part of the statutory pension premium loan (EUR 200m) can be drawn if needed. We have cut our 20E-21E estimates and expect revenue in 20E to decline by 73% y/y to EUR 850m and adj. EBIT of EUR -606m. We keep our rating “HOLD” with TP of EUR 0.38.

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Raute - Q3 remained very quiet

29.10.2020 - 09.30 | Earnings Flash

Raute’s Q3 proved slower than we estimated as both recognized revenue and order intake fell short of our expectations.

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  • Raute Q3 revenue was EUR 27.9m (down by 17 % y/y), compared to our EUR 34.0m estimate. The figure was EUR 18.1m for project deliveries (compared to our EUR 21.0m expectation) and EUR 9.8m for technology services (vs our EUR 13.0m estimate).
  • EBIT amounted to EUR 1.3m vs our EUR 2.1m estimate.
  • Q3 order intake was EUR 11m, while we expected EUR 21m. Raute booked EUR 2m in project deliveries vs our EUR 10m estimate. Meanwhile the figure for technology services was EUR 9m, compared to our EUR 11m expectation.
  • Order book stood at EUR 62m (compared to EUR 109m a year ago).

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SRV - Results neither good nor bad

29.10.2020 - 09.10 | Earnings Flash

SRV's net sales in Q3 amounted to EUR 209.9m, below our and consensus estimates (EUR 223.6m/234.0m Evli/cons.). EBIT amounted to EUR 1.7m, below our and consensus estimates (EUR 2.9m/3.0m Evli/cons.).

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  • Revenue in Q3 was EUR 209.9m (EUR 227.1m in Q3/19), below our estimates and consensus estimates (EUR 223.6m/234.0m Evli/Cons.). Growth in Q3 amounted to -7.6% y/y.
  • Operating profit in Q3 amounted to EUR 1.7m (EUR -7.0m in Q3/19), below our estimates and consensus estimates (EUR 2.9m/3.0m Evli/cons.), at a margin of 0.8%. The operative operating profit clearly beat our estimates at EUR 7.1m (Evli EUR 2.9m). The operating profit was positively affected by the cancellation of a EUR 3.1m provision for expenses that were recognized due to a ruling by a Russian court as well as lower rents from shopping centres due to the pandemic.
  • EPS in Q3 amounted to EUR -0.01, in line with our estimates and consensus estimates (EUR -0.01 Evli/cons.).
  • Construction: Revenue in Q3 was EUR 209.1m vs. EUR 222.9m Evli. Operating profit in Q3 amounted to EUR 5.2m vs. EUR 5.4m Evli.
  • Investments: Revenue in Q3 was EUR 1.1m vs. EUR 1.2m Evli. Operating profit in Q3 amounted to EUR -3.8m vs. EUR -1.5m Evli.
  • Other operations and elim.: Revenue in Q3 was EUR -0.3m vs. EUR -0.5m Evli. Operating profit in Q3 amounted to EUR 0.3m vs. EUR -1.0m Evli.
  • The order backlog amounted to EUR 1,280m, down 19.6% y/y. Order intake in Q3 was EUR 154.4m, 25% more than in the comparison period.

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Tokmanni - Strong revenue growth in Q3

29.10.2020 - 09.05 | Earnings Flash

Tokmanni’s Q3 revenue increased by ~13% y/y (LFL growth of 11.6%) and was EUR 262m vs. EUR 253m/255m Evli/cons. Tokmanni’s adj. EBIT was EUR 24.0m vs. EUR 25.8m/27.3m Evli/cons. Adj. gross margin was 34.0%. The company expects strong growth in revenue and LFL revenue in 20E. Comparable EBIT margin is expected to improve on the previous year.

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  • Q3 revenue growth outpaced the expectations as revenue increased by 13% y/y and was EUR 262m vs. our EUR 253m and consensus of EUR 255m. LFL growth was 11.6%. Growth was good especially in sales of yard and garden furniture, sports and leisure, detergents and home cleaning, paper products and groceries. Online sales grew by ~155%.
  • Q3 adj. gross profit was EUR 89.0m (34.0% margin) vs. EUR 89.3m (35.3%) Evli expectation. Gross margin was impacted by discount sales and different sales structure.
  • Q3 adj. EBITDA was EUR 40.3m vs. EUR 41.9m our view.
  • Q3 adj. EBIT was EUR 24.0m (9.2% margin) vs. EUR 25.8m (10.2%) our expectation and EUR 27.3m (10.7%) consensus. Strong growth in revenue and strict cost control had a positive impact on adj. EBIT despite of the decrease in gross margin.
  • Q3 eps was EUR 0.29 vs EUR 0.32/0.33 Evli/consensus.
  • Guidance for 20E: strong growth in revenue and like-for-like revenue. Profitability (comparable EBIT margin) is expected to improve on the previous year.

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CapMan - Slightly below expectations

29.10.2020 - 08.50 | Earnings Flash

CapMan's turnover in Q3 amounted to EUR 8.9m, below our and consensus estimates (EUR 9.6m/9.9m Evli/cons.). Profitability was slightly below expectations and EBIT amounted to EUR 4.5m, (EUR 5.0m Evli/cons.).

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  • Turnover in Q3 was EUR 8.9m (EUR 9.7m in Q3/19), below our estimates and consensus estimates (EUR 9.6m/9.9m Evli/Cons.). Growth in Q3 amounted to -8.4% y/y.
  • Operating profit in Q3 amounted to EUR 4.5m (EUR 5.5m in Q3/19), slightly below our estimates and consensus estimates (EUR 5.0m Evli/cons.).
  • EPS in Q3 amounted to EUR 0.02 (EUR 0.03 in Q3/19), below our estimates and consensus estimates (EUR 0.03 Evli/cons.).
  • Management Company business revenue in Q3 was EUR 7.0m vs. EUR 7.2m Evli. Operating profit in Q3 amounted to EUR 2.1m vs. EUR 2.6m Evli.
  • Investment business revenue in Q3 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q3 amounted to EUR 2.5m vs. EUR 2.1m Evli. Fair value changes amounted to EUR 2.6m (Evli EUR 2.5m)
  • Services business revenue in Q3 was EUR 1.8m vs. EUR 2.4m Evli. Operating profit in Q3 amounted to EUR 0.6m vs. EUR 1.1m Evli.
  • Capital under management by the end of Q3 was EUR 3.6bn (Q3/19: EUR 3.2bn). Real estate funds: EUR 2.2bn, private equity & credit funds: EUR 1.0bn, infra funds: EUR 0.3bn, and other funds: EUR 0.03bn.
  • CapMan’s NRE III fund held its first closing at EUR 313m. CapMan Growth II exceeded its target size, having raised EUR 88m to date.

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Solteq - Clear earnings beat

29.10.2020 - 08.25 | Earnings Flash

Solteq’s revenue in Q3 grew 8.5% in comparable terms to EUR 13.3m (Evli EUR 13.0m). The comparable operating profit clearly beat our expectations at EUR 1.4m (Evli EUR 0.7m). Guidance reiterated: Solteq Group’s comparable operating profit in 2020 is expected to grow significantly.

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  • Net sales in Q3 were EUR 13.3m (EUR 13.0m in Q3/19), slightly above our estimates (Evli EUR 13.0m). Growth in Q3 amounted to 2.3% y/y. Comparable growth, adjusted for the divestment of the SAP ERP business, amounted to 8.5%. Comparable growth was attributable to both segments. Approximately a fifth of sales came from outside Finland.
  • The operating profit and comparable operating profit in Q3 amounted to EUR 1.4m (EUR 0.3m/0.0m in Q3/19), clearly above our estimates (Evli EUR 0.7m). Capitalized product development investments during 1-9/2020 amounted to EUR 2.3m. Solteq expects product development investments in 2020 to amount to less than EUR 3.0m (2019: EUR 3.9m).
  • Solteq Digital: Comparable revenue in Q3 amounted to EUR 9.2m (Q3/19: EUR 9.3m) vs. Evli 9.2m. The comp. EBIT was EUR 0.8m (Q3/19: EUR 0.2m) vs. Evli EUR 0.5m.
  • Solteq Software: Revenue in Q3 amounted to EUR 4.1m (Q3/19: EUR 3.7m) vs. Evli EUR 3.8m. The comp. EBIT was EUR 0.5m (Q3/19: EUR 0.1m) vs. Evli EUR 0.2m.
  • Guidance reiterated: the comparable operating profit in 2020 is expected to grow significantly.
  • The pandemic has slightly affected sales in several business areas and the Nordic subsidiaries but the good order backlog, the capability to deliver, and success in the Utilies sector drove growth and has so far not affected the group’s performance as a whole.

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Consti - Outlook all in all still favourable

29.10.2020 - 07.30 | Company update

Consti reported Q3 results well in line with our estimates, with highlights being the continued good profitability and free cash flow. Despite a slightly weaker sentiment the outlook in our view still looks favourable but healthy near-term order intake will be of essence for the next year.

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Reported rather good figures, in line with our estimates
Consti reported Q3 results well in line with our estimates. Revenue amounted to EUR 68.2m (Evli EUR 69.6m) and EBIT to EUR 2.5m (Evli 2.5m), at a pretty healthy margin of 3.6%. Order intake amounted to EUR 31.0m and the order backlog as such declined y/y and q/q to EUR 189.4m but still slightly above 2019 year-end levels. The highlight of the report along with the good profitability was the free cash flow, which amounted to EUR 4.6m (Q3/19: EUR -0.4m). With a rolling 12m cash conversion of 174% the net debt (excl. IFRS 16) continued to decline, now at EUR 4.8m (Q3/19: EUR 19.6m).

Coming quarters order intake will steer next year
Management comments for Q4/20 were of a more careful tone given the escalated Coronavirus situation post Q3 but solid performance is nonetheless still expected. The near-term development really depends on demand recovery and order intake development during the coming quarters. Based on the current order backlog activity is seen to be higher next year compared to the same situation in 2019. We have slightly lowered our Q4 estimates for a more conservative approach given order intake uncertainty, now expecting 2020 revenue and EBIT of EUR 268.1m and 8.0m respectively. In 2021 we for now expect only a meager growth of 1.4% and EBIT of EUR 9.1m, with housing company demand recovery a potential key near-term uncertainty up until the housing company General Meeting season next spring.

BUY with a target price of EUR 10.0
Although sentiment appears slightly less positive the order backlog, Consti’s ability to adapt to lower volumes, and the long-term sector outlook along with an attractive valuation remain as beneficial factors. We retain our BUY-rating and TP of EUR 10.0.

Open report

Finnair - Result heavily impacted by the pandemic

28.10.2020 - 09.45 | Earnings Flash

The coronavirus pandemic and strict travel restrictions especially in Finland continued to hamper Finnair’s result in Q3. Finnair’s Q3’20 adj. EBIT was EUR -167m vs. our expectation of EUR -191m and consensus of EUR -179m. Revenue decreased by 88.7% y/y and was EUR 97m vs. our expectation of EUR 157m and consensus of EUR 145m.

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  • Q3 revenue was below expectations at EUR 97m vs. EUR 157m/145m Evli/cons.
  • ASK decreased by ~87% y/y in Q3. PLF was 38.7% (-47.5 points). Strict travel restrictions especially in Finland had a negative impact on Finnair’s flight plans.
  • Q3 adj. EBIT was EUR -167m vs. EUR -191m/-179m Evli/cons. Q3 comparable EBITDA was EUR -82m vs. EUR -103m our view.
  • Absolute costs in Q3: Fuel costs were EUR 29m vs. EUR 55m our view. Staff costs were EUR 57m vs. EUR 53m our view. All other OPEX+D&A combined were EUR 189m vs. EUR 250m our view.
  • Unit costs: CASK was 15.86 eurocents vs. 20.81 eurocents our view.
  • Q3 EPS was EUR -0.15 vs. EUR -0.12/-0.12 Evli/cons.
  • According to the company, comparable operating loss in Q4 will be of a similar magnitude as in Q2 and Q3.
  • The company expects that revenue and capacity (ASK) will both decrease more than 70% in 2020 compared to 2019.

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Vaisala - Uncertainties in W&E outlook

28.10.2020 - 09.35 | Company update

Vaisala delivered a two-fold Q3 result. Despite W&E’s strong profitability improvement, sales and orders declined and COVID-19 continues to pose significant near-term risks. IM business remains resilient. We keep our estimates broadly unchanged and maintain TP of 32€ with SELL.

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Sales mix boosted profitability, orders and sales decreased
Q3 net sales decreased by 11% to 94 MEUR mainly due to the decline in W&E’s project business. Gross margin improved to 57.7% (55.3%) and EBIT to 19.5 MEUR (16.3 MEUR), 20.7% (15.5%) of net sales. W&E’s EBIT improved to 11.1 MEUR (9.7 Evli) and IM’s was 8.6 MEUR (10.3 Evli) According to Vaisala, lower share of less-profitable project business, improved profitability of digital services in W&E and higher share of IM sales boosted margins. Operating expenses also decreased compared to previous year due to less travelling and some non-recurring positive impacts. Orders received decreased overall by 19% as W&E’s order intake was impacted by COVID-19 especially in airports segment and emerging markets. IM’s orders received increased 2% supported by strong order intake in APAC (+19%).

Our estimates broadly unchanged
Vaisala reiterated its 2020 outlook issued last week, as expected, estimating FY20 net sales to be 370-390 MEUR and EBIT to be 40-48 MEUR. Based on the report, we keep our estimates broadly unchanged. We expect 20e sales to decline 5.3% to 382.1 MEUR and EBIT to increase to 46.7 MEUR. W&E outlook is weighed by the weakened outlook for aviation and restrictions will cause delays in project deliveries. Thus, we expect W&E 20e sales to decrease by 7.3% to 242.1 MEUR and EBIT to decrease to 16.7 MEUR. We expect IM to remain relatively resilient with 20e sales down 1.7% to 140 MEUR and EBIT increasing to 30.1 MEUR. In 21e, we expect IM sales to continue growing (+7%), while W&E is expected to recover only slightly (+3%) due to uncertainties and decreased order intake.

Valuation still challenging
On our estimates, Vaisala is still trading at clear premiums compared to our peer group and we see valuation stretched given the weaker financial performance compared to peer group. Based on the report, we retain our TP of 32€ and SELL rating. Our TP values Vaisala at 21-22e EV/EBIT multiples of 22.9x and 20.7x which are above the peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

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Consti - In line with our estimates

28.10.2020 - 09.15 | Earnings Flash

Consti's net sales in Q3 declined 16.7% to EUR 68.2m, in line with our estimates and slightly below consensus (EUR 69.6m/72.1m Evli/cons.). EBIT amounted to EUR 2.5m, in line with our estimates and slightly below consensus (EUR 2.5m/2.7m Evli/cons.). Free cash flow at EUR 4.6m (Q3/19: EUR -0.4m).

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  • Net sales in Q3 were EUR 68.2m (EUR 81.8m in Q3/19), in line with our estimates and slightly below consensus (EUR 69.6m/72.1m Evli/Cons.). Sales declined -16.7 % y/y.
  • Operating profit in Q3 amounted to EUR 2.5m (EUR 2.1m in Q3/19), in line with our estimates and slightly below consensus (EUR 2.5m/2.7m Evli/cons.), at a margin of 3.6%.
  • EPS in Q3 amounted to EUR 0.21 (EUR 0.17 in Q2/19), in line with our estimates and below consensus (EUR 0.21/0.23 Evli/cons.).
  • The order backlog in Q2 was EUR 189.4m (EUR 206.4m in Q3/19), down by -8.2 %. Order intake EUR 31.0m in Q3 (Q3/19: EUR 37.0m).
  • Free cash flow improved to EUR 4.6m (Q3/19: EUR -0.4m) and 1-9/2020 cash flow amounted to a stellar 14.7m (1-9/19: EUR -1.1m).
  • The coronavirus pandemic has impacted through the postponement of some projects and decreased demand in certain areas. Escalation of the coronavirus pandemic after the reporting period creates further uncertainty to the short-term outlook to the short-term demand outlook of renovations.
  • Guidance reiterated: The Company estimates that its operating result for 2020 will improve compared to 2019. The coronavirus pandemic is negatively impacting on Consti’s sales, but performance is expected to remain solid also during Q4/2020.

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Scanfil - Well-positioned for the weather

28.10.2020 - 09.05 | Company update

Scanfil’s top line didn’t meet our estimate but profitability remained strong. We retain our EUR 6.25 TP, rating BUY.

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Some top line softness but in our view nothing dramatic

Scanfil posted EUR 141.6m in Q3 revenue, down 7% y/y. The figure didn’t meet our EUR 156.2m estimate largely due to the Communication and Industrial segments. Communication revenue fell by 28% q/q mostly as a result of low demand for network elements. The segment also supplies other types of products and we expect revenues to stabilize in Q4. Consumer Applications’ top line remained low as expected, slightly up by q/q but down by 23% y/y. There are signs the segment’s demand is bottoming out and we expect more improvement for Q4. Energy & Automation and Medtec & Life Science performed close to expectations, but Industrial managed only EUR 44.7m (vs our EUR 50.5m estimate) and was down by 9% y/y. Industrial softness wasn’t attributable to any single customer and was pronounced in July and August. Demand nevertheless improved in September. In absolute profitability terms Scanfil’s EUR 9.9m Q3 adj. EBIT didn’t quite reach our EUR 10.5m estimate, however the quarter still delivered a strong 7% operating margin.

Guidance implies meaningful q/q improvement for Q4

The low-end of the updated FY ’20 guidance implies 5% q/q Q4 revenue increase, while the high-end implies 19% growth. We make only small updates to our Q4 estimates, and now expect EUR 154m in Q4 revenue (prev. EUR 158m), down by 1% y/y and up by 8% q/q. We now expect Q4 EBIT at EUR 10.0m (prev. EUR 11.1m). Scanfil’s overall positioning within the value chain and relative to competition remains unchanged. The company has a balance sheet ready to facilitate acquisitions should a fitting opportunity arise. There’s a lot of uncertainty but we note Scanfil’s customers tend to be well-positioned OEMs who compete against each other directly only to a very limited extent.

Valuation is still very reasonable

Scanfil is valued at about 6.3x EV/EBITDA on our FY ’20 estimates. Scanfil’s organic strategic growth target for ’23 implies some 5% CAGR for the coming years. Although the target was decided on before the pandemic, we still view it quite relevant considering the customer portfolio and performance so far this year despite the uncertainty. Our TP remains EUR 6.25 and our rating BUY.

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Innofactor - Eager to see what the future holds

28.10.2020 - 08.45 | Company update

Innofactor reported good results in the quarter expected to be most hit by negative impact of the pandemic. The outlook for 2021 remains positive but we have yet to see signs of the next clear steps of growth pick-up and margin improvement. Valuation still remains attractive and we adjust our TP to EUR 1.45 (1.35) and retain our BUY-rating.

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Good results in the by COVID-19 impact weakened quarter
Innofactor reported slightly better Q3 results than we had expected in the due to the coronavirus pandemic more challenging quarter. Net sales grew 0.3% y/y to EUR 14.0m (Evli 13.8m), with the negative impacts of the pandemic lowering sales per employee by 1.6%. EBITDA amounted to EUR 1.6m (Evli EUR 1.3m), with slightly negative figures in the other Nordic countries due to lower sales. The negative impacts of the pandemic were in line with company expectations. Weaker demand has mainly been seen among commercial customers. The order backlog amounted to EUR 58.2m, up 9.4% y/y.

Awaiting signs of faster growth and earnings improvement
Innofactor expects net sales and EBITDA in 2020 to increase from 2019, with our estimates now at EUR 65.5m (2019: EUR 64.2m) and EUR 7.7m (2019: EUR 5.1m) respectively, with the latter estimate up slightly post Q3 following better than expected relative profitability. The outlook for 2021 remains positive but we still expect only a modest growth of 4.0% and minor EBITDA-% improvement (11.7% ->12.0%). Challenges continue to relate mainly to performance in the other Nordic countries and any notable signs of improvement are yet to be seen. M&A activity continues to appear likely in the coming years, with the company committed to its 20% annual growth and 20% EBITDA-% target, but it is too early to account for such.

BUY with a target price of EUR 1.45 (1.35)
On peer multiples Innofactor continues to trade at a clear discount. We also expect Innofactor to initiate dividend payments in 2020. Non-cash items (mainly PPA) affecting earnings will still keep dividend yields rather low (2020e: 2.3%). We raise our TP to EUR 1.45 (1.35) and retain our BUY-rating.

Open report

Suominen - Earnings multiples remain cautious

28.10.2020 - 08.35 | Company update

Suominen again topped expectations. We update our estimates, our TP is now EUR 6.0 (5.5) and rating still BUY.

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Another extension to a steep upward profitability trend

Suominen recorded EUR 115.4m in Q3 revenue, up by 12% y/y and down by 6% q/q, meeting our EUR 114.0m estimate. FX had a negative EUR 5.6m impact. Europe remained very strong (up by 17% y/y), and at EUR 43.5m topped our EUR 41.0m estimate. Americas grew by 9% y/y and at EUR 71.9m was close to our EUR 73.0m estimate. Suominen delivered high volumes and margins despite maintenance breaks, which will also take place in Q4. While the results were near our estimates in terms of top line, margins were again a positive surprise. Suominen achieved a 17.1% gross margin, gaining more on the 16.0% in Q2 and clearly higher than our 15% estimate. Low raw materials prices in general continue to exert pressure on nonwovens pricing, however the pricing clauses work with a lag and Suominen was also able to defend its pricing to some extent. Suominen has been very successfully achieving production cost efficiencies and says the variable cost optimization program continued to yield results on all sites. The company managed strong with SGA, R&D and other expenses as well since the total item was only EUR 6.8m, compared to our EUR 7.3m estimate. Suominen’s EUR 12.9m Q3 EBIT thus clearly beat our EUR 9.8m estimate.

We expect Q4 earnings to decline by some EUR 4m q/q

Although the company continues to perform strong not only due to a favorable environment but also thanks to in-house measures, we expect results to decline q/q in Q4. We now expect Q4 gross margin at 15% and continue to see some further pressure down next year. Raw materials prices have remained low for quite some time and hence are unlikely to support additional boost in profitability. On the positive side wipes demand should remain high for an extended time period.

Multiples attractive despite margin pressure going forward

Suominen is now valued ca. 5.5x EV/EBITDA on our estimates for this year. Going forward, we see additional earnings gain hard next year. In our opinion somewhat low earnings multiples are warranted given the extraordinary environment, but we nevertheless continue to view the overall valuation picture attractive. Our TP is now EUR 6.0 (5.5) and rating remains BUY.

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Detection Technology - Looking past the air turbulence

28.10.2020 - 08.25 | Company update

Detection Technology’s Q3 report was below expectations as SBU continues to struggle under the pandemic. Despite low visibility and the uncertainty related to aviation, we see security market weakness as temporary and do not see DT’s competitive position, strategy or longer-term drivers compromised. Therefore, we see DT well positioned to perform again once security market normalizes. Despite our estimates cut, we maintain our target price of 22 euros and HOLD rating.

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Clear miss due to worse than expected SBU performance

DT’s Q3 result missed our and consensus expectations as SBU continued to struggle due to the ongoing pandemic, which is postponing investments in security market, especially airports. DT’s Q3 net sales were EUR 20.6m (-23.4% y/y) vs. EUR 24m/23.5m Evli/consensus estimates. SBU sales declined -43% to EUR 10.6m (EUR 13.5m our expectation) due to COVID-19 affecting the demand for security X-ray devices. MBU sales increased +20% to EUR 10.1m (EUR 10.5m our expectation) due to continued strong demand in medical CT imaging. DT’s Q3 EBIT came in at EUR 2.6m (12,6% margin) vs. our estimates of EUR 4m (EUR 3.4m cons).

 DT cautiously optimistic that worse is behind it

The COVID-19 pandemic is negatively affecting the demand for X-ray devices in all DT’s target markets, apart from medical CT imaging. Apart from domestic air transport in China, global air transport has failed to recover, which has led to exceptionally low demand in aviation. In addition, extensive restrictions on mass gatherings has negatively affected demand in security applications. DT expects SBU sales to decrease in Q4, but to start improving in H1/21 driven by Chinese demand. DT expects MBU sales to grow in Q4 and to continue to grow in Q1 of 2021, albeit more slowly than in 2020.

 Maintain HOLD with target price 22 euros

Based on the report, we have cut our sales and EBIT estimates for the coming years. On our renewed lowered estimates, DT is now trading at premiums to our peer group, but we note that there is high uncertainty in our estimates and multiples can quickly change when security market recovery starts. It’s difficult to estimate how long the challenging situation regarding aviation will continue and at what point SBU will start recovering. We do not however see DT’s competitive position, strategy or longer-term drivers compromised, and therefore DT should be well positioned to perform again once security market normalizes. Until we see some signs of security market stabilizing, we remain cautious. We maintain our target price of 22 euros and HOLD rating.

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Vaisala - Strong profitability in both segments

27.10.2020 - 14.30 | Earnings Flash

Vaisala’s Q3 did not provide bigger surprises as the company updated its business look for 2020 and published preliminary Q3 net sales and EBIT figures last week. Vaisala’s Q3 net sales decreased by 11% to 94.0 MEUR. Q3 reported EBIT was 19.5 MEUR.

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  • Group level results: Q3 net sales decreased by 11% to 94.0 MEUR.
  • Gross margin was 57.7% vs. 55.3% last year.
  • Orders received were 85.3 MEUR vs. 105.1 MEUR last year. Orders received decreased by 19% due to weakened order intake especially in W&E’s airports markets and emerging markets. Order book was 134.6 MEUR vs. 154.4 MEUR in Q3’19.
  • Weather & Environment (W&E) net sales decreased by 14% to 59.2 MEUR vs. 59.9 MEUR our expectation. W&E EBIT was 11.1 MEUR (9.7 MEUR Evli). W&E’s orders received decreased by 29% and was impacted by decreased order intake mainly from MEA and Latin America.
  • Industrial Measurements (IM) net sales declined 3% to 34.8 MEUR vs. 34.5 MEUR our expectation. IM EBIT was 8.6 MEUR (10.3 MEUR Evli). Industrial Measurements’ order intake growth was 2% and orders received grew by 19% in APAC, while order intake in EMEA and Americas decreased partially offsetting increase in APAC.
  • Business outlook for 2020 maintained: Vaisala estimates its full-year 2020 net sales to be in the range of EUR 370–390 million and operating result (EBIT) to be in the range of EUR 40–48 million (updated on October 21st).

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Suominen - Another exceptional quarter

27.10.2020 - 10.00 | Earnings Flash

Suominen’s Q3 figures continued to defy our expectations as marginal profitability increased further q/q despite being already exceptionally high in Q2.

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  • Suominen Q3 revenue amounted to EUR 115.4m (up 12% y/y), compared to our EUR 114.0m expectation.
  • Europe top line was EUR 43.5m while we estimated EUR 41.0m. Americas posted EUR 71.9m, compared to our EUR 73.0m estimate.
  • Gross profit amounted to EUR 19.7m vs our EUR 17.1m estimate. Gross margin was therefore 17.1% vs our 15.0% expectation. In our view the additional improvement in gross margin (which amounted to 16.0% in Q2’20) indicates Suominen was able to defend its nonwovens pricing in a favorable supply-demand environment, despite low raw materials prices. Suominen hinted at such an opportunity during its CMD, and our view proved too conservative in this respect.
  • Suominen Q3 EBIT was EUR 12.9m, compared to our EUR 9.8m estimate. The beat was mostly due to the higher gross margin and resulting gross profit, however Suominen was also somewhat more efficient in terms of SG&A.

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Innofactor - Fared well in challenging quarter

27.10.2020 - 09.30 | Earnings Flash

Innofactor’s Q3 results were slightly above our expectations and figures were fairly good given the expected COVID-19 related weakness in the quarter. The net sales amounted to EUR 14.0m (Evli EUR 13.8m), while EBITDA amounted to EUR 1.6m (Evli EUR 1.3m). Guidance remains intact. The impact of the pandemic on Q3 was in line with company expectations.

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  • Net sales in Q3 amounted to EUR 14.0m (EUR 14.0m in Q3/19), slightly above our estimates (Evli EUR 13.8m). Net sales in Q3 grew 0.3% y/y. Net sales grew in Finland but declined in the other Nordic countries.
  • EBITDA in Q3 was EUR 1.6m (EUR 1.5m in Q3/19), above our estimates (Evli EUR 1.3m), at a margin of 11.1%. EBITDA was clearly positive in Finland and somewhat negative in the other countries due to smaller than expected net sales due to the coronavirus pandemic.
  • Operating profit in Q3 amounted to EUR 0.4m (EUR 0.3m in Q2/19), above our estimates (Evli EUR 0.2m), at a margin of 2.8%.
  • Order backlog at EUR 58.2m, up 9.4% y/y. Innofactor received several significant orders during the quarter and the order backlog improved q/q.
  • Guidance intact: Innofactor’s net sales and EBITDA in 2020 are estimated to increase compared to 2019.
  • The impact of the coronavirus pandemic on the third quarter was in line with company expectations. On a monthly level August was weaker than anticipated but September instead better than expected and the trend is expected to strengthen during the end of the year.
  • Innofactor updated its strategy during Q3, with no major changes being made. The updated dividend policy was confirmed, and financial targets remain the same.

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Detection Technology - Result miss, but some light in end of tunnel

27.10.2020 - 09.25 | Earnings Flash

DT’s Q3 result clearly missed our and consensus expectations due to worse than expected performance in SBU. DT’s Q3 net sales were EUR 20.6m (-23.4% y/y) vs. EUR 24m/23.5m Evli/consensus estimates. SBU sales declined -43% to EUR 10.6m (EUR 13.5m our expectation) and MBU sales increased +20% to EUR 10.1m (EUR 10.5m our expectation). DT’s Q3 EBIT came in at EUR 2.6m vs. our estimates of EUR 4m (EUR 3.4m cons). On the positive, DT says it is cautiously optimistic that the worst may already be behind it.

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  • Group level results: Q3 net sales amounted to EUR 20.6m (-23.4% y/y) vs. EUR 24m/23.5m Evli/consensus estimates. Q3 EBIT was EUR 2.6m (12.6% margin) vs. EUR 4m/3.4m Evli/cons. R&D costs amounted to EUR 2.3m or 11% of net sales (Q3’19: 2.6m, 9.7%).
  • Security and Industrial Business Unit (SBU) had net sales of EUR 10.6m vs. EUR 13.5m Evli estimate. SBU sales declined -43% y/y, mainly due the COVID-19 pandemic. SBU net sales are expected to decrease in Q4 y/y, but the company expects improvement in H1 of 2021.
  • Medical Business Unit (MBU) delivered net sales of EUR 10.1m which was broadly in line with our estimate of EUR 10.5m. Net sales of MBU increased by +20% y/y due continued strong demand in medical CT imaging. DT expects MBU sales to grow in Q4 and to continue to grow in Q1 of 2021, albeit more slowly than in 2020.
  • No change in medium-term targets; at least 10% net sales growth, EBIT margin at or above 15%.

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Scanfil - Sound figures

27.10.2020 - 08.40 | Earnings Flash

Scanfil reported Q3 revenue slightly on the soft side, however the overall picture seems to remain pretty much unchanged with demand and profitability as previously expected.

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  • Scanfil Q3 revenue was EUR 141.6m vs the EUR 156.2m/147.6m Evli/consensus estimates. In our view the slight softness was due to Communication and Industrial segments.
  • Communication posted EUR 20.7m in revenue, compared to our EUR 27.8m estimate. The softness was due to lower demand for network elements.
  • Consumer Applications’ revenue was EUR 21.3m vs our EUR 20.9m estimate. Scanfil reports encouraging signs of demand picking up for the segment.
  • Energy & Automation revenue was EUR 28.9m while we expected EUR 30.4m. There was a lot of customer-specific sales variation.
  • Industrial recorded EUR 44.7m vs our EUR 50.5m expectation. July and August were slow, but demand improved in September.
  • Medtec & Life Science revenue amounted to EUR 26.1m, compared to our EUR 26.6m estimate.
  • Scanfil Q3 EBIT stood at EUR 9.9m, compared to the EUR 10.5m/10.3m Evli/consensus estimates. Operating margin was thus 7.0% vs our 6.8% expectation.
  • Scanfil guides FY ’20 revenue to land in the EUR 590 – 610m range and EBIT EUR 38 – 40m. The estimate ranges were previously EUR 580 – 620m and EUR 38 – 42m.

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Etteplan - Weaker Q3 figures expected

27.10.2020 - 08.30 | Preview

Etteplan reports Q3 results on October 29th. We expect weakish figures in the seasonally slower quarter, as the impact on demand of the COVID-19 induced uncertainty should also show clearly. We estimate a sales decline of 9.6% in the quarter and an EBIT-margin of 5.3%. We adjust our target price to EUR 9.3 (8.7) and retain our HOLD-rating.

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Seasonal slowness and COVID-19 impact
Etteplan’s Q2 results were a clear positive in the challenging environment and timely measures taken helped in keeping up profitability. The organic decline in revenue was 11.3%. During Q3 the market environment overall saw improvement compared with the restrictions during Q2 but with the third quarter being seasonally slower and a trickle-down effect of the demand weakness in Q2 we expect weakish figures. With the capacity reduction due to temporary layoffs to our understanding somewhat similar to that of Q2 we expect a similar organic revenue decline, expecting revenue of EUR 55.6m (Q3/19: EUR 61.5m). Despite good cost control, we still expect the lower revenue to have an impact on profitability and estimate an adj. EBIT of EUR 2.9m (Q3/19: EUR 4.9m), at a margin of 5.3%.

2020E: sales decline 1.7% and EBIT of EUR 18.4m
Etteplan reissued a guidance in Q2, expecting 2020 revenue to decrease slightly or be at 2019 levels and EBIT to decrease compared with 2019. We currently estimate a sales decline of 1.7% in 2020 and EBIT of EUR 18.4m (2019: EUR 22.8m). The situation with the coronavirus pandemic has turned to the worse again with the second wave and we will be keeping our eyes on comments on the potential effect on demand development.

HOLD with a target price of EUR 9.3 (8.7)
We have made only minor tweaks to our estimates ahead of the Q3 results. With the slightly improved sentiment after Q2 and peer multiple appreciation we adjust our target price to EUR 9.3 (EUR 8.7), valuing Etteplan at 7.5x 2020 EV/EBITDA, and retain our HOLD-rating.

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Talenom - Preparing new avenues for growth

27.10.2020 - 08.00 | Company update

Talenom reported solid Q3 figures despite slight sales weakness. Attention was drawn to the new small customer concept, with the for us surprising addition of banking services. Although still in its infancy, the concept in our view appears promising.

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Solid profitability, slight COVID-19 sales weakness
Talenom reported solid Q3 results. Revenue was slightly weaker than expected, at EUR 14.8m (Evli/cons. EUR 15.3m/15.2m), as the pandemic has a slight impact on transaction volumes. Cost control however aided profitability and the EBIT of EUR 3.1m beat expectations (Evli/cons. EUR 2.6m/2.8m). The financial figures were clearly of lesser interest in the earnings report as focus lied on the new small customer concept.

Seeking to cater previously underserved customer segment
Talenom launched a new small customer concept, the TiliJaska service, a free accounting system, as well as Talenom Light Entrepreneur, designed for the smallest, previously by Talenom underserved customers. Costs for the system arise with usage after a certain threshold. The product is intended to broaden the service offering and attracting growing enterprises to Talenom’s bookkeeping services but also to be a profitable product in itself. The product will be in beta until the end of the year and is also planned to be launched next year in Sweden. A potentially very interesting and unexpected new angle was the addition of banking services. In our view the service, or essentially the idea of in the long-run potentially creating a much broader service platform, view has clear potential. Talenom also mentioned that it is looking into other markets in Europe, but we see it as too early to make any assumptions regarding such expansion.

HOLD with a TP of EUR 10.2 (8.5)
Talenom’s valuation continues to be stretched but with the interesting new sales growth potential and more light to be shed on the new services in the upcoming Capital Markets Day (November 11th), we can justify to stay along for the ride. We adjust our TP to EUR 10.2 (8.5), valuing Talenom at a 2020 P/E of 45x, and retain our HOLD-rating.

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Talenom - Solid profitability figures once again

26.10.2020 - 14.00 | Earnings Flash

Talenom's net sales grew 10.0% in Q3 to EUR 14.8m, slightly below our and consensus estimates (EUR 15.3/15.2m Evli/cons.). EBIT amounted to EUR 3.1m, above our and consensus estimates (EUR 2.6m/2.8m Evli/cons.). Guidance remains intact, net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m.

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  • Net sales in Q3 amounted to EUR 14.8m (EUR 13.5m in Q3/19), slightly below our and consensus estimates (EUR 15.3m/15.2m Evli/Cons.). Growth in Q3 amounted to 10.0% y/y.
  • Operating profit in Q3 amounted to EUR 3.1m (EUR 2.4m in Q3/19), above our and consensus estimates (EUR 2.6m/2.8m Evli/cons.), at a margin of 21.2%.
  • EPS in Q3 amounted to EUR 0.05 (EUR 0.04 in Q3/19), in line with our and consensus estimates (EUR 0.04/0.05 Evli/cons.).
  • Net sales growth was slightly weakened by the impact of the pandemic on transactional volumes, but cost adjustments aided profitability.
  • Talenom launched its new small customer concept, TiliJaska, aimed to be launched also next year in Sweden. Talenom also launched the Talenom Light Entrepreneur service, a service platform catering the needs for customers ranging from part-time light entrepreneurs to listed companies.
  • Talenom clarified its long-term vision, seeking to broaden its offering to an increasing extent also towards banking services, supported by digital transformation and legislative changes.
  • Guidance intact: Net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m.

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Verkkokauppa.com - Towards the important campaign season

26.10.2020 - 09.40 | Company update

Once again, Verkkokauppa.com delivered a strong result as revenue increased by ~7% y/y (EUR 129m) while adj. EBIT totaled EUR 5.6m. We have slightly increased our estimates and keep our rating “BUY” with TP of EUR 6.5 (6.3).

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Revenue increased by 7% y/y

Verkkokauppa.com’s good momentum continued throughout Q3, driven by strong consumer web sales. Growth was particularly good in mid-sized and evolving categories (MDA, BBQ, sports as well as office & supplies). Revenue increased by ~7% y/y amounting to EUR 129m (vs. our EUR 126m). Gross margin developed favorably as well due to the sales mix, strong consumer sales as well as lower level of wholesale sales but also due to operational improvements. The company’s adj. EBIT was EUR 5.6m (vs. our 5.3m) in Q3.

The current environment supports further growth

Online migration has continued strong throughout the year partly due to the COVID-19 and as the virus situation seems to be prolonging, we expect the same trend to continue. Even though the company is known for its strong presence in the consumer electronics market in Finland, the growth has been strong in other product categories as well boosting the company’s sales and profitability development. This also benefits the company’s growth in the future since the consumer electronics market is extremely competed and price driven. The final quarter is normally the most important for Verkkokauppa.com and it is driven by campaigns (e.g. Cyber Monday and Black Friday) and the Christmas season. We expect the good momentum to continue also in Q4E. Due to the travel restrictions, wholesale sales should remain in a lower level also in Q4E, having a positive impact on margins.

“BUY” with TP of EUR 6.5 (6.3)

We have slightly increased our estimates and expect 20E revenue of EUR 546m and adj. EBIT of EUR 20.4m. Hence, our estimates are at the higher end of the given guidance (revenue between EUR 525-550m and adj. EBIT between EUR 17-21m). On our estimates the company trades at 20E-21E EV/EBIT multiple of 10.7x and 11.0x, which translates into ~50% discount compared to the peers. We keep our rating “BUY” with TP of EUR 6.5 (6.3).

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Fellow Finance - Obstacles to overcome

23.10.2020 - 09.15 | Company report

Fellow Finance is a highly scalable international marketplace lending platform. Recent challenges due to increased competition, adverse regulatory decisions and the Coronavirus pandemic caused a setback to the company’s solid growth and profitability track and is now on a slightly challenging turnaround undertaking.

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Good track record, challenging year behind...
Fellow Finance is an international marketplace lending platform connecting investors and lenders and facilitates both consumer and business lending. Operations have in the past years been expanded abroad, with operations now in six countries. The company has been able to achieve a good track record on growth and profitability but has since the latter half of 2019 been met with challenges due to regulation, increased competition and volume declines due to the Coronavirus pandemic. As a result of a decline in facilitated loan volumes sales have decreased and profitability has suffered.

... but long-term potential remains
The business environment still remains challenging in the near-term, especially with the temporary cap on interest rates on certain consumer credit. Potential for disruptive growth in the addressable market and the scalability of the platform still continues to offer ample opportunities in the long-term but with the challenges being faced there is still work to be done. With the improving investor demand after a dip in volumes due to the pandemic we expect the negative sales trend to be reversed and profitability to improve as a result in 2021.

HOLD with a target price of EUR 2.8 (2.5)
We base our valuation on peer multiples and derive a fair value of EUR 2.78 using a 2021 P/sales multiple of 1.3x, at a discount to the consumer finance companies given differences and faced challenges and above the somewhat chronically underperforming lending platform peers. We adjust our target price to EUR 2.8 (2.5) and retain our HOLD-rating.

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Detection Technology - Looking for signs of recovery

23.10.2020 - 08.42 | Preview

Detection Technology will report Q3 earnings next Tuesday, October 27th, at 9:00 EET. As usual, we look forward to hearing the latest developments and outlook regarding the security and medical imaging markets. We maintain our target price of 22 euros ahead of the report, our recommendation is HOLD (prev. BUY).

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Expecting declining sales, but a better quarter than last

We expect Q3 net sales of 24 MEUR (23,5 MEUR cons) and EBIT of 4 MEUR (3,4 MEUR cons), meaning a decline of around -11% and -20% respectively compared to last year. Despite decline, we expect Q3 to be clearly better than Q2. The reason behind net sales decline is the lower demand in SBU due to the COVID-19 pandemic affecting the demand for security X-ray devices, especially in aviation segment. We expect SBU net sales to decline -27% to 13,5 MEUR. MBU is compensating for the decline in SBU, as demand for medical CT imaging is currently strong due to the pandemic. We expect MBU net sales to grow 26% on slightly weak comparison figures to 10,5 MEUR. We expect DT’s Q3 EBIT to be 4 MEUR (17% EBIT margin), which is -20% lower y/y (high comparison figure), but clearly better than in Q2 (2,6 MEUR).

 Looking for signs of recovery in SBU amidst low visibility

DT has stated that it expects lower demand in the security segment to continue in Q3 and SBU sales to decrease in 2020. DT however sees SBU sales starting to improve towards end of the year. DT estimated in its Q2 report that airport CT standard equipment upgrades in Europe and U.S. will be postponed at least 12 months. Regarding China, it remains unclear when similar Chinese airport standardization will start and if any security infrastructure related government recovery measures will take place. MBU sales growth is expected to continue in H2 driven by the demand in CT applications.

 Situation regarding aviation main uncertainty

The situation regarding aviation remains the biggest near-term uncertainty for DT as SBU represents roughly 2/3 of net sales and we’ve estimated aviation to contribute roughly half of SBU net sales. We have not made any changes to our estimates, thus we maintain our target price of 22 euros ahead of the report, our recommendation is HOLD (prev. BUY).

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Verkkokauppa.com - Q3 result in line with expectations

23.10.2020 - 08.35 | Earnings Flash

Verkkokauppa.com’s Q3’20 revenue grew by 7.3% y/y and was EUR 129m vs. Evli EUR 126m and consensus of EUR 127m. Adj. EBIT was EUR 5.6m vs. EUR 5.3m/5.3m Evli/cons. 2020 guidance: the company expects revenue to be 525-550 million euros and comparable operating profit to be 17-21 million euros.

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  • Q3 revenue was EUR 129m (7.3% y/y) vs. EUR 126m Evli view and EUR 127m consensus. Growth was good especially in mid-sized and evolving categories.
  • Q3 gross profit was EUR 20.9m (16.2% margin) vs. EUR 20.7m (16.4% margin) Evli view.
  • Q3 adj. EBIT was EUR 5.6m (4.3% margin) vs. EUR 5.3m (4.2% margin) Evli view and EUR 5.3m (4.2% margin) consensus.
  • Q3 eps was EUR 0.09 vs. EUR 0.09/0.09 Evli/cons.
  • 2020 guidance: the company expects revenue of EUR 525-550m and comparable operating profit of EUR 17-21m.
  • The company also decided on a quarterly dividend of EUR 0.055 per share.

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Vaisala - Q3 EBIT clearly better than expected

22.10.2020 - 09.30 | Company update

Vaisala updated yesterday its business outlook for 2020 and published preliminary net sales and operating result for Q3. With the better than expected profitability development, we raise our TP to 32€ (29), but due to continued share price rally our rating is now SELL (HOLD).

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Sales expected to be 370-390 MEUR and EBIT 40-48 MEUR
Vaisala narrowed net sales estimate and increased EBIT estimate, and now expects 2020 sales to be between 370–390 MEUR and EBIT to be between 40–48 MEUR (prev. sales 370-405 MEUR and EBIT 34-46 MEUR). Vaisala also provided preliminary figures for January–September 2020. Preliminary net sales were 273 MEUR (277.2 MEUR Evli) and EBIT was 33 MEUR (25.6 MEUR Evli).

EBIT clearly better than expected despite the decline in sales
Pandemic has affected negatively especially airports customer segment and emerging markets, and W&E has been missing larger project orders. Some project deliveries have also been delayed due to restrictions related to COVID-19. IM’s industrial instruments and liquid measurements products has not met growth targets due to volatile market situation during Q2 and Q3. On the other hand, Vaisala’s profitability has developed clearly better than expected in Q3 (EBIT 19.9 MEUR vs. 12.6 MEUR Evli). According to Vaisala, W&E’s digital services and IM’s product and service businesses improved their gross margins. In addition, the decline in operating expenses caused by the prolonged pandemic, has improved EBIT more than expected.

Valuation remains stretched
Based on the update, we have cut our sales estimates and increased EBIT estimates for 2020e. We expect 2020e net sales to decline 5.2% to 382.5 MEUR and EBIT to increase to 46.6 MEUR. We have also revised EBIT estimates slightly upwards for 2021e. Despite the margin improvement, COVID-19 continues to pose significant near-term uncertainties. Vaisala’s share price rally has continued and, on our estimates, Vaisala is trading at clear premiums compared to our peer group and we see valuation stretched given the weaker financial performance compared to peer group. We look forward to hearing more about the drivers of margin development in connection with Q3 report next Tuesday. With the better than expected profitability development we raise our TP to 32€ (29), but downgrade to SELL (HOLD).

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Suominen - Multiples are still conservative

22.10.2020 - 09.30 | Preview

Suominen reports Q3 results on Tue, Oct 27. Our estimates, EUR 5.5 target price and BUY rating all remain intact.

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No clear reason to expect softening wipes demand for now

In our opinion outlook is solid even after an exceptionally strong Q2, when revenues in Americas and Europe grew y/y by 19% and 16%. Fatigue and possibly growing indifference towards hygienic considerations could limit wipes growth at a certain near future point, however many reports suggest this unlikely to happen at least during the next few quarters. According to a New York Times article some consumers in the US prize canisters of Clorox disinfecting wipes as kinds of trophies since the item remains such a rare sight on store shelves. Many companies have formed partnerships with Clorox to reassure employees and customers that surfaces can be kept disinfected. Clorox saw wipes demand grow by 500% in a few months and inventory usually enough for 1-2 months gone in 1-2 weeks. Clorox was able to up production and plans to add more early next year. This is just one brand-specific example from the downstream part of the supply chain, but we believe it’s still relevant for upstream nonwovens suppliers. The US is also a key market for Suominen since the Americas BA contributes ca. 65% of revenue. Although European consumers may not be as keen wipers as their American counterparts, we believe the recent pandemic acceleration continues to lift volumes on both sides of the Atlantic.

There are no changes to inform estimate revisions

We view Suominen well-positioned to post double digit y/y growth rates during the next couple of quarters. With regards to H2’20 top line figures we see the uncertainty associated mostly with the scheduled maintenance breaks at several Suominen plants and to what extent exactly these will negatively affect production and delivery volumes. Raw materials prices have continued to develop flat and hence we still expect gross margin to decline from 16% in Q2 to 15% in Q3. There has also been basically no change to FX rates lately and so our EUR 114m revenue and EUR 9.8m EBIT estimates for Q3 remain intact.

We consider the conservative multiples attractive

Suominen continues to trade well below 6x EV/EBITDA on our estimates, compared to a historical average of 6.5x. We find this an attractive level and so retain our EUR 5.5 TP and BUY rating.

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Raute - Earnings not yet out of the woods

20.10.2020 - 09.10 | Preview

Raute reports Q3 results on Thu, Oct 29. Many issues point how order levels and profitability might have bottomed out, yet we continue to view valuation neutral. We retain our EUR 20 per share target price and HOLD rating.

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A very large Russian order raises confidence on next year

While Q3 order intake likely remained at a subdued level Raute disclosed on Oct 16 the signing of a complete plywood mill project delivery. The EUR 55m Russian greenfield is worth close to the record EUR 58m Segezha order now on delivery. Raute begins delivering the new order next year and the mill is set to start production in ‘22. Even though the order is very large such a project delivery announcement is not that surprising given Raute’s Russian plywood mill track record. As usual with such big projects, Raute’s margin potential is likely quite limited. The order raises our confidence on next year’s workload. We now expect FY ’21 revenue at EUR 139m (prev. EUR 127m). With regards to FY ’21 EBIT we now estimate EUR 6.6m (prev. EUR 7.4m).

Long-term potential remains strong, short-term still hazy

While the pandemic has negatively affected Raute’s business it’s worth bearing in mind the investment cycle was cooling already well before this year. Although the pandemic and related uncertainty now only seem to prolong themselves by the day, we nevertheless view the prospect of wider plywood and LVL sector investment upturn entirely plausible. We see a reasonable chance Raute’s order intake will bottom out during H2’20. Another positive is the high likelihood of Raute emerging from the pandemic even stronger relative to competition. On the negative side is the extended short-term pressure on profitability. While it is clear this year’s valuation multiples should be overlooked, next year could still fall meaningfully short of long-term potential. In our opinion Raute does not face long-term profitability challenges, but on the other hand the sector’s cyclical nature means long-term outlook should be valued cautiously.

We expect improvement, but multiples aren’t yet attractive

Now that a big project has been secured, we focus on smaller scale equipment orders and services in the Q3 report. Raute is currently trading some 7x EV/EBITDA and 11x EV/EBIT on our estimates for next year. We view these multiples quite neutral in the current context. We retain our EUR 20 TP and HOLD rating.

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Finnair - Dark winter ahead

19.10.2020 - 09.40 | Preview

Finnair will report its Q3 result on next week’s Wednesday, 28th of October. We have cut our 20E-21E estimates. We keep our rating “HOLD” with TP of EUR 0.38 (EUR 0.50) ahead of Q3 result.

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Q3’20 ASK decreased by 87% y/y

In Jul-Sep, Finnair carried 454k passengers which is 89% decline compared to Q3’19. Finnair’s Q3 Available Seat Kilometers (ASK) decreased by 87% y/y but compared to Q2’20, ASK increased by ~380%. Revenue Passenger Kilometers (RPK) decreased by 94% y/y. Passenger load factor in Q3, was 38.7% (-47.5pp compared to Q3’19). Due to the strict travel restrictions and new infection waves, the company was not able to operate as many flights as it first anticipated. We expect Q3E revenue of EUR 157m and adj. EBIT of EUR -191m.

Aiming to fly ~75 daily flights during the winter season

The coronavirus has not shown signs of abating during the autumn and the travel restrictions have remained relatively tight, impacting negatively on demand. The company has been forced to adjust its traffic plans for several times and due to the current situation, the company now expects to operate approx. 75 flights per day from Nov’20 to Mar’21 (in 2019, ~350 daily flights) and will increase its destinations for summer 2021. During Q3, the company finalized a sale and leaseback arrangement for its A350 aircraft delivered in February this year. This had an immediate EUR ~100m positive cash effect. The company also issued a new EUR 200m hybrid bond (fixed interest rate of 10.250% p.a.).

“HOLD” with TP of EUR 0.38 (0.50)

We have further cut our 20E-21E estimates. We expect 20E revenue of EUR 1062m and comparable operating loss of EUR 609m. We expect the better recovery to start during ’21 spring but we highlight that the outlook is still very blurry. We keep our rating “HOLD” with TP of EUR 0.38 (0.50).

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Pihlajalinna - Headwind from many directions

01.10.2020 - 09.20 | Company update

The FCCA has proposed the market court to prohibit the merger between Mehiläinen and Pihlajalinna. We now see the likelihood of the transaction being completed significantly lower. The political landscape is also changing. We keep our rating “HOLD” with new TP of EUR 11.0 (16.0).

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FCCA proposes to prohibit the merger

The Finnish Competition and Consumer Authority (FCCA) has proposed the market court to prohibit the merger between Mehiläinen and Pihlajalinna. According to the FCCA, the merger would significantly impede effective competition in the Finnish health services market as there would be only two nationwide healthcare companies (Mehiläinen and Terveystalo) in the market post-merger. Hence, the Finnish healthcare market would become even more concentrated post-merger and the merger would create competition concerns and the proposed remedies are not sufficient to address the identified competition concerns (Mehiläinen submitted two remedies proposals). According to the FCCA, the merger is also likely to lead to price increases. The combined market share of the companies would have been ~7% of the total healthcare and social services market. The market court has to issue its decision within three months (latest on 29th of December).

The probability of the acquisition being completed has dropped

The result of the investigation came as a surprise to the parties involved and to us as well. It is possible that the FCCA’s methodology to assess the market size has varied from the methodology used by the companies (e.g. public vs. private sector). Anyhow, we see that the likelihood of the acquisition being completed has decreased significantly thus we return to see Pihlajalinna as an independent service provider also in the future. During the process, Pihlajalinna has continued to develop its business as usual. The company has for instance developed its digital services and other medical services. Additionally, the company has a strong background of cooperating with municipalities. Due to the economic difficulties, the public sector has seeked more efficient ways to produce effective services (e.g. by outsourcings) which has benefited the private sector. The political interests have however shifted more towards the public side meaning that the landscape has become more negative towards private social and healthcare service providers.

“HOLD” with TP of EUR 11.0

We have not made changes to our estimates but we see that the probability of transaction being completed is significantly lower. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 19.5x and 12.9x which translates into 15-30% discount compared to the peers. We keep our rating “HOLD” with a new TP of EUR 11.0 (16.0).

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Verkkokauppa.com - Strong momentum continues

28.09.2020 - 09.10 | Company update

Verkkokauppa.com issued a positive profit warning and expects 20E revenue of EUR 525-550m and adj. EBIT of EUR 17-21m. We have slightly increased our estimates and keep our rating “BUY” and TP of EUR 6.3 intact.

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Guidance upgrade due to better than expected development

Verkkokauppa.com issued a positive profit warning and upgraded its 2020 guidance. The upgrade is due to a better than expected development during Q3 and improved outlook for the remainder of the year. The company now estimates that the revenue in 2020 is in a scale of EUR 525-550m while adj. EBIT is EUR 17-21m (prev. revenue of EUR 520-545m and adj. EBIT of EUR 13-18m). This is the company’s second positive profit warning within a short period of time as the previous one was given in July.

Consumers still on the move

According to the company, sales and the consumer demand have continued stronger than expected throughout Q3. Against the expectations, the strong demand in many of the key product categories (e.g. consumer electronics) in Q2 has not resulted in a weakened demand in these categories in Q3. It is however likely that the growth in the consumer electronics market hasn’t continued as strong but rather that Verkkokauppa.com has been able win market shares. The management indicated that the demand has continued strong also in other smaller product categories. We expect the lower margin wholesale sales to remain relatively low throughout the year, boosting gross margin development. If the same momentum continues, Verkkokauppa.com’s campaign season in Q4 is likely to be very strong. However, there are still significant uncertainties due to the COVID-19 situation.

“BUY” with TP of EUR 6.3

We have only slightly increased our 20E revenue expectation (EUR 543m) while increasing our adj. EBIT expectation by ~11% (EUR 19.8m). On our estimates, the company trades at 20E-21E EV/EBIT multiple of 10.1x and 10.4x, which translates into a 60-70% discount compared to the peers. We keep our rating “BUY” with TP of EUR 6.3 intact.

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Suominen - One sweeping turn

24.09.2020 - 09.15 | Company report

Our estimates and EUR 5.5 TP are intact; retain BUY rating.

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Fundamentals now materially firmer in short and long term

Suominen’s turnaround materialized in a very swift fashion this past spring. Figures were considerably soft as late as Q4’19 when top line slipped in both business areas, especially so in Europe. Americas grew again in Q1’20 but Europe still declined some 11% y/y. While overall Q1 was already a positive surprise in terms of profitability, revenue nevertheless continued to develop flat y/y. Then Suominen proceeded to issue two positive profit warnings during a span of two months in spring and early summer. However strong indication of improving performance this was, our estimates could not exactly keep up with the pace and hence Q2 figures trounced our expectations. Although the groundwork for solid improvement had been laying back there for some time (thanks to e.g. sustainable product introductions), it seems basically all the factors happened to align favorably during the spring. Both Americas and Europe posted revenue increases in the high teens, which also helped production efficiency. Investments in US production assets were ready to pay off. Product mix improved some more while nonwovens prices did not decline quite as much as those of raw materials.

Success in sustainable products helps to reach targets

The notable pre-pandemic challenges have vanished. Strong wipes demand means nonwovens supply-demand balance now tilts much more favorably from a manufacturer’s point of view, at least in the short-term. Despite this we expect some softening in Suominen’s H2 figures as nonwovens prices tend to follow raw materials prices closely, in addition to which several Suominen plants will go through scheduled maintenance breaks. The Q2 records place the bar high for next year, but in our view Suominen’s long-term financial targets look credible. Success in sustainable products (in Suominen’s case increasing share of wood-based fibers) could well defend margins also in the long-term, although the innovations’ profitability remains to be tested in a scenario where significant new capacity enters the market.

We see upside relative to historical earnings multiples

We continue to view Suominen’s below 6x EV/EBITDA multiples attractive. Our TP is EUR 5.5 and we retain our BUY rating.

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Marimekko - Outlook brightens

21.09.2020 - 09.00 | Company update

Marimekko announced a guidance for 2020E and expects net sales to be lower compared to last year and adj. EBIT to be approx. at the same level or lower than last year. Due to the improved outlook we have increased our estimates. We upgrade to “BUY” (“HOLD”) with new TP of EUR 42.0 (32.0).

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Guidance for 20E announced

Marimekko withdrew its earlier 20E guidance in March, solely due to the estimated impacts of the COVID-19. The company stated during its Q2 result that the coronavirus will have a significant negative impact on sales and profitability in 20E. Now the company has announced a guidance for 20E and expects net sales to be lower than in the previous year (EUR 125.4m) and adj. EBIT to be approx. at the same level or lower than in the previous year (EUR 17.1m).

Better than expected trend in sales

According to Marimekko, the improved outlook is mainly due to better than expected trend of Finnish retail sales during the summer and improved outlook of wholesale sales but also due to better fixed cost savings during the rest of 20E. The company however highlights that there are still significant uncertainties caused by the COVID-19. The travel restrictions remained tight throughout the summer thus it is likely that the money normally spent on traveling has now been put into other things. Additionally, during the pandemic, the trend of domesticity has increased among Finnish consumers which should also have a positive impact on domestic sales. According to the company, major portion of its net sales and earnings for H2E will be generated during Q3E.

Upgraded to “BUY” (“HOLD”) with TP of EUR 42.0 (32.0)

We have increased our 20E sales expectation by ~2% and our 20E adj. EBIT estimate by ~21%. In our view, Marimekko’s mid-term outlook is good despite of the challenging times. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 18.6x and 16.4x which translates into a clear discount (~50%) compared to the luxury peers and at 20E-21E P/E multiple of 25.0x and 21.6x – also a clear discount compared to the luxury peers. We upgrade to “BUY” (“HOLD”) with TP of EUR 42.0 (32.0).

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Aspo - Improvement ahead in Q4

15.09.2020 - 09.25 | Company update

Aspo reissued guidance for this year. In our view the main takeaway is that improvement will be visible in Q4 figures, albeit there’s still long way to reach the targets set for ’23. Our TP is EUR 7.25 (6.00), rating BUY (HOLD).

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Q4 will mark the beginning of profitability rebound

Aspo now guides FY ’20 EBIT to be in the EUR 12-16m range, compared to EUR 21.1m last year. Aspo says Telko’s (including Kauko) development has proved a positive surprise while Leipurin has been able to defend its profitability despite exceptional circumstances. Aspo expects the combined EBIT for Telko and Leipurin segments will be higher this year than in ‘19 (the combined figure amounted to EUR 11.0m last year). Meanwhile Aspo estimates ESL will post a negative result for Q3 but expects Q4 to be clearly profitable as e.g. steel industry production shutdowns end and cargo volumes will begin to grow.

Q4 results will still be significantly below target levels

The new range’s EUR 14.0m midpoint is lower than our previous EUR 15.3m estimate, the difference being mostly due to ESL’s expected negative Q3 result (which we previously estimated at EUR 0.4m). We now expect ESL to post EUR -0.2m in Q3 EBIT. We leave our FY ’20 estimates intact for other segments, and so we now expect Aspo to post EUR 14.6m EBIT this year. In our view the guidance reissue is positive news for Aspo shareholders in terms of informational content as it hints at relatively brisk profitability rebound in Q4. On the other hand, Q4 EBIT, which we now estimate at EUR 4.8m, will still be far from Aspo’s full potential. According to the long-term targets published at last fall’s CMD, Aspo aims for 6% EBIT margin in ‘23 (vs our 3.9% estimate for Q4). ESL’s targets imply EUR 24m in annual EBIT, or some EUR 6m on a quarterly level (vs our EUR 2.8m estimate for Q4). Telko and Leipurin will likewise still be generating EBIT margins clearly below their respective 6% and 5% targets.

Uncertainty remains, but we see surprises tilting to upside

The guidance pushes away some uncertainty, yet it was previously known this year will fall significantly below long-term potential. Next year’s profit gradient is the key question; the main upside driver is found in positive surprises for ‘21. Although it’s early to wait such news, we see valuation attractive already in terms of SOTP. Our TP is EUR 7.25 (6.00), rating BUY (HOLD).

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Verkkokauppa.com - Riding the wave

11.09.2020 - 09.20 | Company report

Verkkokauppa.com’s growth story has continued over the years and the company’s revenue CAGR in 2010-2019 was 12.6 percent. Now the company has started to put more emphasize on profitability. We keep our rating “BUY” with TP of EUR 6.3.

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Focusing on profitable growth
Verkkokauppa.com’s revenue CAGR in 2010-2019 was 12.6 percent. The growth has been mainly supported by competitive pricing, strong online positioning and new product categories. The competition in the consumer electronics market has continued fierce and price driven. The company’s efficient and scalable cost base driven by small physical footprint enables competitive pricing and strong reliance against competition. The company has a strong net cash position which enables investments in growth. The company has started to put more emphasis on profitability of which the first evidences have already been seen.

Better profitability improvement via gross margin increase
Verkkokauppa.com’s future growth is depended on the online migration. According to the company, online sales represent some 12-13 percent of the total Finnish retail market. The company’s extremely good performance in H1’20 has been partly driven by the COVID-19, as sales grew by 11 percent and adj. EBIT grew by over 240 percent. It is challenging to estimate how permanent the market changes will be. However, increased online demand benefits e-commerce players such as Verkkokauppa.com. At the same time, risks related to the overall economic outlook and declining purchasing power have increased. Due to the low and scalable cost base we expect the company’s profitability to improve together with revenue growth. However, we see that better profitability improvement stems from higher gross margin levels.

“BUY” with TP of EUR 6.3 intact
We have slightly increased our estimates and expect sales in 20E-21E to grow by ~7 percent and ~4 percent, respectively. We also expect profitability to improve and adj. EBIT margin of 3.2-3.3 percent in 20E-21E. We value Verkkokauppa.com by using our scenario analysis which indicates a fair value of EUR 6.3. On our estimates, Verkkokauppa.com trades at 20E-21E EV/EBIT multiple of 10.9x and 10.7x, which translates into ~60 percent discount compared to the peers. 20E-21E EV/Sales multiple is ~30 percent below peers. We keep our rating “BUY” with TP of EUR 6.3.

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Suominen - CMD notes; wiping trends are strong

03.09.2020 - 09.25 | Company update

Suominen hosted a virtual CMD yesterday. Although there were no major updates the event nevertheless added some color on recent trends. Our TP remains EUR 5.5, rating BUY.

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Volumes are up globally due to cleaning and disinfection

The pandemic has lifted volumes in all markets and Suominen expects elevated demand to persist at least for the next few months. Permanently higher demand is likely within cleaning and disinfection products. Suominen estimates it has an above 15% wiping market share in Europe and is thus the leading player. All segments have enjoyed strong demand, household wiping especially so. Americas’ development has been similar and stores in the US still often have trouble shelving enough household cleaning products. Nielsen Homescan estimates 79% of US households now consider disinfecting wipes a staple item (vs 50% prior to the outbreak). Certain interesting consumer behavior anecdotes were discussed e.g. how Uber riders can now check before boarding whether the ride will feature Clorox disinfecting wipes. Luckily the new assets in Bethune and Green Bay were ready to meet surging demand. Indeed, the plant in Bethune was able to finally reach performance targets. In general, Suominen aims to grow with its current major customers and we see the company well-positioned to capture above market growth (thanks to competitive product portfolio), according to the long-term financial targets updated previously this year. Margins should stay relatively high in the short-term and Suominen might even be able to defend its nonwovens pricing, despite lower raw materials prices, as high wiping demand continues to persist together with the pandemic.

Our estimates remain unchanged for now

The CMD did not lead us to revise our estimates at this point. We expect some softening in gross margin and thus in EBITDA following the exceptionally strong Q2 (Suominen posted a 14.7% EBITDA margin, compared to the above 12% long-term target).

Further improvement not very easy but multiples are low

2020 will be a new record year for Suominen in terms of financial performance and in our view further gain in EBITDA next year can prove tricky. However, we continue to view current valuation attractive (EV/EBITDA is ca. 5.5x on our estimates for this year and next). We retain our EUR 5.5 TP and BUY rating.

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Next Games - Showing some more positive signs

31.08.2020 - 09.00 | Company update

Next Games reported better results than we had expected and clearly better profitability, which effectively halted cash burn. The Stranger Things and Blade Runner Rogue games are set for scaled launch in the year-end or later and growth prospects in 2021 remain largely unchanged.

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Profitability clearly above expectations
Next Games reported better H1 results than we had expected. Revenue amounted to EUR 14.4m (Evli 13.8m) and the adj. operating profit to EUR 0.1m (Evli -2.4m). NML performed above our expectations due to ARPDAU improvements while Our World gross bookings continued to decline as DAU figures fell clearly, although the ARPDAU continued to improve. Our World was affected by COVID-19 restrictions on movement. With the improved profitability operating cash flow turned positive and the cash position excluding debt repayment remained effectively unchanged from the end of 2019.

Scaled new game launches set for the year-end
Next Games has clearly reevaluated its publishing strategy since the launch of Our World and new games will be brought to market and scaled over a longer time period. With Stranger Things expected to be launched in Q4/20 and Blade Runner Rogue still seeing major updates the impact of new games on 2020 revenue will likely be very limited and Next Games quite expectedly dropped its revenue guidance. Publishing operations EBITDA is expected to grow clearly in 2020 following lower marketing costs. 2021 figures are highly dependent on the new games to be launched and visibility as such is extremely low. With a larger share of employees working on live games profitability should improve but marketing costs should still limit near-term profitability potential.

SELL with a target price of EUR 1.2 (0.9)
The improved profitability and resulting halt to cash burn provide needed support for the company’s financial position. With the uncertainty from the dependency on new games, valuation in our view is still not justifiable. We adjust our target price to EUR 1.2 (0.9) and retain our SELL-rating.

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Fellow Finance - Uncertainty in volume recovery

31.08.2020 - 08.15 | Company update

Fellow Finance’s H1 figures were somewhat below our expectations and EBIT barely fell in the red. Volume recovery prospects in 2020 appear rather meager and growth ambitions should pick up during H2 to put things back on track in 2021. We retain our HOLD-rating and TP of EUR 2.5.

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EBIT barely in the red
Fellow Finance reported H1 figures somewhat below our expectations. Revenue amounted to EUR 5.8m (Evli 6.3m), declining 20% y/y, and EBIT to EUR -0.1m (Evli 0.3m). Facilitated loan volumes and commissions income declined around 37% y/y respectively, while increases in interest yield income mitigated some of the revenue impact. The uncertainty caused by the coronavirus was clearly visible in loan volumes after March, dropping average volume levels to approx. EUR 9m per month during 4-6/2020 compared with approx. EUR 14.5m during 1-3/2020.

2020 to be a challenging year
Investor’s demand has according to Fellow Finance seen recovery in recent months. The temporary regulation on maximum interest rates on consumer loans in Finland, valid during 1.7-31.12.2020, should have a negligible impact on volumes as Fellow Finance is compensating investors with the difference to the actual interest rate but will result in some additional costs during H2. We currently expect loan volumes to rebound to an EUR 11m per month average level in Q4. Although possible, with the current more challenging environment we do not see Fellow Finance achieving the pre-corona volume levels during 2020. We still expect notable improvements in 2021, assuming an ease in temporary regulations and renewed focus on growth drivers.

HOLD with a target price of EUR 2.5
Our estimates have been slightly lowered post-H1 given the below expectations figures and continued dim outlook for volume recovery. Near-term multiples on our estimates remain unattractive but longer-term growth potential still remains. We retain our HOLD-rating and target price of EUR 2.5.

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Endomines - Funding still a key issue

31.08.2020 - 07.30 | Company update

Endomines commenced gold concentrate sales at its Friday mine but COVID-19 related challenges have pushed back ramp up to design capacity further. The attractive gold price level unfortunately remains overshadowed by cash burn and lack of more permanent financing solutions. We retain our SELL-rating with a target price of SEK 5.5.

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Sales commenced but head grades still low
Endomines Q2 results were slightly below our estimates, with revenue of SEK 7.5m (Evli 9.0m), EBITDA of SEK -17.5m (Evli -20.6m) and EBIT of SEK -27.7m (Evli -24.5m). The first concentrate sales at the Friday mine were made, but with pre-production development material being milled head grades were low and with the still low capacity revenue was not yet significant. COVID-19 related challenges to supply chains and recruitment have further pushed back the ramp up timetable of the processing facility and design capacity will unlikely be reached in 2020.

Friday ramp-up delayed due to COVID-19
We have clearly lowered our 2020 estimates post-Q2 following the ramp-up delays and update on the stockpiled pre-production development material. We expect 80% of design capacity to have been reached in Q4 and atypical head grades throughout the year due to stockpiled development material. We now expect revenue of SEK 41.0m (prev. 77.1m) and EBITDA of SEK -68.9m (prev. -38.3m). Endomines reported that plans are being made for a possible re-opening of Pampalo given the current gold price, which in our view could provide a production boost somewhere towards H1/21 if initiated.

SELL with a target price of SEK 5.5
Despite production and sales having recommenced, the unfortunate side of the Q2 report was the cash burn rate, with liquid assets again largely depleted and some exploration activities having been put on hold. Gold price levels are clearly attractive but with the expected cash burn rate during H2/20 and so far lack of more permanent financing solutions risks are still substantial. We retain our TP of SEK 5.5 and SELL-rating.

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Next Games - Profitability surpassed expectations

28.08.2020 - 09.30 | Earnings Flash

Next Games' net sales in H1 amounted to EUR 14.4m, slightly above our estimate (EUR 13.8m Evli). Gross bookings amounted to EUR 14.2m (Evli EUR 13.8m). The adj. EBIT was clearly better than expected at EUR 0.1m (EUR -2.4m Evli).

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  • Net sales in H1 were EUR 14.4m (EUR 19.2m in H1/19), slightly above our estimate (EUR 13.8m Evli). Net sales in H1 declined 25% y/y. Compared to our estimates, revenue was better than expected due to better than anticipated performance of No Man’s Land.
  • The adj. operating profit in H1 amounted to EUR -0.1m (EUR -1.8m in H1/19), clearly better than we had expected (EUR -2.4m Evli). The EBITDA of publishing operations in H1 amounted to EUR 3.4m. Research and development expenditure amounted to EUR 3.3m.
  • EBIT amounted to EUR -1.6m (H1/19: -3.5m), clearly above our estimate of EUR -4.0m.
  • TWD: NML (Q1/Q2) - DAU 162k/158k (225k/190k), MAU 483k/463k (669k/540k), ARPDAU EUR 0.27/0.28 (0.22/0.22).
  • TWD: OW (Q1/Q2)- DAU 83k/70k (211k/155k), MAU 309k/246k (982k/602k), ARPDAU EUR 0.50/0.51 (0.29/0.37).
  • Games in development: Blade Runner Rogue continues in development, with the rest of the major updates planned for this year. The Stranger Things game is planned to be brought to the market in stages during Q4/20.
  • Outlook updated: Revenue from already published titles expected to continue on flat or declining trend. Publishing operations EBITDA expected to improve clearly in 2020 compared with 2019. Next Games expects to start scaling 1-2 games during 2020.

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Fellow Finance - Somewhat weaker than expected

28.08.2020 - 09.00 | Earnings Flash

Fellow Finance’s H1/2020 results were somewhat weaker than expected, with revenue of EUR 5.8m (Evli EUR 6.3m) and an adj. EBIT of EUR -0.1m (Evli EUR 0.3m). The adj. EPS was below our estimates at EUR -0.10 (Evli EUR -0.05). Coronavirus uncertainty and temporary regulations affected facilitated loan volumes, down 36.8% in H1/20 compared with H1/19.

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  • Revenue in H1 amounted to EUR 5.8m (EUR 7.2m in H1/19), below our estimates (Evli EUR 6.3m). Revenue declined 19.8% in H1. Compared with H1/19 commission fees declined by 38% and interest yields increased by 31%.
  • Fellow Finance facilitated loans during H1 for a total of EUR 69m (EUR 109.3m in H1/19), a decrease of 36.8%. Loan volumes were affected by uncertainty caused by the coronavirus pandemic, which interrupted new investments, along with temporary regulations in Finland and Poland, which limited loan intermediation possibilities.
  • The adj. EBIT in H1 amounted to EUR -0.1m (EUR 1.4m in H1/19), below our estimates (Evli EUR 0.3m) driven by the lower than expected revenue.
  • The adj. EPS in H1 amounted to EUR -0.10 per share (EUR 0.07 in H1/19), below our estimate of EUR -0.05.
  • Guidance: Fellow Finance withdrew its guidance in March and did not reinstate a guidance in conjunction with the H1 report.
  • Repayment levels of business and consumer loans did not face any significant deterioration despite the challenging environment.
  • Business financing volumes grew 15% compared to H1/19 despite the environment and tightened credit approval criteria.

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Endomines - First production figures in

27.08.2020 - 10.00 | Earnings Flash

Endomines’ gold production amounted to 326.1oz. Head grades were at a low level of 2.9g/t due to the milling of pre-production development material. Near design capacity at Friday is now sought to be reached in Q4, with the COVID-19 pandemic having caused delays. Q2 revenue amounted to SEK 7.5m (Evli 9.0m) and EBITDA to SEK -17.5m (Evli -20.6m).

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  • Endomines made its first shipments of gold concentrate from the Friday mine during Q2.
  • Revenue* in Q2 amounted to SEK 7.5m, with our estimates at SEK 9.0m. Gold production amounted to 326.1oz, with a head grade of 2.9g/t. Gold concentrate was produced from pre-production development material, thus resulting in low head grades.
  • EBITDA* in Q2 was at SEK -17.5m, slightly above our estimate of SEK -20.6m.
    *Figures not reported, derived from Q1-H1 figures
  • At the processing facility at Friday Endomines was able to operate at an average rate of 41.1 tonnes per day. Ramp up to design capacity (3,445 tonnes per month) continued. The COVID-19 pandemic has continued to severely impact production ramp-up due to supply chain disruptions and slowdowns in hiring. Endomines now expects that near design capacity could be reached towards Q4 (previously expected in Q2).
  • Endomines did not give any numeric production guidance for 2020.
  • Endomines sees interest in investing in the decline at Pampalo at current all-time high gold prices.
  • Liquid assets amounted to SEK 3.4m at the end of the quarter.

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Next Games - Two-fold implications of the pandemic

24.08.2020 - 09.15 | Preview

Next Games reports H1 results on August 28th. We expect the COVID-19 restrictions to have supported gaming in general but had an adverse impact on the location based Our World game. The limited news on games in development raises some concerns for the 2020 outlook.

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Expect to see two-fold impact of the pandemic
Next Games will report H1 results on August 28th. We expect the outbreak of the coronavirus pandemic to have had a two-fold effect on current live games. The imposed restrictions on movement and self-isolation should have had an adverse effect on the location based Our World game and Next Games did launch the Free Roam feature to mitigate some of the impact. No Man’s Land should have continued to perform seemingly well, with the restrictions to certain activities having freed up more time for other activities such as gaming. We expect revenue of EUR 13.8m, a decline of 28% from the stronger comparison period, and an adj. EBIT of EUR -2.4m, with positive publishing operations profitability.

Limited news flow on games in development
News flow on games in development has been essentially non-existent post H2/2019. Blade Runner Rogue is running on app stores, but retention issues previously saw the game being moved back to production phase. The Stranger Things -game was in early access earlier on but no further news has been given. The pandemic should not have significantly affected development progress, with employees having rapidly shifted to remote working. Next Games expects modest revenue growth in 2020 assuming one or two games are published in 2020. We see some risks in achieving the outlook given the news flow and expect the H1 report to shed some much-needed light on the progress.

SELL (HOLD) with a target price of EUR 0.9 (0.84)
Valuation continues to be clearly below peers as is profitability. The restrictions due to the pandemic will have aided the gaming sector and peer multiples have in the past months been on the rise. We adjust our TP to EUR 0.9 (0.84) but lower our rating to SELL (HOLD).

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Cibus Nordic - Something more to chew over

21.08.2020 - 09.15 | Company update

Cibus’ portfolio remains unaffected by the pandemic and additional acquisitions are imminent despite already busy H1’20. Our TP is now SEK 160 (150) per share, rating BUY.

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Certain exceptional transactions burdened Q2 bottom line

Cibus was largely immune to the pandemic (shared certain small Finnish tenants’ troubles to the tune of EUR 0.2m). Property figures were as expected with rental income at EUR 16.4m vs our EUR 16.2m estimate. Property expenses remained in check and so net rental income amounted to EUR 15.1m i.e. same as our estimate. Administration costs were elevated by some EUR 0.5m due to bond transactions as well as the restructuring of Finnish books. The EUR 13.6m in operating income thus fell short of our EUR 14.2m estimate. Net financial costs were driven high, to EUR 5.8m, by a one-off EUR 2.9m item attributable to bond redemption premiums and arrangement fees. Net operating income was thus EUR 7.8m vs our EUR 9.9m estimate.

Both existing portfolio and prospects basically unchanged

The daily-goods property market remains stable and the pandemic hasn’t discernibly altered deal flow. This means Cibus is in a strong position to add to its property mass through smaller portfolio acquisitions and thus scale the current organization. Yields are still attractive as Cibus can buy assets at some 100-150bps pick-up relative to its own book valuation. In addition to the EUR 180m Swedish entry, Cibus is well ahead of its annual EUR 50m acquisition target since Finnish purchases total over EUR 70m YTD. With EUR 85m in cash and long-term financing in place further additions might well happen in H2’20. Cibus is also instituting additional shareholder-friendly effects in the near term, namely the transitioning to monthly dividend payments as well as switching to the Nasdaq Stockholm main list.

We see scope for further valuation rerating

In our opinion some tightening in valuation relative to the wider Nordic property sector is warranted since the pandemic has very limited direct bearing on Cibus. The situation is different for the bulk of commercial real estate e.g. offices. Cibus’ yield spread relative to other listed Nordic entities has indeed tightened a bit recently, however in our view there’s still room to go with Cibus yielding ca. 5% vs some 4% for a typical Nordic portfolio. Our TP is now SEK 160 (150) per share. We retain our BUY rating.

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Cibus Nordic - Temporarily elevated expenses

20.08.2020 - 09.30 | Earnings Flash

Cibus’ portfolio continued to perform according to expectations while transactions and financing activities drove central administration expenses and especially net financial costs exceptionally high.

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  • Cibus’ Q2 rental income was EUR 16.4m while we estimated EUR 16.2m.
  • Net rental income (i.e. after property expenses) amounted to EUR 15.1m, compared to our EUR 15.1m estimate.
  • Operating income (after central administration expenses) was EUR 13.6m vs our EUR 14.2m estimate.
  • Net operating income (after net financial costs) stood at EUR 7.8m vs our EUR 9.9m estimate.
  • Annual net rental income capacity is now EUR 65.1m (previously EUR 60.6m).
  • The portfolio was valued at EUR 1,124m and thus EPRA NAV amounted to EUR 11.8 (11.6) per share.
  • Net LTV ratio was 60.5% (58.1%).
  • Occupancy rate was measured at 95.2% (94.8%).
  • WAULT remained at 5.5 years at the end of Q2.

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Pihlajalinna - Focus on the tender offer

17.08.2020 - 09.20 | Company update

Pihlajalinna’s Q2 result was close to expectations. Revenue decreased by 11.6% y/y and was EUR 114.7m while adj. EBIT totaled EUR 0.6m. The tender offer by Mehiläinen is being under review of the FCCA and if approved, the process is expected to be completed during Q3. We keep our rating “HOLD” with TP of EUR 16.0.

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The pandemic hampered especially non-urgent healthcare

Pihlajalinna’s April-June revenue of EUR 114.7m (-11.6% y/y) was slightly above our expectation of EUR 112.1m. Adj. EBITDA was EUR 9.0m vs. our EUR 9.1m and adj. EBIT was EUR 0.6m vs. our EUR 0.2m. Complete outsourcings and other fixed priced invoicing supported the company throughout Q2 (profitability of these remains relatively stable despite of the demand situation). The situation didn’t also have significant impacts on the demand of housing services for elderly, recruitment services, public surgical operations or fertility treatments. Customer flows and demand decreased especially in private clinics and dental clinics. Revenue of Forever-fitness centers declined by over 80 percent y/y, resulting from the temporarily closure of the centers.

Releasing pent-up demand

According to the company, the biggest drop in demand is now behind and as the pent-up demand has started to release, the customer flows in private clinics, occupational healthcare services and dental care services have recovered relatively well and the demand is closer to a normal situation. As the restrictions impacted the most on the demand of non-urgent healthcare services, there are bottlenecks in the treatment queues especially on the public side. This could potentially further increase the customer flows of the private sector. However, the increasing number of new coronavirus infections is indicating a new wave, which increases uncertainties and makes the visibility of H2 blurry.

“HOLD” with TP of EUR 16.0

The tender offer by Mehiläinen is currently being under review of the FCCA (phase two investigation). The deadline for the investigation is 27th of August (plus possible extension period). Based on the current information, if the tender offer is approved, the process is expected to be completed during Q3. We have only made minor adjustment to our estimates after the Q2 result. We expect 20E revenue of EUR 517m (-0.3% y/y) and adj. EBIT of EUR 22.3m. We keep our TP at the tender offer price of EUR 16.0 and retain our rating “HOLD”.

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Gofore - Steady as she goes

17.08.2020 - 08.45 | Company update

Gofore’s H1 report did not provide any larger surprises. With net sales pre-announced at EUR 37.4m adj. EBITA of EUR 5.8m was quite in line with our estimates (Evli EUR 5.5m). The large share of public sector clients (73.5% of H1 net sales) is proving beneficial under these circumstances and the direct impact of COVID-19 has been rather limited. We retain our HOLD-rating with a TP of EUR 8.6 (8.4).

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No surprises in the H1 results

Gofore’s H1 results brought no larger surprises, as net sales had been pre-announced at 37.4m the adj. EBITA was quite in line with our estimates at EUR 5.8m (Evli 5.5m). Relative profitability was as expected weaker in the second quarter compared to the first quarter but saw no major direct negative impact of the coronavirus pandemic. Demand in the public sector clientele, representing 73.5% of net sales in H1, saw demand remaining steady while the private sector clientele saw some delays in development work and cancellations of projects.

Acquisition seals growth prospects

Our estimates remain largely intact as our marginally lowered expectations for H2 are offset by the slight profitability beat in H1. We expect 2020 net sales of EUR 75.1m (co’s guidance EUR 70-76m) and an adj. EBITA of EUR 10.0m. Our profitability estimates are more on the cautionary side given H1 profitability but in our view reflects the company guidance and P&L changes from the Qentinel Finland acquisition. In our estimates for net sales in the second half of the year we currently expect similar organic growth as in H1 along with the expected EUR 4m M&A impact. In 2021 we see Gofore set for solid earnings growth with help of the large inorganic growth.

HOLD with a target price of EUR 8.6 (8.4)

With only minor estimates revisions post-H1 we fine-tune our target price to EUR 8.6 (8.4), valuing Gofore at ~17.0x 2020e adj. P/E. Demand uncertainty is at elevated levels due to the pandemic but resilience has so far been provided by the large share of public sector clients. Our HOLD-rating remains intact.

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Marimekko - First wave survived

14.08.2020 - 09.40 | Company update

Considering the circumstances, Marimekko delivered relatively good Q2 result. Net sales decreased by 20% y/y and amounted EUR 23.3m vs. EUR 18.3m/19.8m Evli/cons. Adj. EBIT clearly beat expectations and was EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. We keep our rating “HOLD” with TP of EUR 32 (24)

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Relatively good result, considering the circumstances
Marimekko’s Q2 net sales were down by 20% y/y and totaled EUR 23.3m (EUR 18.3m/19.8m Evli/cons). Especially retail sales in Finland, Scandinavia and North America faced headwind amid the pandemic but also wholesale sales in the APAC region declined. At the same time, licensing income in the APAC region boosted sales. Adj. EBIT clearly beat estimates and was EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. Profitability was weighed down by lower net sales and declined relative sales margin (sales margin was negatively impacted by increased logistics costs and bigger discounts). In the early stage of the pandemic situation, the company implemented cost saving measures resulting in decreased fixed costs in Q2. Guidance for 20E was not given.

Sales and earnings depending on the pandemic situation
Even though the Q2 result beat the expectations, the uncertainties hover over the H2’20. Despite of the strong online sales growth (more precise information not disclosed), it is vital especially for the retail stores to remain open. In the case of new infection waves, we expect the customers to become even more price sensitive and cautious with their purchases, impacting negatively on sales. This could also have an impact on the partners’ behavior. However, we expect the mentality of “support your local” among the Finnish consumers to continue, supporting domestic sales together with nonrecurring promotional deliveries of which majority will take place in H2’20E. Marimekko is also planning to reorganize its operations and initiates cooperation negotiations. The aim is to seek annual cost savings of approx. EUR 1.5m.

“HOLD” with TP of EUR 32.0 (24.0)
After the Q2 result we have increased our 20E revenue estimate by ~6% (EUR 116m) and our adj. EBIT estimate by ~27% (EUR 13.7m). We have also slightly increased our 21E-22E estimates. However, we note that there are significant uncertainties not only with our 20E estimates but also with our 21E estimates. On our estimates, Marimekko trades at 20E-21E EV/EBIT multiple of 18.1x and 13.5x, which translates into a clear discount compared to the luxury peers. We keep our rating “HOLD” with TP of EUR 32.0 (24.0).

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Gofore - Profitability slightly above estimates

14.08.2020 - 09.30 | Earnings Flash

Gofore’s adj. EBITA in H1 was slightly better than we had expected, at EUR 5.8m (Evli 5.5m). Revenue amounted to EUR 37.4m (pre-announced). Little direct impact of the coronavirus pandemic on the public sector client segment so far, private sector more affected.

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  • Gofore’s H1/20 net sales amounted to EUR 37.4m (pre-announced), with sales growth of 11.7% compared to H1/19 figures. Growth was driven by organic growth and the acquisitions of Silver Planet and Mangodesign.
  • Adj. EBITA in H1 amounted to EUR 5.8m, slightly above our estimates (Evli EUR 5.5m), at a margin of 15.5%. EBIT amounted to EUR 4.0m (Evli EUR 3.7m), at a 10.8% EBIT-margin.
  • The coronavirus pandemic has had little direct impact on the public sector client segment so far, in the private sector some cancellations of projects and delays in development work have been seen.
  • Guidance (upd. Aug 10th): Gofore's net sales in 2020 are expected to be EUR 70-76m and the adjusted EBITA will grow compared to 2019.
  • The number of personnel at the end of the period was 610 (H1/19: 559).

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Solteq - Actions taken yielding results

14.08.2020 - 09.00 | Company update

Solteq reported clearly better than expected profitability figures following cost reductions, with comp. EBIT at EUR 1.5m (Evli 0.5m). Possible demand thinness remains a concern but with the lower cost base we raise our 2021-22 comp. EBIT estimates by some 30% on average. We adjust our TP to EUR 1.65 (1.15) and our rating to BUY (HOLD).

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Profitability clearly beat our estimates
Solteq reported solid Q2 results and profitability was clearly better than we had expected. Revenue grew 7.8% in comparable terms to EUR 15.1m (Evli EUR 14.6m) with both segments contributing nearly equally. The comp. EBIT amounted to EUR 1.5m, clearly above our estimates (Evli EUR 0.5m). The earnings improvement was attributable to previously taken streamlining actions and to some extent reduced travel expenses due to COVID-19. Solteq also reinstated a guidance for 2020, expecting comp. EBIT to grow significantly. The operating cash flow was also strong, at EUR 5.3m in H1 (2019: EUR 4.1m).

Coming year profitability estimates up by quite a bit
We have made larger estimates revisions post Q2, now expecting 2020 revenue of EUR 60.2m (prev 58.9m) and comp. EBIT of EUR 4.8m (prev. 2.4m). We have also raised our 2021-2022 comp. EBIT estimates by some 30% on average. The impact of the coronavirus has so far been limited and sales growth has been good during H1 following good earlier order intake. Our main concerns going forward relate to possible thinness in demand and as such expect lower relative growth figures. Solteq has seen good demand in for instance the energy sector, while areas more affected by the pandemic, such as the travel, restaurant and maritime sectors, saw lower sales in Q2.

BUY (HOLD) with a TP of EUR 1.65 (1.15)
Solteq has been burdened by high leverage and as such low earnings, which to a large extent will be reversed by the improved profitability and improved cash flows will reduce financial risk. With our revised estimates we adjust our TP to EUR 1.65 (1.15), implying a 2020e P/E of 16.5x. We adjust our rating to BUY (HOLD).

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Pihlajalinna - No bigger surprises with Q2 result

14.08.2020 - 08.45 | Earnings Flash

Pihlajalinna’s Q2 result was somewhat in line with our expectations. Q2 revenue amounted to EUR 114.7m vs. EUR 112.1m/119.1m Evli/cons, while adj. EBIT landed at EUR 0.6m vs. EUR 0.2m/1.8m Evli/cons estimates. EPS was EUR -0.03 vs. our EUR -0.03.

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  • Q2 revenue was EUR 114.7m vs. EUR 112.1m/119.1m Evli/cons estimates. Revenue declined by 11.6% y/y.
  • Q2 adj. EBITDA was EUR 9.0m (7.9% margin) vs. EUR 9.1m/10.3m Evli/cons estimates.
  • Q2 adj. EBIT was EUR 0.6m (0.5% margin) vs. EUR 0.2m/1.8m Evli/cons estimates.
  • Q2 EPS was EUR -0.03 vs. EUR -0.03/0.02 Evli/cons.
  • According the company, the pandemic and restrictions reduced customer flows the most in fitness centers, private clinics and dental clinics but over half of the business remained stable during Q2, despite of the situation.
  • The company didn’t provide a guidance for 20E at this point, due to the weak visibility caused by the virus.

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Aspo - Navigation is still challenging

13.08.2020 - 09.25 | Company update

Aspo Q2 was stronger than expected thanks to Telko, but the report and comments painted a cautious short-term picture. Our TP remains EUR 6.0, retain HOLD rating.

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Some beacons of light but still surrounded by thick fog

ESL’s top line declined by 23% y/y and at EUR 32.9m was clearly below our EUR 40.1m estimate. Q2 EBIT, at EUR 0.6m, thus didn’t meet our EUR 1.6m estimate. Steel industry cargo volumes fell steep and energy industry activity wasn’t much better. Smaller vessels continued to perform quite well but many larger ones operated in weak spot markets. ESL managed to shave fixed costs by EUR 0.9m and Aspo says cost measures will be fully realized in Q3, however Q3 outlook is not bright as steel industry volumes will be low with rebound now expected for Q4. Meanwhile Telko posted EUR 4.2m EBIT (vs our EUR 1.1m estimate), a strong show given that revenue declined by 26% y/y to EUR 59.5m (vs our EUR 63.1m estimate). Telko’s performance is clearly on an improving trend thanks to efforts addressing e.g. working capital efficiency. It however seems Q2 EBIT margin was exceptionally high and current outlook is challenging especially in Ukraine and Russia. Leipurin Q2 revenue fell by 17% y/y and the EUR 0.3m EBIT didn’t meet our EUR 0.6m estimate as certain machinery deliveries bound for Russia were postponed to H2.

We cut estimates due to cautious market comments

Aspo’s H1 figures already reflected the pandemic shock yet Q3 remains challenging especially for ESL. We now expect ESL EBIT at EUR 0.4m and EUR 2.9m respectively for Q3 and Q4. In our view Aspo’s unofficial soft guidance for Telko FY ’20 (flat y/y absolute profitability i.e. some EUR 8m) seems a bit conservative given the EUR 6.6m accumulated already in H1. We expect Telko Q3 EBIT at EUR 2.3m. We cut our H2 EBIT estimate all in all by EUR 4.0m to EUR 7.2m, reflecting Aspo’s cautious comments.

Strong rebound remains a possibility yet not imminent

It’s clear this year will be quite soft figurewise with ESL only beginning to rebound in Q4. There’s thus clear upside relative to long-term estimates, yet in our view given the prolonged pandemic uncertainty it takes a lot of conviction to rely on that outlook. In terms of SOTP there’s potential with respect to the ’19 and ’20 average, however that approach relies on Telko’s FY ’20 improvement. Our TP remains EUR 6, rating HOLD.

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Marimekko - Q2 result better than anticipated

13.08.2020 - 09.00 | Earnings Flash

Marimekko’s Q2 result beat the consensus expectations. Net sales were EUR 23.3m (-20% y/y) vs. EUR 18.3m/19.8m Evli/cons. Adj. EBIT was clearly above estimates at EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. Marimekko expects the coronavirus to have a significant negative impact on net sales and profitability in 2020. Guidance for ’20E was not given at this point.

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  • Finland: revenue was EUR 11.4m vs. EUR 10.4m Evli view. Revenue decreased by 32% (retail sales -41% y/y).
  • International: revenue declined by 3% y/y and was EUR 11.9m vs. EUR 7.9m Evli view. Retail sales declined especially in North America and Scandinavia. Wholesale sales decreased especially in the APAC region. On the other hand, increased licensing income in the Asia-Pacific region boosted sales.
  • Q2 adj. EBIT was EUR 2.7m (11.4% margin) vs. EUR 0.6m/0.5m (3.2%/2.7% margin) Evli/cons. Decreased net sales and weaker relative sales margin had a negative impact on profitability. On the other hand, fixed costs decreased significantly, resulting from the saving program.
  • Q2 EPS was EUR 0.27 vs. EUR 0.04/0.03 Evli/cons.
  • Marimekko is also planning to reorganize its operations and initiates cooperation procedure as the company seeks to achieve annual costs savings of approx. EUR 1.5m.
  • The company expects the coronavirus to have a significant negative impact on net sales and profitability in 2020 but guidance for ’20 was not given.

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Suominen - Exceptional performance

13.08.2020 - 09.00 | Company update

Suominen’s Q2 was way above our estimates. The major question now is where gross margin settles as the dance between nonwovens and raw materials prices plays out. We have upgraded our estimates, our new TP is EUR 5.50 (4.75) and we retain our BUY rating as multiples remain low.

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Q2 performance was in our view exceptionally strong

Suominen posted EUR 122.2m in Q2 revenue (up 18% y/y and compared to our EUR 115.0m estimate), a record high despite lower nonwovens prices (reflecting soft raw materials) as volumes grew considerably due to high wiping demand. Both Americas and Europe did brisk volumes and posted revenues respectively at EUR 77.2m (up 19% y/y) and EUR 45.0m (up 16% y/y). Gross margin also increased almost another 400bps q/q to 16.0%. We note this is a record figure (vs e.g. 14.7% GM back in Q3’14) and likely not sustainable long-term. Record revenue and gross margin led to EUR 19.5m gross profit vs our EUR 14.4m estimate. SG&A and R&D remained flat at EUR 7.8m and thus the EUR 12.4m EBIT trounced our EUR 6.8m estimate.

We expect some softening in gross margin going forward

Suominen’s H1 was unexpectedly strong as improving product mix, production efficiency and low raw materials prices led to big margin gains. The pandemic also helped business as demand for wipes increased and Suominen was able to meet the challenge. However, production volumes will be lower in H2 due to scheduled maintenance stoppages at several plants. We nevertheless continue to see the demand and volume outlook strong since the pandemic is unlikely to fade away soon. With respect to profitability we expect the gross margin to have topped out. We don’t expect significant downward correction in the short-term as nonwovens and raw materials prices are in practice highly correlated. Given the current price data we expect Q3 gross margin at 15% and Q3 EBIT thus at EUR 9.8m.

Multiples still quite reasonable on our updated estimates

Suominen also announced an EUR 8m investment in Cressa, Italy. The production line upgrade will enhance capacity and seems a straightforward measure to address growing demand. All in all, we see further upside potential despite sharp rerating this year. On our updated estimates Suominen now trades slightly below 6x EV/EBITDA FY ’20. Our new TP is EUR 5.50 (4.75), rating BUY.

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Solteq - Our estimates clearly beat

13.08.2020 - 08.30 | Earnings Flash

Solteq’s revenue in Q2 grew 7.8% in comparable terms to EUR 15.1m (Evli EUR 14.6m). The comparable operating profit clearly beat our expectations at EUR 1.5m (Evli EUR 0.5m) aided by cost savings from actions taken to improve operational efficiency. Guidance reinstated: Solteq Group’s comparable operating profit in 2020 is expected to grow significantly.

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  • Net sales in Q2 were EUR 15.1m (EUR 14.7m in Q2/19), slightly above our estimates (Evli EUR 14.6m). Growth in Q2 amounted to 2.9% y/y. Comparable growth, adjusted for the divestment of the SAP ERP business, amounted to 7.8%. Growth was attributable to both segments. Approximately a fifth of sales came from outside Finland.
  • The operating profit and adjusted operating profit in Q2 amounted to EUR 1.5m (EUR 0.6m in Q2/19), clearly above our estimates (Evli EUR 0.5m). Profitability was aided by cost savings resulting from streamlining measures taken earlier this year.
  • Capitalized product development investments during H1/20 amounted to EUR 1.8m. Solteq expects product development investments in 2020 to amount to less than EUR 3.0m (2019: EUR 3.9m).
  • Solteq Digital: Comparable revenue in Q2 amounted to EUR 10.5m (Q2/19: EUR 10.4m) vs. Evli 10.3m. The comparable EBIT amounted to EUR 1.1m (Q2/19: EUR 0.5m) vs. Evli EUR 0.4m.
  • Solteq Software: Comparable revenue in Q2 amounted to EUR 4.6m (Q2/19: EUR 4.3m) vs. Evli EUR 4.3m. The comparable EBIT amounted to EUR 0.4m (Q2/19: EUR 0.0m) vs. Evli EUR 0.1m.
  • Solteq reinstated a guidance for 2020, expecting the comparable operating profit to grow significantly.

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Aspo - Major earnings beat due to Telko

12.08.2020 - 10.40 | Earnings Flash

Aspo clearly beat estimates in terms of profitability, managing to post flat EBIT despite a significant drop in revenue as Telko’s profitability proved a huge positive surprise.

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  • Aspo Q2 revenue amounted to EUR 115.6m vs EUR 130.5m/127.1m Evli/consensus estimates.
  • Q2 EBIT was EUR 4.1m, compared to the EUR 2.1m/2.0m Evli/consensus estimates. ESL and Leipurin underperformed relative to our estimates while Telko beat our EBIT estimate significantly.
  • ESL’s top line was EUR 32.9m while we expected EUR 40.1m. EBIT amounted to EUR 0.6m vs our EUR 1.6m expectation. Cargo volumes decreased to 3.0m tonnes (4.1m tonnes a year ago). Two-thirds of the volume decrease was due to steel industry and roughly one-third due to energy industry. Q3 result is expected to be weak.
  • Telko posted EUR 59.5m in Q2 revenue in comparison to our EUR 63.1m estimate. EBIT was EUR 4.2m while we had expected EUR 1.1m. Exceptional circumstances enabled highly active pricing, which temporarily increased margins. Gross margin is expected to decrease in H2 relative to Q2, but overall should improve slightly for FY ’20. Temporary cost measures will have a relatively significant impact in Q3 and FY ’20 profitability should be at the level of previous year.
  • Leipurin Q2 revenue amounted to EUR 23.2m vs our EUR 27.3m estimate. Meanwhile EBIT stood at EUR 0.3m in comparison to our EUR 0.6m expectation.
  • Other operations cost EUR 1.0m vs our EUR 1.2m estimate.
  • Aspo withdrew guidance in April and does not reinstate it for now.

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Suominen - Crushed our estimates

12.08.2020 - 09.55 | Earnings Flash

Suominen’s Q2 results wiped the table clean with our estimates.

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  • Suominen Q2 revenue was EUR 122.2m while we had estimated EUR 115.0m. Revenue thus grew 18% y/y and reached a record on a quarterly basis. Nonwovens delivery volumes increased considerably while prices decreased following lower raw material prices.
  • Gross profit stood at EUR 19.5m vs our EUR 14.4m estimate. Gross margin was therefore 16.0% compared to our 12.5% expectation. While nonwovens prices decreased lower raw material and other direct product costs more than compensated.
  • Q2 EBIT amounted to EUR 12.4m compared to our EUR 6.8m expectation. EBIT thus more than quadrupled compared to year ago.
  • In terms of guidance Suominen expects 2020 comparable operating profit to improve significantly from 2019 (no change).

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Etteplan - Still a bumpy road ahead

12.08.2020 - 09.30 | Company update

Ettplan’s timely actions to reduce costs saw EBIT remaining strong, at EUR 5.4m (Evli/cons. EUR 3.2m/3.8m) despite the organic revenue decrease of 11.3%. Challenges will continue in coming quarters but the hit from the pandemic so far appears smaller than we had feared.

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Timely cost reduction actions kept profitability strong
Etteplan reported Q2 results that were above expectations given the challenging circumstances. Revenue was in line with expectations at EUR 62.9m (EUR 63.3m/63.3m Evli/cons.), decreasing 2.2% y/y and organically 11.3% y/y. EBIT was clearly better than expected, at EUR 5.4m (Evli/cons. EUR 3.2m/3.8m). Profitability was aided by timely actions made to reduce operating costs. With operating costs declining faster than cash flow from sales, Etteplan posted an exceptionally strong operating cash flow of EUR 18.0m (Q2/19: 8.8m). The uncertainty in customer demand remains but we interpret comments by the company pointing to expectations of some recovery in the second half of the year. Etteplan reinstituted a guidance for 2020, expecting sales to light decrease slightly or remain at 2019 levels and EBIT to decrease compared to 2019.

The hit to 2020 figures not as bad as feared based on H1
With the higher than anticipated reduction in operating expenses we adjust our 2020 EBIT estimate to EUR 18.1m (prev. 14.3m), while keeping our revenue estimates largely intact. We expect 2020 revenue of EUR 258.3m for an estimated organic decline of some 7%. Our estimates assume similar capacity decreases due to temporary layoffs in Q3 as Q2 and roughly half the decrease in Q4. Visibility into the coming years is weak but we expect to see Etteplan returning to growth in 2021, as although a second wave of the pandemic may cause challenges, lessons learned during the first wave should result in a lesser strain on both Etteplan and customers.

HOLD with a target price of EUR 8.7 (8.3)
Based on our revised estimates we adjust our target price to EUR 8.7 (8.3), for a 2020e P/E of ~16x, which we currently consider fair given the elevated uncertainty. We retain our HOLD-rating.

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Etteplan - Surprisingly good profitability

11.08.2020 - 13.30 | Earnings Flash

Etteplan's net sales in Q2 amounted to EUR 62.9m, in line with our estimates and consensus (EUR 63.3m/63.3m Evli/cons.). EBIT amounted to EUR 5.4m, above our consensus estimates (EUR 3.2m/3.8m Evli/cons.). Etteplan expects 2020 revenue to decrease slightly or be at the same level as in 2019 and EBIT to decrease compared to 2019.

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  • Net sales in Q2 were EUR 62.9m (EUR 64.2m in Q2/19), in line with our and consensus estimates (EUR 63.3m/63.3m Evli/Cons.). Growth in Q2 amounted to -2.2% y/y, of which -11.3% organic growth.
  • EBIT in Q2 amounted to EUR 5.4m (EUR 5.8m in Q2/19), above our and consensus estimates (EUR 3.2m/3.8m Evli/cons.), at a margin of 8.6%.
  • EPS in Q2 amounted to EUR 0.16 (EUR 0.18 in Q2/19), above our and consensus estimates (EUR 0.09/0.09 Evli/cons.).
  • Engineering Solutions net sales in Q2 were EUR 35.9m vs. EUR 35.8m Evli. EBITA in Q2 amounted to EUR 3.7m vs. EUR 1.9m Evli. The MSI-% in Q2 was 57% compared to 57% in Q2/19.
  • Software and Embedded Solutions net sales in Q2 were EUR 15.2m vs. EUR 16.5m Evli. EBITA in Q2 amounted to EUR 1.7m vs. EUR 1.3m Evli. The MSI-% in Q2 was 52% compared to 55% in Q2/19.
  • Technical Documentation Solutions net sales in Q2 were EUR 11.6m vs. EUR 11.0m Evli. EBITA in Q2 amounted to EUR 1.0m vs. EUR 0.9m Evli. The MSI-% in Q2 was 79% compared to 75% in Q2/19.
  • Guidance given: Revenue for the full year 2020 will decrease slightly or be at the same level as in the previous year, operating profit (EBIT) will decrease compared to 2019 (prev. guidance withdrawn).

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Gofore - Sizeable acquisition boosting growth

11.08.2020 - 09.15 | Company update

Gofore acquired software testing automation specialist Qentinel Finland Oy, with some 100 employees, and specified its 2020 guidance. We now expect 2020 sales growth of 17.2% and the adj. EBITA to improve to EUR 9.8m (2019: 8.0m). We adjust our TP to EUR 8.4 (7.8), HOLD-rating intact.

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Acquisition and guidance revision
Gofore announced the acquisition of Qentinel Finland Oy, a specialist in software testing automation with roughly 100 employees and 2019 sales and EBIT of EUR 12.0m and EUR 1.7m respectively. The debt-free purchase price is EUR 8.9m and an additional purchase price has been agreed upon, expected to be EUR 1-2m, with the deal estimated to be closed September 1st. EV/EBIT multiples of ~7.0x on 2019 figures and upper range of the purchase price appear rather attractive given the high profitability, with our peer group on 2020 estimates at a median on 14.6x. Gofore specified its 2020 guidance in conjunction with the acquisition announcement, with sales expected to be in the range of EUR 70-76m (prev. grow from 2019) and adj. EBITA to grow compared with 2019. The sales impact of the acquisition on 2020 figures is estimated at EUR 4m.

Expecting good H1 figures, acquisition boosting growth
Gofore reports H1 results on August 14th. H1 sales have been pre-announced at EUR 37.4m, with the monthly figures in our view having shown little impact of the pandemic. We see slightly weaker adj. EBITA-margins in H1 compared with the solid 17.3% Q1 margins but still expect a commendable 14.7% adj. EBITA-%. We expect full-year sales and adj. EBITA of EUR 75.1m and 9.8m respectively. The acquisition should keep growth in the double-digits in 2021 assuming a continued limited COVID-19 impact.

HOLD with a target price of EUR 8.4 (7.8)
Following revisions to our estimates based on the acquisition and guidance revision we adjust our target price to EUR 8.4 (7.8), valuing Gofore at 16.5x 2020E adj. P/E, with our HOLD-rating intact.

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Pihlajalinna - Pandemic hampers non-urgent healthcare

10.08.2020 - 09.35 | Preview

Pihlajalinna reports its Q2’20E result on this week’s Friday, 14th of August. We expect the COVID-19 and the movement restrictions have continued to hamper Pihlajalinna’s business especially in April but the situation should have started to normalize. The tender offer by Mehiläinen is still being under review of the FCCA. We keep our rating “HOLD” and TP of EUR 16.0 intact.

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Expecting weak demand in non-urgent healthcare

Pihlajalinna’s operations were heavily impacted by the emergency laws that came into force in mid-March. We expect to see the most negative impacts in April as especially the demand of non-urgent healthcare and oral healthcare started rapidly to decrease in late March. The management indicated earlier in H1 that the complete outsourcings and other fixed-priced invoicing have supported the company during the unexceptional times as the profitability of these kinds of contracts normally remains stable, even during times of lower demand. The demand of housing services for the elderly and recruitment services should also remain relatively stable.

Still waiting for the FCCA’s decision

We expect the customer flows have started slowly to recover. However, we expect to see better improvement later in H2’E as the pent-up demand of social services and non-urgent healthcare should normalize after the restrictions were lifted. The visibility of H2E remains blurry and the demand is depended on the pandemic situation. The tender offer by Mehiläinen is still being under review of the FCCA and the second phase investigation should be ready by the end of August. If approved, the process is expected to be completed during Q3’20E.

"HOLD” with TP of EUR 16.0

We have only made minor adjustments to our estimates. We expect Q2’20E revenue of EUR 112.1m (-13.6% y/y) and adj. EBIT of EUR 0.2m (EUR 2.1m in Q2’19). We expect 20E revenue of EUR 517m (-0.3% y/y) and adj. EBIT of EUR 22.3m (6.7% y/y). We keep our rating “HOLD” and TP of EUR 16.0 intact.

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Scanfil - Proven resilient results

10.08.2020 - 09.15 | Company update

Scanfil’s Q2 clearly beat our estimates. The company’s active plant network management should help secure good profitability in the coming years even if the pandemic will eventually begin to hurt business more. Our TP is now EUR 6.25 (5.25); we reiterate our BUY rating.

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Communication and Energy & Automation up organically

Scanfil Q2 revenue was EUR 156m (up 9% y/y and of which two-thirds due to HASEC i.e. mostly Industrial). Communication posted a 49% revenue surge. Business jumped due to 5G networks but also e.g. camera surveillance systems. Energy & Automation grew by 15% as many accounts drove growth. Industrial top line grew by 17% mainly due to HASEC, yet also organically with e.g. KONE elevators. Medtec & Life Science was flat. Consumer Applications demand fell as the pandemic altered consumer behavior. The segment supplies e.g. TOMRA reverse vending machines and Scanfil says many accounts cut business sharply in Q2, leading to 26% y/y drop in revenue. Scanfil is however seeing signs of stabilizing demand for the segment. The EUR 10.2m in Q2 EBIT (vs our EUR 8.7m estimate) was more than satisfactory as Scanfil estimates the pandemic’s effects’ net cost was EUR 0.8m in H1. The pandemic notably elevated freight and safety costs. On the other hand, Scanfil also received state subsidies in compensation for shortened working hours.

Fundamentally strong thanks to active plant management

We make minor estimate changes, mostly reflecting latest segment updates. We see FY ’20 EBIT at EUR 40.4m. While FY guidance is likely to hold it’s early to say much about next year. However, Scanfil’s Hamburg plant closure will further help profitability going forward. Scanfil expects the decision to yield EUR 2.5m in annual cost savings since two other nearby plants are in a better position to serve the current Hamburg accounts. Scanfil also prunes its Chinese operations, having sold the Hangzhou plant (sheet metal mechanics) and thus focusing on Suzhou (electronics manufacturing and demanding integration).

In our opinion higher multiples are justified

The pandemic could begin to hurt volumes even if so far Scanfil’s overall levels have not been impacted. Scanfil however remains valued at attractive levels, ca. 6.5x EV/EBITDA and 9.0x EV/EBIT on our FY ’20 estimates. Our new TP is EUR 6.25 (5.25), rating BUY.

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Etteplan - Weaker result to be expected

07.08.2020 - 09.00 | Preview

Etteplan reports Q2 results on August 11th. The coronavirus pandemic will have had a detrimental impact on results, but we see a rapid adaption to have limited some of the earnings impact. We expect an organic revenue decline of ~9% and EBITA of EUR 4.1m. We retain our HOLD-rating with a TP of EUR 8.3 (8.0).

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Weaker Q2 but rapid adaption should limit some downside
Etteplan will report Q2 results on August 11th. Earnings uncertainty is clearly elevated due to the coronavirus pandemic, with Q1 challenges having been mainly limited to operations in China. Etteplan adapted rapidly to the situation through temporary layoffs and reducing its cost base which together with the order backlog should according to our estimates still yield a fairly decent profitability given the circumstances. We expect revenue of EUR 63.3m, representing a perceived organic growth decline of approx. 9%, and group EBITA to decline to EUR 4.1m (Q2/19: EUR 6.5m). With the loan agreements made earlier we do not see any significant risk to Etteplan’s financial position.

Uncertainty remains elevated in 2020
The development in 2020 remains shrouded by uncertainty due to the pandemic but we currently expect the biggest dent to be seen in Q3 and Q4 to also remain weaker. The Engineering Solutions service area will have some challenging times ahead while Software and Embedded Solutions should be rather resilient due to digitalization demand. Reported new order values in Q2 for some key customers indicate a double-digit decline y/y, with expectations of demand picking up towards the end of the year. Etteplan’s customer base is relatively diverse and thankfully for instance automotive and aviation, which have been hit hard by the pandemic, account for only a small share of revenue.

HOLD with a target price of EUR 8.3 (8.0)
We have made minor upwards adjustments to our 2020 estimates following an in our view somewhat improved sentiment post-Q1 and revisions based on updates on temporary layoffs. We adjust our target price to EUR 8.3 (8.0) and retain our HOLD-rating.

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Scanfil - Clearly topped expectations

07.08.2020 - 08.40 | Earnings Flash

Scanfil’s Q2 clearly exceeded expectations. Revenue grew by 9% y/y and slightly more than a third of the increase was organic, the rest being attributable to the HASEC acquisition (mainly recognized in the Industrial segment).

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  • Scanfil Q2 revenue was EUR 155.6m compared to the EUR 145.4m/147.0m Evli/consensus estimates. Scanfil says organic demand growth was especially strong in Communication and Energy & Automation.
  • Communication revenue amounted to EUR 28.9m vs our EUR 20.4m estimate.
  • Consumer Applications top line was EUR 20.3m compared to our EUR 26.2m expectation. Scanfil comments the pandemic has had an adverse effect on the segment’s demand.
  • Energy & Automation revenue was EUR 32.6m while we expected EUR 29.1m.
  • Industrial posted EUR 48.5m vs our EUR 43.2m estimate.
  • Medtec & Life Science revenue was EUR 25.3m compared to EUR 26.5m estimate.
  • Scanfil Q2 EBIT amounted to EUR 10.2m vs the EUR 8.7m/9.3m Evli/consensus estimates. Operating margin was therefore 6.5% while we had expected 6.0%.
  • Scanfil guides FY ’20 revenue in the EUR 580 – 620m range and sees adjusted EBIT at EUR 38 – 42m.

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CapMan - Earnings improvement story still strong

07.08.2020 - 08.30 | Company update

CapMan’s Q2 results were better than expected on bottom-line figures. AUM growth is seen to pick up with the establishment of the NRE III (target EUR 500m) and Growth II funds (target EUR 85m). We have revised our 2020 EBIT estimate to EUR 9.4m (prev. 1.2m), with the solid 2021 earnings prospects intact.

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EBIT beat from higher investment returns
CapMan’s delivered an upbeat Q2 earnings report. Q2 EBIT of EUR 4.1m beat our expectations (Evli EUR 2.6m) following a clear recovery in investment returns. Revenue amounted to EUR 8.7m, short of our expectations (Evli EUR 10.4m) due to continued weaker Services business sales and somewhat soft management fees given no new fund closings. AUM (EUR 3.2bn) continued to stall at near previous quarter levels. AUM is seen to grow during H2 following the establishment of the NRE III and Growth II funds, which combined could bring in near EUR 600m in equity commitments. Investor demand for the new funds has according to CapMan been strong.

Solid 2021 earnings prospects despite weak 2020
We continue to expect 2020 to be somewhat of a gap-year due to the weak start but have raised our EBIT estimate to EUR 9.4m (prev. EUR 1.2m) mainly due to higher expectations for investment returns. We expect a clear increase in fee-based profitability in 2021 due to an increase in management fees from fundraising during H2/20. Investment returns are also set to pick up clearly after the challenging 2020. CapMan will re-organize its Service business (no changes to CaPS) and Scala’s private placement business will be discontinued, but the earnings impact is not seen to be notable. All in all, we see a clear improvement in 2021 and expect an EBIT of EUR 33.7m.

BUY with a target price of EUR 2.20 (1.95)
The Q2 report in our view served to prove that CapMan remains on a healthy track despite the elevated uncertainty of Q1 and with the solid earnings outlook 2021E P/E of ~11x is not particularly challenging. We retain our BUY-rating with a TP of EUR 2.20 (1.95).

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Suominen - Profitability outlook is now strong

06.08.2020 - 09.40 | Preview

Suominen reports Q2 results on Wed, Aug 12. We have slightly lowered our revenue estimates due to a currency headwind, while on the other hand we now expect gross margin to have improved modestly q/q also in Q2. Our new TP is EUR 4.75 (4.25), and thus we reiterate our BUY rating.

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Raw materials prices imply gross margin should hold high

Suominen posted a big gross margin jump in Q1 as the figure gained almost 400bps q/q to 12.1%. Improved product mix and production efficiency as well as low raw materials prices fueled the rise. Moreover, Suominen upgraded FY ’20 outlook in June by changing the wording from clear to significant improvement in comparable EBIT. The update had only a minor impact on our estimates since we changed our FY ’20 EBIT estimate from EUR 23.1m to EUR 24.0m. Perhaps more important was the fact that Suominen removed the previous disclaimer according to which estimating the result for H2 was hard due to the pandemic. It seems Suominen’s strategy is proceeding according to plan and financial performance is on a solid upward trend thanks to strong outlook for value-add end-uses such as household and workplace wipes. With respect to raw materials prices Suominen is unlikely to suffer cost inflation pressure for a while. We see the outlook for pulp prices muted, while the same is only true at best for oil-based inputs polyester and polypropylene. In fact, raw materials prices have developed so soft Suominen faces some negative pressure on nonwovens pricing. We expect gross margin further improved modestly to 12.5% in Q2, and see the figure settling on this level in the short-term.

Recent dollar weakness a (small) negative for top line

The dollar has lately declined by some 5% against the euro, the implication being a negative translation impact on US revenue. We update our estimates to reflect the headwind, which we estimate at some EUR 10m on an annual level. The overall result of our update is that we now estimate Q2 EBIT at EUR 6.8m (previously EUR 6.2m). We now see FY ’20 EBIT at EUR 24.4m.

Multiples are low while figures are on a solid trend up

Suominen trades some 6x EV/EBITDA on our estimates for this year while the multiple for next year is about 5.5x. We view these multiples attractive now that profitability is on a steep improvement path. Our TP is now EUR 4.75 (4.25), remain BUY.

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CapMan - Back to healthy profitability

06.08.2020 - 09.00 | Earnings Flash

CapMan's net sales in Q2 amounted to EUR 8.7m, below our and consensus estimates (EUR 10.4m/10.6m Evli/cons.). Profitability was better than expected due to larger fair value changes and EBIT amounted to EUR 4.1m, above our estimates and above consensus estimates (EUR 2.6m/2.5m Evli/cons.).

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  • Revenue in Q2 was EUR 8.7m (EUR 13.4m in Q2/19), below our estimates and consensus estimates (EUR 10.4m/10.6m Evli/Cons.). Growth in Q2 amounted to -35 % y/y.
  • Operating profit in Q2 amounted to EUR 4.1m (EUR 5.8m in Q2/19), above our estimates and consensus estimates (EUR 2.6m/2.5m Evli/cons.), driven by higher than expected fair value changes.
  • EPS in Q2 amounted to EUR 0.02 (EUR 0.02 in Q2/19), above our estimates and consensus estimates (EUR 0.01/0.01 Evli/cons.).
  • Management Company business revenue in Q2 was EUR 6.5m vs. EUR 7.2m Evli. Operating profit in Q2 amounted to EUR 1.6m vs. EUR 2.0m Evli.
  • Investment business revenue in Q2 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q2 amounted to EUR 2.8m vs. EUR 0.1m Evli. Fair value changes amounted to EUR 3.2m (Evli EUR 0.8m)
  • Services business revenue in Q2 was EUR 2.2m vs. EUR 3.2m Evli. Operating profit in Q2 amounted to EUR 0.5m vs. EUR 1.5m Evli.
  • Capital under management by the end of Q2 was EUR 3.2bn (Q2/19: EUR 3.3bn). Real estate funds: EUR 1.9bn, private equity & credit funds: EUR 1.0bn, infra funds: EUR 0.3bn, and other funds: EUR 0.03bn.
  • CapMan Growth established a new growth fund with a target size of EUR 85m, having so far raised EUR 74m.

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Detection Technology - Continued air turbulence ahead

05.08.2020 - 09.30 | Company update

Detection Technology delivered a decent Q2 operating result despite the significant drop in net sales due to the ongoing corona pandemic. Medical business is going strong, but challenging situation in aviation segment weighs on SBU and visibility into how long situation will continue is poor. Although 2020E will be challenging, we see that DT is well positioned to weather out the storm and its competitive position with its new products remains good. We maintain our target price of 22 euros and BUY recommendation.

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Decent quarter considering circumstances

Given the ongoing pandemic affecting especially DT’s security business, DT delivered a decent and broadly in-line Q2 operating result despite a quite significant drop in net sales. Q2 net sales amounted to EUR 21.1m (-23.2% y/y) vs. EUR 25m/25.3m Evli/consensus estimates. Q2 EBIT was EUR 2.6m (12.3% margin) vs. EUR 1.9m/3.0m Evli/cons. R&D costs amounted to EUR 2.7m or 12.7% of net sales (Q2’19: 2.9m, 10.7%). SBU had net sales of EUR 11.2m vs. EUR 15.2m Evli estimate. SBU sales declined -42.1% y/y, mainly due the COVID-19 pandemic affecting the demand for security X-ray devices. MBU delivered net sales of EUR 9.9m which was in line with our estimate of EUR 9.8m. Net sales of MBU increased by +22.5% y/y due to continued strong demand in medical CT imaging.

Short term visibility poor with aviation segment weighing on SBU

DT continues to expect lower demand in the security segment to continue in Q3 and SBU sales to decrease in 2020. DT however sees SBU sales starting to improve towards end of the year. DT estimates airport CT standard equipment upgrades in Europe and U.S. to be postponed at least 12 months. Regarding China, it remains unclear when similar Chinese airport standardization will start and if any security infrastructure related government recovery measures will take place. The situation regarding aviation remains the biggest near-term uncertainty for DT. We estimate aviation to contribute roughly half of SBU net sales. That said, -42% drop in SBU Q2 net sales is a relatively good performance given that aviation grinded almost completely to a halt in Q2. MBU sales growth is expected to continue in H2, although product mix is likely to shift from basic CT devices to more high-end devices, which should support MBU margins further.

Maintain BUY recommendation with TP of 22 euros

Based on the report, we have trimmed our 2020E sales and EBIT estimates by 7% and 4% respectively. We expect SBU sales to decline -23,5% from last year’s highs and MBU to grow +18%, resulting in 2020E net sales to decline -10% and EBIT of 12.5 MEUR. We have increased our sales growth estimates for 2021-22E to account for postponement of CT standardization related upgrades. On our revised estimates, DT is trading at 19.8x and 13.6x EV/EBIT multiples for 20-21E, some 10-20% below our peer group now that peer multiples have rerated since DT’s Q1 report. Although 2020E will be challenging, we see that DT is well positioned to weather out the storm and its competitive position with its new products remains good. Therefore, we continue to see DT as an attractive investment story given the strong longer-term drivers, especially in China, as well as DT’s compelling strategy and execution capabilities. We maintain our target price of 22 euros and BUY recommendation. Our target price implies EV/EBIT multiple of 16.4x on our 21E estimates, which is still ~7% below peer group.

 

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Detection Technology - Decent result despite COVID hammering net sales lower than expected

04.08.2020 - 09.30 | Earnings Flash

DT’s Q2 net sales were EUR 21.1m (-23.2% y/y) vs. EUR 25m/25.3m Evli/consensus estimates. SBU sales declined -42.1% to EUR 11.2m (EUR 15.2m our expectation) and MBU sales increased +22.5% to EUR 9.9m (EUR 9.8m our expectation). DT’s Q2 EBIT came in at EUR 2.6m vs. our estimates of EUR 1.9m (EUR 3.0m cons). DT continues to expect SBU sales to decrease and MBU sales to increase in 2020.

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  • Group level results: Q2 net sales amounted to EUR 21.1m (-23.2% y/y) vs. EUR 25m/25.3m Evli/consensus estimates. Q2 EBIT was EUR 2.6m (12.3% margin) vs. EUR 1.9m/3.0m Evli/cons. R&D costs amounted to EUR 2.7m or 12.7% of net sales (Q2’19: 2.9m, 10.7%).
  • Security and Industrial Business Unit (SBU) had net sales of EUR 11.2m vs. EUR 15.2m Evli estimate. SBU sales declined -42.1% y/y, mainly due the COVID-19 pandemic. DT continues to expect that security market will not return to growth path this year (same guidance in Q1’20).
  • Medical Business Unit (MBU) delivered net sales of EUR 9.9m which was in line with our estimate of EUR 9.8m. Net sales of MBU increased by +22.5% y/y due continued strong demand in medical CT imaging. DT expects MBU sales growth to continue in the second half driven by the demand in CT applications.
  • No change in medium-term targets; at least 10% net sales growth, EBIT margin at or above 15%.

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Talenom - Steadily through the pandemic

04.08.2020 - 09.00 | Company update

Talenom’s Q2 results fell slightly shy of expectations, with the coronavirus pandemic having had some impact on transaction-based invoicing volumes, but relative profitability remained solid. Talenom’s potential remains unchanged, which has been reflected in its share price and valuation is becoming rather stretched. We retain our HOLD-rating with a target price of EUR 8.5 (7.0).

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Minor impact from COVID-19 but profitability still strong
Talenom’s Q2 results fell slightly shy of expectations, with revenue of EUR 16.5m (EUR 17.2m Evli/cons.), affected by a decrease in transaction-based invoicing in for instance payroll services due to customer layoffs. EBIT amounted to EUR 3.6m (EUR 3.7m Evli/cons.) and relative profitability remained on par with expectations, with an EBIT-margin of 21.8%. The new small customer concept is expected to be released later on in the year and long-term potential expectations appear to be high. The impacts of the coronavirus overall have been quite in line with company expectations.

Continued growth and profitability improvement in 2020
Talenom’s guidance for 2020 (net sales EUR 64-68m, EBIT 12-EUR 14m) remains intact and should in our view not be in jeopardy unless a clearly unfavourable development in transaction-based invoicing volumes is seen during H2. We expect net sales of EUR 66.3m and EBIT of EUR 12.4m. Growth potential remains intact, with emphasis seen to be shifting towards M&A and Sweden as well as smaller customers as regional coverage in Finland limits growth. We assume a relative lower profitability of potential acquisitions to limit some margin upside in the coming years.

HOLD with a target price of EUR 8.5 (7.0)
Talenom’s share price has risen to record-high levels, with the stability of the business providing benefits under current market uncertainty and valuation levels are becoming harder to justify. We raise our target price to EUR 8.5 (7.0), valuing Talenom at ~40x 2020E P/E, which we still consider reasonable given growth potential and the defensive nature. Our rating remains HOLD.

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Talenom - Quite in line with expectations

03.08.2020 - 14.00 | Earnings Flash

Talenom's net sales in Q2 amounted to EUR 16.5m, slightly below our and consensus estimates (EUR 17.2m Evli/cons.). EBIT amounted to EUR 3.6m, in line with our and consensus estimates (EUR 3.7m Evli/cons.). Guidance remains intact, net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m.

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  • Net sales in Q2 were EUR 16.5m (EUR 14.8m in Q2/19), slightly below our and consensus estimates (EUR 17.2m Evli/Cons.). Growth in Q2 amounted to 11.8% y/y.
  • Operating profit in Q2 amounted to EUR 3.6m (EUR 3.2m in Q2/19), in line with our and consensus estimates (EUR 3.7m Evli/cons.), at a margin of 21.8%.
  • EPS in Q2 amounted to EUR 0.06 (EUR 0.05 in Q2/19), in line with our and consensus estimates (EUR 0.06/0.07 Evli/cons.).
  • Sales and relative profitability in Q2 were affected by lower transaction-based invoicing and lower relative profitability of acquired businesses.
  • New sales have continued in the upper range of company expectations but below targets set before the coronavirus pandemic. Customer business defaults during Q2 developed as expected while transaction-based invoicing has been in the lower range of company estimates.
  • Guidance intact: Net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m.

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Tokmanni - Discount retail reflects the uncertain times

30.07.2020 - 09.35 | Company update

Tokmanni had a successful Q2 as sales grew by 19.2% y/y to EUR 286m. Adj. EBIT amounted to EUR 30.6m (~64% y/y). The good momentum is expected to continue throughout 20E. We keep our rating “BUY” with TP of EUR 18.4 (16.4).

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Benefiting from the lockdown

Tokmanni continued its solid growth in Q2 with sales totaling EUR 286m, growth of 19.2% y/y (LFL growth of 17.5% y/y). This also beat the revenue growth of department store and hypermarket chains (10.7%, FGTA). Revenue was driven by attractive pricing and growth was strong especially in leisure, gardening, home improvement products and food products, reflecting the situation where people are spending more time at home. At the same time, the demand in clothing was weaker. Tokmanni’s adj. gross margin was 34.5% (35.2% in Q2’19) vs. our 34.1%. The drop was due to cheaper prices and unusual structure of sales. Adj. EBIT totaled EUR 30.6m vs. EUR 30.9m/28.5m Evli/cons.

The success story expected to continue in H2E

Supported by the broad product assortment, attractive pricing and a wide store network, Tokmanni benefited from the situation where people are spending more time at home. On the other hand, the sales structure has been different compared to the normal conditions and the weaker share of Tokmanni’s private labels weighed down adj. gross margin. As the situation is now recovering and people are likely to return back to the offices we expect somewhat normalizing growth in H2E. We expect the sales structure to move closer to normal which supports margin development. The cost control has been successful and this is expected to continue. Tokmanni has also taken precautions to secure its most important season, Christmas (import from China has a key role) and some products are already being shipped to Finland, which is earlier than normally. The company reduced its investments during Q2 but these will continue relatively normally in H2E. Capex in 20E is expected to be EUR ~15m.

“BUY” with TP of EUR 18.4 (16.4)

Tokmanni expects strong growth in revenue and LFL revenue in 20E. Adj. EBIT margin is expected to increase from 2019. We have further increased our estimates and we expect 20E sales growth of 9.5% y/y (EUR 1034m) and adj. EBIT margin of 8.8% (EUR 90.6m). On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 14.7x and 14.0x, which translates into 22-25% discount compared to the int. discount peers. We keep our rating “BUY” with TP of EUR 18.4 (16.4).

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Detection Technology - Challenging quarter ahead

30.07.2020 - 09.15 | Preview

Detection Technology will report Q2 earnings next Tuesday, August 4th at 9:00 EEST. DT’s share price has been lagging the market due to its exposure to aviation segment, but we see the overall investment case intact. We maintain our target price of 22 euros and BUY recommendation ahead of the Q2 result.

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Expecting declining sales and operating profit due to weakened demand in SBU

We expect Q2 net sales to decrease -9% to 25 MEUR (25,3 MEUR cons.) due to lower SBU sales affected by the pandemic. For Q2, we estimate SBU declining -21,6% as demand in security applications is lower due to COVID-19. We expect MBU growing 21% with the help of increased demand in medical CT solutions. Due to lower net sales, our Q2 EBIT estimate is 1,9 MEUR (3,0 MEUR cons), which is down -60% compared to 4,8 MEUR last year.

Focus on market outlook and situation in China

Our focus in the Q2 result will be on management’s comments on the outlook for both security and medical imaging markets, as well as hearing the latest developments in China. DT has indicated that it expects healthy demand in MBU for Q2 and H2, whereas SBU sales are expected to decrease in Q2 and FY20. Looking at other industries, we note that Chinese market has been first to recover after the pandemic resided. That said, there is still a lot of uncertainty related to aviation, which is a crucial part of DT’s security business, accounting for roughly 2/3 of DT’s net sales. DT saw positive signs in demand for medical CT solutions at the end of Q1 (after a slowdown around end of 2019), stemming from CT imaging being used to detect pulmonary changes caused by the COVID-19 virus, as well as diagnosis and treatment of patients.

DT’s share price has been lagging the market, we see investment case intact

DT’s share price is YTD -23% vs. -5% HEX25, and since mid-March +26% vs. +41% HEX25. We see this relating to SBU’s exposure to aviation segment. Although 2020e will be challenging, we see DT well positioned to weather out the storm and its competitive position with its new products remaining good, thus investment case is intact. We maintain our target price of 22 euros and BUY recommendation ahead of the Q2 result.

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Innofactor - On track despite the pandemic

29.07.2020 - 09.30 | Company update

Innofactor posted solid Q2 profitability figures, with EBITDA at EUR 2.1m (Evli 1.1m) for a 12.3% EBITDA-margin. We assume a slightly weaker H2 due to the coronavirus pandemic, but progress made supports the long-term case. Our 2020-2022 EBITDA estimates are up some 20% post-Q2. We raise our TP to EUR 1.35 (0.95) with our BUY-rating intact.

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Delivered a positive earnings surprise
Innofactor delivered a pleasant surprise in second quarter profitability figures, with EBITDA of EUR 2.1m clearly topping our estimates (Evli EUR 1.1m). Net sales grew 0.6% y/y to EUR 16.8m (Evli 16.6m). Net sales in the other Nordic countries developed somewhat unfavourably due to the coronavirus pandemic, resulting in negative EBITDA figures for their part, while Finland continued strong. The impact of the pandemic was still not as large as the company had anticipated. The order backlog continued y/y and q/q growth, up to EUR 56.9m (Q2/19: 44.2m).

Profitability development on a solid track
We have raised our 2020E EBITDA estimate to EUR 7.2m (prev. EUR 5.9m) and our 2021-2022E estimates by ~20%. We expect some margin decline in H2 compared to H1 due to the pandemic given slower sales development, although cost base reductions due to travel restrictions should ease some of the pressure. Our sales growth assumptions in 2021-2022 remain modest (avg. 3.5% p.a.) given the company target (~20% p.a.), with limited signs of more rapid pick-up in growth. Innofactor acquired the remaining ~55% of shares in Arc Technology and with the improved cash flows we expect likely further M&A activity to boost growth.

BUY with a target price of EUR 1.35 (0.95)
Innofactor’s share price has rallied some 40% since our previous update in May but on our revised estimates and peer multiples we still see upside in valuation. On our revised estimates we adjust our target price to EUR 1.35 (0.95), for an implied 2020 EV/EBITDA of 8.7x and retain our BUY-rating.

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Tokmanni - Actions taken in Q2 were successful

29.07.2020 - 09.05 | Earnings Flash

Tokmanni’s Q2 revenue increased by 19.2% (LFL growth of 17.5%) and was EUR 286m. Tokmanni’s adj. EBIT was EUR 30.6m vs. EUR 30.9m/28.5m Evli/cons. Adj. gross margin was 34.5%. The company expects strong growth in revenue and LFL revenue in 20E. Comparable EBIT margin is expected to improve on the previous year.

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  • Q2 revenue grew by 19.2% and was EUR 286m. The preliminary figures were already given earlier thus there were no surprises with the sales development. The increase in sales of leisure, gardening and home improvement products and food products was particularly strong in Q2.
  • Q2 adj. gross profit was EUR 98.6m (34.5% margin) vs. EUR 97.5m (34.1%) Evli expectation. Adj. gross margin fell from last year due to strong sales program and unusual sales structure.
  • Q2 adj. EBITDA was EUR 46.7m vs EUR 46.9m our view.
  • Q2 adj. EBIT was EUR 30.6m (10.7% margin) vs. EUR 30.9m (10.8%) our expectation and EUR 28.5m (10.0%) consensus.
  • Q2 eps was EUR 0.38 vs EUR 0.38/0.35 Evli/consensus
  • Guidance for 20E: strong growth in revenue and like-for-like revenue. Profitability (comparable EBIT margin) is expected to improve on the previous year.

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Innofactor - Continued good profitability

28.07.2020 - 09.30 | Earnings Flash

Innofactor’s Q2 results were above our expectations and profitability remained at a good level. The net sales in Q2 amounted to EUR 16.8m (Evli EUR 16.6m), while EBITDA amounted to EUR 2.1m (Evli EUR 1.1m). Guidance remains intact. The impact of the coronavirus pandemic was limited but EBITDA in Sweden, Norway and Denmark fell in the red due to lowered sales.

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  • Net sales in Q2 amounted to EUR 16.8m (EUR 16.7m in Q2/19), in line with our estimates (Evli EUR 16.6m). Net sales in Q2 grew 0.6% y/y.
  • EBITDA in Q2 was EUR 2.1m (EUR 1.1m in Q2/19), clearly above our estimates (Evli EUR 1.1m), at a margin of 12.3%. EBITDA was clearly positive in Finland but somewhat negative in the other countries due to smaller than expected net sales due to the coronavirus pandemic.
  • Operating profit in Q2 amounted to EUR 0.9m (EUR 0.2m in Q2/19), clearly above our estimates (Evli EUR 0.0m), at a margin of 5.3%.
  • Order backlog at EUR 56.9m, up 28.8% y/y. Innofactor received several significant orders during the quarter and the order backlog improved q/q.
  • Guidance intact: Innofactor’s net sales and EBITDA in 2020 are estimated to increase compared to 2019.
  • The impact of the coronavirus pandemic on the second quarter was smaller than the company had previously expected. The pandemic lowered sales in Sweden, Norway and Denmark in the second quarter. Impact of the pandemic on Group net sales and profitability expected to be small during the rest of 2020. The company estimates a possibility that it will not achieve comparable net sales growth in Q3 as in Q1 and Q2.

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Finnair - Slow recovery ahead

27.07.2020 - 09.35 | Company update

Finnair’s April-June revenue decreased by 91% y/y (EUR 69m) while adj. EBIT totaled EUR -174m. Flights are slowly recovering in Europe and Asia but the costs related to the ramp-up will increase H2E comparable operating loss. We keep our rating “HOLD” with TP of EUR 0.50 (0.60).

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Heavy losses during Q2
Finnair’s Q2 result was weak as expected. April-June passenger numbers were down by ~98% y/y. Revenue declined by ~91% y/y and was EUR 69m vs. EUR 54m/49m Evli/consensus. Adj. EBIT was EUR -174m vs. EUR -177m/-179m Evli/consensus. ASK decreased by ~97% y/y and PLF was 33.1% (-49.4pp). Finnair’s revenue in the second quarter was greatly supported by the cargo business, which generated more than 70% of the revenue. The company reiterated its previous guidance (20E revenue will decline significantly compared to the previous year and the comparable operating loss will be significant). Revenue guidance for Q3E was not given. However, the comparable operating loss in Q3E will be of a similar magnitude than in Q2, due to clearly reduced capacity and costs related to the ramp-up.


Slowly recovering
The historically gloomy quarter is now behind and Finnair is slowly recovering its flights as travel restrictions in many European and Asian countries are gradually being lifted. In July, the company operates approx. 25% of its normal amount of flights. The estimated level in September is approx. 50%. The current traffic plan might change based on the pandemic situation and changes in the country specific restrictions. Finnair’s cargo business has increased its importance during this time and especially on Asian long-haul routes, the profitability is supported by the cargo business thus the good development of freight supports the launch of passenger flights. The company has been able to improve its cash position due to the rights offering proceeds of approx. EUR 500m (wasn’t fully booked by the end of June) and EUR 200m instalment of the EUR 600m statutory pension premium loan which was drawn in June.


“HOLD” with TP of EUR 0.50 (0.60)
Based on the new information we have further cut our estimates. We expect 20E revenue of EUR 1497m and adj. EBIT of EUR -503m. We highlight that the visibility remains very weak and there are significant uncertainties also with our 21E-22E estimates. We keep our rating “HOLD” with TP of EUR 0.50 (0.60).

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Consti - Upgrade to BUY

27.07.2020 - 09.00 | Company update

Consti’s Q2 operating profit of EUR 2.4m was better than expected (Evli/cons. 1.8m/1.4m) and free cash flow and financial position improved clearly. The coronavirus pandemic has and will have some impact on demand in 2020 but the long-term demand situation remains favourable and the company now appears to be in good shape after recent year challenges. We upgrade our rating to BUY (HOLD) with a target price of EUR 10.0 (7.4).

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Q2 profitability better than expected
Consti’s Q2 results were better than expected, as although the revenue of EUR 69.3m came in around expectations (Evli/cons. 68.5m/70.3m), the operating profit of EUR 2.4m clearly exceeded expectations (Evli/cons. EUR 1.8m/1.4m). The order intake in the quarter was also favourable, with new orders of EUR 66.8m, and the order backlog continued on a slight upwards trend since the end of 2019. Free cash flow in the quarter (EUR 8.1m) was exceptionally strong, boosting the rolling 12-month cash conversion ratio to 133.5%. As a result, net debt excl. IFRS 16 improved to EUR 8.3m (2019: 15.3m).

Company in good shape after previous year challenges
Consti’s Q2 report was clearly positive and following measures taken during the past years and management comments the company now appears to be in good shape. We expect sales to continue to decline y/y in H2 due to stricter bidding discipline but for profitability to continue to improve as a result of the healthier order backlog. The coronavirus pandemic has and will in our view have a slight impact on the demand situation during the year, but long-term demand drivers remain intact.

BUY (HOLD) with a target price of EUR 10.0 (7.4)
We have raised our 2020 EBIT estimate by 10% and slightly raised our 2021-2022 profitability estimates. With the higher profitability as well as cash flow and net debt improvements, possible near-term risks from the coronavirus pandemic and St. George arbitration proceedings are reduced. We raise our target price to EUR 10.0 (7.4) and upgrade our rating to BUY (HOLD).

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Verkkokauppa.com - Expecting normalizing growth in H2

27.07.2020 - 08.40 | Company update

Verkkokauppa.com benefited from the lockdown and was able to increase its Q2 sales by ~14% y/y. At the same time profitability development was strong as adj. EBIT totaled EUR 4.8m (EUR 0.2m in Q2’19). We keep our rating “BUY” with TP of EUR 6.3 (6.2).

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Strong growth in both, revenue and profitability
E-commerce took a big leap during H1 as consumers moved online quickly once the movement restrictions came into force. This boosted Verkkokauppa.com’s Q2 result. Sales were up by ~14% y/y (EUR 123m), outpacing the consumer electronics market growth of ~9% (GfK). Adj. EBIT totaled EUR 4.8m (Q2’19: EUR 0.2m) and was driven by improved gross margin (17.4% vs. our 16.4%). The improvement in gross margin was due to the sales mix, improvements in category management and declining wholesale sales. The preliminary Q2 figures were already given in connection with the positive profit warning issued last week thus there were no surprises with the result. The company expects 20E revenue of EUR 520-545m and adj. EBIT of EUR 13-18m.


Expecting normalizing demand in H2
It is clear that Verkkokauppa.com has benefited from the epidemic situation. The company has a low cost base which is supported by small physical footprint and that has been a major advantage during this time. Category management has been successful and as the demand of consumer electronics has increased, the competition hasn’t probably been as price-driven as normally. On the other hand, we expect that the strong growth in demand of consumer electronics during H1 will be shown as weaker sales growth and profitability development in H2E. Thus, we see this only as a momentary market change. In addition, consumers are likely to become more price aware, especially ahead of the campaign season in Q4 which will add pressure on margins.


“BUY” with TP of EUR 6.3 (6.2)
We have kept our estimates largely intact and expect 20E revenue of EUR 535m and adj. EBIT of EUR 17.1m. Thus, our estimates are at the higher end of the given guidance. On our estimates, Verkkokauppa.com trades at 20E-21E EV/sales multiple of 0.4x, ~17% below its online-focused Nordic & European peers. We keep our rating “BUY” with TP of EUR 6.3 (6.2).

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Finnair - Ugly Q2, as expected

24.07.2020 - 09.50 | Earnings Flash

Finnair’s Q2’20 adj. EBIT was EUR -174m vs. our expectation of EUR -177m and consensus of EUR -179m. Revenue decreased by 91% and was EUR 69m vs. our expectation of EUR 54m and consensus of EUR 49m.

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  • Q2 revenue was EUR 69m vs. EUR 54m/49m Evli/cons.
  • ASK decreased by 97.2% y/y in Q2. PLF was 33.1% (-49.4 points).
  • Q2 adj. EBIT was EUR -174m vs. EUR -177m/-179m Evli/cons. Q2 comparable EBITDA was EUR -89m vs. EUR -91m our view.
  • Absolute costs in Q2: Fuel costs were EUR 33m vs. EUR 14m our view. Staff costs were EUR 48m vs. EUR 37m our view. All other OPEX+D&A combined were EUR 173m vs. EUR 180m our view.
  • Unit costs: CASK was 70.5 eurocents vs. 67.1 eurocents our view.
  • Q2 EPS was EUR -0.25 vs. EUR -0.12/-0.12 Evli/cons.
  • In Q3, Finnair gradually increases its capacity and will operate ~25% of flights in July compared to the same period in 2019. Based on the current assumption, the share of flights operated increases to ~50% in September. There are uncertainties relating to COVID-19 development and lifting of travel restrictions. As a result, the outlook remains unclear and the company does not provide revenue guidance for Q3.
  • Finnair reiterates its previous guidance and states that the revenue will decrease significantly in 2020 compared to 2019 and that the comparable operating loss will be significant in the financial year 2020. In addition, Finnair's capacity will decrease significantly this year compared to 2019.

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Verkkokauppa.com - Restrictions boosted Q2 result

24.07.2020 - 09.15 | Earnings Flash

Verkkokauppa.com’s Q2’20 result was extremely strong. The report did not offer surprises as the company issued a positive profit warning and released preliminary information on April-June figures earlier this week. Revenue grew by 14.1% and was EUR 123m. Gross profit was EUR 21.4m (17.4% margin) vs. our EUR 20.2m (16.4% margin). Adj. EBIT was EUR 4.8m (3.9% margin). 2020E guidance: The company expects revenue to be EUR 520-545m and comparable operating profit to be EUR 13-18m.

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  • Q2 revenue grew by 14% to EUR 123m. Revenue growth in Q2 was driven by strong online sales, positive performance in mid-sized and evolving categories, and successful marketing that resulted in increased online traffic.
  • Q2 gross profit was EUR 21.4m (17.4% margin) vs. EUR 20.2m (16.4% margin) Evli view. Gross margin improved due to good sales improvement in higher margin categories, improvements in category management and declining sales in lower margin wholesale.
  • Q2 adj. EBIT was EUR 4.8m (3.9% margin) and improved as a result of strong sales and improved gross margin.
  • Verkkokauppa.com updated its guidance on 21 July 2020, and estimates 2020E revenue to be between 520-545 million euros and comparable operating profit to be between 13-18 million euros.

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Raute - Uncertainty continues to run high

24.07.2020 - 09.15 | Company update

Raute reported Q2 results below our expectations. We turn slightly more cautious as uncertainty remains quite elevated. Our TP is now EUR 20 (21), rating HOLD (BUY).

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Uncertainty is high as many regions grapple with the crisis

Raute posted EUR 24m in Q2 revenue vs our EUR 29m estimate. Services revenue was as expected (EUR 10m) while project deliveries were EUR 5m below our EUR 19m expectation. Russian revenue, at EUR 12m, was EUR 7m lower than we estimated, and the low figure is explained by order book timing with regards to the large EUR 58m Russian order to be delivered mostly this year. Order book timing as well as the pandemic (which complicated installations and services) meant profitability was weak also in Q2 as the company recorded EBIT at EUR -1.0m vs our EUR 1.3m estimate. Order intake, at EUR 13m, was also lower than we expected (EUR 19m) and was due to softness in both machinery and services orders. Order intake declined by half y/y as the pandemic postponed project decisions. Russian orders were lower in Q2 than we expected (EUR 3m vs our EUR 9m estimate). Although no major projects were initiated during the quarter Raute says cancellations are unlikely and many investment decisions could receive green light when the situation stabilizes.

We make minor estimate changes

According to Raute activity levels are still good in Russia and China, and customers are planning some big strategic investment projects but for now there’s no way to reliably estimate a time frame during which the leads might translate to actual orders for Raute. We expect Q2 to prove the slowest quarter for Raute in terms of order intake, but there’s significant uncertainty as to how rapidly order intake might improve in H2.

Long-term strategy intact yet short-term outlook hazy

We continue to view Raute’s prospects beyond this year’s weak results. A significant pick up in order activity would likely follow the operating environment’s inevitable normalization, but this might take some time to be reflected in the order book. We view Raute well positioned to capture large plywood and LVL machinery orders in the coming years once the sector is ready to commit itself to new capacity investments. However, in the current uncertain environment we see the overall valuation picture neutral. Our new TP is EUR 20 (21), rating HOLD (BUY).

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Consti - Profitability beats expectations

24.07.2020 - 09.00 | Earnings Flash

Consti's net sales in Q2 amounted to EUR 69.3m, in line with our estimates and consensus (EUR 68.5m/70.3m Evli/cons.). EBIT amounted to EUR 2.4m, above our and consensus estimates (EUR 1.8m/1.4m Evli/cons.). Free cash flow improved to a solid EUR 8.1m (Q2/19: EUR 2.7m).

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  • Net sales in Q2 were EUR 69.3m (EUR 81.2m in Q2/19), in line with our estimates and consensus estimates (EUR 68.5m/70.3m Evli/Cons.). Sales declined -14.7 % y/y.
  • Operating profit in Q2 amounted to EUR 2.4m (EUR 0.1m in Q2/19), above our estimates and consensus estimates (EUR 1.8m/1.4m Evli/cons.), at a margin of 3.4 %.
  • EPS in Q2 amounted to EUR 0.21 (EUR -0.04 in Q2/19), above our estimates and consensus estimates (EUR 0.14/0.11 Evli/cons.).
  • The order backlog in Q2 was EUR 211.8m (EUR 226.8m in Q2/19), down by -6.6 %. Order intake EUR 66.8m in Q2 (Q2/19: EUR 57.4m).
  • Free cash flow improved to EUR 8.1m (Q2/19: EUR 2.7m) driven by profitability improvement and release of working capital.
  • The corona pandemic had a limited impact, with worksites remaining open in all business areas. Short-term uncertainty in renovation demand outlook due to the possible moving forward of some projects in the negotiation stage.
  • Guidance reiterated: The Company estimates that its operating result for 2020 will improve compared to 2019.

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Raute - Results below our expectations

23.07.2020 - 09.50 | Earnings Flash

Raute’s Q2 results were clearly below our expectations with respect to revenue and profitability as well as order intake.

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  • Q2 revenue amounted to EUR 24.4m vs our EUR 29.0m estimate. The shortfall was attributable to project deliveries.
  • EBIT was EUR -1.0m, compared to our EUR 1.3m expectation. Order book timing affected the results negatively.
  • Q2 order intake stood at EUR 13m (EUR 26m a year ago) while we expected EUR 19m. Order intake for both project deliveries and technology services declined by about half y/y. The pandemic postpones investment decisions but Raute says project cancellations are unlikely and the situation could normalize quickly.
  • Order book amounted to EUR 80m at the end of the quarter (EUR 72m a year ago), which we view a rather good figure.

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Verkkokauppa.com - Extremely strong performance in Q2

23.07.2020 - 09.05 | Company update

Verkkokauppa.com issued a positive profit warning and gave preliminary information on April-June figures. The company now expects 20E revenue of EUR 520-545m and adj. EBIT of EUR 13-18m. The company’s Q2 result is due on Friday. We keep our rating “BUY” with TP of EUR 6.2.

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Strong performance during spring & summer

Verkkokauppa.com issued a positive profit warning as its spring/summer sales and profitability have developed better than first anticipated but also due to the brighter H2’20E outlook. The company now expects 20E revenue of EUR 520-545m (Evli prev. 525m) and comparable operating profit of EUR 13-18m (Evli prev. 14.3m). The company previously expected 20E revenue of EUR 510-530m and comparable operating profit of EUR 12-15m. Verkkokauppa.com also provided preliminary Q2 figures. April-June revenue is approx. EUR 123m, growth of ~14% y/y (Evli 113m/cons. 113m) while adj. EBIT is approx. EUR 4.8m (EUR 0.2m in Q2’19) vs. EUR 1.3m/1.4m Evli/consensus. According to the company, comparable operating profit improved as a result of strong sales and improved gross margin.

Consumers have been active during Q2

Based on the preliminary second quarter figures, it seems that the demand of consumer electronics has continued strong. Due to the increased demand, we expect less price driven competition in the consumer electronics market which impacts positively on gross margin. However, we see this only as a temporary change. Also, good demand in other smaller categories (offering higher margins) supports gross margin development. We now expect Q2E gross margin of 16.4% (14.2% in Q2’19). According to the management, the pandemic might not have as big impact on consumer demand as first anticipated which is also likely to impact on H2’20E.

“BUY” with TP of EUR 6.2

We have increased our estimates as a result of the positive profit warning. We expect sales to grow also in H2’20E, although the growth is expected to normalize from H1’20. We now expect 20E revenue of EUR 535m (6% y/y) and adj. EBIT of EUR 17.1m (51% y/y). On our estimates, the company trades at 20E-21E EV/sales multiple of 0.4x, ~20% below the online focused Nordic & European peers. We keep our rating “BUY” with TP of EUR 6.2.

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Vaisala - Eyes on the horizon

22.07.2020 - 09.30 | Company update

Vaisala delivered a decent Q2 result, with improved EBIT despite decrease in net sales and orders received. Vaisala maintained its 2020 guidance although market outlook is still weighed down by COVID. Although there are still short-term risks related to the pandemic, we see Vaisala coming out rather unscathed from the pandemic, and therefore we are ready to emphasize more the coming years and Vaisala’s post-COVID performance. Our estimates remain unchanged, and we continue to see Vaisala executing well but valuation is challenging. We maintain HOLD recommendation with target price of 29 euros (prev. 26).

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W&E stronger than expected, while IM soft

On a whole, Vaisala’s Q2 result was broadly in line. Q2 net sales decreased -5% to 91,4 MEUR vs. 93,5 MEUR Evli and 94 MEUR consensus. Q2 EBIT improved 9,7% y/y to 7,9 MEUR (8,7% margin) vs. 8,1 MEUR our expectation (cons. 7,9 MEUR). EPS was 0.16 (0.19 Evli, 0.20 consensus). Gross margins held up nicely (54,5% vs. 54,2% last year) despite lower volumes. Orders received decreased -2% to 95,9 MEUR due to weakened order intake in IM and especially in APAC region. Overall, W&E fared slightly better than we expected with Q2 EBIT at 0,7 MEUR (0,2 MEUR Evli) and decent orders received +1% due to strong EMEA. On the other hand, IM was softer than we had expected. IM net sales declined -5% to 33,8 MEUR (37,1 MEUR Evli) and EBIT was 7,1 MEUR (7,9 MEUR Evli), due to lower net sales. IM order intake declined -8% in all regions, especially APAC. According to Vaisala, IM’s high-end humidity and high-end carbon dioxide markets were affected by COVID as customers suspended operations and delayed decision making.

2020 outlook maintained

Vaisala estimates that lost order intake during H1 was roughly 15–25 MEUR and lost net sales was in range of 5–15 MEUR. Looking forward, it’s clear that uncertainties will continue. W&E outlook is weighed by the weakened outlook for aviation and lack of larger infra projects, especially in developed countries. IM is also expected to suffer short term from COVID repercussions. Vaisala maintained its 2020 outlook it issued in April, expecting FY20 net sales of 370–405 MEUR and EBIT of 34–46 MEUR. Our estimates remain broadly unchanged after the report. We believe pulling out of COVID will help IM fare better in H2, and our 20E estimates are at midpoint of guidance. We expect 2020e net sales to decline roughly 4% to 388 MEUR and reported EBIT to decline to 39,5 MEUR. Our 2021-22E estimates remain unchanged and we continue to see Vaisala’s targeted above 5% sales growth achievable and road to >12% margins resuming after pandemic resides.

Valuation remains challenging

On our estimates, Vaisala is still trading at premiums compared to our peer group, and as noted before, we see valuation stretched given Vaisala’s weaker financial performance compared to peer group. Peer group valuation multiples have however risen, and premiums are now more acceptable. Although there are still short-term risks related to the pandemic, we see Vaisala coming out rather unscathed from the pandemic, and therefore we are ready to emphasize more the coming years and Vaisala’s post-COVID performance. We raise our target price to 29€ (prev. 26€) and maintain our HOLD recommendation. Our target price values Vaisala at 21-22e EV/EBIT multiples of 22x and 19x which is above peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

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SRV - Upgrade to BUY

22.07.2020 - 09.30 | Company update

SRV’s Q2 profitability fell short of our estimates due to one-offs, with revenue and construction profitability slightly better than expected. We have raised our 20-22E EBIT estimates by some 5-10% on a fairly good H1 order intake and higher construction margin expectations. We upgrade our rating to BUY (HOLD) with a target price of EUR 0.66 (0.64).

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One-offs affected profitability, good construction margins
SRV’s revenue in Q2 grew 28% y/y to EUR 265.0m for a slight expectations beat (EUR 243.4m/243.0m Evli/cons.). The operative operating profit was at EUR 0.5m (Evli 3.8m), affected by an EUR 3.1m provision for expenses recognized due to a ruling by a Russian court as well as recovery programme costs and costs stemming from impacts of the coronavirus. Construction profitability was good and slightly better than expected, with an operative operating profit margin of 2.8% (Evli 2.6%). The effects of the coronavirus were limited, although some additional costs were incurred, and housing sales were slower during April-May. Shopping centres were also affected and in Russia a large share of stores were and remain closed due to restrictions.

20-22E EBIT estimates raised by some 5-10%
We have post-Q2 raised our 20-22E EBIT estimates by some 5-10%, prompted by a fairly good H1/20 order intake and slightly raised construction margin expectations. The coronavirus pandemic continues to pose a risk, but current recovery prospects in Finland and a higher share of housing units sold to investors in the construction portfolio remain supportive factors.

BUY (HOLD) with a target price of EUR 0.66 (0.64)
Uncertainty of shopping centre exits has increased due to the pandemic and will most likely be delayed, with Pearl Plaza discussions already having been in late stages. On our 21-22E estimates and peer multiples, current valuation levels in our view essentially appear to only assign a value to SRV’s construction operations. We upgrade our rating to BUY (HOLD) with a target price of EUR 0.66 (0.64).

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Exel Composites - Profitability outshines uncertainties

22.07.2020 - 09.25 | Company update

Exel’s Q2 volumes developed as expected while profitability was a big positive surprise. We weigh the strong performance against valuation prudence; caution is warranted since volumes are sensitive even in benign business climates. However, we view the current valuation simply too low. Our TP is EUR 6.25 (5.50), rating BUY.

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Top line as expected, profitability a major positive surprise

Exel’s Q2 was as expected in terms of group-level revenue. The figure was EUR 27.2m i.e. in line with the EUR 27.9m/27.2m Evli/cons. estimates and up 3% y/y. Wind power grew by 52% y/y, and the EUR 7.9m figure was clearly above our EUR 6.6m estimate. The increase was driven by Asia-Pacific. All in all, it seems the pandemic has had only a limited impact on Exel’s business so far. Revenues have rolled in as expected and Q2 order intake only fell by 4% y/y, which in our view is a remarkable result considering the business and the current macro context. In this sense the Q2 update was a bit unsurprising relative to the Q1 release. The surge in profitability, however, was unforeseen. Exel achieved EUR 2.9m in adj. EBIT, compared to the EUR 2.0m/2.0m Evli/cons. estimates. The US unit fueled the positive surprise.

Profitability outperformance has been extended

Guidance wasn’t reinstated (Exel guided increased revenue and adj. EBIT earlier this year). In our view the reluctance to issue guidance for now reflects order uncertainties. Deliveries could be hit should the environment rapidly worsen, which is a relevant possibility. Yet in our view Exel is on a clear track to achieve higher earnings, considering the EUR 5.0m in H1’20 adj. EBIT vs the EUR 4.2m in H1’19. The company has topped the expectations we had prior to the pandemic. The earnings report changes our top line estimates very little, but we upgrade our profitability estimates. We previously expected EUR 3.7m in H2’20 adj. EBIT, and now see the figure at EUR 5.1m. For FY ’21 we now estimate the figure at EUR 11.1m (previously EUR 9.5m).

Valuation is undemanding especially compared to peers

Exel has continued to outperform our expectations while the macroeconomic situation does justify some valuation caution. We nevertheless see clear upside to current multiples. Our new TP of EUR 6.25 (5.50) implies ca. 6.5x EV/EBITDA and 10.5x EV/EBIT on our estimates for this year. Our rating remains BUY.

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Vaisala - Q2 broadly in line, IM softer than expected

21.07.2020 - 12.25 | Earnings Flash

Vaisala’s Q2 EBIT was broadly in line, but pandemic had its toll on both business areas and orders received. Vaisala’s Q2 net sales decreased 5% to 91,4 MEUR vs. 93,5 MEUR our expectation and 94 MEUR consensus. Q2 reported EBIT was 7,9 MEUR (8,7% margin) vs. our expectation of 8,1 MEUR (7,9 MEUR consensus).

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  • Group level results: Q2 net sales decreased 5% to 91,4 MEUR vs. 93,5 MEUR our expectation and 94 MEUR consensus. Q2 EBIT was 7,9 MEUR (8,7% margin) vs. our expectation of 8,1 MEUR (cons. 7,9 MEUR). EPS was 0.16 (0.19 Evli, 0.20 consensus).
  • Gross margin was 54,5% vs. 54,2% last year
  • Orders received was 95,9 MEUR vs. 98 MEUR last year. Orders received decreased by -2% due to weakened order intake in Industrial Measurements and especially in APAC region. Order book was 145,3 MEUR vs. 141,6 MEUR Q1’20.
  • Weather & Environment (W&E) net sales decreased -5% (-5% excl. FX) to 57,6 MEUR vs. 56,4 MEUR our expectation. W&E EBIT was 0,7 MEUR (0,2 MEUR Evli). Order intake growth was 1% with strong orders received in EMEA offset by weaker APAC and Latin America.
  • Industrial Measurements (IM) net sales declined -5% (-5% excl. FX) to 33,8 MEUR vs. 37,1 MEUR our expectation. IM EBIT was 7,1 MEUR (7,9 MEUR Evli), due to lower net sales. Industrial Measurements order intake declined -8% in all regions, especially APAC.
  • Business outlook for 2020 maintained: Vaisala estimates that its full-year 2020 net sales will be in the range of 370–405 MEUR and EBIT will be in the range of 34–46 MEUR (updated previously on April 21st)

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Exel Composites - Excellent results

21.07.2020 - 10.45 | Earnings Flash

Exel Composites reported Q2 revenue in line with expectations while profitability was clearly higher than expected. Higher profitability was mainly due to the US unit’s improved performance. Overall Exel’s performance seems very solid despite the pandemic, however the company does not yet reissue guidance.

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  • Q2 revenue amounted to EUR 27.2m, compared to the EUR 27.9m/27.2m Evli/consensus estimates.
  • With respect to customer industries, Wind power revenue stood at EUR 7.9m in Q2 i.e. some EUR 1.3m higher than we expected.
  • Adjusted operating profit was EUR 2.9m vs EUR 2.0m/2.0m Evli/consensus estimates. Adjusted operating margin was thus an excellent 10.6%. The profitability improvement was primarily driven by the US unit.
  • Q2 order intake declined by 3.8% y/y to EUR 22.9m, which in our view is more than a decent figure considering the extraordinary circumstances that prevailed during the quarter. One large order, attributable to Buildings and infrastructure (worth some EUR 3.5m), helped but overall the order book situation looks rather good for now.
  • Exel withdrew guidance for FY ’20 in connection with the Q1 earnings release. The company says it will reinstate guidance later this year.

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Consti - Eyes on the demand situation

21.07.2020 - 09.30 | Preview

Consti will report Q2 results on July 24th. As the direct impacts of the Coronavirus pandemic have been limited, we expect profitability to have remained at a good level and clearly above the weak comparison period. The order backlog will remain of support for the quarter while a thinness in demand may start to show during the latter half of the year. We retain our HOLD-rating and adjust our target price to EUR 7.4 (7.0).

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Limited direct pandemic impact to support profitability
Consti continued on a track of improved profitability in Q1 and we do not expect any major deviations from that trend. The direct impacts of the Coronavirus pandemic on the second quarter results are expected to be limited, as on-going worksites have to our understanding been able to operate without significant interruptions. We expect EBIT to improve clearly from the weak comparison period (Q2/2019: EUR 0.1m), which was affected by certain weak-margin projects, to EUR 1.8m in Q2/2020. We expect a revenue of EUR 68.5m, a decline of 15.7% y/y, as a result of the weakened order backlog from more disciplined bidding procedures.

Short-term demand thinness to be expected
Going forward, we expect our main attention to be pointing toward the overall demand situation. Given the timing of the housing company General Meeting season, decision-making for certain renovation projects will have been delayed to the fall or possibly next year. Decisions of corporations will possibly also have been affected while the public sector should have been less affected. The renovation sector fundamentals, however, remain unaffected and the impact should as such be of more temporary nature.

HOLD with a target price of EUR 7.4 (7.0)
Our estimates remain unchanged ahead of the Q2 results. Following lower COVID-19 uncertainty and increases in peer multiples we adjust our target price to EUR 7.4 (7.0) and retain our HOLD-rating.

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SRV - Fared rather well

21.07.2020 - 09.00 | Earnings Flash

SRV's net sales in Q2 amounted to EUR 265.0m, above our and consensus estimates (EUR 243.4m/243.0m Evli/cons.). EBIT amounted to EUR 3.3m, below our estimates and above consensus estimates (EUR 3.8m/2.4m Evli/cons.).

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  • Revenue in Q2 was EUR 265.0m (EUR 207.4m in Q2/19), above our estimates and consensus estimates (EUR 243.4m/243.0m Evli/Cons.). Growth in Q2 amounted to 27.8 % y/y.
  • Operating profit in Q2 amounted to EUR 3.3m (EUR -3.1m in Q2/19), below our estimates and above consensus estimates (EUR 3.8m/2.4m Evli/cons.), at a margin of 1.2 %. The operative operating profit amounted to EUR 0.5m (Evli EUR 3.8m). The operating profit was affected by an EUR 3.1m provision for expenses that were recognized due to a ruling by a Russian court, as well as costs relating to the recovery programme among other things.
  • EPS in Q2 amounted to EUR 0.02, above our estimates and consensus estimates (EUR -0.02/-0.01 Evli/cons.).
  • Construction: Revenue in Q2 was EUR 264.1m vs. EUR 242.7m Evli. Operating profit in Q2 amounted to EUR 7.4m vs. EUR 6.3m Evli.
  • Investments: Revenue in Q2 was EUR 1.2m vs. EUR 1.2m Evli. Operating profit in Q2 amounted to EUR -1.7m vs. EUR -1.5m Evli.
  • Other operations and elim.: Revenue in Q2 was EUR -0.2m vs. EUR -0.5m Evli. Operating profit in Q2 amounted to EUR -2.4m vs. EUR -1.0m Evli.

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Raute - Longer perspective is warranted

20.07.2020 - 09.20 | Preview

Raute reports Q2 results on Thu, Jul 23. Order book stands at a decent level but Q2 must have been slow with respect to new orders. Raute issued two releases in Q2 which speak of the company’s strategy proceeding according to plan; however, these news items will not immediately impact our estimates. In our view valuation is turning attractive on our unchanged estimates. Our TP is EUR 21, rating BUY (HOLD).

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Order intake was likely low, but strategy appears on track

Raute didn’t disclose any large orders in Q2, which in our view is unsurprising. However, the company did book an order for the delivery of modern veneer drying and automated lay-up lines to South China. Although the order is moderate in size, amounting to perhaps a few million euros, it may prove to hold significant reference value for Raute as the machinery represents the inaugural Chinese purchase of such advanced plywood production technology. The order will be delivered by the end of this year. In our view the order is an initial encouraging sign that the Chinese plywood market, by far the biggest, is gradually maturing towards higher quality standards. Raute has so far been unable to make meaningful inroads into the market and it remains to be seen in what time frame significant results might materialize. Raute also recently announced the acquisition of a Finnish software company specializing in demanding industrial solutions, including machine vision. From a financial perspective the deal has no impact on our current estimates but is consistent with Raute’s strategy, according to which the company continues to invest in further developing its technological edge.

We see soft Q2 order intake, expect improvement in H2

We expect Raute to have booked EUR 19m in Q2 new orders i.e. about half the average quarterly level last year. As with so many other industries, the focus will be on comments regarding the changes and improvement in activity following the most acute weeks of the pandemic lockdown.

We view valuation low especially relative to peer multiples

This year will not be great in terms of profitability. On our estimates for next year Raute currently trades ca. 5.5x EV/EBITDA and 8.5x EV/EBIT; despite uncertainty regarding the sharpness of next year’s profitability improvement we view these multiples attractive. Our TP remains EUR 21, rating now BUY (HOLD).

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Verkkokauppa.com - Strong tailwind amid the pandemic

17.07.2020 - 09.30 | Preview

Verkkokauppa.com reports its April-June result on next week’s Friday, 24th of July. We expect Q2E sales of EUR 113m (5% y/y) and adj. EBIT of EUR 1.3m. We keep our rating “BUY” with TP of EUR 6.2 (4.5).

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Expecting a strong Q2
Verkkokauppa.com had a strong start for the year as Q1’20 sales increased by over 8% y/y, boosted by exploded online sales caused by the COVID-19. Remote working has become the new normal during this time thus we expect good growth in the consumer electronics market. The management indicated that the demand of several other categories has developed favorably as well (e.g. sports, home). We also expect the good weather in the early summer to have a positive impact on sales. We have increased our Q2’20E sales expectation by 3% to EUR 113.2m. We expect Q2’20E adj. EBIT of EUR 1.3m (Q2’19: EUR 0.2m).


Targeting improved brand awareness
Verkkokauppa.com transferred to the main list of Nasdaq Helsinki in early June as the company is targeting to increase its brand awareness and to improve its liquidity. The total expenses related to the listing are EUR ~0.8m. According to the listing prospectus, some 16% of total sales in Q1’20 came from outside of Finland (2019: 12%). Due to the global movement restrictions, we expect significantly lower international sales during Q2E. We expect gross margin to improve in Q2E (14.9% vs. 14.2% in Q2’19) as the consumer electronics market should ease temporarily but also due to the good development of other smaller categories (offering higher margins). We expect good control over costs, supporting earnings development.


“BUY” with TP of EUR 6.2 (4.5)
We have increased our 20E adj. EBIT expectation by ~5% (EUR 14.3m) while slightly increasing our 20E sales expectation (EUR 525.4m). The company expects 20E sales of EUR 510m-530m and adj. EBIT of EUR 12-15m thus our estimates are at the higher end of the given guidance. We have also increased our 21E-22E sales expectation by 1-1.5% and adj. EBIT expectation by 6-7%. On our estimates, the company trades at 20E-21E EV/sales multiple of 0.4x, which translates into ~25% discount compared to the online focused Nordic and European peers. We keep our rating “BUY” with TP of EUR 6.2 (4.5).

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Finnair - Gloomy Q2 figures ahead

16.07.2020 - 09.30 | Preview

Finnair reports its Q2 result on next week’s Friday, 24th of July. As well known, April-June figures will not be pretty. We expect Q2E revenue of EUR 54m and adj. EBIT of EUR -177m. We upgrade to “HOLD” (“SELL”) with TP of EUR 0.60.

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Historically gloomy traffic
Finnair’s April-June traffic figures were extremely weak, as expected. Passenger numbers decreased by 97% y/y as Finnair carried only ~100k passengers during this time. ASK decreased by 97% y/y and RPK decreased by 99% y/y. The were no flights to North Atlantic nor to Asia during most of the quarter and the remaining operations have been mainly related to cargo. Finnair has estimated that its daily comparable operating loss will be approx. EUR 2m throughout Q2. We expect Q2’20E revenue of EUR 54m and adj. EBIT of EUR -177m.

Jet fuel prices dropped during Q2
Jet fuel prices have dropped significantly during Q2. The average price in both, USD and in EUR dropped by 49% on a q/q basis compared to Q1’20. On a y/y basis, the average price in USD fell by 62% and in EUR by 61%.

Flights starting gradually to recover
Finnair has gradually started to add frequencies and routes to its network as many travel restrictions have now been removed and the pandemic situation has improved, at least in Europe and Asia. The company estimated earlier that it aims to fly some 30% of its normal amount of flights in July. Some 70% of the normal capacity is expected to be operated by the end of the year. The company should be able to expand its offering relatively quickly depending on the country specific restrictions and demand.

“HOLD” (“SELL”) with TP of EUR 0.60
As a result of Finnair’s rights offering issued during the summer, Finnair receives net proceeds of approx. EUR 501m. The total number of Finnair’s shares increased to 1.4b. There are no major changes in our 20E-22E estimates. We expect 20E revenue of EUR 1595m and adj. EBIT of EUR -304m. We expect the traffic slowly to recover during 21E-22E but we don’t expect to see levels reached prior the pandemic any time soon. We keep our TP of EUR 0.60 and upgrade to “HOLD” (“SELL”).

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Tokmanni - Positive surprise with Q2 sales

10.07.2020 - 09.30 | Company update

Tokmanni’s Q2’20 sales increased by 19.1% y/y to EUR 286m which is a positive surprise after the company withdrew its guidance in March due to the COVID-19. Tokmanni will report its Q2 result on 29th of July. We keep our rating “BUY” with TP of EUR 16.4 (13.5).

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Q2 sales increased by 19.1% y/y

Tokmanni published its Q2 sales beforehand (Q2 result will be published on 29th of July) as its April-June sales increased by 19.1% y/y (EUR 286m). The exceptional jump in sales came as a surprise as the company withdrew its guidance in March, due to the coronavirus situation and the consensus expectation indicated decrease in sales. According to the company, the customer numbers decreased towards the end of March but have since recovered. LFL growth was 17.4% y/y and online sales accounted for 1.4% of sales. Our previous Q2E sales expectation was EUR 191m. Tokmanni expects comparable gross margin in Q2E to decrease by ~1ppt y/y, resulting from the active measures to increase sales and the structure of sales.

Restrictions impacting positively on consumer behavior

Due to the movement restrictions caused by the COVID-19, Finns have spent more time at home and at their summer cottages and domestic tourism has become more popular. Therefore, the demand of leisure, gardening and home improvement products has strongly increased. Also, the demand of food products has been strong during Q2. On the other hand, clothing sales decreased y/y. We don’t expect a significant increase in customer numbers during the quarter but rather in the average basket size. We expect that Tokmanni’s cost base has remained stable despite of the increase in sales, resulting in improved profitability. We expect Q2’20E adj. gross margin of 34.1% and adj. EBIT of EUR 30.9m.

“BUY” with TP or EUR 16.4 (13.5)

As result of the latest information, we return back to our view prior the COVID-19 and expect Tokmanni to reach sales of over EUR 1bn in 20E. We expect 20E sales of EUR 1026m and adj. EBIT of EUR 90m. As the significant increase in Q2’20 revenue was exceptional, we expect normalized sales during H2’20E and sales to remain in the same level also in 21E. Our view of Tokmanni’s 21E-22E hasn’t changed. On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 13.0x and 13.1x, which translates into 25-31% discount compared to the international discount peers. We keep our rating “BUY” with TP of EUR 16.4 (13.5).

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Suominen - Clean and shining

25.06.2020 - 09.25 | Company update

Suominen revised its outlook upwards for the second time this year. We update our estimates; the announcement has only minor impact in quantitative terms but turns us more confident towards Suominen’s sustainable profitability improvement. Our TP is now EUR 4.25 (3.25) and thus we rate the shares BUY (HOLD).

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The update reflects conviction in value-add wiping demand
Suominen previously expected comparable FY ‘20 EBIT to improve clearly from ‘19. The updated outlook guides significant improvement. The figure amounted to EUR 8.1m last year, and we now expect Suominen to post EUR 24.0m this year (our previous estimate was EUR 23.1m). In our view the outlook update therefore has somewhat limited information value as such, although it’s worth mentioning that Suominen also removed the previous disclaimer according to which the result estimate for the second half of the year was uncertain due to the pandemic. In other words, the announcement does not change our estimates quantitatively as much as it does qualitatively. Suominen did not comment on market developments, but in our view the update reflects certain value-add wiping product categories’, namely those meant for household and workplace uses, improved prospects due to the pandemic.

Our higher gross margin estimate offsets weaker USD
During the last two months USD has declined by about 5% relative to EUR. We thus update our revenue estimate for this year downwards to EUR 443m from the previous EUR 454m. There have been no meaningful interim changes in raw materials prices, and as we expect value-add wiping product demand to remain brisk we revise our FY ’20 gross margin estimate up by some 50bps to 12.1%. These changes’ net effect on our FY ’20 EBIT estimate is an increase to the tune of EUR 0.9m.

Valuation is attractive as profit recovery gains traction
Suominen currently trades at about 5.7x and 4.8x EV/EBITDA on our estimates for this year and next. In our view higher multiples are now warranted as profitability improvement looks increasingly robust. Our new EUR 4.25 (3.25) TP implies the respective multiples at levels of 6.2x and 5.3x. Suominen is also valued clearly below peer group multiples. We now rate the shares BUY (HOLD).

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Finnair - Strengthening its balance sheet

12.06.2020 - 09.25 | Company update

Finnair will strengthen its balance sheet with a rights offering of approx. EUR 500m, which have been fully underwritten. We have also cut our 20E estimates to be in line with the latest traffic plan. We keep our rating “SELL” with TP of EUR 0.6 (3.3).

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Aiming to raise gross proceeds of approx. EUR 500m

Finnair has announced the terms and conditions of its rights offering of approx. EUR 500m, which have been fully underwritten. The proceeds from the offering are intended for strengthening the company’s balance sheet and to support the company’s long-term strategy. The company offers up to ~1279m new shares for subscription for the existing shareholders. The existing shareholders receive one subscription right for each share held on the record date and each subscription right carries the right to subscribe for ten offer shares. The subscription price is EUR 0.40 per offer share. The state of Finland, which is the largest shareholder of Finnair, has committed to subscribe in full for offer shares on the basis of subscription rights allocated to it (a total of 55.9% of the offer shares). The subscription period commences on 17 June 2020 and ends on 1 July 2020.

Further estimates cut for 20E

We have also adjusted our H2’20E estimates downward based on the traffic plan introduced earlier in May. Finnair will start gradually to add frequencies and routes back starting from July. For instance, the company will fly to several European destinations, concentrating first on the key cities. Also, long-haul flights to Asia will start in phases. The company aims to operate approx. 30% of its normal amount of flights in July. Finnair estimated that it will fly approx. 70% of its normal capacity at the end of this year.

“SELL” with TP of EUR 0.6 (3.3)

We now expect 20E revenue to decline by ~48% y/y, amounting to EUR 1605m (prev. EUR 1752m). We expect 20E adj. EBIT of EUR -305m (prev. EUR -265m). We keep our rating “SELL” with TP of EUR 0.6 (3.3).

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SRV - Next step of recovery measures

03.06.2020 - 09.45 | Company update

SRV is approaching the final leg of its recovery programme and initiated a rights issue, seeking to raise EUR 50m gross proceeds. The good progress so far remains somewhat overshadowed by the development of the Russian economy. We adjust our TP to EUR 0.64 (1.10), HOLD-rating intact.

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Seeking to raise EUR 50m gross proceeds
SRV initiated a rights issue with the aim of raising gross proceeds of EUR 50m and resolved upon offering up to ~131m new shares, corresponding to 49.8% of all shares if fully completed, with existing shareholders receiving one subscription right for each owned share and the subscription price for new shares set at EUR 0.38. The share issue proceeds are primarily intended for strengthening of the company’s balance sheet. SRV also completed a directed share issue in May, resulting in gross proceeds of approx. EUR 75m but no cash proceeds, as outstanding hybrid bonds were converted into equity. The company expects that the issues along with measures taken as part of the company’s recovery programme will improve the company’s equity ratio excl. lease liabilities from 26.4% (31.12.2019) to 30-33% by the end of Q2.

Profitability improving, financial expenses hamper earnings
We assume full completion of the rights issue in our estimates given the EUR 40m commitments made and the discount of the subscription price. Apart from adjustments due to the expected expenses related to the share issues our estimates remain intact. We expect the operative operating profit to improve to EUR 15.3m following improved construction profitability, while expecting net earnings to remain negative due to the high financial expenses.

HOLD with a target price of EUR 0.64 (1.10)
Our SOTP implies an equity value of EUR 0.69 per share while peer multiples remain challenging. The ruble has seen recovery from its Q1 dip but together with the state of the Russian economy pose a risk to easing balance sheet strains through exits. We adjust our target price to EUR 0.64 (1.10) with our HOLD-rating intact.

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Cibus Nordic - Staple and stable

18.05.2020 - 09.20 | Company update

Cibus performed strong. The fundamentals are solid as before, yet wider property valuations are subject to higher uncertainty. We retain our SEK 150 TP and BUY rating.

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There’s little reason to expect performance to be impaired

Cibus’ portfolio performed as expected with Q1 rental income at EUR 14.0m vs our EUR 13.9m estimate, while net rental income amounted to EUR 13.0m (vs our EUR 13.0m expectation). We did expect temporarily elevated administration costs due to the Coop acquisition, as the company suggested, and estimated the Q1 figure at EUR 1.1m. The figure came in at EUR 1.5m and thus the EUR 11.5m Q1 operating income missed our EUR 11.9m estimate. Meanwhile we overestimated financial costs (excluding currency losses) since net operating income excluding currency losses was EUR 7.7m, compared to our EUR 7.6m estimate. In terms of earnings capacity, the updated property expenses line is higher than we expected while the administration cost line is slightly lower. We make only small revisions to our estimates.

Cash flow is solid, yet valuation is not immune to macro

In our view Cibus’ figures and comments prove the pandemic will have little impact operationally. While in the big picture retail rents are likely to be under pressure (mainly due to shopping centers) in our opinion there’s no valid reason to expect this will apply to daily-goods stores. Cibus hasn’t noticed changes to deal flow and bank financing prospects. We see the daily-goods property market remaining stable and would not expect distressed sellers to surface in any meaningful numbers. Even though the pandemic will provide strong tailwind for online grocery sales the fact remains that such operations still struggle profit-wise in the Nordics. We expect Cibus will continue to generate robust cash flow as before. We view wider property valuation trends as the main risk for Cibus’ shareholders: uncertainty runs high and it remains to be seen how exactly e.g. telecommuting practices will affect office vacancy rates.

We reiterate our SEK 150 TP and BUY rating

Cibus continues to scan e.g. the Norwegian market, but for now the focus is on Finland and Sweden. The purchased Swedish properties are being converted into Coop stores (Coop purchased them from Netto last year); Cibus says the conversion is progressing well. We retain our SEK 150 TP and BUY rating.

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Cibus Nordic - No meaningful surprises

15.05.2020 - 09.30 | Earnings Flash

Cibus Nordic reported Q1 property portfolio performance in line with our estimates, while operating income was slightly below our estimate due to the Coop portfolio acquisition which temporarily elevated central administration expenses.

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  • Q1 rental income amounted to EUR 14.0m vs our EUR 13.9m estimate.
  • Accounting for property expenses, net rental income was EUR 13.0m while we expected EUR 13.0m.
  • Subtracting central administration expenses, operating income stood at EUR 11.5m in comparison to our EUR 11.9m estimate. The expenses were higher than we expected due to the Coop portfolio acquisition.
  • After considering net financial costs (including currency losses), net operating income was EUR 6.8m vs our EUR 7.6m expectation. The figure was EUR 7.7m excluding currency losses.
  • Annual net rental income capacity now stands at EUR 60.6m (previously EUR 50.9m).
  • The portfolio was valued at EUR 1,053m, meaning EPRA NAV amounted to EUR 11.6 (11.4) per share.
  • Net LTV ratio was 58.1% (58.7%).
  • Occupancy rate stood at 94.8% (94.7%) at the end of Q1.
  • WAULT was 5.5 years (4.9 years), increasing due to the Coop portfolio acquisition.

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Marimekko - Consumer behavior likely to change

15.05.2020 - 09.25 | Company update

Marimekko’s Q1 result was below expectations as net sales declined by 8% y/y, amounting to EUR 24.9m (27.9m/25.4m Evli/cons). Adj. EBIT was EUR 1.2m (1.7m/1.4m Evli/cons). The coronavirus hampered sales in all Marimekko’s market areas. We downgrade to “HOLD” (“BUY”) with TP of EUR 24 (28).

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All market areas were impacted by the coronavirus

COVID-19 hampered all Marimekko’s market areas which led to a decline in net sales (-8%). Net sales totaled EUR 24.9m (27.9m/25.4m Evli/cons). Finland was the only market area with a positive sales development (+6%) in Q1. Net sales in the second largest market area APAC, declined by 28% y/y. Wholesale sales in APAC fell by -30% y/y not only due to the coronavirus but also as the corresponding figures in the comparison period were high due to an exceptional delivery pattern. Relative sales margin was affected by increased logistics costs and nonrecurring expenses resulting from the relocation of the company’s main warehouse. Decline in sales and weakened relative sales margin weighed down adj. EBIT which was EUR 1.2m vs.  EUR 1.7m/1.4m Evli/cons.

Consumers likely to become more cautious

Our expectations for the upcoming months are not high as the movement restrictions and the temporary closure of stores will no doubt have a significant negative impact on Marimekko’s sales and profit. The company’s online store supports the business in some level as the online sales have increased significantly, though the management did not provide information regarding the magnitude of this. The outlook for ’20 wholesale sales in Asia is affected by the temporary closure of partner-owned stores and changing customer sentiment. At the same time, domestic wholesale sales in ’20 are boosted by nonrecurring promotional deliveries, which will be mainly taking place during H2. Going forward, the globally weakening economic outlook and declining purchasing power will have a negative impact on consumer behavior. We expect retail sales and wholesale sales to decline by 12% and 11%, respectively in 20E.

“HOLD” (“BUY”) with TP of EUR 24 (28)

We have cut our 20E sales expectation by ~4% and adj. EBIT expectation by ~8%. The company expects COVID-19 to have a significant negative impact on sales and profit in ‘20 but did not provide more detailed guidance at this point. Due to the weakening economic outlook we have also cut our 21E-22E sales expectation by 7-9% and adj. EBIT expectation by 10-12%. On our estimates, Marimekko trades at 20E-21E EV/EBIT multiple of 17.3x and 10.3x, which translates into 50-60% discount compared to the luxury peers. We downgrade to “HOLD” (“BUY”) with TP of EUR 24 (28).

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Endomines - Production finally picking up

15.05.2020 - 09.15 | Company update

Endomines Q1 report was largely uneventful, with no gold concentrate production at Friday during the quarter. Financial transactions in Q2 will aid the strained cash position. Q2 is set for first Friday gold concentrate sales, while the COVID-19 pandemic is creating uncertainty around production ramp-up to design capacity. We retain our SELL-rating with a target price of SEK 5.5 (5.0).

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No gold concentrate sales in Q1
Endomines Q1 report contained limited new information of value. No gold concentrate sales from Friday occurred and revenue amounted to SEK 3.1m due to Pampalo clean up gold. Lesser cost activation saw costs higher than our estimates and as a result a weaker EBITDA, at SEK -27.8m (Evli -13.6m). 3,700 tonnes of lower grade (5.7 g/t) ore was mined during the first quarter. Design capacity (3,445 tonnes/month) at Friday is sought to be reached in Q2, however, COVID-19 impacts on staff and component availability may cause delays. The first gold concentrate shipment from Friday was made during Q2.

Financing arrangements to aid cash position
Post-Q1 financial transactions will bring much needed relief to Endomines’ strained cash position (Q1/20: SEK 1.3m), raising some SEK 81m through two loans and a rights issue. We expect further financing to be needed during 2020, as evident by the signing of an engagement letter with a financial advisor for long-term financing. Closing of the transaction with Transatlantic Mining provides additional production potential, although little is yet known of the assets. 2020 will in our view revolve around ramping-up production at Friday and planning for production at other assets from 2021 onwards.

SELL with a target price of SEK 5.5 (5.0)
Following adjustments to our valuation approach following the favourable gold price development and taking into account the transactions in Q2 we raise our target price to SEK 5.5 (5.0). Our SELL-rating remains intact.

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Endomines - Focus on ramp-up

14.05.2020 - 10.00 | Earnings Flash

Endomines did not sell any gold concentrate from Friday in Q1. Design capacity at Friday is sought to be reached in Q2, although impacts of the COVID-19 pandemic may cause delays. No numeric production guidance was given. 3,700 tonnes of ore at 5.7g/t grade mined during Q1. EBITDA lower than our expectations at SEK -27.8m (Evli -13.6m).

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  • Endomines did not sell any gold concentrate from Friday in Q1. An agreement for the sale of gold concentrate was signed and the first shipment of gold concentrate from the Friday mine was done in May.
  • Revenue in Q1 amounted to SEK 3.0m, with our estimates at SEK 3.1m.
  • EBITDA in Q1 was at SEK -27.8m, below our estimate of SEK -13.6m following higher than expected costs.
  • At the processing facility at Friday Endomines was able to operate at a rate of 36 tonnes per day. Ramp up to design capacity (3,445 tonnes per month) continued. The goal is to reach design capacity during Q2, however, the COVID-19 pandemic poses some challenges with staff and part availability and continued effects of the pandemic may postpone the reaching of design capacity. Endomines has mined approximately 3,700 tonnes of ore at a grade of 5.7 g/t at Friday in Q1.
  • Endomines did not yet give any numeric production guidance for 2020.
  • Liquid assets amounted to SEK 1.3m at the end of the quarter. After the quarter Endomines raised SEK 81m net proceedings through the issuance of two loans and a directed share issue.
  • An agreement with Transatlantic Mining was signed after Q1 to buy US Grant Mine and mill and the Kearsarge Gold Project.

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Marimekko - Decline in sales in Q1

14.05.2020 - 08.45 | Earnings Flash

Marimekko’s Q1 result was below expectations as net sales decreased by 8%, amounting EUR 24.9m vs. EUR 27.9m/25.4m Evli/cons. Adj. EBIT was EUR 1.2m vs. EUR 1.7m/1.4m Evli/cons. Marimekko expects the coronavirus to have a significant negative impact on net sales and profitability in 2020. Guidance for ’20 was not given at this point.

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  • Finland: revenue was EUR 13.6m vs. EUR 13.3m Evli view. Revenue increased by 6%.
  • International: revenue was EUR 11.3m vs. EUR 14.6m Evli view. Revenue declined by 21%. The decline in wholesale sales in APAC was due to an exceptional delivery pattern in the comparison period but the coronavirus had also a negative impact as some expected reorders were not placed.
  • Retail sales were at the same level as in the comparison period but wholesale sales declined by 13% and licensing income by 71%.
  • Q1 adj. EBIT was EUR 1.2m (4.6% margin) vs. EUR 1.7m/1.4m (5.9%/1.4% margin) Evli/cons. Lower sales and a decline in relative sales margin had a weakening impact on result whereas lower fixed costs had a positive impact.
  • Q1 EPS was 0.02 EUR vs. EUR 0.07/0.10 Evli/cons.
  • The company expects the coronavirus to have a significant negative impact on net sales and profitability in 2020. Guidance for ’20 was not given at this point.

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Cibus Nordic - Graduating the property ladder

12.05.2020 - 09.30 | Company report

Our updated TP is SEK 150 (155), rating now BUY (HOLD).

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Cibus has performed according to expectations

Cibus’ portfolio performance has delivered the promises since the IPO in March 2018. Moreover, the portfolio’s exposure to supermarkets, in our view the preferred daily-goods store type, has increased following a string of acquisitions large and small. The company has also advanced on the organizational side. Cibus is now more independent entity, and Sirius’ partial exit made entry for other institutional investors easier and helped facilitate the Swedish property market expansion earlier this spring.

The Swedish market entry fits the strategy well

Cibus was able to acquire the EUR 180m Coop supermarket portfolio at a yield of close to 6%, which to us was a surprisingly high level, especially considering the portfolio’s quality, 10-year triple-net lease structure as well as Coop’s agreement to invest SEK 3m into each of the 110 stores for rebranding purposes (Coop acquired the stores from Netto last year). We view the portfolio a good base for further expansion in Sweden.

We base our TP on the portfolio’s current CF capacity

Cibus continues to trade at attractive levels relative to other listed Nordic property portfolios since Cibus’ assets are small in the institutional investor context and thus there’s a paucity of buyers as this specific asset class isn’t the most convenient way to deploy large amounts of capital. Single grocery stores can often be purchased at high yields. We’d describe Cibus a vehicle for capitalizing on the yield differential. Since Cibus’ portfolio is well diversified we see there’s scope for fair value gains every time Cibus buys a property. Having said that Cibus isn’t the only Nordic daily-goods property portfolio (although it’s the only publicly traded one) and so we view it prudent to focus on the current portfolio cash flow capacity. We value Cibus’ current cash flow prospects with a yield we see sufficiently below that of the underlying daily-goods property market (to account for diversification benefits) on the one hand, and adequately above that of the wider property market (the vehicular benefits shouldn’t be exaggerated) on the other. Our TP is now SEK 150 (155), rating BUY (HOLD).

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Pihlajalinna - Getting ready for the FCCA’s decision

11.05.2020 - 09.25 | Company update

Pihlajalinna’s Q1 revenue amounted to EUR 133m (+0.4% y/y) vs. our EUR 135m. Adj. EBIT was EUR 4.2m vs. our EUR 5.2m. The tender offer by Mehiläinen is currently being under review of the FCCA and the final decision should be ready at the end of Q2 or latest in Q3. We keep our TP of EUR 16.0 and downgrade our rating to “HOLD” (“BUY”).

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Non-urgent and oral healthcare took hit from COVID-19

Pihlajalinna’s Jan-March result was rather good even though it slightly missed our expectations. Q1 revenue increased by 0.4% y/y to EUR 133m (EUR 135m/133m Evli/cons). Adj. EBIT landed at EUR 4.2m (EUR 5.2m/4.4m Evli/cons). According to the management, revenue and profitability developed as expected during the first months of the year but the coronavirus and the emergency laws that came into force in mid-March had a negative impact on the company’s business. Negative impacts were especially seen on the demand of non-urgent healthcare and oral healthcare. Fitness centers were also closed at the end of March. The decreased customer flows reduced the invoicing by approx. EUR 3.3m.

Demand should start slowly to recover

We expect the coronavirus had the most negative impacts on Pihlajalinna’s business in April due to the movement restrictions but the demand should start slowly to recover as the government is starting to ease the restrictions. Also, the management of Pihlajalinna indicated that some signs of recovering demand have already been seen. During these unexceptional times, complete outsourcings and other fixed-price invoicing have supported the company as the profitability of these kinds of contracts normally remains stable, even during times of lower demand. Also, the coronavirus should not have significant impacts on the demand of housing services for the elderly or recruitment services. Thus, more than half of the business operations are expected to remain stable during this time. The outlook for H2 still remains blurry as the visibility around the situation is very weak. Therefore, guidance for 20E was not given at this point.

“HOLD” (“BUY”) with TP of EUR 16

We have cut our 20E adj. EBIT estimate by ~20% while making only minor adjustments to our revenue expectation. We expect 20E revenue of EUR 517m (-0.3% y/y) and adj. EBIT of EUR 21.6m (3% y/y). The tender offer by Mehiläinen is currently being under review of the FCCA (in the phase two investigation). The investigation process should be completed at the end of Q2 or latest during Q3. We keep our TP at the tender offer price of EUR 16 and downgrade our rating to “HOLD” (prev. “BUY”).

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Pihlajalinna - Q1 result slightly below expectations

08.05.2020 - 08.40 | Earnings Flash

Pihlajalinna’s Q1 result was slightly below our expectations but in line with consensus. Q1 revenue amounted to EUR 133m vs. EUR 135m/133m Evli/cons, while adj. EBIT landed at EUR 4.2m vs. EUR 5.2m/4.4m Evli/cons estimates. Guidance for 20E was not given at this point.

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  • Q1 revenue was EUR 133m vs. EUR 135m/133m Evli/cons estimates. Revenue grew by 0.4% y/y.
  • Q1 adj. EBITDA was EUR 12.7m (9.5% margin) vs. EUR 14.2m/13.2m Evli/cons estimates.
  • Q1 adj. EBIT was EUR 4.2m (3.2% margin) vs. EUR 5.2m/4.4m (3.9%/3.3%) Evli/cons estimates
  • Q1 EPS was EUR 0.06 vs. EUR 0.12/0.10 Evli/cons.
  •  According the company, sales and profitability developed as planned during the first months of the year, prior the coronavirus epidemic.
  •  Pihlajalinna did not provide a guidance for 20E at this point due to the coronavirus.

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Exel Composites - The story is not derailed

07.05.2020 - 09.30 | Company update

Exel’s Q1 met expectations. The pandemic has so far had a limited impact on operations. Short-term demand outlook is uncertain, but we don’t see long-term fundamentals impaired. Our TP is now EUR 5.50 (6.75), rating still BUY.

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Strong development continued during Q1

Exel’s EUR 27.8m Q1 revenue grew by 3% y/y and matched EUR 27.9m/27.2m Evli/cons estimates. The company updated its reporting structure, now disclosing revenue for seven customer industries instead of the previous three broad segments. Buildings & infrastructure and Wind power, which previously made up the Construction & Infrastructure segment, reported a combined EUR 12.0m in revenue, which was in line with our estimate (Wind power only grew by 1% y/y due to timing issues). Machinery & electrical, Transportation and Telecommunications, i.e. the former parts of Industrial Applications, reported a combined EUR 8.4m. This was less than we expected but Equipment & other industries and Defense made up with a total of EUR 7.4m. Adjusted EBIT, at EUR 2.1m, also met EUR 2.2m/2.0m Evli/cons estimates. ROCE increased to 12% from 3% a year ago and the US unit reached profitability. Order intake growth accelerated to 23% y/y pace and the EUR 34.5m in new orders meant order backlog stood at EUR 37.1m, up 50% y/y. A big US order is scheduled to be delivered through FY ’20.

We now expect adjusted EBIT to increase to EUR 7.8m

Although strong development continued Exel is not immune to macro uncertainty and thus the company withdrew guidance. We revise our estimates down. We previously expected 6% top line growth for this year, and we have revised the figure down to 3%. We cut our FY ’20 EBIT estimate down by EUR 0.9m to reflect potential operational challenges. In our opinion the long-term case remains intact. Exel also has a good liquidity situation. The EUR 10m overdraft facility was extended by two years.

We cut our TP due to significantly higher uncertainty

In our view higher multiples are justified by the fact that Exel has continued to perform according to expectations. Meanwhile the pandemic raises uncertainty even if development has remained good. We update our TP to EUR 5.50 (6.75) due to lowered estimates and higher uncertainty; yet in our view Exel still trades at relatively low multiples and we thus retain our BUY rating.

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Etteplan - Better than feared

06.05.2020 - 10.00 | Company update

Etteplan’s Q1 results were better than feared and market turbulence had a rather minor impact, with a slight decline in organic growth. We expect an average organic growth of around -7% in 2020 and EBITA to decline to EUR 16.9m (2019: 25.9m). We retain our HOLD-rating with a target price of EUR 8.0 (6.9).

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Q1 results better than expected
Etteplan’s Q1 results beat our and consensus estimates. Revenue amounted to EUR 71.3m (EUR 67.0m/70.0m Evli/Cons.) and EBIT to EUR 5.7m (EUR 4.4m/5.0m Evli/cons.). The assumed effect of the COVID-19 pandemic and labor market turbulence in Finland on Q1 was fortunately smaller than expected. The organic growth did however turn negative and was -1.9% on comparable FX. The number of hours sold in China decreased 25% y/y but business was nearly back to normal by the end of March.

We expect 2020 organic growth of around -7%
Uncertainty in the coming quarters is elevated by the COVID-19 pandemic and visibility is low, due to which Etteplan is also not giving a guidance for 2020. We use the number of temporary layoffs as a benchmark for our 2020 estimates, for which we assume an upper bound for the Q2 average FTE capacity decrease of around 8%. Pricing pressure is further likely to increase along with a risk for credit losses, for which Etteplan made minor reservations in Q1. We currently assume that the situation will improve in the latter quarters but still expect an average organic growth of around -7% in 2020, with our 2020 revenue estimate at EUR 259.8m (2019: 262.7m). We expect 2020 EBITA to decline to EUR 16.9m (2019 25.9m).

HOLD with a target price of EUR 8.0 (6.9)
Etteplan is currently trading at 8.2x 2020 EV/EBITDA on our estimates, with peers trading at ~8.8x. With the COVID-impact now more accurately reflected in peer multiples we assign a higher weight on peer multiples, keeping the pre-COVID average NTM EV/EBITDA of 9.0x as a benchmark, and along with some added confidence from the Q1 report raise our target price to EUR 8.0 (6.9) and retain our HOLD-rating.

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Exel Composites - Q1 as expected but guidance is off

06.05.2020 - 09.35 | Earnings Flash

Exel Composites’ Q1 results met expectations. The company nevertheless had to withdraw FY ’20 guidance. The pandemic has so far had only a limited impact on business.

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  • Q1 revenue was EUR 27.8m vs EUR 27.9m/27.2m Evli/consensus estimates, thus increasing by 3% y/y. The pandemic impacted business only in China during Q1, where production has resumed to full capacity. The UK unit has been running at reduced capacity since April.
  • Exel Composites updated its reporting structure. The company previously reported revenue for three broad segments and now discloses figures for seven customer industries. In Q1 most of the customer industry revenues grew y/y, excluding Transportation and Telecommunications. 
  • Exel Q1 adjusted operating profit stood at EUR 2.1m compared to EUR 2.2m/2.0m Evli/consensus estimates.
  • Order intake increased by 23% y/y to EUR 34.5m. Order backlog was thus 50% higher than a year ago.
  • Exel Composites issued an outlook on Feb 18 according to which revenue and adjusted operating profit are expected to increase in 2020 compared to 2019. The company now withdraws the guidance due to poor short-term visibility.

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Aspo - Improvement outlook unclear

06.05.2020 - 08.55 | Company update

Aspo’s operations ran rather normal in Q1, but profitability is under more pressure in Q2 and it’s quite uncertain how strong EBIT might rebound in H2’20. We have cut our estimates, our TP is now EUR 6.00 (6.25), rating HOLD.

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The segments will perform far short of their potential

The nascent pandemic began to impair ESL’s EBIT early on in Q1 as the escalating situation in China had a substantial negative effect on shipping rates. ESL’s Q1 EBIT thus fell to EUR 2.3m from EUR 3.2m a year ago. ESL was able to run its operations without interruptions and cargo volumes declined only slightly to 3.5m tonnes (3.6m tonnes a year ago), helped by stable levels for smaller vessels. Demand for larger vessels, however, remains rather weak and this also negatively affects demand for loading services. Q2 is thus set to be worse. Telko’s EUR 2.4m EBIT in the face of falling volumes and prices was in our view strong show (revenue down 12% y/y), yet the operational improvements are probably not going to help figures that much in the near-term considering the kind of macroeconomic outlook e.g. vaporizing oil prices are indicating. Leipurin’s EBIT improved to EUR 0.6m, but many customers such as restaurants, cafes and small bakeries are suffering. Large industrial bakeries saw demand briefly spike but the situation has since normalized.

We now expect FY ’20 EBIT to decline almost 20%

We have cut our estimates especially for Telko. We now expect Telko’s FY ’20 revenue to decline by 14% and see EBIT down to EUR 6.4m compared to EUR 8.0m last year. For Q2 we see Telko revenue down 22% y/y. We estimate Aspo’s FY ’20 EBIT at EUR 17.4m (previously estimated EUR 20.7m) as macroeconomic recovery prospects have continued to deteriorate. H2’20 remains particularly uncertain in terms of ESL’s cargo volume outlook (on which EBIT improvement mainly relies). In our view Aspo’s creditworthiness is not in question (the company also has a EUR 67m liquidity position), but from a shareholder point of view the pace of improvement remains crucial, and right now it’s unclear just how quickly profitability could reach more attractive levels.

We see current valuation fair in the present environment

Our view is unchanged in the sense that higher profitability potential remains, but for now it’s difficult to rely on long-term estimates. Our TP is EUR 6.00 (6.25), rating still HOLD.

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Innofactor - Right on track

06.05.2020 - 08.45 | Company update

Innofactor posted solid profitability figures in Q1 along with continued revenue growth. A minor COVID-19 impact is expected for the rest of the year. We continue to expect minor sales growth along with EBITDA improvement in 2020. We retain our BUY-rating with a target price of EUR 0.95 (0.90).

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Solid Q1 profitability and sales growth
Innofactor’s Q1 results beat our expectations and profitability reached solid levels. Revenue amounted to EUR 17.2m (Evli 16.8m) and grew 6.2% y/y. EBITDA amounted to EUR 2.0m (Evli 1.2m). All countries were profitable and showed sales growth in Q1. Non-cash internal debt exchange rate fluctuations kept PTP in the red but operating cash flow was a solid EUR 3.1m. The order backlog was at a good level of EUR 54.1m and the pipeline remains healthy according to the company. Guidance remains intact, with net sales and EBITDA expected to increase compared to 2020.

COVID-19 impact expected to be minor
Innofactor expects the impacts of the Coronavirus pandemic on the rest of the year to be minor. Our 2020 estimates remain largely intact as the solid Q1 offset adjustments due to the pandemic for the later quarters. We expect minor growth in 2020, with revenue of EUR 65.1m (2019: 64.2m), and an EBITDA of EUR 5.9m (2019: 5.1m). The high share of recurring revenue, some 55% in Q1, will prove to be beneficial under current circumstances. Additional funding of EUR 3.0m was secured for financial flexibility and possibly pursuing inorganic growth opportunities. The ownership in Arc Technology was increased and will be reported as a subsidiary from Q2, 2020 net sales impact is approximately EUR 1.0m.

BUY with a target price of EUR 0.95 (0.90)
Innofactor has been on a good track on EPS growth and improved operational efficiency and the impact of COVID-19 is estimated to be limited. Valuation has become fairer on peer multiples, but we see long-term potential intact. We retain our BUY-rating with a target price of EUR 0.95 (0.90).

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Aspo - Q2 will be weaker

05.05.2020 - 10.50 | Earnings Flash

Aspo disclosed its preliminary Q1 figures already on Apr 9, in addition to withdrawing guidance for FY ’20, so there was little surprise with regards to the results released today. The pandemic did hurt Q1 figures to some extent, but the impact will be felt harder during Q2.

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  • Aspo Q1 revenue stood at EUR 133.2m, down 6% y/y.
  • Q1 EBIT was EUR 4.0m. Lower shipping rates in early Q1, due to the situation in China back then, affected ESL’s profitability, while in our view Telko and Leipurin managed relatively strong operating profits. Q2, however, is bound to be worse for all three.
  • ESL Shipping’s top line was EUR 42.7m (EUR 43.7m a year ago) while EBIT amounted to EUR 2.3m (EUR 3.2m a year ago). Q1 cargo volumes declined slightly y/y from 3.6m to 3.5m tonnes. Volumes for smaller vessels remained at a normal level. ESL can operate normally, but both demand and shipping rates are set to fall further during Q2.
  • Telko’s Q1 revenue was EUR 63.6m i.e. down 12% y/y, and EBIT came in at EUR 2.4m (EUR 2.4m a year ago). Aspo expects volumes to decline rapidly during Q2.
  • Leipurin posted EUR 26.9m revenue, up 4% y/y, and EUR 0.6m EBIT (EUR 0.5m a year ago). Aspo says the pandemic will have a significant negative impact on Q2 figures.

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Innofactor - Solid profitability figures

05.05.2020 - 09.30 | Earnings Flash

Innofactor’s Q1 results were above our expectations and profitability was at solid levels. The net sales in Q1 amounted to EUR 17.2m (Evli EUR 16.8m), while EBITDA amounted to EUR 2.0m (Evli EUR 1.2m). Guidance remains intact. COVID-19 impact so far limited, minor impact on net sales and profitability expected for the end of the year.

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  • Net sales in Q1 were EUR 17.2m (EUR 16.1m in Q1/19), slightly above our estimates (Evli EUR 16.8m). Net sales in Q1 grew 6.2 % y/y. Net sales grew in all countries.
  • EBITDA in Q1 was EUR 2.0m (EUR 0.9m in Q1/19), clearly above our estimates (Evli EUR 1.2m), at a margin of 11.4 %.
  • Operating profit in Q1 amounted to EUR 0.8m (EUR -0.1m in Q1/19), clearly above our estimates (Evli EUR 0.1m), at a margin of 4.8 %.
  • Order backlog at EUR 54.1m, up 32% y/y. Innofactor received several significant orders during the quarter and the order backlog improved q/q.
  • Guidance intact: Innofactor’s net sales and EBITDA in 2020 are estimated to increase compared to 2019.
  • The Coronavirus pandemic has so far not had a significant effect on the ability to provide services. Innofactor estimates that the pandemic will have a minor effect on the net sales and profitability of the rest of the year. Third and fourth quarter growth and profitability will depend on the schedule of removal of restrictions in the Nordics.
  • EUR 3.0m additional funding received, organic growth opportunities possible

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Solteq - Good start given prevailing uncertainty

04.05.2020 - 09.45 | Company update

Solteq’s Q1 growth was clearly better than expected, 11.6% in comparable terms, with sales at EUR 15.7m (Evli 14.4m). The adj. EBIT was in line with our expectation at EUR 0.9m (Evli 0.8m). We expect reasonable growth in comparable terms in 2020 despite some COVID-19 headwind. We retain our HOLD-rating with a TP of EUR 1.15 (0.95).

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Growth in Q1 a positive surprise
Solteq’s revenue growth in Q1 was a clear positive, with revenue growing 5.0% (comparable growth 11.6%) to EUR 15.7m (Evli EUR 14.4m). Growth was driven by the Solteq Digital as a result of good order intake. The adj. EBIT was in line with our estimates at EUR 0.9m (Evli EUR 0.8m), with a lower relative profitability y/y (Q1/19: comp. EBIT 1.2m) due to higher product development depreciation, long-term project revenue recognition and COVID-19 provisions.

Expect growth in comparable revenue despite COVID-19
Based on the positive Q1 revenue figures we have revised our 2020E estimates, expecting revenue to amount to EUR 58.9m and increase some 6.5% from 2019 comparable revenue figures. We assume a dip in sales growth during mid-2020 due to the COVID-10 pandemic but for growth to pick up in 2021. We expect the adj. EBIT in 2020E (Evli EUR 2.4m) to be slightly below 2019 comparable figures largely due to an increase in depreciation related to capitalized product investments. Solteq does not provide a guidance for 2020 due to the pandemic. During 2021-2022 we expect stronger relative growth pick up in Solteq Software with the ramp-up of new projects and a perceived lesser impact of the pandemic along with a notable improvement in relative profitability.

HOLD with a target price of EUR 1.15 (0.95)
On our revised estimates we retain our HOLD-rating with a target price of EUR 1.15 (0.95). Should growth continue at a similar pace as in Q1 valuation upside potential would be clearer, but visibility is currently limited due to the COVID-19 pandemic and earnings multiples on our estimates rather unattractive.

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SRV - Good start to the year

30.04.2020 - 09.45 | Company update

SRV’s Q1 results were better than expected, most importantly profitability improved to healthy levels (EBIT Act./Evli EUR 4.5m/-5.1m), and order intake is showing positive development. Steps to improve the financial position continue to be of focus, COVID-induced uncertainty poses a threat to shopping centre exit plans. We retain our HOLD rating with a TP of EUR 1.1 (1.0).

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Back to healthier profitability in Q1
SRV’s Q1 results were better than expected. Revenue amounted to EUR 208.1m (EUR 187.0m/198.0m Evli/cons.) and EBIT to EUR 4.5m (EUR -5.1m/-0.4m Evli/cons.). Compared to our estimates, profitability was higher mainly due to a misjudgment of FX hedging and the higher revenue. Q1 included EUR 2.1m profit margin eliminations from the sale of holdings in REDI and Tampere Deck and Arena. Overall, Q1 profitability was in our view a clear but still early positive sign of a turnaround. New orders have developed positively so far during 2020, with EUR 198m new orders in Q1.

2020 EBIT estimate raised to 14.8m (4.3m)
Apart from adjustments based on Q1 figures, our 2020 estimates are largely intact. SRV’s estimate for developer-contracted housing unit completions in 2020 was revised to 520 (586), but we had for housing construction already as a precaution to possible near-term housing market uncertainty due to the coronavirus pandemic assumed a clearly lower number of units recognized as income compared to completion guidance. Our revised 2020E estimates for revenue and EBIT are EUR 957.2m (prev. 956.2m) and EUR 14.8m (prev. EUR 4.3m).

HOLD with a target price of EUR 1.1 (1.0)
Following estimates revisions, we adjust our target price to EUR 1.1 (1.0) and retain our HOLD-rating. Q1 showed good progress on the profitability front, next steps will be the measures to improve the financial position. Received commitments support the upcoming rights issues, shopping centre exits will likely see delays due to the COVID-induced uncertainty.

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Finnair - Figuring out the new normal of air travel

30.04.2020 - 09.25 | Company update

Finnair’s Q1 result was weak as expected due to the coronavirus pandemic. Revenue declined by 16% y/y to EUR 561m while adj. EBIT was EUR -91m. We have decreased our 20E-22E estimates and downgrade our rating to “SELL” (“HOLD”) with TP of EUR 3.3 (4.0).

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Weak Q1 result due to COVID-19
Finnair’s Q1 result was heavily impacted by COVID-19. Revenue declined by 16% y/y to EUR 561m vs. EUR 585m/555m Evli/cons. Adj. EBIT was below estimates at EUR -91m vs. EUR -73m/-59m Evli/cons. ASK decreased by 9.4% y/y while RASK decreased by 7.3% y/y. The company expects a significant comparable operating loss in 20E. Earlier Finnair cut its capacity by over 90% due to the coronavirus and the company will operate the current minimum network throughout Q2. Finnair estimates that its comparable operating result will be a daily loss of approx. EUR 2m throughout Q2.

Ugly Q2 ahead – H2 remains blurry
Due to the coronavirus pandemic, Q2E result will be even uglier than in Q1. We expect Finnair’s Q2E ASK to decrease by 95% y/y, resulting in a significant decline in revenue. We expect comparable operating loss of EUR ~170m in Q2E. The situation should start slowly to recover after Q2 but we still expect significant capacity cuts during the late summer and autumn. H2’20E remains blurry as it still is unknown how the coronavirus situation will evolve in different markets. Finnair also gave insights of how the mid-term outlook of air travel might look like and indicated that the passenger numbers are not expected to recover to the levels prior the crisis at least not during the next couple of years. It is likely that the air travel will face permanent structural changes and will never return as it was before the crisis.

“SELL” (“HOLD”) with TP of EUR 3.3 (4.0)
We have decreased our 20E revenue estimate by ~20% and adj EBIT estimate by ~80%. We have also cut our 21E-22E revenue estimates by ~14% and adj EBIT estimates by ~30-50%. We now expect Finnair’s 20E revenue to decline by 43% y/y to EUR 1752m and comparable operating loss of EUR 265m. We note that there are significant uncertainties with our estimates. Prior the crisis, Finnair had a strong cash position and a healthy balance sheet. The company is also implementing a substantial funding plan, including sale and leasebacks of unencumbered aircraft, a revolving credit facility of EUR 175m, which has already been raised and a statutory pension premium loan totaling to EUR 600m. Therefore, we see that Finnair is well placed to continue its operations after the crisis, even if the situation is prolonged. Finnair is also planning for an approx. EUR 500m share issue to strengthen its equity. We downgrade our rating to “SELL” (“HOLD”) with TP of EUR 3.3 (4.0).

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Raute - Long-term story not much changed

30.04.2020 - 09.10 | Company update

Raute’s Q1 results missed our estimates due to order timing and certain delays, while order intake was a positive surprise. The pandemic has so far had a limited impact. In the big picture our view is not meaningfully changed since Raute’s results tend to be volatile also in more normal times. Our TP remains EUR 21 and rating HOLD.

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Outlook seems to have turned more positive in early Q1
Q1 revenue fell by 42% y/y to EUR 24m vs our EUR 36m estimate. Services’ EUR 10m top line fell short of our EUR 13m expectation, but most of the gap was due to project deliveries’ order timing as the EUR 58m Russian order was recognized at a lower rate than we expected. Certain unseen delivery delays also had an impact. Project revenue thus amounted to EUR 14m while we had estimated EUR 23m. The EUR -3.0m EBIT (vs our EUR 1.5m estimate) was also due to higher investments in R&D, which Raute booked EUR 1.4m in Q1, or slightly higher than our expectation (Raute says there were certain exceptional items to the line and says ca. EUR 1.2m would be a more normal figure). The report’s positive note was found in order intake, which at EUR 25m was above our EUR 15m estimate. Technology services’ order intake, at EUR 11m, was as we expected and so the EUR 14m in project deliveries orders clearly exceeded our estimate.

Raute’s competitive position is unlikely to be hit
Maintenance and spare parts demand continued good, but safety policies began to restrict business with the onset of the pandemic. Raute saw positive signs in terms of potential uptick in demand prior to the pandemic. Since then customers’ comments have been mixed and there’s no consensus on how long-term fundamentals might have been altered. Our view is that end-demand, i.e. wood-based construction, is not meaningfully impaired. Government actions could possibly help construction but right now there are few facts. The EUR 92m order book is highly current i.e. cancellations are unlikely. The EUR 40m cash position means liquidity is no problem.

We see reasons why more long-term valuation is justified
Multiples for FY ‘20 begin to look high but should normalize next year. We see Raute well-positioned for an uncertain macro environment and thus in our opinion a more long-term view is justified. Our TP is still EUR 21, rating HOLD.

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Solteq - Solid revenue growth

30.04.2020 - 08.30 | Earnings Flash

Solteq’s revenue in Q1 was better than expected at EUR 15.7m (Evli EUR 14.4m). Comparable growth was 11.6%. The adj. operating profit was in line with expectations at EUR 0.9m (Evli EUR 0.8m). Product development investments in 2020E EUR 3.0m (2019 3.9m).

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  • Net sales in Q1 were EUR 15.7m (EUR 14.9m in Q1/19), above our estimates (Evli EUR 14.4m). Growth in Q4 amounted to 5.0 % y/y. Comparable growth, adjusted for the divestment of the SAP ERP business amounted to 11.6%. Growth was mainly driven by the Solteq Digital segment. Approximately a quarter of sales came from outside Finland.
  • The operating profit in Q1 amounted to EUR 0.7m (EUR 1.5m in Q1/19), in line with our estimates (Evli EUR 0.8m). The adj. operating profit amounted to EUR 0.9m (EUR 1.2m in Q1/19), in line with our estimate of EUR 0.8m.
  • Capitalized product development investments during Q1/20 amounted to EUR 1.0m. Solteq expects product development investments in 2020 to amount to EUR 3.0m (2019: EUR 3.9m).
  • Solteq Digital: Revenue in Q1 amounted to EUR 11.3m (Q1/19: EUR 10.7m). Comparable growth 15.5%. The adj. EBIT amounted to EUR 0.7m (Q1/19: EUR 0.6m).
  • Solteq Software: Revenue in Q1 amounted to EUR 4.3m (Q1/19: EUR 4.2m). Growth was 2.5%. The adj. EBIT amounted to EUR 0.2m (Q1/19: EUR 0.7m).
  • Solteq announced a change to its dividend proposal due to uncertainty caused by the coronavirus pandemic and the BoD is to propose that no dividend be distributed.

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Tokmanni - Expecting a quick recovery after the crisis

30.04.2020 - 07.45 | Company update

Tokmanni’s Q1 revenue increased by 5.8% y/y to EUR 199m (EUR 197m our view), while adj. EBIT was EUR 0.3m (EUR -2.2m our view). We expect sales and margins to decline in Q2 due to the movement restrictions but the situation should normalize relatively fast during the summer. We keep our rating “BUY” with TP or EUR 13.5 (12.5).

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Good sales and profitability development in Q1
Tokmanni’s Q1 result was slightly above estimates as revenue increased by 5.8% y/y to EUR 199m vs. EUR 197m/194m Evli/cons. LFL growth was 4.4%. Revenue was supported by good growth in online sales while the mild winter in Southern Finland had a negative impact on sales. The movement restrictions that came into force in mid-March had also a negative impact. For the first time in the company’s history, adj. EBIT was positive in Q1 as it amounted to EUR 0.3m vs. EUR -2.2m/-1.4m Evli/cons. The positive development in EBIT was mainly due to improved adj. gross margin which was 32.1% (Q1’19: 31.2%). Due to the situation around the coronavirus, the company did not provide a guidance for 20E.

Attracting new customer groups as the economic outlook weakens
The customer numbers in stores saw a significant drop when the movement restrictions came into force in mid-March. The stores have been open during this exceptional time. We expect the customer numbers to remain in a lower level during Q2 compared to the normal levels but expect the numbers to increase relatively fast after the restrictions are removed. We expect good growth in grocery sales and as people are staying at home, the demand in categories such as leisure and gardening is likely to remain strong. As an only nationwide general discount retailer with a broad product assortment, we expect Tokmanni to attract new customer groups as it is likely that consumers become more price conscious when the economic outlook weakens and the purchasing power declines. We expect a decline in sales and margins in Q2 compared to the previous year but the situation should normalize relatively quickly after that. Due to the temporary changes in the sales mix, we expect only a slight improvement in gross margin in 20E.

“BUY” with TP of EUR 13.5 (12.5)
After the Q1 result we have increased our 20E revenue expectation by ~1% and adj. EBIT expectation by 17%. We now expect 20E revenue of EUR 931m (-1.4% y/y) and adj. EBIT of EUR 64.5m (-8% y/y). On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 16.0x and 11.9x, which translates into ~15-30% discount compared to the international peers. With the estimates upgrade, we increase our TP to EUR 13.5 (12.5) and retain our rating “BUY”.

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Consti - Order backlog declines showing

30.04.2020 - 07.30 | Company update

Consti’s Q1 revenue declined more than expected (Act./Evli EUR 59.0m/64.7m), while EBIT was below our overly optimistic estimates (Act./Evli EUR 0.5m/1.9m). The impact of COVID-19 has been limited, some headwind is seen in new projects. We adjust our TP to EUR 7.0 (7.2), HOLD-rating remains intact.

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Below our optimistic estimates, good cash conversion
Consti’s Q1 results were below estimates but quite in line with company expectations. Revenue declined more than expected, 19.7% y/y, to EUR 59.0m (EUR 64.7m/67.9m Evli/cons.). EBIT was below our estimates as a result of the lower revenue and admittedly also our overly optimistic estimates, at EUR 0.5m (EUR 1.9m/0.4m Evli/cons.). Conti’s cash conversion remained solid (LTM cash conversion ratio 105.7%) and free cash flow amounted to EUR 2.0m. The order intake development was positive and amounted to EUR 62.1m, with the order backlog at EUR 202.2m (-14.9% y/y).

Some headwind seen in new projects
We have lowered our estimates based on the perceived new revenue level after the high volumes in 2019 and Q1 figures. We now expect revenue of EUR 271.9m (prev. 282.3m) and EBIT of EUR 7.6m (prev. 10.1m) in 2020E. The coronavirus pandemic has so far had a limited impact on Consti, as worksites have been able to be kept open. Negotiations for new renovation projects have been successful, for instance a EUR 11.3m school renovation project. Some projects in the negotiation stage have however been cancelled and the start of some projects have been postponed. Our estimates currently only include a limited impact of the pandemic.

HOLD with a target price of EUR 7.0 (7.2)
On our revised estimates we adjust our target price to EUR 7.0 (7.2), valuing Consti at ~10x 2020E EV/EBIT, and retain our HOLD-rating. Uncertainty is elevated by the pandemic and the St. George arbitration proceedings, which saw the time limit for delivering the final arbitration award extended to June 2021.

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Finnair - Significant losses due to COVID-19

29.04.2020 - 09.35 | Earnings Flash

Finnair’s Q1’20 adj. EBIT was EUR -91m vs. our expectation of EUR -73m and consensus of EUR -59m. Revenue decreased by 16% and was EUR 561m vs. our expectation of EUR 585m and consensus of EUR 555m.

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  • Q1 revenue was EUR 561m vs. EUR 585m/555m Evli/cons.
  • ASK decreased by 9.4% y/y in Q1. RASK decreased by 7.3% y/y.
  • Q1 adj. EBIT was EUR -91m vs. EUR -73m/-59m Evli/cons. Q1 comparable EBITDA was EUR -8.6m vs. EUR 4.5m our view.
  • Absolute costs in Q1: Fuel costs were EUR 144m vs. EUR 132m our view. Staff costs were EUR 136m vs. EUR 117m our view. All other OPEX+D&A combined were EUR 386m vs. EUR 425m our view.
  • Unit costs: CASK was 6.75 eurocents vs. 6.81 eurocents our view.
  • Q1 EPS was EUR -1.14 vs. -0.61/-0.70 Evli/cons.
  • Finnair expects that comparable operating loss will be significant in 20E. The company estimates that with the current minimum network, its comparable operating result will be a daily loss of approximately 2 million euros throughout the second quarter, despite cost adjustments.

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Raute - Miss driven by order book timing

29.04.2020 - 09.35 | Earnings Flash

Raute’s Q1 revenue and EBIT came in clearly below our expectations. According to Raute the pandemic had some negative impact, but the miss relative to our estimates seems to have been mostly attributable to order book scheduling. Order intake was clearly above our estimate, meaning order book increased slightly during the quarter.

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  • Raute posted EUR 23.8m Q1 revenue, compared to our 36.0m estimate. Project deliveries generated EUR 14.0m revenue (which we had expected at EUR 23.0m), while technology services sales amounted to EUR 9.8m (vs our EUR 13.0m estimate). The rather low top line figure was due to the timing of order book and a few projects’ postponing but the pandemic also had a negative impact, which Raute says was limited but not insignificant.
  • Q1 EBIT amounted to EUR -3.0m vs our EUR 1.5m estimate.
  • Order intake was EUR 25m in Q1 while we expected EUR 15m. The intake consisted of small and mid-sized individual production line deliveries and modernizations. Most of the orders received were attributable to projects that were negotiated long before the pandemic. Raute’s customers have continued to start up their investment projects in the face of the pandemic.
  • Order book stood at EUR 92m, compared to our EUR 67m expectation. In our view this is a rather strong figure.

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SRV - Q1 figures beat expectations

29.04.2020 - 09.15 | Earnings Flash

SRV's net sales in Q1 amounted to EUR 208.1m, above our and consensus estimates (EUR 187.0m/198.0m Evli/cons.). EBIT amounted to EUR 4.5m, above our and consensus estimates (EUR -5.1m/-0.4m Evli/cons.). SRV estimates that 520 developer-contracted housing units will be completed in 2020 (previously 586).

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  • Revenue in Q1 was EUR 208.1m (EUR 222.6m in Q1/19), above our estimates and consensus estimates (EUR 187.0m/198.0m Evli/Cons.). Growth in Q1 amounted to -6.5 % y/y.
  • Operating profit in Q1 amounted to EUR 4.5m (EUR 3.3m in Q1/19), above our estimates and consensus estimates (EUR -5.1m/-0.4m Evli/cons.), at a margin of 2.2 %. Operative operating profit was EUR 5.0m (Evli EUR 0.9m).
  • EPS in Q1 amounted to EUR -0.13 (EUR -0.02 in Q1/19), below our estimates and consensus estimates (EUR 0.07/-0.08 Evli/cons.).
  • The order backlog in Q1 was EUR 1,361.5m (EUR 1,782.5m in Q1/19), down by -23.6 %.
  • Construction: Revenue in Q1 was EUR 204.9m vs. EUR 186.3m Evli. Operating profit in Q1 amounted to EUR 6.2m vs. EUR 3.4m Evli.
  • Investments: Revenue in Q1 was EUR 1.6m vs. EUR 1.2m Evli. Operating profit in Q1 amounted to EUR 1.4m vs. EUR -7.5m Evli.
  • Other operations and elim.: Revenue in Q1 was EUR 1.6m vs. EUR -0.5m Evli. Operating profit in Q1 amounted to EUR -0.2m vs. EUR -1.0m Evli.
  • SRV estimates that 520 developer-contracted housing units will be completed in 2020 (previously 586).
  • The coronavirus pandemic did not substantially affect SRV’s revenue and result for January–March.

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Tokmanni - Q1 result slightly above estimates

29.04.2020 - 09.05 | Earnings Flash

Tokmanni’s Q1 revenue increased by 5.8% (LFL growth of 4.4%) and was EUR 199.0m vs. EUR 196.6m/193.5m Evli/consensus. Tokmanni’s adj. EBIT was EUR 0.3m vs. EUR -2.2m/-1.4m Evli/cons. Adj. gross margin was 32.1% vs. 31.4% Evli. The company did not provide a guidance for 20E, due to the coronavirus situation.

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  • Q1 revenue grew by 5.8% and was EUR 199.0m vs. EUR 196.6m/193.5m Evli/consensus. The leap day had a positive impact on sales. The restrictions caused by the coronavirus reduced customer flows towards the end of the quarter.
  • Q1 adj. gross profit was EUR 63.8m (32.1% margin) vs. EUR 61.7m (31.4%) Evli expectation.
  • Q1 adj. EBITDA was EUR 16.3m vs EUR 13.6m/14.5m Evli/consensus.
  • Q1 adj. EBIT was EUR 0.3m (0.1% margin) vs. EUR -2.2m (-1.1%) our expectation and EUR -1.4m (-0.7%) consensus.
  • Q1 eps was EUR -0.04 vs EUR -0.07/-0.06 Evli/consensus
  • Guidance for 20E was not given at this point due to the coronavirus crisis.

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Consti - Lower revenue drives estimates miss

29.04.2020 - 09.00 | Earnings Flash

Consti's net sales in Q1 amounted to EUR 59.0m, below our estimates and below consensus (EUR 64.7m/67.9m Evli/cons.). EBIT amounted to EUR 0.5m, below our estimates but in line with consensus (EUR 1.9m/0.4m Evli/cons.). Uncertainty has increased as a result of the coronavirus pandemic, but impact so far limited.

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  • Net sales in Q1 were EUR 59.0m (EUR 73.5m in Q1/19), below our estimates and consensus estimates (EUR 64.7m/67.9m Evli/Cons.). Growth in Q1 amounted to 19.7 % y/y.
  • Operating profit in Q1 amounted to EUR 0.5m (EUR 0.4m in Q1/19), below our estimates and in line with consensus estimates (EUR 1.9m/0.4m Evli/cons.), at a margin of 0.8 %.
  • EPS in Q1 amounted to EUR 0.01 (EUR -0.08 in Q1/19), below our estimates and in line with consensus estimates (EUR 0.15/0.00 Evli/cons.).
  • Free cash flow EUR 2.0 (Q1/19: EUR -3.5m)
  • The order backlog in Q1 was EUR 202.2m (EUR 237.8m in Q1/19), down by -15 %. Order intake in the quarter amounted to EUR 62.1m (Q1/19: EUR 73.5m)
  • Uncertainty has increased as a result of the coronavirus pandemic, but impact so far limited. Worksites have remained open in all operational areas. Some projects in the negotiation stage have been cancelled, and the start of some projects that were at the contractual stage has been moved forward.
  • Guidance reiterated: The Company estimates that its operating result for 2020 will improve compared to 2019.

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Vaisala - Clouds over W&E while IM keeps on rocking

29.04.2020 - 08.45 | Company update

Vaisala delivered a better than expected Q1 result. Overall, Vaisala is well positioned to weather the corona storm, but clouds are gathering above W&E as project business is exposed to the pandemic. Given the uncertainty to W&E’s performance in H2, we do not see short term risk/reward profile particularly attractive now. Based on our slightly raised estimates, we raise our target price to 26€ (prev. 25€), our recommendation is now HOLD (prev. SELL).

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No major impact of corona in Q1
Vaisala delivered a better than expected Q1 result as corona did not have major impact on business in the quarter and delivery capabilities remained good. Q1 net sales grew 4% to 87.2 MEUR vs. 84.5 MEUR our expectation and 84.3 MEUR consensus. Q1 reported EBIT was 5.2 MEUR (6% margin) vs. our expectation of 2.1 MEUR (3.2 MEUR consensus). EBIT improvement was due to strong 3pp improvement in gross margins (56.4% vs. 53.2% Q1’19), which was attributed to projects and digital services in W&E and exceptionally high GM of 65.8% in IM. Q1 order intake decreased -21% due to lower order intake in W&E. It’s worth noting however that order intake comparison period was exceptionally good (including two large projects) and variations between quarters can be large depending on timing of projects. Order book grew +2% q/q and -6% y/y. The Ethiopian project order (13 MEUR) is not yet included in order book.

W&E business exposed while IM continues on track
Vaisala reiterated its 2020 guidance (updated on April 21st); expecting net sales of 370–405 MEUR and EBIT of 34–46 MEUR. With W&E’s current strong order book, descent order intake, and delivery capabilities remaining at current acceptable levels, we expect W&E business to perform well in H1. The effects of the corona pandemic impact more on W&E business in H2, where delays or postponements of projects become more likely if current situation is prolonged. Vaisala sees developed countries market remaining more stable while developing countries being more hit by the pandemic. IM is expected to continue growing, albeit slower than last year’s organic growth of roughly 9.5%.

Valuation stretched given weakened financial outlook in W&E
We’ve only made small adjustments to our estimates based on the report. We expect IM to continue performing well, while W&E to decline in H2 partly due the pandemic and high comparison period. We expect 2020e net sales to decline 3% to 392 MEUR and reported EBIT to decline to 39 MEUR, mainly due to the lower performance in W&E in H2. On our estimates, Vaisala is still trading at clear premiums compared to our peer group. Also, our 2020-21e PPA-adjusted EV/EBIT multiples of 22x and 19x, are ~25% above our peer group. Given the uncertainty to W&E’s performance this year, we do not see short term risk/reward profile particularly attractive now. Based on our slightly raised estimates, we raise our target price to 26€ (prev. 25€), our recommendation is now HOLD (prev. SELL). Our target price values Vaisala at 20-21e EV/EBIT multiples of 23.5x and 20x which is above peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

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Detection Technology - Corona related bump in the road

28.04.2020 - 09.00 | Company update

DT’s Q1 result clearly missed expectations due to weaker than expected demand and profitability development caused by COVID-19. DT expects weakness in SBU sales to continue throughout the year, while MBU is enjoying good momentum. DT is well positioned to weather out the corona storm and its competitive position with new products remains good. We have lowered our estimates for 2020e and based on the estimates cut, we lower our target price to 22€ (prev. 24€) but maintain BUY recommendation.

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Corona pandemic affecting SBU demand and profitability
DT’s Q1 net sales amounted to 19.9 MEUR (-13.6% y/y) vs. 22.2/22.0 MEUR Evli/consensus estimates. Q1 EBIT was 1.2 MEUR (5.9% margin) vs. 2.8/2.6 MEUR Evli/cons. R&D costs amounted to 2.6 MEUR or 13% of net sales (11% Q1’19). SBU had net sales of 11.5 MEUR vs. 14.2 MEUR Evli estimate. SBU sales declined -20% y/y, mainly due the COVID-19 pandemic. Both air and land transport decreased from 30 to 90% in different segments. MBU delivered net sales of 8.4 MEUR which was in line with our estimate of 8.0 MEUR. Net sales of MBU decreased by -2% y/y due to the expected softness in the CT market outside China at the beginning of the year, and the ramp-down in production of a product family started by one of DT’s key customers last year. The COVID-19 pandemic increased demand in CT applications towards the end of Q1, but relatively high comparison figures led to the overall development in net sales remaining negative.

Mid-term fundamentals remain good for both BU’s
DT expects lower demand in the security segment to continue in Q2 and SBU sales to decrease in 2020. DT sees that despite the short-term challenges in the aviation segment, ECAC C3 standard equipment upgrades will continue at European airports, but the deadline for CT machine installations will be probably extended by 6-12 months. The CT upgrades in the US have continued, however a slight delay is expected for future purchases. China is also preparing similar standardization and has informed earlier that they will publish details by the end of 2020. On the other hand, MBU sales is enjoying better momentum as CT imaging is used to detect pulmonary changes caused by the COVID-19 virus, as well as in the diagnosis and treatment of patients. DT sees demand in medical CT applications remaining at a good level also in H2 and MBU sales to increase in 2020.

Investment story remains attractive despite bump in the road
Based on the report, we have cut our 2020e sales and EBIT estimates by 8% and 23% respectively, while keeping our 2021-22e estimates broadly unchanged. We expect SBU sales to decline -13% from last year’s highs and MBU to grow 17%, resulting in 2020e net sales to decline -3% and EBIT of 13 MEUR. On our revised estimates, DT is trading at 19x and 13x EV/EBIT multiples for 20E-21E. Valuation picture is now more mixed as 2020e metrics will be clearly lower due to the pandemic, and growth and profitability should resume in 2021e. DT is now trading on slight EV/EBIT premium on our 2020e estimates, but on a 12% discount on our 2021e estimates. Although 2020e will be challenging, DT is well positioned to weather out the storm and its competitive position with its new products remains good. Therefore, we continue to see DT as an attractive investment story given the strong longer-term drivers, especially in China, as well as DT’s compelling strategy and execution capabilities. Based on the estimates cut, we lower our target price to 22€ (prev. 24€) but maintain BUY recommendation. Our target price implies EV/EBIT multiple of 15.5x on our 2020e estimates, broadly in line with our peer group.

Open report

Talenom - Defensive characteristics showing

28.04.2020 - 09.00 | Company update

Talenom’s Q1 results slightly beat our expectations, with net sales of EUR 17.4m (Evli 16.9m) and EBIT of EUR 3.7m (Evli 3.5m). Net sales and EBIT guidance for 2020 was set at EUR 64-68m and 12-14m respectively. Growth outlook remains favourable and any plausible impact from the coronavirus pandemic for now appears limited. We adjust our target price to EUR 7.0 (6.7), HOLD-rating intact.

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Q1 slightly better than expected
Talenom’s Q1 results were slightly better than expected. Net sales grew 17.4% to EUR 17.4m (Evli 16.9m) and EBIT amounted to EUR 3.7m (Evli 3.5m). Talenom gave a numeric guidance for 2020, expecting net sales of EUR 64-68m and EBIT of EUR 12-14m. Sales plans have progressed almost in line with plans despite the coronavirus pandemic. Investments are being made to customer interfaces and plans for a new concept for small customers were floated, which sounds promising but will likely have little sales impact before 2021. Additional financing of EUR 10m was secured for acquisitions and growth projects in Finland and Sweden.

Near-term risks limited
Our post-Q1 estimates revisions are minuscule and we expect 2020E net sales and EBIT of EUR 67.3m and EUR 12.5m respectively. Near-term risks due to the pandemic are limited, with transactional volumes possibly affected. A prolonged situation and an increase in defaults would have a heavier impact on 2021 due to customer bookkeeping obligations. The resilience of the bookkeeping market is noteworthy, and the near-term uncertainty may open more opportunities for inorganic growth.

HOLD with a target price of EUR 7.0 (6.7)
Talenom remains an attractive investment case through its track-record and defensive nature, valuation slightly less so, with the share price essentially at pre-COVID levels. We adjust our target price to EUR 7.0 (6.7), valuing Talenom at ~32x 2020E P/E, and retain our HOLD-rating.

Open report

Talenom - Earnings flash - Upbeat Q1 report

27.04.2020 - 14.00 | Earnings Flash

Talenom's net sales in Q1 amounted to EUR 17.4m, slightly above our and consensus estimates (EUR 16.9m/17.0m Evli/cons.). EBIT amounted to EUR 3.7m, slightly above our and consensus estimates (EUR 3.5m/3.5m Evli/cons.). Net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m.

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  • Net sales in Q1 were EUR 17.4m (EUR 14.8m in Q1/19), slightly above our estimates and consensus estimates (EUR 16.9m/17.0m Evli/Cons.). Growth in Q1 amounted to 17.4 % y/y.
  • Operating profit in Q1 amounted to EUR 3.7m (EUR 3.4m in Q1/19), above our estimates and consensus estimates (EUR 3.5m/3.5m Evli/cons.), at a margin of 21.4 %.
  • EPS in Q1 amounted to EUR 0.07 (EUR 0.06 in Q1/19), above our and consensus estimates (EUR 0.06/0.06 Evli/cons.).
  • Sales team has changed over to a distance sales model and sales still almost in line with plans despite the coronavirus pandemic.
  • An additional loan of EUR 10m has been negotiated, that can be used for acquisitions and for other projects in support of growth in Finland and Sweden.
  • Guidance 2020: Net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m (Evli 2020E: 68.8m and 12.6m respectively). Previous guidance: 2020 is expected to be in line with 2019 in terms of relative growth in net sales and relative profitability.

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Detection Technology - Clear miss due to weakened demand and profitability caused by COVID-19

27.04.2020 - 09.20 | Earnings Flash

DT’s Q1 net sales were EUR 19.9m (-13.6% y/y) vs. EUR 22.2m/22.0m Evli/consensus estimates. SBU sales declined -20% to EUR 11.5m (EUR 14.2m our expectation) and MBU sales declined -2% to EUR 8.4m (EUR 8.0m our expectation). DT’s Q1 EBIT came in at EUR 1.2 m vs. our estimates of EUR 2.8m (EUR 2.6m cons). DT expects SBU sales to decrease and MBU sales to increase in 2020.

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Group level results: Q1 net sales amounted to EUR 19.9m (-13.6% y/y) vs. EUR 22.2m/22.0m Evli/consensus estimates. Q1 EBIT was EUR 1.2m (5.9% margin) vs. EUR 2.8m/2.6m Evli/cons. R&D costs amounted to EUR 2.6m or 13% of net sales (11% Q1’19).
Security and Industrial Business Unit (SBU) had net sales of EUR 11.5m vs. EUR 14.2m Evli estimate. SBU sales declined -20% y/y, mainly due the COVID-19 pandemic. Both air and land transport decreased from 30 to 90% in different segments.
Medical Business Unit (MBU) delivered net sales of EUR 8.4m which was in line with our estimate of EUR 8.0m. Net sales of MBU decreased by -2% y/y due to the expected softness in the CT market outside China at the beginning of the year, and the ramp-down in production of a product family started by one of DT’s key customers last year. The COVID-19 pandemic increased demand in CT applications towards the end of Q1, but high comparison figures led to the overall development in net sales remaining negative.
Outlook update: DT expects lower demand in the security segment to continue and SBU sales to decrease in Q2. Demand in medical CT applications, however, will remain at a good level, and MBU sales will grow. DT expects the demand in medical CT applications to remain at a good level also in H2, and MBU sales to increase in 2020. DT estimates that drop in demand in the security segment will continue at least to the end of the year, and thus DT expects SBU sales to decrease in 2020.

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Verkkokauppa.com - Focus on sustainable growth

27.04.2020 - 09.20 | Company update

Verkkokauppa.com delivered a strong Q1 result as revenue increased by 8% y/y to EUR 125m (121m/118m Evli/cons). Adj. EBIT increased by 63% y/y to EUR 3.8m (2.7m/2.5m Evli/cons). The management had a good control over the business despite of the challenging times. We have slightly increased our estimates and upgrade our rating to “BUY” (“HOLD”) with TP of EUR 4.5 (3.5).

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Strong sales growth without forgetting profitability

Verkkokauppa.com delivered a strong Q1 result. Revenue increased by 8.2% y/y to EUR 125m (121m/118m Evli/cons). Good sales growth was driven by strong online sales and effective marketing. Development was good in all the major product categories but strong performance was also seen in evolving categories such as sports and home. Gross profit improved by 12% y/y to EUR 19.4m (15.5%) vs. our EUR 18.3m (15.1%), resulting from good control over sales mix. This impacted positively on adj. EBIT which was up by 63% y/y, totaling EUR 3.8m (2.7m/2.5m Evli/cons).

A strong online presence offering competitive advantages

Verkkokauppa.com’s small physical footprint and strong online presence offer the company competitive advantages amid the coronavirus and the movement restrictions. The company’s agile business model and a strong cash position support the company during these challenging times and it enables the company to develop its business as planned. We don’t expect the coronavirus to have significant negative impacts on Verkkokauppa.com’s operative business, although some availability issues might occur in some product categories later in H2. The increasing uncertainties are more related to the economic outlook and declining purchasing power. The company has introduced new delivery methods and sub-categories to enhance customer experience. Going forward, we expect the sales mix and broad product assortment to be the key drivers behind sustainable growth as the competition in the consumer electronics market is likely to remain tight, meaning that seeking growth in this category might become too expensive.

“BUY” (“HOLD”) with TP of EUR 4.5 (3.5)

We have slightly increased our estimates after the Q1 result. We expect 20E revenue of EUR 523m and EBIT of EUR 13.6m. Thus, our estimates are slightly above the midpoint of the given guidance (revenue of EUR 510-530m and adj. EBIT of EUR 12-15m). The outlook in the market remains blurry due to the weak visibility of the coronavirus and its full impacts but it is likely that the current situation speeds up the more permanent shift into online which benefits players like Verkkokauppa.com. On our estimates, the company trades at 20E-21E EV/sales multiple of 0.3x which translates into ~40 discount compared to the peers. We upgrade to BUY (HOLD) with TP of EUR 4.5 (3.5).

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Scanfil - Outlook basically unchanged

27.04.2020 - 09.15 | Company update

Scanfil operations continue to develop on a positive note as industrial OEM customer demand seems remarkably strong in the face of the pandemic. We have made rather small downward revisions to our estimates due to increasing uncertainty. Our TP is EUR 5.25 (5.75), rating BUY.

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No dramatic effects to segment performances so far
Q1 revenue grew by 11% y/y (two-thirds due to the HASEC acquisition) to EUR 144m and thus beat estimates by ca. EUR 10m. ROI, at 17.8% in Q1, continued to develop strong. February saw the Chinese plants stall due to the coronavirus situation that hadn’t back then escalated into a pandemic. There has been only one production plant closure so far since (in Poland). In fact, March was the strongest month in terms of (organic) growth and helped to compensate for slow February. According to Scanfil supply chains have continued to work well and only a few customer accounts have seen demand forecasts drop for Q2 and Q3. Naturally uncertainty is growing but for now Scanfil can reiterate its previous strong outlook for this year.

Scanfil continues to perform and is ready for acquisitions
We have slightly revised our estimates down due to increased uncertainty. The adjustments are remarkably small, amounting to an average of EUR 6m in quarterly revenue, or 4%. We have also done a small downward adjustment to operating margin, now expecting 6.5% instead of the previous 6.75%. We thus see EBIT at the low bound of the guidance range i.e. at EUR 39.0m; we previously expected EUR 41.4m. Scanfil says it has a liquidity position of some EUR 60m ready to be deployed for e.g. M&A.

A valuation above peer multiples is well justified
The pandemic seems to pose no cracks to Scanfil’s fundamentals. According to one narrative the pandemic will reverse globalization and thus supply chains and actors such as contract manufacturers are hit particularly hard. In our opinion such stories fly a bit too high and are based on unsound reasoning. Scanfil’s comments readily confirm industrial OEMs still want to outsource significant amounts of production. We update our TP to EUR 5.25 (5.75) due to increased macroeconomic uncertainty but note how few facts seem to impair Scanfil’s long-term story. We see good upside to Scanfil’s 5.5x EV/EBITDA and 7.5x EV/EBIT ‘20e valuation multiples.

Open report

Raute - Outlook weakens

27.04.2020 - 09.00 | Company update

Raute downgraded its outlook for FY ‘20 ahead of the Q1 report, which the company releases on Wed, 29 Apr. We cut our estimates; TP now EUR 21 (25), rating still HOLD.

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We expect FY ’20 revenue down almost 20% y/y
Raute issued a profit warning. The company had previously guided flat revenue and decreasing operating profit for 2020 compared to 2019. The updated outlook guides declining top line as well as clearly weakening operating profit. The downgrade is not particularly surprising since Raute noted increasing uncertainty in the operating environment already last year due to cooling demand in the wake of major new capacity investments. There was a dearth of demand for mid-sized projects like modernizations. Raute saw demand for large and small orders at a good level, however it’s always hard to anticipate when big investment decisions will receive green light and the current extraordinary macroeconomic environment will not help. Safety policies will also limit assembly, commissioning and maintenance works at plywood and LVL mills.

We estimate FY ’20 EBIT falling close to 40% y/y
We cut our estimates for this year and next. We expect Raute’s top line at EUR 123m in ’20 (previously estimated EUR 142m) while we see EBIT down to EUR 5.2m (prev. EUR 7.6m). This year finds support from the record EUR 58m Segezha order, but extended weakness in order intake will mean next year revenue prospects will be under pressure as well. Should order intake begin to improve during the latter half of ‘20 we expect Raute to achieve rather stable development in ’21. We now estimate ’21 revenue at EUR 127m (prev. EUR 140m) and have revised ’21 EBIT estimate down to EUR 7.4m (prev. EUR 9.3m). We don’t see the pandemic hurting Raute’s long-term competitive positioning as the market leader within its niche. If anything, in our view it’s more likely that the opposite would be true.

We still view valuation neutral given competitive position
Raute trades some 7x EV/EBITDA and 12x EV/EBIT on our new estimates for ‘20. On our next year estimates the multiples stand at 5.5x and 8.5x, respectively. In our view current valuation falls within an acceptable range considering earnings have plenty of potential to rebound from the low level to be seen this year. Our new TP is EUR 21 (25), rating remains HOLD.

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Suominen - Long-term story gains more ground

24.04.2020 - 09.10 | Company update

Suominen’s Q1 revenue only slightly exceeded our estimate but as gross margin improved close to 400bps EBIT came in almost double our estimate. Suominen upgraded FY ’20 EBIT guidance. We have updated our estimates, and our new TP is EUR 3.25 (2.50), rating now HOLD (SELL).

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Profitability would have jumped even without the pandemic

Suominen reported flat y/y Q1 revenue at EUR 110.2m, while our estimate was EUR 108.0m. Suominen says its sustainable products sales are developing well (new products contributed more than 25% of sales vs 20% previously). The investment in Green Bay, WI plant helped volumes and contributed to a more favorable i.e. higher quality product mix. The pandemic also began to have a positive effect on volumes towards the end of Q1. Especially cleaning and disinfection applications demand has increased. Nonwovens demand in general has received a boost due to applications like surgical drapes and face masks, however such products represent relatively small business for Suominen. New products, improved production and raw material efficiency as well as low raw material prices together lifted gross margin almost 400bps (we had expected only slight improvement), and thus EBIT amounted to EUR 5.7m vs our EUR 2.9m estimate.

We now expect FY ’20 EBIT at EUR 23m (prev. EUR 12m)

Suominen sees Q2 another strong quarter, and thus updated FY ’20 guidance, now guiding clear EBIT improvement (previously improving) even if there’s much uncertainty with regards to H2’20 as the demand surge induced by the pandemic may cool down. Nonwovens prices will adjust with a few months’ time lag to accommodate changes in raw materials prices. We see some downward pressure on Q2 gross margin due to lower nonwovens prices, expecting a 60bps decline to 11.5%. So far Suominen’s operations have run basically normal. There could be raw material shortages and Suominen or its customers might have to close plants due to the pandemic.

Long-term story receives a boost, yet uncertainty still high

Suominen trades 5x EV/EBITDA and 10x EV/EBIT on our estimates for ‘20. In our view these are attractive levels, yet much depends on the gross margin going forward. Although new products sell well, the size of the pandemic’s positive impact is still hard to gauge. Our TP is now EUR 3.25 (2.50), rating HOLD (SELL).

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SSH - New CEO takes the realm in exceptional times

24.04.2020 - 09.00 | Company update

SSH’s Q1 report was in line with our expectations and we have not made any material changes to our estimates based on the report. We continue to see growth as main value driver and, as noted previously, we see SSH’s limited growth investment capacity as main strategic obstacle. We maintain our TP of 0.70€, our recommendation is SELL (prev. HOLD).

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Q1 in line, more transparency to come in reporting

SSH’s Q1 net sales were 3.1 MEUR (3.1 MEUR Evli), an increase of 16% y/y on relatively low comparison figures, mainly driven by strong license sales and supported by growth in subscription revenue. Software fees were 0.9 MEUR (0.8 MEUR Evli), professional services were 0.0 MEUR (0.1 MEUR Evli), and recurring revenue was 2.1 MEUR (2.2 MEUR Evli). Q1 operating loss was –0.6 MEUR (vs. -0.5 MEUR Evli). The report did not provide materially new information that would affect our estimates at present, but SSH did provide a more transparent and candid overview into its result and operations than previously. SSH plans on introducing monthly recurring revenue (MRR) figures in coming quarters. According to SSH, MRR was approximately 1 MEUR in December (reported FY’19 recurring revenue 8.6 MEUR).

Newly appointed CEO to update strategy in June

SSH’s new CEO, Mr. Teemu Tunkelo started in end of March. Mr. Tunkelo has held various global management and technology leadership roles in companies such as Voith, Siemens, ABB, Invensys, and Compaq. According to the CEO, preliminary guidelines for SSH’s new strategy can be expected in June. He acknowledged the need for further investments into go-to-market and talked about the potential in being first mover in cloud PAM (PrivX) and IoT applications. The COVID-19 outbreak has not had a significant impact during the first quarter, but SSH has seen some project delays and it is still too early to assess the full business impact of the pandemic. As such, SSH’s cash position is good (11.7 MEUR Q1’20) and share of recurring revenue around 60%, which should help SSH weather the storm. SSH is reviewing options for further funding for product development, as well as options for its 12 MEUR hybrid debt. Negotiations regarding the hybrid have however stalled due to the pandemic. The hybrid debt’s interest rate increased from 7.5% to 11.5 % as of March 30th. Under the current circumstances the hybrid is valuable despite the increase in financial expenses.

Estimates unchanged, target price of 0.70€ maintained

We have not made any changes to our estimates based on the report and we note that SSH is in a good position to ride out the corona pandemic. After the share price rally yesterday, current valuation looks challenging given sales growth uncertainty. On our estimates, SSH is trading at 2020-21e EV/Sales multiples of 2.8x and 2.4x, which is, as previously noted, clearly below the cyber security sector and could prompt SSH to become an acquisition target of larger players wanting to enter the space or a consolidation play. However, as a standalone business, we’d like to see the results of SSH’s strategy materializing somewhat in the growth figures in order to justify higher valuation multiples.We maintain our TP of 0.70€, with SELL recommendation (prev. HOLD). Our target price implies an EV/Sales multiple of 2.2x on our ‘20E estimate, slightly below Nordic software peers, which we see as warranted given weaker growth and profitability metrics and the uncertainty to our estimates.

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Verkkokauppa.com - A strong start to the year

24.04.2020 - 08.40 | Earnings Flash

Verkkokauppa.com’s Q1’20 result beat our and consensus estimates. Revenue grew by 8.2% and was EUR 125m vs. Evli EUR 121m and consensus of EUR 118m. Gross profit was EUR 19.4m (15.5% margin) vs. EUR 18.3m (15.1% margin) Evli view. Adj. EBIT was EUR 3.8m vs. EUR 2.7m/2.5m Evli/cons. 2020E guidance reiterated: The company expects revenue to be EUR 510-530m and comparable operating profit to be EUR 12-15m.

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  • Q1 revenue was EUR 125m vs. EUR 121m Evli view and EUR 118m consensus. Sales grew as much as by 8.2% y/y. Revenue growth in Q1 was boosted by strong online sales and marketing. All product categories performed well.
  • Q1 gross profit was EUR 19.4m (15.5% margin) vs. EUR 18.3m (15.1% margin) Evli view.
  • Q1 adj. EBIT was EUR 3.8m (3.0% margin) vs. EUR 2.7m (2.2% margin) Evli view and EUR 2.5m (2.1% margin) consensus. EBIT improved mainly due to gross margin improvement.
  • Q1 eps was EUR 0.05 vs. EUR 0.04/0.04 Evli/cons.
  • 2020 guidance reiterated: The company expects revenue to be EUR 510-530m and comparable operating profit to be EUR 12-15m.
  • The company also decided on a quarterly dividend of EUR 0.053 per share.

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CapMan - Good progress negated by FV changes

24.04.2020 - 08.30 | Company update

CapMan’s Q1 results were slightly better than expected and underlying performance remained good, although EBIT as a result of negative fair value changes as expected fell clearly, to EUR -6.0m (Evli/cons. -7.5m/-3.9m). Fundraising projects continue but delays of 0-6 months are seen. Cost savings of up 10% of the cost base are sought without affecting growth ambitions. We retain our BUY-rating and TP of EUR 1.95.

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Negative FV changes spoiled otherwise good profitability
CapMan’s Q1 results came in slightly better than we had expected, with revenue of EUR 11.9m (Evli/cons. 10.7m) and EBIT of EUR -6.0m (Evli/cons -7.5m/-3.9m). Termination of the 2018 share plan caused a one-off cost of approx. EUR 1.4m. Unrealized FV changes amounted to EUR -10.5m. Profitability of the Management company and Service businesses improved clearly y/y, the latter aided by success fees from Scala but also seeing good development overall.

2020 an unfortunate dent to solid progress
With the significant negative FV changes in Q1 and assuming a cautionary view on carry and success fees in the current market environment we expect adj. EBIT to decline in 2020 to EUR 1.2m (25.0m). We expect the fee-based profitability to continue to improve through growth in AUM. Fundraising projects are seen to be delayed by 0-6 months but are continuing nonetheless, and CapMan also flashed a second Growth fund. CapMan is seeking to achieve cost savings of up to 10% of its cost base, which are sought to be achieved without affecting growth ambitions.

BUY with a target price of EUR 1.95
The expected weak earnings in 2020, mainly due to the negative unrealized FV changes, makes valuation on near-term figures more challenging. Upside potential can be seen on 2021E peer multiples and dividend yields but with the weakened visibility due to the Coronavirus we assume a near-term uncertainty discount and retain our target price of EUR 1.95 and BUY-rating.

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Scanfil - Good results amid the pandemic

24.04.2020 - 08.30 | Earnings Flash

Scanfil’s Q1 revenue clearly exceeded our and consensus estimates. Communication, Energy & Automation as well as Industrial segments were stronger than we expected. Scanfil says profitability developed as expected and reaffirms FY ’20 outlook.

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  • Q1 top line stood at EUR 144.1m, compared to EUR 133.7m/135.2m Evli/consensus estimates.
  • Communication revenue was EUR 22.4m while we expected EUR 16.1m. Scanfil says 5G network elements were the most important demand driver.
  • Consumer Applications revenue amounted to EUR 18.7m vs our EUR 24.7m estimate. Scanfil says the softness was due to a certain account whose demand begins in Q2 this year. The coronavirus also had an impact on a couple of accounts.
  • Energy & Automation recorded EUR 30.7m compared to our EUR 25.4m estimate. Demand was broad and strengthened during the quarter.
  • Industrial top line was EUR 45.6m vs our EUR 38.6m expectation.
  • Medtec & Life Science revenue amounted to EUR 26.7m, in comparison to our EUR 28.9m estimate.
  • Scanfil’s Q1 EBIT was EUR 8.6m vs EUR 8.7m/8.3m Evli/consensus estimates. The 6.0% operating margin was thus slightly lower than our 6.5% estimate.
  • Scanfil issued annual guidance on Feb 19, 2020 according to which the company saw FY ’20 revenue in the EUR 590-640m range and EBIT at EUR 39-43m. Scanfil said the guidance was subject to exceptional uncertainty due to the coronavirus situation that was evolving in China back then. The company made a certain allowance accordingly. Scanfil now reaffirms the outlook but updates the definition of uncertainties with a reference to potential negative effects of the pandemic.

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Suominen - Strong EBIT and updated guidance

23.04.2020 - 10.00 | Earnings Flash

Suominen reported Q1 revenue slightly above our estimate, while EBIT came in double our estimate. The beat was driven by higher gross margin. Suominen updates its guidance for FY ’20, expecting EBIT to improve clearly (previously improve).

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  • Q1 revenue amounted to EUR 110.2m vs our EUR 108.0m estimate. EUR 37m was attributable to Europe and EUR 73m to Americas. Nonwovens volumes increased while prices decreased along with raw materials. Suominen says the pandemic helped volumes towards the end of Q1 (for all markets) and expects extended strong demand in the short-term. In the long-term the pandemic may lead to continued increased demand for nonwovens in cleaning and disinfection applications. For now the company’s operations have been running basically normal, and nonwovens production has been classified essential.
  • Gross profit stood at EUR 13.3m while our expectation was EUR 9.2m. This means gross margin was 12.1% vs our 8.5% estimate.
  • Q1 EBIT was EUR 5.7m, compared to our EUR 2.9m estimate. The strong figure was due to higher volumes, improved production and raw materials efficiency as well as favorable raw materials prices.
  • Suominen updates its guidance, and now expects FY ’20 EBIT to improve clearly (previously improve) but notes the result estimate for H2’20 is uncertain due to the pandemic.

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SSH - Q1 result in line with expectations

23.04.2020 - 09.30 | Earnings Flash

SSH reported a Q1 result that was in line with our expectations. New CEO says financial performance was not significantly affected by the COVID-19 outbreak during the first quarter, but they’ve seen some project delays and it is still too early to assess the full business impact of the pandemic.

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• Q1 net sales were EUR 3.1 million (vs. 3.1m our expectation). Net sales increased by 16% compared to the previous driven mainly by strong license sales and supported by growth in subscription revenue.
• Software fees were EUR 0.9 million (0.8m Evli), Professional services were EUR 0.0 million (0.1m Evli), and Recurring revenue was EUR 2.1 million (2.2m Evli)
• Q1 operating loss was EUR – 0.6 million (vs. -0.5m our expectation)
• EPS was -0.02 (vs. -0.02 our estimate)
• Liquid assets were EUR 11.7m (12m Q4/19)
• PrivX update: development of the SaaS version of PrivX is proceeding well, and SSH anticipates the pilot launch during Q2. SSH has started the active conversion of existing CryptoAuditor customers to use PrivX.

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CapMan - FV changes burdened results

23.04.2020 - 09.00 | Earnings Flash

CapMan's net sales in Q1 amounted to EUR 11.9m, above our and consensus estimates (EUR 10.7m/10.7m Evli/cons.). EBIT amounted to EUR -6.0m, above our estimates and below consensus (EUR -7.5m/-3.9m Evli/cons.). Profitability burdened by fair value changes amounting to EUR -8.4m (Evli -9.7m).

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  • Revenue in Q1 was EUR 11.9m (EUR 9.3m in Q1/19), above our estimates and consensus estimates (EUR 10.7m/10.7m Evli/Cons.). Growth in Q1 amounted to 28 % y/y.
  • Operating profit in Q1 amounted to EUR -6.0m (EUR 4.7m in Q1/19), below our estimates and above consensus estimates (EUR -7.5m/-3.9m Evli/cons.). Profitability burdened by fair value changes amounting to EUR -8.4m (Evli -9.7m). Portfolio companies average FV decline 20%, Infra/RE 4%.
  • EPS in Q1 amounted to EUR -0.05 (EUR 0.02 in Q1/19), in line with our estimates and below consensus estimates (EUR -0.05/-0.03 Evli/cons.).
  • Management Company business: Revenue in Q1 was EUR 7.2m vs. EUR 7.1m Evli. Operating profit in Q1 amounted to EUR 1.9m vs. EUR 1.4m Evli.
  • Investment business: Operating profit in Q1 amounted to EUR -8.4m vs. EUR -10.0m Evli.
  • Services business: Revenue in Q1 was EUR 4.8m vs. EUR 3.5m Evli, aided by Scala success fees during Q1. Operating profit in Q1 amounted to EUR 3.0m vs. EUR 2.0m Evli.
  • Capital under management by the end of Q1 was EUR 3.2bn (Q1/19: EUR 3.2bn). Real estate funds: EUR 2.0bn, private equity & credit funds: EUR 1.0bn, infra funds: EUR 0.3bn, and other funds: EUR 0.03bn.

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Consti - COVID-induced uncertainty

23.04.2020 - 08.00 | Preview

Consti will report Q1 results on April 29th. We expect a third consecutive quarter of healthier profitability, while the points of interest will be less on Q1 financials and more on comments on any impact of the Coronavirus pandemic and order backlog development. Our estimates overall remain intact for now. With the added uncertainty we adjust our target price to EUR 7.2 (8.0) and retain our HOLD-rating.

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Profitability expected to have remained at healthier levels
With the on-going Coronavirus pandemic, the Q1 financials will be of lesser interest, as we expect that Consti should have been able to post a third consecutive quarter of healthier profitability. Our Q1 revenue and EBIT estimates are at EUR 64.7m and EUR 1.9m respectively. Of key interest in the Q1 report will be any comments regarding the possible impacts of the Coronavirus pandemic and order backlog development. The renovation sector in general is less prone to near-term shocks due to lengthier orders but the coinciding housing company General Meeting season could affect order backlog development and revenue later on in the year.

Sales decline 2020E, additional risk from COVID-19
Our estimates on annual basis remain largely intact for now. We expect a 10.3% decline in 2020 revenue based on completion of larger projects in 2019 and the order backlog development. We expect EBIT to improve to EUR 10.7m (2019: 4.6m) as profitability burdening projects have been completed. The Coronavirus pandemic poses a risk to our estimates through plausible project delays and potential supply chain problems, dependent also on the general economic impact, but we still see fundamental drivers in place and a slow-down in new construction volumes due to the pandemic could benefit renovation construction.

HOLD with a target price of EUR 7.2 (8.0)
Our estimates remain largely intact for now in awaiting the Q1 results, but with the elevated risk level we adjust our target price to EUR 7.2 (8.0), with our HOLD-rating intact.

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Finnair - Coronavirus hampers Q1 result

22.04.2020 - 09.15 | Preview

Finnair will report its Q1 result on next week’s Wednesday, 29th of April. The company’s Q1’20 traffic data was below our expectations thus we have cut our estimates. We expect Q1’20E revenue of EUR 585m and adj. EBIT of EUR -73m. We keep our rating “HOLD” with TP of EUR 4.0 (3.5) ahead of Q1.

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Q1 traffic hampered by the coronavirus

Finnair’s traffic figures were substantially below our expectations in Q1, due to March traffic figures, which slumped more than we expected. In Jan-Mar, capacity (ASK) decreased by 9% vs. our +2% expectation, while sold capacity (RPK) declined as much as by 16% vs. our -1% expectation. Thus, passenger load factor (PLF) declined by 5.7 percentage points to 72.6%. Traffic figures and cargo were heavily impacted by the coronavirus in all Finnair’s market areas. Total passenger number declined by 16% y/y. We expect Q1’20E revenue of EUR 585m (Q1’19: EUR 668m) and adj. EBIT of EUR -73m (Q1’19: EUR -16m).

Drop in fuel prices

Oil prices have dropped significantly since the beginning of the year amid the coronavirus pandemic and the price war between Saudi Arabia and Russia. The average fuel price in both USD and EUR dropped by 20% on a q/q basis compared to Q4’19. The average price in Q1’20 was 19% lower y/y in USD and 17% lower y/y in EUR.

“HOLD” with TP of EUR 4.0 (3.5)

We have cut our 20E estimates as the ongoing movement restrictions are likely to continue for several weeks or even months and the air travel is not expected to return to normal, not at least during this summer. Finnair has cut some 90% of its capacity due to COVID-19. We now expect 20E revenue of EUR 2213m (-29% y/y) and adj. EBIT of EUR -144m (-190% y/y). We note that there are significant uncertainties with our short-term estimates due to the situation. We have also decreased our 21E-22E revenue estimates by ~6% and adj. EBIT estimates by ~9%. Despite of the weak short-term outlook we still see Finnair’s mid-term outlook rather positive. Prior the crisis Finnair had a strong cash position and a healthy balance sheet. The company is also implementing a substantial funding plan, including sale and leasebacks of unencumbered aircraft, a revolving credit facility of EUR 175m, which has already been raised and a statutory pension premium loan totaling to EUR 600m. It has been proposed that the State of Finland would guarantee the loan. Therefore, we see that Finnair is well placed to continue its operations relatively normally after the crisis. We keep our rating “HOLD” with TP of EUR 4.0 (3.5) ahead of Q1.

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Vaisala - W&E business hurting from corona

22.04.2020 - 09.10 | Company update

Vaisala issued yesterday a profit warning due to estimated impacts related to the coronavirus pandemic. Consequently, we’ve revised down our estimates for 2020. Despite Vaisala being a great company, we see current valuation unattractive given the weakened financial outlook. We maintain our SELL with new target price of 25 euros (prev. 29.5).

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W&E’s project and services business suffering from corona
Vaisala expects delays or interruptions particularly in project and services deliveries due to the extensive restrictions imposed by governments and authorities. Demand in W&E has to some extent already weakened and Vaisala estimates that the situation will become more challenging as governments have tighter budgets, especially in emerging markets. The profit warning did not come as a complete surprise given that Vaisala’s largest segment, W&E, consists roughly 40-45% of projects and services, and the growth is very dependent on investments from emerging market governments. Vaisala does not expect demand for IM to change materially, but growth will slow down from last year (+22.2%).

New guidance broader as predicting is currently difficult
Vaisala’s now expects 2020 sales will be between 370–405 MEUR and EBIT between 34–46 MEUR (prev. sales 400–425 MEUR and EBIT 38–48 MEUR). The outlook’s range for both net sales and EBIT is wide due to high uncertainty related to the duration and impact of coronavirus pandemic as well as unknown speed of recovery. Vaisala will provide an update to its market outlook in connection with its Q1 report due next week on Tuesday 28th.

Valuation still stretched given weakened financial outlook
Based on the new outlook, we have cut our estimates for 2020e and the coming years. For 2020e, we’ve cut our sales and EBIT estimates with 8% and 20% respectively. We expect 2020e net sales to decline 3% to 390 MEUR and reported EBIT to decline to 34.9 MEUR, mainly due to lower performance in W&E. On our renewed estimates, Vaisala is still trading at clear premiums compared to our peer group, which we do not see justified given the financial performance outlook currently weighed down by W&E. We maintain our SELL with new target price of 25 euros (prev. 29.5). Our target price values Vaisala at 20e EV/EBIT multiple of 25x which is still above peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

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CapMan - Upgrade to BUY

21.04.2020 - 09.15 | Preview

CapMan will report Q1 results on April 23rd. We expect weak earnings on paper due to negative fair value changes (non-cash) as a result of implications of the Coronavirus pandemic. CapMan was heading into a year of major AUM growth potential, which is now put at some risk due to plausible fundraising challenges. We adjust our target price to EUR 1.95 (2.50) following revised estimates and upgrade to BUY (HOLD).

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Negative fair value changes to burden Q1 results
We expect CapMan to report weak Q1 results due to negative fair value changes, although these are non-cash items. The largest relative hit will come from portfolio companies due to peer valuation declines. We currently estimate fair value changes of EUR -14.2m in 2020. We estimate a Q1 adj. EBIT of EUR -7.5m. Apart from the fair value changes, the Coronavirus pandemic will not yet have had a significant impact on other business areas and we expect decent results from the Management Company and Service businesses, not expecting significant carry or success fees in the quarter.

2020 growth outlook more challenging
CapMan was heading into a year of major AUM growth potential with on-going projects as well as significant new fundraising projects announced in late 2019. COVID-19 will in our view have a detrimental effect on fundraising and we will be looking for any comments implying the magnitude of the impact from the Q1 results. Although growth expectations are pointing downwards, the Management Company business enjoys a healthy base of recurring fees that for now remain unaffected. We expect the Services business revenue and profits to decline in 2020, as Scala in particular would be affected by any possible dry-up of new fundraising projects.

(BUY) HOLD with a target price of EUR 1.95 (2.50)
Following estimates revisions and the increased uncertainty we adjust our TP to EUR 1.95 (2.50) based on our SOTP and peer multiples and upgrade to BUY (HOLD) due to share price declines.

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Detection Technology - COVID-19 - a near term threat with a silver lining

21.04.2020 - 09.02 | Preview

Detection Technology will report Q1 earnings next Monday, April 27th. We’ve slightly lowered our near term estimates due to the pandemic. Despite the current headwinds related to coronavirus, we see longer term investment case intact. We maintain our target price of 24 euros, rating is now BUY (prev. HOLD).

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COVID-19 – both a threat and part opportunity

DT usually doesn’t give full year guidance due to short visibility into customer demand. With the ongoing corona pandemic, it’s even harder to make predictions now. As airline travel is constrained, the pandemic can be expected to weigh negatively in H1 on SBU, which represents roughly 2/3 of DT’s sales. On the other hand, CT scanning is used to detect virus-related pulmonary changes, which in turn increases demand for CT scanners especially in China. DT’s recently launched new production facility in Wuxi provides additional capacity to support the possible increase in demand for CT equipment. As CT equipment plays an important role in diagnosing and treatment of COVID-19, DT has been permitted to keep its Beijing site operational and start manufacturing in Wuxi despite restrictions set by the local and national authorities in China.

Estimates cut, but investment story remains compelling despite near term uncertainties

Given the change in the landscape due to COVID-19, we’ve slightly lowered our Q1 estimates, especially for SBU. For Q1’20, we estimate SBU declining -2% and MBU declining -7% y/y, with total Q1 net sales declining -4% y/y to 22.2 MEUR (22.3 MEUR cons). Our Q1 EBIT estimate is 2.8 MEUR (2.9 MEUR cons), which is down 30% compared to 3.9 MEUR last year. We’ve revised down our FY’20E sales growth estimate from 10% to 6%. We still expect most of the growth to materialize in H2 as growth returns, especially in China, and volumes of new Aurora and X-Panel CMOS products ramp-up. Consequently, we’ve also lowered our FY’20E EBIT estimate by 11% due to lower sales and increased spending. Our estimates beyond 2020E are broadly unchanged, and we expect EBIT to improve in medium term due to volume growth and better GM’s due to mix and new products. We note however that coronavirus poses a clear near-term threat to our estimates, especially if the current situation is prolonged.

We maintain TP of 24 euros, with rating BUY (prev. HOLD)

On our revised estimates, DT is trading at 15x and 12x EV/EBIT multiples for 20E-21E. This is roughly 15-20% below our peer group, which we see inexpensive and unwarranted given strong market drivers, especially in China, as well as DT’s compelling strategy and execution capabilities. We maintain our target price of 24 euros, rating is now BUY (prev. HOLD).

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Suominen - The pandemic tailwind is not clear

20.04.2020 - 09.30 | Preview

Suominen reports Q1 results on Thu, Apr 23. We have left our estimates unchanged. We expect Suominen to perform relatively well in the current environment, however we don’t see the pandemic producing absolute gains based on current info. Our TP is EUR 2.50 (2.25), rating SELL (HOLD).

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Last year was weak for European sales

Suominen’s revenue declined by 5% last year to EUR 411m as the European business lost volumes and sales fell by 13% to EUR 150m. Americas was flat. Product split held steady as baby wipes were the largest group (40%) followed by personal care and home care wipes with about a fifth each. Suominen gives no short-term sales guidance but expects EBIT to improve this year. We estimate Q1 top line to have declined by 2% y/y to EUR 108m assuming volumes have improved a bit while nonwovens prices have declined slightly along with raw materials prices. We still expect Q1 gross margin at 8.5% i.e. marginally up from the 8.3% Q4 figure. We see SGA stable, and thus expect Q1 EBIT at EUR 2.9m (EUR 3.0m a year ago). Assuming stabilizing raw materials prices and gross margins for the rest of the year, we expect FY ’20 revenue up by 3% due to improving volumes. We thus see FY ’20 EBIT at EUR 12.0m vs EUR 8.1m last year.

In our view the pandemic might not inevitably help sales

Relatively speaking Suominen should perform well amid the pandemic, but in terms of absolute gains we don’t see the picture that clear. Suominen’s recent challenges were not due to lack of nonwovens demand, but rather caused by abundance of supply. Also, customer specific considerations matter as the ten largest accounts generate 65% of sales. We see a possibility that the pandemic and its aftermath will help accelerate volume growth, which is what the company needs in order to reach its long-term financial targets. Suominen is reportedly planning to enter face mask production in Finland in co-operation with Ahlstrom-Munksjö, however in our view it’s still early to estimate and value the possible impact on bottom line.

Valuation seems to have gone ahead of itself

In our view the current share price reflects rather hasty assumptions about the pandemic’s impact on the nonwovens market. We see caution warranted as a boost to total volumes is not inevitable. Our TP is now EUR 2.50 (2.25), rating SELL (HOLD).

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Verkkokauppa.com - COVID-19 boosting online sales

20.04.2020 - 09.00 | Preview

Verkkokauppa.com will report its Q1’20E result on Friday. We expect the coronavirus to boost online sales but expect decreasing sales in the physical stores. We have made small adjustments to our 20E estimates and retain our rating “HOLD” with TP of EUR 3.5 ahead of Q1.

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Online sales boosted by COVID-19

The exceptional situation due to COVID-19 has pushed retailers online as the demand in physical stores slumped quickly when the movement restrictions came into force. This is likely to have a positive impact on Verkkokauppa.com’s sales development in Q1’20E as the company has a strong online presence and only four physical stores in Finland. According to the management, the demand for instance in home office supplies has increased as people have switched their working spaces to their homes.

Expecting good market growth in Q1’20E

We expect the market growth in consumer electronics to be relatively good in Q1’20E but in the near future, consumers might become more cautious due to the weakening economy, especially if the situation is prolonged. Despite of the good online sales outlook we expect to see decreasing sales in Verkkokauppa.com’s physical stores during this situation. We have slightly increased our Q1’20E estimates. We expect Q1’20E revenue to increase by 4.5% y/y to EUR 121m (cons. EUR 118m) and EBIT of EUR 2.7m (cons. EUR 2.4m).

“HOLD” with TP of EUR 3.5 intact

We have made small adjustments to our 20E estimates and expect revenue of EUR 518m (2.7% y/y) and EBIT of EUR 13.0m (~15% y/y). According to the guidance given for 20E, the company expects revenue to be between EUR 510-530m and EBIT of EUR 12-15m, thus our estimates are at the lower end of the guidance. COVID-19 might speed up the more permanent leap into online in long-term which should benefit players such as Verkkokauppa.com. At the same time, the rumors of Amazon entering the Nordic market have once again increased. On our estimates, Verkkokauppa.com trades at 20E-21E EV/sales multiple of 0.3x which translates into ~50% discount compared to the peers. We keep our rating “HOLD” with TP of EUR 3.5 intact ahead of Q1 result.

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Gofore - Back on track in Q1

15.04.2020 - 09.00 | Company update

Gofore released its business review for March 2020 and first quarter figures, with net sales up 12.8% in Q1 and profitability at high levels, with the adj. EBITA-% at 17.3%. We have slightly lowered our estimates due to the Coronavirus pandemic but currently expect only a limited impact in particular due to the comparatively large exposure to the public sector. With our lowered estimates we adjust our TP to EUR 7.8 (8.2), HOLD-rating intact.

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Profitability in Q1 back at solid levels

Gofore released its business review for March 2020 and first quarter figures. Net sales in Q1 grew 12.8% to EUR 18.8m. The adjusted EBITA amounted to a solid EUR 3.3m, at a margin of 17.3% (Q1/19: 17.2%). EBITA amounted to EUR 2.5m, affected by non-recurring costs and provisions relating to the divestment of the UK business. Gofore’s profitability figures were clearly positive given the challenges faced during the latter half of 2019.

Currently expect a rather limited impact of the pandemic

We have lowered our 2020 sales growth and EBITA estimates by 3pp and 12.5% respectively. The adjustments relate mainly to the estimated impact of the Coronavirus pandemic. We currently do not expect a major impact due to the comparatively large public sector exposure. We assume some challenges in sales of new projects due to customer investment caution, which we expect to show during H2/2020 as a slightly lower billing rate and thus lower sales and profitability. So far, the effects of the pandemic have been limited to employees shifting to working remotely and March sales figures were at a solid level.

HOLD with a target price of EUR 7.8 (8.2)

Current circumstances relating to the pandemic do not suggest a significant negative impact on Gofore’s operations, but a further prolongation would without a doubt have an adverse effect. On our revised estimates we lower our target price to EUR 7.8 (8.2) and retain our HOLD-rating.

 

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Aspo - The pandemic stirs the picture more

14.04.2020 - 09.20 | Company update

Aspo withdrew FY ’20 guidance as the pandemic is yet another setback for operations. We have cut estimates according to our assumption that business will begin to normalize during Q2 as many governments are reportedly about to ease restrictions. Yet we remain cautious given the uncertainty; our TP is now EUR 6.25 (8.25), rating HOLD.

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Q1 was very weak for ESL, Telko performed relatively strong

Aspo disclosed preliminary Q1 figures. ESL operated in challenging conditions as the Chinese situation in the beginning of the year already affected shipping rates. ESL’s steel and energy transport volumes decreased in Q1 and the uncertainty means there’s no solid view on cargo volume potential for the rest of the year. Aspo says smaller vessels’ cargo volumes remained at a normal level. ESL’s Q1 top line decreased by 2% y/y to EUR 42.7m (our estimate was EUR 46.7m) and EBIT decreased to EUR 2.3m compared to EUR 3.2m a year ago and our EUR 4.9m expectation. Meanwhile Telko performed relatively good as Q1 revenue amounted to EUR 63.6m i.e. down by 12% y/y but close to our EUR 63.9m estimate. Telko’s Q1 EBIT, unchanged y/y at EUR 2.4m, was slightly above our EUR 2.2m estimate. This indicates Telko’s profitability measures are having some effect. Leipurin’s Q1 revenue amounted to EUR 26.9m, up 4% y/y and in line with our EUR 26.8m estimate. Leipurin’s EBIT increased slightly to EUR 0.6m while our estimate was EUR 0.7m.

The H2’20 EBIT improvement slope is very hard to assess

Aspo previously guided FY ’20 EBIT to be higher than in ’19 (EUR 21.1m). In our view Aspo’s profitability for this year is especially difficult to estimate with current information as last year’s result doesn’t represent a high hurdle as such given the long-term potential. In a scenario closer to normal we would have expected Aspo to reach the guidance easy. Yet the potential is now even more subject to uncertainty as the macro picture is very murky. We expect better results in Q3 but see Q2 EBIT down to EUR 2.6m (we previously estimated Q2 EBIT at EUR 7.0m).

The environment justifies low valuation relative to potential

In our view the potential for higher EBIT remains, however in the current situation it’s challenging to rely on long-term estimates. Our TP is now EUR 6.25 (8.25), rating remains HOLD.

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Solteq - Software house journey setback

07.04.2020 - 09.15 | Company update

Solteq withdrew its guidance for 2020 due to the prevailing uncertainty caused by the Coronavirus pandemic. Customer deliveries within core business areas have so far remained unaffected but we expect to see some weakness within smaller project deliveries. Ramping up sales of newly developed own products will likely also prove to be more challenging. We expect a 6.5% decline in revenue in 2020. We retain our HOLD-rating with a TP of EUR 0.95 (1.40).

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Guidance withdrawn due to Coronavirus uncertainty
Solteq withdrew its guidance for 2020 for the time being due to the prevailing uncertainty caused by the Coronavirus pandemic. Customer deliveries with core business areas, with typically larger contracts and longer customer relationships, have so far continued without interruption. We expect the implications of the Coronavirus pandemic going forward to act as a driver for digitalization, partly due to movement restrictions and increasing online demand. In the near term we nonetheless expect revenue to be affected, mainly from smaller project deliveries. We also expect a more challenging ramp up of some of newer software products, some of which had already shown a promising start.

Expect a 6.5% sales decline in 2020
We have lowered our 2020 sales growth estimate to -6.5% (-1.4%) and EBIT to EUR 2.1m (3.5m). We currently expect to see clear margin and sales growth picking up in 2021 but note the high estimates uncertainty due to the Coronavirus outbreak. An additional uncertainty element is caused by the high leverage and interest expenses. Solteq informed of intentions to consider initiating a written procedure to extend its outstanding EUR 24.5m notes by 12 months, that were to mature July 1st, 2020.

HOLD with a TP of EUR 0.95 (1.40)
Solteq’s cash flows were set to improve in the near-term due to lower investments and improved operational profitability. Although Solteq should be able to show relative resilience, the increased uncertainty amid the company’s ambitions to change track towards a software focus is clearly suboptimal and we adjust our TP to EUR 0.95 (1.40), retaining our HOLD-rating.

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Fellow Finance - Loan volumes at risk

06.04.2020 - 09.15 | Company update

The Ministry of Justice of Finland has informed that it will start preparing a bill proposal to limit maximum consumer loan interest to 10%. According to Fellow Finance the proposal in its current form would – ceteris paribus – reduce current intermediated loan volumes by approx. 50% compared to March 2020 volumes. We keep our estimates largely intact for now but derive valuation scenarios based on which we adjust our TP to EUR 2.5 (3.0), HOLD-rating intact.

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Proposal to cap consumer loan interest at 10% (20%)
The Ministry of Justice of Finland has informed that it will in the upcoming weeks start preparing a bill proposal to limit maximum consumer loan interest to 10% from the current 20% due to the Coronavirus pandemic. The changes are planned to be in effect until the end of 2020. According to Fellow Finance the proposal in its current form would cut current intermediated loan volumes by 50% compared with March 2020 volumes. Furthermore, if investors in a 12% interest risk class would lower interest requirements to the proposed 10% cap, around 80% of current loan volumes could be intermediated.


Proposal would affect near-term profitability
We keep our estimates largely intact for now as the outcome and content of the bill proposal is not yet certain. Given the economic impact of the Coronavirus pandemic and an ease of making drastic decisions we see a high likelihood of the proposed bill passing. We derive scenarios for the possible effects of the proposal and expect a 10% cap to put EBIT in the coming years at near zero or negative.


HOLD with a target price of EUR 2.5 (3.0)
We derive three scenarios based on the planned bill proposal, described more in detail on page two. Based on a weighted approach, assuming an 80% likelihood of the bill passing, we derive a target price of EUR 2.5 (3.0) and keep our HOLD-rating intact.

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Etteplan - Challenging times ahead

01.04.2020 - 09.00 | Company update

Etteplan withdrew its guidance for the time being due to uncertainty caused by the coronavirus outbreak. The increased uncertainty in the global economy has adversely affected customer demand and will have a negative impact on financial development. We have lowered our 2020 estimates, expecting revenue to remain at 2019 levels and EBITA to decline clearly. We lower our target price to EUR 6.9 (10.2) and retain our HOLD-rating.

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Guidance withdrawn due to coronavirus uncertainty
Etteplan withdrew its guidance for the time being due to uncertainty caused by the coronavirus outbreak, having previously estimate revenue in 2020 to increase clearly and EBIT to be at the same level or improve compared with 2019. The coronavirus outbreak has adversely affected customer demand essentially across all customer segments. Europe is expected to show weak figures in Q2, while the in Q1 weak Chinese economy has now been picking up and demand development there is showing favourable signs.

2020 EBITA estimate down some 35%
We expect the outbreak to have a clear negative effect on financial development in 2020E. We expect the brunt of the impact on Q2/Q3 while Q1 is expected to have been somewhat weaker due to the situation in China. We note the challenges in near-term estimation due to the lacking visibility and unforeseeable nature of the consequences of the outbreak. We currently expect 2020 revenue to remain at 2019 levels, despite the current situation due to inorganic growth, and profitability to decline clearly, with our EBITA estimate at EUR 18.1m (27.5m).

HOLD with a target price of EUR 6.9 (10.2)
Etteplan has on a three-year average NTM EV/EBITDA traded at around 9.0x. Assuming a swift return to a normalized demand situation current valuation is in no way challenging. The significant near-term uncertainty, however, warrants a discount and we value Etteplan at 2020E EV/EBITDA of 7.0x, and with our 2020E EBITDA estimate down some 25% we lower our target price to EUR 6.9 (10.2) and retain our HOLD-rating.

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SRV - Turning the ship in stormy waters

31.03.2020 - 09.15 | Company report

SRV’s road has been bumpy in the past two years and measures are being taken to turn the tide. The slowing down of the Finnish construction market has created prerequisites for improved profitability by alleviating some supply chain pressure. The unfortunate Coronavirus outbreak casts a shadow over the planned turnaround and the uncertainty is reflected in valuation multiples. We adjust our target price to EUR 1.00 (1.30) and retain our HOLD-rating.

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Seeking turnaround from recent weak profitability years
SRV’s profitability has been in the red the past two years and the company is under new management seeking to turn the tide. Measures are being taken to enhance operational profitability and improve the financial situation. Market development has shown beneficial signs, as a slowing down of new construction volumes should ease supply chain pricing pressure. The Coronavirus outbreak, however, creates significant near-term uncertainty and any possible impact is yet hard to quantify.

Volumes expected to decline, profitability improve
We expect sales to settle at a level of around 10% below the solid 2019 levels (EUR 1,060.9m) following an expected overall decline in construction volumes. 2020 remains supported by the lengthy order backlog while the completion of fewer developer-contracted housing units will lower sales. We expect profitability to improve in 2020 from the recent weak comparison years due to a diminishing burden of non-recurring items but margins to still remain relatively low. We estimate a 2020 operative operating profit margin of 1.1%.

HOLD with a target price of EUR 1.00 (1.30)
Our DCF and SOTP implied equity fair values are EUR 1.10 and 0.64 respectively. We derive a target price or EUR 1.00 (1.30) per share, assigning more weight to our DCF fair value due to an unjust near-term weight on profitability of our SOTP-model and retain our HOLD-rating.

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Pihlajalinna - 20E guidance withdrawn

30.03.2020 - 09.20 | Company update

Pihlajalinna withdrew its 20E guidance as it is challenging to assess and predict the total impacts of the coronavirus. Half of the operations are expected to remain stable but the demand for non-urgent health care and oral health services has declined. We expect 20E revenue to remain at the same level as in ’19 (EUR 519m) and adj. EBIT of EUR 27m (28% y/y). However, there are significant uncertainties with our short-term estimates. Our rating is now “BUY” (“HOLD”) with TP of EUR 16.

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20E guidance temporarily withdrawn
Pihlajalinna withdrew its guidance for 20E as it is challenging to predict the total financial and operational impacts caused by COVID-19 and the given emergency laws. A new guidance will be given at a later point, when the total impacts can be more reliably assessed. According to the company, during the first months of the year, turnover and profitability have developed as expected. Based on the previous guidance given in February, Pihlajalinna expected turnover and adj. EBIT to improve from the previous year.

Non-urgent and oral health services hampered by COVID-19
According to the company, comprehensive outsourcing in the context of the social welfare and healthcare reform and other fixed-price invoicing is related to a steady recognition of income over time. Profitability of these kinds of contracts normally remains stable, even during periods of low demand. Demand for housing services for the elderly and recruitment services is not expected be affected by the situation. Therefore, more than half of the business operations are expected to remain stable. Also, demand for remote services has increased. Pihlajalinna’s fitness centers have been temporarily closed since late March and the demand for non-urgent healthcare and oral health services has decreased due to the coronavirus. We expect the demand for these services to increase after the situation, which should partly compensate this period of low demand.

“BUY” (“HOLD”) with TP of EUR 16
We have decreased our 20E turnover expectation by ~3% and adj. EBIT expectation by ~24%. We now expect 20E turnover to remain at the same level as in ‘19 (EUR 519m) and adj. EBIT of EUR 27m (28% y/y). Adj. EBIT is expected to improve due to the cost savings resulting from the efficiency improvement program that was launched last summer. However, we note that there are significant uncertainties especially with our short-term estimates. The tender offer by Mehiläinen is currently being under review of the FCCA. As expected, the FCCA initiated the phase two investigation, meaning that the process will be completed at the end of Q2’20E or latest during Q3’20E. We keep our TP at the tender offer price of EUR 16 and upgrade our rating to “BUY” (“HOLD”).

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Tokmanni - Customer flows hampered by COVID-19

27.03.2020 - 09.35 | Company update

Tokmanni withdrew its 20E guidance as there is a clear decline in customer flows due to the coronavirus. New guidance will be given at a later point when the visibility is more clear. We expect 20E sales of EUR 919m (-2.7% y/y) and adj. EBIT of EUR 55.3m (-21% y/y). We note that there are significant uncertainties with our short-term estimates. We keep our rating “BUY” with TP of EUR 12.5 (16).

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Coronavirus hampering customer flows
Tokmanni withdrew its guidance for 20E due to the situation around coronavirus. According to the company, after the emergency restrictions that came into force in March, the customer flows have clearly declined in stores. At the current stage, the company doesn’t give a guidance for the year 20E but expects that the coronavirus and the restrictions on movement will affect at least Q2’20E sales. As stated by the company, it is very challenging to estimate the development in H2’20E. Based on the guidance given in February, Tokmanni expected good revenue growth and slight growth in LFL-sales for 20E and profitability (adj. EBIT margin) to increase from the previous year.

Expecting declining sales in Q2’20E
We expect a clear decline in Q2’20E sales (-27% y/y) as the movement restrictions are likely to last for several weeks. Tokmanni aims to keep all the stores open during this unexpected time. We expect the consumer demand for grocery to remain stable but at the same time demand for non-grocery products is expected to decline. We expect online sales to increase but the contribution to the total sales is still expected to remain marginal. As the visibility is very weak it is difficult to estimate the total impacts on H2’20E sales. We expect the lockdowns in China, occurred in Q1’20, to have a negative impact on Tokmanni’s direct import, which will hamper gross margin development. As most of Tokmanni’s employees work in stores (85%), the company should be able to adjust its workforce in some level. We expect only limited adjustment possibilities in other operations, hampering profitability in Q2’20E.

“BUY” with TP of EUR 12.5 (16)
We have decreased our 20E sales expectation by ~8% and adj. EBIT estimate by ~30%. We now expect 20E sales to decline by 2.7% y/y (EUR 919m) and adj. EBIT of EUR 55.3m (-21% y/y), resulting in adj. EBIT margin of 6.0%. We note that there are significant uncertainties with our short-term estimates. We expect the customer flows and demand to normalize relatively fast after the situation and expect Tokmanni is able to return back to its growth path. On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 16.7x and 10.4x, which translates into 4% premium in 20E and 29% discount in 21E compared to the int. discount peers. We keep our rating “BUY” with TP of EUR 12.5 (16).

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Fellow Finance - Guidance withdrawn amid uncertainty

27.03.2020 - 08.45 | Company update

Fellow Finance withdrew its 2020 guidance due to the weakened visibility caused by the coronavirus outbreak. We expect the uncertainty to affect investor sentiment and have lowered our estimates for facilitated loan volumes and as a result our revenue and profitability estimates. Fellow Finance will also have to put the brakes on some expansion plans, which will further impede growth. We retain our HOLD-rating with a TP of EUR 3.0 (4.0).

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Guidance withdrawn due to coronavirus uncertainty
Fellow Finance withdrew its 2020 guidance due to the weakened visibility caused by the coronavirus outbreak. The company previously expected turnover to grow in 2020 and the growth efforts to decrease operating profit compared to 2019, with growth expected to accelerate during 2021-2022. The uncertainty affects investor sentiment, which we expect to have a negative near-term effect on facilitated loan volumes. Furthermore, Fellow Finance will in the elevated uncertainty situation have to put the brakes on some of its growth plans internationally, which will affect growth in the coming years.

Estimates lowered on weakened investor demand prospects
We have lowered our estimates for facilitated loan volumes, driven by the change in investor sentiment, and as a result our estimates for revenue and profitability. Fortunately, fees from managing the current portfolio along with fees from Lainaamo’s loan commitments will support revenue while the variable cost components, mainly the commissions to loan brokers, should slightly soften the profitability impact. We now expect a 6% revenue decline in 2020 (prev. 4% increase) and an operating profit of EUR 0.6m (prev. EUR 1.3m).

HOLD-rating with a target price of EUR 3.0 (4.0)
On our revised estimates and increased uncertainty, we adjust our target price to EUR 3.0 (4.0). We assume only a fairly moderate deterioration of the economy due to the coronavirus, while a larger deterioration could result in a clear increase in loan defaults and have a clear negative impact on the company.

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Marimekko - COVID-19 impacting sales and profit

26.03.2020 - 09.10 | Company update

Marimekko withdrew its guidance for 20E as the consumer demand in all the market areas has dropped due to COVID-19. We now expect 20E sales to decline by 10% y/y and adj. EBIT of EUR 11.7 (-32% y/y) but we note that there are significant uncertainties especially with our short-term estimates. We upgrade to “BUY” (“HOLD”) with TP of EUR 28 (44).

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Weakened consumer demand outlook due to COVID-19
Marimekko withdrew its 20E guidance as the situation around COVID-19 has clearly weakened the consumer demand outlook in all Marimekko’s market areas (prev. 20E sales are expected to increase from the previous year and adj. EBIT is expected to be at the same level or higher than on the previous year). At the current stage, the company doesn’t give a guidance for 20E. However, if the situation is prolonged, it will have significant impacts on the company’s sales and profitability. As a result of the current situation, Marimekko is planning to adjust its operations and initiates cooperation negotiations. Marimekko has also changed its proposal for the ’19 dividend payment (prev. dividend proposition of EUR 0.90) and proposes that the AGM would authorize the Board of Directors to decide on a dividend payment of a max. of EUR 0.90 per share to be distributed in one or several instalments at a later stage when the company is able to make a more reliable estimate on the impacts of COVID-19 to the company’s business.

Expecting a significant drop especially in retail sales
As most of the market areas have some level lockdowns and thus many stores are being closed, we expect negative impacts especially on Q2’20E sales. We have lowered our Q2’20E sales estimate by ~44% and our EBIT estimate by ~82%. We expect retail sales to face the hardest hit due to the rapid drop in consumer numbers. We don’t expect as dramatical decline in wholesale sales as the buyers (of distribution channels) should have already ordered the spring/summer lines. However, it is difficult to estimate how the situation will impact on H2’20E sales. We also expect negative impacts on production and supply chain in H1’20E.

“BUY” (“HOLD”) with TP of EUR 28 (44)
We’ve lowered our 20E sales expectation by 17% and adj. EBIT estimate by 42%. We expect 20E sales of EUR 113 (-10% y/y) and adj. EBIT of EUR 11.7 (-32% y/y). We note that there are significant uncertainties with our short-term estimates but we see Marimekko’s mid-term investment case unchanged and positive as we see Marimekko is able to achieve higher sales and margins after this shock. In normal circumstances, Marimekko also offers an attractive dividend yield. On our estimates, Marimekko trades at 20E-21E EV/EBIT multiple of 17.6x and 10.2x which translates into 22-40% discount compared to the luxury peers. We upgrade our rating to “BUY” (“HOLD”) with TP of EUR 28 (44).

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SSH - Withdraws 2020 guidance due to COVID-19

24.03.2020 - 20.49 | Company update

SSH announced yesterday that it estimates the COVID-19 pandemic to negatively impact its outlook and thus it withdraws its guidance for the year 2020. We’ve clearly cut our estimates for 2020 and 2021. We note that estimating future performance now is exceptionally difficult, as the depth and length of the current crisis is unknown. Based on our lowered estimates and postponed turnaround, we lower our target price to 0.70€ (prev. 1.00€) but maintain HOLD recommendation.

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Guidance for 2020 withdrawn due to COVID-19

SSH announced yesterday that as a result of the COVID-19 pandemic, operating conditions in their markets have deteriorated significantly. Large enterprises globally, including some of SSH’s customers, have already announced profit warnings or cost savings programs. SSH expects this to affect customer’s investment decisions and the timing of IT project deployments. Due to the continued uncertainty of the situation, SSH’s visibility into the scope and duration of these effects is limited. SSH notes, that they are pre-emptively preparing for the effects of this situation by systematically reducing operating expenses, although details regarding this were not given.

 Estimates cut; turnaround postponed further

After a challenging 2019, SSH was guiding for clear improvement. For the year 2020, SSH was expecting revenue growth of 10-15 percent and an improving EBIT (FY’19: -1.2 MEUR), but this guidance is now withdrawn. We’ve cut our sales estimates for 2020E and 2021E roughly -16%. We estimate 2020E sales to decline -5%, resulting in -1.0 MEUR operating loss, despite measures to lower opex. Due to lower sales estimates, we estimate profit turnaround to be pushed forward to 2021E.

 HOLD maintained with TP 0.70€ (prev. 1.00€)

We note that estimating future performance is now exceptionally difficult, as the depth and length of the current crisis is unknown. Based on our lowered estimates and postponed turnaround, we lower our target price to 0.70€ (prev. 1.00€) but maintain HOLD recommendation.

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Finnair - Significant losses due to COVID-19

17.03.2020 - 09.25 | Company update

The continuing crisis around COVID-19 forces Finnair to cut its capacity by some 90% in April. We have cut our 20E estimates substantially and expect EUR -52m comparable operating loss in 20E. We keep our rating “HOLD” with TP of EUR 3.5 (5.0).

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Second profit warning due to COVID-19

Finnair issued its second profit warning within a month as the COVID-19 continues to hammer the global airline industry. Earlier the company withdrew its capacity estimate for 20E and expected 20E comparable operating profit to be significantly lower than on the previous year. Due to the flight restrictions and low demand, Finnair now cuts its capacity by ~90% starting from April and indicates that the comparable operating loss will be significant in 20E. Also, the company decided to withdraw the ’19 dividend proposal of EUR 0.2 per share.

Strong financial position securing Finnair’s operations

In order to secure its financing, Finnair has started to implement a substantial financing plan. This includes funding instruments such as available credit lines (Finnair has an available non-used credit line of EUR 175m), sale and leasebacks of unencumbered aircraft (Finnair currently has 42 unencumbered aircraft, which represents about half of the balance sheet value of the total fleet) and a substantial, market-based pension premium loan. Also, the Finnish government will actively support the company. Prior the COVID-19 situation, the company had a healthy balance sheet and a strong cash position, which should support Finnair’s finance and operations even if the situation around COVID-19 is prolonged. The company will also make further cost adjustments (prev. aiming cost savings of some EUR 40-50m). We expect relatively quick savings from personnel expenses but many of the other cost savings are expected to be realized later in H1’20E.

“HOLD” with TP of EUR 3.5 (5.0)

We have significantly cut our 20E estimates. We now expect 20E revenue to decline by ~13% y/y (EUR 2707m) while we expect comparable operating profit to decline by ~132% y/y (EUR -52m). This is mainly due estimates cut in Q2’20E. With our updated estimates, Finnair’s 20E gearing would be some 137% (64% in 2019), while the company’s target is to keep the ratio below 175%. Our net debt/EBITDA estimate is 3.9 (1.3 in 2019). On our estimates, Finnair trades at 20E EV/EBITDA multiple of 5.4x, which translates into 105% premium compared to the peers. Despite of the severe situation, we expect Finnair has good possibilities to quickly continue its operations after the situation. As Finnair’s financial position is strong we continue to see Finnair’s mid-term outlook rather positive. Due to the exceptional situation, there are significant uncertainties with our short-term estimates. We keep our rating “HOLD” with TP of EUR 3.5 (5.0).

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Cibus Nordic - A strong base for Swedish expansion

06.03.2020 - 09.25 | Company update

Cibus Nordic enters the Swedish property market with the EUR 180m portfolio acquisition of 111 Coop supermarkets. We view the deal as a fine way to gain more property mass and extend geographical reach in a controlled manner. Our new TP is SEK 155 (150), rating HOLD.

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We believe Cibus is an ideal owner for the supermarkets

Cibus acquires a portfolio of 111 properties located in Southern Sweden for EUR 180m. The portfolio of grocery properties belonged to Coop, the second largest grocery retailer in Sweden (19% market share), which had acquired the portfolio last year from Netto. Coop will provide some SEK 3m into each store for rebranding purposes and sign 10-year triple-net lease contracts. In this sense the new Swedish portfolio is even more cost-efficient from Cibus’ point of view. The longer lease contracts will lift Cibus’ WAULT to 5.5 years from 4.9 years. Coop has in total about 800 stores in Sweden; thus the 111 properties mean Cibus’ relationship with Coop can be compared to that with Kesko, considering Cibus’ properties amount to more than 10% of Kesko’s facility sourcing. The properties now acquired are relatively modern (83% were either constructed or renovated during the last 15 years), and are mostly located in residential areas, traffic routes and city centers. The typical property is only some 1,000 sqm in area (compared to old Cibus’ 3,500 sqm), so they can be best described as rather small supermarkets. As Coop is now in the process of rebranding the stores the inventory selection is set to expand from 1,800 items per store to 6,000.

The deal is valued at a yield above that where Cibus trades

The price implies a yield of almost 6%, which is undemanding as Cibus trades only slightly above 5%. Cibus’ net debt LTV ratio stays close to the old almost 60% level. Cibus fully used the mandate to issue 6.22m shares and thus raised EUR 84m new equity via a directed share issue. The EUR 123m new senior bank debt carries a 2% interest; Cibus consequently has some EUR 25m more cash in its balance sheet to make add-on acquisitions in Sweden. Cibus expects the deal to close next week, on Mar 10.

Cibus’ valuation and yield development

Cibus trades at a 100bps wider yield compared to the median NTM EBITDA/EV of a listed Nordic Real Estate company. Cibus managed to issue new equity at a 1.18x P/NAV (or 2.7% below the day’s closing price) to fund the Swedish expansion, which we see as a strong signal that investors view Cibus’ book value as quite conservative. We have updated our estimates; we expect Cibus’ rental income to continue to increase at the rate of inflation, and we estimate annual operating income at more than EUR 10m higher going forward.

The deal adds some EUR 10m in operating income capacity

The deal is good news for Cibus as portfolio diversification further improves. Our TP is SEK 155 (150), remain HOLD.

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Tokmanni - Bright future of discount retailing

06.03.2020 - 09.15 | Company report

Tokmanni continued its strong performance in 2019 as sales grew by 8.5% y/y while adj. EBIT margin improved to 7.5%. Profitability improvement through gross margin improvement and OPEX scalability is high on the company’s agenda and we see the set targets to be reachable. We keep our rating “BUY” with TP of EUR 16.

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Targeting EUR 1bn of sales

Tokmanni targets EUR 1bn in sales with further store network expansion and LFL growth. With 191 stores at the end of 2019 and at the targeted store network expansion pace (12,000m2 or ~5 stores annually) Tokmanni is set to reach its target of over 200 stores within the next few years. The company’s LFL growth has notably improved from 2017 levels as it was 5.6% y/y in 2018 and 4.3% y/y in 2019. We expect Tokmanni to reach its sales target of EUR 1bn during 2020E.

Further adj. EBIT margin improvement potential

Tokmanni targets to increase its adj. EBIT margin to ~9%. The adj. EBIT margin target implies ~1.5 percentage point (pp) margin improvement compared to the level reached in 2019 (7.5%). Some 0.5-1.5pp of this is to come from gross margin, which is to improve primarily driven by increased direct sourcing and by increased share of private label products in the mix. The targeted gross margin improvement is in line with what we had already incorporated into our estimates and it reaffirms the validity of further sourcing improvement potential, which has been key to our investment case. OPEX scalability should contribute the remaining 0.5-1.0pp. Positive LFL growth and more efficient operations are expected to be a key driver behind OPEX scalability.

We retain our rating “BUY” and TP of EUR 16

We approach Tokmanni’s valuation through our scenario analysis and valuation multiples. Our scenario analysis, with emphasis on base case and optimistic estimates, yields a fair value of EUR 16.0. On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 12.9x and 11.7x which translates into 7-10% discount compared to the Nordic non-grocery peers and 12-17% discount compared to the international discount peers. We keep our rating “BUY” and TP of EUR 16 intact.

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Raute - Adapting to a shift in demand

04.03.2020 - 09.20 | Company report

Raute’s 2017-18 was busy as familiar customers executed major capacity investments; thus ’18 marked a record year for the company. European order intake fell substantially in ’19, and was soft in other markets as well, barring Russia. This year may prove a relatively stable one owing to the record-large Russian order, yet should the cool environment be prolonged revenue is bound to fall further from the EUR 150m level. Our TP is EUR 25, rating HOLD.

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Demand for large and small orders remains at a good level

Raute left the record-year ’18 behind with a strong EUR 95m order book. Order intake remained at a decent level in early ’19, but activity began to cool steadily during the year due to increasing market uncertainty. This was manifest in mid-sized projects (such as repair and improvement investments) accounting for an exceptionally low share of order activity. Uncertainty has stayed high, but it should also be noted demand for spare parts and maintenance services remains stable, implying good capacity utilization rates at plywood and LVL mills. The record-large EUR 58m Segezha order means Raute can guide flat sales development for this year. Nevertheless, Raute guides decreasing EBIT for the year as the company has recognized a need to accelerate its investments in R&D and marketing. Raute looks to segment its machinery in order to better address lower price points and so achieve meaningful growth in emerging markets, but also aims to further improve its digital solutions offering.

Focus now on the missing middle-sized order demand

Raute’s customer demand is now focused on both large and small orders i.e. major new capacity projects, minor improvements and services. By contrast, demand for mid-sized projects, like modernizations, is at an exceptionally low level. It’s always hard to predict when big orders will materialize; we’ll focus on monitoring how mid-sized order activity develops going forward.

We view the multiples neutral in current market situation

Raute is now valued at 7x EV/EBITDA and 11x EV/EBIT ‘20e. We view the valuation neutral given the long-term fundamentals but high current uncertainty. Our TP is EUR 25, rating HOLD.

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Talenom - Share issue update, TP EUR 6.7

02.03.2020 - 09.30 | Company update

Talenom made a share issue without payment on the 28.2. to improve share liquidity, with five new shares for each existing share, after which the nr. of shares amounts to 41.836m. We adjust our target price to EUR 6.7 (prev. split adj. EUR 6.83) accounting for dividend distribution (split. adj. EUR 0.125 per share) and retain our HOLD-rating.

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Share issue without payment to improve share liquidity

Talenom made a share issue without payment on the 28.2. to improve the liquidity of its share, with five new shares given for each existing share, upon which the number of shares increased to 41.836m (6x pre-issue). We have since our previous update adjusted our quarterly estimates due to the impact of the Income Register, which based on discussion with management should be just below double the Q4/19 impact and we have as such lowered our Q1/20 revenue and EBIT estimates by EUR 0.6m, while upward adjustments to the latter quarters in the year keep our full year estimates intact. Talenom announced the acquisition of Addvalue Advisors on the 28.2., a bookkeeping company with around EUR 0.5m in revenue. The acquisition has no material impact on our estimates.

Growth and profitability improvement in 2020

Talenom expects relative growth in net sales and relative profitability in 2020 to be in line with 2019. We expect revenue in 2020 to grow 18.7% to EUR 68.8m mainly due to organic growth in Finland, with revenue growth in Sweden in our view expected to start to show in 2021. We expect EBIT to amount to EUR 12.6m, with growth of ~21% y/y.

HOLD with a target price of EUR 6.7

We adjust our target price to EUR 6.7 (prev. split adj. EUR 6.83), taking into account the distribution of dividend (record date 27.2., split adj. EUR 0.125 per share). Our target price values Talenom at ~30x 2020E P/E. With valuation in line with our estimates we retain our HOLD-rating.

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Finnair - 20E profit hampered by coronavirus

02.03.2020 - 09.20 | Company update

Finnair came out with revised 20E outlook and issued a profit warning as the impacts of the coronavirus are more severe and far reaching than first estimated. We have cut our 20E revenue estimate by ~1% and comparable EBIT estimate by ~23%. We keep our rating “HOLD” with TP of EUR 5.0 (EUR 6.3).

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Revised outlook for 2020E

Finnair revised its 20E outlook due to the larger than first estimated impacts of the coronavirus. During Q4’19 result, the company indicated that the impacts on Q1’20E result will be limited and expected 20E capacity growth of ~4% y/y. According to the new guidance, Finnair expects Q1’20E comparable EBIT to be lower than in the previous year. The company foresees decreasing demand also in Q2’20E, resulting in a negative impact on revenue. Q2’20E comparable EBIT is expected to be significantly lower compared to Q2’19. Therefore, comparable EBIT for 20E is also expected to be significantly lower than in FY19. In addition, the company withdrew its capacity (ASK) growth estimate (~4%) for 20E and aims to adjust its capacity to the current situation. Finnair has also commenced to seek how to adjust its costs by EUR 40-50m to mitigate the negative financial impact resulting from the virus.

20E estimates cut

We have made small adjustments to our Q1’20E revenue expectation and cut our already rather conservative Q1’20E comparable EBIT estimate by ~15%. We also cut our Q2’20E revenue estimate by ~4% and our comparable EBIT estimate by ~48%. Thereby, our FY20E revenue estimate is reduced by ~1% and comparable EBIT estimate by ~23%. We now expect 20E revenue growth of 1.8% y/y (EUR 3154m) while we expect comparable EBIT to decline by ~19% y/y (EUR 133m). We foresee 20E capacity (ASK) growth of 2.4% y/y (prev. estimate of 3.5% y/y). We expect negative impacts especially on Asian routes (Finnair suspended all the flights to mainland China, which might continue until the end of March) but also on European routes and on global cargo during H1’20E. We also expect weaker demand in travel services.

“HOLD” with TP of EUR 5.0 (prev. EUR 6.3)

We have kept our 21E-22E estimates intact as we don’t expect long-term financial impacts resulting from the coronavirus. However, as the visibility around the coronavirus and its development remain weak, there are uncertainties especially with our short-term estimates. We keep our rating “HOLD” with TP of EUR 5.0 (6.3).

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Next Games - Viewing game launches in H2/2020

02.03.2020 - 08.00 | Company update

Next Games Q4 revenue (Act./Evli EUR 7.7m/8.2m) fell short of our expectations despite total gross bookings in line with our estimates while EBIT (Act./Evli EUR -1.8m/-1.7m) was in line with our estimates despite the revenue miss and a low gross profit. With Blade Runner Nexus moved backed to production phase we expect new game launches in mid to late H2/2020, with priority in our view set on launching the Stranger Things -game.

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Slight revenue miss, EBIT held up fairly well

Next Games revenue in Q4 amounted to EUR 7.7m (Evli 8.2m), with gross bookings of EUR 8.2m (Evli 8.2m). EBIT was in line with our estimates at EUR -1.8m (Evli -1.7m) despite the lower revenue and a low gross profit margin (Act./Evli 53%/67%). The adj. EBIT amounted to EUR -1.0m (Evli -0.7m). Our World continued to be affected by retention issues and gross bookings continued to decline. Next Games added Publishing Operations to its reporting (live games revenue – costs), at an EBITDA of EUR 3.8m in 2019.

Next major steps should be seen during H2/2020

Next Games expects moderate revenue growth in 2020 and for its publishing operations EBITDA to be profitable. Revenue from live games is expected to continue on a flat or declining trend. Blade Runner Nexus was moved back to production phase and we now expect new game launches in mid to late H2/2020. Priority in our view will likely be on bringing the commercially more attractive Stranger Things -game to the market. Successful new launches along with seeking to solve Our World’s retention and reverse the declining will be key for 2020. We expect a revenue growth of 5% in 2020 and EBIT to remain clearly in the red due to development costs of new projects.

HOLD with a target price of EUR 0.84 (0.90)

We have overall slightly lowered our estimates post-Q4 and with the slight increase in uncertainty brought by the postponement of a BRN launch we adjust our target price to EUR 0.84 (0.90) and retain our HOLD rating.

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Cibus Nordic - EUR 200m Swedish entry this year?

28.02.2020 - 09.20 | Company update

Cibus reported an unsurprising portfolio performance for Q4, however administration costs were temporarily elevated due to development efforts. Nordic expansion could well be on the cards this year. We see Cibus’ yield still relatively attractive. Our TP is now SEK 150 (135), rating still HOLD.

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The existing portfolio continues to perform well

Cibus’ Q4 rental income, at EUR 13.2m, was close to our EUR 13.3m estimate. There were no surprises in terms of property expenses, as these summed up to EUR 0.6m and thus net rental income was EUR 12.6m, compared to our EUR 12.5m estimate. Cibus’ budgeted admin costs run close to EUR 1.0m per quarter. The admin costs amounted to EUR 2.0m in Q4 due to many one-off considerations. First, the outsourcing contract with Pareto, now terminated, still had an effect. Second, Cibus booked EUR 0.5m in restructuring costs in order to achieve a more efficient legal structure. Cibus also incurred EUR 0.2m due to mapping of Nordic markets beyond Finland. Therefore Cibus’ Q4 operating income missed our estimate by ca. EUR 1.0m. There were no notable changes to key metrics as EPRA NAV (EUR 11.4), LTV ratio (59%), occupancy rate (95%) and WAULT (4.9 years) remained basically unchanged. Cibus also highlighted its active property management successes in certain less-than-metropolitan areas like Nastola and Kajaani by filling local vacancies with tenants such as Lidl and Rusta (a discount store chain).

Authorization could enable a EUR 200m GAV acquisition

The acquisition of three Tokmanni-anchored properties helped lift the portfolio’s annual net rental income capacity by about EUR 1.0m to EUR 50.9m. Last year Cibus managed to achieve its annual EUR 50m acquisition target, however this year a larger transaction might take place as Cibus is authorized to issue up to 6.22m new shares. Cibus is eyeing other Nordic markets beyond Finland. Sweden seems to be the most potential option; the market is, on average, slightly higher priced than Finland, but Cibus believes it can apply its own concept there successfully.

Cibus’ 1.23x P/NAV still offers a 100bps yield pick-up

Cibus’ shares have rerated along with the rest of the Nordic RE market. While Cibus trades at a clear premium relative to GAV/NAV (1.08x/1.23x), the portfolio remains priced at a competitive yield. Our TP is now SEK 150 (135), rating still HOLD.

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Solteq - Slowly but steadily

28.02.2020 - 09.00 | Company update

Solteq’s Q4 results fell shy of our expectations. Revenue amounted to EUR 15.7m (Evli EUR 15.7m) while the adj. EBIT amounted to EUR 1.1m (Evli EUR 1.5m), affected by some project challenges. We expect revenue to decline slightly in 2020 due to the SAP ERP business divestment, while expecting the adj. EBIT to remain at 2019 levels. Following estimates revisions, we adjust our target price to EUR 1.40 (1.50) and retain our HOLD-rating.

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Project challenges affected H2 profitability

Solteq’s revenue in Q4 amounted to EUR 15.7m (Evli 15.7m), growing 5.2% y/y. The adj. EBIT amounted to EUR 1.1m (Evli 1.5m) and EBIT to 3.3m (Evli 3.8m) due to the profit from the sale of Solteq’s SAP ERP business. Solteq seeks to distribute a dividend of EUR 0.05 per share, to be decided upon later. Project challenges in Finland during H2 affected revenue and as a result profitability. Comments on the positive development of own software products (i.e. Utilities, POS) and international growth were welcome, although near-term visibility is still limited. Product development expenses amounted to EUR 3.9m in 2019 and are expected to decrease clearly in 2020.

Slight sales decline expected in 2020

We expect revenue to decrease by 1.4% in 2020 following the impact of the sale of the SAP ERP business. The adj. EBIT is expected to remain at 2020 levels and with a pick-up in depreciation of capitalized development costs we expect operational performance to improve in 2020. Our EBITDA and adj. EBIT estimates for 2020-2021E are down by some 6-10% and ~20% respectively post-Q4 following an updated view on profitability improvement progress.

HOLD with a target price of EUR 1.40 (1.50)

Solteq saw good earnings growth in 2019 but with the capitalization of development costs cash flows remained weak. We expect improvements in 2020 but at a slower pace than previously anticipated. On our lowered estimates we adjust our target price to EUR 1.40 (1.50) and retain our HOLD-rating.

Open report

Next Games - Revenue miss, total gross bookings in line

28.02.2020 - 08.30 | Earnings Flash

Next Games' net sales in Q4 amounted to EUR 7.7m, below our and consensus estimates (EUR 8.2m/8.1m Evli/cons.). Gross bookings amounted to EUR 8.2m (Evli EUR 8.2m). EBIT amounted to EUR -1.8m, in line with our and consensus estimates (EUR -1.7m/-1.8m Evli/cons.). Next Games expects moderate growth in 2020 and profitable publishing operations EBITDA.

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  • Net sales in Q4 were EUR 7.7m (EUR 11.3m in Q4/18), below our and consensus estimates (EUR 8.2m/8.1m Evli/Cons.). Net sales in Q4 declined -48% y/y. Compared to our estimates, revenue was lower than expected due to lower revenue despite gross bookings being in line with our estimates (Act./Evli EUR 8.2m/8.2m).
  • Operating profit in Q4 amounted to EUR -1.8m (EUR --1.6m in Q4/18), in line with our and consensus estimates (EUR -1.7m/-1.8m Evli/cons.), at a margin of -24%. The EBITDA of publishing operations in H2 amounted to EUR 1.5m
  • Adj. EBIT amounted to EUR -1.0m (Q4/18: -0.5m), below our estimate of EUR -0.7m.
  • TWD: NML - DAU 183k (Q4/18: 253k), MAU 651k (Q4/18: 728k), ARPDAU EUR 0.25 (Q4/18: 0.25).
  • TWD: OW - DAU 114k (Q4/18: 223k), MAU 591k (Q4/18: 759k), ARPDAU EUR 0.38 (Q4/18: 0.28).
  • Guidance: Next Games expects moderate growth in 2020, weighted towards the end of the year. Publishing operations EBITDA is expected to be profitable. Revenue from already published games expected to continue on a flat or declining trend.
  • Changes to reporting: R&D now includes costs relating to unpublished products, costs relating to developing live games included in sales and marketing expenses

Open report

Cibus Nordic - Portfolio performed as expected

27.02.2020 - 09.45 | Earnings Flash

Cibus Nordic reported property portfolio results in line with our expectations. However, administration costs were higher than we had estimated due to certain group restructuring and development-related costs.

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  • Cibus’ Q4 rental income amounted to EUR 13.2m vs our EUR 13.3m estimate.
  • After subtracting property expenses, Q4 net rental income was EUR 12.6m, while we expected EUR 12.5m.
  • When taking central administration expenses into account, operating income was EUR 10.6m, compared to our EUR 11.5m estimate. Administration costs were higher than we anticipated due to non-recurring group restructuring costs totaling ca. EUR 0.5m (to simplify group structure and help facilitate internal funds transfers) as well as EUR 0.2m cost attributable to mapping of Nordic markets.
  • Including net financial costs, net operating income was EUR 7.0m vs our EUR 8.1m expectation.
  • Annual net rental income capacity now stands at EUR 50.9m (previously EUR 49.9m).
  • The portfolio was valued at EUR 875m, translating to an EPRA NAV of EUR 11.4 (11.4) per share.
  • Net debt LTV ratio stood at 58.7% (58.9%).
  • Occupancy rate was 94.7% (94.5%) at the end of Q4.
  • WAULT remained basically unchanged at 4.9 years (5.0 years).

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Solteq - EBIT misses our estimates

27.02.2020 - 09.15 | Earnings Flash

Solteq's Q4 results were slightly below our estimates. Net sales in Q4 amounted to EUR 15.7m (Evli EUR 15.7m), while the adj. EBIT amounted to EUR 1.1m (Evli EUR 1.5m). Solteq expects that its adjusted EBIT will remain at the same level as in 2019.

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  • Net sales in Q4 were EUR 15.7m (EUR 14.9m in Q4/18), in line with our estimates (Evli EUR 15.7m). Growth in Q4 amounted to 5.2 % y/y. Revenue in Finland did not grow in 2019 compared to 2018, foreign subsidiary organic growth 26%.
  • The operating profit in Q4 amounted to EUR 3.3m (EUR 0.6m in Q4/18), below our estimates (Evli EUR 3.8m). The divestment of the SAP ERP business had a positive impact of EUR 2.5m. The adj. operating profit amounted to EUR 1.1m (EUR 0.6m in Q4/18), below our estimate of EUR 1.5m.
  • Product development investments during Q4/19 amounted to EUR 0.9m (2019: EUR 3.9m).
  • Guidance for 2020: Solteq expects that its adjusted operating profit will remain at the same level as in 2019. In our estimates we have expected growth in the adj. operating profit in 2020.
  • Dividend proposal: a dividend of a maximum amount of EUR 0.05 per share may be distributed, conditional upon whether the requirements for distribution of dividends are fulfilled in term of the company’s solvency and / or financial position. A separate announcement will be made if a resolution to distribute dividend is made. (Evli est. 0.03 per share)

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Innofactor - Sustaining successful turnaround

26.02.2020 - 09.15 | Company update

Innofactor’s Q4 results were slightly below our expectations, with net sales of EUR 17.4m (Evli 17.0m) and EBITDA of EUR 1.6m (Evli 2.0m). The business development remains favourable through a continued healthy order backlog and revenue mix. With significant improvements in cash generation and a reasonable financial situation M&A activity could again be on the table to supplement the service offering in the Nordics and speed up growth.

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Continued healthier profitability

Innofactor’s Q4 results were slightly shy of our expectations. Net sales grew 9.7% from the relatively weak comparison period to EUR 17.4m (Evli 17.0m) while EBITDA amounted to EUR 1.6m (Evli EUR 2.0m). Innofactor expects net sales and EBITDA in 2020 to increase from 2019. The order backlog remained at a good level of EUR 49.8m. Q4 saw no new significant orders but several orders have already been received during early 2020. The net sales mix remains favourable through a continued higher level of recurring revenue.

M&A activity could pick up

We continue to expect limited near-term growth (2020E: 4%) with the longer duration of the order backlog while expecting some further pick-up in margins (2020E: +1.2%p EBITDA-%). Wage inflation through changes to the Competitiveness Pact may pose a risk while the margin improvement potential remains supported by the to our understanding current suboptimal billing rates. With the improved cash generation and not particularly challenging financial position M&A activity could likely pick up again to supplement the offering of Innofactor’s pan-Nordic platform and accelerate growth.

BUY with a target price of EUR 0.90 (0.85)

Innofactor is in our view continuing to show good progress in building up a healthier business. With valuation not overly stretched we retain our BUY-rating and raise our target price to EUR 0.90 (0.85).

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Next Games - New game launches crucial in 2020

26.02.2020 - 09.00 | Preview

Next Games will report H2 results on February 28th. During Q4 Next Games announced that the Blade Runner Nexus game will not be launched during 2019 and updated its outlook. We expect Q4 revenue of EUR 8.2m, seeing some support from season 10 of TWD and the typically stronger Q4, as gross bookings have been on a declining trend for both live games, and an EBIT of EUR -1.7m.

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Expect Q4 revenue of EUR 8.2m, EBIT EUR -1.7m

With Next Games having previously announced that the Blade Runner Nexus game will not be launched during 2019, of key interest in the H2 report will be any comments on the upcoming new products. We expect Q4 revenue of EUR 8.2m (Q4/18: EUR 11.3m), seeing some support for gross bookings from season 10 of TWD and the typically stronger Q4 due to holiday seasons, with gross bookings having been on a declining trend so far during 2019. We expect an EBIT of EUR -1.7m. Profitability has been burdened by the relatively high R&D costs in relation to revenue from live games.

Launch of new games in 2020 remain crucial

With the delay in the BRN launch from the company’s previous expectations, no new games were launched in 2019. Successful new game launches in 2020 remain crucial for ensuring cash flow stability. Both live games have previously been reported to be operated profitably as independent projects, but development costs relating to new products have kept earnings figures in the red. Our assumption is for BRN to be launched mid Q2/20 and the Stranger Things -game in early Q4/20. The successful rights issue during Q4 together with cost savings during 2019 provided some much-needed breathing room for the otherwise rather strained financial position.

HOLD with a target price of EUR 0.90

Following some estimates revisions due to BRN launch timetable assumptions we continue to expect weaker profitability in 2020 before revenue from new products kick in. We retain our HOLD-rating and target price of EUR 0.90 ahead of the H2 results.

Open report

Innofactor - Margins slightly below expectations

25.02.2020 - 09.15 | Earnings Flash

Innofactor’s Q4 results were slightly below our expectations. The net sales in Q4 amounted to EUR 17.4m (Evli EUR 17.0m), while EBITDA amounted to EUR 1.6m (Evli EUR 2.0m). Innofactor expects that its net sales and EBITDA in 2020 will increase from 2019. The BoD proposes that no dividend be paid for 2019 (Evli EUR 0.00).

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  • Net sales in Q4 were EUR 17.4m (EUR 15.9m in Q4/18), in line with our estimates (Evli EUR 17.0m). Net sales in Q4 grew 9.7 % y/y. Net sales per employee has improved by 15.6% since the previous year.
  • EBITDA in Q4 was EUR 1.6m (EUR -0.9m in Q4/18), below our estimates (Evli EUR 2.0m), at a margin of 8.9 %.
  • Operating profit in Q4 amounted to EUR 0.5m (EUR - 1.7m in Q4/18), below our estimates (Evli EUR 1.0m), at a margin of 2.8 %. Profitability has been supported by the measures taken during the end of 2018 to improve profitability.
  • Order backlog at EUR 49.8m, up 62.4% y/y. No significant individual orders were signed during the quarter as several decisions were delayed until the turn of the year.
  • Guidance for 2020: Innofactor’s net sales and EBITDA in 2020 are estimated to increase compared to 2019.
  • Dividend proposal: The BoD proposes that no dividend be paid for 2019 (Evli EUR 0.00).

Open report

Solteq - Finishing off a year of good progress

25.02.2020 - 09.00 | Preview

Solteq will report Q4 results on February 27th. Solteq will report exceptionally good results, aided by gains from the sale of its SAP ERP business to Enfo. We expect the operating profitability to have improved slightly from previous year levels. The divestment should further improve debt ratios sufficiently for Solteq to reinitiate dividend distribution and we expect a dividend proposal of EUR 0.03 per share. We retain our HOLD-rating and target price of EUR 1.50 intact ahead of the Q4 results.

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Expect healthy profitability in Q4

We expect Solteq’s Q4 revenue to amount to EUR 15.7m and the adj. EBIT to EUR 1.5m. Solteq sold its SAP ERP business to Enfo Oyj during the quarter and is expected to book an approx. EUR 2.3m profit in Q4, which will clearly boost earnings. The sales of the SAP ERP business in 2019 is expected to be EUR 4m. With the sale of the business Solteq will focus more on the development of its own software products and services. We expect the sale to sufficiently improve debt ratios for Solteq to reinitiate dividend distribution, which have been on hold for two years due to bond covenants and expect a dividend proposal of EUR 0.03 per share.

SAP ERP business sale to affect growth

With the divestment of the SAP ERP business we have lowered our coming year estimates to account for the decrease in sales. With Solteq on a transformation journey towards becoming more focused on its own software products and related services we have not anticipated major growth in the near-term and with the divestment now expect a minor sales decline in 2020. We continue to expect for Solteq to remain on a margin improvement trajectory. 2020 guidance should in our view likely reflect growth in adj. operating profit compared to 2019.

HOLD with a target price of EUR 1.5

Apart from adjustments made based on the divestment of the ERP SAP business, our estimates remain unchanged. We retain our HOLD-rating and TP of EUR 1.5.

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Scanfil - Higher multiples are warranted

20.02.2020 - 09.20 | Company update

Scanfil’s Q4 results fell slightly short of our expectations, yet overall there were no significant changes in the wider picture. The HASEC acquisition helped Industrial as well as Medtec & Life Science top line, however both segments extended strong organic growth. Scanfil aims to grow at a 5% organic CAGR according to its updated long-term target; in our view there’s still good upside to current multiples. Our TP is now EUR 5.75 (5.25), remain BUY.

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All segments continued to grow except Communication

Scanfil’s EUR 155m Q4 revenue didn’t quite meet our EUR 159m estimate yet grew by 10% y/y. The Industrial segment (key accounts include Kone) jumped by a third in Q4 (Q3 y/y growth was 52%), and so the EUR 47m revenue almost met our EUR 51m estimate. Scanfil says the performance has been due to organic growth but the HASEC acquisition also helped. Medtec & Life Science (potential customers include Thermo Fisher Scientific and Vaisala) top line grew by 17% y/y and so was in line with our EUR 29m estimate. Scanfil says the segment grew mostly in an organic fashion, receiving only slight lift from the German acquisition. Energy & Automation (e.g. Valmet) continued to grow at a stable organic 6% annual rate. Consumer Applications has stabilized for two quarters now, but the business is rather seasonal. Communication (e.g. Nokia) fell by 24%, yet Scanfil says the segment could well stabilize this year. Scanfil’s Q4 operating margin, at 6.5%, was 60bps below our estimate; we still think the company will easily reach its 7% long-run target.

Scanfil targets 5% organic CAGR during the next four years

We estimate Scanfil has grown at a 6% organic rate during the last two quarters. Considering Scanfil’s strong cost, quality and delivery record we view the company’s 5% CAGR target as highly feasible, especially given a good positioning in Industrial and Medtec & Life Science, which we estimate to contribute some two-thirds of all the organic growth going forward.

In our view Scanfil can be valued above peer multiples

Although lowish valuation multiples are in general well-advised for contract electronics manufacturers, in our view Scanfil’s strong profitability track record as well as organic growth outlook justify higher than the current 6x EV/EBITDA and 8x EV/EBIT ‘20e multiples. Our new TP is EUR 5.75 (5.25), retain BUY.

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Gofore - Room for improvement in 2020

20.02.2020 - 08.30 | Company update

Gofore’s H2 results came in slightly better than expected. EBITA was at comparison period levels and amounted to EUR 3.0m (Evli EUR 2.8m). The BoD proposes a dividend of EUR 0.23 per share (Evli EUR 0.20). Gofore expects revenue and the comparable adj. EBITA to grow compared to 2019. We retain our HOLD-rating with a TP of EUR 8.2 (8.0).

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H2 EBITA slightly above our estimate at EUR 3.0m

Gofore’s H2 results were slightly better than expected. Revenue amounted to EUR 30.6m (pre-announced), with growth of 18.2% y/y, while EBITA remained at comparison period levels and amounted to EUR 3.0m (Evli EUR 2.8m). The BoD proposes a dividend of EUR 0.23 per share (Evli EUR 0.20). Full year relative profitability declined slightly, driven by a 5% increase in average wages and a 1 %-point decrease in billing rates, while customer prices increased 2.3%.

Continued revenue and EBITA growth

Gofore expects revenue and the comparable adj. EBITA in 2020 to grow compared to 2019. Organic growth in H2 was according to our estimates clearly in the single-digits, affected by the drop in demand among certain larger customers in Q3. We expect organic growth to pick-up in 2020. Currently, the impact of inorganic growth in 2020 will be clearly smaller and we expect a decline in sales growth to 9.7% in 2020. Gofore is however sitting on a formidable cash position and continued M&A activity is not unlikely. Profitability in 2020 will be affected by one-offs relating to the divestment of the UK business but cost-savings will bring the impact to a net positive. We expect an improvement in adj. EBITA-margins to 13.6% in 2020.

HOLD with a target price of EUR 8.2 (8.0)

Gofore’s performance has slightly faltered, with slower organic growth and minor margin declines, but we still see performance and thus valuation at above peers. We value Gofore at 16x 2020 P/E (goodwill amortization. adj.) and adjust our target price to EUR 8.2 (8.0) and retain our HOLD-rating.

Open report

Gofore - Slightly above expectations

19.02.2020 - 09.30 | Earnings Flash

Gofore’s EBITA in H2 was slightly better than our expectations, at EUR 3.0m (Evli 2.8m). Revenue amounted to EUR 30.6m (pre-announced). The BoD proposes a dividend of EUR 0.23 per share (Evli EUR 0.20). Gofore expects that its net sales and comparable adjusted EBITDA will grow in 2020 compared to 2019.

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  • Gofore H2/19 net sales amounted to EUR 30.6m (pre-announced), with sales growth in at 18.2% compared to H2/18 figures. Growth was driven by organic growth and the acquisition of Silver Planet.
  • EBITA in H1 amounted to EUR 3.0m, slightly above our estimates (Evli EUR 2.8m), at a margin of 10.0%. EBIT amounted to EUR 2.0m (Evli EUR 1.7m), at a 6.5% EBIT-margin.
  • Dividend proposal: Gofore’s BoD proposes a dividend of EUR 0.23 per share (Evli EUR 0.20)
  • Guidance: Gofore's net sales and comparable adjusted EBITA will grow compared to 2019. Adjusted EBITA means EBITA, adjusted for nonrecurring items.
  • The number of personnel at the end of the period was 582 (H2/18: 495).

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Exel Composites - Improvement potential still exists

19.02.2020 - 09.10 | Company update

Exel’s Q4 EBIT failed our estimate due to one-off items. We believe the company remains on an improvement track. Our TP is now EUR 6.75 (6.00), new rating BUY (HOLD).

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We continue to expect top line to grow at high single digits

Q4 top line, at EUR 26.6m, was flat y/y and a little soft compared to our EUR 27.8m estimate. This was due to Construction & Infrastructure, where Q4 revenue declined by 2% y/y to EUR 12.6m, while we expected EUR 14.3m. Q4 was thus a relatively slow quarter for the segment, as y/y revenue growth had amounted to 12% in Q3. Exel says there have been no changes to e.g. wind energy demand; there can be wide variations in quarterly figures. Industrial Applications’ Q4 revenue declined by 1% y/y to EUR 8.5m and so the figure was above our EUR 8.0m estimate. Other Applications’ Q4 revenue was in line with our EUR 5.5m estimate. Although Exel’s Q4 top line fell short of our estimate only slightly, adj. EBIT was only EUR 1.3m vs our EUR 2.3m estimate. The gap was due to other operating expenses, which were high at EUR 6.4m (had averaged EUR 5.4m in the last few quarters). Exel says the high expenses were due to items like temporary production plant overlap in China as well as certain production-related one-offs. We find no other surprises on the cost side as gross margin remained at a 60% level and employee expense share continued to decline (down by 200bps y/y to 28%). Order intake continued to increase by 9% y/y.

Exel guides increasing revenue as well as adj. EBIT for ‘20

Exel will likely record some EUR 15m capex in ’20 due to the production plant investment in Austria and residual payments related to a past Chinese acquisition. Overall, we continue to view Exel’s volume outlook favorable. We expect wind energy to provide further strong uplift this year. Exel highlights good volume potential in applications such as cable cores and certain defense-related equipment. With regards to profitability, cost savings measures by themselves should contribute another EUR 1m this year, following the EUR 2m achieved last year.

We see more upside as volume outlook remains good

Exel’s valuation (ca. 8x EV/EBITDA and 13x EV/EBIT ‘20e) is still more than 20% below peer multiples. Although we believe some discount is warranted, we see upside from current levels. Our updated TP is EUR 6.75 (6.00), rating now BUY (HOLD).

Open report

Scanfil - Not quite as high as we expected

19.02.2020 - 08.35 | Earnings Flash

Scanfil’s Q4 didn’t reach our expectations as top line missed our estimate by a few percentage points while operating margin was some 60bps lower than we expected.

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• Scanfil Q4 revenue amounted to EUR 155m vs EUR 159m/157m Evli/consensus estimates.

• Communication top line was EUR 21m, while we estimated EUR 23m.

• Consumer Applications’ revenue was EUR 28m, compared to our EUR 27m estimate.

• Energy & Automation recorded EUR 29m Q4 revenue vs our EUR 29m estimate.

• Industrial top line amounted to EUR 47m vs our EUR 51m expectation.

• Medtec & Life Science Q4 revenue was EUR 29m, compared to our EUR 29m estimate.

• Scanfil’s Q4 EBIT stood at EUR 10.0m vs EUR 11.3m/11.0m Evli/consensus estimates. Operating margin thus amounted to 6.5%, whereas we estimated 7.1%.

• The BoD proposes EUR 0.15 (0.13) dividend per share to be distributed, which we had estimated at EUR 0.16.

• Scanfil guides ’20 revenue in the EUR 590-640m range and expects adjusted operating profit to amount to EUR 39-43m. We find this guidance range unsurprising as FY ’19 revenue stood at EUR 579.4m while adjusted operating profit was EUR 39.4m. Scanfil says the guidance is subject to exceptional uncertainty due to the coronavirus situation.

• Scanfil updates its long-term financial target, according to which Scanfil aims to reach EUR 700m revenue organically in ’23 (previously EUR 600m in ’20) with a 7% operating margin.

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Exel Composites - EBIT miss driven by elevated costs

18.02.2020 - 09.35 | Earnings Flash

Exel Composites reported Q4 revenue slightly below our expectations, while adjusted operating profit fell short of our estimate more dramatically, by about EUR 1.0m, as other operating expenses were higher than we had estimated.

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  • Q4 revenue amounted to EUR 26.6m, compared to EUR 27.8m/27.7m Evli/consensus estimates.
  • Construction & Infrastructure top line was EUR 12.6m (EUR 12.9m a year ago) vs our EUR 14.3m estimate.
  • Industrial Applications generated EUR 8.5m (EUR 8.6m) sales, whereas we expected EUR 8.0m.
  • Other Applications top line amounted to EUR 5.5m (EUR 5.2m), in line with our EUR 5.5m expectation.
  • Q4 adjusted EBIT was EUR 1.3m, compared to EUR 2.3m/2.2m Evli/consensus estimates. The figure missed our expectation as other operating expenses were about EUR 1.0m higher than we had estimated.
  • The BoD proposes EUR 0.18 (0.18) dividend per share be distributed, while we had expected EUR 0.20.
  • Exel Composites guides revenue and adjusted operating profit to increase in 2020 compared to 2019, which is as we expected. The company says the coronavirus will have an impact on its Chinese production volumes in Q1 yet is not ready to estimate the impact in more detail.

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Verkkokauppa.com - Shifts focus towards profitability

17.02.2020 - 09.35 | Company update

Verkkokauppa.com’s Q4 result didn’t meet the expectations as sales were negatively impacted by the postal strike and the changed timing of tax refunds. Q4 sales were EUR 159.9m (Evli 168.9m) while EBIT amounted to EUR 4.5m (Evli 6.0m). We keep our rating “HOLD” with TP of EUR 3.5 (3.3).

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Q4 result hampered by the postal strike

Verkkokauppa.com’s Q4 result missed expectations as sales growth of 2.6% y/y remained below market growth (Gfk: 4.4%), amounting to EUR 159.9m vs. our EUR 168.9m (cons. 164m). Headwind from the postal strike was stronger than anticipated and the changed timing of tax refunds hampered December sales. Black Friday sales were however better than ever. Gross profit was down by 3% y/y due to heavy campaigning during Black Friday. EBIT was EUR 4.5m vs. our EUR 6.0m (cons. 5.6m) resulting from weakened gross profit. ’19 dividend proposal was in line at EUR 0.21 vs. our EUR 0.21 (cons. 0.21).

Prioritizing profitability in ‘20E

Verkkokauppa.com has normally prioritized growth over profitability, which has weighed down margins, as the competition in the consumer electronics market has been extremely tight and price driven. In ‘20E, the company shifts its focus towards profitability and aims for more moderate growth. We thus expect the growth to be somewhat in line with the market growth (GfK ’19 estimate: 2.9% y/y). In order to strengthen efficiency especially in logistics, the company has commenced to seek opportunities within drop shipping (direct delivery from manufacturer to the customer). This allows Verkkokauppa.com to expand its product assortment without logistical pressures. The company also aims to launch a new subcategory in H1’20E and to increase its private label assortment during 20E, which should have a positive impact on profitability, as private labels normally provide better margins. We expect ‘20E-‘21E sales growth of 3.2-3.5% y/y and EBIT growth of 12-18% y/y.

“HOLD” with TP of EUR 3.5 (3.3)

Verkkokauppa.com guided ‘20E revenue of EUR 510m-530m and EBIT of EUR 12-15m. We have lowered our ‘20E sales estimate by some 5% and expect ‘20E sales of EUR 520m (3.2% y/y), which is at the midpoint of the guidance. Our view of EBIT development is rather conservative as the market is highly competitive and price driven. Despite of the good control over costs we expect to get more visibility on the actions to be taken for more efficient operations. We expect EBIT to grow by ~18% y/y in ‘20E, amounting to EUR 13.3m. On our estimates, Verkkokauppa.com trades at ‘20E-‘21E EV/EBIT multiple of 10.1x and 9.0x, which translates into ~60-70% discount compared to the peers. We keep our rating “HOLD” with TP of EUR 3.5 (3.3).

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SSH - Small progress, but not enough

17.02.2020 - 09.10 | Company update

SSH’s Q4 was broadly in line, capping off a challenging year of sales decline. Given the weak performance in FY’19, SSH’s guidance for 2020 was a small disappointment. We’ve cut our estimates for the coming years and maintain our target price of EUR 1.0, our recommendation is now HOLD (prev. SELL).

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Q4 broadly as expected, capping off a disappointing year

Q4 net sales were EUR 4.1 million (vs. 4.7m our Evli). Net sales decreased by -35.8% compared to the previous year mainly due to the end of the patent licensing programme and reduced consulting revenue. Software business sales decreased -11.8% y/y due to the smaller initial project size compared to last year including a large license deal received in Q4’18. Software fees were EUR 1.8 million (2.2m Evli), Professional services were EUR 0.3 million (0.2m Evli), and Recurring revenue was EUR 2.1 million (2.3m Evli). Q4 operating loss was EUR -0.1 million (vs. 0.2m Evli). FY’19 as a whole; net sales of software business (excluding patent income in FY’18) decreased -8% y/y and EBIT was -1.2 MEUR (0.5 MEUR FY’18), attributed to lower sales (despite OPEX reduction), less larger license deals and with significant patent income received in FY’18.

2020 guidance disappointing given 2019 performance

SSH’s expectations for 2020 are revenue growth of 10-15 percent and an improving operating result (-1.2 MEUR FY'19). SSH expect clearly faster growth rates for PrivX and NQX, steady growth for UKM matching the industry growth rate, and modest growth for Tectia, which is the most mature product. The combined effect of these growth rates will result in moderate short-term growth, which SSH expects to accelerate over the next several years. Given the weak performance in SSH’s software business in FY’19, the guidance was a small disappointment and we have consequently cut our sales estimates. We now estimate 16.6 MEUR net sales for 2020E (prev. 17.5MEUR), resulting in 15% y/y growth, which is right at SSH’s guidance upper range. Reaching that level of net sales will require several larger one-off UKM license deals and/or some bigger NQX deals in 2020E. In conjunction with our estimates revision, we have also now amended our estimates regarding the 12 MEUR hybrid loan interest expenses, which as of March 30th 2020 will rise from 7.5% to 11.5%. Management did not provide any new commentary regarding hybrid loan and its possible redemption or re-financing.

Maintain EUR 1.0 target price, recommendation HOLD (prev. SELL)

Despite our estimates cut, the bigger picture remains unchanged in our view; with the underlying question in the investment case still regarding growth. SSH has made progress, but the progress is slow and given SSH’s historical and current growth profile, the question remains will growth materialize. We maintain our target price of EUR 1.0, our recommendation is now HOLD (prev. SELL). As noted before, SSH trades at a clear discount to the cyber security sector. Our target price implies an EV/Sales multiple of 2.4 on our ‘20E estimate, slightly below Nordic software peers, which we see as warranted given weaker metrics and the uncertainty to our estimates.

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Fellow Finance - Growth investments in 2020

17.02.2020 - 08.30 | Company update

Fellow Finance’s H2 results fell short of our expectations, with EBIT amounting to EUR 0.3m (Evli 1.0m), affected by non-recurring personnel expense items of EUR 0.7m. Margin pressure is expected to continue in 2020 due to growth investments while accelerated turnover growth is expected in 2021-2022. Fellow Finances BoD proposes that no dividend be paid for FY2019 (Evli EUR 0.04). We retain our HOLD-rating with a target price of EUR 4.0 (4.2).

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H2 EBIT below expectations mainly due to NRI’s

Fellow Finance’s H2 results fell short of our expectations. Turnover amounted to EUR 7.0m. Turnover grew 9.1%, driven by an increase in interest yields as commission income decreased slightly. EBIT amounted to EUR 0.3m (Evli 1.0m), impacted by NRI’s of EUR 0.7m. The BoD proposes that no dividend be paid (Evli EUR 0.04 per share). Turnover is expected to grow in 2020 while the operating profit is expected to decrease compared to 2019 (EUR 1.6m) due to growth investments.

Growth investments to lower margins in 2020

We have made downward revisions to our estimates post-H2. We expect an EBIT of EUR 1.3m (prev. 2.1m) and turnover growth of 4% (prev. 6%) in 2020. The consumer lending market in Finland is expected to remain challenging at least during H1/20. We expect limited growth in 2020 as the international operations ramp up and low average consumer loans in Poland, one of the furthest established international markets, will limit the growth pace but offer some upside through higher relative commission yields. We continue to expect growth pick-up in 2021. Profitability will be burdened by higher personnel costs and credit loss reservations associated with scaling up new markets.

HOLD with a target price of EUR 4.0 (4.2)

Fellow Finance’s growth story continues to be challenged by the competitive situation in the consumer lending market in Finland and the visibility into accelerated international growth remains limited. On our revised estimates we adjust our target price to EUR 4.0 (4.2) and retain our HOLD-rating.

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Pihlajalinna - Expecting a profitability turnaround in 20E

17.02.2020 - 08.30 | Company update

Pihlajalinna’s Q4 revenue was as expected at EUR 133.8m (Evli 133.6m) but profitability was weighed down by increased costs. Q4 adj. EBIT amounted to EUR 5.6m (Evli 7.8m). The tender offer by Mehiläinen is currently being reviewed in FCCA and the process is expected to be completed at the end of Q2’20 or latest during Q3’20. For ‘20E we expect a clear improvement in profitability. We keep our rating “HOLD” with TP of EUR 16.

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Q4 revenue in line – adj. EBIT missed expectations

Pihlajalinna’s Q4 revenue of EUR 133.8m (5.4% y/y) was as anticipated (Evli/cons EUR 133.6m/134.4m) but adj. EBIT of EUR 5.6m missed the expectations (Evli/cons EUR 7.8m/8.5m). Profitability was hampered by increased costs related to public specialized care which were concentrated towards the end of the year. Volume and profitability developed favorably in sales to insurance companies (revenue up by 18.1% y/y) but also in occupational healthcare, following the acquisition of Terveyspalvelu Verso. Due to the tender offer by Mehiläinen, no dividend for ’19 is proposed (Evli/cons EUR 0.15/0.15).

Expecting a turnaround in profitability

In ’19, the performance especially in occupational healthcare was good as revenue in the segment grew more than 25% y/y. Profitability was positively impacted by increased share of fixed price services and development of operational models. We expect further growth in occupational healthcare but also in sales to insurance companies, of which, the latest agreement with Pohjola Insurance is an example. Due to the uncertainties around the social and healthcare reform, municipalities have become more active on outsourcing projects. In late ’19, Kristiinankaupunki and Pihlajalinna agreed on a partial outsourcing deal, starting in ‘21E, with total value of EUR ~90m. The contract is at least for 15 years. For ‘20E we don’t expect any new outsourcings to occur. We expect profitability (adj. EBIT) to improve by 68% y/y in ’20E and by 7% y/y in ‘21E due to the cost savings resulting from the efficiency improvement program that was launched last summer. We expect ’20E-‘21E revenue growth of ~3-4%.

“HOLD” with TP of EUR 16 intact

The tender offer by Mehiläinen is currently being under review of FCCA. The first phase investigation will be completed by mid-March though it is highly likely that FCCA will initiate continued phase two proceedings after phase one, meaning that the process is likely to be completed at the end of Q2’20E or latest during Q3’20E. According to Pihlajalinna’s guidance, ‘20E revenue and adj. EBIT are expected to increase from ‘19. We expect ‘20E revenue of EUR 538m (3.8% y/y) and adj. EBIT of EUR 35.1 (68% y/y). Our target price is in line with the tender offer price of EUR 16. We keep our rating “HOLD”.

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Gofore - Expect slightly lower margins in H2

17.02.2020 - 08.30 | Preview

Gofore will report H2 results on February 19th. Revenue in H2 amounted to EUR 30.6m based on reported monthly figures. We expect margin decreases compared to H1/19, driven by the weak development of Gofore’s UK operations and lower revenue, and expect an EBITA-margin of 9.0%. We expect a dividend proposal of EUR 0.20 per share. Growth will in our view slow down clearly in 2020 with a lower impact of inorganic growth and a weaker market outlook. We retain our HOLD-rating and TP of EUR 8.0.

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Expecting weaker margins in H2 due to lower revenue

Gofore will report H2 results on February 19th. Revenue in H2 has based on monthly figures been EUR 30.6m, with a y/y growth of 18.4%, of which a majority will have been inorganic growth from the Silver Planet acquisition. Revenue development during H2 has been sub-par, affected partly by a weak development of Gofore’s UK operations, which were divested in early 2020. We expect the revenue development to have had a negative impact on margins and expect the EBITA-margin to decrease to 9.0% (H1/19: 15.1%). Our dividend proposal estimate is EUR 0.20 per share (2019: EUR 0.19).

Relative growth pace seen to slow down

Gofore revised its long-term financial target for growth in December 2019. Growth is still seen to be faster than the target market, but the market growth estimate was lowered from 15-25% to above the general ICT service sector growth but below 10%. Our growth estimate for 2020 is 10.8%, of which some 9% organic (not including possible new M&A activity). Cost savings from divesting the UK operations will have a slight net positive effect on profitability in 2020 and we expect an EBITA-margin of 13.5%.

HOLD with a target price of EUR 8.0

We have not made any notable changes to our estimates pre-H2 apart from adjustments based on monthly revenue figures. We retain our HOLD-rating and target price of EUR 8.0 ahead of the H2 results.

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SSH - Q4 result broadly as expected, 2020 guidance signals confidence in turnaround

14.02.2020 - 09.30 | Earnings Flash

SSH Q4 result was broadly as expected. Outlook for 2020: SSH expects revenue growth of 10-15 percent and an improving operating result.

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  • Q4 net sales were EUR 4.1 million (vs. 4.7m our expectation). Net sales decreased by -35.8% compared to the previous year mainly due to the end of the patent licensing programme and reduced consulting revenue.Software business sales decreased -11.8% y/y due to the smaller initial project size compared to last year including a large license deal received in Q4’18.
  • Software fees were EUR 1.8 million (2.2m Evli), Professional services were EUR 0.3 million (0.2m Evli), and Recurring revenue was EUR 2.1 million (2.3m Evli)
  • Q4 operating loss was EUR -0.1 million (vs. 0.2m our expectation)
  • EPS was -0.02 (vs. 0.00 our estimate)
  • Liquid assets were EUR 12.0m (11.6m Q3/19)
  • Business outlook for 2020: SSH expects revenue growth of 10-15 percent and an improving operating result (-1.2 MEUR FY'19)
  • SSH expect clearly faster growth rates for PrivX and NQX, steady growth for UKM matching the industry growth rate, and modest growth for Tectia, which is the most mature product. The combined effect of these growth rates will result in moderate short-term growth, which SSH expects to accelerate over the next several years.
  • CEO comment: “We are making progress with our new products, PrivX and NQX, which we expect to start having an increasing impact on our revenue and bottom line in 2020 and beyond.”

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Marimekko - Investments into growth continue

14.02.2020 - 09.20 | Company update

Marimekko delivered good Q4 result. Sales grew by 17% y/y to EUR 34.7m (Evli 34.6m). Sales growth was strong especially in Finland and APAC region. Adj. EBIT was EUR 3.0m (Evli 2.9m). We keep our rating “HOLD” with TP of EUR 44 (39).

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Q4 revenue driven by strong sales in Finland

Marimekko’s Q4 net sales amounted to EUR 34.7m (17% y/y) vs. our EUR 34.6m (cons. 34.3m). Sales performance was strong especially in Finland, driven by increased retail and wholesale sales (retail LFL growth 21% y/y). APAC region performed well also, as revenue was boosted by increased wholesale sales and licensing income. Q4 adj. EBIT was EUR 3.0m vs. our EUR 2.9 (cons. 3.0m). Profitability was driven by strong sales but weighed down by increased fixed costs. Proposed ’19 dividend of EUR 0.90 was below expectations (Evli/cons EUR 1.14/1.08).

Expecting a strong year in home market

We expect the good performance in Finland to continue in ‘20E, driven by broader target audience. Domestic wholesale sales are expected to be substantially higher than in ‘19, due to nonrecurring promotional deliveries. We expect ‘20E sales growth of 12% y/y in Finland, representing some 58% of Marimekko’s total sales in ‘20E. We also expect sales to increase in APAC region, though the coronavirus and political uncertainties could have a negative impact on sales. The actions taken to control the grey export cases in APAC region will also have an impact on sales and result. We expect APAC ‘20E sales growth of 2.5% y/y (H2’19 sales included nonrecurring licensing income of EUR 1.6m).

Increased investments into growth

We expect profitability improvement of ~12-18% y/y in ‘20E-‘21E, supported by strong sales growth and improved gross margin. According to the company, investments into growth will be higher in ‘20E, resulting in increase in personnel and marketing expenses. Store network will be expanded by ~10 new stores and shop-in-shops and some existing stores will be renewed. The company will also develop further its digital business and IT systems. We expect total OPEX to increase by ~10% y/y, hampering profitability development.

“HOLD” with TP of EUR 44 (prev. EUR 39.0)

We have slightly increased our ‘20E sales expectation and expect sales growth of 9.2% y/y (136.9m) while we expect adj. EBIT of EUR 20.1m (17.5% y/y). We see that Marimekko is able to achieve and maintain higher margins than the premium goods peer group, which justifies higher multiples similar to our luxury goods peer group median. On our estimates, Marimekko trades at ‘20E-‘21E EV/EBIT multiple of 16.7x and 14.6x which translates into ~20% discount compared to the luxury peer group. We keep our rating “HOLD” with TP of EUR 44 (EUR 39).

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Aspo - Higher EBIT remains missing

14.02.2020 - 09.15 | Company update

Aspo’s EUR 5.4m Q4 EBIT missed us and consensus by ca. EUR 1.0m. The miss was due to Telko. We believe Aspo has operational upside long-term, however we also view current valuation neutral given the uncertainty surrounding the improvement slope. We have made only minor estimate revisions. Our TP remains EUR 8.25, rating still HOLD.

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ESL didn’t disappoint, yet macro uncertainty still weighs

ESL posted EUR 4.4m Q4 EBIT i.e. a 5% y/y increase and slightly above our EUR 4.3m estimate. In our view this was a decent performance considering Q4 cargo volumes declined y/y from 4.5m tonnes to 4.0m tonnes as steel industry shipments fell dramatically. Energy industry shipment volumes were also soft due to warm weather. Aspo sees Baltic Sea steel industry cargo volumes now stabilizing. Even though the LNG-powered vessels as well as AtoB@C are performing well, there’s uncertainty regarding ESL’s EBIT improvement slope this year. Nevertheless, even if steel industry shipments don’t rebound meaningfully in ’20 we would still expect ESL to achieve significantly higher EBIT. Telko’s EUR 0.9m Q4 EBIT didn’t meet our EUR 2.2m estimate and declined significantly y/y from EUR 3.4m. EBIT took a EUR 0.9m hit due to low volumes and raw materials prices, and FX. Telko also destocked low-margin low-turnover inventory, which also had a negative EUR 0.9m effect. Leipurin bakery business seems to be improving especially in Russia, however given the macro uncertainties around ESL’s and Telko’s profit development we don’t see this as a meaningful enough value driver currently.

Aspo guides improving EBIT for this year

We still view ESL able to post some EUR 5-6m in quarterly EBIT; should steel industry volume development turn positive in ’20 the dry bulk carrier should have no trouble achieving EUR 20m (compared to EUR 14.6m last year). Aspo says Telko’s Q1 will still be burdened by destocking measures. In our view Telko should still be able to achieve quarterly EBIT close to EUR 3m this year.

In our view valuation is neutral given uncertainty

There’s significant upside potential relative to Aspo’s long-term targets, however in our opinion the bridge there is not as of now stable enough to turn our view more positive. Our TP is still EUR 8.25, while our rating remains HOLD.

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Endomines - Growth story in need of financing

14.02.2020 - 09.00 | Company update

Endomines is nearing commercial production at Friday, after several bumps on the road, and ramp-up to design capacity is expected in March 2020. The production delay has put a clear dent in Endomines’ financial situation and additional financing will in our view be needed in the near-term to bring further assets into production. With the financing risk overshadowing the future potential we downgrade to SELL (HOLD) with a TP of SEK 5.0 (4.7).

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Nearing commercial production at Friday

Endomines continued to post meager figures in Q4, as gold concentrate sales from Friday have not yet commenced. Bottom-line figures were as a result clearly in the red, with EBITDA at SEK -15.1m. Endomines expects to ramp-up production at Friday to design capacity (3,445 tonnes/month) in March 2020. The concentrate sales agreement is yet to be confirmed but should in our view be signed during Q1. Built up ore stockpiles will speed up production ramp-up, but we expect head grades to be well below expected typical grades during the first half of 2020.

Financial position again at risk

Endomines financial situation has again become a reason for concern, as group cash fell to SEK 15.7m (Q3/19: SEK 61.9m) in Q4. The Friday production facility investments are largely behind and cash flows will improve once production at Friday picks up. Friday cash flows will however not suffice to develop new assets and Endomines will in our view seek additional financing in the near future. Previous debt-financing options have not been favourable and a rights issue could be on the table.

SELL (HOLD) with a target price of SEK 5.0 (4.7)

Endomines is finally nearing production start at Friday and has continued consolidating its land assets in Idaho and is seeking to expand further through the transaction with Transatlantic. The gold price development has further remained favourable. The positive drivers are in our view, however, overshadowed by the near-term financial risks. We adjust our target price to SEK 5.0 (4.7) and downgrade to SELL (HOLD).

Open report

Raute - Growth pursuit weighs EBIT this year

14.02.2020 - 08.40 | Company update

Raute’s Q4 was mixed relative to our estimates. More important was Raute’s commitment to pursue emerging markets growth. We retain our EUR 25 TP and HOLD rating.

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Q4 put an end to a year following the record-high one

Raute reported EUR 39.3m in Q4 sales, above our EUR 37.0m estimate but down by 27% y/y. Project deliveries sales declined by 36% y/y to EUR 24.1m, while technology services top line was also soft at EUR 15.2m (down 10% y/y) owing to the low demand for cyclical modernization projects. We had expected Raute to post EUR 3.0m in Q4 EBIT as the company indicated Q4 would be the strongest in ’19 in terms of profitability, however the figure was realized at EUR 1.8m due to certain unforeseen costs owing to the record-high workload in ’18. With regards to order activity, Raute booked EUR 17m in new orders during Q4. The figure was slightly below our EUR 19m expectation and declined by 39% y/y. The EUR 4m project order intake was indeed low, while services orders dropped by 32% to EUR 13m due to lack of modernizations. In our view the cool market is not, at least for now, a major problem for Raute as the company should still be able to post relatively stable top line this year thanks to the EUR 58m Segezha project (and total EUR 88m order book).

Raute guides flat sales and lower EBIT for this year

In our opinion Raute’s decision to guide stable sales development for ’20 wasn’t a surprise. In practice Raute’s guidance policy is rather loose and given the recent order flow we see sales slightly down this year. The picture could of course change swiftly should larger orders materialize. In our view the main takeaway was that Raute expects lower EBIT this year as the company is responding to the market shift by committing itself to increased efforts in R&D and marketing. As European activity remains low due to recent major investment cycle in new capacity, Raute aims to grow in emerging markets more seriously than before by segmenting its equipment to better reach lower price points.

We update our estimates following the report

We have cut our estimates for this year as the market environment has remained cool. While we previously expected Raute’s ‘20e revenue to amount to EUR 148.6m, we now expect EUR 141.8m. With regards to operating profit, we previously expected Raute to achieve EUR 11.1m this year. We now see the figure down to EUR 7.8m as Raute has decided to invest more in developing its offering more attractive for emerging markets. Raute used to spend some EUR 3m annually in R&D; looking at Raute’s latest figures we think the company is on track to spend more than EUR 5m this year. Moreover, the large Segezha order makes up a significant portion of workload this year and thus its lower margin will restrict operating profit potential.

We continue to view valuation neutral

In the long-term an expanded offering could have big financial potential. Still, the current picture is rather murky. We view Raute’s valuation (8x EV/EBITDA and 12x EV/EBIT ‘20e) neutral in the current environment. Our TP is still EUR 25, rating HOLD.

Open report

Verkkokauppa.com - Earnings miss in Q4

14.02.2020 - 08.35 | Earnings Flash

Verkkokauppa.com’s Q4’19 revenue grew by 3% and was EUR 159.9m vs. Evli EUR 168.9m and consensus of EUR 164.0m. Gross profit was EUR 22.2m (13.9% margin) vs. EUR 24.7m (14.6% margin) Evli view. EBIT was EUR 4.5m vs. EUR 6.0m/5.6m Evli/cons. 2020E guidance: The company expects revenue to be 510-530 million euros and comparable operating profit to be 12-15 million euros.

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• Q4 revenue was EUR 159.9m vs. EUR 168.9m Evli view and EUR 164.0m consensus. Sales grew by 3% while market growth was 4.4% (GfK estimate). Revenue growth in Q4 was boosted by record sales during Black Friday, additional marketing activities and campaigning. Tax refund changes and Posti’s strike had a negative impact on sales during the Christmas season.

• Q4 gross profit was EUR 22.2m (13.9% margin) vs. EUR 24.7m (14.6% margin) Evli view. Gross profit weakened due to heavy campaigning during Black Friday.

• Q4 EBIT was EUR 4.5m (2.8% margin) vs. EUR 6.0m (3.6% margin) Evli view and EUR 5.6m (3.4% margin) consensus. EBIT decreased mostly due to a lower gross margin.

• Q4 eps was EUR 0.07 vs. EUR 0.10/0.09 Evli/cons.

• 2020 guidance: The company expects revenue to be 510-530 million euros and comparable operating profit to be 12-15 million euros.

• The company also decided on a quarterly dividend of EUR 0.048 per share. Total ’19 dividend is EUR 0.21 vs. our EUR 0.21 and EUR 0.21 consensus.

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Pihlajalinna - Profitability below expectations

14.02.2020 - 08.30 | Earnings Flash

Pihlajalinna’s Q4’19 revenue amounted to EUR 133.8m vs. EUR 133.6m/134.4m Evli/cons, while adj. EBIT landed at EUR 5.6m vs. EUR 7.8m/8.5m Evli/cons estimates. Organic growth increased by 3.1% y/y. 20E consolidated revenue is expected to increase from the 2019 level. Adjusted EBIT is expected to increase compared to 2019.

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• Q4 revenue was EUR 133.8m vs. EUR 133.6m/134.4m Evli/cons estimates. Revenue grew by 5.4% y/y. Organic growth was 3.1% y/y.

• Q4 adj. EBITDA was EUR 14.4m (10.8% margin) vs. EUR 16.7m/17.5m Evli/cons estimates. Profitability was affected by the costs of public specialized care that were concentrated towards the end of the year. Personnel expenses were also increased by stricter requirements imposed by the authorities.

• Q4 adj. EBIT was EUR 5.6m (4.2% margin) vs. EUR 7.8m/8.5m (5.8%/6.3%) Evli/cons estimates.

• Q4 EPS was EUR 0.16 vs. EUR 0.23/0.21 Evli/cons.

• Due to the Mehiläinen’s tender offer, no dividend for ’19 is proposed (EUR 0.15/0.15 Evli/cons).

• Guidance for 20E: consolidated revenue is expected to increase from the 2019 level. Adjusted EBIT is expected to increase compared to 2019

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Fellow Finance - Miss on earnings, guidance weakness

14.02.2020 - 08.30 | Earnings Flash

Fellow Finance’s H2/2019 results fell short of our expectations. Revenue was as per co’s previous guidance EUR 7.0m, while EBIT and adj. EBIT amounted to EUR 0.3m and EUR 1.0m respectively (Evli EUR 1.0m/1.0m). Fellow Finance’s BoD proposes that no dividend be paid for 2019 (Evli EUR 0.04 per share). Fellow Finance expects turnover to grow in 2020 while growth efforts are expected to decrease the operating profit compared to 2019.

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  • Revenue in H2 amounted to EUR 7.0m (EUR 6.4m in H2/18), in line with our estimates (Evli EUR 7.0m, pre-announced). Growth in H2 amounted to 9.1%.
  • Fellow Finance facilitated loans during H2 for a total of EUR 92m (EUR 96m in H2/18).
  • Adj. EBIT in H2 amounted to EUR 1.0m (EUR 1.7m in H2/18), in line with our estimates (Evli EUR 1.0m). EBIT amounted to EUR 0.3m (Evli EUR 1.0m).
  • Adj. EPS in H2 amounted to EUR 0.01 per share (EUR 0.14 in H2/18), below our estimate of EUR 0.04. EPS amounted to EUR -0.07 (Evli EUR 0.04)
  • Guidance: In 2020, turnover is expected to grow, and the company's growth efforts are expected to decrease operating profit compared to 2019. The guidance implies weaker figures than we had expected, as we have estimated minor growth in 2020 but EBIT of EUR 2.1m. New guidance implies EBIT of less than EUR 1.6m.
  • Dividend proposal: The BoD proposes that no dividend be paid for 2019 (Evli EUR 0.04).
  • During H2 new services and market openings were prepared and a subsidiary established in Estonia.

Open report

Aspo - EBIT miss attributable to Telko

13.02.2020 - 10.40 | Earnings Flash

Aspo reported Q4 EBIT at EUR 5.4m i.e. missing our and consensus estimate by about EUR 1.0m. In our view the EBIT miss was wholly attributable to Telko.

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  • Group revenue amounted to EUR 147.0m in Q4, compared to EUR 150.5m/152.5m Evli/consensus estimates.
  • Aspo posted EUR 5.4m Q4 EBIT whereas the expectation was EUR 6.4m/6.6m Evli/consensus.
  • ESL Shipping’s Q4 revenue stood at EUR 45.3m, while we expected EUR 44.5m. ESL Q4 EBIT was EUR 4.4m vs our EUR 4.3m estimate.
  • Telko’s revenue amounted to EUR 69.8m in Q4 vs our EUR 71.9m expectation. Meanwhile Q4 EBIT was recorded at EUR 0.9m, in comparison to our EUR 2.2m estimate. Aspo says Telko’s EBIT was burdened by measures aiming to address the low-margin low-turnover material inventories (to the tune of EUR 0.9m). The figure was also burdened by decreased volumes and raw materials prices as well as FX (a combined EUR 0.9m).
  • Leipurin’s Q4 revenue was EUR 31.9m, compared to our EUR 34.1m estimate. Leipurin posted EUR 1.1m in Q4 EBIT vs our EUR 1.0m expectation.
  • The BoD proposes EUR 0.45 dividend per share to be distributed in two installments.
  • Aspo guides operating profit to increase this year compared to the EUR 21.1m figure last year.

Open report

Endomines - Full production at Friday sought during Q1

13.02.2020 - 10.00 | Earnings Flash

Endomines did not sell any gold concentrate from Friday in Q4, with commercial production expected to commence in March 2020. Full production at Friday is sought to be achieved during Q1. No numeric production guidance was given but ramp-up to design capacity (3,445 tonnes per month) is expected in March 2020.

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  • Endomines did not sell any gold concentrate from Friday in Q4 and had in early February announced the expected start-up of commercial production in March 2020, which was not included in our estimates.
  • Revenue* amounted to SEK 0.7m, with our estimates at SEK 22.0m, as we had expected gold concentrate sales from Friday.
  • EBITDA* in Q4 was at SEK -15.1m, below our estimate of SEK -0.8m given the lack of gold concentrate sales.
  • (*Not reported, derived from H1 and Q1-Q3 figures)
  • During December Endomines processed 420.5 ore tonnes with a head grade of 2.65g/t Au (low-grade pre-production development ore) resulting in 2.65 tonnes of concentrate grading 189.2g/t Au. In December Endomines took over all mining activities from the mining contractor at Friday. Endomines has mined approx. 5,000 tonnes of ore up to date, stockpiled at the mine and mill areas. Full mining production delayed to coincide with mill commissioning.
  • Endomines did not give a numeric production guidance for 2020, expecting ramp-up to design capacity (3,445 tonnes per month) in March 2020.
  • The BoD expectedly proposed that no dividend will be paid for 2019.

Open report

Raute - Guides lower operating profit

13.02.2020 - 09.35 | Earnings Flash

Raute reported Q4 revenue above our expectations, however operating profit fell clearly short of our expectations as Raute discovered costs attributable to ’18 workload. As expected, Raute guides flat sales development for ’20, however we didn’t expect the company to guide lower operating profit for the year.

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  • Raute reported EUR 39.3m Q4 sales (27% y/y decline) in comparison to our EUR 37.0m estimate. Project deliveries generated EUR 24.1m in sales.
  • Q4 EBIT amounted to EUR 1.8m, while we had estimated EUR 3.0m. The figure was burdened by unforeseen costs stemming from record-high workload in ‘18. Apparently Raute discovered these issues not before late ’19. Operating margin was thus 4.6% vs our 8.1% expectation.
  • Q4 order intake was EUR 17m vs our EUR 19m expectation. Order intake thus decreased 39% y/y. Order book stood at EUR 88m (EUR 95m a year ago).
  • The BoD’s dividend proposal is EUR 1.45 per share.
  • Raute guides flat sales development for this year (as expected) but expects operating profit to decrease due to adaption measures taken to respond to shifting markets as well as investments in marketing, product development and digitalization.

Open report

Vaisala - Valuation running ahead of things

13.02.2020 - 09.10 | Company update

Vaisala ended a solid 2019 with a good Q4 that beat expectations. The outlook for 2020 was rather cautious with current expectations already at upper range of guidance. Both acquired companies contributed significantly in last year’s growth, and we see further M&A as key to accelerate growth and maintain current valuation. Our estimates remain broadly unchanged post Q4 and thus we maintain previous TP of EUR 29.5. Due to continued share price rally our recommendation is now SELL (prev. HOLD).

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A good finish to a solid year

Vaisala ended a solid 2019 with a good Q4 that beat expectations. Q4 net sales grew 9% y/y to 118.1 MEUR (118 Evli, 116 cons) and EBIT improved +27% to 17.7 MEUR (16 MEUR Evli/cons.). Dividend proposal is 0.61 (0.60 Evli/cons.). Net sales growth was driven by good level of delivery volumes thanks to record high order book during end of last year. Q4 EBIT improvement was driven by gross margin improvement of 170 bps due to net sales growth and scale benefits.

Both business areas fuelled by M&A

W&E Q4 net sales grew 5% (1% excl. FX and M&A) to 81.9 MEUR (80.0 Evli), with growth in all regions except China. W&E Q4 EBIT was 12.1 MEUR (10 Evli). W&E order intake growth was -3%, -8% growth excl. FX and M&A, due to less larger projects during Q4. IM Q4 net sales grew 18% (5% excl FX and M&A) to 36.3 MEUR (38.0 Evli) and was strong in all regions. IM Q4 EBIT was 5.5 MEUR (7.6 Evli). IM order intake grew by 19%, 8% excl. FX and M&A. Both acquired companies, i.e. Leosphere (W&E) and K-patents (IM), have been successfully integrated to Vaisala’s platform and contributed significantly in FY’19 growth. Half of IM’s FY’19 net sales growth came from K-Patents acquisition, while W&E FY’19 net sales growth excluding FX and M&A was 2%. Vaisala has indicated the possibility of further add-on acquisitions in liquid measurements area. With its platform, strong balance sheet and current valuation, Vaisala is in a good position to continue value accreditive acquisitions in our view.

2020 outlook slightly soft as expectations already in upper end

Vaisala estimates its 2020 net sales to be in the range of 400–425 MEUR and EBIT in the range of 38–48 MEUR, which practically means 0-5% growth and 9-12% EBIT margins. Given that our previous 2020 estimates, as well as consensus figures (FY’20E net sales 423M, EBIT 48.3 MEUR) were already in the upper end of the outlook, the guidance is cautious. Vaisala expects W&E market segments to be stable or somewhat grow, while industrial and liquid measurement market segments are expected to continue to grow.

Estimates unchanged, valuation is running ahead of things

Apart from a slight trim to our sales estimates, our estimates are unchanged for the coming years. With the acquired businesses integrated into Vaisala’s sales channel and continued stable to good organic momentum in both W&E and IM, we see Vaisala’s targeted above 5% sales growth achievable and road to >12% margins progressing well. The underlying main driver for growth is continued good growth in industrial business supported by further bolt-on acquisitions. As a result, we estimate IM share of Vaisala’s EBIT to grow to 66% in ‘21E (vs. 56-57% in ’17-’18), driving ~10% EBIT growth in coming years. Vaisala’s share har continued to rally, pushing new all-time highs. On our estimates, Vaisala is trading at PPA amortizations adjusted EV/EBIT multiples of 24.7x and 22.4x for ‘20E and ‘21E, a ~50% premium to our peer group median despite exhibiting lower profitability profile than our peer group. On our adjusted ‘20E P/E multiples, premium is roughly 50% as well. Despite Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions, we see current valuation too stretched given our current growth and earnings estimates (which do not account for further M&A). We maintain previous TP of EUR 29.5, which values Vaisala at EV/EBIT 23.5x and 21x on ’20-21E, still at ~40% premium to our peer group. Due to continued share price rally our recommendation is now SELL (prev. HOLD).

Open report

Marimekko - Q4 result as expected

13.02.2020 - 09.00 | Earnings Flash

Marimekko’s Q4 net sales increased by 17% and amounted to EUR 34.7m vs. EUR 34.6m/34.3m Evli/cons. Adj. EBIT was EUR 3.0m vs. EUR 2.9m/3.0m Evli/cons. In 2020E, revenue is expected to be higher than in the previous year while adj. EBIT is estimated to be approximately at the same level or higher than in the previous year.

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  • Finland: revenue was EUR 21.9m vs. EUR 21.0m Evli view. Revenue increased by 20%.
  • International: revenue was EUR 12.8m vs. EUR 13.6m Evli view. Revenue increased by 12%.
  • Retail sales increased by 16%. Wholesale sales increased by 15%. Growth came primarily from retail and wholesale sales in Finland as well as increased wholesale sales and licensing income in the Asia-Pacific region.
  • Q4 adj. EBIT was EUR 3.0m (8.7% margin) vs. EUR 2.9m/3.0m (8.4%/8.8% margin) Evli/cons. Profitability was boosted by sales growth whereas higher fixed costs had a negative impact on result.
  • Q4 EPS was EUR 0.26 vs. EUR 0.29/0.28 Evli/cons.
  • Proposal for ’19 dividend: EUR 0.90 vs. EUR 1.14/1.08 Evli/cons.
  • Guidance for 2020E: revenue is expected to be higher than in the previous year while adj. EBIT is estimated to be approximately at the same level or higher than in the previous year.

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Vaisala - Q4 result small beat, 2020 outlook signals 0-5% growth and 9-12% EBIT margins

12.02.2020 - 14.20 | Earnings Flash

Vaisala’s Q4 net sales grew 9% to 118.1 MEUR vs. 118 MEUR our expectation and 116 MEUR consensus. Q4 reported EBIT was 17.7 MEUR vs. our expectation of 16 MEUR (16 MEUR consensus). Dividend proposal is 0.61(0.60 Evli, 0.60 consensus).

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• Group level results: Q4 net sales grew 9% to 118.1 MEUR vs. 118 MEUR our expectation and 116 MEUR consensus. Q4 EBIT was 17.7 MEUR vs. our expectation of 16 MEUR (cons. 16 MEUR). EPS was 0.41 (0.35 Evli, 0.34 consensus).

• Dividend proposal is 0.61(0.60 Evli, 0.60 consensus).

• Gross margin was 56.0 % vs. 54.3 % last year.

• Orders received was 103.3 MEUR vs. 99.1 MEUR last year. Orders received increased by 4% and growth without currency impact and acquisitions was -3%.

• Weather & Environment (W&E) net sales grew 5% (1% excl. FX and M&A) to 81.9 MEUR vs. 80.0 MEUR our expectation. EBIT was 12.1 MEUR (10 MEUR Evli). Order intake growth was -3% in Weather and Environment, -8% growth excl. FX and M&A.

• Industrial Measurements (IM) net sales grew 18% (5% excl FX and M&A) to 36.3 MEUR vs. 38.0 MEUR our expectation. EBIT was 5.5 MEUR (7.6 MEUR Evli). Industrial Measurements order intake grew by 19%, 8% excl. FX and M&A.

• Business outlook for 2020: Vaisala estimates its full-year 2020 net sales to be in the range of EUR 400–425 million and its operating result (EBIT) to be in the range of EUR 38–48 million.

Open report

Etteplan - Some uncertainty heading into 2020

12.02.2020 - 09.00 | Company update

Etteplan’s Q4 results were below expectations, driven by the impact of the industrial strike in Finland. The guidance for 2020 EBIT was softer than expected, with some caution being taken due to the unpredictability in the impact of the coronavirus. Demand outlook comments were nonetheless slightly positive based on early 2020 development. We have slightly lowered our 2020 estimates to account for a likely weaker Q1. We retain our HOLD-rating with an ex-div TP of EUR 10.2.

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Clear negative impact of industrial strike

Etteplan’s Q4 results were below expectations. Revenue amounted to EUR 71.8m (EUR 72.1m/72.7m Evli/cons.), with 14.2% growth y/y (1.4% organic excl. FX), driven by the mid-2019 acquisitions. EBIT amounted to EUR 5.6m (EUR 6.1m/6.3m Evli/cons.) and EBIT excl. NRI’s to EUR 5.1m. Profitability was below comparison period figures in all service areas, driven mainly by the impact of the industrial strike in Finland in December. Challenges in certain projects also affected profitability of the Software and Embedded Solutions service area. The BoD’s dividend proposal is EUR 0.35 per share (EUR 0.36 Evli/cons.)

Coronavirus prompts EBIT guidance cautiousness

Etteplan expects revenue to grow clearly in 2020 and EBIT to be at the same level or improve compared to 2019. The EBIT guidance was softer than expected, reflective of a more cautious approach due to uncertainty related to the coronavirus. Comments on general demand outlook were slightly more positive, with signs of pick-up following slightly decreased political uncertainty. We have lowered our 2020 EBIT estimate by some 7%, expecting a weaker Q1 due to the coronavirus.

HOLD with an ex-div target price of EUR 10.2

On our revised estimates and slightly increased caution due to the coronavirus uncertainty we adjust our target price to EUR 10.2 ex-div and retain our HOLD-rating, valuing Etteplan at 14x 2020 P/E.

Open report

Etteplan - Some softness in results/guidance

11.02.2020 - 13.15 | Earnings Flash

Etteplan's net sales in Q4 amounted to EUR 71.8m, in line with our estimates and consensus (EUR 72.1m/72.7m Evli/cons.). EBIT amounted to EUR 5.6m, below our estimates and below consensus (EUR 6.1m/6.3m Evli/cons.). Dividend proposal: Etteplan proposes a dividend of EUR 0.35 per share (EUR 0.36 Evli/Cons.).

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  • Net sales in Q4 were EUR 71.8m (EUR 62.8m in Q4/18), in line with our and consensus estimates (EUR 72.1m/72.7m Evli/Cons.). Growth in Q4 amounted to 14.2 % y/y, of which 0.7 % organic growth.
  • EBIT in Q4 amounted to EUR 5.6m (EUR 5.7m in Q4/18), below our and consensus estimates (EUR 6.1m/6.3m Evli/cons.), at a margin of 7.7 %. EBIT (excl. NRIs) amounted to EUR 5.1m (Evli EUR 6.1m).
  • EPS in Q4 amounted to EUR 0.16 (EUR 0.18 in Q4/18), below our and consensus estimates (EUR 0.19/0.20 Evli/cons.).
  • Engineering Solutions: Net sales in Q4 were EUR 40.8m vs. EUR 40.5m Evli. EBITA in Q4 amounted to EUR 3.6m vs. EUR 4.0m Evli.
  • Software and Embedded Solutions: Net sales in Q4 were EUR 17.7m vs. EUR 19.1m Evli. EBITA in Q4 amounted to EUR 1.4m vs. EUR 2.1m Evli.
  • Technical Documentation Solutions: Net sales in Q4 were EUR 13.1m vs. EUR 12.5m Evli. EBITA in Q4 amounted to EUR 0.9m vs. EUR 1.0m Evli.
  • Dividend proposal: Etteplan proposes a dividend of EUR 0.35 per share (EUR 0.36 Evli/Cons.).
  • Guidance: revenue for 2020 expected to increase clearly and EBIT to be at the same level or improve compared to 2019. The EBIT guidance appears somewhat soft compared to our expectations.

Open report

Fellow Finance - Looking for signs of growth pick-up

11.02.2020 - 09.15 | Preview

Fellow Finance will report H2/19 results on February 14th. Revenue growth will based on company guidance have been around 10% during H2 despite a minor decline in intermediated loan volumes. We expect the slower growth and increased competition in Finland to have had a negative impact on margins. We expect a dividend proposal of EUR 0.04 per share. We retain our HOLD-rating and lower our target price to EUR 4.2 (5.0) ahead of H2 results.

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Slower loan volume growth puts pressure on margins

Company guidance for 2019 puts full-year revenue growth at around 19% and the implied H2/19 growth will be around 10%. Intermediated loan volumes during H2 have seen minor declines compared with H2/18, affected by the increased competition within consumer lending in Finland. Revenue growth is as such expected to be driven by higher interest income. We expect margins to have continued to decline with the slower revenue growth and the impact of the increased competition on broker commissions. We expect a dividend proposal of EUR 0.04 per share (2018: 0.04).

2020 expected to remain a ramp-up year

We expect 2020 to continue to be challenging for Fellow Finance. Fellow Finance’s growth story was heavily dented by the stalling intermediated loan volume development and profitability has declined. We expect 2020 to continue to be a ramp-up year for international operations but do not expect the growth to materialize significantly before 2021. Growth investments are also expected to have an impact on margins, and we expect a minor decline in operating profit in 2020.

HOLD with a target price of EUR 4.2 (5.0)

Without any clear signs of growth pick-up, we find it hard to identify clear near-term upside potential. The 2020 guidance should hopefully provide more light on the matter. We lower our target price to EUR 4.2 (5.0) and retain our HOLD-rating.

Open report

Detection Technology - Slight dent in growth story

11.02.2020 - 09.10 | Company update

DT reported a Q4 that clearly missed ours and market expectations. DT’s lowered medium-term financial target regarding sales growth also put a slight dent in our growth story investment case. Due to the miss and lowered medium-term growth target, we have clearly cut our estimates for the coming years. Despite our estimates cut, we remain, as noted in our preview comment, positive towards the longer-term investment case as we continue to see DT executing well on a growth market with strong drivers. Our target price remains EUR 24, recommendation is now HOLD (prev. BUY).

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Q4 result missed clearly expectations, FY’19 growth decent

DT’s Q4 net sales amounted to EUR 25m (-2.5% y/y) vs. EUR 27.7m/27.4m Evli/consensus estimates. Q4 EBIT was EUR 3.2m (12.8% margin) vs. EUR 5.1m/4.7m Evli/cons. R&D costs amounted to EUR 2.66m or 10.6% of net sales. Dividend proposal is 0.38 (0.38 Evli / 0.39 cons.). SBU had net sales of EUR 16.4m vs. EUR 19m Evli estimate. SBU sales grew 6% y/y, but growth was affected by temporarily lower sales in CT products and delayed deliveries to one key customer. MBU delivered net sales of EUR 8.6m which was in line with our estimate of EUR 8.7m. Net sales of MBU decreased by -15.4% y/y due to continued softness in the medical imaging market. In FY’19, DT posted +9.2% growth (+5.5% in FY’18), with 16.6% EBIT-margin (19.7% in FY’18) hampered by increased costs and slowdown in MBU.

Growth to continue in 2020, but circumstances lower visibility

As usual, the visibility in DT’s case is quite low. DT estimates annual growth to remain at previous 5-6% level in all market segments in 2020, but coronavirus may have a temporary adverse impact on growth in H1. DT also estimates the temporary slowdown in the global medical CT market to continue in Q1, and the situation to normalize at the end of 2020. DT still sees H1 growth despite headwinds. DT expects significant sales contribution in 2020E from recently launched Aurora product family for SBU as well as roughly 1 MEUR contribution from X-Panel on MBU side.

Updated financial targets puts slight dent in growth story

DT updated its medium-term financial targets; DT now aims to grow at least 10% (prev. 15%) and achieve EBIT-margin at or above 15% (no change) in medium term. DT announced in Q2’19 its updated strategy until 2025; the new strategic target is to be the growth leader in digital x-ray imaging detector solutions and a significant player in other technologies and applications where the company sees good business opportunities. DT estimates that the market for digital x-ray imaging detector solutions will be around EUR 3 billion in 2025. DT’s previous strategy until 2020 was based on being the leader in computed tomography and line-scan x-ray detectors and solutions. The total market, as per the company's previous strategy, is estimated to be around EUR 700 million in 2020, of which DT has roughly 20% share. Despite a larger market scope, DT sees moderating the sales growth targets as prudent as growth becomes more difficult as a +100 MEUR revenue company. We’ve emphasized the growth story in our investment case based on the strong growth drivers, especially in China, where Beijing’s “Made in China 2025” initiative has led to double digit growth rates for many local Chinese OEM’s that are DT’s clients. Although market drivers remain intact, we lower our sales growth estimates for 2020-21E from 14-15% to 10-12.5% based on the updated financial targets.

Estimates cut, we maintain target price of EUR 24

Based on the Q4 report and lowered longer-term sales growth targets, we have cut our sales estimates 7-9% and our EBIT estimates 17-20% for 2020-21E. We now estimate DT to grow 10% and 12.5% in 2020-21E (prev.14-15%). We estimate 2020E EBIT to grow 12% to 19 MEUR (17% EBIT margin) as SBU’s Aurora volumes ramp-up in H2 and MBU returns to growth mode after temporary slowdown. On our new estimates, DT is trading at ‘20E 17.2x EV/EBIT and 23.6x P/E, which is broadly in line with our peer group. Despite our estimates cut, we remain, as noted in our preview comment, positive towards the longer-term investment case as we continue to see DT executing well on a growth market with strong drivers. We do not however currently have enough conviction in our estimates; therefore, we maintain our target price at EUR 24, recommendation is now HOLD (prev. BUY).

Open report

Detection Technology - Q4 result miss, moderates its financial targets

10.02.2020 - 09.30 | Earnings Flash

DT’s Q4 net sales at EUR 25m (-2.5% y/y) vs. EUR 27.7m/27.4m Evli/consensus estimates. SBU sales grew +6% to EUR 16.4m (EUR 19m our expectation) and MBU sales declined -15.4% to EUR 8.6m (EUR 8.7m our expectation). DT’s Q4 EBIT came in at EUR 3.2m vs. our estimates of EUR 5.1m (EUR 4.7m cons). EBIT excluding non-recurring items was EUR 3.9 million (4.9 Q4’18). Dividend proposal is 0.38 (0.38 Evli / 0.39 consensus).

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• Group level results: Q4 net sales amounted to EUR 25m (-2.5% y/y) vs. EUR 27.7m/27.4m Evli/consensus estimates. Q4 EBIT was EUR 3.2m (12.8% margin) vs. EUR 5.1m/4.7m Evli/cons. R&D costs amounted to EUR 2.66m or 10.6% of net sales. Dividend proposal is 0.38 (0.38 Evli / 0.39 cons.).

• Security and Industrial Business Unit (SBU) had net sales of EUR 16.4m vs. EUR 19m Evli estimate. SBU sales grew 6% y/y but growth was affected by temporarily lower sales in CT products and delayed deliveries to one key customer.

• Medical Business Unit (MBU) delivered net sales of EUR 8.6m which was in line with our estimate of EUR 8.7m. Net sales of MBU decreased by -15.4% y/y due to softening in the medical CT market and the ramp-down of one key MBU customer’s product.

• Outlook update: DT estimates annual growth to remain at previous 5-6% level in all market segments in 2020, but the indirect impacts of the corona virus epidemic in Asia may have a temporary adverse impact on growth in H1. DT also estimates the temporary slowdown in the global medical CT market to continue in Q1, and the situation to normalize at the end of 2020, but demand may fluctuate significantly.

• New financial targets: DT aims to increase sales by at least 10% per annum and to achieve an operating margin at or above 15% in the medium term. (Previous target: to increase sales by at least 15% p.a. and to achieve an EBIT margin at or above 15% in the medium term)

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Finnair - Normalizing capacity growth in ‘20E

10.02.2020 - 09.25 | Company update

Finnair delivered strong Q4 result. Q4 revenue was EUR 774.9m vs. our 740m (cons. 744m) while adj. EBIT amounted to EUR 31.2m vs. our 8.2m (cons. 9.0m). Finnair expects ‘20E capacity growth of ~4% but didn’t provide more detailed ‘20E guidance due to the coronavirus. We keep our rating “HOLD” with TP of EUR 6.3 (6.5).

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Q4 better than expected

Finnair’s Q4 result beat the expectations in terms of both revenue and profitability. Revenue grew by 13.4% y/y and amounted to EUR 774.9m vs. our EUR 740m (cons. 744m). The difference is mainly due to Finnair’s better than anticipated revenue management (i.e. ticket fares). Revenue development was good especially in North America (38.5% y/y) and in Europe (17.3% y/y). Q4 costs were as expected with fuel cost of EUR 171m (Evli 171m) and other OPEX (incl. D&A) of EUR 588m (Evli 580m). Q4 adj. EBIT was EUR 31.2m vs. our EUR 8.2m (cons. EUR 9.0m). Proposed dividend for ’19 is EUR 0.20 vs. our EUR 0.11 (cons 0.10).

Expecting ASK growth of ~4% y/y

Finnair’s capacity (ASK) growth was strong in ’19 (11.3% y/y), driven by two new A350s, received last year and one A350, received in Dec’18. The added capacity was mainly put to Asian routes. Two more A350s are expected to be delivered during H1’20E. For 20E, Finnair guides capacity growth of ~4% y/y while our expectation is at 3.6% y/y. We expect the good performance to continue especially in Europe where many airlines have cut capacity but also in North America. We expect cargo to remain relatively soft in ’20E due to continuing uncertainties around global trade.

Weak visibility due to the coronavirus

Finnair did not provide a revenue estimate for 20E, as the total impacts of the coronavirus are still unknown. Finnair has suspended all the flights to mainland China, which might continue until the end of March. Finnair estimates that the Q1’20E financial impacts remain limited as the post Chinese New Year time is usually relatively quiet in terms of traveling. Due to the coronavirus, one delivery of A350 will be delayed from April to June. We have slightly decreased our Q1’20E revenue expectation (approx. -1%) but expect the impacts for the full year to remain limited.

“HOLD” with TP of EUR 6.3 (6.5)

We expect 20E revenue of EUR 3191m (3% y/y) and adj. EBIT of EUR 171m (5% y/y), resulting in adj. EBIT margin of 5.4%. However, as the visibility of the coronavirus is weak, there are uncertainties especially with our short-term estimates. On our estimates, Finnair trades at ‘20E-'21E EV/EBIT multiple 9.2x and 8.4x, which translates into ~10-20% premium compared to the peers. We keep our rating “HOLD” with TP of EUR 6.3 (6.5).

Open report

Raute - This year relies on a record order

10.02.2020 - 09.20 | Preview

Raute reports Q4 results on Thu, Feb 13. Our estimates stand unchanged since we see market softness still exists as before. We retain our EUR 25 TP and HOLD rating.

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Raute did not disclose any large orders in late ‘19

We see no reason to update our estimates for Q4 and beyond as Raute hasn’t released information regarding any larger booked orders since the company disclosed the record-large EUR 58m Russian project. Raute booked the Segezha order at the end of Q3 and the project will be delivered this year, meaning Raute has a decent backbone from which to work on in an environment of cooling demand. All in all, our view towards Raute hasn’t changed in the sense that we continue to wait to see more positive signals in the market, which is still mostly cooling in the wake of a strong capacity investment boom in Europe.

We expect Q4 order intake to have declined to EUR 19m

Raute’s Q3 revenue decreased by 30% y/y to EUR 33.7m as project deliveries sales fell by 51% y/y to EUR 16.5m. Meanwhile technology services top line grew by 20% y/y to EUR 17.2m. However, we note services order intake fell to only EUR 8m in Q3 because of the slow demand for more cyclical modernization projects (the order intake had averaged some EUR 15m in recent quarters). Overall, Q3 order intake increased to EUR 73m from EUR 42m in Q3’18 owing to the Segezha order. We expect Q4 revenue to decline 32% y/y to EUR 37.0m as we see project deliveries down by 47% to EUR 20.0m and services up marginally to EUR 17.0m. We see Q4 EBIT at EUR 3.0m (EUR 3.4m a year ago); this would make Q4 the strongest quarter of the year in terms of profitability, as Raute suggested before.

Our TP of EUR 25 per share and HOLD rating are unchanged

We don’t expect Raute to report meaningful changes to current market environment i.e. the sentiment is still characterized by uncertainty. We expect Raute to guide flat revenue and EBIT for FY ’20; we see Raute’s profitability improving slightly this year as the company is in a relatively good position thanks to the EUR 58m order. Still, Raute’s conservative guidance policy is unlikely to reflect this. We view valuation (6.5x EV/EBITDA and 8.5x EV/EBIT ‘20e) neutral given the market softness. We believe the BoD will propose a dividend of EUR 1.40 per share.

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Consti - Margin recovery progressing well

10.02.2020 - 08.30 | Company update

Consti’s Q4 results were quite in line with our estimates, with net sales at EUR 78.3m (Evli EUR 80.9m) and operating profit at EUR 2.8m (Evli EUR 3.0m). We expect sales to decline around 10% in 2020 due to continued weak order backlog development. The new organization along with the related cost savings should absorb the expected lower volumes and we continue to expect clear earnings improvement. We retain our HOLD-rating with a target price of EUR 8.0 (7.0).

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Q4 results largely in line, order backlog continued decline

Consti’s Q4 results were quite in line with our estimates. Net sales amounted to EUR 78.3m (Evli EUR 80.9m) and operating profit to EUR 2.8m (Evli EUR 3.0m). Profitability was still slightly affected by the project that had a significant negative impact on H1/19 profitability. Consti’s BoD proposes a dividend of EUR 0.16 per share (Evli 0.17). The order backlog continued to decline and was down 17.4% y/y at EUR 186m.

Expecting sales declines but clear profitability improvement

Following the continued weak order backlog we have lowered our coming year sales estimates by some 10% and now expect a 9.8% net sales decline in 2020. We expect Consti to be able to absorb the volume declines without major margin pressure due to the new organization and related cost savings. We have slightly raised our 2020 EBIT estimate, now expecting an EBIT of EUR 10.7m. The Q4 results in our view provided continued support for the sustainability of Consti’s successful profitability turnaround.

HOLD with a target price of EUR 8.0 (7.0)

On our slightly raised earnings estimates and increased confidence in the profitability turnaround, we adjust our TP to EUR 8.0 (7.0), valuing Consti at ~7.5x 2020E EV/EBIT, with the Hotel St. George arbitration proceeding still warranting the clear discount to peers. We retain our HOLD-rating.

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Tokmanni - Towards EUR 1bn of sales

10.02.2020 - 07.50 | Company update

Tokmanni’s Q4 result was in line with expectations and the company executed well its strategy to improve profitability. We expect further improvement in profitability, driven by gross margin increase. We expect Tokmanni to reach EUR 1bn (6.2% y/y) of sales in 20E and adj. EBIT increase of ~17% y/y (EUR 82m). We keep our rating “BUY” with TP of EUR 16 intact.

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Good performance continued

Tokmanni’s Q4 result was broadly in line with expectations with revenue of EUR 284.8 (+6.1% y/y) vs. our EUR 287.7m (cons. 287.0m). Revenue was driven by successful campaigns whereas the timing of tax refunds, late winter in certain areas and the postal strike weighed down sales. Gross margin increased to 35.2% (Q4’18:34.4%) vs. our 35.5%, reflecting the increase in direct import (28.6% vs 26.4% of total sales in Q4’18). Costs were well controlled and the decreased relative share of operating expenses (18.9% vs. 19.8% in Q4’18) impacted positively on adj. EBIT, which improved by ~26.5% y/y to EUR 32.0m vs. our EUR 32.7m (cons. 31.8m). Proposed ’19 dividend is EUR 0.62 (EUR 0.62/0.60 Evli/cons).

Expecting profitability to further improve and sales of EUR 1bn

Tokmanni successfully executed its strategy to improve profitability in ’19 as adj. EBIT margin rose from 6.0% (2018) to 7.5%. In our view, there is still potential for further profitability improvement, especially through gross margin improvement. The company targets to increase its adj. EBIT margin gradually to ~9% and indicated that gross margin improvement potential is some 0.5-1.5% while the operating expenses improvement potential is ~0.5-1.0%. We expect gross margin (34.4% in ’19) to improve to 34.8% in ‘20E and to 35.1% in ‘21E, boosted by increased share of direct import (and own products). We expect the relative share of operating expenses to decrease by 30-40bps in ‘20E-21E, driven by more efficient supply chain. Tokmanni targets to reach revenue of EUR 1bn (timeline not specified) which we expect to be reached during 20E, as increased customer flows and new store openings are boosting revenue growth. We expect LFL sales growth of 2.0% and 1.7% in 20E-21E.

“BUY” with TP of EUR 16 intact

Tokmanni expects good revenue growth in ‘20E and slight growth in LFL sales. The adj. EBIT margin is expected to increase from the previous year. We have slightly increased our estimates and expect 20E sales of EUR 1bn (6.2% y/y) and adj. EBIT of EUR 82.1 (~17% y/y), resulting in adj. EBIT margin of 8.2%. On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 14.6x and 13.7x which is on par with its Nordic non-grocery peers and 25-27% discount compared to the international peer group. We keep our rating “BUY” with TP of EUR 16.

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Finnair - Earnings above expectations

07.02.2020 - 09.35 | Earnings Flash

Finnair’s Q4’19 adj. EBIT was EUR 31.2m vs. our expectation of EUR 8.2m and consensus of EUR 9.0m. Revenue was EUR 775m vs. our expectation of EUR 740m and consensus of EUR 744m.

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• Q4 revenue was EUR 774.9m vs. EUR 740m/744m Evli/cons.

• ASK increased by 10.6% in Q4. RASK increased by 2.5% y/y.

• Q4 adj. EBIT was EUR 31.2m vs. EUR 8.2m/9.0m Evli/cons. Q4 comparable EBITDA was EUR 120.7m vs. EUR 89.7m our view.

• Absolute costs in Q4: Fuel costs were EUR 171m vs. EUR 171m our view. Staff costs were EUR 136m vs. EUR 133m our view. All other OPEX+D&A combined were EUR 451m vs. EUR 447m our view.

• Unit costs: CASK was 6.42 eurocents vs. 6.31 eurocents our view.

• Q4 EPS was EUR 0.17 vs. -0.14/-0.12 Evli/cons.

• 2019 dividend: EUR 0.20 vs. 0.11/0.10 Evli/cons.

• Finnair expects capacity increase of ~4% in 2020 but due to the coronavirus the company does not provide a full year revenue estimate.

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Tokmanni - Q4 result in line with expectations

07.02.2020 - 09.00 | Earnings Flash

Tokmanni’s Q4 revenue increased by 6.1% and was EUR 284.8m vs. EUR 287.7m/287.0m Evli/consensus. LFL growth was 3.1% vs. 3.7% our expectation. Tokmanni’s adj. EBIT was EUR 32.0m vs. EUR 32.7m/31.8m Evli/cons. Gross margin was 35.2% vs. 35.5%/35.2% Evli/cons.

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• Q4 revenue grew by 6.1% and was EUR 284.8m vs. EUR 287.7m/287.0m Evli/consensus. Revenue was boosted by successful campaigns but at the same time the change in the timing of tax refunds, delayed winter season and the postal strike slowed down year-end sales.

• Q4 adj. gross profit was EUR 100.1m (35.2% margin) vs. EUR 102.1.m (35.5 %) Evli expectation.

• Q4 adj. EBITDA was EUR 47.6m vs EUR 47.7m/46.3m Evli/consensus

• Q4 adj. EBIT was EUR 32.0 (11.2% margin) vs. EUR 32.7m (11.4%) our expectation and EUR 31.8m (11.1%) consensus.

• Q4 eps was EUR 0.39 vs EUR 0.41/0.39 Evli/consensus

• 2019 dividend: EUR 0.62 vs. EUR 0.62/0.60 Evli/cons.

• Tokmanni expects good revenue growth for 2020, based on the revenue from the new stores acquired and opened in 2019 and new stores to be opened in 2020, as well as on slight growth in like-for-like revenue. Group profitability (comparable EBIT margin) is expected to improve on the previous year.

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Consti - Quite in line with our expectations

07.02.2020 - 08.45 | Earnings Flash

Consti's net sales in Q4 amounted to EUR 78.3m, in line with our estimates and below consensus (EUR 80.9m/86.0m Evli/cons.). EBIT amounted to EUR 2.8m, slightly below our and consensus estimates (EUR 3.0m/3.0m Evli/cons.). Dividend proposal: Consti proposes a dividend of EUR 0.16 per share (EUR 0.17/0.17 Evli/Cons.). Guidance: the operating result for 2020 will improve compared to 2019.

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  • Net sales in Q4 were EUR 78.3m (EUR 96.8m in Q4/18), in line with our estimates and below consensus estimates (EUR 80.9m/86.0m Evli/Cons.). Growth in Q4 amounted to -19.2 % y/y.
  • Operating profit in Q4 amounted to EUR 2.8m (EUR -2.2m in Q4/18), slightly below our estimates and consensus estimates (EUR 3.0m/3.0m Evli/cons.), at a margin of 3.6 %.
  • EPS in Q4 amounted to EUR 0.25 (EUR -0.25 in Q4/18), slightly below our estimates and consensus estimates (EUR 0.26/0.26 Evli/cons.).
  • The free cash flow in Q4 was EUR 5.1m (Q4/18: 1.9m) and EUR 4.0m in 2019 (2018: EUR -7.1m)
  • The order backlog in Q4 was EUR 185.8m (EUR 225.1m in Q4/18), down by -17.5 %. Q4/19 order intake amounted to EUR 46.8m.
  • Dividend proposal: Consti proposes a dividend of EUR 0.16 per share (EUR 0.17/0.17 Evli/Cons.).
  • Guidance: the operating result for 2020 will improve compared to 2019.
  • Consti updated its financial targets. Consti now expects revenue growth at above the market pace (previously: average growth exceeding 10% p.a.), while other targets remain unchanged.

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SRV - Short-term losses for long-term gains

07.02.2020 - 08.15 | Company update

SRV’s Q4 results were on paper rather catastrophic due to significant impairment charges relating mainly to the REDI shopping centre, with the Q4 operative operating profit at EUR -87.2m (Evli EUR 2.3m). SRV announced a series of measures to strengthen its financial position, that on a short-term perspective appear unfavourable, but will benefit SRV in the coming years. We retain our HOLD-rating with a target price of EUR 1.30.

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Earnings clearly in the red due to impairment charges

SRV’s Q4 revenue amounted to EUR 403.8m (Evli 370.2m) and operative operating profit to EUR -87.2m (Evli 2.3m). Q4 included impairment charges of EUR 92.9m, relating mainly to the REDI shopping centre, as SRV has agreed to divest its ownership. Although the Q4 results on paper were rather catastrophic, construction margins (excluding one-off charges) were in fact clearly better than we had expected, supported at least partly by the higher than expected revenue.

Taking measures to improve financial situation

SRV announced a series of measures to strengthen its financial position, of which the in our view in the near-term most important include the divestment of the ownership in the REDI shopping centre and a larger part of the Tampere Deck and Arena project, which should have a near-term positive cash flow impact of some EUR 45m. The measures do not appear favourable in the short-term but are in our view a positive sign as SRV is under CEO Saku Sipola clearly looking to create a more sustainable financial situation and improve operational performance.

HOLD with a target price of EUR 1.3

Our SOTP values SRV at EUR 1.9 per share. The valuation is still highly dependent on improvement in the construction business profitability, which we have yet to see significant proof of. The financial situation is still somewhat challenging even with the measures announced and as such the investment risks remain elevated. We retain our HOLD-rating and target price of EUR 1.3

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Pihlajalinna - Profitability in focus

07.02.2020 - 08.15 | Preview

Pihlajalinna reports its Q4 result on 14th of Feb. We expect Q4 sales of EUR 133.6m (5.2% y/y) and adj. EBIT of EUR 7.8m, resulting in adj. EBIT margin of 5.8%. We have kept our estimates intact ahead of Q4 and retain our rating “HOLD” with TP of EUR 16.0.

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Expecting further profitability improvements in Q4

Pihlajalinna implemented its efficiency improvement program last summer, targeting annual cost savings of EUR 17m and indicated that already some EUR 5m savings could be seen in H2’19. In Q3, we saw improvement in profitability as adj. EBIT rose by ~60% y/y. Expansion particularly into regional capitals continued in ’19 as multiple new clinics were opened, boosting revenue growth. We expect Q4 revenue growth of 5.2% y/y (133.6m), driven by new clinics and adj. EBIT of EUR 7.8m (~13% y/y), resulting in adj. EBIT margin of 5.8%.

Increased ownership in municipal joint-stock companies

In late Q4, Pihlajalinna increased its ownership in its municipal joint-stock companies Kuusiolinna Terveys and Mäntänvuoren Terveys. After the transactions, Pihlajalinna’s ownership in Kuusiolinna Terveys is 89% (51%) and in Mäntänvuoren Terveys 91% (81%). Pihlajalinna pays EUR 16.3m for the shares of Kuusiolinna Terveys and EUR 2m for the shares of Mäntänvuoren Terveys. The transactions have no impact on our revenue or profitability estimates. In our view, the increase in ownership is positive as the joint-stock companies represent a significant part of Pihlajalinna’s revenue and profit (the combined revenue of Kuusiolinna Terveys and Mäntänvuoren Terveys represented some 29% of total ’18 revenue) and due to the transactions, the share of non-controlling interest decreases, increasing earnings attributable to the owners of the parent company. We expect ‘20E revenue growth of 3.3% (536m), driven by new clinic openings and adj. EBIT improvement of ~53% (EUR 35.1m). Mehiläinen’s cash tender offer of Pihlajalinna’s shares is currently ongoing and being reviewed in FCCA.

“HOLD” with TP of EUR 16 intact

With our estimates intact, we expect 19E revenue of EUR 518.5m (6.3% y/y) and adj. EBIT of 23.0 (~60% y/y), resulting in adj. EBIT margin of 4.4%. We expect a dividend of EUR 0.15 (cons. EUR 0.14) for ’19. Our share price is in line with the tender offer price of EUR 16.0. We keep our rating “HOLD” with TP of EUR 16.

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SRV - REDI amortization driven miss

06.02.2020 - 09.00 | Earnings Flash

SRV's net sales in Q4 amounted to EUR 403.8m, above our estimates and above consensus estimates (EUR 370.2m/381.0m Evli/cons.). EBIT amounted to EUR -86.8m, below our and consensus estimates (EUR 2.3m/0.2m Evli/cons.). Q4 was affected by significant amortization charges relating mainly to the REDI shopping centre.

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  • Revenue in Q4 was EUR 403.8m (EUR 299.7m in Q4/18), above our estimates and consensus estimates (EUR 370.2m/381.0m Evli/Cons.). Growth in Q4 amounted to 34.7 % y/y.
  • Operating profit in Q4 amounted to EUR -86.8m (EUR 0.1m in Q4/18), below our estimates and consensus estimates (EUR 2.3m/0.2m Evli/cons.). SRV recorded amortization charges totaling EUR 92.9m, relating mainly to the REDI shopping centre sale.
  • Construction: Revenue in Q4 was EUR 403.1m vs. EUR 368.7m Evli. Operating profit in Q4 amounted to EUR 3.6m vs. EUR 8.8m Evli.
  • Investments: Revenue in Q4 was EUR 1.7m vs. EUR 1.5m Evli. Operating profit in Q4 amounted to EUR -87.5m vs. EUR -5.0m Evli.
  • Other operations and elim.: Revenue in Q4 was EUR -0.9m vs. EUR 0.0m Evli. Operating profit in Q4 amounted to EUR -2.9m vs. EUR -1.5m Evli.
  • SRV expects revenue in 2020 to decline compared with 2019 and the operative operating profit to be positive and improve compared with 2019.
  • SRV proposes that no dividend will be paid for 2019 (EUR 0.0 Evli/Cons.).
  • SRV further informed of a sale of its ownership in the REDI shopping centre and is decreasing its ownership in the Tampere Deck and Arena project along with a series of financing decisions.

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Detection Technology - Coronavirus could pose near term threat to our estimates

06.02.2020 - 08.45 | Preview

Detection Technology will report Q4 earnings next Monday, February 10th. As majority of DT’s production and personnel is located in China, with Asia representing some 2/3 of DT’s total net sales, the effects of the coronavirus will be a key focus. Despite possible headwinds related to coronavirus, we remain positive to the investment case. Our rating and target price of EUR 24 remain intact ahead of Q4.

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Q4 wraps up a year of decent growth

The security imaging market has been experiencing strong demand due to increasing CT investments related to new EU and US airport standards, while medical imaging market is going through a temporary slowdown. For Q4’19, we estimate SBU growing 23% and MBU declining 14% y/y, with total Q4 net sales growing 8% y/y to 27.7 MEUR (27.4 MEUR cons). Our Q4 EBIT estimate is 5.1 MEUR (4.7 MEUR cons), which is +15% compared to slightly low comparison figures of 4.4 MEUR in Q4’18. On a whole, we expect FY’19E sales growth of 12% (FY’18 5.5%) and flat EBIT growth due to increasing R&D investments and lower MBU sales and share in mix. Our DPS estimate is 0.38 (0.39 cons.), which is on par with last year’s dividend due to flat net profit growth in 2019.

Growth story to continue despite coronavirus posing a near term threat

DT usually doesn’t give full year guidance due to low visibility into customer demand. We look forward to hearing about the latest status of the medical imaging market and the effects of the coronavirus. Most of DT’s production and ~80% of personnel are located in China, with Asia representing some 2/3 of DT’s total sales. Our FY’20E sales growth estimate is +15% based on continued good growth, especially in China, and volume ramp-up of new Aurora and X-Panel CMOS products. Despite continued R&D spending, we expect EBIT improvement 2020E due to increase in sales growth and better GM’s due to mix and new products. We note however that coronavirus poses a clear near-term threat to our estimates.

Rating and TP of 24 euros maintained ahead of Q4

Despite the short visibility and possible headwinds related to coronavirus or trade politics, we see longer term investment case intact due to strong market drivers, especially in China, as well as DT’s compelling strategy and execution capabilities. Our estimates, as well as our rating and target price of 24 euros remain unchanged ahead of the Q4 report.

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Etteplan - Expect good Q4 despite minor bumps

06.02.2020 - 07.45 | Preview

Etteplan will report Q4 results on February 11th. We expect Etteplan to finish the year on a positive note, although the industrial strike in December is expected to have had a minor negative impact. We expect revenue to grow 14.7% in Q4 and an EBITA-margin of 9.9%, near the comparison period figure. Guidance should reflect growth in revenue and operating profit. We expect a dividend proposal of EUR 0.36 per share. Following peer multiple appreciation, we raise our TP to EUR 10.6 (9.6) and retain our HOLD-rating.

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Industrial strike expected to have a minor impact on figures

We expect Q4 revenue of EUR 72.1m, with growth of 14.7% y/y, driven by acquisitions made during mid-2019. We expect an EBITA of EUR 7.1m, at a margin of 9.9%. Some uncertainty in Q4 figures is brought by the industrial strike in Finland in December, which we expect to have had a minor negative impact on Q4 figures. Etteplan made two smaller acquisitions during the quarter within technical documentation, with some 50 employees combined, which will have a minor impact on growth in 2020. We expect a dividend proposal of EUR 0.36 per share.

Continued revenue and earnings growth expected in 2020

The outlook for 2020 remains somewhat hazy following demand uncertainties and a slightly slower organic growth during 2019. We expect Etteplans guidance for 2020 to at least reflect clear growth in revenue and EBIT compared to 2019, supported by the acquisitions made during 2019. A guidance reflecting significant growth this early in 2020 would be a positive sign. We expect a sales growth of around 10% and growth in EBIT of 8% in 2020.

HOLD with a target price of EUR 10.6 (9.6)

Valuation multiples for both peers and Etteplan have increased post-Q3 and current valuation does not appear particularly attractive, although Etteplan still remains on good track. We raise our target price with the increased peer multiples and value Etteplan at 15x 2019E P/E, for a target price of EUR 10.6 (9.6) and retain our HOLD-rating.

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Verkkokauppa.com - Critical Q4 ahead

05.02.2020 - 08.40 | Preview

Verkkokauppa.com reports it’s Q4’19 earnings on 14th of Feb. We expect the competition has remained tight and price driven. We expect Q4E sales of EUR 168.9m (8.4% y/y) and EBIT of EUR 6.0m. We keep our rating “HOLD” with TP of EUR 3.3 intact ahead of Q4.

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Black Friday and Christmas sales boosting Q4 growth

During ‘19, Verkkokauppa.com has faced ups and downs in the highly competitive and price driven consumer electronics market. After a relatively weak H1’19, the company was able to show a positive turn in earnings development in Q3, despite of weaker sales growth. For Verkkokauppa.com, Q4 is critical, as most of its sales and profit are generated during this quarter, driven by Christmas sales and Black Friday. We expect only limited impacts resulting from the postal strike but the changed timing of tax refunds might have a negative impact on December sales compared to last year. We expect 8.4% y/y increase in Q4 sales (EUR 168.9) and EBIT to be on par with the previous year at EUR 6.0m (Q4’18: 5.9m).

No ease of competition ahead

We don’t expect the consumer electronics market in ‘20E to grow much from last year thus the management of sales mix plays an important role of supporting further sales and profit development. We expect the growth investments (e.g. increased marketing) to bear fruit in 2020E, resulting in new customers. We also hope to get more color on the new plans regarding B2B sales with the Q4 result. Due to the price driven competition and growth investments, we don’t expect profitability (EBIT%) to improve from last year, although the company’s cost base is scalable. We expect sales in ‘20E to increase by 7% y/y (EUR 549.1m) and EBIT increase of ~10% y/y resulting in EBIT margin of 2.6%..

“HOLD” with TP of EUR 3.3 intact

We have kept our estimates intact ahead of Q4. Verkkokauppa.com guides ‘19E sales of EUR 500-525m and EBIT of EUR 11-15m. Our estimates are in the mid-point of the guidance with ‘19E sales of EUR 513m (7.4% y/y) and EBIT of EUR 12.8m (FY18:13.3m). We continue to expect a growing dividend of EUR 0.21 (cons. EUR 0.21) vs. EUR 0.20 for ’18. We keep our rating “HOLD” with TP of EUR 3.3 intact ahead of Q4.

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Talenom - Sights remain set on growth

04.02.2020 - 09.00 | Company update

Talenom’s Q4 results fell below our expectations, with EBIT at EUR 1.5m (Evli 2.6m), driven by higher than anticipated D&A and the impact of the introduction of the Incomes Register. The impact of growth investments on profitability in 2020 appears somewhat larger than previously anticipated and we have lowered our 2020-2021E EBIT estimates by ~10%. We raise our TP to EUR 41 (37.5) but downgrade to HOLD.

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EBIT in Q4 clearly below expectations

Talenom’s Q4 results were below our expectations. Revenue grew 19.8% to EUR 14.9m (Evli 15.1m), while EBIT amounted to EUR 1.5m (Evli 2.6m). Compared with our estimates the difference was largely due to higher than anticipated D&A and introduction of the Incomes Register. D&A expenses increased as depreciation of the latest implementations of the bookkeeping line began in Q4. One-off items were limited although year-end reviews to our understanding also affected the elevated expenses.

Growth investments pressuring margin improvements

Talenom’s expects relative growth in net sales and relative profitability in 2020 to be in line with 2019. We see that margin improvement potential remains possible in 2020 through enhanced operational efficiency in acquired businesses and from the bookkeeping line improvements. More importantly, Talenom is in our view seeking to maintain momentum on growth and targeting geographical expansion and growth in smaller customer segments domestically as well as growth pick-up in Sweden. Talenom also emphasized focus on customer retention and satisfaction. With growth investments expected to increase we now only expect a 0.4pp EBIT-margin improvement and sales growth of 18.9% in 2020.

HOLD (BUY) with a target price of EUR 41 (37.5)

Talenom is in our view continuing on a healthy long-term track. We have lowered our 2020-2021E EBIT estimates by around 10%. With the outlook still remaining solid we raise our target price to EUR 41 (37.5), valuing Talenom at 30x 2020E P/E. With the share price having picked up we downgrade to HOLD (BUY).

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Marimekko - Upswing expected to continue in Q4

04.02.2020 - 08.55 | Preview

Marimekko reports its Q4’19 result on 13th of Feb. We expect Q4 sales of EUR 34.6m (16.5% y/y) and adj. EBIT of EUR 2.9m. We have kept our estimates largely intact and expect ’19 dividend of EUR 1.14 per share. We keep our rating “HOLD” with TP of EUR 39.0 intact ahead of Q4.

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Christmas sales expected to boost revenue growth

Marimekko’s upswing has continued in ’19 driven by positive sales development in Finland and increased licensing income from APAC region, resulting in two guidance upgrades in July and October. We expect Q4’19E sales to grow by 16.5% y/y (EUR 34.6m), driven by Christmas sales and representing some 28% of total year-end sales while we expect adj. EBIT to nearly double from Q4’18 to EUR 2.9m (Q4’18: 1.6m) due to improved gross profit and lower relative share of fixed costs. We expect good sales performance to continue in Finland (+15% y/y) but also APAC region (+27% y/y).

A sequel of the UNIQLO collaboration

Marimekko gave its first positive profit warning for ‘19E ahead of Q2 due to increased licensing income from APAC region. Licensing income of EUR 1.2m was booked in Q3 and shortly after the result it was revealed that the collaboration was with UNIQLO, a Japanese global apparel retailer, with who Marimekko partnered also in 2018. The new fall/winter collection was launched in late November ‘19 in all UNIQLO markets except in Japan. We thus see more far reaching positive impacts resulting from the partnership as the collaboration rises Marimekko’s brand recognition globally.

“HOLD” with TP of EUR 39.0 intact

Based on the second guidance upgrade given in October, sales are expected to increase from ‘18 while comparable operating profit is expected be higher than in ’18, amounting approx. EUR 17m. We have made only small adjustments to our estimates and expect 2019E sales of EUR 125.3m (+12% y/y) while our adj. EBIT expectation is in line with the guided EUR 17m (FY18: 12.2m). We expect Marimekko to propose a dividend of EUR 1.14m per share in ‘19. In ‘20E, we expect ~8% sales growth and further EBIT improvement (~21% y/y), driven by positive gross margin development. We keep our rating “HOLD” with TP of EUR 39.0 intact ahead of Q4.

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Talenom - Miss on EBIT

03.02.2020 - 13.50 | Earnings Flash

Talenom’s Q4 results were below our expectations due to a miss on profitability. Net sales amounted to EUR 14.9m (Evli/cons. EUR 15.1m) while the operating profit amounted to EUR 1.5m (Evli/cons. EUR 2.6/2.4m). Talenom reiterated its guidance for 2020, expecting relative growth and relative profitability to be in line with 2019. Talenom proposes a dividend of EUR 0.75 (Evli/cons. 0.74/0.71).

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  • Talenom’s net sales in Q4 amounted to EUR 14.9m (EUR 12.4m in Q4/18), in line with our and consensus estimates (Evli/cons. EUR 15.1m). Revenue growth in Q4 was 19.8% y/y.
  • Introduction of the Incomes Register had a negative impact of EUR 0.33m on net sales and operating profit in Q4/19.
  • The operating profit in Q4 was EUR 1.5m (EUR 1.5m in Q4/18), below our and consensus estimates (Evli/cons. EUR 2.6/2.4m), at a margin of 9.8%. The operating profit miss was mainly due to higher than estimated depreciation and amortization.
  • Guidance reiterated: the relative growth in net sales and relative profitability in 2020 expected to be in line with 2019.
  • Net investments during in 2019 EUR 15.4m compared with 9.5m in 2018.
  • Talenom proposes a dividend of EUR 0.75 per share (Evli/cons. 0.74/0.71).

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Tokmanni - Increasing target price ahead of Q4

31.01.2020 - 09.00 | Preview

Tokmanni reports its Q4 earnings on next week’s Friday, 7th of February. We expect Q4 revenue to grow by 7.2% to EUR 288m and EBIT of EUR 32.7m. We keep our rating “BUY” with updated TP of EUR 16 (13.5) ahead of Q4.

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New store openings to support sales

Q4 is normally the strongest quarter in terms of both revenue and profit for Tokmanni. According to PTY, revenue of department stores & hypermarkets grew by some 6% in Oct-Nov but declined by 1.5% in December. Decline in sales was exceptionally high in clothing (-11.6%) but also in home & leisure (-4.8%), partly due to mild winter. We expect Tokmanni’s Q4’19E revenue to grow by 7.2% to EUR 288m (Q4’18 268m) driven by new store openings and increased customer flows. Two new stores were opened during Q4 with combined selling space of ~4500m2. We expect Q4’19E adj. EBIT of EUR 32.7m (Q4’18: 25.6m) resulting in EBIT margin of 11.4%.

Expecting further profitability improvements in 2020E

So far Tokmanni’s ‘19 has been strong. In Jan-Sept’19 LFL sales grew +4.9% and at the same time gross profit developed favorably as gross margin was 34.1% vs. 33.7% in Jan-Sept’18. The actions taken to improve profitability seem to work although we hope to get more color on the progress made in improving the efficiency of Tokmanni’s supply chain as the success of this is one of the key drivers for further profitability improvement. In 2020E, we expect EBIT margin to increase to 8.2%, stemming mainly from gross margin improvement and 4.4% y/y revenue growth (EUR 989m) driven by store network expansion. The company’s long-term target is to reach adj. EBIT margin of ~9%.

“BUY” with TP of EUR 16 (13.5)

We have kept our estimates intact ahead of Q4 and expect FY19E revenue of EUR 947m (FY18: 870m) and adj. EBIT of EUR 71m (FY18: 52m). We expect Tokmanni to propose a dividend of EUR 0.62 per share in ’19 (cons. EUR 0.60). We keep our rating “BUY” with updated TP of EUR 16 (13.5) due to the ~20-30% increase in Nordic non-grocery peer multiples. On our estimates, with the new target price of EUR 16, Tokmanni trades at ’20E-21E EV/EBIT multiple of 16.1x and 14.6x which still translates into ~7-10% discount compared to its international peers.

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CapMan - Robust fundraising pipeline

31.01.2020 - 08.45 | Company update

CapMan posted strong Q4 results and the operating profit adjusted for the EUR 4.2m goodwill amortization related to CapMan’s operations in Russia improved clearly to EUR 7.7m, aided by significant carried interest. On-going fundraising projects, with the NRE III and NC III funds as new projects, provide major AUM growth potential. The Q4 report overall provided clear support for continued solid earnings growth in coming years. We raise our target price to EUR 2.5 (2.1) ex-div and retain our HOLD-rating.

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Carried interest boosted Q4 profitability

CapMan’s Q4 results beat expectations. Revenue grew to EUR 16.6m, aided by EUR 5.4m carried interest mainly from the Hotels fund. The operating profit amounted to EUR 3.4m but was affected by a non-cash amortization of goodwill relating to CapMan’s business in Russia and the adj. operating profit was at EUR 7.7m. A clear positive sign was the growth in management fees during Q4, up to EUR 7.3m. CapMan proposed a dividend of EUR 0.13 per share.

Major AUM growth potential in coming years

CapMan has begun the fundraising for the NRE III and NC III funds, which should add new AUM north of EUR 500m upon close. Together with other on-going fundraising projects we see major AUM growth potential in the coming years. We have post Q4 raised our estimates, with our 2020-2021E adj. operating profit estimates up some 20%. We expect a 140% increase in the Management Company business adj. operating profit (excl. carry) in 2020 driven by fee growth and limited cost increases.

HOLD with an ex-div TP of EUR 2.5 (2.1)

CapMan’s share price has seen larger increases and on peer multiples the expected major profitability improvement in 2020 appears to have been largely accounted for. On our revised estimates we raise our target price to EUR 2.5 (2.1) ex-div and retain our HOLD-rating.

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Suominen - Volumes haven’t stabilized yet

30.01.2020 - 09.20 | Company update

Suominen’s Q4 results fell short of our expectations as volume pressure continued. We have cut our estimates, our updated TP is EUR 2.25 (2.50), rating still HOLD.

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Suominen’s EUR 94.5m Q4 revenue missed our estimate

Suominen’s Q4 revenue declined by 14% y/y and 12% short of our EUR 107.1m estimate. The decline was attributable to volume losses but also to lower prices (due to lower raw materials prices). Volumes were lost in the Americas, with revenue down by 6% to EUR 62m, but the drop was sharp in Europe as Q4 sales slid by 26% y/y to EUR 32m. Suominen’s customer base is concentrated as the ten largest accounts make 65% of sales. Suominen lost volumes last year as the nonwovens price hikes became effective. Suominen says certain customer accounts might still be negatively affected. Suominen reported an 8.3% gross margin in Q4, in line with our estimates. The gross profit was thus EUR 7.8m while we expected EUR 9.0m. SGA, R&D and other items were as expected, and therefore the EUR 1.1m gap in EBIT relative to our estimate (EUR 1.4m vs EUR 2.5m) was due to the low sales figure and resulting weak absolute gross profit.

Short-term growth uncertain, but EBIT should still improve

Although the Q4 sales shortfall was a disappointment relative to our expectations, the softness didn’t fundamentally alter our view towards Suominen’s wider picture as a high level of uncertainty continues to fog the outlook. Suominen doesn’t guide sales outlook for FY ’20 but expects EBIT to further improve from the FY ’19 EUR 8.1m figure. We have cut our estimates for this year. We previously estimated Suominen to achieve 5% top line growth in ’20. We now expect 3% growth. Our expectation for FY ’20 EBIT is now EUR 12.0m (previously EUR 16.1m). Nonwovens demand is expected to grow at a CAGR of more than 4% in the markets where Suominen is present. Suominen targets to grow in excess of this rate in the long-term, however the oversupply problem seems to persist at least in the short-term.

Long-term targets are hard to price in given uncertainty

In our view Suominen’s valuation is neutral considering profitability has just bottomed out. However, it’s hard to say when profitability reaches adequate levels; we retain our cautious stance. Our TP is now EUR 2.25 (2.50), rating HOLD.

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CapMan - Carry offset by goodwill amortization

30.01.2020 - 09.00 | Earnings Flash

CapMan's net sales in Q4 amounted to EUR 16.6m, above our estimates and above consensus estimates (EUR 12.5m/11.4m Evli/cons.) following clearly higher carried interest. EBIT amounted to EUR 3.4m, below our and consensus estimates (EUR 4.7m/5.0m Evli/cons.). Adj. EBIT was EUR 7.7m. CapMan proposes a dividend of EUR 0.13 per share (EUR 0.13/0.13 Evli/Cons.).

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  • Revenue in Q4 was EUR 16.6m (EUR 8.9m in Q4/18), above our estimates and consensus estimates (EUR 12.5m/11.4m Evli/Cons.). CapMan recorded EUR 5.4m in carried interest, (Evli EUR 2.0m).
  • Operating profit in Q4 amounted to EUR 3.4m (EUR -2.9m in Q4/18), below our estimates and consensus estimates (EUR 4.7m/5.0m Evli/cons.). The operating profit includes a EUR 4.2m goodwill amortization relating to CapMan’s business in Russia and the adjusted operating profit amounted to EUR 7.7m
  • EPS in Q4 amounted to EUR 0.02 (EUR -0.02 in Q4/18), in line with our and consensus estimates (EUR 0.02/0.03 Evli/cons.).
  • Management Company business: Revenue in Q4 was EUR 13.0m vs. EUR 8.7m Evli. Operating profit in Q4 amounted to EUR 2.4m vs. EUR 2.9m Evli. Adj. operating profit was EUR 6.6m
  • Investment business: Operating profit in Q4 amounted to EUR 2.1m vs. EUR 1.6m Evli.
  • Services business: Revenue in Q4 was EUR 3.2m vs. EUR 3.4m Evli. Operating profit in Q4 amounted to EUR 0.9m vs. EUR 1.2m Evli.
  • Dividend proposal: CapMan proposes a dividend of EUR 0.13 per share (EUR 0.13/0.13 Evli/Cons.).
  • Capital under management by the end of Q4 was EUR 3.2bn (Q4/18: EUR 3.0bn).

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Suominen - Miss due to low sales

29.01.2020 - 12.40 | Earnings Flash

Suominen’s top line missed our estimate as Q4 sales declined by 14% y/y due to lower volumes as well as prices. Suominen expects operating profit to improve this year compared to FY ’19 (EUR 8.1m).

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  • Q4 revenue amounted to EUR 94.5m, compared to our EUR 107.1m estimate. The miss was due to higher-than-expected volume losses. Declining raw materials prices also had a negative effect.
  • Gross profit was EUR 7.8m vs our EUR 9.0m expectation. The resulting 8.3% gross margin was close to our 8.4% estimate.
  • Q4 EBIT was recorded at EUR 1.4m, whereas we expected EUR 2.5m. SG&A and R&D were basically as expected, so the earnings miss was attributable to low gross profit, which was due to weak top line.
  • The BoD’s dividend proposal for FY ’19 is EUR 0.05 per share; our expectation was EUR 0.04 per share.
  • Suominen guides FY ’20 EBIT will improve compared to ’19 (EUR 8.1m). Suominen will no longer provide sales guidance on annual level, which in our view is understandable given the recent struggles with volumes. Suominen targets long-term sales growth above that of the relevant market.

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Finnair - Strong Q4 traffic supports revenue growth

29.01.2020 - 09.20 | Preview

Finnair will report its Q4 result on next week’s Friday, 7th of February. The company’s Q4’19 traffic was in line with our expectations thus we have made only minor adjustments to our estimates. We expect Q4 revenue of EUR 740m and EBIT of EUR 8.2m. We keep our rating “HOLD” with TP of EUR 6.5 ahead of Q4.

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Good Q4 traffic data

Finnair’s traffic met the expectations in Q4. Capacity (ASK) grew by 10.6% vs. our 9.4% expectation, while sold capacity (RPK) grew as much as 13.6% vs. our 9.4% expectation. Thus, passenger load factor (PLF) increased by 2.1 percentage points to 79.0% in Q4. PLFs grew in all the market areas but especially in Europe (+3.4pp) and in Finland (+3.4pp). Total passenger number rose by 11 % y/y. Cargo development continued soft as the global uncertainty in world trade continued to press the global air freight market, especially in Asia. We expect Q4 revenue of EUR 740m (Q4’18: 684m) and EBIT of EUR 8.2m (Q4’18: 26.5m).

Slight increase in jet fuel prices

Jet fuel prices slightly increased towards the end of the year. The average price in USD moved up by 1% and in EUR by 2% on a q/q basis compared to Q3’19. Yet the average price in Q4’19 was still -7% lower y/y in USD and -4% lower in EUR.

Coronavirus hampers share price

Finnair’s share price has slumped after the fears around Coronavirus rose. In order to control the situation, China has restricted traveling and day-to-day business in some areas, which affects Finnair’s operations in Asia. The impacts for Finnair’s financial outlook are still unknown thus we have not made changes to our estimates. We expect to get more color on this with the Q4 result.

“HOLD” with TP of EUR 6.5 intact

We have kept our estimates largely intact ahead of Q4 result. For FY19E we expect revenue of EUR 3077m (FY18: EUR 2850m) and adj. EBIT of 140m (FY18: EUR 218m), resulting in EBIT margin of 4.6% which is at the lower end of the guided adj. EBIT margin level of 4.5-6.0%. We expect Finnair to propose a dividend of EUR 0.11 per share for ’19. We keep our rating “HOLD” with TP of EUR 6.5 intact ahead of Q4.

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Consti - Downgrade to HOLD

29.01.2020 - 08.45 | Preview

Consti will report Q4 earnings on February 7th. We expect to see the favourable profitability development trend from Q3 to continue but for revenue to decline from the strong comparison period. Apart from margin development, the order intake will be of key interest following order backlog declines during 2019. Following a near 50% share price increase since our previous update we downgrade to HOLD (BUY) with a target price of EUR 7.0 (5.8).

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Expect continued positive profitability development trend

Consti’s Q3 saw profitability improve substantially, following a lengthy period of weaker profitability, affected in particular by a few large renovation projects. With some older projects still having an impact on Q3, we expect profitability to improve q/q and estimate a EUR 3.0m operating profit in Q4. We expect revenue to decline some 16% from the strong comparison period following the completion of some larger renovation projects and estimate a revenue of EUR 80.9m.

Profitability to improve in 2020, sales growth unlikely

Consti has in recent years typically given a rather vague guidance and not guided revenue development and we expect a likely guidance to reflect a higher operating profit in 2020 compared to 2019. Based on the weak H1/19 we expect a clear improvement in profitability in 2020 and the operating profit margin to improve from 1.5% in 2019E to 3.3% in 2020E. The sales growth outlook for 2020 remains unfavourable based on the order backlog development. We currently estimate only a minor decline of 1.7% in awaiting details on Q4 order intake.

HOLD (BUY) with a target price of EUR 7.0 (5.8)

Consti’s share price has increased near 50% since our previous update. We are prepared to accept part of the increase following concurrent smaller peer multiple increases and although valuation compared to peers remains attractive, with the still limited proof of sustainable profitability improvement and the on-going St. George arbitration proceedings we downgrade to HOLD (BUY) with a target price of EUR 7.0 (5.8).

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CapMan - Expecting a good finish to the year

27.01.2020 - 09.15 | Preview

CapMan will report Q4 results on January 30th. We expect the operating profit to remain on par with the quarterly average earnings during 2019 and expect and operating profit of EUR 4.7m. CapMan should record higher carried interest (Evli est. EUR 2.0m) in Q4, aided by the Hotels I fund, while we expect higher personnel costs and lower investment returns to offset the positive impact. Our DPS estimate is at EUR 0.13 (2018: EUR 0.12). We retain our HOLD-rating and TP of EUR 2.1 intact ahead of the results.

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Q4 operating profit estimate at EUR 4.7m

We expect Q4 revenue of EUR 12.5m (Q4/18: 8.9m) and an operating profit of EUR 4.7m (Q4/18: -2.9m). Pre-Q4 we have made downward adjustments to our estimates mainly due to increases in personnel expenses relating to expected bonuses and minor downward adjustments to revenue estimates. We have also lowered our investment return estimates based on the news flow on exits during Q4. We expect carried interest to increase clearly q/q (Evli est. EUR 2.0m) due to continuation of the Hotels fund and thereto related realization of carried interest.

Expect continued solid earnings growth in 2020

Our estimates imply a y/y improvement of 73% in operating profit during 2019. CapMan has not given any guidance for 2020 but expects significant growth in capital under management and we expect continued solid growth in operating profit of around 40% in 2020 driven by earnings growth across the board. The continuation of the Hotels I fund during Q4 will have a clear positive impact on both management fees and operating profit following an expected limited impact on costs.

HOLD with a target price of EUR 2.1

We expect CapMan to propose a dividend of EUR 0.13 per share, translating into a dividend yield of 5.6% on previous closing price. We keep our HOLD-rating and target price of EUR 2.1 intact ahead of the Q4 results.

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Suominen - Improvement gradient still uncertain

24.01.2020 - 09.25 | Preview

Suominen reports Q4 results on Wed, Jan 29. Our estimates stand unchanged. We expect positive FY ’20 guidance given ’19 figures represent a rather soft comparison base. Our TP is now EUR 2.50 (2.25), rating remains HOLD.

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Expect a stable Q4 result compared to preceding quarters

We note nonwovens demand unchanged since Q3, and thus leave our estimates intact. We estimate Q4 revenue at EUR 107m i.e. down by few percent y/y due to volume losses. All the nonwovens’ raw materials prices basically flatlined during Q4 and so we expect gross margin stable at 8.4%. We also expect other costs to have remained in control and thus see EBIT at EUR 2.5m (EUR -0.4m a year ago). We see stabilizing prices and volumes helping Suominen to continued improvement with FY ‘20e EBIT at EUR 16.1m (compared to ‘19e EUR 9.2m).

FY ’20 guidance should be positive for both sales and EBIT

Although Suominen’s FY ’19 figures will likely translate to an EBIT twice that of ’18, the company’s profitability is still far off from satisfactory. We thus expect continued meaningful profitability improvement this year. Suominen recently published its new strategy and financial targets for 2020-25. The targets were moderated; Suominen now aims for sales growth above that of the relevant market. As Suominen’s markets grow ca. 3% p.a. we would expect this to imply a CAGR of some 3-5%. In order to reach the targeted above 12% EBITDA margin (which would imply an EBIT margin close to 8%) by ‘25, Suominen not only needs to achieve improved operational efficiency but also robust sales growth. We look forward to Suominen commenting on the outlook for the two currently reported geographies, Europe and Americas, as well as any color on the possible Asia expansion (about which the company has talked over the years). We would also like to hear about turning customer relationships stickier since the nonwovens markets are still well-supplied.

We update our TP but remain HOLD due to uncertainty

Our updated TP is EUR 2.50 (2.25) as peer multiples have gained in recent months. Our rating is still HOLD. Valuation starts to look attractive longer term (‘21e EV/EBITDA ~4.5x and EV/EBIT 10x) yet in our view there’s too much uncertainty. We expect Suominen to declare EUR 0.04 dividend per share for ’19.

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Vaisala - Upgrades outlook on continued good momentum

12.12.2019 - 08.08 | Company update

Vaisala upgraded yesterday its 2019 outlook. The upgrade did not come as a surprise as momentum in both business units have continued strong and as such our estimates were already taking this into account. We’ve made small upward adjustments to our estimates. We maintain our HOLD recommendation with new TP of 29.5 (prev. 24.5).

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Continued good momentum in both business areas

Vaisala cited that strong demand in both business areas has continued. In Q3 Vaisala’s orders received YTD was up +34% yoy with bulk of growth being organic, supported by acquired businesses. Strikes in November and December have been a significant risk to production and logistics, but Vaisala has been able to maintain its good delivery capacity also during Q4. The continued strong demand has had a positive impact on gross margin and project margins have also remained at a good level. However, there are still uncertainties related to the rest of the year, like the ongoing strikes in France, and estimating the impact of these is challenging.

Outlook upgrade not a surprise, estimates slightly upwards

Vaisala now estimates 2019 net sales of 395-405 MEUR and EBIT to be in the range of 36-42 MEUR. Previous outlook was net sales of 380-400 MEUR with EBIT of 25-35 MEUR including 10-12 MEUR acquisition related amortization and one-off expenses. As our 2019E estimates for net sales of 398 MEUR were in the upper range of the previous guidance and our EBIT estimate of 36.4 MEUR was slightly above previous guidance, the outlook upgrade did not come as a surprise. We have slightly adjusted our 2019 and onwards estimates upwards reflecting the continued good momentum. As noted previously, with acquired businesses integrated into Vaisala’s sales channel and continued good organic momentum in both W&E and IM, we see targeted 5% sales growth clearly achievable and road to >12% margins progressing well. The driver for profitability improvement is larger volumes and continued good growth in industrial business. We estimate IM share of Vaisala’s EBIT in ’20-21E to grow to 66% (vs. 56-57% in ’17-’18), driving Vaisala’s ~10-12% EBIT growth and EBIT margins of 10.5-11% (12-13% adj. for IAC).

Valuation is stretched, but justified

Vaisala’s share har rallied +105% YTD, being now at an all-time high. On our raised estimates, Vaisala is trading at PPA amortizations adjusted EV/EBIT multiples of 23x and 21.6x for ‘19E and ‘20E, a 30-38% premium to our peer group median despite exhibiting lower profitability profile than our peer group. However, a high valuation and premium are in our view justified due to the current stable outlook for W&E, strong ESG profile and growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions. On the back of our raised estimates, we raise our target price to 29.5 euros (prev. 24.5) and maintain our HOLD recommendation.

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Aspo - CMD notes; targets softened

27.11.2019 - 09.15 | Company update

Aspo updated its long-term targets in connection with the CMD yesterday. There were no actual downgrades to longterm EBIT margin targets, however Aspo abandoned the target ranges’ upper limits for both ESL and Telko, in addition to pushing the margin target dates further forward into the future for all segments. Our updated TP is EUR 8.25 (8.75), while our rating remains HOLD.

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ESL’s 12% EBIT margin target left intact, but pushed back

ESL now aims for EUR 200m revenue and 12% EBIT margin in ‘23. The previous target was EUR 200m revenue and 12-15% margin in ‘20. A target softening wasn’t a big surprise considering the recent cargo weakness, largely attributable to the Nordic steel industry, although in our view the ‘23 target date should leave ESL with potential for a positive surprise assuming the market challenges are not seriously prolonged. No big news regarding the fleet’s current situation were floated. ESL said it is assessing new fleet investments i.e. growth prospects beyond ‘23. These would be in the form of environmentally friendly coasters (consistent with the acquisition of AtoB@C). Such an evaluation reflects ESL’s positive outlook on biofuels volumes. ESL also told it is considering different types of ownership and financing alternatives for the potential new smaller vessels. However, no major investments are likely soon.

Telko and Leipurin margin target dates pushed back

While Telko’s volumes have developed well (+10% this year), the focus will be on improving profitability in the coming years, i.e. the story wasn’t changed. Telko’s profitability in e.g. Ukraine hasn’t been developing as hoped. Aspo also said Kauko’s annual revenue will decline to EUR 10m effective Jan 1. Telko now targets 6% EBIT margin with EUR 300m revenue (excl. Kauko) in ‘23 (previously EUR 300-350m revenue and 6-7% margin in ‘20). Leipurin still targets EUR 140m revenue and 5% EBIT margin, however the date was pushed back by a year to ‘23.

Full potential will not materialize for a while

We have updated our estimates following the new targets. We revise our estimates down especially beyond ‘20, but also see next year EBIT some EUR 2.4m lower than previously. Our new TP is EUR 8.25 (8.75). Our rating remains HOLD.

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Exel Composites - Turnaround progressing well

22.11.2019 - 09.20 | Company update

Exel Composites updated its guidance for FY ‘19. The update wasn’t big news as progress has been good this year. We make small revisions to our profitability estimates, and our new TP is EUR 6.00 (5.50), rating now HOLD (BUY).

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EBIT has improved considerably this year

Exel Composites updated its FY ’19 guidance. The company had previously guided improving revenue and adjusted EBIT compared to previous year. The updated outlook guides increase in revenue (as before) and significant increase in adjusted EBIT. The positive guidance update didn’t come as a major surprise as Exel had already accumulated EUR 5.9m in adjusted EBIT during the first nine months of the year, compared to the EUR 5.0m for FY ’18. Exel says there have been no material changes to order activity since the release of Q3 figures. We thus continue to expect further extension to the recent segmental performance trends. We see Construction & Infrastructure growing at a 10% annual rate, whereas we expect more muted 3-5% CAGR development for Industrial Applications and Other Applications.

Good volumes and cost savings program have helped EBIT

We see no reason to make changes to our top line estimates, i.e. we still estimate Exel’s revenue to grow at a 7% annual rate during the next few years. Exel expects to fully realize the annual savings target of EUR 3m during 2020. Although visibility is limited, we make small upward revisions to our profitability estimates. We now expect EUR 2.3m in Q4 EBIT (previously EUR 2.1m). For FY ’20 we now estimate the figure at EUR 9.2m (previously EUR 8.6m). In other words, we see Exel achieving operating margins at above 8% going forward. Such a level still falls short of the company’s long-term target (Exel targets long-term adjusted operating margin at above 10%).

Long-term upside remains due to operating leverage

In our view more positive development can be expected; higher revenues will further lift operating margin. There’s still long-term upside potential in Exel, however we see certain caution is in order due to limited visibility. We regard EV/EBITDA and EV/EBIT multiples of some 7-8x and 11-12x for this year and next as reasonable (roughly 30% below peer medians). We update our TP to EUR 6.00 (5.50); our new rating is therefore HOLD (BUY).

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Aspo - Market softness to cut results short

21.11.2019 - 09.15 | Company update

Aspo abandoned its former guidance for the rest of this year as ESL’s cargo volumes will be soft due to low steel industry demand. Telko’s profitability development will remain muted especially in the Western markets. We cut our estimates, our TP is now EUR 8.75 (9.25), rating HOLD.

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In our view ESL’s long-term case remains intact

As was known previously, SSAB will temporarily shut one of its two furnaces in Raahe. The seizure is expected to last some 4-6 weeks, and the furnace should be firing up again early next year. ESL had of course made allowances in its budgeting for such an event, nevertheless the shipments materialized lower than expected. We note the Baltic Dry Index has declined steeply during the last couple of months, however ESL says its Supramaxes haven’t been materially affected so far. As the new LNG-powered vessels and AtoB@C are now performing according to expectations, it follows that the lowered near-term outlook is entirely due to low steel industry shipping volumes. With regards to Telko, Aspo says the Eastern market is developing basically as before, however the Western market has proved more challenging than expected.

We cut our Q4 estimates, see higher uncertainty for Telko

We trim our Q4 estimates. We previously expected ESL to achieve EUR 5.5m in Q4 EBIT; our new estimate stands at EUR 4.3m. Our previous Q4 EBIT estimate for Telko was EUR 2.7m, and the reduced expectation amounts to EUR 2.3m. We leave our estimates for Leipurin intact. This means we estimate Aspo to post EUR 6.4m Q4 EBIT, which can be compared to the EUR 6.7m figure recorded in the previous quarter, and the adjusted EBIT of EUR 7.4m in Q4’18. We thus see Aspo reaching EUR 22.1m in FY ’19 EBIT (EUR 20.6m in ’18, or EUR 25.4m when adjusted for the Kauko write-off). Aspo now guides FY ’19 EBIT to be higher than in ’18. Aspo previously expected the figure to be in the EUR 24- 30m range. We also cut our next year estimates for Telko.

Improvement steepness is uncertain due to macro softness

Our updated TP is EUR 8.75 (9.25), rating remaining HOLD. In our view both ESL and Telko continue to hold significant improvement potential, however caution is in order considering the softness of certain key Aspo markets.

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Cibus Nordic - Yield not yet entirely digested

18.11.2019 - 09.20 | Company update

Cibus’ portfolio performed as expected in Q3 as the EUR 12.5m net rental income figure was in line with our estimate. Admin and financial expenses were elevated due to administrative transition as well as IFRS 16 adjustments and other financial costs. We make minor changes to our estimates, retain our SEK 135 TP and HOLD rating.

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Admin and financial expenses were temporarily elevated

Cibus’ portfolio developed without surprises during Q3 as the properties generated EUR 13.2m in rental income (vs our EUR 13.3m estimate). Property expenses also were largely as expected, and thus net rental income amounted to EUR 12.5m (we expected EUR 12.4m). Cibus is currently in the process of developing its organization and so transitions administration as well as asset management back to itself. This meant central administration as well as financial costs were temporarily elevated during the quarter, with admin expenses amounting to EUR 1.2m (compared to the normal EUR 0.9-1.0m level), and thus operating income stood at EUR 11.3m (vs our EUR 11.5m estimate). Cibus also made IFRS 16 related adjustments to its reporting, and now records site leasehold fees among its financial expenses, the effect being roughly EUR 0.15m per quarter. Net financial expenses totaled EUR 4.0m in Q3, and Cibus sees the level at around EUR 3.4m going forward.

Q3 was quiet in terms of portfolio development

There were no changes to Cibus’ portfolio during the quarter as the company still holds 139 Finnish properties valued at EUR 862m. Net debt LTV ratio and occupancy rate were basically unchanged at their respective 59% and 95% levels. Average lease-length remains at 5.0 years. Likewise, annual net rental income capacity continues to stand at EUR 49.9m, implying EUR 46.2m operating income potential. Cibus says it expects to list on the Nasdaq Stockholm Main List by Q3’20. Cibus continues to actively monitor the Nordic property market beyond Finland.

Cibus’ portfolio still offers a 100bps yield pick-up

We leave our operative estimates largely intact following the report. We retain our TP of SEK 135 per share, rating HOLD. Cibus’ portfolio net yield, at 5.1%, remains almost 100bps above that of a typical listed Nordic Real Estate portfolio.

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Cibus Nordic - Operating profit as expected

15.11.2019 - 10.20 | Earnings Flash

Cibus posted Q3 results largely in line with expectations. Operating income (rental income less property and central administration expenses), at EUR 11.3m, was close to our EUR 11.5m estimate. Larger than expected financial expense items meant profit from property management was a little soft as Cibus is developing its own organization.

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  • Q3 rental income amounted to EUR 13.2m vs our EUR 13.3m estimate.
  • Net rental income stood at EUR 12.5m, compared to our EUR 12.4m expectation.
  • Operating income was recorded at EUR 11.3m while we expected EUR 11.5m.
  • Net operating income (profit from property management) was EUR 7.3m, falling short of our EUR 8.5m projection due to higher than expected financial expense items. Cibus is in the process of transitioning administration as well as asset management back to the company from third-parties.
  • Annual net rental income capacity stands at EUR 49.9m (unchanged).
  • The property portfolio is valued at EUR 862m, which translates to an EPRA NAV of EUR 11.4 (previously EUR 11.3) per share.
  • Net debt LTV ratio was 58.9% (previously 59.0%) at the end of Q3.
  • Occupancy rate stood at 94.5% (94.3% in Q2’19).

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SSH - Issues profit warning

14.11.2019 - 08.15 | Company update

SSH lowered on Tuesday its revenue estimate for 2019. The lowered outlook did not come as a surprise as the bar was set really high for Q4. We’ve cut our sales and EBIT estimates for 2019 and coming years. Despite the estimates cut, the big picture remains unchanged in our view, with the underlying question in the investment case still being growth. We note that, SSH is making progress, but the speed of the transition is slow due to limited growth investment capacity. On the back of lowered estimates, our new target price is 1.0 euros (prev. 1.10), our recommendation remains SELL.

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Lowering revenue estimate for 2019

SSH now estimates that its revenue from the software business (software fees, professional services, and recurring revenue) will decrease somewhat compared to 2018 level, which was 15.6 MEUR (excluding patent income). The previous guidance was for above 10% revenue growth. Reasons behind the lowered revenue outlook are lower professional services revenue than expected, negative FX impact from weakening euro, and postponement of significant NQX sales due to lengthy procurement processes.

Estimates cut, NQX showing signs of traction

Due to the profit warning we have cut our 2019E net sales estimates from 17.1 MEUR to 15.0 MEUR, and 2019E EBIT from 0.9 MEUR to -0.9 MEUR. Consequently, our net sales estimates for 2020-21E are also cut ~8%, while our EBIT estimates are cut even further. The lowered net sales estimates have a clear negative effect on our profitability estimates, thus postponing profit turnaround into the future. On the positive, the firewall product NQX is showing promising traction, with SSH citing that “significant sales” were now postponed to 2020. Our read is that significant would mean deals in the seven-figure range. In Q3, SSH received a request for information (RFI) by the Finnish Defence Forces Logistics Command regarding NQX.

Target price 1.0 euros, recommendation unchanged

On our renewed 2019-20E estimates, SSH is trading at EV/Sales multiples of 3.0x and 2.5x, which is clearly below the sector as noted before. Despite the estimates cut, the big picture remains unchanged in our view, with the underlying question in the investment case still regarding growth. We note that, SSH is making progress, but the speed of the transition is slow due to limited growth investment capacity. On the back of lowered estimates, our new target price is 1.0 euros (prev. 1.10), our recommendation remains SELL. Our target price implies an EV/Sales multiple of 2.2x on our ‘20E estimate, slightly below Nordic software peers, which we see as warranted given weaker metrics and the uncertainty to our estimates.

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Finnair - CMD notes

13.11.2019 - 09.45 | Company update

Finnair held its CMD yesterday where the company presented its road map for sustainable and profitable growth after a phase of accelerated growth. The company aims to grow in line with market growth, focusing on improving its market position in Asia. The company provided a mix of efficiency improvement actions in order to improve profitability. We don’t expect any short-term impacts hence we retain our rating “HOLD” with TP of EUR 6.5.

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Focusing on Asian mega cities

Finnair continues to focus on improving its market position in Asia. The company’s geographical position provides Finnair a competitive advantage of transfer traffic between Europe and Asia. Transfer traffic between the two continents is essential as transfer traffic represents 62% of Finnair’s flown ticket revenue of which transfer traffic from Asia represents 73%. The company will concentrate on Asian mega cities which are providing higher yields. Japan and China are the two main markets but Finnair increases its presence also in other Asian countries, South Korea being an example as the company opens a new route to Busan in March 2020. The market growth is estimated to be some 4% between Europe and Asia. The company aims to be a modern premium airline and has renewed its website and mobile app to better serve its customers globally. The company is also renewing its ticket types and will offer a new option, premium economy class alongside with the normal economy and premium classes.

Heavy investments on fleet renewal

During the past few years, Finnair has focused on accelerated growth. The company has increased its capacity in 2015-2019 by 14 new A350 aircrafts and five more has been ordered (for 2020-2022). During the strategy period, the company aims to increase its wide-body fleet from 22 to ~30 and the total fleet from 83 to ~100. The company has estimated that the fleet investments during 2020-2025 will be some EUR 3.5b-4.0b (including the five new A350s) depending on the final fleet renewal plan. According to the company, one-third of the investments will be invested into growth and the remaining two-thirds into fleet renewal/replacement. The company aims to increase the share of its owned aircrafts. The investments will predominantly be funded by the company’s cashflow.

Updated financial targets for 2020-2025

Finnair updated its financial targets for 2020-2025 as the company is moving towards a new phase where the company seeks sustainable and profitable growth. The company’s opex (ex fuel) has increased by 6.1% (CAGR) since 2014, which exceeds the revenue growth of 5.5% (CAGR). Based on the strategy update, the company aims to moderate its growth and expects it to be in line with the market growth. Finnair guides ASK growth (CAGR) of 3-5% which is in line with our expectations (3-4% in 20E-21E). The company’s new target is to reach comparable EBIT margin of over 7.5% (prev. over 6%) over the cycle (at constant fuel and currency), after a 12-18 month build-up period. Profitability improvement will be driven by operational efficiency. Key drivers for lower unit costs are fuel efficiency, digitalization and automatization as well as improved on-time performance. Finnair targets to improve its OTP rate to 85% (2018: 78%). Also, fleet renewal should boost efficiency and updated ticket types to support margins. We see Finnair’s profitability target achievable, although we don’t expect any short-term impacts as the improvement of OTP is gradual and implementation of new processes takes time. Finnair also updated its ROCE target and expects ROCE of over 10% (prev. over 7%) over the cycle (at constant fuel and currency), after a 12-18 month build-up period. The company will provide more information of its sustainability targets in Q1’20.

HOLD with TP of EUR 6.5

We have made small adjustment mainly to our 21E estimates after the CMD. We expect revenue to grow 3-4% in 20E-21E while we expect comparable EBIT margin of 5.2% and 6.6%. The updated strategy does not impact our short-term estimates but we see the new targets to create positive outlook for Finnair’s earnings development in the future. We keep our rating “HOLD” with TP of EUR 6.5.

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Endomines - Upgrade to HOLD

08.11.2019 - 09.15 | Company update

Endomines’ Q3 results were clearly below our estimates, as no concentrate from Friday was sold during the quarter. Mining operations have progressed well but issues with the commissioning of the mill delayed concentrate production. Full forecasted production rates at Friday are expected by the end of the year. We adjust our TP to SEK 4.7 (4.8) and upgrade to HOLD (SELL) following share price declines.

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Estimates miss from mill commissioning delays

Endomines Q3 results fell clearly below our estimates, as no gold concentrate from the Friday-mine was yet sold, whereas we had expected minor sales. The gold concentrate production was affected by issues with commissioning the mill at Friday, which delayed previous plans of commencing production during Q3. Revenue amounted to SEK 1.6m (Evli 10.9m) and EBIT to SEK -16.4m (Evli -7.2m). Revenue was generated from gold recovered from the clean-up at Pampalo. Production at the Friday-mine has progressed well and a significant ore stockpile has been built up and Endomines expects to be reaching full forecasted production rates by the end of the year.

Bumps on the road in the near-term not unlikely

We have slightly revised our 2019 estimates downwards following the delay in concentrate production. The issues relating to the commissioning of the mill continue to pose risks for concentrate production in Q4. The impact of any further delays are however essentially not of any major importance and would only shift cashflows to a slightly later stage and the improved financial situation from the completed rights issue allows for some headwind.

HOLD (SELL) with a TP or SEK 4.7 (4.8)

Our view on Endomines post-Q3 in general remains intact. Our SOTP (Gold spot price) implies a value of SEK 5.4 per share but with the production uncertainty still present we continue to justify a discount and check our target price to SEK 4.7 (4.8) per share following SOTP adjustments. Due to a near 10% share price decline since our previous update we upgrade our rating to HOLD (SELL).

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Endomines - No gold concentrate production in Q3

07.11.2019 - 09.50 | Earnings Flash

Endomines did not sell any gold concentrate from Friday in Q3, as the commissioning of the mill was delayed. Mining operations have progressed well, and an ore stockpile has been built up. Due to the lack of gold concentrate sale from Friday, Endomines’ Q3 figures were clearly below our estimates.

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  • Endomines did not sell any gold concentrate from Friday in Q3, while gold recovered from the clean-up at Pampalo generated some revenue. Mining has progressed well at Friday and a significant ore stockpile at the mine and the mill sites has been produced.
  • Revenue* amounted to SEK 1.6m, with our estimates at SEK 10.9m. We had expected minor gold concentrate sales from Friday, while Q3 revenue consisted solely of sale of clean-up gold from the Pampalo mill.
  • EBITDA* in Q3 was at SEK -13.2m, below our estimate of SEK -3.2m given the limited gold concentrate sales. (*Not reported, derived from H1 and Q1-Q3 figures)
  • In the third quarter Endomines was able to commence the ramp-up of the Friday mining and milling operations and the work is now fully ongoing. Issues relating to the commissioning of the mill delayed the start of gold concentrate production. Successful commissioning of the mill is expected to take place during Q4.
  • Endomines did not give an updated production guidance for 2019. The ramp-up of the Friday mine is on-going and an updated guidance will be given once completed the mill is successfully commissioned and ramp-up completed

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Marimekko - Strong outlook ahead

07.11.2019 - 09.35 | Company update

Marimekko delivered good Q3 result, as expected. We saw some concrete actions to reach a wider target audience as the company launched its first streetwear collection KIOSKI. We have slightly increased our estimates for 19E-21E. We keep our rating “HOLD” with TP of EUR 39 (30).

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Q3 earnings supported by increased sales both in Finland and international

Marimekko’s Q3 result was strong, as expected. Revenue grew by 15% and was EUR 34.5m vs. EUR 34.7m/33.8m Evli/consensus. Sales is Finland grew by 14% while international sales increased by 17%. Marimekko’s sales grew in all the market areas, growth being particularly good in Finland and APAC region. In Finland, growth was driven by retail sales (16% y/y). In APAC region, retail sales increased by 14% and wholesale sales by 9%. Also, increased licensing income boosted sales in APAC. Comparable operating profit was slightly higher than consensus estimates but in line with our estimate at EUR 7.8m resulting in EBIT margin of 22.7% (vs. EUR 7.8m/7.6m Evli/consensus). Earnings development was boosted by the good growth in net sales but at the same time profitability was impacted by increased fixed costs which were partly due to the share-based incentive scheme for management.

Successful launches appeal to a wider target audience

In Jan-Sept, Marimekko’s sales development has been good especially in Finland (9% y/y) and APAC region (14% y/y), which are the two main markets for the company but also in EMEA (25% y/y). Marimekko’s brand continues strong in Finland and the company has been able to reach new customer groups while keeping the existing customers, resulting higher sales. Marimekko’s first (unisex) streetwear collection KIOSKI, which was launched in Q3 is an example of the actions the company has taken in order to appeal to a wider audience. The launch of the collection was successful and we see the collection to appeal well to a younger customer base in particular. In addition to Marimekko KIOSKI, the new leather bag line supports the company’s strategy as bags and accessories (share of net sales ~26%) provide a convenient way to introduce the brand to new customers. In Q3, Marimekko’s prints were also part of an anniversary collection by Target, bringing a lot of visibility in the US. During Jan-Sept, most of the company’s net sales were generated in Finland (54%) while 21% of net sales came from APAC region. Finland and APAC both represent ~37% of brand sales.

Growth strategy to support outlook for 19E-21E

We expect 19E revenue to grow by 10% y/y in Finland and 14% y/y internationally. In our assumptions, Finland represents ~55% of the total revenue in 19E-20E. We expect retail and wholesale sales to develop favorably in the future resulting from increasing global brand awareness and wider customer base. Increasing retail sales should also support gross margin improvement. We have slightly adjusted our 20E-21E outlook by increasing our revenue expectation by some 1% while increasing our 20E-21E EBIT expectation by 0.5% and 5.7%. We foresee revenue growth of ~8% in 20E-21E. Marimekko’s target is to achieve operating profit margin of 15% which we see achievable given the growth outlook. We also expect increasing e-commerce to support growth.

“HOLD” with TP of EUR 39 (30)

We expect Marimekko’s 2019E sales to grow by 12% and to total EUR 125.3m. We have increased our EBIT expectation to EUR 17.0m (prev. EUR 16.8m), resulting in EBIT margin of 13.6% (2018: 10.9%). We see that Marimekko is able to achieve and maintain higher margins than the premium goods peer group, which justifies higher multiples similar to our luxury goods peer group median. On our estimates, Marimekko trades at 19E-20E EV/EBIT multiple of 18.8x and 15.4x which translates into 14-18% discount compared to the luxury goods peer group median. Our target price translates into EV/EBIT multiple of 19.6x and 16.0x on our 19E-20E estimates, which still are below the EV/EBIT multiples of Marimekko’s luxury goods peer group. We keep our rating “HOLD” with TP of EUR 39 (prev. EUR 30).

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Pihlajalinna - Becomes part of the consolidation

06.11.2019 - 09.40 | Company update

Pihlajalinna’s Q3 revenue was in line with expectations but profitability was better than expected. Mehiläinen made a cash tender offer of all the shares of Pihlajalinna with the offer price of EUR 16 per share. We see the offer likely to be approved by the shareholders. With the TP of EUR 16 (12) our rating is now “HOLD”.

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Efficiency improvements already shown in Q3

Pihlajalinna delivered good Q3 result. Revenue grew by 5.5% (of which 3.7% organic growth) and was in line with estimates at EUR 122.7m (EUR 123.0m/121.5m Evli/consensus). The company’s adj. EBITDA beat expectations and was at EUR 17.4m (21.9% y/y) vs. our EUR 15.7m. Profitability improved mainly as a result of the efficiency improvement program but was also supported by increased revenue growth.

Mehiläinen plans to acquire Pihlajalinna

Mehiläinen has made a cash tender offer of all the shares of Pihlajalinna with the offer price of EUR 16 per share which values Pihlajalinna’s total equity at EUR ~362m. The offer price translates into a premium of ~46% compared to Monday’s closing price of EUR 10.96. The tender offer is unanimously recommended by the non-conflicted members of the board of directors of Pihlajalinna. We see the offer likely to be approved by the shareholders as the largest shareholders have already accepted the offer (~63% of shares). The combined revenue would represent some 23% of the total private social and healthcare market and in certain sectors the market shares might become too large, harming the competition. At the same time Terveystalo’s acquisition of Attendo’s Finnish branch in 2018 supports the approval. The offer is subject to the approval of the Finnish Competition and Consumer Authority (FCCA).

“HOLD” with TP of EUR 16.0 (12.0)

After the good Q3 result, we have fine-tuned our 19E-21E estimates. We expect 2019E sales to grow by 6.3% to EUR 518.5m and adj. EBIT of EUR 23.0 resulting in adj. EBIT margin of 4.4% (2018: 3.0%) The offer price of EUR 16.0 translates into EV/EBITDA multiple of 9.6x and 7.7x on our 19E-20E estimates which is 5-10% discount compared to the peer group. We have increased our TP to match the offer price of EUR 16.0 (prev. EUR 12.0) and our rating is now “HOLD”.

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Marimekko - Q3 result in line with expectations

06.11.2019 - 09.10 | Earnings Flash

Marimekko’s Q3 net sales increased by 15% and was EUR 34.5m vs. EUR 34.7m/33.8m Evli/cons. Adj. EBIT was EUR 7.8m vs. EUR 7.8m/7.6m Evli/cons. Sales grew in all the market areas which boosted earnings development. Marimekko reiterated its guidance for 2019E.

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  • Finland: revenue was EUR 19.7m vs. EUR 19.6m Evli view. Revenue increased by 14%. Retail sales increased by 16%. Wholesale sales increased by 9%.
  • International: revenue was EUR 14.8m vs. EUR 15.1m Evli view. Revenue increased by 17%. Retail sales increased by 15% and wholesale sales increased by 4%.
  • Net sales growth was generated primarily by Finnish retail and wholesale sales as well as licensing income and wholesale sales in the APAC region.
  • Q3 adj. EBIT was EUR 7.8m (22.7% margin) vs. EUR 7.8m/7.6m (22.5%/22.5% margin) Evli/cons. Profitability was boosted by sales growth but at the same time higher fixed costs impacted negatively on profitability.
  • Q3 EPS was EUR 0.79 vs. EUR 0.77/0.73 Evli/cons.
  • Guidance for 2019: net sales in 2019E are forecasted to be higher than in the previous year and comparable operating profit is expected to be higher than in the previous year, amounting to approximately EUR 17m.

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Pihlajalinna - Tender offer from Mehiläinen

05.11.2019 - 09.00 | Earnings Flash

Mehiläinen and Pihlajalinna have on 5th of November 2019 entered into a combination agreement pursuant to which Mehiläinen will make a voluntary recommended public cash tender offer for all issued and outstanding shares in Pihlajalinna. The offer price is EUR 16.00 in cash for each issued and outstanding share in Pihlajalinna, valuing the company’s total equity at EUR ~362m. The offer price represents a premium of ~46%. The non-conflicted members of the board of directors of Pihlajalinna have unanimously decided to recommend that the shareholders of Pihlajalinna accept the tender offer.

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  • Q3 revenue was EUR 122.7m vs. EUR 123.0m/121.5m Evli/consensus estimates. Revenue grew by 5.5% y/y. Organic growth was 3.7% y/y.
  • Q3 adj. EBITDA was EUR 17.4m (14.2% margin) vs. EUR 15.7m/11.4m Evli/cons estimates. Adj. EBITDA increased by 21.9% y/y.
  • Q3 adj. EBIT was EUR 9.3m (7.5% margin) vs. EUR 6.8m/3.8m Evli/cons estimates. Profitability improved due to the efficiency improvement program which was launched in June but was also supported by revenue growth.
  • Outlook for 2019E remains unchanged: Pihlajalinna’s consolidated revenue is expected to increase from 2018. Adj. EBIT is expected to improve clearly compared to 2018.

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Next Games - Awaiting a launch of BRN

04.11.2019 - 09.15 | Company update

Next Games Q3 results were below our estimates, with revenue of EUR 7.8 (Evli 8.7m) and EBIT at EUR -2.1m (Evli -1.6m). The number of active users in live games continued to decline but monetization figures remained on good levels and Next Games remained on target monthly fixed cost levels. The targeted growth in 2019 is looking more at risk with little news on the BRN launch. We retain our HOLD-rating with a target price of EUR 0.9 (1.0).

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Decline in active users impacted revenue and profitability

Next Games Q3 results fell short of our expectations. Revenue amounted to EUR 7.8m (Evli 8.7m). Revenue was affected by a continuing declining trend of the number of active users in both NML and Our World, although monetization figures continued to be on a good level. EBIT was as a result of the lower than estimated revenue below our estimates, at EUR -2.1m (Evli -1.6m). Next Games remained on target monthly fixed cost levels in Q3.

2019 growth target at risk

Next Games seeks moderate revenue growth during 2019 compared to 2018 assuming NML and Our World maintain current levels and the plan of launching one game per year remains on schedule. We now estimate a 2.6% revenue growth in 2019. We assume slight overall improvement in revenue of live games in Q4, supported by the post-Q3 NML update and the start of TWD season 10. We continue to assume the launch of Blade Runner Nexus late 2019, although with the already prolonged soft launch period and little update on the game’s situation in Q3, the risk of a delay in launch to 2020 remains high. Comments on Our World do not suggest any notable upscaling in 2019.

HOLD with a target price of EUR 0.9 (1.0)

We have made slight revisions to our estimates post-Q3 and have lowered our 2019-2020 EBIT-margin estimates by some 3-4pp respectively following lowered gross bookings estimates. We adjust our TP to EUR 0.9 (1.0) and retain our HOLD-rating.

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Etteplan - Continued good performance

04.11.2019 - 07.45 | Company update

Etteplan’s Q3 results were better than expected, with both revenue and EBIT beating our estimates. EBIT was aided by net one-offs of EUR 0.8m, at EUR 5.7m (Evli 4.9m). Revenue growth was 17.0%, with a respectable 5.1% organic growth given continued market uncertainty. The comments on market outlook saw some continued signs of slow-downs, without any major changes. We retain our HOLD-rating with a target price of EUR 9.6.

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Exceptional Q3 profitability boosted by one-offs

Etteplan’s Q3 results were better than we had expected. Revenue amounted to EUR 61.5m (Evli 59.1m), with the difference mainly due to higher sales in Engineering solutions. Growth was driven by acquisitions made during Q2-Q3/19, with revenue growth at 17.0% y/y, of which 5.1% organic growth. EBIT was above our expectations at EUR 5.7m (Evli 4.9m) due to non-recurring items of EUR 0.8m, including a EUR 1.1m impact from a revaluation of the earn-out in the Eatech acquisition. Challenges in Germany also continued to have an effect on profitability.

No major changes in market outlook

The market outlook continued to reflect the more challenging environment posed by uncertainty in the global economy. Comments on demand outlook point towards some slow-down and the situation in China continued to be challenging, with a decline in hours sold y/y. However, no signs of any larger deterioration in the overall demand situation was observable and according to Etteplan remained generally at a good level.

HOLD with a target price of EUR 9.6

Our top-line estimates remain largely unchanged post Q3. We have made some adjustments to our coming year estimates due to a readjustment of amortization of acquisition fair value adjustments, with our 2020-2021 EBIT estimates down by some 5%. With only minor estimates revisions and the continued uncertainty in demand outlook, we retain our HOLD-rating with a target price of EUR 9.6.

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SRV - Persisting challenges

01.11.2019 - 08.45 | Company update

SRV’s Q3 results were below our expectations, as while revenue beat our estimates slightly (Act./Evli 227.1m/222.1m), EBIT was below our estimates at EUR -6.3m (Evli -2.5m). Profitability was impacted by impairments relating to investments in Russia and weaker margins in the Construction segment, driven by two larger projects. SRV announced the initiation of a recovery programme, with the short-term goal of ensuring positive cash flow and operating profit in 2020.

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Results below expectations

SRV’s Q3 results were weaker than expected. Revenue was slightly above our estimates, at EUR 227.1m (Evli EUR 222.1m), while EBIT was below our estimates at EUR -6.3m (Evli -2.5m). EBIT was weaker partly due to impairments relating to investments in Russia, which we had forecast to Q4/19, but the weaker margins also hit EBIT of the Construction segment harder than we had estimated and was EUR -3.4m (Evli -0.5m). Positive operational news in the quarter were quite frankly limited, but the announced recovery programme and comments from recently joined CEO Saku Sipola point towards stronger determination in improving cash flows and the balance sheet.

Initiated a recovery programme

SRV announced the launch of a recovery programme, with the short-term goal of ensuring its operative operating profit and cash flow for 2020 are positive and returning its operative operating profit for 2021 to the level of 2017 (EUR 27.1m). We interpret the information given as a continued subpar performance in 2020 and take a more conservative stance on earnings improvement, lowering our 2020 EBIT estimate to EUR 12.6m (prev. EUR 28.2m). The slowing down of the construction sector and the more non-recurring nature of a larger part of the problems in 2019 in our view, however, still continue to speak for clear profitability improvements.

HOLD with a target price of EUR 1.30

Following revisions to our estimates we lower our target price to EUR 1.3 (1.4), retaining our HOLD-rating.

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Next Games - Results below expectations

01.11.2019 - 08.20 | Earnings Flash

Next Games's net sales in Q3 amounted to EUR 7.8m, below our estimates and in line with consensus (EUR 8.7m/8.1m Evli/cons.). EBIT amounted to EUR -2.1m, below our and consensus estimates (EUR -1.6m/-1.1m Evli/cons.).

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  • Net sales in Q3 were EUR 7.8m (EUR 13.4m in Q3/18), below our estimates and in line with consensus estimates (EUR 8.7m/8.1m Evli/Cons.). Growth in Q3 amounted to -41.8 % y/y. Compared to our estimates, revenue was lower than expected as the number of active users in NML and Our World declined compared to Q2, while we had expected flattish development. ARPDAU figures were quite in line with our estimates for both games.
  • Operating profit in Q3 amounted to EUR -2.1m (EUR -10.3m in Q3/18), below our and consensus estimates (EUR -1.6m/-1.1m Evli/cons.), at a margin of -27.1 %. The company’s cost base remained at target levels but the lower revenue compared to our estimates affected profitability.
  • Adj. EBIT amounted to EUR -1.2m (Q3/18: -9.2m), below our estimate of EUR -0.5m.
  • TWD: NML - DAU 163k (Q3/18: 275k), MAU 479k (Q3/18: 800k), ARPDAU EUR 0.21 (Q3/18: 0.24).
  • TWD: OW - DAU 127k (Q3/18: 386k), MAU 529k (Q3/18: 2.1mk), ARPDAU EUR 0.36 (Q3/18: 0.23).
  • The funds received from the rights offering were received post-Q3 and at the 22.10 the company had a cash balance of EUR 10.3m.

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CapMan - Solid performance across the board

01.11.2019 - 07.50 | Company update

CapMan posted solid Q3 results, largely in line with our estimates, with Q3 revenue amounting to EUR 9.7m (Evli 9.9m) and EBIT of EUR 5.5m (Evli 5.3m). CapMan is showing good development across all business segments and in the light of a good fundraising outlook we have slightly raised our AUM estimates and for 2020-2021 and made corresponding changes to the Management company business EBIT. Following adjustments to expenses of Other operations our Group estimates are largely intact. We retain our HOLD-rating with a TP of EUR 2.1 (1.95)

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Solid results, carry contribution minor

CapMan continued to post solid results, on Group level largely in line with our estimates. Q3 revenue amounted to EUR 9.7m (Evli 9.9m) and EBIT of EUR 5.5m (Evli 5.3m). AUM development compared to Q2 was flattish given no new fund closings but up 21% y/y. The Mezzanine V -fund entered carry but with a limited impact and total carry was at Q2 levels of EUR 0.7m. The Investment business contributed to a larger part of EBIT, aided by Buyouts exit from Kämp Collection Hotels. Q3 in general in our view showed little signs of weakness.

Positive fundraising outlook

CapMan is currently raising capital more or less across the board and management sees significant growth in AUM during 2020. Investment returns so far during 2019 surpassed the lower end of the 10-15% target return and all three service businesses are reportedly performing well, with 1-9/2019 Services business growth of over 90%. We have slightly increased our views on 2020-2021 AUM development and as a result raised our Management company EBIT estimates by some 12%. Following an offsetting impact of revised Other operations expense estimates our Group estimates remain largely unchanged.

HOLD with a target price of EUR 2.1 (1.95)

On Group level our coming year estimates remain largely unchanged. With the outlook for the core business looking yet more favourable we adjust our target price to EUR 2.1 (1.95) and retain our hold rating.

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Etteplan - Good Q3 figures

31.10.2019 - 13.40 | Earnings Flash

Etteplan's net sales in Q3 amounted to EUR 61.5m, slightly above our estimates and in line with consensus (EUR 59.1m/60.4m Evli/cons.). EBIT amounted to EUR 5.7m, above our and consensus estimates (EUR 4.9m/4.9m Evli/cons.), in line with our and consensus estimates after excluding EUR 0.8m one-offs.

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  • Net sales in Q3 were EUR 61.5m (EUR 52.6m in Q3/18), slightly above our estimates and in line with consensus estimates (EUR 59.1m/60.4m Evli/Cons.). Growth in Q3 amounted to 17.0 % y/y, of which 5.1 % organic growth.
  • EBIT in Q3 amounted to EUR 5.7m (EUR 4.4m in Q3/18), above our estimates and consensus estimates (EUR 4.9m/4.9m Evli/cons.), at a margin of 9.3 %. EBITA amounted to EUR 6.6m (Evli EUR 5.5m), at a margin of 10.7%. Q3 EBIT/EBITA was improved by one-off items of EUR 0.8m related to a revaluation of the earn-out in the Eatech acquisitions.
  • EPS in Q3 amounted to EUR 0.19 (EUR 0.13 in Q3/18), above our estimates and consensus estimates (EUR 0.15/0.15 Evli/cons.).
  • Engineering Solutions: Net sales in Q3 were EUR 35.3m vs. EUR 31.9m Evli. EBITA in Q3 amounted to EUR 3.4m vs. EUR 3.0m Evli.
  • Software and Embedded Solutions: Net sales in Q3 were EUR 15.4m vs. EUR 15.8m Evli. EBITA in Q3 amounted to EUR 1.6m vs. EUR 1.6m Evli.
  • Technical Documentation Solutions: Net sales in Q3 were EUR 10.7m vs. EUR 11.5m Evli. EBITA in Q3 amounted to EUR 0.8m vs. EUR 1.0m Evli.
  • The MSI-% of sales improved above 60% for the first time.

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Tokmanni - Upgraded to “BUY”

31.10.2019 - 09.25 | Company update

Tokmanni’s Q3 sales were in line with our expectation and the company was able to deliver strong earnings. The outlook for future earnings development looks positive. We have increased our estimates for 20E-21E. We upgrade to “BUY” with TP of EUR 13.5 (prev. EUR 10.2).

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Solid Q3 performance

Tokmanni’s upswing continued in Q3 as the company beat the already high Q3 expectations. Sales grew by 9.9% (of which LFL growth of 4.9% vs. our 3.0%) to EUR 231.5m vs. EUR 231.3/228.4m Evli/consensus. Sales were supported by increased number of customer visits and higher average purchases but also by tax refunds. Tokmanni’s adj. gross profit was EUR 82.0m (35.4%) vs. EUR 82.1m (35.5%) our view. Gross margin improvement was driven by the structure of sales, private labels and increased direct import. Improved profit margin and lower relative share of costs reflected to the company’s operating result as Tokmanni’s adj. EBIT increased to EUR 21.9m vs. EUR 19.4m/18.7m Evli/consensus.

Positive earnings outlook – estimates upgraded

Tokmanni updated its 2019E outlook for revenue and expects strong revenue growth for 2019 based on the revenue from the new stores acquired and opened in 2018 and new stores to be opened in 2019, as well as on good growth in LFL revenue (prev. Tokmanni expects good revenue growth for 2019, based on the revenue from the new stores acquired and opened in 2018 and new stores to be opened in 2019, as well as on slight growth in LFL revenue.). The company reiterated its guidance for profitability and expects comparable EBIT margin to improve from the previous year. We expect 2019E revenue to grow by 8.8% to EUR 947m and EBIT to improve to EUR 71m (prev. estimate of EUR 68m) resulting in EBIT margin of 7.5% (2018: 6.0%). In our view, Tokmanni has succeeded in appealing more customers by wide selection of products and low prices and the actions taken towards improved profitability are working, creating positive outlook for the earnings development also in the future. The company’s long-term comparable EBIT margin target is about 9% which we believe to be achievable. We have increased our 2020E-2021E revenue expectation by 0.5%-1% and adj. EBIT expectation by 3-4%. We expect 2020E-2021E LFL growth of 1.5% and EBIT margins of 8.2% and 8.6 %.

Seasonally strong final quarter ahead

Tokmanni will open two new stores during Q4’19 in Vääksy and Virrat, which will increase the store network to 191 stores (Tokmanni targets to increase its store network to above 200 stores). The new store openings as well as Christmas sales should support the sales growth in the last quarter of the year, which is normally the strongest quarter of the year for Tokmanni. The company indicated that many of the “easy” ways of improving profitability have already been used but the company continues to take actions towards improved operational efficiency for example by continuing profitability improvements of its supply chain. Margin expansion is also supported by increasing the share of direct import and private labels (the current private label’s share of sales is 31.8%).

Upgraded to “BUY” with TP of EUR 13.5 (10.2)

Tokmanni’s EBIT margin levels in 19E-20E are at the same level with the company’s international discount peers. We see that Tokmanni is able to achieve and maintain higher margins than the Nordic peers, which justifies higher multiples similar to our international discount peer group median. On our estimates, Tokmanni trades at 19E-20E EV/EBIT multiple of 15.0x and 13.1x which translates into 16-25% discount compared to the international discount peers and to ~10% premium compared to the Nordic peers. Our target price translates into EV/EBIT of 16.4x and 14.3x on our 19E and 20E estimates, which still are below the EV/EBIT multiples of Tokmanni’s international discount peers. The company also offers attractive dividend yield (~6%) in 19E-20E. Based on our estimates increase, we upgrade to “BUY” with TP of EUR 13.5 (prev. EUR 10.2).

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Exel Composites - More uplift to be expected

31.10.2019 - 09.10 | Company update

Exel Composites posted Q3 results basically in line with our estimates. Wind energy continued to support volumes. Exel left FY ’19 guidance unchanged, expecting revenue and adjusted operating profit to increase. We update our TP to EUR 5.5 (5.0) as we see further improvement in the cards. Our rating is still BUY.

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No major surprises in terms of segmental performance

Exel Composites posted EUR 23.6m in Q3 revenue, a figure slightly below our EUR 24.7m estimate. Industrial Applications, a segment which includes telecommunications customers, continued soft as revenue declined by 10% y/y. We expected flat development. Other Applications reported EUR 4.8m Q3 revenue, a decent improvement y/y but not quite meeting our EUR 5.0m estimate. Construction & Infrastructure, driven by wind energy, improved by 11% y/y to EUR 10.9m and thus was basically in line with our expectations. The adjusted operating profit of EUR 1.7m was also in line with our expectations. Overall, the Q3 report didn’t provide major surprises as key customer industries such as wind energy continued to support volumes.

We make relatively minor estimate changes

We make only minor updates to our revenue and profitability estimates. We have revised our Q4 revenue estimate slightly upwards due to the strong 10% increase in order intake. We continue to expect Exel to manage around 7.5% adjusted operating margins going forward. Exel says it expects to fully reach the targeted EUR 3m in annual cost savings in 2020.

We see further upside in the light of recent performance

We continue to expect Exel to post positive volume and profitability development going forward. Although we do not make major changes to our estimates, in the light of recent good performance we argue slightly higher valuation multiples are warranted. Our updated TP is EUR 5.5 (5.0), which would imply roughly 8x EV/EBITDA and 12x EV/EBIT (adj.) on our ‘19e estimates. On our ‘20e estimates the multiples would amount to some 6x EV/EBITDA and 10x EV/EBIT. Such valuation is still significantly below peer group median. Our rating remains BUY.

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CapMan - In line with expectations

31.10.2019 - 09.00 | Earnings Flash

CapMan's net sales in Q3 amounted to EUR 9.7m, in line with our estimates and slightly below consensus (EUR 9.9m/10.1m Evli/cons.). EBIT amounted to EUR 5.5m, slightly above our estimates and in line with consensus (EUR 5.3m/5.6m Evli/cons.).

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  • Revenue in Q3 was EUR 9.7m (EUR 7.2m in Q3/18), in line with our estimates and slightly below consensus estimates (EUR 9.9m/10.1m Evli/Cons.). Growth in Q3 amounted to 34.7 % y/y.
  • Operating profit in Q3 amounted to EUR 5.5m (EUR 4.8m in Q3/18), slightly above our estimates and in line with consensus estimates (EUR 5.3m/5.6m Evli/cons.), at a margin of 56.7 %.
  • EPS in Q3 amounted to EUR 0.03 (EUR 0.03 in Q3/18), in line with our estimates and consensus estimates (EUR 0.03/0.03 Evli/cons.).
  • Management Company business: Revenue in Q3 was EUR 7.0m vs. EUR 6.9m Evli. Operating profit in Q3 amounted to EUR 1.9m vs. EUR 2.0m Evli.
  • Investment business: Revenue in Q3 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q3 amounted to EUR 3.2m vs. EUR 2.4m Evli.
  • Services business: Revenue in Q3 was EUR 2.7m vs. EUR 3.0m Evli. Operating profit in Q3 amounted to EUR 1.6m vs. EUR 1.3m Evli.
  • Capital under management by the end of Q3 was EUR 3.2bn (Q3/18: EUR 2.7bn). Real estate funds: EUR 1.9bn, private equity & credit funds: EUR 1.0bn, infra funds: EUR 0.3bn, and other funds: EUR 0.1bn.
  • The CapMan Mezzanine V fund under our CapMan’s Credit strategy started realizing carry in September.

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Raute - Market uncertainty continues

31.10.2019 - 09.00 | Company update

Raute’s Q3 missed our estimates, but overall a weak Q3 was as expected due to low order book. Raute sees Q4 a lot stronger, yet when it comes to the wider picture the report didn’t offer us a reason to change our cautious view. We thus reiterate our EUR 25 TP and HOLD rating.

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Elevated market risks continue to weigh on order intake

Raute’s Q3 revenue decreased by 30% y/y to EUR 33.7m, and hence EBIT declined to EUR 1.7m from EUR 5.5m. Raute posted Q3 services revenue at EUR 17m, a figure in line with our estimate and an increase of 20% y/y. Raute says certain customers have seen deteriorating prices due to the recent boom in plywood and LVL mill investments and subsequent high capacity utilization rates. Raute sees the market currently polarized in the sense that a good level of demand remains for both large as well as small orders (in addition to services and spare parts demand), whereas activity for mid-sized orders such as mill modernizations is weak. The modernization softness was reflected in the very low EUR 8m (EUR 15m) Q3 services order intake. Elevated uncertainty continues to postpone major investment decisions.

Raute is in a good shape to weather further softening

We don’t make major updates to our estimates following the report. We note Raute expects Q4 to be strongest quarter of ’19 in terms of EBIT, which we now expect at EUR 3.0m. In our view Raute is well-positioned for a cooling market environment due to its strong balance sheet and leading product offering. Next year will be greatly helped by the recently disclosed EUR 58m Russian project delivery. On the other hand, excluding the Segezha order the current EUR 109m order backlog implies only some EUR 50m in orders, a rather soft level. In other words, even if the big order alleviates concerns regarding next year, we want to see pick-up in orders before turning our view more positive.

We see valuation as neutral due to uncertainties

We view Raute’s valuation, at ca. 7x EV/EBITDA and 9x EV/EBIT for ‘19e, as neutral. Valuation on ‘20e multiples could quickly turn attractive should orders pick-up, however visibility on next year’s figures remains limited despite the good groundwork laid by the record order. We reiterate our EUR 25 TP and HOLD rating.

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SRV - Earnings weaker than expected

31.10.2019 - 08.45 | Earnings Flash

SRV's net sales in Q3 amounted to EUR 227.1m, in slightly above our and consensus estimates (EUR 222.1m/222.0m Evli/cons.). EBIT amounted to EUR -6.3m, below our and consensus estimates (EUR -2.5m/-2.9m Evli/cons.). SRV announced the initiation of a recovery programme.

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  • Revenue in Q3 was EUR 227.1m (EUR 208.7m in Q3/18), slightly above our estimates and consensus estimates (EUR 222.1m/222.0m Evli/Cons.). Growth in Q3 amounted to 8.8 % y/y.
  • Operating profit in Q3 amounted to EUR -6.3m (EUR -5.7m in Q3/18), below our estimates and consensus estimates (EUR -2.5m/-2.9m Evli/cons.), at a margin of -2.8 %. The operative operating profit amounted to EUR -7.0m, below our estimates (Evli -2.5m).
  • EPS in Q3 amounted to EUR -0.22 (EUR -0.15 in Q3/18), below our estimates and consensus estimates (EUR -0.13/-0.13 Evli/cons.).
  • The order backlog in Q3 was EUR 1,592.6m (EUR 1,661.5m in Q3/18), down by -4.1 %.
  • Construction: Revenue in Q3 was EUR 226.0m vs. EUR 220.9m Evli. Operating profit in Q3 amounted to EUR -3.4m vs. EUR -0.5m Evli.
  • Investments: Revenue in Q3 was EUR 1.4m vs. EUR 1.2m Evli. Operating profit in Q3 amounted to EUR -3.1m vs. EUR -1.5m Evli.
  • SRV further announced the initiation a recovery programme, with the short-term goal of ensuring its operative operating profit and cash flow for 2020 are positive and returning its operative operating profit for 2021 to the level of 2017.

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Raute - No changes to an uncertain market

30.10.2019 - 10.35 | Earnings Flash

Raute’s Q3 EBIT, at EUR 1.7m, fell short of our EUR 2.5m estimate due to delayed new order development. Raute continues to comment the market situation in a cautious manner.

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  • Raute’s Q3 revenue stood at EUR 33.7m vs our EUR 35.0m estimate. Services revenue was in line with our estimate while project deliveries fell a little short of our expectation.
  • Q3 EBIT was EUR 1.7m whereas we expected EUR 2.5m.
  • Order intake amounted to EUR 73m in Q3 vs EUR 42m a year ago. The figure was greatly helped by the EUR 58m record order the company had disclosed previously.
  • Order book stood at EUR 109m at the end of Q3 vs EUR 121m a year ago.
  • Raute continues to comment the market environment in a cautious manner, citing prolonged negotiations and decision making. Services and spare parts demand remains stable, indicating good mill capacity utilization rates.
  • Raute reiterates existing guidance, expecting both revenue and operating profit to decline compared to previous year.

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Exel Composites - Proceeding according to plan

30.10.2019 - 10.00 | Earnings Flash

Exel Composites reported Q3 figures very much in line with our estimates. Revenue didn’t quite meet our estimate for the quarter, however operating margin came in a bit above our estimate.

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  • Q3 revenue was EUR 23.6m vs our EUR 24.7m estimate. Wind energy continued to support growth in the Construction & Infrastructure segment.
  • Exel Composites posted EUR 1.7m in Q3 EBIT i.e. in line with our expectation.
  • Operating margin, at 7.0%, was slightly above our 6.8% estimate.
  • Exel says Q3 order intake remained on a good level and grew 9.7% y/y.
  • The company says the cost savings program is proceeding according to plan, and the targeted EUR 3m in annual savings will be fully reached in 2020.
  • Exel reiterates FY ’19 outlook, expecting revenue and adjusted operating profit to increase compared to previous year.

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Aspo - Q4 needs to be strong

30.10.2019 - 09.45 | Company update

Aspo’s EUR 6.7m Q3 EBIT fell short of our EUR 7.6m estimate, yet we see the key segments making progress despite the prolonged series of disappointing earnings. Macro weakness hit both ESL and Telko in Q3; we see the segments positioned to improve despite macro headwinds. Our TP is now EUR 9.25 (9.50); we rate Aspo HOLD (BUY).

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ESL’s cargo volumes disappointed projections

ESL Shipping’s Q3 EBIT of EUR 4.4m is a step forward on the path towards a materially elevated earnings level. However, we expected the dry bulk carrier to achieve a EUR 5.3m EBIT for the quarter and as such view the result disappointing. ESL shipped 4.2 million tonnes of dry cargo in Q3, which according to our view fell almost 10% short of expected levels. The company comments the volume miss was especially due to low Nordic steel industry shipments, although softness was seen also in other cargo categories such as forest products. Besides the weak Q3 cargo development, the report had a silver lining as Aspo says the LNG-powered vessels and AtoB@C are performing strong.

Chemicals prices remained soft, pressuring Telko earnings

Telko’s underlying Q3 volumes grew by 8% y/y, yet revenue decreased by 4% as plastics and chemicals prices extended their slide. The cited 16% y/y and 3% q/q chemicals price decreases meant Telko’s EUR 74.7m in Q3 revenue and EUR 2.4m EBIT fell short of our respective EUR 81.5m and EUR 2.7m estimates. This led to EBIT margin decreasing by more than 100bps y/y. However, such a comparison is not very meaningful due to the big drop in prices, and we note the 3.2% Q3 EBIT margin a clear improvement relative to Q2 as prices have continued soft. We view the figure as evidence that Telko is making progress in improving working capital management.

Aspo’s key segments were affected by macro weakness

We leave our Q4 estimates for ESL intact despite the earnings miss as we see certain positive comments (such as good demand for loading operations) balancing the negatives regarding transportation volume softness. We expect ESL to achieve EUR 5.5m in Q4 EBIT, thus bringing FY ’19 EBIT to EUR 15.7m. We update our estimates for Telko to reflect the latest market developments. We now expect Telko to achieve EUR 2.7m in Q4 EBIT (we previously expected EUR 3.0m) and thus see the chemical distributor’s FY ’19 EBIT at EUR 9.8m. We note the uncertainty is elevated concerning Telko’s profitability going forward. On the positive side, we see the company making progress with its efficiency improvement program, and thus in an improved position to post better results should markets stabilize. On the other hand, the market and price outlook stays clouded for now. Leipurin’s machinery business continued to strain profitability, and Aspo sees the business line will post an annual loss. A change in schedule for a significant Russian machinery delivery leads us to cut our Q4 EBIT estimate for Leipurin to EUR 1.0m from the previous EUR 1.3m. On the positive side, Aspo’s group administration costs only amounted EUR 0.9m (has been previously hovering around EUR 1.3m).

We update our TP, rating now HOLD (BUY)

We update our estimates, and now expect Aspo to record EUR 24.0m in FY ’19 EBIT. We expect ESL to further improve going forward and see Telko improving materially should markets and plastics and chemicals prices stabilize. Aspo left its FY ’19 guidance intact, indicating accelerating performance for Q4 and a minimum of EUR 8.3m in EBIT. Our new TP is EUR 9.25 (9.50), rating now HOLD (BUY).

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Pihlajalinna - Towards profitability improvement

30.10.2019 - 09.20 | Preview

Pihlajalinna will report its Q3 earnings on next week’s Tuesday, 5th of November. Our interest is on how the execution of the efficiency improvement program is going and what are the impacts for Q3. We have increased our revenue and earnings estimates by 1-2%, resulting from the cooperation agreement with Pohjola Insurance. We keep our rating “BUY” with TP of EUR 12 ahead of Q3.

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Changes in service network

Pihlajalinna has faced efficiency problems especially with the new clinics which has impacted negatively on the company’s profitability. In order to improve profitability, the company launched an efficiency improvement program in H1 that aims to achieve annual cost savings of EUR 17m. The planned cost savings are expected to be realized during 2020. As a result of the efficiency improvement program the company informed that it will merge units but closures of some of the loss-making clinics are also possible. We have already seen some actions taken during Q3 as the company has announced changes (mergers and unit closures) to its service network at least in Eastern and Southwest Finland.

Cooperation agreement with Pohjola Insurance

Pihlajalinna and Pohjola Insurance signed a cooperation agreement in early September which is a continuation to the successful pilot project that took place during the summer. The company estimates that the turnover from the contract could be some EUR 5-10m per annum, which means 1-2% increase in revenue. As a result of the agreement we have increased our revenue and earnings estimates by 1-2% for 2020E-2021E.

We retain “BUY” with TP of EUR 12

We expect Q3’19E revenue to grow by 5.8% to EUR 123m (cons. of EUR 122m) driven by new clinics and fitness centers. We expect adj. EBIT of EUR 6.8m (cons. of EUR 5.4m) resulting in EBIT margin of 5.6%. We expect profitability to improve from last year as some of the costs savings are expected to be shown already in Q3’19. We keep our rating “BUY” with TP of EUR 12.

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Solteq - Minor bumps, narrative unchanged

30.10.2019 - 09.00 | Company update

Solteq’s Q3 results fell short of our expectations due to the postponement of certain customer projects. Net sales were EUR 13.0m (Evli 13.5m) and EBIT EUR 0.3m (Evli 0.7m), with Q3 providing no other surprises. Solteq announced plans to implement a new structure during 2020, with two business segments, and their long-term financial targets. We retain our HOLD-rating with a TP of EUR 1.50.

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Estimates miss from project postponements

Solteq’s Q3 results fell short of our as well as company expectations. Revenue in Q3 grew 1.2% to EUR 13.0m (Evli 13.5m) and EBIT amounted to EUR 0.3m (Evli 0.7m). The third quarter was impacted by the postponement of certain customer projects to the fourth quarter, with the value of a single postponed order at more than EUR 0.3m. Aside from the impact of the postponed projects the Q3 results provided no surprises. Solteq noted a continued positive development of its order backlog.

Plans to change segment structure during 2020

Solteq announced intentions to change its segment structure during 2020 into two business segments: Solteq Software and Solteq Digital. Solteq Software will focus on the company’s own products and Solteq Digital on IT expert services. The long-term financial targets for Software/Digital are: minimum average annual revenue growth 20%/5% and minimum EBIT-margin 25%/8%. For some perspective, this could imply Group EBIT-margins well over 10% by 2022.

HOLD with a target price of EUR 1.50

We have lowered our 2019 net sales and EBIT estimates to EUR 58.3m (prev. 58.9m) and EUR 3.9m (prev. 4.4m), with only minor adjustments to our coming year estimates. Solteq as an investment case relies on the transition towards own software and related services and some positive signs were seen from order inflow during Q3, although not large enough to warrant changes to our views. With our estimates largely intact we retain our HOLD-rating and target price of EUR 1.50.

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Tokmanni - Strong performance continues

30.10.2019 - 09.00 | Earnings Flash

Tokmanni’s Q3 revenue increased by 9.9% and was EUR 231.5m vs. EUR 231.3m/228.4m Evli/consensus. LFL growth continues to be above our estimates at 4.9% vs. 3.0% our expectation. Tokmanni’s adj. EBIT was EUR 21.9m vs. EUR 19.4m/18.7m Evli/cons. Gross margin was 35.4% vs. 35.5%/34.4% Evli/cons. Tokmanni updated its 2019E outlook.

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  • Q3 revenue grew by 9.9% and was EUR 231.5m vs. EUR 231.3m/228.4m Evli/consensus.
  • Q3 adj. gross profit was EUR 82.0m (35.4% margin) vs. EUR 82.1.m (35.5 %) Evli expectation.
  • Q3 adj. EBITDA was EUR 37.2m vs EUR 34.4m/33.9m Evli/consensus
  • Q3 adj. EBIT was EUR 21.9m (9.5% margin) vs. EUR 19.4m (8.4%) our expectation and EUR 18.7m (8.2%) consensus.
  • Q3 eps was EUR 0.27 vs EUR 0.23/0.22 Evli/consensus
  • Revenue was driven by increased customer numbers and customers’ average purchases but also due to tax refunds
  • Updated 2019E outlook: Tokmanni expects strong revenue growth for 2019, based on the revenue from the new stores acquired and opened in 2018 and new stores to be opened in 2019, as well as on good growth in like-for-like revenue. Group profitability (comparable EBIT margin) is expected to improve on the previous year.

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Innofactor - Return to slight sales growth

30.10.2019 - 08.15 | Company update

Innofactor’s Q3 saw a return to net sales growth and better than expected profitability. The continued solid order backlog development remains a clearly supportive factor. With order backlog conversion visibility being challenging due to longer duration of signed contracts, we continue to expect only minor growth in the near-term, however noting the advantages of the added sales stability. We retain our BUY-rating with a TP of EUR 0.85 (0.80).

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Profitability above estimates, solid order backlog growth

Innofactor’s Q3 results were better than our expectations. Net sales were in line with our estimates at EUR 14.0m (Evli 14.1m), showing slight growth of 1.4%, for the first time since Q3/2017. EBITDA and EBIT beat our estimates at EUR 1.5m (Evli 0.7m) and EUR 0.3m (-0.2m) respectively. Q3 EBIT was slightly burdened by depreciation adjustments attributable to the period 1-9/2019. Profitability improved compared with the previous year due to the measures taken to improve profitability at the end of 2018 and the sales per employee improved 12% from the previous year. The order backlog further grew by 107% y/y to EUR 53.2m.

Continuing to show signs of improvement

Innofactor’s Q3 results in our view continued to show signs of good progress and also saw the recurring components of the net sales mix increase to just slightly over 50%. Interpreting the speed of translation of the order backlog to sales remains challenging due to the increased share of long-term projects, which on the other hand provides added stability in net sales going forward. We have made minor revisions to our estimates post-Q3, expecting revenue growth of 3% during 2020-2021. Our 2020-2021 EBITDA estimates are up by around 5%, expecting profitability to continue to improve.

BUY with a target price of EUR 0.85 (0.80)

Having made minor upwards revisions to our estimates we adjust our target price to EUR 0.85 (EUR 0.80). On our estimates valuation on purchase price excluded basis still remains fairly attractive and we retain our BUY-rating.

Open report

Aspo - ESL’s EBIT not there yet

29.10.2019 - 10.45 | Earnings Flash

Aspo’s Q3 EBIT, at EUR 6.7m, missed our EUR 7.6m estimate by 12% (the consensus was EUR 7.8m). ESL improved, but still didn’t quite reach the level of EBIT we were expecting. Nevertheless, Aspo retains its FY ’19 guidance, implying steepening improvement for Q4.

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  • Aspo booked Q3 revenue at EUR 148.0m, whereas we expected EUR 155.3m.
  • EBIT was EUR 6.7m vs our EUR 7.6m estimate.
  • ESL Shipping recorded EUR 43.4m in Q3 revenue vs our EUR 43.3m expectation. The dry bulk carrier posted EUR 4.4m in Q3 EBIT, compared to our EUR 5.3m estimate. Aspo says cargo volumes didn’t reach the previously estimated levels and this was especially due to steel industry shipments.
  • Telko’s Q3 revenue was EUR 74.7m compared to our EUR 81.5m estimate. The chemical distributor achieved EUR 2.4m in Q3 EBIT, while we expected EUR 2.7m. The resulting 3.2% operating margin was therefore in line with our 3.3% estimate.
  • Leipurin’s Q3 revenue stood at EUR 29.9m vs our EUR 30.5m estimate. Leipurin’s Q3 EBIT amounted to EUR 0.8m vs our EUR 0.9m expectation. The 2.7% operating margin was slightly below our 3.0% expectation.
  • Aspo retains its FY ‘19 operating profit guidance, according to which the company sees EUR 24-30m in EBIT. As Aspo booked EUR 15.7m in EBIT for the first nine months of ’19, the implication is a minimum of EUR 8.3m EBIT for Q4. In our view such a level should still be achievable, although might be a close call.

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Innofactor - Profitability beats expectations

29.10.2019 - 09.15 | Earnings Flash

Innofactor’s Q3 results were better than we had expected. The net sales in Q3 amounted to EUR 14.0m (Evli EUR 14.1m), while EBITDA amounted to EUR 1.5m (Evli EUR 0.7m). Innofactor reiterated its 2019 guidance, with net sales expected to increase from 2018 and EBITDA to be in between EUR 4.0-6.0m.

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  • Net sales in Q3 were EUR 14.0m (EUR 13.8m in Q3/18), in line with our estimates (Evli EUR 14.1m). Net sales in Q3 grew 1.4 % y/y. Sales per employee has improved by 12.0% since the previous year.
  • Operating profit in Q3 amounted to EUR 0.3m (EUR -1.2m in Q3/18), above our estimates (Evli EUR -0.2m), at a margin of 1.8 %. Profitability has been supported by the measures taken during the end of 2018 to improve profitability.
  • EBITDA in Q3 was EUR 1.5m (EUR -0.5m in Q3/18), above our estimates (Evli EUR 0.7m), at an EBITDA-margin of 11.0 %.
  • Order backlog at EUR 53.2m, up 107% y/y, aided by several significant orders signed.
  • Guidance reiterated: Innofactor’s net sales in 2019 is estimated to increase from 2018 and EBITDA is estimated to grow up to EUR 4.0–6.0 million

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Solteq - EBIT miss from project postponements

29.10.2019 - 08.15 | Earnings Flash

Solteq's Q3 results were slightly below our estimates. Net sales in Q3 amounted to EUR 13.0m (Evli EUR 13.5m), while EBIT amounted to EUR 0.3m (Evli EUR 0.7m). The operating profit was affected by the postponement of certain customer projects. Solteq reiterated its guidance, expecting the operating profit to grow clearly compared to the financial year 2018.

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  • Net sales in Q3 were EUR 13.0m (EUR 12.8m in Q3/18), slightly below our estimates (Evli EUR 13.5m). Growth in Q3 amounted to 1.2 % y/y. The revenue of overseas subsidiaries increased considerably.
  • Operating profit and adjusted operating profit in Q3 amounted to EUR 0.3m (EUR 0.5m in Q3/18), below our estimates (Evli EUR 0.7m), at a margin of 2.2 %. The operating profit was below company expectations due to the postponement of certain customer projects to the fourth quarter.
  • Product development investments during Q3/19 amounted to EUR 0.9m (1-9/2019: EUR 3.0m), co’s FY2019 estimate EUR 3.7m.
  • The group’s order intake continued to develop positively during Q3/19 and improved considerably compared to Q3/18.
  • Guidance reiterated: Solteq's operating profit is expected to grow clearly compared to the financial year 2018
  • Solteq further announced a change in reporting structure and will during 2020 implement and structure with two segments: Solteq Software and Solteq Digital. The average annual sales growth targets for the segments are 20% and 5% respectively and EBIT-margin targets 25% and 8% respectively.

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Verkkokauppa.com - High importance of sales mix

28.10.2019 - 09.35 | Company update

Verkkokauppa.com was able to make a turnaround in profitability in Q3 but at the same time sales growth decreased. Profitability improvement was mainly due to sales mix and better terms with suppliers. The management had a good control over the business in Q3. We keep our rating “HOLD” with TP or EUR 3.3.

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Profitability improvement driven by sales mix

In Q3, Verkkokauppa.com focused more on profitability and achieved EBIT of EUR 4.3m vs. EUR 3.7m/3.0m Evli/cons. EBIT margin increased to 3.6% vs. 2.9%/2.4% Evli/cons driven by higher gross margin (15.7% vs. 14.7% our expectation). Gross margin improvement was mainly due sales mix (smaller product categories with higher gross margins) and better terms and conditions from suppliers. The company’s sales in Q3 were below expectations and the growth (3%) was only slightly above the market growth of 2.5% (GfK), reflecting the tight and price driven competition in consumer electronics. The company was also able to keep good control over the costs (~8% y/y) in Q3.

Support from other product categories

Verkkokauppa.com has sought growth over profitability and as the company has aggressively competed in a highly competitive consumer electronics market, the company’s earnings development has been weak. In Q3, the company shifted more focus towards other categories with higher margins. We see this as a positive change as the aggressive competition in consumer electronics market is expected to remain tight, and the growth might become too expensive. After Q3, the pressure on EBIT has eased, although Q4 is critical for the business as Black Friday and Christmas are important sales drivers for the company.

“HOLD” with TP EUR 3.3

Verkkokauppa.com updated its outlook for FY19 and expects sales of EUR 500-525m and EBIT of EUR 11-15m (prev. sales of EUR 500-550m and EBIT of EUR 11-17m). We expect 19E sales of EUR 513m and EBIT of EUR 12.8m. As we expect the aggressive competition to continue we have decreased our 20E-21E sales expectation by 3-5%. On our estimates Verkkokauppa.com trades at 19E-20E EV/EBIT multiple of 9.0x and 7.8 which translates into ~80% discount compared to the peer group. We keep our rating “HOLD” with TP of EUR 3.3.

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Consti - Upgrade to BUY

28.10.2019 - 09.30 | Company update

Consti posted good Q3 results, showing clearly positive profitability figures again after four consecutive weak quarters. Although some open risks still exist in older projects, the stricter bidding procedures, the new organizational structure and lack of new significant negative impact projects supports continued healthy profitability. Going forward the order backlog development will be of larger interest and the Q3 development has prompted us to expect sales declines in 2020.

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Clear profitability improvement

Consti’s Q3 saw profitability returning back on a healthier track, with EBIT of EUR 2.1m (Evli 2.2m). The improvement in profitability (Q3/18: -1.4m) was due to a clearly smaller impact of old projects in the discontinued housing repair unit, which however still did have an impact. Net sales growth was better than we have expected, growing 3.7% y/y to EUR 81.8m (Evli 79.5m). The order backlog development remained rather weak, amounting to EUR 206.8m in Q3, down -23.6% y/y. The decline has been affected by stricter bidding procedures, but also to some degree by a tie-up of resources in larger projects.

Order backlog development speaks for 2020 sales decline

We have lowered our net sales estimates post-Q3, now expecting a sales decline in 2020 of ~5%. Our current estimate appears rather generous given the order backlog development. More clarity will be given by order intake during Q4/19-Q1/20, the quarters in which intake has typically been strongest. In our view the freeing up of resources, improved profitability and the progression of the organizational structure development speak for the potential for improving order intake. Our bottom-line estimates remain largely intact.

BUY (HOLD) with a TP of EUR 5.8 (5.4)

The signs of profitability improvement alleviate some of the uncertainty pressure, although risks still remain. Nonetheless, valuation still appears attractive and we raise our target price to EUR 5.8 (5.4) and upgrade to BUY (HOLD).

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Scanfil - We see extended solid performance

28.10.2019 - 09.20 | Company update

Scanfil’s 7.9% EBIT margin topped our estimate, and while the result was partly due to a favorable product mix, we now see the company in shape to post 7% EBIT margins on a regular basis. Our new TP is EUR 5.00 (4.75), rating BUY.

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HASEC contributed, yet organic growth was also decent

Scanfil’s sales have developed in a stable fashion during the last few years. The Communication segment was the only one of the five where revenue declined y/y. The segment supplies telecommunications companies with products such as base stations, is arguably the most cyclical and challenging of Scanfil segments, and with LTM revenue of EUR 86m the smallest. Nevertheless, even Communication sales have been improving since Q2. Consumer Applications and Energy & Automation grew slightly, and Medtec improved by 14% relative to the soft comparison period. Most noteworthy was the Industrial segment, which contributed ca. 80% of the revenue increase, and as such the most significant segment generates almost a third of Scanfil revenue. Although HASEC added revenue meaningfully, more than half of the Industrial segment’s growth was organic.

We see Scanfil able to routinely post 7% EBIT margins

Scanfil says the integration of HASEC is proceeding according to plan. Revenues attributable to HASEC will be mostly reported under the Industrial and Medtec segments. Scanfil says the strong 7.9% operating margin was partly due to favorable product mix, and so we wouldn’t extrapolate this profitability level too far. However, Scanfil posted an above 7% operating margin also in Q2 with what the company says was a normal product mix. It’s early to assess prospects for next year, but in the light of such performance Scanfil’s 7% operating margin target for ’20 might start to look a tad conservative.

We raise our TP due to continued good performance

We’ve made upward revisions to our EBIT estimates, now expecting Scanfil to reach 7.0% margin already in ’19 (we previously expected 6.6%). We base our TP on Scanfil’s historical multiples, which have valued the company at some 7x EV/EBITDA and 9x EV/EBIT, and thus our updated TP stands at EUR 5.00 (4.75). Our rating remains BUY. We also note Scanfil’s peer group multiples have gained sharply during the last couple of months.

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Detection Technology - Growth story unabated

28.10.2019 - 09.00 | Company update

Detection Technology delivered a healthy Q3 report, which was broadly in line with expectations. We remain positive to the investment case and have slightly adjusted upwards our estimates. Our rating remains BUY with revised target price of 24.0 euros (prev. 23.5).

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Healthy Q3 with strong growth in SBU and softness in MBU as expected

DT’s Q3 figures came in close to expectations. Net sales amounted to EUR 26.9m (+9.5% y/y) vs. EUR 27.9m/27.6m Evli/consensus estimates. Q3 EBIT was EUR 5.1m (19.1% margin) vs. EUR 4.9m/5.2m Evli/cons. SBU sales grew 42.3% y/y to EUR 18.6m (EUR 17.9m Evli) due to strong demand especially in airport applications. MBU sales decreased by -27.6% y/y to EUR 8.4m (EUR 10m Evli) due to softening of the medical CT market and the ramp-down of one key MBU customer’s product. R&D costs amounted to EUR 2.6m or 9.7% of net sales.

Small estimate changes - growth drivers remain strong

Post Q3, we have made only minor upward adjustments to our estimates. Demand for new standard CT systems for airports has accelerated, starting with Europe and the US as previously noted. Chinese authorities are also commencing their standardization of airport CT equipment, which will support security outlook even further, likely starting 2021 onwards. The slowdown in medical market remains a question which management does not have a clear answer on, but most likely this is only temporary. Overall, DT’s growth drivers remain strong, especially in China where Beijing’s “Made in China 2025” initiative, has led to double digit growth rates for local Chinese OEM’s that are DT’s clients. Further support for DT’s future sales growth is provided by DT’s new product launches such as Aurora, a lower-end and price competitive product family for SBU, and X-Panel, a CMOS flat panel detector product family for static imaging (e.g. dental).

The strategy update in Q2 report affirmed that DT is committed to continue growth - no change to medium-term financial targets

In conjunction with its Q2 result, DT announced its updated strategy until 2025. The company's new strategic target is to be the growth leader in digital x-ray imaging detector solutions and a significant player in other technologies and applications where the company sees good business opportunities. The company estimates that the market for digital x-ray imaging detector solutions will be around EUR 3 billion in 2025. DT’s previous strategy until 2020 was based on being the leader in computed tomography and line-scan x-ray detectors and solutions. The total market, as per the company's previous strategy, is estimated to be around EUR 700 million in 2020. Given DT’s current estimated 2019E sales of above 100 MEUR, it’s fair to say that DT is a leader in the scope of the previous strategy. The new 2025 strategy expands the addressable market to an estimated EUR 3 billion in 2025, which will provide plenty of growth opportunity for DT going ahead. DT’s medium-term financial targets remain unchanged; sales growth at least 15% per annum and operating margin at or above 15% in the medium term.

Valuation remains attractive, we maintain BUY recommendation

On our estimates, DT is trading at ~20% discount on EV/EBIT and P/E multiples for ’19-20E, which we see as unjustified. Despite the short visibility, we see investment case attractive due to strong market drivers, especially in China, as well as DT’s compelling strategy and execution capabilities, which should enable DT to grow faster than the market and maintain above target level margins. Due to its proximity to the fastest growing market China and current valuation, DT could be also become an acquisition target. Our target price translates into an EV/EBIT multiple of 16.8x and 13.4x on our ‘19E and ‘20E estimates, some 6-20% under our peer group median, i.e. still leaving upside potential should investment case materialize as expected. Our rating remains BUY with revised target price of 24.0 euros (prev. 23.5).

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Detection Technology - Q3 result broadly in line

25.10.2019 - 09.45 | Earnings Flash

DT’s Q3 net sales at EUR 26.9m (+9.5% y/y) vs. EUR 27.9m/27.6m Evli/consensus estimates. SBU sales grew +42.3% to EUR 18.6m (EUR 17.9m our expectation) and MBU sales declined -27.6% to EUR 8.4m (EUR 10.0m our expectation). DT’s Q3 EBIT came in at EUR 5.1m vs. our estimates of EUR 4.9m (EUR 5.2m cons).

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  • Group level results: Q3 net sales amounted to EUR 26.9m (+9.5% y/y) vs. EUR 27.9m/27.6m Evli/consensus estimates. Q3 EBIT was EUR 5.1m (19.1% margin) vs. EUR 4.9m/5.2m Evli/cons. R&D costs amounted to EUR 2.6m or 9.7% of net sales.
  • Medical Business Unit (MBU) delivered net sales of EUR 8.4m which was below our estimate of EUR 10.0m. Net sales of MBU decreased by -27.6% y/y due to softening of the medical CT market and the ramp-down of one key MBU customer’s product.
  • Security and Industrial Business Unit (SBU) had net sales of EUR 18.6m vs. EUR 17.9m Evli estimate. SBU sales grew 42.3% y/y due to strong demand especially in airport applications.
  • Outlook update: DT expects growth in net sales, but growth to slow down in Q4 compared to the previous year. Previous guidance was for Q3.
  • Medium-term business outlook is unchanged: to increase sales by at least 15% p.a. and to achieve an EBIT margin at or above 15% in the medium term.

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Vaisala - Strong performance continues

25.10.2019 - 09.00 | Company update

Vaisala delivered a strong Q3 on all fronts but surprisingly kept their guidance intact despite strong YTD performance and good momentum in both W&E and IM. We’ve updated our estimates for the coming years due to better overall growth profile and increasing profitability driven by IM’s continuing good performance. On the back of our raised estimates, we raise our target price to 24.5 euros (prev. 21) and maintain our HOLD recommendation.

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Strong quarter on all fronts, with contribution from W&E

On the back of a good Q2 report, Vaisala delivered an even better Q3, which clearly beat expectations. Orders received increased +37% y/y (+20% organic) to 105.1m (vs. 76.8m Q3’18), with orders received as well as sales growth coming from both business areas and all geographies. Order intake for W&E was +45% (+27% organic), with mostly mid-sized orders, a positive signal. Q3 net sales grew +25% to 105.2m (vs. 100.4m Evli / 99.7m cons.). With the help of strong sales growth (W&E +27%, IM +22%), EBIT was 16.3m (vs. 11m Evli/13m cons), an 15.5% EBIT margin. IM posted good figures, with +22.4% growth (9% organic), an all-time high quarter, and solid 23.6% EBIT margin (24.7% adj. margin). Biggest positive contribution was W&E with +27% (+14% organic) sales growth, and EBIT margin of 13.5% (16% adj. margin).

Outlook unchanged despite strong performance so far

Despite the beat and good figures YTD, Vaisala repeated its FY’19 guidance: sales between 380–400m, EBIT between 25–35m including 10–12m PPA amortization and one-offs. Our pre-Q3 estimates were already in the upper end of the guidance, and now with the result beat we have raised our FY’19E estimates slightly above the guidance. We also increase by ~2% our estimates for 2020E-21E due to better growth profile in both business areas. With the acquired businesses integrated into Vaisala’s sales channel and continued good organic momentum in both W&E and IM, we see targeted 5% sales growth clearly achievable. We estimate that IM share of Vaisala’s EBIT in ‘19E and ‘20E will be around 65-67% (vs. 56-57% in ’17-’18), resulting in ~13-17% EBIT growth and EBIT margins of 10-11% (12-13% adj. for PPA).

Valuation becoming stretched

Vaisala’s share har rallied +70% YTD and +30% since Q2 the report, being now at an all-time high. On our raised estimates, Vaisala is trading at adj. EV/EBIT multiples of 20x and 18.5x for ‘19E and ‘20E, a 20-26% premium to our peer group despite exhibiting a lower growth and profitability profile than our peer group. However, a high valuation and premium are in our view justified due to the stable outlook for W&E and especially IM’s highly profitable growth with possibility of further add-on acquisitions. On the back of our raised estimates, we raise our target price to 24.5 euros (prev. 21) and maintain our HOLD recommendation.

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Consti - Profitability back at healthier levels

25.10.2019 - 08.45 | Earnings Flash

Consti's net sales in Q3 amounted to EUR 81.8m, slightly above our and consensus estimates (Evli/cons. EUR 79.5m). EBIT amounted to EUR 2.1m, in line with our estimates and above consensus (Evli/cons. EUR 2.2m/1.6m). The negative impact of certain projects on profitability was clearly smaller than at the beginning of the year, contributing to the clear improvement in profitability.

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  • Net sales in Q3 amounted EUR 81.8m (EUR 78.9m in Q3/18), slightly above our estimates (Evli EUR 79.5m). Growth in Q3 amounted to 3.7 % y/y. Net sales development was still supported by sustained high volumes of large comprehensive renovation projects in Q3.
  • Operating profit in Q3 amounted to EUR 2.1m (EUR 0.1m in Q3/18), in line with our estimates (Evli EUR 2.2m), at a margin of 2.6 %. The profitability was still affected by old projects of the already discontinued housing repair unit, but the impact was clearly smaller than at the beginning of the year. All business areas were profitable in the third quarter
  • The order backlog in Q3 was EUR 206.4m (EUR 270.0m in Q3/18), down by 23.6 %. The order intake amounted to EUR 37.0m, down 5.7% y/y, reflecting the company’s more disciplined bidding procedures.
  • Guidance reiterated: The Company estimates that its operating result for 2019 will improve compared to 2018.

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Scanfil - Strong operating margin for Q3

25.10.2019 - 08.45 | Earnings Flash

Scanfil’s Q3 revenue, at EUR 152m, missed our EUR 163m estimate by 7%, however the company still managed to beat our EUR 11.4m operating profit expectation by posting a figure of EUR 12.1m.

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  • The EUR 152.3m in Q3 revenue represents 16% y/y increase. The 7% q/q growth nevertheless didn’t meet our estimate.
  • Operating profit came in strong, the EUR 12.1m figure translating to an operating margin of 7.9% (vs 6.7% margin a year ago). Our expectation was for a 7.0% margin.
  • Scanfil says roughly half of the EUR 21m y/y increase in revenue was due to organic growth, the remainder being attributable to the HASEC acquisition closed at the end of Q2.
  • Industrial and Medtec segments performed well, and the strong operating profit was partly attributable to favorable product mix but also thanks to high utilization rate.
  • Scanfil expects the fourth quarter of 2019 to be the best in terms of sales, sees good activity also for the first quarter of next year.
  • Scanfil updates its FY ’19 guidance. The new guidance is EUR 570-590m in revenue and EUR 39-41m in operating profit (previously EUR 580-610m and EUR 39-42m).

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CapMan - Downgrade to HOLD

25.10.2019 - 08.30 | Preview

CapMan will report Q3 results on October 31st. With our expectation of only a limited impact of carried interest and success fees on the quarter, for group results remaining on par with H1/19 levels investment returns will need to be at a good level. In general, the news flow during Q3 implies little out of the ordinary and as such our interest will mainly be on the development of recently launched products and fundraising projects. We retain our target price of EUR 1.95 but downgrade to HOLD (BUY) following a share price increase since our previous update.

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Estimates revisions ahead of Q3

We expect a Q3 revenue of 9.9m (prev. 11.5m) and operating profit of EUR 5.3m (prev. EUR 7.2m). We have lowered our estimates mainly to reflect lower expectations for carried interest from newer funds, now mainly from Access Capital funds, and lower our management fee estimates given no new fund closings. The first closing of the Buyout XI-fund in 6/2019 will however support management fees and we expect to see continued growth. Investment returns pose the biggest uncertainty risk to our estimates and would need to be at a good level for group results remaining on par with H1/19 levels.

Development of newer products of interest

The news flow during Q3 in our view in general does not imply anything out of the ordinary during the quarter. We will be looking for more information regarding on-going fundraising projects and newly launched products as well as any potential remarks on near-term carried interest outlook from the interim report.

HOLD (BUY) with a target price of EUR 1.95

We have made minor downward revisions to our estimates ahead of Q3 and retain our target price of EUR 1.95. With the share price having enjoyed clear increases since our previous update we downgrade to HOLD (BUY).

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Verkkokauppa.com - Profitability improved in Q3

25.10.2019 - 08.25 | Earnings Flash

Verkkokauppa.com’s Q3’19 revenue grew by 3% and was EUR 120.6m vs. Evli EUR 126.7m and consensus of EUR 125.8m. Gross profit was EUR 18.9m (15.7% margin) vs. EUR 18.6m (14.7% margin) Evli view. EBIT was EUR 4.3m vs. EUR 3.7m/3.0m Evli/cons. The company updated its 2019E guidance and expects revenue of EUR 500-525m and EBIT of EUR 11-15m.

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  • Q3 revenue was EUR 120.6m vs. EUR 126.7m Evli view and EUR 125.8m consensus. Sales grew by 3% while market growth was 2.5% (GfK estimate). Revenue growth in Q3 was boosted by successful season sales, campaigns and increased marketing.
  • Q3 gross profit was EUR 18.9m (15.7% margin) vs. EUR 18.6m (14.7% margin) Evli view. The improvement was due to a positive sales mix and better terms and conditions from suppliers.
  • Q3 EBIT was EUR 4.3m (3.6% margin) vs. EUR 3.7m (2.9% margin) Evli view and EUR 3.0m (2.4% margin) consensus. EBIT improvement was mainly due to higher gross margin.
  • Q3 eps was EUR 0.07 vs. EUR 0.06/0.05 Evli/cons.
  • 2019 guidance updated: The company expects 2019E revenue of EUR 500-525m and EBIT of EUR 11-15m.
  • The company also decided on a quarterly dividend of EUR 0.051 per share.

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Vaisala - Strong Q3 result, clear beat

24.10.2019 - 15.00 | Earnings Flash

Vaisala delivered a strong Q3 report, with a solid perfomance all around. Vaisala’s Q3 net sales grew 25% to 105.2 MEUR vs. 100.4 MEUR our expectation and 99.7 MEUR consensus. Q3 reported EBIT was 16.3 MEUR vs. our expectation of 11 MEUR (13 MEUR consensus). Business outlook is unchanged.

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  • Group level results: Q3 net sales grew 25% to 105.2 MEUR vs. 100.4 MEUR our expectation and 99.7 MEUR consensus. Q3 EBIT was 16.3 MEUR vs. our expectation of 11 MEUR (cons. 13 MEUR). EPS was 0.37 (0.23 Evli, 0.27 consensus).
  • Gross margin was 55.3% vs. 55.9% last year
  • Orders received was 105.1 MEUR vs. 76.8 MEUR last year. Orders received increased by 37% and growth without currency impact and acquisitions was 20%.
  • Weather & Environment (W&E) net sales grew 27% (14% excl. FX and M&A) to 69.1 MEUR vs. 66.0 MEUR our expectation. EBIT was 9.3 MEUR (5.0 MEUR Evli). Order intake growth 45% in Weather and Environment, 27% growth excl. FX and M&A.
  • Industrial Measurements (IM) net sales grew 22% (9% excl FX and M&A) to 36.1 MEUR vs. 34.5 MEUR our expectation. EBIT was 8.5 MEUR (6 MEUR Evli). Industrial Measurements order intake grew by 23%, 9% excl. FX and M&A.
  • Business outlook for 2019 unchanged: 2019 net sales to be in the range of EUR 380–400 million and operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract.

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Etteplan - Acquisitions boosting growth

24.10.2019 - 09.00 | Preview

Etteplan reports Q3 results on October 31st. The guidance revision in Q2 and steady development track should limit information value from financial figures of the seasonally slower quarter. Macro uncertainties, however, continue to pose a risk on demand. The acquisitions made during mid-2019 will bolster growth while opening some room for estimates deviations. Market outlook comments remain of key interest but will likely remain limited given the near-term uncertainties relating to the trade war and Brexit.

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Acquisitions to boost growth in seasonally slower quarter

Etteplan raised its guidance in Q2, largely due to acquisitions made in mid-2019, expecting revenue and EBIT for 2019 to grow significantly compared to 2018. With the revised guidance and the stable development that Etteplan has shown, results of the seasonally slower Q3 should not be particularly eventful, although the recent acquisitions may likely cause some estimates deviation due to lack of comparison figures. We expect revenue to amount to EUR 59.1m, with a growth of 12.5%. We expect over 10% growth in all service areas, with Engineering Solutions in particular boosted by the acquisitions. We expect an EBITA-margin of 9.3%.

Market outlook comments remain of interest

Our interest in the Q3 results will remain focused on remarks regarding market outlook and any possible comments on the outlook for 2020, as we are rather confident in the 2019 guidance being reached. Given the near-term nature of key uncertainties (Brexit and U.S-China trade war) forward-looking comments will likely still be limited. Some small positive signs have been seen post-Q3 but without agreements the uncertainty will likely continue to have an effect on investment decisions.

HOLD with a target price of EUR 9.6

We have not made changes to our estimates ahead of Q3. We retain our HOLD-rating and target price of EUR 9.6 intact.

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SSH - High expectations for Q4

24.10.2019 - 09.00 | Company update

SSH’s Q3 result missed our expectations and the company now needs a stellar Q4 in order to reach its guidance. SSH is progressing in the right direction, but the pace is slow due to limited growth investment capacity. We maintain our estimates and SELL recommendation with target price of 1.10 euros.

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Result miss puts pressure on nailing Q4 to reach guidance

The Q3 result missed our expectations with sales being 3.6m vs our 5.0m estimate. SSH’s prudent cost control led to lower opex than we had anticipated. Despite this, EBIT missed our expectations due to lower sales, with Q3 EBIT being -0.2m vs. 0.7m our estimate. Software fees were 1.3m (2.4m Evli), professional services were 0.1m (0.3m Evli), and recurring revenue was 2.3m (2.3m Evli). In order to reach FY’19 guidance, SSH needs some 7m sales in Q4, which would be an all-time best quarterly result. According to management, sales pipeline for Q4 is strong and they seem confident that the necessary key deals will be closed in Q4.

Secures €2M EU Horizon 2020 funding for PrivX program

SSH successfully attained a €2m SME grant from the EU for development and marketing of PrivX over the next 24 months. Based on our discussion with management, we note that PrivX is still in a development phase and the new funding will be instrumental to accelerating PrivX’s roadmap, with most of the funding going towards R&D. The funding supports our estimates for the coming years, but we do not make any estimate changes at this point. Management sees critical applications even in sensitive fields, such as banks and financial institutions which are important clients to SSH, eventually transitioning to cloud or private cloud environments, but the transition will be over time and gradual. Therefore, PrivX is adapted for on-premise, with full SaaS version being part of the roadmap.

Maintain SELL recommendation with target price of €1.10

Post Q3 result, we have not made any changes to our estimates. Regardless of the profit warning risk, the underlying question in the investment case is still regarding growth. We note that, SSH is making progress, but the speed of the transition is slow due to limited growth investment capacity. On our ’19-20E estimates, SSH is trading at EV/Sales of 3.1x and 2.7x, which is below the sector and could prompt SSH to become an acquisition target of larger players wanting to enter the space or a consolidation play. However, as a standalone business, we’d like to see stronger growth coming through in the numbers to justify higher valuation. Our target price implies an EV/Sales multiple of 2.2x on our ‘20E estimate, broadly in line with Nordic software peers.We maintain our SELL recommendation and target price of 1.10 euros.

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SSH - Q3 result misses our expectations, guidance unchanged

23.10.2019 - 09.20 | Earnings Flash

SSH Q3 result missed our expectations due to lower than expected software fees. As software fees fluctuate between quarters, one should not read to much of this. CEO sees reaching guidance still possible and outlook for 2019 is unchanged; SSH expects double digit percentage growth from software business (software fees, professional services, and recurring revenue) at comparable exchange rates.

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  • Q3 net sales were EUR 3.6 million (vs. 5.0m our expectation)
  • Software fees were EUR 1.3 million (2.4m Evli), Professional services were EUR 0.1 million (0.3m Evli), and Recurring revenue was EUR 2.3 million (2.3m Evli)
  • Q3 operating profit was EUR -0.2 million (vs. 0.7m our expectation)
  • EPS was -0.01 (vs. 0.01 our estimate)
  • Liquid assets were EUR 11.6m (11.2m Q2/19)
  • Business outlook for 2019 unchanged: SSH expects double digit percentage growth from software business (software fees, professional services, and recurring revenue) at comparable exchange rates
  • CEO comment: “Entering the fourth quarter, our sales pipeline is strong, and we maintain our guidance despite the slightly slower than planned growth in the first nine months of the year. Achieving our full year target, however, requires some key customer wins during Q4.”

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Finnair - Market outlook remains volatile

23.10.2019 - 09.15 | Company update

Finnair’s Q3 earnings fell short of expectations. We have cut our estimates for 2019E-2021E after Q3 earnings. Considering the weakening profitability trend and market outlook uncertainties we do not see valuation being particularly attractive. We downgrade to “HOLD” with TP of EUR 6.5 (prev. EUR 7.4).

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Profitability weighed down by fuel costs and currencies

Finnair’s Q3 revenue increased by 7.9% and was EUR 870.3m vs. our expectation of EUR 889.2m and consensus of EUR 871.4m. The revenue was boosted by increased passenger numbers (11.9% y/y). Especially the European traffic development was good as well as traffic in North America due to the new Los Angeles route which was opened last March. Finnair’s traffic from Asia to Europe remained at good level, whereas demand from Europe to Asia was softer. Capacity (ASK) increased by 9.5% y/y while RASK decreased by 1.5% y/y. Finnair’s Q3 profitability fell short of expectations as comparable EBIT decreased by ~14% from last year and was EUR 100.7m vs. our expectation of EUR 135.4m and consensus of EUR 121.9m. Profitability was weighed down by fuel costs (incl. hedging), a decline in the dollar-based discount rate on maintenance reserves and negative exchange rate effects. Also, softening demand in cargo impacted Finnair’s Q3 earnings.

Global uncertainties increasing risks

We expect the market outlook to remain volatile in the latter half of the year as the global economies of Finnair’s key markets are slowing down and the uncertainties surrounding global trade, such as Brexit and US-China trade talks continue which could have an impact on air travel and cargo demand. We have already seen some softening in cargo demand especially in Asia and we expect the market environment to remain challenging. Finnair experienced some lower air travel demand in Hong Kong in Q3 and we expect this to continue as long as the disorder continue. We expect Finnair to gain some competitive advantage in short term, especially in the European routes as Norwegian has cut down its capacity growth expectations for 2019 (Norwegian expects capacity growth of 0-5% in 2019). Considering the tight competition, we expect the advantages to last only for a short time.

Guidance for 2019E unchanged

Finnair reiterated its guidance and expects capacity growth of 11%-12% which is mainly due to the new route to Beijing’s Daxing International Airport which will be opened in early November. The company expects revenue to grow at a slightly slower pace than capacity in 2019E. Finnair expects adj. EBIT margin to be between 4.5-6.0% in 2019, assuming no material changes in fuel prices and exchange rates. We expect capacity to grow by 11% in 2019E while we expect RPK growth of 10% and total revenue growth of 8%. Our expectation for 2019E adj. EBIT margin is at the lower end of the guidance at 4.6%.

Estimates cut – downgrade to “HOLD”

After Q3’19 earnings we have cut our 2019E-2021E estimates. We have lowered our 2019E-2021E revenue expectations by ~1% and cut our EBIT estimate for 2019E by 23% and for 2020E-2021E by 12-17%. We now expect 2019E revenue of EUR 3074m (prev. EUR 3104m) while our 2019E adj. EBIT expectation is at EUR 140m (prev. EUR 181m) resulting in EBIT margin of 4.6%. Considering the weakening profitability trend and market outlook uncertainties we do not see valuation being particularly attractive. With our new TP of EUR 6.5 (prev. EUR 7.4) Finnair trades on our estimates at its historical average of NTM EV/EBITDA of 3.5x. After estimates cut we downgrade our rating to “HOLD” (prev. “BUY”).

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Suominen - Profit ascent more elusive

23.10.2019 - 09.15 | Company update

Suominen’s Q3 EBIT, at EUR 1.1m, missed our EUR 3.8m estimate by a wide mark. Suominen achieved rather stable volumes compared to our expectations, however this was achieved at the cost of margins. While the soft results were partly due to inventory reductions and reorganization costs, we turn slightly more cautious with respect to margin estimates. Our new TP is EUR 2.25 (2.50), reiterate HOLD.

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Suominen sees nonwovens markets largely stable

Suominen posted EUR 103.4m in Q3 revenue (-1% y/y), close to our EUR 104.4m estimate. The figure was helped to the tune of 3% by the strengthening of USD relative to EUR. Volume losses were moderate, the pricing of Suominen’s nonwovens remaining flat. Suominen’s profitability improvement proved modest compared to our expectations as declining raw materials prices and significant inventory reductions during Q3 led to flat pricing. Suominen recorded a 7.4% gross margin, whereas we expected 9.9%. Suominen says the inventory reductions had a EUR 0.5m negative effect on profitability i.e. the gross margin would have amounted to roughly 8% without such reductions. The company says it is now close to the targeted inventory level. Operating profit was further strained by EUR 0.2m items related to the reorganization of business areas, as Suominen now reports business for the areas Americas and Europe. FX had a negative EUR 0.6m effect through raw materials purchases.

We have adjusted our margin estimates downwards

We remain cautious following the report as margin improvement is proving harder than we expected. In order to reach a 5% operating margin, a level where corresponding returns on capital could be deemed adequate, Suominen needs to achieve both improving (or at the minimum flat) volumes and gross margin north of 10%.

Current valuation reflects modest expectations

While Q3 volumes were better than we expected, we see the softness in margins as another source of uncertainty, and thus the steepness of Suominen’s ongoing profit improvement remains clouded. We retain our HOLD rating, our new TP being EUR 2.25 (2.50).

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Suominen - Inventory reductions strained profit

22.10.2019 - 13.45 | Earnings Flash

Suominen’s Q3 revenue came close to our expectations. However, gross margin fell clearly short of our estimate and consequently operating profit improved only rather modestly in absolute terms relative to the weak comparison period a year ago. Suominen says cash flow was strong during the quarter due to inventory reductions, however this had a negative effect on the operating result.

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  • Q3 revenue stood at EUR 103.4m vs our EUR 104.4m estimate. The strengthening of USD compared to EUR contributed a positive EUR 2.7m, or 2.6%.
  • Gross profit amounted to EUR 7.7m vs our estimate of EUR 10.3m. The 7.4% gross margin was clearly below our 9.9% expectation.
  • Q3 EBIT was EUR 1.1m, whereas we expected EUR 3.8m. In other words, Suominen posted a 1.1% operating margin, compared to our 3.6% expectation.
  • Suominen cites significant inventory reductions during the quarter having had a positive impact on cash flow but a negative impact on the result.
  • Suominen reiterates its 2019 outlook, expecting flat sales and improving operating profit compared to 2018.

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Finnair - Profitability clearly below estimates

22.10.2019 - 09.25 | Earnings Flash

Finnair’s Q3’19 adj. EBIT was EUR 100.7m vs. our expectation of EUR 135.4m and consensus of EUR 121.9m. Revenue was EUR 870.3 vs. our expectation of EUR 889.2 and consensus of EUR 871.4m. Finnair reiterated its guidance. The company expects capacity growth of 11-12% and revenue to grow at a somewhat slower pace than capacity in 2019. Finnair expects its EBIT% to be between 4.5%-6.0% in 2019.

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  • Q3 revenue was EUR 870m vs. EUR 889m/871m Evli/cons.
  • ASK increased by 9.5% in Q3. RASK decreased by 1.5% y/y.
  • Q3 adj. EBIT was EUR 101m vs. EUR 135m/122m Evli/cons. Profitability was negatively impacted by the year-on-year increase in jet fuel price paid (incl. hedging), a decline in the dollar-based discount rate on maintenance reserves and negative exchange rate effects.
  • Q3 comparable EBITDA was EUR 182m vs. EUR 213m our view.
  • Absolute costs in Q3: Fuel costs were EUR 190m vs. EUR 187m our view. Staff costs were EUR 132m vs. EUR 131m our view. All other OPEX combined were EUR 461m vs. EUR 455m our view.
  • Unit costs: CASK was 6.10 eurocents vs. 5.97 eurocents our view

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Talenom - Upgrade to buy

22.10.2019 - 09.05 | Company update

Talenom continued to post solid growth and profitability figures in Q3, with revenue slightly below our optimistic estimates. Talenom gave a guidance for 2020, expecting net sales growth and relative profitability to be in line with 2019, rather similar to our expectations. With the added visibility given by the guidance we set our sights towards 2020, raising our target price to EUR 37.5 (36.0) and upgrade to BUY (HOLD).

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Gave guidance for 2020

Talenom’s net sales in Q3 amounted to EUR 13.5m (Evli 14.2m) and operating profit to EUR 2.4m (Evli 2.5m). A decision to focus staffing services on supporting the core accounting business saw staffing services volumes decline but its profitability improving, although the impact on group figures is minor. Discontinuation of annual payroll reports due to the change in income register will smooth some seasonal variation, with H1 figures expected to gain at the expense of H2 figures. Talenom further gave a guidance for 2020, expecting net sales growth and relative profitability to be in line with 2019.

2019 estimates slightly lower, 2020 largely unchanged

We have lowered our 2019 estimate for net sales to 58.1m (prev. 59.9m) to account for the changes in billing of payroll reports and also seeing some overoptimism in our year end estimates. We expect Talenom to still be able to slightly improve relative profitability in 2020 driven by development of the new bookkeeping production line and scalability. Our 2020-2021 estimates overall remain largely unchanged, as some of the expected net sales growth was shifted to 2020. We expect a sales growth of 19% and EBIT-% of 20.7% in 2020.

Upgrade to BUY (HOLD) with a TP of EUR 37.5 (36.0)

With the added visibility given by the guidance for 2020, we are prepared to set our sights towards 2020. With the narrative of Talenom’s profitable growth story largely unchanged we raise our target price to EUR 37.5, valuing Talenom at a target 2020 P/E of ~24x. With our target price increase and share price declines since our last update we upgrade our rating to BUY.

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Detection Technology - Expecting growth to continue despite MBU headwinds

22.10.2019 - 09.00 | Preview

Detection Technology will report Q3 earnings this Friday, October 25th. We’ll be looking for commentary regarding the market outlook and possible effects of trade politics, with special focus on the extent of the slowdown in medical imaging market growth and the effects of the ramp-down of one of DT’s key medical customer’s product in H2. Despite some short-term headwinds, we remain positive to the investment case. Our BUY rating and target price of EUR 23.5 remain intact ahead of Q3.

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Expecting strong growth in SBU, MBU softness in turn

While the security imaging market is experiencing strong demand due to increase in Chinese investments and increasing CT investments related to new EU and US airport standards, DT noted in its Q2 report that it expects a temporary slowdown in medical imaging market growth. DT has guided for Q3 sales to grow above 10%, with SBU net sales growing and MBU sales decreasing. For Q3, we estimate SBU growing 37% and MBU declining 13% y/y, with total Q3 net sales growing 13.6% y/y to 27.9 MEUR (27.6 MEUR cons). Our Q3 EBIT estimate is 4.9 MEUR (5.2 MEUR cons) compared to 5.1 MEUR in Q3’18.

Flat EBIT this year, but growth story continues

For full year 2019E, we expect net sales to grow 14% to 107 MEUR driven by SBU’s return to growth of 28% after a weaker 2018. We expect ‘19E MBU net sales growth to decline 7.6% due to the temporary slowdown in customer demand and the ramp-down of key customer’s product in H2. We expect ‘19E EBIT to be at last year’s level due to increase in R&D spending, increasing share of SBU sales affecting the mix, as well as increased pricing competition in both segments.

BUY rating and TP of 23.5 euros maintained ahead of Q3

Despite the short visibility and trade politics being unpredictable, we see investment case intact due to strong market drivers, especially in China, as well as DT’s compelling strategy and execution capabilities. Our estimates, as well as our BUY rating and target price of 23.5 euros remain unchanged ahead of the Q3 report.

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Tokmanni - Expecting a good quarter

22.10.2019 - 08.40 | Preview

Tokmanni will report its Q3 earnings on next week’s Wednesday, October 30th. The company had a strong H1 and we expect the good momentum to continue throughout the year. With the 11.2% share price increase, our rating is now “HOLD” (prev. “BUY”) while our target price remains unchanged at EUR 10.2.

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Market pick up providing tail wind

Tokmanni’s H1’19 was strong as the company was able to increase its revenue (9.4% y/y) and keep a good EBIT level, particularly in Q2. We expect the good momentum to continue throughout the year as we enter the seasonally stronger H2. According to PTY, revenue of department store and hypermarket chains increased by 5.3% and 7.4% in July-August (3% y/y in H1’19) which indicates good for Tokmanni in Q3’19. We expect Q3’19E revenue of EUR 231.3m (9.8% y/y, LFL growth 3.0%) vs. EUR 229.6m/cons and EBIT of EUR 19.4m vs. 18.7m/cons. In Q3, Tokmanni strengthened its existing private label assortment with a new label Pisara (beauty and cleansing products). The current share of Tokmanni’s own brands as of sales is ~30% and it plays an important part in Tokmanni’s earnings improvement.

Efficiency improvements ongoing

Tokmanni targets to increase its store network to cover more than 200 stores. The company currently has 189 stores and two new stores will be opened during Q4’19. Tokmanni’s long-term target is to achieve comparable EBIT margin of ~9% by improving gross margin and reducing the relative share of current opex. Some results of the efficiency improvement actions were already shown during H1’19 and we expect further gross margin improvements in H2’19E (35.5% H2’19E vs. 34.3% H2’18). We also expect the profitability improvements of the company’s supply chain to be on the right track, although most of the benefits will be fully seen in midterm.

“HOLD” (prev. “BUY”) with TP of EUR 10.2

We have kept our estimates intact ahead of Q3 earnings and expect 2019E sales of EUR 945.9m (8.7% y/y) and EBIT of EUR 67.6m resulting in EBIT margin of 7.1%. With the share price increase, our rating is now “HOLD” (prev. “BUY”) while our target price remains unchanged at EUR 10.2.

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Talenom - Slightly below expectations

21.10.2019 - 13.55 | Earnings Flash

Talenom’s first quarter results were slightly below our expectations. Net sales amounted to EUR 13.5m (EUR 14.2m Evli) while the operating profit amounted to EUR 2.4m (EUR 2.5m Evli). Talenom reiterated its guidance for 2019 and gave a financial outlook for 2020, expecting growth and relative profitability to be in line with 2019.

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  • Talenom’s net sales in Q3 amounted to EUR 13.5m (EUR 11.1m in Q3/18), slightly below our estimates (Evli EUR 14.2m). Revenue growth in Q3 was 21.1% y/y.
  • The operating profit in Q3 was EUR 2.4m (EUR 1.9m in Q3/18), in line with our estimates (Evli EUR 2.5m), at a margin of 17.4%.
  • Talenom’s guidance intact: the net sales growth rate is expected to be greater than in 2018 and the operating profit margin to improve compared to 2018
  • Financial outlook 2020: Growth and profitability expected to be in line with 2019. Our estimates: 2020 revenue growth and EBIT-% 18.0% and 20.7% respectively (2019E: 22.5% and 19.6%)
  • Net investments during 1-9/2019 EUR 12.0m compared with 7.1m during 1-9/2018.

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Consti - Careful optimism amid continued uncertainty

21.10.2019 - 09.15 | Preview

Consti will report Q3 earnings on October 25th. We expect to see improved profitability and a better indication of underlying profitability, although risks related to the earnings improvements still remain at elevated levels given the project impact on Q2/19 profitability. The order backlog development is also of key interest. The negative impact of stricter bidding procedures on the order backlog poses a considerable risk of sales declines in 2020, in our view, without improvements in order intake during H2/19.

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Expect profitability improvement but risks still present

During the first half of 2019 Consti’s profitability was materially affected by performance obligations relating to an individual building purpose modification project, which at the end of Q2/19 was essentially completed. Although the project still poses a risk to our estimated profitability improvement in Q3 (Evli EUR 2.2m, Q3/18 EUR -1.4m), of more long-term importance would be the absence of new, large profitability burdening projects in Q3, which is supported by the company’s more selective bidding procedures for larger projects.

Order backlog development of interest

A downside of the stricter bidding procedures has been a weaker development of the order backlog, which at the end of Q2/19 was down 21% y/y, at EUR 227m. Sales growth in 2019 remains supported by a more rapid order backlog conversion while a continued weaker order intake during H2/19 would impose a risk of sales declines in 2020. We expect focus in the second half of 2019 to remain on continued development of the organizational structure and cost savings.

HOLD with a target price of EUR 5.4 (5.8)

Compared to peer multiples, on our estimates valuation is in no way particularly challenging, especially when looking at 2020. However, due to the profitability challenges and the St. George arbitration proceedings the near-term uncertainty continues to remain high and signs of stabilizing profitability in Q3 would be needed. We retain our HOLD-rating with a TP of EUR 5.4 (5.8).

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Verkkokauppa.com - Eyes on competitive outlook

18.10.2019 - 09.20 | Preview

Verkkokauppa.com will report its Q3 earnings on next week’s Friday. As before, our interest is on how the competition has developed over the last months and what impact this has had on margins. We have kept our estimates intact and retain our rating “HOLD” with TP of EUR 3.3 ahead of Q3.

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Profitability pressures expected to continue

Verkkokauppa.com was able to beat the market growth in H1’19 but the growth did not come for free as the company’s profitability development has been lagging behind. We expect the continuing growth investments (e.g. increased marketing expenses) to further hamper Verkkokauppa.com’s profitability in 2019E. Verkkokauppa.com has guided EBIT of EUR 11-17m in 2019E while our expectation is at the lower end of the guidance, at EUR 12.2m (EBIT margin of 2.3%). We expect the competition to remain fierce adding to pressure on profitability. Depending on Q3 earnings, guidance revision for 2019E EBIT might be needed.

H2 has considerable impact on total year-end sales

We expect the competition in the consumer electronics market has continued tight and price driven also in Q3’19. However, Verkkokauppa.com’s historical ability to grow faster than the market and the ongoing growth investments create positive outlook for the future sales development. H2 is normally stronger for Verkkokauppa.com as the holiday season and campaigns are likely to boost sales. Therefore, we expect H2 to have a considerable impact on Verkkokauppa.com’s total sales in 2019E. We expect H2’19E sales of EUR 295.6m (8.4% y/y). Verkkokauppa.com’s guidance for FY2019E total sales is EUR 500-550m while our FY2019E sales expectation is at EUR 519.3m (8.7% y/y).

“HOLD” with TP of EUR 3.3

We have kept our estimates intact ahead of Q3 earnings. We expect Q3’19E sales of EUR 126.7m and EBIT of EUR 3.7m resulting in EBIT margin of 2.9%. We keep our rating “HOLD” with TP of EUR 3.3 ahead of Q3.

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Finnair - Q3 traffic close to expectations

16.10.2019 - 09.20 | Preview

Finnair will report its Q3 result on next week’s Tuesday. The company’s traffic data in Q3 was slightly above our estimates but did not provide any major surprises. Q3 ASK growth was 10% while RPK growth was 12% (Finnair’s 2019E guidance for capacity growth is 11-12% while revenue is expected to be slightly below capacity growth). With the share price correction, our rating is now “BUY” (prev. HOLD) while our target price remains unchanged at EUR 7.4 ahead of Q3.

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No surprises with Q3 traffic data

Finnair’s Q3’19 ASK grew by 10% while we expected ASK growth of 9%. ASK increased especially in North America as a result of the new Los Angeles route which was opened in March 2019 and additional flights to San Francisco. ASK growth in Asia was mainly due to additional frequencies to Hong Kong and Osaka. Finnair’s RPK growth was 12% in July-September vs. our expectation of 10%. Revenue increased especially in the European and North American routes where RPK growth beat ASK growth. Passenger Load Factor increased in all the other market areas expect in Asia where PLF declined by 2.3%. Global uncertainty in world trade and the softening of demand and price pressures have lowered expectations for cargo especially in the Asian market. The Q3 traffic data did not provide any major surprises thus we have kept our estimates intact.

Ease in jet fuel prices during Q3

Jet fuel prices have eased during Q3’19. In Q3, the average spot price of jet fuel in USD declined by 4% from Q2. On a y/y basis, the average Q3 USD price was down by 13%. Similarly, the average spot price in EUR moved down by 3 % q/q and by 9% on a y/y basis.

“BUY” (prev. HOLD) with TP of EUR 7.4

We have kept our Q3’2019E estimates intact after Q3 traffic information. We expect Finnair’s Q3’19E revenue to be EUR 889m while we expect Q3’19E EBIT of EUR 135m resulting in EBIT margin of 15.2%. We expect Finnair’s 2019E total sales to be EUR 3104m (8.9% y/y) while we expect EBIT of EUR 181m. With the share price correction, our rating is now “BUY” (prev. “HOLD”) while our target price remains unchanged at EUR 7.4.

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Suominen - Focus on volumes

16.10.2019 - 09.20 | Preview

Suominen posts Q3 results next week, on Tue, Oct 22. Suominen’s gross margin improved to 9.3% in Q2, and as raw material prices further slipped during Q3 we now expect the company’s gross margin at 9.9% for the quarter. However, we remind Q2 volume losses proved larger than we expected, and thus we retain our cautious view ahead of the report. Our target price remains EUR 2.50, rating HOLD.

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Margin improvement story continues to solidify

The prices of key raw materials (i.e. viscose, polyester and pulp) have extended their soft streak during the recent months. European softwood pulp prices declined by more than 10% during Q3, therefore bringing the total price decline for the past year to about 25%. The price trends are roughly similar for viscose and polyester, whereas polypropylene prices have remained stable since spring. Assuming stable pricing for Suominen’s nonwovens, we have consequently made moderate upwards adjustments to our gross margin (and thus EBIT) estimates. We now expect Q3 gross margin at 9.9% (we previously expected 9.2%). This implies an EBIT of EUR 3.8m, or 3.6% operating margin (previously estimated at EUR 3.1m and 3.0%). As the pricing of raw materials registers with a lag of few months, we expect further improvement for Q4, which brings our new EBIT estimate for FY ’19 to EUR 14m (previously EUR 12m).

Q2 volume losses proved a strain on EBIT

While we are confident regarding additional improvement in gross margin, we note volume losses pose a risk for our EBIT estimates. Even though Suominen posted Q2 gross margin above our estimate (9.3% vs our 8.7% estimate), the 15% volume decline in Q2 led to EBIT falling short of our estimate by almost 20%. We expect volume losses to have amounted to 9% in Q3.

In our view valuation is neutral given the uncertainty

Suominen is currently achieving a turnaround in earnings, and trades ca. 20% below peer group multiples on our estimates for ’20 and ’21. Nevertheless, we see the uncertainty due to volume losses posing a risk for our earnings estimates. We therefore reiterate our EUR 2.50 TP and HOLD rating ahead of the report.

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Marimekko - Raises earnings outlook for FY19E

15.10.2019 - 09.15 | Company update

Marimekko updated its 2019E guidance yesterday. The company expects 2019E comparable operating profit to be higher than in the previous year, approximately of EUR 17m. The company reiterated its guidance for FY19E revenue; revenue is expected to be higher than in the previous year. Marimekko will report its Q3 result on November 6th. We retain our rating HOLD with TP of EUR 30.

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Updated guidance for 2019E

Marimekko raised its earnings estimates for FY19E and reiterated its FY19E revenue guidance. According to the updated outlook, Marimekko expects FY19E comparable operating profit to be higher than in the previous year, amounting to approximately EUR 17 million (previous guidance; comparable operating profit is expected to amount maximum of EUR 15 million). This is mainly due to stronger than estimated sales growth and improved sales outlook in Finland but also better than estimated trend in relative gross margin. Marimekko did not provide much information other than that, so we wait for more color in the Q3 report.

We expect increase in sales in H2’19

We expect Marimekko’s H2’19 net sales to be EUR 69.4 million (16.4% y/y) while we expect H2’19 adj. EBIT to be EUR 10.5 million (H2’18 adj. EBIT of EUR 7.9m), resulting in EBIT margin of 15.1% (H2’18 EBIT margin of 13.3%). We expect sales and profitability to increase especially in Finland and APAC due to stronger sales growth in Finland and higher license revenue from APAC. We also expect the holiday season in the last quarter to have a considerable impact on Marimekko’s total sales in 2019E.

We maintain “HOLD” with TP of EUR 30

We have updated our estimates after the updated guidance. We have increased our 2019E revenue expectation and expect 2019E sales to total EUR 125.6m (previous: EUR 123.4m). We expect 2019E adj. EBIT of EUR 16.8m (previous: EUR 14.7m) resulting in EBIT margin of 13.4% We maintain our rating “HOLD” with TP of EUR 30.

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Gofore - Guidance revision from weaker Q3

14.10.2019 - 09.15 | Company update

Gofore released its Q3 business review on October 11th and revised it guidance for FY2019 net sales, expected to be in between EUR 64-67m (prev. EUR 67-72m). Q3 was burdened by lower sales in July and August, with net sales growth of 16% y/y, and the EBITA-margin as a result lower than in the comparison period (Q3/19: 9.2%, Q3/18: 13.3%). The near-term demand outlook has improved while uncertainty going forward still remains at elevated levels. We retain our HOLD-rating and target price of EUR 8.0.

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Weaker Q3 sales and lowered sales guidance

Gofore’s group net sales in Q3 amounted to EUR 13.3m, up 16 % y/y. Demand during July and August was affected by a delay in project deliveries, as some already signed projects did not pick-up as expected. The lower billing rate saw profitability fall from previous year levels, with a Q3/19 EBITA-margin of 9.2% (Q3/18: 13.3%). Gofore also noted that its UK business sales have decreased considerably during the year, possibly due to uncertainty related to Brexit, and the UK business being clearly loss-making. Gofore further revised its FY2019 net sales guidance to EUR 64-67m (prev. 67-72m) based on the weaker Q3 figures.

Demand recovery to aid end of year figures

We have revised our 2019 sales and EBITA-margin estimates to EUR 65.3m (prev. 67.8m) and 12.6% (prev. 13.6%) based on the Q3/19 figures. The revised guidance range indicates growth of some 18-40% during Q4/19, with the upper range corresponding to monthly levels seen during H1/19. The near-term demand outlook has improved compared with the earlier part of Q3/19, while the volatility in demand seen during 2019 keeps the uncertainty regarding the coming years development at higher levels.

HOLD with a target price of EUR 8.0

On our estimates valuation remains slightly above peers. Gofore continues to be among the top performers based on sales growth and profitability while the increased demand uncertainty remains a cautionary factor. With valuation in our view still quite fair, we retain our HOLD rating and target price of EUR 8.0.

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Aspo - Backed by ESL, lifted further by Telko

11.10.2019 - 09.30 | Company report

Aspo’s H1’19 results were subdued as ESL was hampered by a plethora of one-off problems, while Telko and Leipurin also posted weaker profits. We expect Aspo’s results will improve sharply from H2’19 onwards, particularly due to ESL as the dry bulk carrier’s recent investments start to contribute. We also expect gradual improvement for Telko and Leipurin as both segments are taking actions to address profitability. Our TP is now EUR 9.5 (9.0) due to higher peer multiples raising SOTP valuation; our rating remains BUY.

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We expect ESL to carry Aspo to materially higher results

We estimate ESL’s H2’19 EBIT to almost double compared to H1’19 as the malfunctioning cranes have been fixed, the market for Supramaxes has improved, and acute issues with Baltic Sea steel industry and ports have subsided. For FY ’19 we expect ESL to record EUR 16.6m in EBIT. We estimate the figure to further improve to EUR 23.6m in 2020 as synergies with AtoB@C fully materialize. In our view ESL will remain the cornerstone of Aspo as the segment contributes ca. 60% of the conglomerate’s value.

Telko and Leipurin have plenty of improvement potential

Telko’s operating margin weakened in H1’19 as the distributor carried high inventories and plastics and chemicals prices declined. Although market outlook remains soft we expect profitability to have bottomed out as the company is taking measures to boost efficiency. In our view Telko could prove a source of further upside for Aspo shareholders as there’s good potential for improved profitability. The situation for Leipurin is not unlike that for Telko; Leipurin is developing its operations and H2’19 results are bound to improve due to machinery deliveries. We expect Telko and Leipurin to post a combined EBIT at a level EUR 5.3m higher in 2020 compared to 2019.

Value is anchored to ESL, yet Telko could move the needle

Our updated TP is EUR 9.5 (9.0) as peer multiples have increased, boosting SOTP. Our estimates for next year and beyond do not fully capture the profitability potential of Telko and Leipurin, which could drive further upside beyond ESL. Our rating is BUY.

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SRV - Lowers profit guidance

11.10.2019 - 09.15 | Company update

SRV issued a profit warning on October 10th, estimating that its operative operating profit will be at a loss due to impairments relating to its investments in Russia and decreasing margins in certain projects. We had expected profitability to improve towards the end of 2019 with the completion of a significant number of developer-contracting housing units and the new guidance puts the operative operating profit well below our estimates (Evli EUR 14.7m).

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2019 operative operating profit to be negative

SRV downgraded its operative operating guidance for 2019, estimating that its operative operating profit will be at a loss due to impairments relating to its investments in Russia and decreasing margins in certain projects. Previous guidance put the operative operating profit between EUR 0-27m. SRV’s estimate for completed developer-contracting housing units in 2019 remains unchanged, at 809 units. We had estimated a 2019 operative operating profit of EUR 14.7m, based on the expected large number of completions in Q4/2019.

We expect a 2019 EUR -6.3m operative operating profit

Based on the limited information given we have adjusted our H2/19 operative operating profit estimate for the Construction segment by EUR -11m to account for the weaker margins and costs related to the delay of REDI Majakka. We have further included a EUR -10m impairment charge to Q4/19 relating to the Russian investments, which on a speculative note may relate to the on-going Pearl Plaza negotiations. Our revised operative operating profit for 2019 is at EUR -6.3m. We do not expect a dividend in 2019/2020, with our other estimates unchanged until further clarity from the Q3 results on October 31st.

HOLD with a target price of EUR 1.40 (1.80)

Following the vague guidance revision, uncertainty regarding our end of year estimates is significant, but 2019 will nonetheless be another weak year. We adjust our target price to EUR 1.40 (1.80) following the estimates revisions and retain our HOLD-rating.

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Raute - A record large order for next year

02.10.2019 - 09.30 | Company update

Raute received a big EUR 58m order to be delivered in 2020, alleviating some of the short-term demand concerns that have clouded the outlook recently. We raise our estimates from 2020 onwards but retain our HOLD rating for now as we wait for more signs of improvement in demand outlook. Our new target price is EUR 25.0 (23.5).

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New order more than twice the size of a usual large order

Raute will deliver all machinery and equipment for a greenfield plywood mill to be built in the Kostroma region of Russia. The order, commissioned by Segezha Group, totals EUR 58m and is the largest single order in Raute’s history, a demonstration of Raute’s technological competitiveness and core competence in delivering entire production lines. This is not Raute’s first project delivery for the Russian forestry group. The new project will be delivered during 2020 and the 125,000m3 mill is scheduled to commence operations in the summer of 2021.

We raise our estimates as visibility has improved

Raute says the order will have no impact on 2019 outlook as the company continues to expect both revenue and EBIT to decrease compared to the record year 2018. The EUR 58m new order is very significant in size considering the project value matches Raute’s whole order intake for H1’19 (of which EUR 29m was attributable to project deliveries and the other EUR 29m to services). In other words, while the order is good news for Raute it also highlights the company’s inherent project volume volatility. Raute’s order book, which stood at EUR 72m at the end of Q2’19, covers an exceptionally long period of time as a significant share of deliveries is scheduled for 2020 (and some even for 2021). We adjust our estimates upwards from 2020 onwards. We now expect EUR 149m in ‘20e revenue (previously EUR 128m) and ‘20e EBIT of EUR 11m (previously EUR 9m).

New target price EUR 25.0 (23.5), HOLD rating maintained

Raute’s current EV/EBITDA and EV/EBIT multiples, approximately 6x and 8x respectively, place the company’s valuation on neutral ground in terms of historical averages. We raise our TP to EUR 25.0 (23.5) on the back of our updated estimates yet maintain HOLD rating for now as we wait for more signs of improvement in demand outlook.

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Next Games - Final leg of turnaround commencing

01.10.2019 - 00.00 | Company report

Next Games is through the initiated rights offering commencing the final leg of its turnaround project. Future growth initiatives remain of key importance given the declining revenue trend from live games. We expect growth to accelerate during 2020-2021 following new game launches and profitability to improve but remain at weaker levels.

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Rights offering to finance growth opportunities

Next Games has faced challenges following the launch of Our World, in which the company invested heavily during launch, having failed to meet expectations and seeing declines in the user base due to technical difficulties. As a result the company initiated a turnaround project in late 2018. Q2/2019 saw the company reach targeted cost savings levels and as such also improved profitability. Following changes to its operating model Next Games now has nine projects or prototypes under development in addition to Blade Runner Nexus in soft launch and the Stranger Things -game in pre-production. The company is now seeking to move to the final leg of its turnaround project by securing financing for growth initiatives through an EUR 8m rights offering.

Growth dependent on new launches in the coming years

Having seen a declining trend in gross bookings in its two live games, growth in the coming years is dependent on successful new games launches, with Next Games target to launch at least one new game per year. We expect sales growth to accelerate in 2020 with the expected launch of Blade Runner Nexus in late 2019 and the Stranger Things -game in 2020. The new game launches are expected to impact on profitability, and we expect the EBIT-margin to remain negative until 2021.

HOLD with a target price of EUR 1.0 (1.5)

We adjust our target price to EUR 1.0 (1.5) following the expected dilution from the rights offering, with our minor estimates revisions not having a significant impact. Valuation still quite justifiably emphasizes near-term uncertainties and we consider current valuation levels reasonable.

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Cibus Nordic - Still more yield left to bite

02.09.2019 - 09.30 | Company update

Cibus’ Q2 rental income of EUR 12.6m was a little soft (we expected EUR 12.8m) due to a change in tenancy, while EUR 0.3m in accruals also had a negative impact. However, the fundamentals remain as before, strategy is on track and there is further room for yield compression. We update our TP to SEK 135 (125); rating remains HOLD.

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Cibus is well ahead of its EUR 50m annual acquisition goal

Cibus completed the acquisition of five properties during the quarter (the total number now stands at 139), meaning Cibus has already acquired EUR 45m worth of properties this year, thus bringing the portfolio gross asset value to EUR 862m. The net debt LTV ratio increased to 59.0% during the quarter, up from the previous 56.7%, however Cibus’ average interest rate on borrowings declined by ca. 30bps, to 2.6%. Adjusted EPRA NAV increased slightly to EUR 11.3 (11.2) per share.

Occupancy temporarily lowish due to a tenancy change

Cibus reported a little soft Q2 net rental income due to a change in tenancy as occupancy rate dropped to 94.3% (has typically been above 95%). Another one-off was a EUR 0.3m accruals charge, and thus net rental income stood at EUR 11.5m vs our EUR 12.0m estimate. The most important forward-looking metric, namely net rental income less central administration costs, increased by EUR 2.0m to EUR 46.2m. We see the current portfolio posting EUR 46.7m next year, which translates to a 5.2% yield.

Cibus continues to grow the portfolio, attracts new investors

So far this year Cibus has announced EUR 45m in Finnish daily-goods property acquisitions, meaning the company is now well ahead of its stated annual EUR 50m investment target for the year. The portfolio is now worth EUR 862m in terms of gross asset value, comprising of 139 properties located around Finland and with a total lettable area of some 500,000 sqm. Central portfolio metrics such as occupancy rate (94.3%), weighted average unexpired lease term (5.0 years) and net debt LTV ratio (59.0%) have remained steady. The tenant mix stays anchored to Kesko (54%) and Tokmanni (28%), with S-Group (7%) and others (11%) making up the rest. During the last twelve months the company has been able to improve its cost of borrowing by around 60bps as the interest-bearing liabilities’ average interest rate now stands at ca. 2.6%.

Cibus has also continued developing its own organization with the help of few recruits, and in the long-term may eventually enter the Swedish property market. Funds managed by Sirius Capital Partners sold three quarters of their stake in May, which we see as a positive development as it widens Cibus’ institutional investor base and so makes it easier to arrange e.g. an equity issue in connection with a major portfolio acquisition.

Cibus trades above GAV and NAV, but yield still attractive

Cibus’ shares have rerated during the last year, now trading at a premium on book value. In early 2019 Cibus was trading at ca. 0.95x EV/GAV and 0.85x P/NAV, whereas the respective multiples now stand at 1.05x and 1.10x. We estimate the corresponding yield compression at 75bps. Meanwhile major Nordic Real Estate companies’ yields have also compressed, and Cibus’ absolute yield spread has stayed largely unchanged at ca. 100bps. The high underlying portfolio yield, as well as the resulting 7% dividend yield (itself a function of the property yield, leverage and dividend payout ratio), means Cibus’ shares have further potential. We update our TP to SEK 135 (125), valuing Cibus at a 1.10x P/NAV multiple (1.05x EV/GAV). Our rating stays HOLD.

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Cibus Nordic - Expenses higher than expected

30.08.2019 - 10.45 | Earnings Flash

Cibus’ Q2 rental income stood at EUR 12.6m, in line with expectations. Property expenses were slightly higher than we expected, and thus net rental income, at EUR 11.5m, was less than our EUR 12.0m estimate. Central operating metrics remained largely unchanged.

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  • Q2 rental income amounted to EUR 12.6m vs our EUR 12.8m estimate.
  • Net rental income was EUR 11.5m, whereas we expected EUR 12.0m. Property expenses were some EUR 300k higher than we expected. Annual net rental income capacity now stands EUR 49.9m from Q3 onwards (Cibus previously estimated the figure at EUR 49.3m).
  • Operating income (net rental income minus central administration costs) stood at EUR 10.5m vs our EUR 11.0m projection.
  • The portfolio’s GAV amounted to EUR 862m (a total of 139 properties), while EPRA NAV rose to EUR 11.3 (previously EUR 11.2) per share.
  • Net debt LTV ratio rose to 59.0% (56.7% in Q1’19).
  • Occupancy rate was 94.3% (95.1% in Q1’19).

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Fellow Finance - Growth pick-up taking time

26.08.2019 - 09.15 | Company update

Fellow Finance’s H1 saw a weaker loan volume development, largely due to an increased competition within domestic consumer loans. Larger investments into international growth are expected to be seen in 2020, with some upfront investments to show in 2019, and we expect to see weaker margins but a more rapid growth going into 2020. We retain our HOLD-rating with a TP of EUR 5.0 (5.5)

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Increased competition affecting domestic consumer loans

Fellow Finance’s H1/19 figures in general were quite as expected, with revenue at EUR 7.2m (Evli EUR 7.0m) and the adj. EBIT at EUR 1.4m (Evli EUR 1.3m). Profitability was affected by the bond issue and upfront growth investments. Overall facilitated loan volumes were below expectations, with consumer loans in Finland showing a weaker development due to an increase in competition from other lenders.

Expect more aggressive growth moves in 2020

Based on management comments we expect 2019 to remain a ramp-up year for the international operations, building up a foundation for accelerating growth. We had expected some more aggressive moves already in 2019 but now expect to see this happening in 2020. As such we have lowered our profitability estimates for 2020 due to expected increases in marketing investments while increasing our coming year growth estimates. Following recent recruitments, we expect to see larger moves in Poland in the near term, followed by Germany.

HOLD with a TP of EUR 5.0 (5.5)

We view Fellow Finance at an elevated level of uncertainty following the lowered guidance pre-H1 and the weaker the expected loan volume development. We consider the indicated stronger growth investments towards 2020 a positive, as the weaker loan volume development has mostly been due to domestic consumer loan development, contrary to domestic business financing and international financing, were we have expected the bulk of coming years’ growth. Due to estimates revisions we lower our TP to EUR 5.0 (5.5), retaining our HOLD-rating.

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Fellow Finance - Growth some 30% in H1

23.08.2019 - 09.00 | Earnings Flash

Fellow Finance’s H1/2019 revenue and EBIT were quite in line with expectations, with revenue of EUR 7.2m (Evli EUR 7.0m) and an EBIT of EUR 1.4m (Evli EUR 1.3m). EPS was below our estimates at EUR 0.06 (adj. EPS EUR 0.07, Evli EUR 0.09). Fellow Finance expects revenue in 2019 to grow by over 20 % and the adjusted EBIT to be lower than in 2018 (updated 16.8.2019).

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  • Revenue in H1 amounted to EUR 7.2m (EUR 5.6m in H1/18), quite in line with our estimates (Evli EUR 7.0m). Growth in H1 amounted to 29.6%.
  • Fellow Finance facilitated loans during H1 for a total of EUR 109m (EUR 76.5m in H1/18).
  • EBIT in H1 amounted to EUR 1.4m (EUR 1.7m in H1/18), in line with our estimates (Evli EUR 1.3m).
  • EPS in H1 amounted to EUR 0.06 per share (EUR 0.14 in H1/18), below our estimate of EUR 0.09. The for listing expenses adjusted EPS amounted to EUR 0.07.
  • Guidance: Fellow Finance expects revenue in 2019 to grow by over 20 % and the adjusted EBIT to be lower than in 2018 (updated 16.8.2019).
  • Fellow Finance will during the end of the year continue to expand to new markets.

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Marimekko - Growth strategy expected to succeed

19.08.2019 - 09.15 | Company update

Marimekko’s H1 has been impressive and we expect the good momentum to continue throughout the year. The company has been able to target broader audience and license sales in APAC is expected to increase in H2, which should support revenue growth. We keep “HOLD” with TP of EUR 30 (26).

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Strong Q2 earnings

Marimekko’s Q2 revenue was in line with expectations at EUR 29.1m vs. EUR 31.1m/29.8m Evli/cons. Revenue growth was good especially in Finland where comparable retail sales increased by 17% y/y and totaled EUR 16.8m vs. 16.7m Evli view. Also, growth in wholesale sales in EMEA region was good. Wholesale sales in Finland decreased by 18% y/y as there were large non-recurring wholesale deliveries in Q2’18. International revenue was EUR 12.4m vs. EUR 14.4m Evli view. Adj. EBIT was EUR 3.7m vs. EUR 3.5m/3.2m Evli/cons. Earnings were supported by increased sales and gross margin improvements, which were impacted by moderate sale campaigns and increased retail sales.

Broader customer segments support growth

Marimekko had a strong H1 as the company’s revenue grew by ~8% and adj. EBIT by ~46 % y/y. We expect the good momentum to continue as the company has been able to target wider customer segments and seeks to improve growth through online store, partner-led retail in Asia as well as by increasing the sales/m2 in its physical stores. Marimekko has approximately 150 stores in 15 countries, of which most of the stores are outside of Finland and the company aims to open 10 new shops or shop-in-shops in 2019. In APAC, Japan is the largest market area but the company sees growth opportunities in other countries as well. Net sales from APAC represented 21% of total sales in H1’19. During the last couple of years, the company’s combined revenue from APAC has been flat but the company has indicated that the revenue from APAC is likely to increase in the future as the strategy is to appeal to broader target audience globally. We expect APAC’s retail revenue in 2019E to increase by ~20% y/y and wholesale sales growth of ~13% y/y. In Q2, Marimekko updated its guidance for 2019, mainly as it expects higher licensing income in APAC during H2’19. The company reiterated its guidance for 2019E revenue and expects the revenue to be higher than in 2018 and expects operating profit to be higher than in 2018, approximately maximum of EUR 15m (previous: operating profit expected to be in the same level as in 2018). The company targets 10% y/y revenue growth and EBIT% of 15% in the long-term. We expect 2019E revenue of EUR 123m (prev. EUR 125m) and EBIT of EUR 15m (prev. EUR 14m), resulting in EBIT% of 11.9%.

We retain ”HOLD” with TP of EUR 30 (prev. EUR 26)

We have kept our underlying estimates largely intact but increased our 20E-21E estimates as we expect broader target audience and improved gross margin levels to support growth. We expect the company’s revenue to grow ~8% y/y in 20E-21E and EBIT growth of ~20% y/y. On our estimates, Marimekko trades at 19E-20E EV/EBITDA multiple of 9.7x and 8.6x which translates into ~50% premium compared to the premium goods peer group. We see Marimekko’s current valuation as stretched, but as we expect the company to transition towards new customer segments and markets, which should accelerate growth and enable the company to reach a new profitability level, we accept the premium. Our EBIT% estimates are already shifting towards the luxury goods peer group which also justifies higher multiples. We keep our rating “HOLD” with new TP of EUR 30 (prev. EUR 26).

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Endomines - Eyeing production start in Q3

19.08.2019 - 09.00 | Company update

Endomines did not produce any gold concentrate in Q2, as expected. Furthermore, no production guidance was given. We have revised our 2019 production estimate slightly downwards to ~3,000oz, expecting a smaller production already in Q3. We revise our TP to SEK 4.8 (4.4) following NPV adjustments, retaining our SELL-rating.

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No production in Q2, production guidance yet to be given

Endomines’ Q2 results were uneventful, as no gold concentrate production occurred during the quarter, as expected, and no new production guidance was given. Costs were limited compared to our expectations and EBITDA as such was SEK -9.3m compared to our estimate of SEK -15.0m. Ramp-up at Friday appears to be progressing rather well given the delays experienced so far. Based on the information given in Q2 we have, however, adjusted our Q3 production estimates further downwards, and now expect 2019 production of ~3,000oz.

Friday ramp-up key in the near-term

Endomines long-term plan is to produce over 40,000oz by the end of 2023, with near-term production relying on the Friday mine followed by the Rescue ore body (production in 2021). With essentially no production currently on-going the successful ramp-up of Friday remains vital to secure cash flows for on-going operations, although the recently completed rights issue substantially alleviated near-term financing concerns.

SELL with a TP of SEK 4.8 (4.4)

Our NPV values Endomines at SEK 4.8 per share, up from SEK 4.4 since our previous update following net debt adjustments based on the Q2 balance sheet and expected rights issue proceeds. We assume a 1,400USD/oz LT gold price, reflecting analyst estimates and the nature of the recent gold price increases. Drivers for long-term gold price through supply/demand remain in place but near-term gold price development remains uncertain following the more short-term macro event driven price increases.

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Fellow Finance - Guidance for 2019 lowered

19.08.2019 - 07.45 | Company update

Fellow Finance lowered its 2019 guidance due to weaker intermediated loan volume development and a more aggressive execution of its international expansion strategy. We have lowered our 2019 adj. EBIT estimate down by some 40%. On our lowered estimates and given the increased uncertainty we downgrade to HOLD (BUY) with a target price of EUR 5.5 (9.0).

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Lowered guidance for sales and profitability

Fellow Finance gave an updated guidance, according to which the 2019 revenue is expected to grow by over 20% (prev. over 30%) while the adjusted operating profit is expected to be lower than in (prev. grow from) 2018. The guidance revision is mainly due to a lower than expected intermediated loan volume and a more aggressive than international expansion strategy. Based on monthly figures the intermediated loans saw good growth during early to mid H1, with the summer months having exhibited a growth pace decline.

Our 2019 adj. EBIT estimate lowered by some 40%

For Fellow Finance to achieve the new guidance a pick-up in intermediated loan volume growth will be needed in H2/19. The more aggressive execution of the international expansion strategy should support volume growth. On our revised estimates we expect a 25% y/y growth in intermediated loan volumes during H2/19 and 2019 sales to grow 22% to EUR 14.6m (prev. 16.5m). The guidance given for operating profit leaves room for notable uncertainty regarding profitability levels. We estimate a 2019 adj. operating profit of EUR 2.6m (prev. 4.5m), down from EUR 3.5m in 2018, based on the expected lower revenue while keeping our cost structure estimates essentially unchanged.

HOLD (BUY) with a target price of EUR 5.5 (9.0)

On our revised estimates valuation does not appear particularly attractive. Fellow Finance will post H1/19 results on August the 23rd, which should provide much-needed clarity on earnings development and outlook. On our clearly lower estimates and increased uncertainty we downgrade to hold ahead of the H1 results with a target price of EUR 5.5 (9.0).

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Endomines - Production guidance update not yet given

16.08.2019 - 10.00 | Earnings Flash

Endomines’ revenue and EBITDA in Q2 amounted to SEK 1.4m (Evli 0.0m) and SEK –9.3m (Evli -15.0m) respectively. There was no gold concentrate production during Q2. Endomines did not give an updated production guidance for Q2.

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  • Endomines did not produce any gold concentrate in Q2.
  • Revenue amounted to SEK 1.4m (42.1m in Q2/18), while we had not estimated any revenue for Q2. The Q2 revenue derived from clean-up gold from the Pampalo mill.
  • EBITDA in Q2 was at SEK -9.3m, above our estimate or SEK -15.0m.
  • Construction of the Mill was ongoing and developmental drifting at the Friday Mine was the focus for Q2.
  • Endomines did not give an updated production guidance for 2019. A production plan is being worked on based on the results of the drilling campaign and test mining as well as the commissioning of the plant and an updated guidance will be given once completed.

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Taaleri - Supportive fee outlook

16.08.2019 - 09.40 | Company update

Taaleri’s H1 earnings were due to the previously given guidance quite unsurprising and segment development corresponded roughly to expectations. A better than anticipated AUM development supports the fee outlook going forward, with 2019 earnings still expected to rely on the Texas wind farm project.

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Favourable AUM development improving WM fee outlook

Taaleri’s had pre-H1 announced an H1 EBIT-margin range of 20-25%, with EBIT at EUR 6.4m (Evli 6.8m), at a 20.6% margin. Segment results corresponded roughly to our expectations, with solid investment returns boosting Financing’s earnings, while Wealth Management earnings were weak, as indicated by the guidance revision. Energy’s earnings remained negative as expected. The in our view most positive information of the first half-year was AUM development, with group AUM up 15.6% to EUR 6.6bn. Uncalled commitments along with the accumulation of AUM towards late H1 is expected to benefit Wealth Management’s fees and continuing earnings going into H2.

2019 earnings still dependent on Texas wind farm project

Taaleri has guided for the 2019 EBIT-margin to be slightly below that achieved in 2018. Compared to H1/19 we expected clear improvements in Wealth Managements operating profits, driven by higher AUM and an increase in performance fees (-0.5m in H1). We expect a decline in Financing, both H2/19 and the coming years, due to expected lower investment returns. The deciding factor for 2019 earnings will be Energy, were the divestment of the Texas wind farm project is expected during H2/19, with SolarWind II fees also expected to boost the operating profitability to a positive level. H1 group earnings were also affected by elevated personnel expenses, which we expect to support earnings improvement in H2.

BUY with a target price of EUR 7.6 (8.0)

Based on the H1 report, which given the favourable AUM development and expected cost base decline in H2 was slightly more positive than we had expected, we retain our BUY-rating with a target price of EUR 7.6 (8.0).

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Pihlajalinna - Aiming for profitability turnaround

16.08.2019 - 09.15 | Company update

Pihlajalinna’s Q2 result fell short of expectations. The company faces profitability issues in many of its units and has launched an efficiency improvement program that aims at annual cost savings of EUR 17m. We keep our rating “BUY” with TP of EUR 12 (prev. EUR 13).

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Q2 earnings weaker than expected

Pihlajalinna’s Q2 earnings fell short of expectations. The company’s revenue was EUR 130m vs. EUR 134m/132m Evli/cons. Revenue grew by 3.5% of which organic growth was 1.5% y/y. Adjusted EBITDA was EUR 10.8m (8.3% margin) vs. EUR 13.3m/13.2m (9.9%/9.9%) Evli/cons. EBITDA was negatively impacted by unequal resourcing of units and general salary increases. Adj. EBIT was clearly below expectations at EUR 2.1m vs. EUR 4.8m/4.6m Evli/cons. In a group level, EBIT was negative in April and May but improved in June. Profitability improved in the Forever fitness center chain and in public specialized care but decreased in outsourced primary care and social care services, private clinics, surgical operations and dental care services. Seasonality impacted the Q2 result as well.

Strong actions to improve profitability

Pihlajalinna’s long-term target is to increase its EBIT margin to over 7%, which so far has seemed rather distant. The company has faced efficiency problems especially with the new clinics which has impacted negatively on the company’s profitability. The company indicated that it has several loss-making clinics. In order to improve its profitability, Pihlajalinna launched an efficiency improvement program that aims to achieve annual cost savings of EUR 17m. The planned cost savings are expected to be realized during 2020. As a result of the efficiency improvement program the company informed that it will merge units but closures of some of the loss-making clinics are also possible. The focus is on operational management. The company estimated that the efficiency improvement program will help to reduce costs in H2’19 by approximately EUR 5m. The program involves a non-recurring item of approximately EUR 8m, which will be allocated to Q3’19 as an adjustment item. Despite of the weak Q2 result the company reiterated its guidance for 2019E and expects revenue to increase from 2018 and EBIT clearly to improve from last year.

High activity in M&A and partnerships

Pihlajalinna has been active in M&A and partnerships in H1’19 but the company has also been able to grow organically. During Q2, the company released a letter of intent on co-operation with Pirkanmaa Hospital District. The partnership seeks to design new and innovative service models with a strong customer focus. The company has also agreed on pilot co-operation with Pohjola Vakuutus. During the review period, Pihlajalinna has further expanded its occupational healthcare network by acquiring Raisio’s Aurinkoristeys occupational healthcare units and the Kouvola Työterveys occupational healthcare unit. Pihlajalinna also opened an occupational healthcare center to Rovaniemi in August. In H2’19, the company seeks to improve its services in its healthcare centers but also in mobile. Improved remote services should further support the company’s efficiency. Pihlajalinna sees that the collapse of social and healthcare service reform has activated municipalities and the company has indicated that it has new possible contracts in the pipeline.

We retain “Buy” with TP of EUR 12 (prev. EUR 13)

As a result of the weak Q2, we have decreased our 2019E estimates. We now expect 2019E revenue of EUR 516m (prev. EUR 525m). We expect adj. EBIT of EUR 20m (prev. EUR 24m) resulting in EBIT% of 3.9% (prev. 4.6%). Despite of the expected EBIT improvement (42.8% y/y) from 2018, 2019E earnings remain uncertain. If the planned efficiency improvements succeed in 2020E we expect a turnaround in profitability and the company to move towards its EBIT% target of 7%. On our estimates, Pihlajalinna trades at 2019E-2020E EV/EBITDA multiple of 7.5x and 6.1x, which translates into ~27% discount compared to the peer group. We keep our rating “Buy” with new TP of EUR 12 (prev. EUR 13).

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Gofore - Uncertain times ahead

15.08.2019 - 09.45 | Company update

Gofore’s H1 results were slightly better than expected, with EBITA at EUR 5.0m (Evli 4.8m). Of key interest were comments regarding market and demand development, which lacked more precise detail but still imply a weakened outlook. We retain our HOLD-rating with a target price of EUR 8.0 (8.5).

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Comments point towards increased uncertainty

Gofore’s H1 results beat our estimates slightly. EBITA amounted to EUR 5.0m (Evli 4.8m), as the impact of the drop in certain customers’ demand during Q2 on margins was smaller than expected. There appears to have been no pattern in the decreased demand per customer segment, which opens up reasons to view the overall market development with further caution. Comments regarding the market development were somewhat lacking in detail and we opt to interpret the information given as likely weaker figures during H2 as filling the gaps caused by the demand drop may prove to be challenging.

Uncertainty driven sales growth estimate revision

We have made revisions primarily to our coming year growth estimates as well as our H2/19 estimates, having lowered our sales estimate to EUR 34.3m and EBITA-% estimate to 12.3% to account for an uncertainty in the demand situation, while our full-year estimates remain mostly intact due to the solid H1 figures. We have also lowered our coming years sales estimates, having lowered our 2018-2021E CAGR estimate by 4pp to 17%.

HOLD with a target price of EUR 8.0 (8.5)

The near-term revenue and earnings development along with the uncertain tone in the market outlook comments in our gives rise to additional concern relating to development in the coming years. We still highlight that Gofore still is and has been among the top performers in its field and as such we continue to justify a valuation premium to peers. Upside nonetheless appears limited and we retain our HOLD-rating but adjust our target price to EUR 8.0 (8.5) to account for the added estimates uncertainty.

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Taaleri - Favourable AUM development amid challenging half-year

15.08.2019 - 09.00 | Earnings Flash

Taaleri’s H1 results were quite in line with our expectations, with group income amounting to EUR 30.9m (Evli 31.1m) and EBIT to EUR 6.4m (Evli EUR 6.8m). AUM development better than we had foreseen, increasing 15.6% y/y to EUR 6.6bn.

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  • Income in H1 amounted to EUR 30.9m (EUR 35.5m in H1/18), in line with our estimates (Evli EUR 31.1m). The group’s continuing earnings declined some 8.6 per cent y/y.
  • EBIT in H1 amounted to EUR 6.4m (EUR 12.4m in H1/18), slightly below our estimates (Evli EUR 6.8m). Taaleri had pre-announced the EBIT -margin in H1/19 to be between 20-25%
  • The Wealth Management segments income in H1 was EUR 17.2m (H1/18 EUR 29.7m) and EBIT EUR 2.0m (H1/18 EUR 14.1m), with our estimates at EUR 18.0m and EUR 2.2m respectively.
  • The Financing segments income in H1 was EUR 10.4m (H1/18 EUR 6.2m) and EBIT EUR 6.1m (H1/18 EUR 2.4m), with our estimates at EUR 10.6m and EUR 6.5m respectively.
  • The Energy segments income in H1 was EUR 1.4m (H1/18 EUR 1.1m) and EBIT EUR -1.6m (H1/18 EUR -0.9m), with our estimates at EUR 2.0m and EUR -0.8m respectively.
  • Income from other operations in H1 amounted to EUR 1.8m (H1/18 EUR -1.5m) and EBIT EUR -0.1m (H1/18 EUR -3.3m), with our estimates at EUR 0.5m and EUR -1.1m respectively.
  • Assets under management at the end of H1/19 amounted to EUR 6.6bn, up 15.6% y/y.

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Aspo - ESL’s EBIT set for strong gain in H2

15.08.2019 - 08.50 | Company update

Aspo’s Q2 didn’t alter the bigger picture much as ESL is still expected to post higher EBIT in H2’19 as investments are paying off. However, Telko’s subdued results were a negative. Our TP is now EUR 9.00 (9.25), rating BUY (HOLD).

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Q2 weaker than expected as Telko was unable to improve

Aspo’s EUR 151m Q2 revenue met our expectations, yet the EUR 4.1m EBIT missed our EUR 5.2m estimate. The miss was largely attributable to Telko’s weak 2.9% operating margin (we expected 4.5%), which declined both q/q and y/y. Telko’s EUR 80.6m Q2 revenue was in line with our estimate, and improved q/q and y/y, however declining plastic raw materials and chemicals prices continued to hurt profitability as Telko’s inventories were high (although have since normalized). The strengthening Russian and Ukrainian currencies had a further negative impact. Leipurin also fell short of our expectations and last year due to the machinery business’ weakness. Meanwhile ESL posted EUR 2.6m in EBIT (we cut our estimate to EUR 1.8m after Aspo warned Q2 will be weak due to a challenging market for the Supramax vessels).

ESL’s EBIT is set to almost double in H2 compared to H1

ESL’s LNG vessels are expected to reach their full potential in H2’19 as the cranes are now functioning normally. AtoB@C is also contributing. The market for Supramaxes has improved with the Baltic Dry Index rebounding sharply from its early 2019 lows. Steel sector shipments have also normalized after Q2, a period hampered by process challenges in Baltic steel mills as well as heavy traffic at Baltic Sea ports. We thus leave our H2’19 estimates for ESL intact (expect EUR 11m in H2’19 EBIT vs EUR 8m in H2’18). We revise our Telko estimates down as the market outlook in both West and East remains cautious. We previously expected Telko to reach 4.5-5.0% EBIT margins in H2’19 but now expect ca. 3.5%. On a more positive note, Aspo says Telko has managed to improve its inventory turnover recently.

Aspo’s H1’19 was subdued, but EBIT should improve considerably in H2’19

ESL’s H1’19 was weak with EBIT amounting to EUR 5.8m vs EUR 6.9m previous year. The results were hampered by the two new LNG vessels’ crane problems (which have since been fixed) as well as challenging market for the two Supramax vessels. Moreover, Q2 was slow for steel industry shipments as Baltic Sea steel mills’ annual maintenance procedures took longer than expected. Baltic Sea ports also faced operational challenges, leading to extended waiting periods for vessels. Meanwhile Telko and Leipurin struggled to improve their profitability in H1’19 due to the former suffering from declining chemicals prices and the latter dragged by slow machinery business. Aspo’s H1’19 EBIT stood at EUR 9m (EUR 11m). We expect Aspo’s EBIT to improve to EUR 16m in H2’19.

The bulk of Aspo’s value continues to tilt towards ESL

Telko’s contribution to our SOTP valuation has dropped as we have lowered our estimates for the chemical distributor. We now expect Telko to manage EUR 10m (EUR 14m) in FY ’19 EBIT. Our TP is now EUR 9.00 (9.25) due to lower SOTP as we expect FY ’19 EBIT at EUR 25m (EUR 28m). Our rating is now BUY (HOLD).

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Marimekko - Good EBIT growth in Q2

15.08.2019 - 08.30 | Earnings Flash

Marimekko’s Q2 revenue increased by 3% and was EUR 29.1m vs. EUR 31.1m/29.8m Evli/cons. Adj. EBIT was EUR 3.7m vs. EUR 3.5m/3.2m Evli/cons. Revenue was mainly driven by improved relative sales margin and sales growth. Marimekko reiterated its guidance for 2019E.

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  • Finland: revenue was EUR 16.8m vs. EUR 16.7m Evli view. Revenue increased by 4%. Retail sales increased by 17%. Wholesale sales decreased by 18%.
  • International: revenue was EUR 12.4m vs. EUR 13.4m Evli view. Revenue increased by 2%. Retail sales decreased by 1% and wholesale sales increased by 6%.
  • Q2 operating profit was EUR 3.7m (12.7% margin) vs. EUR 3.5m/3.2m (11.3%/10.6% margin) Evli/cons.
  • Q2 EPS was EUR 0.32 vs. EUR 0.34/0.30 Evli/cons.
  • Guidance for 2019: net sales in 2019E are forecasted to be higher than in the previous year and adj. EBIT is expected to be higher than in the previous year, amounting at most to approx. EUR 15m.

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Pihlajalinna - Q2 earnings below expectations

15.08.2019 - 00.00 | Earnings Flash

In Q2’19, Pihlajalinna’s revenue amounted to EUR 129.7m vs. EUR 134.0m/132.4m Evli/cons estimates, while adj. EBIT landed at EUR 2.1m vs. EUR 4.8m/4.6m Evli/cons estimates. Organic growth increased by 1.5% y/y. The company reiterated its 2019E guidance.

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  • Q2 revenue was EUR 129.7m vs. EUR 134.0m/132.4m Evli/cons estimates. Revenue grew by 3.5% y/y. Organic growth was 1.5% y/y.
  • Q2 adj. EBITDA was EUR 10.8m (8.3% margin) vs. EUR 13.3m/13.2m (9.9%/9.9%) Evli/cons estimates. Adj. EBITDA increased by 5.6% y/y. Administrative and personnel costs were higher than planned as unequal resourcing and general salary increases impacted costs.
  • Q2 adj. EBIT was EUR 2.1m (1.6% margin) vs. EUR 4.8m/4.6m (3.6%/3.5%) Evli/cons estimates.
  • Q2 EPS was EUR -0.02 vs. EUR 0.1/0.1 Evli/cons.
  • Guidance: consolidated revenue is expected to increase from 2018. Adj. EBIT is expected to improve clearly compared to 2018.
  • The company has launched an efficiency improvement program that aims at annual cost savings of approx. EUR 17m.

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Aspo - Weak Q2, but improvement ahead

14.08.2019 - 10.35 | Earnings Flash

Aspo’s Q2 revenue stood in line with our estimate, however the EUR 4m EBIT fell short of our EUR 5m expectation mostly due to Telko’s relatively low 2.9% operating margin. ESL’s EBIT came in above our estimate. Aspo had previously warned about subdued Q2 for ESL due to a challenging market for the Supramax vessels.

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  • Aspo Q2 revenue amounted to EUR 151m vs our EUR 152m estimate.
  • Q2 EBIT was EUR 4.1m whereas we expected EUR 5.2m.
  • ESL Shipping posted EUR 42.6m in Q2 revenue vs our EUR 39.5m estimate. ESL’s EBIT was EUR 2.6m vs our EUR 1.8m expectation. Aspo had previously warned Q2 to be weak as Supramaxes posted losses (EBIT was EUR 4.3m a year ago).
  • Telko recorded EUR 80.6m in revenue vs our EUR 80.9m estimate, whereas EBIT came in at EUR 2.3m compared to our EUR 3.6m projection. Operating margin was therefore 2.9% i.e. weaker than the 4.1% recorded previous year and clearly off our 4.5% expectation.
  • Leipurin managed EUR 28.0m in Q2 revenue while we expected EUR 31.6m. EBIT stood at EUR 0.6m vs our EUR 0.9m estimate.
  • Aspo guides EUR 24-30m operating profit for 2019 (EUR 20.6m in 2018).

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Etteplan - Narrative largely unchanged

14.08.2019 - 10.00 | Company update

Etteplan’s Q2 results were slightly below our and consensus estimates but at a good level nonetheless. Etteplan upgraded its guidance mainly driven by the acquisitions made. The market comments were mostly unchanged, with some hints of weakened demand. We retain our HOLD rating with a target price of EUR 9.6.

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Below estimates, acquisition driven guidance upgrade

Etteplan’s Q2 results were slightly below our and consensus estimates, but continued to be at a good level nonetheless. Revenue grew 3.7% to EUR 64.3m (Evli/cons. 66.6m/66.4m), with organic growth falling clearly to 1.2%, although impacted by working day differences. Profitability surpassed the target level, with EBITA at 6.5m (Evli 6.9m) for a margin of 10.1%. Etteplan further upgraded its guidance (prev. upgrade in Q1) following the acquisitions made during Q2/Q3, expecting its revenue and operating profit for 2019 to grow significantly (prev. clearly) compared to 2018. Market outlook comments were mostly neutral compared to Q1, with some signs of negative development for instance in China.

No major estimates revisions

Our estimates remain mostly unchanged post-Q2, as we had already included the acquisitions in our estimates. Profitability of the acquired companies had not been given pre-Q2 but management comments implied similar profitability to Etteplan or possibly better when accounting for synergies, in line with our expectations. We expect revenue growth of 11.4% in 2019 (2018: 10.1%) and an EBITA-margin of 9.9% (2018: 9.5%).

HOLD with a target price of EUR 9.6

The prevailing uncertainty in customer activity and the lower organic growth in Q2, although affected by working day differences, gives continued reasons for caution while the upgraded guidance did reduce some near-term uncertainty. With no major changes to our estimates, we retain our HOLD-rating and target price of EUR 9.6.

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Gofore - Slight earnings beat

14.08.2019 - 09.20 | Earnings Flash

Gofore’s EBITA in H1 came in slightly above our expectations, at EUR 5.0m (Evli 4.8m). Revenue was pre-announced at EUR 33.4m, with the organic growth amounting to 16%. Gofore expects net sales in 2019 between EUR 67-72m (unchanged).

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  • Gofore H1/19 net sales amounted to EUR 33.4m (pre-announced), with sales growth in at 35.5% compared to H1/18 figures. Growth was driven by the acquisitions of Solinor and Silver Planet. Organic growth amounted to 16%. The company’s international business net sales amounted to EUR 3.6m, corresponding to 10.7% of total net sales.
  • EBITA in H1 amounted to EUR 5.0m, slightly above our estimates (Evli EUR 4.8m), at a margin of 14.9%. Profitability remained on par with the company’s long-term target (15%) following the strong Q1 figures, as the Q2 EBITA-% fell to 12.6%.
  • Guidance: Gofore expects net sales in 2019 between EUR 67-72m (updated 10.7.2019).
  • The number of personnel at the end of the period was 559 (H1/18: 423).

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Solteq - Showing promising progress

14.08.2019 - 08.15 | Company update

Solteq’s Q2 results were slightly better than our expectations, with net sales at EUR 14.7m (Evli 14.4m) and EBIT at EUR 0.6m (Evli 0.5m). The report mostly implied business as usual, with encouraging comments on order intake development. We have made minor estimates revisions, now expecting a 2019 EBIT-margin of 7.4% (prev. 6.8%). We raise our target price to EUR 1.5 (1.4) and retain our HOLD-rating.

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Q2 slightly better than expected

Solteq posted Q2 results slightly better than our expectations. Net sales amounted to EUR 14.7m vs. our estimate of EUR 14.4m. Growth picked up slightly in Q2, at 3.0% y/y, with the revenue of the international subsidiaries having grown significantly. The order intake has according to the company continued to develop positively and was larger than in the comparison period. Q2 EBIT amounted to EUR 0.6 vs. our estimate of EUR 0.5m. Product development investments grew to EUR 1.1m (0.6m), with the co’s full year estimate still at EUR 3.5m.

Slight upwards revisions of our estimates

We have made only minor adjustments to our estimates post-Q2. We expect sales in 2019 to grow 3.5% to EUR 58.9m, supported by a favourable order intake development and expect continued solid growth internationally. We expect the operating profit margin in 2019 to improve to 7.4% (prev. est. 6.8%) from 4.3% in 2018, driven by the actions taken to improve operational efficiency during 2018. Solteq has guided for its operating profit in 2019 to grow clearly compared to 2018.

HOLD with a target price of EUR 1.5 (1.4)

On 2019 peer multiples valuation still appears reasonably fair. Although we are not yet prepared to fully emphasize 2020 multiples, with the good progress so far during the year and our slightly raised estimates we raise our target price to EUR 1.5 (1.4) and retain our HOLD-rating.

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Etteplan - Upgrades guidance

13.08.2019 - 13.15 | Earnings Flash

Etteplan delivered solid Q2 results, although slightly below Evli and consensus estimates. Etteplan's net sales in Q2 amounted to EUR 64.3m, slightly below our and consensus estimates (Evli/cons. EUR 66.6m/66.4m). EBITA amounted to EUR 6.5m compared to our estimates (Evli EUR 6.9m). Etteplan upgraded its guidance, expecting the revenue and operating profit (EBIT) for the year 2019 to grow significantly (prev. clearly) compared to 2018.

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  • Net sales in Q2 were EUR 64.3m (EUR 62m in Q2/18), slightly below our estimates (Evli EUR 66.6m). Growth in Q2 amounted to 3.7 % y/y.
  • EBITA in Q2 amounted to EUR 6.5m (EUR 6.2m in Q2/18), slightly below our estimates (Evli EUR 6.9m), at a margin of 10.1 %.
  • Engineering Solutions: Net sales in Q2 were EUR 35.3m vs. EUR 36.4m Evli. EBITA in Q2 amounted to EUR 3.8m vs. EUR 3.9m Evli. The MSI-% in Q2 was 57 % compared to 52 % in Q2/18.
  • Software and Embedded Solutions: Net sales in Q2 were EUR 17.1m vs. EUR 17.9m Evli. EBITA in Q2 amounted to EUR 1.6m vs. EUR 1.8m Evli. The MSI-% in Q2 was 55 % compared to 46 % in Q2/18.
  • Technical Documentation Solutions: Net sales in Q2 were EUR 11.8m vs. EUR 12.4m Evli. EBITA in Q2 amounted to EUR 1.0m vs. EUR 1.2m Evli. The MSI-% in Q2 was 75 % compared to 73 % in Q2/18.
  • Overall development of Etteplan’s business environment remains favourable.
  • Guidance updated: Etteplan expects the revenue and operating profit (EBIT) for the year 2019 to grow significantly (prev. clearly) compared to 2018.

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Taaleri - Eyes on Wealth Management

13.08.2019 - 09.15 | Preview

Taaleri has previously given guidance for an operating profit margin of 20-25% in H1/19, affected by a decline in Wealth Management’s continuing earnings and a postponement of planned projects. We expect the bulk of earnings from Financing following a favourable investment environment during H1. We keep our long-term view intact pre-H1 and retain our BUY-rating, lowering our TP to EUR 8.0 (8.5) to reflect increased Wealth Management uncertainty.

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Co’s H1/19 operating profit margin guidance 20-25%

Taaleri will report H1/19 results on August 15th. Taaleri has previously given guidance for a H1 operating profit margin of 20-25%, mainly following a decline in continuing earnings in Wealth Management and the postponement of planned projects to H2/19. The corresponding full year margin is expected to be slightly lower than in 2018 (33.0%).

Financing main earnings contributor in H1/19E

We expect the bulk of Taaleri’s H1 results to be delivered by Financing, following expected solid investment returns from the favourable market environment during H1. Wealth Management’s continuing earnings are as per company guidance expected to be lower y/y, and we further expect performance fees and investment returns to have been only minor. We see reason for viewing AUM development with caution and will focus our attention in the H1/19 report on the development of Wealth Management. We expect the operating profit of Energy to have remained in the red during H1 but the first closing of the SolarWind II -fund at EUR 220m post-Q2 as well as the expected exit from the Truscott-Gilliland East wind farm are expected to significantly boost both Energy’s and group earnings in H2.

BUY with a target price of EUR 8.0 (8.5).

The development of Wealth Management’s continuing earnings gives some reason for concern. However, with the currently limited information we do not see a basis for extrapolating any long-term conclusions before the H1 report. As such we retain our BUY rating but lower our target price to EUR 8.0 (8.5).

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Solteq - Results quite as expected

13.08.2019 - 08.30 | Earnings Flash

Solteq's Q2 results were slightly above our estimates. Net sales in Q2 amounted to EUR 14.7m (Evli EUR 14.4m), while EBIT amounted to EUR 0.6m (Evli EUR 0.5m). Solteq reiterated its guidance, expecting the operating profit to grow clearly compared to the financial year 2018.

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  • Net sales in Q2 were EUR 14.7m (EUR 14.2m in Q2/18), slightly above our estimates (Evli EUR 14.4m). Growth in Q2 amounted to 3.0 % y/y. Revenue growth of international subsidiaries was significant.
  • Operating profit in Q2 amounted to EUR 0.6m (EUR 0m in Q2/18), above our estimates (Evli EUR 0.5m), at a margin of 3.9 %. The adjusted operating profit amounted to EUR 0.6m (Evli 0.5m), at a margin of 4.3%.
  • Product development investments during Q2/19 increased to EUR 1.1m (0.6m), co’s FY2019 estimate EUR 3.5m.
  • The group’s order intake developed positively during Q2/19 and was clearly better than in Q2/18.
  • Guidance reiterated: Solteq's operating profit is expected to grow clearly compared to the financial year 2018

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Verkkokauppa.com - Competition remains fierce

12.08.2019 - 09.10 | Company update

Verkkokauppa.com’s Q2 result fell short of expectations. The competition is expected to remain fierce and the company’s growth investments are hampering EBIT improvement in 19E. H2 has a high emphasis on the company’s total performance. We downgrade to “HOLD” with TP of EUR 3.3 (prev. EUR 4.7).

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Q2 earnings below expectations

Verkkokauppa.com’s Q2 result was a disappointment as earnings fell short of expectations. However, the company was able to increase its market share despite of the declining consumer electronics market. The company’s revenue grew by 5.0% while GfK estimated 0.5% decline in the consumer electronics market in April-June. Verkkokauppa.com’s revenue totaled EUR 108m vs. EUR 111m/111.5m Evli/consensus. Revenue growth was impacted by increased marketing and campaigns. Gross profit was EUR 15.3 (14.2%) vs. our view of EUR 16.1m (14.5%). Fixed costs (incl. staff costs of EUR 8.1m) totaled EUR 14m vs. our view of EUR 14m. The increase in personnel costs was mainly due to growing personnel costs in IT, retail stores and purchasing. Low gross margin level and continuing marketing expenses dragged the company’s operating profit down, which totaled EUR 0.2m vs. EUR 0.9m/1.3m Evli/consensus.

Growth still prioritized

Verkkokauppa.com prioritizes growth and the company has made extensive investments in marketing from Q4’18 onwards. The company seeks to increase its visibility and brand recognition via tv-commercials as well as through online advertising. Increased marketing expenses are expected to continue throughout the year which will hamper the company’s EBIT improvement in 19E. Verkkokauppa.com targets to increase the share of its private labels which should increase gross margins. The company also informed that the outsourced warehouse with Posti will move to new premises during Q3. According to the company, there are no significant costs related to the moving. We expect 2019E total fixed costs of EUR 59m (9.7% y/y). The company expects the competition to remain fierce and price driven throughout the year. Declining GDP growth is also likely to have an impact on sales (the Ministry of Finance estimates 2019 GDP growth of 1.6%). As consumer electronics market is declining, other product categories are expected to support growth. H2 is critical for the company as sales and profitability are normally higher than in H1. Verkkokauppa.com reiterated its guidance for 2019E and expects revenue of EUR 500-550m and EBIT of EUR 11-17m. We expect 2019E revenue of EUR 519m (prev. EUR 522m) and EBIT of EUR 12m (prev. EUR 13m).

“HOLD” with TP of EUR 3.3 (4.7)

After a weak Q2 we have lowered our 2019E-2020E estimates. Our 19E estimates are now at the lower bottom of the company’s guidance. As continuing growth investments and fierce competition weigh down the company’s EBIT in 2019E we expect 2019E EBIT margin of 2.3% (2018: 2.8%). We expect the market outlook to remain uncertain which adds pressure on EBIT. On our estimates, Verkkokauppa.com trades at 19E-20E EV/EBIT multiple of 9.6x and 7.3x, which translates into ~53% discount compared to the peer group. Due to our weakened estimates and continuing pressure on EBIT we downgrade to “HOLD” with TP of EUR 3.3 (prev. EUR 4.7).

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Scanfil - Expecting further pickup in H2’19

12.08.2019 - 08.55 | Company update

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

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Scanfil expects improved customer demand during H2’19

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

Scanfil writes down Hamburg, closes the HASEC acquisition

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

Minor estimate changes as the thesis remains unchanged

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

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Endomines - Friday production further delayed

12.08.2019 - 08.00 | Company update

Endomines’ announced that the ramp-up of production at Friday will be further delayed and the earlier production guidance for 2019 will not be achieved. Recent increases in gold prices are a welcome development but has bloated valuation. We re-establish our rating with SELL (N/A) and a target price of SEK 4.4 (N/A).

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Production to fall short of 2019 guidance

Endomines announced on August 9th that its production guidance for 2019 (5,000-8,000oz gold) will not be achieved due to reparations of damages to Friday’s tailings pond causing longer than expected delays to production. Ramp-up of the processing plant is expected to take a couple of weeks before being fully commissioned. No new guidance was given. We now estimate a gold production in 2019 of 4,340oz. Although the added delay to production timewise is relatively short, this will cause additional strain on the already limited near-term cash flows.

Sounder financial situation following the rights issue

With the completion of Endomines’ rights issue, having raised gross proceeds of SEK 156m, the company’s financial situation is now at a much sounder level. The raised funds should as such cover the by the company earlier estimated next twelve-month capital need of SEK 100m. Proceeds will mainly be used to short-term debt repayment and ramp-up of Friday as well as start-up of other assets.

SELL (N/A) with a target price of SEK 4.4 (N/A)

Endomines’ share price has seen recent rapid increases, as the gold price has climbed to levels last seen in 2019, driven by macroeconomic uncertainties. Although the rise in gold prices certainly is a welcome development, the current valuation in our view does not reflect the high uncertainty relating to Endomines’ gold production, with Friday having seen several delays and additional costs, and production has not yet commenced. We re-establish our rating with SELL (N/A) and a target price of SEK 4.4 (N/A), in line with our SOTP.

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CapMan - Steaming ahead

09.08.2019 - 09.30 | Company update

CapMan’s Q2 results were above estimates, largely due to Scala’s success fees. The Buyout XI fund held a first closing at EUR 160m, to aid management fees during H2/19 and onwards. The Q2 report gave little reason to change our views on CapMan’s development; on the contrary, we have made upward revisions to our estimates. We retain our BUY-rating with a target price of EUR 1.95 (1.85).

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Earnings boosted by significant Scala success fees

CapMan’s Q2 results beat both our and consensus expectations, with revenue at EUR 13.4m (Evli/cons. 10.8m/11.0m) and EBIT at EUR 5.8m (Evli/cons. 4.5m/4.2m). The stronger earnings were in our view largely due to stronger than expected Scala success fees. The solid Services business operating profit (Act./Evli 4.9m/2.1m) was slightly offset by weaker investment returns, due to weaker performance of certain portfolio companies, according to management of a more temporary nature. The Buyout XI fund held a first closing at EUR 160m, with management fees expected to kick in during Q3.

Solid Services business development

We have revised our 2019 estimates slightly upwards, mainly due to the strong Q2 earnings. We have further raised our estimates for the coming years, with our 2020 operating profit estimate up 10%, reflected mainly through the Services business. Our estimates continue to rely on more rapid accumulation of carried interest starting from H2/19, the timing and materialization of which remains the biggest near-term uncertainty. For 2019 we expect an operating profit of EUR 24.7m, with a diversified contribution split from all business areas.

BUY with a target price of EUR 1.95 (1.85)

Our SOTP implies a fair value of EUR 1.82 per share, which together with peer multiple valuation implies a limited valuation upside. However, when considering the top-class dividend yield and expected ~35% improvement in operating profit in 2020, CapMan in our view remains an attractive case. Following our estimates revisions, we lift our target price to EUR 1.95 (1.85) and retain our BUY-rating.

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Verkkokauppa.com - Weak Q2 earnings

09.08.2019 - 08.45 | Earnings Flash

Verkkokauppa.com’s Q2’19 revenue grew by 5% despite of declining market and was EUR 108m vs. Evli EUR 111m and consensus of EUR 111.5m. Gross profit was 15.3m (14.2% margin) vs. EUR 16.1m (14.5% margin) Evli view. EBIT was EUR 0.2m vs. EUR 0.9m/1.3m Evli/cons. The company reiterated its 2019E guidance.

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  • Q2 revenue was EUR 108m vs. EUR 111.0m Evli view and EUR 111.5m consensus. Sales grew by 5% despite of declining market growth (-0.5% y/y according to GfK). Revenue growth in Q2 was boosted by campaigns and increased marketing.
  • Q2 gross profit was EUR 15.3m (14.2% margin) vs. EUR 16.1m (14.5% margin) Evli view.
  • Q2 EBIT was EUR 0.2m (0.2% margin) vs. EUR 0.9m (0.8% margin) Evli view and EUR 1.3m (1.2% margin) consensus. This was impacted by lower gross profit and increased marketing expenses.
  • Q2 eps was EUR 0.00 vs. EUR 0.02/0.02 Evli/cons.
  • 2019 guidance intact. The company expects 2019E revenue of EUR 500-550m and EBIT of EUR 11-17m.
  • The company also decided on a quarterly dividend of EUR 0.05 per share.

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Scanfil - Strong EBIT despite soft revenue

09.08.2019 - 08.45 | Earnings Flash

Scanfil reported Q2 revenue clearly below our expectations yet managed to beat our operating profit estimate. Operating margin remained strong despite 6% decline in revenue compared to previous year.

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  • Q2 revenue, at EUR 143m, missed our EUR 158m estimate by 10% and declined by 6% compared to previous year (but increased by 10% compared to previous quarter). Scanfil says revenue developed favorably in all segments except Medtec & Life Science.
  • Q2 adjusted operating profit amounted to EUR 10.3m vs our EUR 10.0m estimate. Adjusted operating margin was thus 7.2% vs our 6.3% expectation.
  • The adjustment items include expenses related to the acquisition of HASEC-Elektronik GmbH (EUR 0.4m) and the impairment of Scanfil GmbH’s goodwill (EUR 3.6m).
  • Scanfil adjusts 2019 outlook to reflect the HASEC acquisition it completed at the end of Q2. Scanfil says HASEC will contribute ca. EUR 20m in revenue and EUR 1m in operating profit during 2019 and hence the new FY 2019 guidance is EUR 580-610m in revenue and EUR 39-42m in adjusted operating profit (previously EUR 560-610m and EUR 36-41m).
  • Scanfil also said it will initiate a share repurchase program. The authorization is to purchase a maximum of 300,000 shares, or approximately 0.46% of the total number of shares (the maximum amount to be used is EUR 1.35m). The repurchasing will start on Aug 12, 2019 at the earliest.

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Tokmanni - Good momentum expected to continue

09.08.2019 - 08.05 | Company update

Tokmanni delivered good Q2 earnings. The company focuses on improving profitability in 2019E but will also strengthen its store network in H2 and launch two own brands. Tokmanni reiterated its guidance and expects revenue and EBIT margin to improve from last year. We upgrade to “BUY” with TP of EUR 10.2 (prev. EUR 9.0).

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Strong Q2 earnings

Tokmanni delivered strong Q2 earnings. The company’s revenue increased by 10.2 % and was EUR 240m vs. EUR 236m/234m Evli/consensus. The sales were boosted by new store openings and the timing of Easter. The company was also able to reduce the dependence of weather during the spring season. The company’s gross margin was EUR 84.5m (35.2 %) which was close to our expectation of EUR 83.9m (35.6 %). Gross margin improvement was mainly driven by the structure of sales and reduced waste in groceries. Tokmanni’s Q2 EBIT was 18.7m (7.8 %) vs. EUR 15.8m (6.7 %) Evli and 15.0m (6.4 %) consensus. Operational efficiency improvements impacted positively on the company’s profitability in Q2.

Focus on profitability improvements

Tokmanni’s target in 19E is to improve its profitability through improved gross margin and more efficient operations. The company stated that it will keep its customer promise of low prices thus gross margin improvements are made by increasing the share of own brands and direct import as well as by reducing waste in groceries. The profitability improvements of the company’s supply chain are on the right track, although most of the benefits will be seen later in the future.

Upgraded to “BUY” with TP of EUR 10.2 (prev. EUR 9)

Based on the Q2 result, we have raised our 19E-20E estimates and expect 19E revenue of EUR 946m (prev. EUR 936m) and EBIT of EUR 68m (prev. EUR 62m) resulting in EBIT margin of 7.1 %. We expect 20E revenue of EUR 984m and EBIT of EUR 78m (7.9 %). On our estimates, Tokmanni trades at 19E-20E EV/EBIT multiple of 13.4x and 11.4x which translates into ~28 % discount compared to the international discount peers but is valued at par to its Nordic peers. The company also offers attractive dividend yield (~7 %) in 19E-20E. We upgrade to “BUY” with TP of EUR 10.2 (prev. 9.0).

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Suominen - Wait to see improving volumes

08.08.2019 - 09.45 | Company update

Suominen’s Q2 unfolded without surprises in terms of prices and input costs i.e. margins were stable. Yet volume losses were larger than we expected, and thus the EUR 104m in Q2 sales missed our EUR 113m estimate and EBIT fell short. We have revised our estimates slightly down; our TP is now EUR 2.50 (2.85), rating HOLD (BUY).

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Margins continued stable, volume losses were larger in Q2

Suominen’s Q2 revenue, at EUR 104m, declined by 6% y/y and missed our estimate by 8%. Strong USD added some 3% y/y, and considering the implemented price increases, we estimate ca. 15% of delivery volumes were lost y/y (we estimate the losses to have amounted to ca. 10% in Q1). We expect Suominen to lose 10% of volumes in ‘19 (expect FY revenue to decline by 1%). We expect stable GM for the rest of ’19, and hence EBIT at EUR 12m. Suominen guides flat revenue and improving EBIT for FY ’19.

Suominen changes its business area structure

Suominen has reorganized its business areas, opting for a geographical split (Americas and Europe) instead of the previous application-based reporting (Convenience and Care). The new structure will be effective from Q3 onwards. Suominen says the new organizational model should further help improve efficiency especially when it comes to optimizing regional capacity utilization. There was scant news about Bethune, although the company said the China-US trade war could potentially help Suominen’s competitive positioning in the US market as Chinese imports are hurt by tariffs. Suominen also noted the EUR 6m capacity improvement investment in its Green Bay, WI, plant will support additional volumes from Q3 onwards. Regarding the European market, Suominen says competition among nonwovens producers remains tight but stable.

Estimates

Suominen has achieved an earnings turnaround in ’19 as improved pricing and stabilizing raw material costs have led to a clear improvement in gross margin from the lows of ’18, when the margin was hit by significantly higher input costs. The implemented price increases have, however, led to volume losses. Even though profitability has improved lately, we expect FY ’19 EBIT margin at a relatively low 2.9%. Going forward Suominen needs to achieve higher volumes in order to reach further improvement in EBIT margin. Following the Q2 report, we have revised our FY ’19 EBIT estimate down to EUR 12m (previously EUR 13m), while our revenue estimate stands at EUR 425m (EUR 436m). For ’20 we expect further improvement in EBIT margin (3.9%), assuming gradual improvement in delivery volumes.

We wait to see evidence of stabilizing (improving) volumes

Although Suominen’s valuation is not demanding (ca. 6x EV/EBITDA ‘19e vs. 6.5x historically), volume uncertainty still remains. As the price hikes pass through during ‘19, we are waiting to see evidence of stabilizing (and improving) volumes that would lead to further EBIT improvement in ‘20. We lower our TP to EUR 2.50 (2.85) due to volume uncertainty, and thus our rating is now HOLD (BUY).

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Tokmanni - Strong Q2 performance

08.08.2019 - 09.05 | Earnings Flash

Tokmanni’s Q2 revenue increased by 10.2 % and was EUR 239.9m vs. EUR 236m/234m Evli/consensus. LFL growth continues to be clearly above our estimates at 5.3 % vs. 2.5 % our expectation. Gross margin was 35.2 % vs. 35.6 % our expectation. Tokmanni reiterated its 2019E guidance.

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  • Q2 revenue grew by 10.2 % and was EUR 239.9m vs. EUR 236m/234m Evli/consensus.
  • Q2 adj. gross profit was EUR 84.5m (35.2 % margin) vs. EUR 83.9.m (35,6 %) Evli expectation.
  • Q2 adj. EBITDA was EUR 34.0m vs EUR 30.8/29.7m Evli/consensus
  • Q2 adj. EBIT was EUR 18.7 (7,8 % margin) vs. EUR 15.8m (6.7 %) Evli expectation and EUR 15.0m (6.4 %) consensus
  • Q2 eps was EUR 0.21 vs EUR 0.18/0.18 Evli/consensus
  • Revenue was driven by the timing of Easter and good sales in spring season. Also, the operational efficiency measures progressed in the right direction during Q2.
  • 2019 guidance intact: revenue will grow in 2019 based on the sales from new openings in 2018 and in 2019. Profitability will increase y/y in 2019E.

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CapMan - Earnings beat through success fees

08.08.2019 - 09.00 | Earnings Flash

CapMan's net sales in Q2 amounted to EUR 13.4m, above our estimates (Evli EUR 10.8m), with EBIT also above our estimates (Evli EUR 4.5m), at EUR 5.8m. Scala recorded significant success fees in the quarter, larger than we had anticipated, contributing strongly to the earnings beat.

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  • Revenue in Q2 was EUR 13.4m (EUR 11.4m in Q2/18), above our estimates (Evli EUR 10.8m). Growth in Q2 amounted to 18 % y/y.
  • Operating profit in Q2 amounted to EUR 5.8m (EUR 6m in Q2/18), clearly beating our estimates (Evli EUR 4.5m).
  • Management Company business: Revenue in Q2 was EUR 6.4m vs. EUR 6.7m Evli. Operating profit in Q2 amounted to EUR 0.9m vs. EUR 0.8m Evli.
  • Investment business: Revenue in Q2 was EUR 0m vs. EUR 0m Evli. Operating profit in Q2 amounted to EUR 1m vs. EUR 2.3m Evli.
  • Services business: Revenue in Q2 was EUR 6.9m vs. EUR 3.9m Evli. Operating profit in Q2 amounted to EUR 4.9m vs. EUR 2.1m Evli.
  • Capital under management by the end of Q2 was EUR 3.3b. Of the capital under management EUR 1.9bn was attributable to Real Estate, EUR 1.0bn to Private Equity & Credit and EUR 0.3bn to Infra and other.

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Etteplan - Executing growth strategy

08.08.2019 - 08.00 | Preview

Etteplan will report Q2 results on August 13th. Etteplan has during and after the quarter made acquisitions with a combined number of employees of over 250, expected to have an insignificant impact on Q2 but to aid in achieving the FY2019 guidance amid continued global uncertainty. We expect minor overall margin improvement y/y in Q2 while still remaining cautious to margin development in Technical Documentation Solutions. Following the post-Q1 share price rally we downgrade our rating to HOLD (BUY) with a target price of EUR 9.6.

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Executing its M&A aided growth strategy

Our estimates ahead of Q2 remain intact apart from adjustments made for the acquisitions of Devex Mekatronik (Sweden) and EMP Engineering Alliance (Germany). The two companies combined had revenue of around EUR 26m and over 250 employees in 2018. To our understanding the revenue generated will mainly fall under Engineering Solutions and a smaller share under Software and Embedded Solutions. Our 2019 and 2020 net sales estimates are up by some 3% and 8% respectively. For Q2 we expect net sales and EBITA of EUR 66.6m (Q2/18: 62.0m) and EUR 6.9m (Q2/18: 6.2m).

Market outlook comments of interest

Etteplan expects its revenue and operating profit for 2019 to grow clearly compared to 2018. The acquisitions made will certainly aid in achieving the guidance and reduces 2020 sales growth concerns, but recent macro development still warrants cautionary remarks and our focus in the Q2 report will be on market outlook comments.

HOLD (BUY) with a target price of EUR 9.6

Etteplan’s share price has climbed after the Q1 guidance upgrade and although still at a slight discount to peers, valuation is looking fairer when also considering Etteplan’s historical valuation. We downgrade our rating to HOLD (BUY) and retain our target price of EUR 9.6.

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Pihlajalinna - Focus on profitability

08.08.2019 - 07.55 | Preview

Pihlajalinna reports its Q2 earnings on next week’s Thursday, August 15th. During Q2, the company has actively expanded its service network across the country. The company also announced the launch of an efficiency improvement program in mid-June. We keep our rating “BUY” with TP of EUR 13.0 ahead of Q2.

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Expanding occupational healthcare network continues

Pihlajalinna has grown fast in H1’19 through M&A and expanding the company’s service network. The company indicated earlier that it sees opportunities in expanding its occupational healthcare network as municipalities and other public sector entities are interested in divesting the occupational healthcare providers they currently own. As a result of that, Pihlajalinna has expanded its occupational healthcare network actively in Q2’19 as the company announced the acquisitions of Raisio’s occupational healthcare center Aurinkoristeys and Kouvola’s Työterveys. In addition to acquisitions, the company announced that it will open an occupational healthcare center to Rovaniemi and a healthcare center to Vaasa. The company has also agreed on cooperation with Sydänsairaala and pilot cooperation with Pohjola Vakuutus.

Pihlajalinna seeks annual cost savings of EUR 14m

Pihlajalinna announced in mid-June that the company will launch the preparations of an efficiency improvement program. Through the program, the company seeks to achieve annual cost savings of EUR 14m. The cost savings sought are meaningful as the company’s adj. EBIT in 2018 was EUR 14m. Last year, the company underwent organizational restructuring and in connection with that, conducted codetermination negotiations. The estimated annual cost savings of these were EUR 2.8m. The company stated earlier in Q1’19 that its focus in 2019E is to improve profitability by organic growth, increasing cross-selling and by addressing profitability issues in the new medical service centers. The commence of the newest efficiency improvement program supports the company’s long-term target to reach EBIT margin of 7%, which so far has seemed rather distant. We will update our estimates accordingly once we have more detailed information about the program.

We maintain “BUY” with TP of EUR 13

Our 2019E estimates are intact ahead of Q2 earnings. The company expects 2019E revenue to increase from last year while EBIT is expected to increase notably from last year. We foresee 2019E revenue of EUR 525m (7.6% y/y), while consensus is at EUR 520m and EBIT of EUR 24m (71.4% y/y) vs. consensus of EUR 22.7m. The targeted cost savings add upward pressure on our estimates, but these will be updated once we have more detailed information. We expect Q2’19 revenue of EUR 134m (cons. EUR 132.5m) and EBIT of EUR 4.8m (cons. EUR 4.6m) resulting in EBIT margin of 3.6%. On our estimates, Pihlajalinna trades at 19E-20E EV/EBITDA multiple of 7.2x and 6.6x, which translates into ~25% discount compared to the peer group. We keep our rating “BUY” with TP of EUR 13 ahead of Q2.

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Suominen - Sales miss, profitability stable

07.08.2019 - 13.35 | Earnings Flash

Suominen reported Q2 results with revenue missing our estimate by 8%. However, the company managed a 9.3% gross margin, which was clearly above our 8.7% estimate. At first glance we see no major surprises in the sense that margins have stabilized at higher levels, yet significant nonwovens delivery volumes were also lost. Suominen also reorganized its business areas into a new geographical reporting structure (Americas and Europe).

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  • Q2 revenue amounted to EUR 103.8m vs our EUR 112.7m estimate. Revenue declined by 6% compared to previous year. USD strengthening relative to EUR contributed a positive EUR 3.4m.
  • Gross profit stood at EUR 9.7m vs our EUR 9.8m expectation. Suominen thus managed a 9.3% gross margin, whereas we expected 8.7%.
  • EBIT amounted to EUR 2.7m in Q2 vs our EUR 3.3m estimate i.e. Suominen posted a 2.6% EBIT margin (compared to our 2.9% projection).
  • Until Jun 30, Suominen’s business areas were Convenience and Care. Since Jul 1, Suominen’s business areas are Americas and Europe. More than 60% of Q2 sales were attributable to Americas.
  • Suominen reiterates its 2019 outlook, expecting 2019 sales at 2018 level while guiding improving operating profit.

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Detection Technology - MBU slowdown, but growth story continues

05.08.2019 - 09.15 | Company update

Detection Technology's Q2 result slightly missed our and consensus expectations. MBU outlook remains mixed for the rest of the year, but this is temporary, and we see investment case intact. We maintain BUY rating and target price of 23.5 euros.

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Strong growth in SBU, MBU softness in turn

DT’s Q2 result slightly missed our and consensus expectations with Q2 net sales of EUR 27.5m (+12.8% y/y) vs. EUR 28.5m/28.1m Evli/consensus estimates. Q2 EBIT was EUR 4.8m (17.5% margin) vs. EUR 5.4m/5.1m Evli/cons. SBU sales were clearly better than we expected at 19.4 MEUR (+27.4%, 17.8 MEUR Evli estimate), due to strong demand in China and increasing CT investments related to new EU and US airport standards. MBU Q2 sales were 8.1 MEUR (-11.5% y/y, 10.7 MEUR Evli estimate), which was unexpected since DT in Q1 expected both BU’s to grow in Q2. The decline was attributed to a slowdown in medical CT demand and the sooner than expected ramp down of a key customer’s product. While SBU is now in turn enjoying good demand, the softness in the medical market is expected to be temporary but continuing at least until the end of the year.

Visibility remains low, but overall investment case intact

DT revised its outlook for the rest of the year citing short visibility into customer demand and unpredictable trade politics. DT previously expected total sales to grow during the second half of the year. DT is now guiding for Q3 sales to grow above 10%. Based on the result, we have made only small changes to our headline estimates 2019 and onwards. We expect 2019E net sales to grow 13.7% to EUR 107m driven by SBU’s return to growth of 28% on weak comparables. We expect ‘19E MBU net sales to decline by -7.6% due to the ramp-down of key customer’s product in H2 and slowdown in medical demand. We expect ‘19E EBIT to be at last year’s level due to increase in R&D spending, increasing share of SBU sales affecting the mix, as well as increased pricing competition in both segments.

Strategy update for 2025 period, no change to medium-term financial targets

In conjunction with the result, DT announced its updated strategy until 2025. The company's new strategic target is to be the growth leader in digital x-ray imaging detector solutions and a significant player in other technologies and applications where the company sees good business opportunities. The company estimates that the market for digital x-ray imaging detector solutions will be around EUR 3 billion in 2025. DT’s previous strategy until 2020 was based on being the leader in computed tomography and line-scan x-ray detectors and solutions. The total market, as per the company's previous strategy, is estimated to be around EUR 700 million in 2020. Given DT’s current estimated 2019E sales of above 100 MEUR, it’s fair to say that DT is a leader in the scope of the previous strategy. The new 2025 strategy’s market scope is broader, but DT’s medium-term financial targets remain unchanged; sales growth at least 15% per annum and operating margin at or above 15% in the medium term.

DT is well positioned to benefit from digitalization since the company’s product portfolio already consists of digital radiography products that are used in digital X-ray solutions. There are also new emerging technologies (e.g. CMOS, multi energy) that DT has invested in with the strategic goal to be the growth leader when the emerging technologies become more adapted. To our understanding, the security X-ray equipment manufacturers have been quick to adopt digitalization. However, medical and industrial equipment manufacturers are at an earlier stage of adopting the technology.

BUY recommendation maintained

On our estimates, DT is trading at discounts on EV/EBIT and P/E multiples for ’19-20E. Although visibility is short and trade politics unpredictable, we see longer term investment case intact and therefore discount unjustified. With our estimates broadly intact, we maintain our BUY recommendation with target price of 23.5 euros. Our target price values DT at EV/EBIT-multiple of 16x and 13x on our ‘19E and ‘20E estimates, which is still clearly lower than peer group despite DT’s strong metrics.

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Detection Technology - Q2 result miss, MBU outlook softer

02.08.2019 - 09.20 | Earnings Flash

Q2 net sales at EUR 27.5m (+12.8% y/y) vs. EUR 28.5m/28.1m Evli/consensus estimates. MBU sales were EUR 8.1m (EUR 10.7m our expectation) and SBU sales were EUR 19.4m (EUR 17.8m our expectation). DT’s Q2 EBIT came in at EUR 4.8m vs. our estimates of EUR 5.4m (EUR 5.1m cons).

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  • Group level results: Q2 net sales amounted to EUR 27.5m (+12.8% y/y) vs. EUR 28.5m/28.1m Evli/consensus estimates. Q2 EBIT was EUR 4.8m (17.5% margin) vs. EUR 5.4m/5.1m Evli/cons. R&D costs amounted to EUR 2.9m or 10.7% of net sales.
  • Medical Business Unit (MBU) delivered net sales of EUR 8.1m which was below our estimate of EUR 10.7m. Net sales of MBU decreased by -11.5% y/y due to softening demand and earlier than expected ramp down of one key customer’s product.
  • Security and Industrial Business Unit (SBU) had net sales of EUR 19.4m vs. EUR 17.8m Evli estimate. SBU sales grew 27.4% y/y due to strong demand in China.
  • Outlook updated: sales will grow in the SBU business and decrease in the MBU business in the third quarter. The company expects its net sales to increase in the third quarter in line with the company's financial targets. (Previous: the company's total net sales are expected to grow in the second half of the year.)
  • Medium-term business outlook is unchanged: to increase sales by at least 15% p.a. and to achieve an EBIT margin at or above 15% in the medium term.
  • Strategy update: new strategic target is to be a growth leader in digital x-ray imaging detector solutions. DT estimates the market size of digital x-ray detectors to be around EUR 3 billion in 2025. DT’s focus in the 2020 strategy done five years ago was primarily on the CT and line scan x-ray detector and solution markets, which size is estimated to be around EUR 700 million in 2020.

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Aspo - Supramaxes posted losses in Q2

02.08.2019 - 09.15 | Company update

Aspo lowered its FY 2019 guidance yesterday due to ESL Shipping’s weak Q2 result as the dry bulk carrier’s two Supramax vessels operated at a loss. Aspo previously expected 2019 operating profit to be in the EUR 28-33m range, but now guides EUR 24-30m (the company managed EUR 20.6m in 2018). We previously estimated Aspo’s FY 2019 EBIT at EUR 31m; our revised estimate stands at EUR 28m. Our target price is now EUR 9.25 (9.75) per share. Our new rating is HOLD (BUY).

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We update our estimates for ESL Shipping

Aspo says ESL’s Q2’19 EBIT will decline y/y as the two Supramax vessels posted losses. Aspo also states main customers’ shipping volumes (e.g. SSAB) decreased substantially during the summer months, thus weakening operational efficiency. ESL reported EUR 4.3m in Q2’18 EBIT. Whereas we previously expected ESL to post EUR 4.2m in Q2’19 EBIT, we now expect the dry bulk carrier to have generated EUR 1.8m in EBIT during the quarter. We also update our estimates for the coming quarters. We previously expected ESL’s FY 2019 EBIT at EUR 19m, and now estimate EUR 16m. For FY 2020 we project EUR 23m (previously EUR 26m). There was no update concerning the two new LNG vessels, but Aspo has previously said the crane problems have now been fixed and thus we continue to expect ESL to achieve significant earnings improvement during the second half of 2019.

We leave Telko and Leipurin estimates unchanged

We are not making changes to our estimates for Telko and Leipurin this time. Our revised estimates for ESL mean we now expect Aspo to have generated EUR 5.2m in Q2 EBIT (vs EUR 7.1m a year ago). Our previous estimate stood at EUR 7.6m. We now expect Aspo to manage EUR 28m in FY 2019 EBIT (previously EUR 31m). Aspo’s new guidance range for FY 2019 EBIT is EUR 24-30m (previously EUR 28-33m).

Our updated TP is EUR 9.25 (9.75); new rating HOLD (BUY)

Following our model update we now expect Aspo to post EUR 40m in EBIT next year. Our new TP is EUR 9.25 (9.75), reflecting lower SOTP valuation. Our rating is now HOLD (BUY).

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Verkkokauppa.com - Growth investments impacting profitability

02.08.2019 - 09.10 | Preview

Verkkokauppa.com will report its Q2 earnings on next week’s Friday, August 9th. We expect the competition in consumer electronics market has continued tight and price driven. We expect Q2’19 revenue to grow and profitability to remain flat. We keep our rating “Buy” with TP of EUR 4.7 ahead of Q2.

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Marketing expenses hampering EBIT improvement

According to Verkkokauppa.com, the company continues focusing on growth and enhancing consumer experience. The company has made extensive investments in marketing from Q4’18 onwards and has indicated that the investments will continue throughout 2019. We expect these to hamper EBIT improvement this year. Verkkokauppa.com’s guidance for 2019E revenue is EUR 500-550m while EBIT is expected to be between EUR 11-17m. We expect 2019E revenue of EUR 522m (cons. EUR 524m) and EBIT of EUR 13m (cons. EUR 13m). We expect the increased revenue from the Raisio store, which was opened in Q1’18, to stabilize Q2’19 onwards.

Tight competition expected to continue

Despite of the tight competition, the company was able to strengthen its market share in Q1’19 but as the company has indicated, Q2 is normally weaker. As we expect the competition has remained fierce and price driven, we do not expect any improvements in Q2 margins. We expect Q2 revenue of EUR 111m (8.4% y/y) while consensus is at EUR 114m and EBIT of EUR 1m (cons. of EUR 1.4m) resulting in EBIT margin of 0.8%. We expect gross margin of 14.5% in Q2’19 (Q2’18: 14.7%). Possible wholesale/B2B deliveries might further impact gross margin in Q2.

“Buy” with TP of EUR 4.7

We have kept our estimates intact ahead of Q2 earnings. On our estimates, Verkkokauppa.com is trading at 19E-20E EV/EBIT multiple of 10.7x and 7.7x which translates into ~50-70% discount compared to the online-focused Nordic and European peer group. We keep our rating “BUY” with target price of EUR 4.7 ahead of Q2.

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Raute - More orders needed

01.08.2019 - 09.25 | Company update

Raute’s Q2 EBIT missed our estimates, but overall picture remains unchanged. Market uncertainty is postponing investment decisions. We adjust our estimates slightly downwards, lower our TP to 23.5 (25.5). Our rating is now HOLD (BUY).

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Market uncertainty continues

Raute’s Q2 EBIT was EUR 2.3m, missing our estimate of EUR 2.9m. The miss was due to due to a few projects causing extra delay costs. Revenue amounted to EUR 37.0m vs. our EUR 35.6m estimate (EUR 43.7m in Q2’18). While project deliveries stood at a relatively low EUR 18m (vs EUR 30.7m a year ago), services revenue was EUR 19m, i.e. increasing by almost 50% y/y. Raute held its outlook and repeated the market remains uncertain, with current demand mostly attributable to larger as well as smaller projects, while within mid-sized orders there’s unusual silence. Raute says so far it has only seen investment decisions and negotiations being delayed instead of actual cancellations. Activity concerning potential larger projects remains at a good level, and services demand remains stable.

Order book and intake still healthy, but more is needed

Raute’s Q2 order intake, at EUR 26m, declined only slightly compared to the EUR 28m figure a year earlier. Considering Q2’19 did not include any new major capacity projects the figure could even be described as relatively strong. The current EUR 72m order book is clearly below the EUR 120-140m record 2018 highs. The book covers an exceptionally long period of time as a significant share of deliveries is scheduled for 2020 (and some even for 2021). Therefore, Raute needs clear pick-up in orders during H2’19 to reach our previous FY 2019 revenue estimate (EUR 158m). While larger orders may materialize shortly (e.g Russia), we adjust our FY 2019 estimates downwards to reflect the increased uncertainty. We now expect for 2019E EUR 148m in revenue and EUR 10m in EBIT (6.8% margin).

European revenue exposure set to decline due to low orders

Geographical sales split didn’t change much during the second quarter as Europe accounted for roughly 45% of revenue, Russia for 25% and North America ca. 15%. While the split has remained steady compared to last year, Europe’s share is bound to decline significantly in the coming quarters due to much lower order intake during 2019. So far this year European order intake has been a fraction of previous year’s volume (EUR 9m in H1’19 compared to EUR 49m in H1’18). Russia has developed strong, almost doubling order intake in H1’19 (EUR 26m) compared to year earlier (EUR 14m), while North American orders have been stable, increasing by a couple of million to EUR 12m. In other words, Russia and North America are set to generate major portions of revenue next year.

Valuation is low but earnings development uncertain

On our revised estimates Raute trades ca. 4x EV/EBITDA and 6x EV/EBIT ‘19e (compared to their respective 6x and 8x historical averages). Due to uncertain earnings development, we see lower multiples justified. We revise our TP to reflect our slightly lower estimates; our TP is EUR 23.5 (25.5); rate HOLD (BUY).

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Raute - Project delays burden EBIT margin

31.07.2019 - 09.45 | Earnings Flash

Raute’s EUR 37m Q2 revenue topped our estimate slightly, helped by strong services sales. Nevertheless, operating margin remained on the weak side due to the cost burden caused by a few delayed projects. Order book stands some 40% lower than a year ago, however it now spans an exceptionally long period.

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  • Q2 revenue amounted to EUR 37.0m vs our EUR 35.6m estimate (EUR 38.2m consensus).
  • Order intake was EUR 26m compared to EUR 28m a year ago. Order book stood at EUR 72m at the end of Q2 (compared to EUR 127m a year ago). Raute says a significant proportion of the order book is scheduled for 2020 (and a small amount for 2021) i.e. the order book is stretched exceptionally long.
  • Q2 operating profit was EUR 2.3m vs our EUR 2.9m estimate (EUR 2.7m consensus). Operating margin therefore amounted to 6.3% vs our 8.1% expectation (7.1% consensus). A few delayed projects lead to extra costs.
  • Raute says current demand is focused on major new capacity projects as well as services and small-scale improvements, whereas the share of mid-sized projects is exceptionally low and causes fluctuations in order intake. All in all, market uncertainty has increased, causing delays in project negotiations.
  • Raute changed its FY 2019 guidance on Jun 25, expecting revenue and operating profit to decrease compared to previous record-high year.

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Tokmanni - Boom in store openings in Q2

31.07.2019 - 09.00 | Preview

Tokmanni will report its Q2 result on next week’s Thursday, August 8th. The company has opened and relocated stores in a good pace in Q2 and therefore the company should clearly exceed its annual expansion targets in 2019. We expect Q2 LFL growth of 2.5% and continued profitability improvements. We keep our rating “HOLD” with TP of EUR 9.0 ahead of Q2.

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New store openings in Q2

Tokmanni’s target is to increase its store network to above 200 stores and to increase its retail space by some 12,000 square meters annually which means approximately five new store openings per year. During Q2’19, Tokmanni has reopened the old Ale-Makasiini stores under the Tokmanni brand in Central Finland, which the company acquired in Q4’18. The company has also relocated stores and opened new stores in Tesoma and Loppi in Q2. Due to the active opening pace in H1, Tokmanni will exceed its annual target of approx. five new store openings/year.

Improving profitability in 2019E

Tokmanni is focusing towards improved profitability in 2019E. The company aims to reach ~9% adj. EBIT margin in long-term. Profitability improvements will be made through gross margin and operational efficiency improvements such as pushing OPEX as % of sales down. Some results were shown already in Q1’19 and we expect the same trend to continue in Q2. We expect 2019E EBIT of EUR 62m (~19% growth y/y), while consensus is at EUR 61m.

We keep our rating “HOLD” with TP of EUR 9.0

We have kept our estimates intact and expect Q2 revenue of EUR 236m (cons. EUR 234m) and gross margin of 35.5%. Tokmanni’s LFL growth was exceptionally high in Q2’18 (7.7%). We have taken a more conservative view for Q2’19 LFL growth and expect LFL growth of 2.5%. We foresee Q2 EBIT of EUR 16 (cons. EUR 15m) and EBIT margin of 6.7%. On our estimates, Tokmanni trades at 19E-20E EV/EBIT multiple of 13.8x and 11.8x (~2-5% premium compared to the peer group). We keep our rating “HOLD” with TP of EUR 9.0 ahead of Q2.

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Talenom - Downgrade to HOLD

30.07.2019 - 09.15 | Company update

Talenom’s top- and bottom-line figures in Q2 were quite in line with our estimates, and the larger piece of news was the change of CEO. We have made mostly minor upwards revisions to our estimates due to acquisitions and a faster than anticipated implementation of new automation procedures to the bookkeeping automation line. With valuation becoming stretched due to share price inclines we downgrade to HOLD (BUY) with a TP of EUR 36.0 (35.0)

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Earnings in line, CEO to change

Talenom’s Q2 earnings did not deliver any major surprises, with net sales of EUR 14.8m (Evli 14.4m) and EBIT of EUR 3.2m (Evli 3.2m) well in line with our estimates, with the main news being the change of CEO. Otto-Pekka Huhtala (former deputy CEO) has started as CEO as of the 29.7.2019. Talenom gave a limited update on the Talenom Financing Services, having provided EUR 31m financing during H1/19. The potential for the service area remains promising but we expect an insignificant near-term impact.

Estimates revisions mostly minor

We have made minor upwards revisions to our estimates, with only minor adjustments to our 2019 estimates, now expecting 2019 sales of EUR 59.9m and EBIT of EUR 11.7m. We have made slight adjustments to sales estimates to account for the Wasa Tilit and WT Företagstjänster acquisitions, also raising our 2020E sales growth estimate by 2pp to 18%. Talenom has also started to implement the new instance of automation, thus eliminating dependencies to other third-party accounting software. The implementation schedule is ahead of our previous estimates, prompting a minor adjustment to our H2/19 earnings estimates.

HOLD (BUY) with a target price of EUR 36.0 (35.0)

Talenom has enjoyed substantial share price inclines and although Talenom on our estimates is set to continue to deliver solid sales and earnings growth, valuation is becoming a stretch. Our target price and estimates value Talenom at a 2019 P/E multiple of 28.5x, which we still consider justifiable. We downgrade our rating to HOLD (BUY).

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Suominen - Margin gains, volume losses

30.07.2019 - 09.15 | Preview

Suominen reports Q2 results next week, on Wed, Aug 7. In Q1 the company’s gross margin improved to 8.1% (compared to the 6.2% low in Q4’18) as raw material costs remained stable and price hikes came into effect. We expect the gross margin improvement trend to continue throughout 2019, but the main question concerns volume losses following price hikes. We leave our previous estimates unchanged for now. Our target price still stands at EUR 2.85 per share; our new rating is BUY (HOLD).

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Volume declines in focus following the hiking of prices

In our view Suominen’s declining earnings trend bottomed out in Q1 as price hikes and stabilizing raw material costs drove improvement in gross margin. Q1’19 gross margin stood at 8.1%; we expect Q2 gross margin at 8.7%. However, the company lost significant delivery volumes. We estimate Suominen’s delivery volume losses amounted to some 9% in Q1; we expect losses of similar magnitude for the remainder of 2019. Our expectation for Q2 is EUR 113m in revenue and EUR 3.3m in EBIT.

Expect flat input costs and price hikes to lift ‘19e earnings

While the EURUSD exchange rate has remained steady during the last three months, European softwood pulp prices have declined further, by about 10%. The development is beneficial from Suominen’s point of view, softwood pulp being a key nonwovens raw material. Meanwhile polypropylene prices have increased by a roughly similar percentage. According to Lenzing, viscose and polyester prices remained stable during spring (development until Apr 15). All in all, raw material costs have been flat. We expect ‘19e revenue at EUR 436m and EBIT at EUR 13.3m, assuming stable input costs for the remainder of the year.

We leave our estimates intact ahead of the report

Suominen is valued at ca. 6.0x EV/EBITDA ‘19e (on our estimates) vs historical average of 6.5x. Suominen’s peer group multiples have gained during the last three months, and although there is still uncertainty concerning delivery volumes, we consider the current valuation undemanding. We retain our TP of EUR 2.85 per share, and thus our updated rating is BUY (HOLD).

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Talenom - In line with estimates

29.07.2019 - 13.15 | Earnings Flash

Talenom’s Q2 results were well in line with our estimates, with revenue at EUR 14.8m (Evli EUR 14.4m) and EBIT at EUR 3.2m (Evli EUR 3.2m). Talenom also reported that its CEO will change, with deputy CEO Otto-Pekka Huhtala taking over as CEO from the 29.7.2019.

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  • Talenom’s net sales in Q2 amounted to EUR 14.8m (EUR 12.5m during Q2/18), slightly above our estimates (Evli EUR 14.4m). Q2 revenue growth was at 17.7% y/y.
  • The operating profit in Q2 amounted to EUR 3.2m (EUR 2.6m in Q2/18), in line with our estimates (Evli EUR 3.2m), at a margin of 21.4%.
  • Talenom’s CEO will step as of the 29.7.2019 and will be replaced by current deputy CEO Otto-Pekka Huhtala
  • Talenom’s guidance intact: the net sales growth rate is expected to be greater than in 2018 and the operating profit margin to improve compared to 2018
  • Net investments during the H1/19 amounted to EUR 9.5m (H1/18: 5.5m). The acquisitions of Wakers Consulting and Wasa Tilit and Företagstjänster amounted to EUR 4.2m

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Raute - Market uncertainty justifies caution

29.07.2019 - 09.45 | Preview

Raute reports Q2 results this week, on Wed, Jul 31. The company downgraded its FY 2019 guidance recently, on Jun 25. Raute had previously expected flat revenue and operating profit for FY 2019, but now expects revenue and EBIT to be lower than last year. We keep our target price at EUR 25.5 per share; our rating is now BUY (HOLD).

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We expect strong Q2 EBIT margin due to inventory timings

Even though Raute recently moderated its guidance for FY 2019, we expect Q2 to have been quite strong in terms of operating margin; Raute’s Q1 operating margin amounted to a relatively weak 6.3% due to unfavorable timing of certain inventory-related line items, which the company said were some EUR 0.5- 1.0m in magnitude. We therefore expect Q2 operating margin at 8.1% (vs 7.3% a year ago and 6.3% in Q1). Our EUR 35.6m revenue and EUR 2.9m EBIT estimates for Q2 compare to the respective EUR 38.2m and EUR 2.7m consensus estimates.

Lowered FY 2019 outlook as project deliveries were delayed

Raute lowered guidance on Jun 25 due to delayed schedules of certain challenging project deliveries and postponed negotiations concerning some larger orders not yet closed. Upon lowering its outlook, Raute said it continues to view the operating environment stable and sees healthy activity related to potential mill capacity expansion projects. However, Raute also cited elevated uncertainty due to increased share of smaller customers, whose decision-making is more unpredictable. We expect 2019 revenue to decrease by a double-digit percentage to EUR 158m (EUR 156m consensus) and EBIT to decline to EUR 11m (same as consensus) due to project uncertainties and slower order book development (EUR 84m Q1’19 vs. EUR 142m Q1’18).

Low multiples warranted due to outlook uncertainties

Raute trades around 4x EV/EBITDA and 5x EV/EBIT on our 2019 estimates. We leave our estimates unchanged for now and retain our EUR 25.5 target price. Our new rating is thus BUY (HOLD) as Raute’s share price has declined since our previous update.

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Detection Technology - Expecting good growth, flat EBIT

29.07.2019 - 09.30 | Preview

Detection Technology will report Q2 earnings this Friday, August 2nd. Our focus will be on commentary regarding the market outlook for both security and medical business units. With SBU currently exhibiting a good growth profile, we’re looking for color on the possibility of MBU growth mitigating the negative effects of the ramp-down of one of DT’s key medical customer’s product in H2. Our rating and target price remain intact ahead of Q2.

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Expecting good growth in both SBU and MBU

DT has guided for double digit growth for both BU’s in Q2. We estimate SBU growing 17% and MBU 16% y/y, which is in line with DT’s Q2 guidance. We expect Q2 net sales of 28.5 MEUR (+16.7% y/y, 28.1 MEUR cons.) and 5.4 MEUR EBIT (+2% y/y), 5.1 MEUR cons.). Our EBIT expectation is flat due to increase in R&D spending. Overall, the outlook for SBU is positive with the security market picking up momentum after a decline in the end of last year. Demand is increasing due to the Chinese security market returning to growth and increasing CT investments related to new EU and US airport standards. The outlook for MBU is however more mixed with one key MBU customer ramping down sales of one of DT’s product in H2. Despite this, H2 net sales are expected to grow compared to last year. With SBU exhibiting a good growth profile, we’re looking for color on the possibility of MBU growth mitigating the effects of the product ramp-down in H2.

Flat EBIT this year, but growth story continues

For full year 2019E, we expect net sales to grow 11% to EUR 104m driven by SBU’s return to growth of 17.8% on weak comparables. We expect ‘19E MBU net sales growth to be flat due to the ramp-down of key customer’s product in H2. We expect ‘19E EBIT to be at last year’s level due to increase in R&D spending, increasing share of SBU sales affecting the mix, as well as increased pricing competition.

BUY rating and TP of 23.5 euros maintained ahead of Q2

Our estimates, rating and target price of 23.5 euros remain unchanged ahead of Q2 report.

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Consti - Earnings visibility still an issue

29.07.2019 - 08.05 | Company update

Consti’s Q2 results were slightly weaker than expected, as the EBIT of EUR 0.1m fell below our estimates (Evli 0.6m), further impacted by an individual building purpose modification project. The order backlog development raises some concerns for near-term sales growth, but our eyes are still on profitability improvements.

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Project burden still visible in profitability

Consti’s Q2 results fell slightly short of our expectations. Profitability was as expected further burdened by the impact of an individual building purpose modification project, but EBIT in Q2 was still weaker than anticipated, at EUR 0.1m (Evli EUR 0.6m). The revenue of EUR 81.2m was in line with our estimates (Evli EUR 81.3m), aided by the completion of certain larger projects. The order backlog of EUR 227m was down 20.8% y/y due to the high sales and lower orders received.

Order backlog raises some concerns for sales growth

We have made slight revisions to our estimates, mainly to near-term net sales estimates. Consti’s order backlog and orders received development has in our view been relatively meager during H1/19, which coupled with the continued sales growth during H1 opens up some concern for sales development in 2020. We have lowered our 2019-2021E sales CAGR estimate to 1%, with essentially flat growth in 2020. Due to the past profitability challenges we do not however see sales growth as a primary concern and see that Consti’s near-term focus will remain on improving profitability. We expect a notable increase in profitability during H2/19, as the project that burdened H1 is expected to be completed and expect 2019 EBIT of EUR 5.2m.

HOLD with a TP of EUR 5.80

Consti trades below peers, in particular on 2020 estimates when earnings are expected to rebound. Although profitability according to Consti has remained at good levels, when excluding the profitability burdening large projects, we see that weak visibility in the underlying profitability still warrants caution and retain our HOLD-rating with a target price of EUR 5.80.

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Next Games - Welcome turnaround progress

29.07.2019 - 00.00 | Company update

Next Games’ profitability saw improvement during Q2, with the adj. EBIT rising to EUR -0.5m (Q2/18: -2.0m). Revenue grew 65% y/y to EUR 9.4m but was below our estimates mainly due to a lower than expected DAU for Our World. Development of the financial situation saw positive signs, but game launch financing still remains a concern.

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Earnings improvement and mixed Our World progress

Next Games reported decent Q2 results, with EBIT still in the red, at EUR -1.1m, but seeing improvements and in line with our estimates (Evli EUR -1.0m). The adj. EBIT was slightly below our estimates, at EUR -0.5m (Evli 0.1m). Revenue saw growth of 65% y/y to EUR 9.4m, below our estimates (Evli 10.4m) mainly due to a lower than expected DAU for Our World. Q2 did however see the game’s ARPDAU improve to a commendable EUR 0.34 (from IAP’s). Retention issues, however, led to marketing investment levels for the game rising to above planned levels.

Financial situation progress but concerns remain

We have made some adjustments to our estimates, mainly due to having revised our launch timetable estimate for Blade Runner Nexus from Q3/2019 to Q4/2019. Our estimates also include a minor adjustment for marketing revenue from Our World, which based on figures posted in Q2 shows promising revenue potential. We expect revenue in 2019 to grow 21% to EUR 42.5m (prev. 47.8m), while expecting profitability to remain negative, with an adj. EBIT of EUR -3.0m (prev. EUR -0.5m). A key near-term concern remains the launch of Blade Runner and financing of any more substantial marketing investments that are to be expected in conjunction with the launch. A positive sign for the financial situation was the stabilization of the cash balance and a renewed credit limit guarantee.

HOLD with a target price of EUR 1.50

Next Games turnaround project has seen good progress and earnings have seen improvements compared to the near past. With the uncertainty relating to financing of upcoming game launches justifying valuation upside remains a challenge and we retain our HOLD-rating and target price of EUR 1.50.

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Consti - Earnings remain weaker

26.07.2019 - 09.00 | Earnings Flash

Consti's net sales in Q2 amounted to EUR 81.2m, in line with our estimates (Evli EUR 81.3m). EBIT amounted to EUR 0.1m, below our estimates (Evli EUR 0.6m). Profitability continued to be affected by performance obligations of a single building purpose modification project.

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  • Net sales in Q2 were EUR 81.2m (EUR 77.8m in Q2/18), in line with our estimates (Evli EUR 81.3m). Growth in Q2 amounted to 4.4 % y/y. Growth was aided by an increase in volume of large comprehensive renovation projects.
  • Operating profit in Q2 amounted to EUR 0.1m (EUR 1.7m in Q2/18), below our estimates (Evli EUR 0.6m), at a margin of 0.1 %. The profitability was still burdened by remaining performance obligations of an individual building purpose modification project, that was essentially completed by the end of Q2/19. The impact was included in our estimates but was larger than anticipated.
  • The order backlog in Q2 was EUR 227m (EUR 286m in Q2/18), down by 20.8 %. The order intake amounted to EUR 57.4m, down 35.2% y/y, reflecting the company’s more disciplined bidding procedures.
  • Guidance reiterated: The Company estimates that its operating result for 2019 will improve compared to 2018.

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Next Games - Healthy earnings improvement

26.07.2019 - 08.40 | Earnings Flash

Next Games' net sales in Q2 amounted to EUR 9.4m, below our estimates (Evli EUR 10.4m). EBIT amounted to EUR -1.1m, in line with our estimates (Evli EUR -1.0m) and the adj. EBIT to EUR -0.5m (Evli EUR 0.1m). TWD: OW boasted an impressive ARPDAU of EUR 0.34 (from IAP’s) during the quarter, while challenges with retention led to higher than planned marketing investments levels.

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  • Net sales in Q2 were EUR 9.4m (EUR 5.7m in Q2/18), below our estimates (Evli EUR 10.4m). Growth in Q2 amounted to 65 % y/y.
  • Operating profit in Q2 amounted to EUR -1.1m (EUR -2.4m in Q2/18), in line with our estimates (Evli EUR -1m), while adj. EBIT amounted to EUR -0.5m (Evli EUR 0.1m). Monthly fixed costs in Q2 amounted to EUR 1.2m following successful implementation of the savings program (co’s target EUR 1.1-1.2m).
  • DAU during Q2/19 was 350k (Q2/18: 306k). MAU was 1.16m (Q2/18: 0.98m). ARPDAU was EUR 0.28 in Q2/19 (Q2/18: EUR 0.2).
  • TWD: NML - DAU 190k (Q2/18: 287k), MAU 540k (Q2/18: 884k), ARPDAU EUR 0.22 (Q2/18: 0.21).
  • TWD: OW - DAU 155k, MAU 602k, ARPDAU EUR 0.34 (from IAP’s).
  • TWD: OW boasted an impressive ARPDAU of EUR 0.34 (from IAP’s) during the quarter, but challenges with player retention led to marketing investments being at a higher level than planned.
  • With the new operating model, the company now has nine new concepts or prototypes in development.
  • The company’s cash balance stood at EUR 4.7m at the end of the quarter compared to EUR 4.8m at the end of the first quarter of 2019.

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Exel Composites - Improvement amid breezy conditions

24.07.2019 - 09.30 | Company update

Exel Composites achieved an 8.5% adjusted operating margin in Q2, a profitability level some 200bps above our and consensus expectations. Exel’s recent decision to retain its ambitious long-term financial targets also speaks volumes about the company’s conviction on wind energy growth potential. So far development in 2019 has been encouraging, although the targets represent a gap which will not be closed for a while yet. We retain our BUY rating; our target price still stands at EUR 5 per share.

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Wind energy sector continued to support volumes

Muted development extended within the Industrial Applications segment and Asia-Pacific region as telecommunications sector volumes remained weak. The Rest of the World region more than doubled its H1’19 revenues y/y due to the DSC acquisition; the transaction also boosted the Construction & Infrastructure segment thanks to the U.S. unit’s wind energy exposure. DSC remained unprofitable in Q2 (cost measures’ fruits should be visible already during Q3).

Financial targets remain stiff compared to current figures

Exel lately confirmed its long-term financial targets for 2019-22, continuing to target adjusted operating margin at a level above 10% while aiming for ROCE north of 20%. Exel’s Q2 recorded the respective figures at 8.5% and 14.1%. Q2 gross margin was strong at 63% i.e. somewhat above the typical level. We continue to expect the company’s ongoing volume shift to wind energy applications will put slight pressure on gross margin; hence the realization of profit-based targets depends on continued strong volume growth. Exel also introduced a net gearing target (at or below 60%), according to which the company should more than halve its indebtedness from the current 123% level. Exel retained its guidance for FY 2019 (expects higher revenue and adj. EBIT).

Current valuation level means there’s room for upside

We leave our revenue estimates largely intact but revise our operating margin estimates slightly upwards. Exel currently trades below 7x EV/EBITDA ‘19e (on our estimates) vs the historical 8-9x levels. Our rating remains BUY, our TP at EUR 5.

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Innofactor - Starting to show earnings stability

24.07.2019 - 09.15 | Company update

Innofactor’s Q2 results did not present any surprises and both net sales (Act./Evli EUR 16.7m/16.8m) and EBITDA (Act./Evli EUR 1.1m/1.0m) were well in line with our estimates. With a sales decline during H1/19 Innofactor will need to deliver a pick up in sales during H2/19, which should be made possible by the solid order backlog and new recruitments and actions to turn the sales growth in Denmark and Sweden back on track. We retain our BUY-rating with a target price of EUR 0.80.

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Q2 results well in line with our expectations

Innofactor’s Q2 results did not present any surprises and were well in line with our estimates. Revenue declined 2.1% y/y to EUR 16.7m (Evli EUR 16.8m) while EBITDA improved to EUR 1.1m (Evli EUR 1.0m). Profitability continues to be aided by the actions taken during H2/18, as the revenue per employee increased by some 8%. The improved profitability also saw the operating cash flow increasing to EUR 2.1m in H1/19 (H1/18: EUR 0.4m).

Sales growth uplift needed during H2/19

Our estimates remain unchanged post-Q2, expecting net sales of EUR 64.0m and an EBITDA of EUR 4.7m in 2019. Innofactor has estimated for its net sales in 2019 to increase from 2018 and EBITDA to amount to EUR 4.0-6.0m. We expect net sales in 2019 to increase on slightly, by 1.3% from 2018. With net sales in H1/19 2.0% below H1/18 a pick-up in sales growth is required during H2/19. According to management sales growth is supported by the order backlog and recent larger new recruitments. Denmark and Sweden are expected to show growth in sales by Q4.

BUY with a target price of EUR 0.80

On our estimates Innofactor trades at a discount to peers, namely on EV/EBITDA and purchase price amortization adjusted multiples. With our estimates and views on Innofactor unchanged post-Q2 we retain our BUY-rating and target price of EUR 0.80.

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Exel Composites - Positive development continued

23.07.2019 - 10.45 | Earnings Flash

Exel Composites reported Q2 revenue at EUR 26.5m, in line with our expectations. Adjusted operating profit, at EUR 2.2m, was above our estimate. The company’s cost savings program is delivering good results.

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  • Q2 revenue amounted to EUR 26.5m vs our EUR 26.7m estimate (consensus at EUR 27.4m).
  • Q2 adjusted operating profit stood at EUR 2.2m vs our EUR 1.7m expectation (consensus at EUR 1.8m). The 8.5% adjusted operating margin was clearly above our 6.3% estimate, as well as the consensus.
  • The 4.8% increase in revenue y/y was mainly attributable to the acquisition of DSC (completed in May 2018). The wind energy industry continued to support volumes. The telecommunications sector remained weak.
  • The acquisition of DSC was reflected in the increase in revenue within the Rest of the World region. Asia- Pacific revenues declined due to telecommunications volumes. European revenue remained flat y/y.
  • The cost savings program is proceeding according to plan. The company expects to fully realize the EUR 3m annual savings target in 2020. DSC remained in the red during Q2.
  • Guidance for full year 2019 remains unchanged as the company expects revenue and adjusted operating profit to increase compared to previous year.

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Innofactor - In line with expectations

23.07.2019 - 09.15 | Earnings Flash

Innofactor’s Q2 results were in line with our estimates. The net sales in Q2 amounted to EUR 16.7m (Evli EUR 16.8m), while EBITDA amounted to EUR 1.1m (Evli EUR 1.0m).

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  • Net sales in Q2 were EUR 16.7m (EUR 17m in Q2/18), in line with our estimates (Evli EUR 16.8m). Net sales in Q2 declined -2.1 % y/y.
  • Operating profit in Q2 amounted to EUR 0.2m (EUR -0.6m in Q2/18), in line with our estimates (Evli EUR 0.1m), at a margin of 0.9 %.
  • EBITDA in Q2 was EUR 1.1m (EUR 0m in Q2/18), in line with our estimates (Evli EUR 1m), at an EBITDA-margin of 6.8 %.
  • Order backlog at EUR 44.2m, up 87% y/y, aided by several significant orders signed during the first half of 2019.
  • Guidance reiterated: Innofactor’s net sales in 2019 is estimated to increase from 2018 and EBITDA is estimated to grow up to EUR 4.0–6.0 million

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Marimekko - Updated guidance for 2019E

23.07.2019 - 09.15 | Preview

Marimekko will report its Q2 result on August 15th and the company updated yesterday its guidance for FY19E. The company expects 2019E EBIT to be higher than in previous year, approximately maximum of EUR 15m. The company reiterated its guidance for revenue; revenue is expected to be higher than in previous year. We retain our rating “HOLD” with TP of EUR 26 (25) ahead of Q2.

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Updated guidance ahead of Q2

Marimekko updated its 2019E guidance ahead of its Q2 result. The company reiterated its FY19E revenue guidance but updated its guidance for FY19E comparable operating profit. According to the new guidance for 2019E, revenue is expected to be higher than in previous year while operating profit is expected to be higher than in previous year at maximum of EUR 15m (previous: 2019E operating profit expected to be in the same level as in 2018). Marimekko did not provide much information other than that. Increased EBIT guidance for 2019E is mainly due to increased licensing income in APAC. The company also expects H2’19 costs to be higher than in H2’18.

Sales expected to increase in Q2

We expect Marimekko’s Q2 total sales to be EUR 31.1m (10.4% y/y) while we expect Q2’19E adj. EBIT of EUR 3.5m (2018 adj. EBIT of EUR 3.1m) resulting EBIT margin of 11.2% (2018 EBIT margin of 11.1 %). Marimekko’s business is cyclical and H2 and especially the outcome of Q4 holiday sales have a high impact on Marimekko’s total sales and profitability. The company also became aware of grey export in Asia in Q1’19 and the actions taken might have an impact on sales and earnings.

We retain “HOLD” with TP of EUR 26 (25)

We have updated our estimates after the guidance update. We have increased our FY19E revenue expectation to EUR 125m (previous EUR 118m) and adjusted our cost estimates to be in line with the new guidance. We expect 2019E adj. EBIT to be EUR 14.2m (previous estimate EUR 12.5m). We keep our rating “HOLD” with TP of EUR 26 (previously EUR 25).

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Vaisala - Performance on track

22.07.2019 - 09.00 | Company update

Vaisala delivered a good Q2 result with a clear EBIT beat. The outlook for 2019 remains positive as Vaisala enters H2 which is seasonally stronger for W&E. The acquisitions of Leosphere and K-Patents are bearing fruit and we see both accelerating sales further when fully integrated into Vaisala’s sales channel. We raise our target price to 21 euros (prev. 20) but maintain HOLD recommendation.

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Acquired businesses bearing fruit

Vaisala’s Q2 net sales were 96.1 MEUR vs. 94.2 MEUR our expectation (93.5 MEUR consensus). Q2 EBIT was 7.2 MEUR vs. our expectation of 3.2 MEUR (4.5 MEUR consensus). The EBIT beat was driven by slightly better sales growth and 4 percentage points higher gross margin (54% vs. 50% Q2/18) in both business units, which was a result of product and project profitability, and currency tailwind. W&E’s net sales growth was 16.7% and it came mostly from wind lidars. IM net sales growth was 26%, with K-Patents contributing around 12% of the growth. The integration of Leosphere is now complete and K-Patents is expected to be integrated during Q3, therefore sales synergies should start to become more visible during H2.

H2 seasonally stronger for W&E, estimates revised upward

After the solid Q2 result, Vaisala is on track to deliver in H2, which is seasonally stronger for W&E. Post Q2 result, we have adjusted slightly upward both our sales and EBIT estimates for this year and coming years reflecting the confidence we have in Vaisala’s strategy. We expect 2019E net sales to be 392 MEUR (12% growth yoy) and reported EBIT to be 35 MEUR (46 MEUR adjusted for PPA and one-offs), representing 9% EBIT margin (12% adj. EBIT margin). Our EBIT estimates are now in the upper end of the company’s 2019 guidance. For 2020-21E, we expect 4-5% net sales growth, and we estimate EBIT margin to gradually improve from 9% 2019E towards 11% 2021E (adjusted EBIT margin from 12% 2019E towards 13% in 2021E).

HOLD maintained with revised TP of 21 euros (prev. 20)

On our adjusted EBIT estimates, Vaisala is trading some 10-15% under our peer group on EV/EBIT multiples. Reflecting our estimates revisions, we raise our target price to 21 euros (prev. 20) but maintain HOLD recommendation.

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Vaisala - Clear Q2 beat, with good contribution from acquired businesses

19.07.2019 - 12.15 | Earnings Flash

Vaisala’s Q2 net sales at 96.1 MEUR vs. 94.2 MEUR our expectation and 93.5 MEUR consensus. Q2 EBIT was 7.2 MEUR vs. our expectation of 3.2 MEUR (4.5 MEUR consensus). Adjusted EBIT was 9.4 MEUR vs. our 6.2 MEUR adjusted EBIT expectation.

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  • Group level results: Q2 net sales at 96.1 MEUR vs. 94.2 MEUR our expectation and 93.5 MEUR consensus. Q2 EBIT was 7.2 MEUR vs. our expectation of 3.2 MEUR (4.5 MEUR consensus). Adjusted EBIT was 9.4 MEUR vs. our 6.2 MEUR adjusted EBIT expectation. EPS was 0.14 (0.06 Evli, 0.08 consensus).
  • Gross margin was 54.2% vs. 50.1% last year
  • Order received was 98.0 MEUR vs. 71.1 MEUR last year
  • Weather & Environment (W&E) net sales was 63.2 MEUR vs. 60.2 MEUR our expectation. EBIT was 0.6 MEUR (-1.5 MEUR Evli)
  • Industrial Measurements (IM) net sales was 34.8 MEUR vs. 34.0 MEUR our expectation. EBIT was 7.5 MEUR (4.7 MEUR Evli)
  • CEO comment: “Vaisala’s second quarter orders received and net sales were strong in all geographical areas. Around half of the order growth came from acquired companies. Excellent growth of orders received in Weather and Environment Business Area reached 49%. This growth was generated by medium-sized orders and especially in sounding and wind lidar businesses.”
  • Business outlook for 2019 unchanged: 2019 net sales to be in the range of EUR 380–400 million and operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract.

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Consti - Expecting weaker earnings quarter

19.07.2019 - 08.15 | Preview

Consti will report Q2/19 earnings on July 26th. A key uncertainty factor still remains any potential profitability impacts of the building purpose modification project that affected Q1 earnings. With the project having been on-going still post-Q1 we remain conservative in our profitability estimates but still expect Q2 EBIT to be slightly positive, at EUR 0.6m, and net sales at EUR 81.3m. We retain our HOLD rating with a target price of EUR 5.8 (6.0).

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Expect project burden impact on Q2 earnings

Consti’s Q1 EBIT was barely negative, at EUR -0.4m, due to performance obligations of an individual building purpose modification project. As the project has been on-going also during Q2, we expect a continued negative impact on profitability. We estimate a Q2 EBIT of EUR 0.6m. We expect slight y/y sales growth to EUR 81.3m. Although the order backlog declined slightly in Q1 sales remain supported by strong Q1 growth and order intake as well as an expected faster order backlog conversion.

Risk levels still highish but declining

Consti has in our view been showing signs of lower project pipeline risks after having struggled with project management issues since the latter half of 2017. H1/19 has seen the completion and near or expected completion of several significant projects. The share of more demanding building purpose modification projects in the order backlog has also decreased. The likelihood of new major surprises in our view is declining, while we note that the arbitration proceedings relating to the St. George project are still on-going.

HOLD with a target price of EUR 5.8 (6.0)

Consti trades at a discount to its peers, which we consider partly justifiable given profitability challenges and a still weaker near-term earnings visibility. We retain our HOLD rating with a target price of EUR 5.8 (6.0).

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Finnair - Weaker 19E profitability expectations

18.07.2019 - 09.15 | Company update

Finnair’s Q2 profitability fell short of expectations. The company issued new FY19E guidance for profitability. Global market uncertainties and weaker outlook for cargo business are likely to impact H2’19. We have cut our 19E-20E adj. EBIT estimates after Q2 result. Despite of the sizeable drop in share price we do not see valuation being particularly attractive considering the weakening profitability trend. Hence, we retain “HOLD” with TP of EUR 7.4 (prev. 8.0).

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FY19E outlook remains volatile

Finnair expects EBIT% of 4.5%-6.0% for 2019E, which is clearly weaker than 2018 EBIT% of 7.7%. Increased fuel costs and high irregular maintenance costs in Q2 as well as weak profitability Q1 are burdening profitability expectations for FY19E. The operating environment is expected to remain volatile and continued uncertainties in global trade, such as Brexit and US-China trade talks could have an impact on air travel and cargo.

Good capacity growth in 2019E

Finnair’s capacity growth in Q2 (+14.8%) was good and the company strengthened its market share in both Asia and Europe. Finnair updated its guidance for 19E capacity growth as the new route to Beijing’s Daxing International Airport will be opened in early November. The company expects capacity growth to be 11%-12% (previously 10%) and revenue growth slightly below that in 2019E. Our capacity growth estimate is 11%, while we expect revenue to grow 9% in 2019E.

“HOLD” with TP of EUR 7.4 (prev. 8.0)

As a result of updated FY19E guidance and weak H1 profitability we have decreased our 2019E EBIT expectation from EUR 203m to EUR 181m resulting EBIT% of 5.8% (prev. 6.5%). We see revenue of EUR 3104m for 2019E. Considering the weakening profitability trend and market outlook uncertainties we do not see valuation being particularly attractive for 2019E-2020E. With our new TP of EUR 7.4 (prev. 8.0) Finnair trades on our estimates at its 3yr historical average NTM EV/EBITDA of 3.4x. We retain our rating “HOLD”.

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SRV - Profitability remains under pressure

18.07.2019 - 09.00 | Company update

SRV’s profitability in Q2 was clearly weaker than we had expected following margin reductions in certain construction projects. We adjust our 2019E operative operating profit estimate downward to EUR 14.7m (prev. 21.1m). We retain our HOLD rating with a TP of EUR 1.8 (1.9)

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Weaker margin projects pushed profits back in to the red

SRV’s Q2 earnings were weak, with the operative operating profit at EUR -3.1m compared to our estimate of EUR 2.9m. Q2 saw the completion of a low number of developer-contracted housing units and as such a y/y revenue decline to EUR 207.4m, in line with our estimate of EUR 209.8m, which had an impact on profitability. Earnings were further affected by construction margin reductions in three projects, expected to be completed by the end of this year, totaling EUR 6.8m, along with other minor non-recurring items.

2019 earnings to be dictated by Q4 housing completions

Our estimates remain intact apart from minor H2/19 adjustments and a revision for 2019 profitability due to the weaker than expected Q2. For 2019E we estimate revenue of EUR 1,026m (prev. 1,029m) and an operative operating profit of EUR 14.7m (prev. 21.1m). Earnings in 2019 are heavily skewed towards Q4 due to developer-contracting housing unit completion timing, with REDI Majakka accounting for some half of the expected completions. We continue to expect a divestment of Pearl Plaza in 2019, although not included in our earnings estimates as the possible transaction would according to SRV have no significant impact on group profits.

HOLD with a target price of EUR 1.80 (1.90)

Valuation based on peer multiples appears more than challenging, in particular on EV metrics due to the high leverage, while our SOTP offers some leeway due to the shopping centres not reflected through earnings comparison. Caution due to weak near-term earnings visibility following a sequence of negative surprises is also warranted and we retain our HOLD rating, adjusting our TP to 1.80 (1.90) following our estimates revision.

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SSH - Tall order for H2

18.07.2019 - 09.00 | Company update

SSH delivered a decent Q2 result that was in line with our expectations. The good Q2 result sets the company up for the seasonally stronger H2, but SSH will need to execute well in order to reach its 2019 guidance. We maintain our SELL recommendation and target price of 1.10 euros.

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Q2 result in line with our expectations

SSH’s Q2 result was in line with our expectations. Q2 net sales were EUR 4.0 million (vs. 4.4m our expectation), and operating profit was EUR 0.4 million (vs. 0.4m our expectation). Software fees were EUR 1.7 million (1.9m Evli), Professional services were EUR 0.1 million (0.3m Evli), and Recurring revenue was EUR 2.2 million (2.2m Evli). There were no larger UKM perpetual deals during Q2, but SSH did sign several PrivX deals with larger corporations, e.g. Western Union. Revenue impact of PrivX is however still expected to be modest this year. Noteworthy also that during Q2 SSH entered into a global partnership with Tech Mahindra, a large global IT services company.

Estimates unchanged, focus on execution in H2

In order to reach its 2019 guidance (>10% growth in software business), SSH needs to execute well in H2. Sales need to grow about 30% in H2 from last year, which is a tall order and it will depend heavily on closing larger UKM deals. Based on yesterday’s result, we have not made any changes to our estimates. We expect 2019E net sales to decline -6% to 17.2 MEUR (reaching guidance though) and 2019E EBIT to be 0.6 MEUR thanks to efficient cost control. Our estimates for the coming years are also intact, with net sales growth expectations for 2020E and 2021E at 11% and 12% and gradually improving EBIT. Our sales estimates reflect the company’s current short and mid-term guidance.

No change in recommendation

On our estimates, SSH is trading at 2019-20 EV/Sales multiples of 3.3x and 2.9x. As noted previously in our reports, we’d like to see the results of SSH’s strategy materialising somewhat in the growth figures in order to justify higher valuation multiples. We maintain SELL recommendation with target price of 1.10 euros.

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Finnair - Q2 result below our estimates

17.07.2019 - 09.35 | Earnings Flash

Finnair’s Q2’19 adj. EBIT was EUR 47m vs. our expectation of EUR 65m and consensus of EUR 62m. Sales was EUR 793m. Finnair’s Q2 number of passengers rose to a new Q2 record and the company’s market share strengthened in both Asian and European markets. The growth development of cargo and travel services was not as favorable in Q2. Finnair issued its guidance for 2019E. The company expects capacity growth of 11-12% and revenue to grow at a somewhat slower pace than capacity in 2019. Finnair expects its EBIT% to be between 4.5%-6.0% in 2019.

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  • Q2 revenue was EUR 793m vs. EUR 806m/799m Evli/cons.
  • ASK grew by 14.8% in Q2. RASK growth decreased by 3.8%.
  • Q2 adj. EBIT was EUR 47 m vs. EUR 65m/62m Evli/cons. This was impacted by a EUR 13m increase in fuel price and exceptionally higher maintenance costs.
  • Q2 comparable EBITDA was EUR 126m vs. EUR 143m our view.
  • Absolute costs in Q2: Fuel costs were EUR 181m vs. EUR 174m our view. Staff costs were EUR 137 m vs. EUR 137m our view. All other OPEX combined were EUR 441m vs. EUR 370m our view.
  • Unit costs: CASK was 6.06 eurocents vs. 6.02 our view while CASK ex fuel was 4.59 eurocents vs. our view of 4.61

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SRV - Weaker margin projects burden EBIT

17.07.2019 - 09.15 | Earnings Flash

SRV’s Q2 earnings overall were weaker than expected. Revenue was in line with our expectations (Act./Evli EUR 207.4m/209.8m) as Q2 saw the completion of fewer developer-contracted housing units. The operative operating profitability was negative at EUR -3.1m (Evli 2.9m) and clearly weaker than expected, seemingly mainly due to an underestimation of the impact of weaker margin projects.

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  • SRV’s revenue in Q2 amounted to EUR 207.4m (Q2/18: EUR 235.8m), in line with our estimates and below consensus estimates (EUR 209.8m/220.0m Evli/cons.). Revenue in Q2 declined some 12% y/y. Revenue was as expected weaker due to the completion of fewer developer-contracted housing units.
  • The operating profit in Q2 amounted to EUR -3.1m (Q2/18: EUR -5.5m), clearly below both our and consensus estimates (EUR 3.6m/2.4m Evli/cons.), at an operating profit margin of -1.5%. The operative operating profit amounted to EUR -3.2m (Evli EUR 2.9m). The deviation seems to arise mainly from an underestimation of the impact on weak margin projects.
  • The order backlog remained largely unchanged at EUR 1,667.2m (Q2/18: EUR 1,716.7m)
  • SRV issued an EUR 58.4m hybrid bond, of which EUR 20.5m was used to repay an existing hybrid bond and EUR 37.9m for early repayment of existing notes.

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SSH - Q2 in line with our expectations

17.07.2019 - 09.15 | Earnings Flash

SSH Q2 result was in line with our expectations. Outlook for 2019 is unchanged; SSH expects double digit percentage growth from software business (software fees, professional services, and recurring revenue) at comparable exchange rates

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  • Q2 net sales were EUR 4.0 million (vs 4.4m our expectation)
  • Software fees were EUR 1.7 million (1.9m Evli), Professional services were EUR 0.1 million (0.3m Evli), and Recurring revenue was EUR 2.2 million (2.2m Evli)
  • Q2 operating profit was EUR 0.4 million (vs 0.4m our expectation)
  • EPS was 0.00 (vs. 0.00 our estimate)
  • Liquid assets were EUR 11.2m (12.3m Q1/19)
  • Business outlook for 2019 unchanged: SSH expects double digit percentage growth from software business (software fees, professional services, and recurring revenue) at comparable exchange rates

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Gofore - Revised net sales guidance

12.07.2019 - 09.15 | Company update

Gofore revised its guidance for FY2019 net sales on the 10th of July, expected to amount to EUR 67-72m (prev. guidance EUR 71-79m). The revised guidance is mainly due to unforeseen reductions in demand of some of Gofore’s largest customers. We expect some impact on H1 billing rates but full-year margins to remain at healthy levels. We retain our HOLD rating with a target price of EUR 8.50.

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FY 2019 sales guidance EUR 67—72m (prev. 71-79m)

Gofore revised its FY2019 sales guidance to EUR 67-72m (prev. EUR 71-79m) due to reduced demand among some of its largest customers. Based on monthly net sales figures the revision was not completely unexpected, with figures during Q2 in particular being weaker than our estimates. The reduced demand to our understanding stems from a cooling down of customer digitalization investment eagerness and the permanence is difficult to judge. The sales growth in 2019 is nonetheless expected to remain solid, at 32-42% based on the guidance range.

Expect some impact on H1 billing rates

We estimate FY2019 net sales at 69.9m (prev. 73.3m). Growth is supported by several significant orders as well as the Silver Planet and Mango Design acquisitions, with an expected impact on revenue on an annual basis of closer to EUR 10m. Pick up in public sector spending with the recently-elected Finnish government may also offer further growth opportunities going forward. We expect the weaker revenue in Q2 to impact on billing rates and as such on margins but the strong Q1 EBITA-margin (17.2%) will support overall margins in H1. We expect an EBITA margin of 13.7% in 2019.

HOLD with a target price of EUR 8.50

Compared to peer multiples the current valuation does not appear to offer any notable near-term valuation upside. With the rapid sales growth and healthy margins Gofore in our view still remains an attractive case and we retain our HOLD rating with a target price of EUR 8.50.

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Finnair - Strong passenger numbers support sales

10.07.2019 - 08.50 | Preview

Finnair’s traffic data in April-June indicates Q2’19 revenue of EUR 806m. We expected Q2 revenue of EUR 785m while consensus was at EUR 778m. Capacity growth in Q2 was above the company’s 2019E guidance (14.8% vs. 10% 2019E guidance) and our Q2 expectation of 12%. Fuel price continued to move up in Q2. We maintain our rating “HOLD” with to TP of EUR 8 ahead of Q2.

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Strong passenger number growth and improved load factor

Finnair’s passenger numbers in Q2 grew by 13% y/y and hit the monthly all-time company record in June with 1.4m passengers in total. Overall capacity (ASK) grew by 14.8% y/y which was above our expectation of 12%. Capacity increase was mainly supported by three new A350-aircrafts that entered the service in December 2018, February 2019 and April 2019 and by one new A321-aircraft that was added to European routes. In North America, capacity increased following the new Los Angeles route and frequency additions to San Francisco. Sold capacity (RPK) growth was in line with the capacity growth at 14.7% y/y and clearly beat our growth expectation of 10%. Q2 passenger load factor (PLF) improved from Q1 and was 82.5% (-0.1% y/y growth vs. our expectation of -1.4% y/y).

Fuel price continued to move up in Q2

Jet fuel price development has continued in line with Q1. In Q2, the average spot price of jet fuel in USD moved up by 4% from Q1. On a y/y basis, the average Q2 USD price was down by 8%. Similarly, the average sport price of jet fuel in EUR moved up by 5% q/q and was down by 3% on a y/y basis.

“HOLD” with TP of EUR 8

As a result of Finnair’s strong April-June traffic data we have increased our Q2 revenue expectation from EUR 785m to EUR 806m (12% y/y) while keeping other estimates intact. We foresee Q2 adj. EBIT of EUR 65m (8.0% margin). We maintain our rating “HOLD” and TP of EUR 8 intact ahead of Q2.

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Verkkokauppa.com - E-commerce taking market share

28.06.2019 - 09.00 | Company report

Verkkokauppa.com is a growth story with good fundamentals and solid business model. The company continues focusing on growth and enhancing consumer experience. We see Verkkokauppa.com’s mid-term outlook remaining favorable, despite of the tightened competition.

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Growth company with strong focus on consumer experience

Verkkokauppa.com’s revenue CAGR in 2010-2018 was 13.5%, which has been mainly supported by competitive pricing, strong online positioning, new product categories as well as the new Raisio store. The competition has continued fierce and price-driven, forcing the market to consolidate and smaller competitors exit the market. With a small physical footprint, the company has an efficient and scalable cost base enabling competitive pricing and strong reliance against competition. The company has strong net cash position which enables investments in growth. Verkkokauppa.com has made extensive investments in marketing from Q4’18 onwards and focuses on improving consumer experience. These investments should support further growth but will hamper EBIT improvement this year.

Growth expected to continue despite of tight competition

We see Verkkokauppa.com’s outlook for mid-term favorable and expect the company to continue growing in FY19-21E with annual growth of ~9%. We see that if consumer migration to online shopping continues strong, the company’s scalable cost base will support improvements in profitability. We expect EBIT to be flat at EUR 13m in 2019E but to improve in 2020E-2021E. The biggest concerns are related to the Finnish GDP growth which is expected to slow down in 2019-2020 and to fierce competition in the market.

“Buy” with TP of EUR 4.7

We have not made changes to our estimates. On our estimates, Verkkokauppa.com is trading ~45% EV/EBIT discount vs. peer group in 2019E-2020E. We value Verkkokauppa.com’s base case at EV/EBIT multiple of 11x. Our recommendation remains BUY with TP of EUR 4.7

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Solteq - Initiating coverage with HOLD

27.06.2019 - 00.00 | Company report

Solteq has during the past years sought to shift its focus towards own cloud-based software products and services from a more IT-services oriented past. The strategic approach coupled with an increased focus on expansion internationally and new product development investments offer growth opportunities and margin improvement potential but the early stages of Solteq’s transition warrants caution. We initiate coverage of Solteq with a HOLD-rating and a target price of EUR 1.40.

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Shifting focus towards own products and related services

Solteq is striving to transition from its more IT-services oriented past towards a company focused on own software products and related services, with strengths within commerce related solutions. Growth is sought from expansion internationally and product development investments such as autonomous service robotics solutions, while actions taken to enhance operational efficiency have and continue to aid margins.

Expect margin improvement and moderate growth

We expect a sales CAGR of near 3.5% between 2018-2021E, not including likely acquisitions, which have been elemental in achieving an average growth rate of over 10% p.a. since 2010. Operating profit margin development has been aided by actions to enhance operational efficiency and we expect further improvement to 6.8% in 2019E (2018: 4.3%).

Initiating coverage with HOLD and TP of EUR 1.40

We initiate coverage of Solteq with a HOLD-rating and a target price of EUR 1.40. Our valuation relies mainly on public Nordic IT-services oriented peer multiples. Based on our estimates and current valuation the 2019E and 2020E EV/EBIT and P/E multiples do not imply any notable upside, with the multiples generally in line with peers. Main drivers for valuation upside would in our view be faster revenue growth and margin improvement through a more rapid shift in the product mix and growth internationally. Investments into autonomous service robotics solutions are also a yet unproven but potentially very lucrative bet.

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Raute - Moderated guidance for 2019

26.06.2019 - 09.25 | Company update

Raute has downgraded its 2019 guidance. The company now expects 2019 revenue and operating profit to decline compared to the record highs set in 2018. Raute previously guided flat 2019 figures. We don’t see the profit warning as a major negative development relative to our own expectations as we have previously acknowledged Raute is unlikely to reach similarly lofty figures anytime soon. Our rating remains HOLD; we adjust our TP to EUR 25.5 (27.0).

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Raute doesn’t see marked changes in environment

Raute refrains from issuing too specific guidance due to the company’s project-like business. We understand the previous flat guidance covered a relatively wide revenue and profitability range, and we continue to expect double-digit revenue decline in 2019. We expect quarterly revenues at levels close to Q1’19 for the remainder of the year. We lower our 2019 operating margin expectation slightly, to 7.1% (we previously expected 7.4%). In comparison, Raute averaged 8% operating margin in 2017-18. The company cites delays in challenging project deliveries and postponement of larger order negotiations as the reason for lowered guidance. Raute still views the operating environment stable, and sees healthy activity related to possible capacity expansion projects. The company has several large projects pending. On the other hand, Raute highlights additional uncertainty stemming from the increased share of smaller customers, the types of whose decision-making isn’t as straightforward as those of the likes of more established and traditional customers, such as UPM. Raute will assess the need for possible adaptation measures only later in the summer along with the realization of certain orders.

Multiples are undemanding amid uncertainties

Raute continues to trade at low multiples (4.3x EV/EBITDA ‘19e and 5.5x EV/EBIT ‘19e on our estimates). However, the investment cycle for plywood and LVL industries is probably past its peak and demand volumes are shifting to smaller customer accounts, thus making any predictions of potential investment project realizations doubly more difficult. We retain our HOLD rating and adjust our target price to EUR 25.5 (27.0) per share.

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Scanfil - Expect further robust results

18.06.2019 - 09.25 | Company report

We expect Scanfil to remain one of the contract electronics manufacturers with better positioning amid a perennially competitive market for outsourced industrial electronics production. We view Scanfil’s strength premised on quality control, competitive pricing and good relationships with its key customers. In our view Scanfil’s valuation is at an attractive level as the current multiples represent a discount of some 20% compared to its own historical averages. We rate the shares BUY, TP at EUR 4.75 per share.

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Scanfil remains well-positioned strategy-wise

While Scanfil’s short-term success is dependent on its most important customers’ products (the ten largest accounts generate ca. 60% of revenues), and these large industrial OEMs often face cyclical demand, Scanfil’s plant network can serve accounts both in the early stages of a product cycle and industrial electronics that are already being manufactured at high volumes, meaning Scanfil is able to nurture initially small customers and in the longer perspective graduate them to more significant revenues. However, such development demands patience as it will take a few years to reach a couple of million in annual sales (and this is only a fraction of the tens of millions required to be recognized as a major Scanfil customer).

Scanfil set to grow both organically and inorganically

Scanfil targets organic growth of ca. 3% in 2019-20 and a slight improvement in operating margin (7% in 2020). In our view these remain realistic targets, although success could be hampered by the softening of demand for a major customer product. Scanfil is still committed to screening the German market for acquisition targets (after announcing a deal in May).

Both Scanfil and its peers valued at undemanding multiples

Scanfil has historically traded at EV/EBITDA and EV/EBIT multiples above 7x and 9x, while the company is currently valued at 5.7x and 7.4x (based on our 2019 estimates). This 20% discount is in line with the recent peer group development. We rate Scanfil BUY, our target price being EUR 4.75 per share.

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Vaisala - CMD notes: Roadmap for profitable growth

17.06.2019 - 08.45 | Company update

Vaisala held its CMD last Friday, where the company provided insight into its businesses and updated strategy. Based on the CMD and updated financial targets, we see Vaisala’s roadmap for profitable growth as attainable and we have made smaller upward adjustments to our sales estimates. We maintain HOLD recommendation with new target price of 20 euros (prev. 18).

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Updated financial targets – more emphasis on growth

Vaisala targets an average annual growth exceeding 5% and EBIT margin exceeding 12%. Earlier Vaisala’s objective was growth with an average annual growth of 5%, and to achieve 15% EBIT margin. The slightly more ambitious growth target is based on both organic and non-organic opportunities, with key areas of growth being liquid measurements, new industrial instruments, digital solutions, and wind lidars. The recent acquisitions of Leosphere (wind lidars) and K-Patents (liquid measurements), provide growth areas for both W&E and IM segments.

Roadmap for profitable growth

We have made minor upward changes to our sales estimates based on the presented roadmap and new financial targets. We expect 2019E net sales to be 390 MEUR (12% growth yoy, driven by Leosphere and K-Patents acquisitions) and EBIT to be 31 MEUR (43 MEUR adjusted for PPA and one-offs), representing 8% EBIT margin (11% adj. EBIT margin). For 2020-21E, we expect above 4% net sales growth, and we estimate EBIT margin to gradually improve from 8 % 2019E towards 10% 2021E (adjusted EBIT margin from 11% 2019E towards 12% in 2021E). Non-organic growth is very likely (although not reflected in our estimates), hence we see above 5% growth very achievable.

HOLD maintained with TP of 20€ (prev. 18)

On our estimates, Vaisala is trading close to par with our peer group on adjusted EV/EBIT multiples. On EV/Sales multiples, Vaisala is trading below peers, reflecting the potential valuation upside should Vaisala succeed in accelerating its profitable growth. We raise target price to 20 euros (prev. 18) but maintain HOLD recommendation.

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Endomines - Rights issue on-going

17.06.2019 - 00.00 | Company update

The subscription period of Endomines’ rights issue commenced on June 14. Endomines is seeking to raise gross proceeds of SEK 165m. The proceeds of the rights issue are intended to be used to repay debt and interest of existing debt and development of its assets in Idaho, as well as exploration along the Karelian Goldline and for general corporate costs.

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Seeking to raise SEK 165m

Endomines is through a rights issue seeking to raise gross proceeds of around SEK 165m, with expenses related to the rights issue estimated at SEK 10m. Endomines has estimated that its current financial position does not cover the capital needs for the following twelve months. Trading in subscription rights will take place during the 14-25 June 2019 while subscription using the subscription rights will take place from the 14th of June to the 1st of July, 2019.

Proceeds mainly to cover debt and project development

Of the proceeds some SEK 36m would be used to repay debts and interest relating to the TVL Gold acquisition. The larger share of the proceeds from the rights issue are intended to be used for development of its projects in Idaho. To our understanding some of the proceeds would be used for further development of the Friday mine while the bulk would be allocated to development of the Rescue, Kimberly, and Unity projects. Furthermore, part of the proceeds would be used to continue exploration along the Karelian Goldline as well as to cover general corporate costs. The cost allocation and project timelines are described in further detail in figures 1 and 2.

Rating withdrawn during rights issue

Evli Bank is the financial advisor of the rights issue, and although a segregation of duties is followed, we refrain from expressing our views on the rights issue. Our estimates have not been revised to include any new information given in the prospectus and we withdraw our rating and target price (prev. HOLD, TP SEK 6.0). We will publish an updated view after the rights issue.

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SSH - CMD notes: High ambitions

11.06.2019 - 11.20 | Company update

SSH held a CMD yesterday, where the company offered insight into its business and outlined its long-term ambitions. The recently announced SSH200 Growth Vision aims at EUR 200m net sales during the 2020’s, with primary growth engines being UKM and PrivX. We do not make any changes to our estimates or recommendation at this moment.

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Addressable market not lacking in size or growth potential

To reach EUR 200M in sales by 2029, SSH would need to grow around 24% annually. From the underlying market’s perspective this is achievable, given the strong growth profiles in the markets. According to SSH, the Enterprise Key Management market is estimated to be USD 3.5 bln and expected to grow annually 21% by 2024. Looking at PrivX’s market, the Privileged Access Management is estimated to be USD 6 bln, with 30% annual growth expectations by 2023.

The SSH200 Growth Vision

The growth engines for the vision are UKM and PrivX. SSH estimates that there are thousands of potential customers for UKM, with deal sizes ranging from a hundred thousand up to millions of euros. PrivX poses an even bigger opportunity, but currently the number of customers is small, and sales ramp up is still very much on-going. SSH does not expect any material revenue impact from PrivX this year, nor was the company ready to give any estimate on the number of customers or ARR it expects to have from PrivX in the coming years.

No changes to estimates and recommendation

SSH maintained its 2019 guidance (>10% growth from software business) and mid-term target (similar or faster growth than market). Apart from previously announced partnerships and alliances, SSH did not specify what concrete new measures it would take to accelerate growth or what investments it requires. Based on yesterday’s CMD, we note that the vision is bold, but we’d like to see growth materializing in the figures. Thus, we have not made any changes to our estimates or recommendation. Our estimates reflect the company’s current short and mid-term guidance.

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Innofactor - Upgrade to BUY

05.06.2019 - 09.30 | Company update

Innofactor revised its guidance for EBITDA, expecting EBITDA in 2019 in between EUR 4-6m, compared to EUR -1.0m in 2018. The sales guidance remains intact, with sales expected to increase from 2018 (EUR 63.1m). Our revised EBITDA estimate for 2019 is EUR 4.6m (prev. EUR 4.0m). With the alleviated earnings uncertainty and our slightly revised estimates we raise our rating to BUY (HOLD) with a target price of EUR 0.80 (0.60).

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2019 EBITDA guidance range EUR 4-6m

Innofactor revised its guidance for EBITDA while keeping the sales guidance intact. Under the new guidance Innofactor expects sales to increase from 2018 (EUR 63.1m) and EBITDA to be in between EUR 4-6m (prev. increase from 2018), compared to EUR -1.0m in 2018. To our understanding the revised guidance was not triggered by any extraordinary items but instead mainly due to increased visibility into the full year development.

Our 2019 EBITDA estimate at EUR 4.6m

Based on Q1 figures and historical development, with Q4 typically being strong, the mid-range of the guidance would certainly be achievable. The upper range of the guidance appears challenging but would, when considering the impact of IFRS 16 changes, imply similar EBITDA levels as Innofactor has achieved pre-2017. Innofactor’s Q1 showed promising development but with two weaker years behind we opt to stay more on the cautious side of the guidance range and adjust our 2019 EBITDA estimate to EUR 4.6m (prev. 4.0m).

BUY (HOLD) with a target price of EUR 0.80 (0.60)

On 2019E EV/EBITDA valuation is only slightly below peers. As the guidance range offers increased visibility into 2019 development we shift some more focus on 2020E multiples. On the 2020E multiples valuation looks more attractive, in particular when considering the PPA adjusted multiples. We upgrade to BUY (HOLD) with a target price of EUR 0.80 (0.60).

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Innofactor - Still warrants caution

03.06.2019 - 09.30 | Company update

Innofactor’s Q4 earnings release did not in our view bring any major surprises and the results were only slightly below our estimates. Significant evidence of a turnaround remains to be seen, although the guidance and order backlog give some support for improving figures in 2019. We retain our HOLD-rating with a target price of EUR 0.45 (0.40).

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Signs of improvements seen, evidence still lacking

Innofactor’s Q4 results were slightly below our estimates, with revenue and EBITDA at EUR 15.9m (Evli 16.4m) and EUR -0.9m (Evli -0.7m), and due to the profit warning issued in January did not bring any major surprises. In our view the results still did not show solid evidence of a major turnaround. The guidance given was at least at this point still vague, with net sales and EBITDA in 2019 expected to increase from 2018 levels, which given the 2018 results should clearly be viewed as a minimum requirement. A positive sign for 2019 was the order backlog, which was reported for the first time, standing at around EUR 32m, up some 40% y/y.

Estimates intact apart from IFRS 16 adjustments

Our estimates remain largely intact post Q4, apart from IFRS 16 revisions to EBITDA of approx. EUR 1m. We continue to expect Innofactor to reach a barely positive EBIT in 2019. We expect profitability improvements mainly from a higher billing rate, supported by the order backlog and a smaller headcount. Sale of Dynasty product family updates are expected to support early 2019 but we expect overall stronger profitability during H2. Although potential for larger profitability improvements exists we still remain cautious due to the weak track during previous years and operations in Denmark continue to cause headaches.

HOLD with a target price of EUR 0.45 (0.40)

With IFRS 16 adjustment causing possible comparability issues with EV/EBITDA multiples we adjust EV/EBIT multiples for purchase price amortizations to arrive at 2019E and 2020E multiples of 12.5x and 6.7x respectively, compared to peer median multiples of 10.9x and 10.0x. We retain our HOLD-rating with a target price of EUR 0.45 (0.40).

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Pihlajalinna - CMD notes

20.05.2019 - 09.15 | Company update

Pihlajalinna hosted the 2019 CMD last Friday. The focus of the event was on increased health and social care costs, cooperation of private and public sectors as well as the digitalization of health care. Pihlajalinna did not make any changes to its ‘19E guidance nor its long-term financial targets. We maintain our rating “Buy” with TP of EUR 13.

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Need of new solutions for arranging services

The finances of Finnish municipalities have continued to deteriorate and municipalities are forced to find new solutions to balance their increased health and social care costs. Cooperation with private sector is no longer purely voluntary. As Pihlajalinna stated in Q1, municipalities’ activity has increased after the failure of the SOTE reform, despite of the restriction law.

New opportunities on occupational healthcare

Pihlajalinna has been able to use its network to expand services across the country. The company sees opportunities in expanding its occupational healthcare network as municipalities and other public sector entities are interested in divesting the occupational healthcare providers they currently own. The company targets to expand in basic-level specialized care and non-urgent specialized care as the public sector has made cuts in operations and centralized specialized care in fewer units.

Focusing on profitability improvements in 2019E

Pihlajalinna’s plan is to improve its profitability by organic growth, increasing cross-selling, and by addressing profitability issues in the new medical service centers. Pihlajalinna will also improve its customer service experience by bringing new digital solutions to the market, which will also be a significant profitability driver in the future.

Guidance for 2019E intact

Pihlajalinna reiterated its guidance for 2019E; to increase its revenue and EBIT in 2019E from 2018 levels. The company did not make changes to its long-term targets and expects EBIT % of 7% in long-term. We keep our estimates intact. We maintain our rating “Buy” with TP of EUR 13.

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Innofactor - Profitability improving

20.05.2019 - 09.00 | Company update

Innofactor’s profitability improved in Q1, aided primarily by the cost savings program from Q4/18 and a higher revenue per employee. Prerequisites for further improvements remain, as the personnel base has decreased while the order backlog remains at healthy levels. We retain our HOLD-rating with a target price of EUR 0.60 (0.45).

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Improved profitability in Q1

Innofactor’s profitability in Q1 improved in line with our expectations, with EBITDA amounting to EUR 0.9m, at a margin of 5.4%. Revenue fell slightly short of our expectations, affected partly by a smaller impact of the timing of Dynasty product sales than we had expected. Profitability was aided primarily by the restructuring efforts and cost savings done during Q4/18 but also by a higher revenue per employee (+9.2% y/y). The adoption of IFRS 16 had a EUR 0.3m positive impact on EBITDA.

Prerequisites for improving profitability in place

The level of impact on profitability of the cost savings efforts that were executed during Q4/18 was largely visible in Q1 figures. Focus will remain on improving profitability and further increases of the revenue per employee remains a key source for improvement in our view. The prerequisites certainly exist, as the number of personnel has decreased 10% y/y while the order backlog is up some 85% y/y. The positive development has still been largely attributable to operations in Finland, as challenges in both Denmark and Sweden have persisted and remain a key uncertainty. We have made only minor adjustments to our estimates post Q1, with our 2019 revenue and EBITDA estimates at EUR 64.0m and EUR 4.0m respectively.

HOLD with a target price of EUR 0.60 (0.45)

Innofactor trades at a 2019E EV/EBITDA of 9.5x, in line with peers. Given the challenges Innofactor has faced and an elevated level of uncertainty we would normally consider this quite a stretch. With signs of improving profitability and more attractive 2020E multiples we are however prepared to give Innofactor the benefit of the doubt and retain our HOLD-rating with a target price of EUR 0.60 (0.45).

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Marimekko - Investing in growth in 2019E

17.05.2019 - 08.20 | Company update

Marimekko’s Q1 result hit all-time record and beat our estimates. Growth was mainly boosted by strong retail sales in Finland and wholesale sales in APAC. Even though adj. EBIT in 2019E is expected to remain flat, annual growth is likely to continue with good momentum. We upgrade our rating to “Hold” (“Sell”) and our TP to 25 (22).

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Growth on the right track

Q1 revenue growth was 13% y/y and totaled EUR 27.1m. This was driven by wholesale sales growth in APAC and retail sales growth in Finland where LFL-growth was 12% y/y. As APAC wholesale sales was mainly impacted by deliveries that were transferred from Q4’18 to Q1’19, we expect wholesale sales to normalize during 2019E. In Finland, similar sized, non-recurring promotional deliveries as in 2018 (in Q2 and Q4 especially) are not expected to occur in 2019E. The company’s total sales are expected to grow from last year.

Investments in growth will increase 2019E expenses

Marimekko’s plan for 2019E is to invest in growth, which increases expenses. Major part of the investments will be used to revamp store network. Marketing expenses are expected to increase in 2019E as well as investments into IT and digitalization. These will weigh down adj. EBIT in 2019E but are likely to boost growth in the upcoming years. Marimekko has also become aware of grey exports in Asia, which could incur further costs.

Upgraded to “Hold” (“Sell”) with TP of 25 (22)

We have updated our estimates to take into account the IFRS 16 changes but kept the underlying 2019E figures mostly intact. We expect 2019E sales of EUR 118m (6% growth) and EBIT of EUR 13m (’18 EUR 12m). We have increased our growth expectations for ‘20E with sales growth of 7% y/y. On our estimates, Marimekko trades at EV/EBITDA 19E-20E multiple of 9.1x and 8.0x, which translate into 19% and 13% premium compared to the premium goods peer group. Investments in 2019E should support future growth but we are not ready yet to put emphasis on ‘20E-‘21E. We upgrade to “Hold” (“Sell”) with TP of 25 (22).

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Marimekko - Q1 result beats our estimates

16.05.2019 - 09.15 | Earnings Flash

Marimekko’s Q1 revenue increased by 13% and was EUR 27.1m vs. EUR 25.3m Evli view. Adj. EBIT was EUR 2.6m vs. EUR 1.2m Evli view. Revenue was mainly driven by strong wholesale sales in APAC and increased retail sales in Finland. Operating result was boosted by increased sales and improved gross margin. Guidance for 2019E is kept intact.

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  • Finland: revenue was EUR 12.8m vs. EUR 12.1m our expectation. Revenue grew by 7% y/y, split to 12% own retail and -1% wholesale. Own retail sales growth was driven by well performed regular-priced sales and the favorable trend in the domestic market. Wholesale was lower than last year as wholesale sales for the corresponding period included nonrecurring promotional deliveries, of which there were none this year.
  • International: revenue was EUR 14.3m vs. EUR 13.1m our view. Revenue increased by 18% y/y, mainly driven by wholesale sales in APAC region where the increase was 21%, as Q4’18 deliveries were transferred to Q1’19. Net sales increased also in all the other areas. In Japan, net sales grew by 18% of which retail sales growth was 13%.
  • Adj. EBIT was EUR 2.6m EUR vs. EUR 1.2m our view. Operating result was impacted by increased sales and improved gross margin. Net effect of IFRS 16 on operating result was +125 thousand. It is notable that our estimates do not reflect the IFRS 16 changes yet.
  • Guidance: Marimekko reiterated its guidance and expects 2019E revenue to increase from last year while adj. EBIT is expected to remain flat.

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Cibus Nordic - Property income as expected

16.05.2019 - 09.05 | Company update

Cibus’ Q1 developed without surprises as NOI, at EUR 12.1m, was 1.7% above our estimate. Cibus is now well on track to achieving the annual target of EUR 50m in dailygoods property acquisitions this year. At the end of Q1 the portfolio GAV stood at EUR 821m and is expected to reach EUR 850m by the end of Q2 as already announced deals will be closed. We update our estimates to reflect the situation as expected from Q3 onwards. We update our TP to SEK 125 (120) per share while our rating remains HOLD.

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No significant changes in key metrics during Q1

Valuation per sqm (EUR 1,740), EPRA NAV (EUR 11.2 per share) and net LTV ratio (57%) all improved a bit. Occupancy rate declined by a percentage point to 95%. Cibus’ average borrowing rate now equals 2.8%, and there is still room for improvement as the third senior debt facility is yet to be refinanced. The EUR 135m bond is trading above par and Cibus is likely able to refinance at a rate more than 100bps below the current coupon.

The portfolio WAULT remains stable at 5.0 years

The portfolio is stable in terms of the weighted average unexpired lease term. The measure has proved steady at around 5.0 years as the portfolio has an even number of leases coming up for renewal each year. The leases are typically extended with the same terms for the next 5 years. Cibus also continues with its plans to develop the organization while monitoring the Swedish property market even if there are yet no concrete entry plans.

We update estimates based on earnings capacity for Q3

Cibus has so far this spring announced EUR 30m in acquisitions; these are reflected in the current earnings capacity figure for Jun 30 (the deals will close in Q2). We therefore update our estimates from Q3 onwards. Cibus now trades close to par in terms of EV/GAV and P/NAV. In our view a slight premium (somewhere in the 0-10% range) can be justified as the valuation methodology for individual daily-goods properties doesn’t capture the risk diversification effect Cibus can achieve with its property portfolio (currently numbering 132 assets). We update our target price to SEK 125 (120) per share and retain our HOLD rating.

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Cibus Nordic - Income slightly above our estimate

15.05.2019 - 11.00 | Earnings Flash

Cibus’ Q1 net rental income came in a bit above our expectations. Q1 earnings capacity was unchanged, but is expected to increase by about 3% by the end of Q2 as recently announced acquisitions will be closed.

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  • Net rental income amounted to EUR 12.1m vs. our EUR 11.9m estimate.
  • Central administration expenses totaled EUR 1.0m vs. our expectation of EUR 0.9m. EBIT therefore stood at EUR 11.2m vs. our EUR 11.0m projection.
  • Gross asset value was EUR 821m (EUR 816m previously).
  • EPRA NAV was booked at EUR 11.2 (11.1) per share.
  • Occupancy rate stood at 95.1% (96.0%).
  • Net LTV amounted to 56.7% (58.4%).
  • The current NTM earnings capacity (in terms of net rental income minus central administration expenses, or EBIT) stood unchanged at EUR 44.2m as of Mar 31, 2019. Cibus expects the figure increase to EUR 45.6m by Jun 30, 2019 as the recently announced property acquisitions will be included in the portfolio.

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Innofactor - Net sales slightly lower, operating margin in line

14.05.2019 - 09.30 | Earnings Flash

Innofactor reported Q1 net sales of EUR 16.1m and EBITDA of EUR 0.869m. Net sales missed our estimate of EUR 17.1m, but EBITDA was in line with our expectation of EUR 0.8m. Innofactor commented that measures for improving profitability, carried out near the end of 2018, have started to take an effect in the first quarter as planned. Innofactor expects net sales and operating margin (EBITDA) in 2019 to increase from 2018 (2018: net sales EUR 63.1m EBITDA EUR -1.0m)

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  • Q1 net sales were approximately EUR 16.1 million (2018: 16.5) vs. EUR 17.1m our expectation
  • EBITDA was EUR 0.869 (+155% yoy), vs. EUR 0.8m our expectation.
  • The order backlog was EUR 41.0 million (2018: 22.2), which shows an increase of 85%.
  • Innofactor got several significant orders in the first quarter, for example, Traficom VISA, approximately EUR 0.5 million; a decision-making system for the City of Espoo, approximately EUR 1.5 million; and a membership management project for a Swedish organization, approximately EUR 1.3 million
  • Guidance maintained; Innofactor’s net sales and operating margin (EBITDA) in 2019 is estimated to increase from 2018, during which the net sales were EUR 63.1 million and operating margin was EUR -1.0 million

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Verkkokauppa.com - Focusing on growth in 2019E

13.05.2019 - 08.50 | Company update

As competition is likely to remain tight and price-driven, we are not expecting margins to improve in 2019E. Investments in marketing should bring more visibility and support sales growth. We retain our rating “BUY” with TP of EUR 4.7.

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Attractive pricing and marketing likely to support sales

Verkkokauppa.com was able to increase its market share, driven by solid revenue growth of 13% y/y (revenue of EUR 116m) in Q1. In 2019E, the company still seeks to win market share and compete with low prices. The company has made investments into marketing and targets to reach larger audience by new campaigns and tv-commercials. Vekkokauppa.com also continuously aims to improve the user experience online and in mobile. With these investments, we expect revenue growth to continue in ‘19E.

No expectations of margin improvements in 2019E

Verkkokauppa.com’s Q1 operating profit decreased by 14% y/y and was EUR 2.3m. This was mainly due to lower gross margin and increased marketing expenses. Revenue growth in 2019E is unlikely to come for free and price-driven competition adds pressure on the margin. Gross margin is also impacted by wholesale/B2B sales which varies by each quarter. As investments into marketing are expected to continue, we believe OPEX will remain at higher level in ‘19E. The revenue from Apuraha continued to grow and was EUR 0.83m (EUR 0.67m) in Q1. Apuaraha financing is expected to continue growing and supporting margins also in 2019E.

Retaining “Buy” with TP of EUR 4.7

We have slightly adjusted our estimates with 2019E sales totaling EUR 522m (prev. EUR 519m), gross margin of 14.7% and EBIT of EUR 13m (prev. EUR 14m). The company reiterated its guidance for 2019E and expects revenue of EUR 500-550m and EBIT of EUR 11-17m. On our estimates, Verkkokauppa.com trades at 11.9x and 8.7x EV/EBIT in ’19-‘20E, which translates into 67% and 49% discount compared to the online focused Nordic & European peers. We retain our rating “Buy” with TP of EUR 4.7.

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Verkkokauppa.com - Strong revenue growth in Q1’19

10.05.2019 - 09.00 | Earnings Flash

Verkkokauppa.com’s Q1’19 revenue was EUR 116m compared to EUR 114m Evli and EUR 117m consensus estimates. Sales grew by 13% y/y. Adj. EBIT was slightly below Evli/cons. estimates at EUR 2.3m. Verkkokauppa.com reiterated its guidance for 2019E.

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  • Q1 revenue was EUR 115.8m vs. EUR 113.9m Evli view and EUR 116.5m consensus. Sales grew by 13% y/y. Revenue growth was driven mainly by marketing improvements, effective campaigning and sales from Raisio store. The market remained competitive and price-driven and grew by 4.9% in January-March, according to GfK.
  • Q1 gross profit was EUR 17.4m (15.0% margin) vs. EUR 17.8m (15.6% margin) Evli view.
  • Q1 adj. EBIT was EUR 2.3m (2.0% margin) vs. EUR 2.5m (2.2% margin) Evli view and EUR 3.0m (2.6% margin) consensus. Slightly lower operating profit y/y was mainly due to lower gross margin and increased marketing investments.
  • 2019E guidance is intact: Verkkokauppa.com expects revenue to be between EUR 500-550m and operating profit of EUR 11-17m.

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Endomines - Downgrade to HOLD

09.05.2019 - 09.10 | Company update

Endomines’ revenue in Q1 was limited to SEK 2.1m due to lack of production at Friday and as such profitability remained weak, with EBIT at SEK -13.0m. Ramp-up of production at Friday is expected in Q2. With Endomines’ financial situation becoming a concern we downgrade to HOLD (BUY) with a target price of SEK 6.0 (8.0).

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Friday production expected in Q2

Endomines’ Q1 revenue and EBIT amounted to SEK 2.1m and -13.0m respectively. Ore production at the Friday mine is on-going but due to damage to the processing facility no new gold concentrate was produced and revenue was only generated from sales of remaining concentrate from Pampalo. Ramp-up of gold concentrate production at the Friday site is expected to start in Q2. Although the concentrate production was delayed Endomines has remained on schedule with the mining of ore and retained its 2019 guidance production for Friday of 5,000-8,000 oz gold concentrate.

Financial situation concerning

Endomines’ financial situation has increased causes for concern. The liquid funds at the end of the period amounted to SEK 7.8m, despite issuance of the EUR 3.7m bond, as Q1 cash flow after investments amounted to SEK -46.7m. The situation should be alleviated with the ramp-up of production at Friday, with the larger investments also having been done. With the additional costs of the processing plant at Friday the financial situation is in our view now even more fragile and Endomines can’t really afford more setbacks in production start-up without additional financing.

HOLD (BUY) with a target price of SEK 6.0 (8.0)

Endomines is in our view in a delicate situation financially and the need for additional financing, at least to finance any new projects, seems inevitable. Endomines already issued a rather expensive bond and further financing will likely not come easily or cheap. We downgrade to HOLD (BUY) with a target price of SEK 6.0 (8.0).

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Aspo - Value increasingly reliant on ESL

09.05.2019 - 09.00 | Company update

Aspo posted a 3.5% EBIT margin, missing our expected 4% level as Telko and Leipurin disappointed. Telko suffered from declining plastic raw materials and chemicals prices, while Leipurin’s Q1 fell short due to timing of Easter and machine sales. However, we see ESL proceeding on track. Our rating stays BUY; we update our TP to EUR 9.75 (9.50).

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ESL’s operations on track towards higher EBIT

ESL’s Q1 was expectedly subdued as the two new LNG vessels’ cranes were being repaired. The warranty repairs were mostly finished by the end of Q1. Aspo says some parts are still being changed, but the ships are expected to be fully operational in Q2. However, we note that it will likely be a few more months before maximum efficiency is achieved, and consequently we do not expect ESL to reach its full operating profit potential in Q2. We estimate ESL to post EUR 6m EBIT in Q3, seeing the annual EBIT potential from thereon at around EUR 25m.

Telko now includes Kauko; Leipurin slow due to timings

The old Telko beat our EUR 63.6m revenue estimate, posting EUR 65.8m in Q1 sales (EUR 71.9m w/ Kauko). The comparable y/y growth amounted to 14% (11% w/ Kauko). Q1 sales growth was high y/y due to the slowness of the comparison period (itself impacted by exceptionally cold weather which affected Russian and Ukrainian construction). Volume growth was strong, however the price levels of plastic raw materials continued to decline, hurting margins. The prices declined by 5-6% q/q and 7- 10% y/y (margins on raw materials held in storage will be particularly impacted). Meanwhile chemicals prices declined by 10% q/q and 3% y/y. As a result, the old Telko managed a 3.6% EBIT margin (3.8% in Q1’18). Telko targets EBIT margin at 6-7% in ‘20. The target may prove challenging, and we don’t expect improvement on last year’s 4.5% margin (old Telko) this year.

Our expectations for ESL remain unchanged

We expect large EBIT growth in ‘19-20 as ESL’s new ships’ contribution will fully materialize. We lower our estimates for the other businesses slightly, update our TP to EUR 9.75 (9.50) as higher peer multiples lift SOTP valuation. Our rating stays BUY.

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Etteplan - A good start for the year

09.05.2019 - 08.00 | Company update

Etteplan’s Q1 saw all business areas achieving margins near the financial target of a 10% EBITA-margin. With a good order backlog development during the beginning of the year Etteplan also raised its guidance for 2019. We expect a 2019 revenue and EBITA of EUR 258.6m and 26.0m respectively. We retain our BUY rating with a target price of EUR 9.6 (9.0).

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Good performance across the board and guidance upgrade

Etteplan’s Q1 results were good across the board, with especially profitability beating our estimates, driven by better than expected profitability in Engineering Solutions and Technical Documentation Solutions. Revenue also saw good growth of 11.3% in the quarter following a continued good demand situation despite market uncertainties. Etteplan upgraded its guidance, expecting the revenue and operating profit for 2019 to grow clearly (prev. only grow) compared to 2018.

Technical Documentation Solutions still faces challenges

Etteplan’s Q1 results showed little weakness, as although the on-going trade war did have some impact on the development in China, the significant new orders signed, the guidance upgrade and customer order backlog development alleviate some of the near-term uncertainty. The Technical Documentation Solutions business area remains the likely subpar performer due to elevated costs related to a larger project in Germany. Our revised revenue and EBIT estimates are 258.6m and 23.4m respectively, implying an increase of 9.4% and 12.4% from 2018 figures.

BUY with a target price of EUR 9.6 (9.0)

On our estimates Etteplan trades at a 26% and 12% discount on 2019E peer median EV/EBITDA and P/E. With our increased estimates and lesser near-term uncertainty we raise our target price to EUR 9.6 (9.0), valuing Etteplan at a P/E and EV/EBITDA of 13.5x and 7.6x respectively, and retain our BUY-rating.

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Etteplan - Earnings beat and guidance upgrade

08.05.2019 - 13.20 | Earnings Flash

Etteplan’s Q1 results beat expectations especially for profitability, with EBIT at EUR 5.8m (EUR 5.2m/5.1m Evli/cons.) and revenue at EUR 65.6m (EUR 63.5m/64.0m Evli/cons.). Performance was solid across all business areas. Etteplan upgraded its guidance and now expects its revenue and operating profit for the year 2019 to grow clearly compared to 2018.

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  • Etteplan’s net sales in Q1 amounted to EUR 65.6m (EUR 59.0m in Q1/18), slightly above our estimates (Evli EUR 63.5m). Sales growth in Q1 amounted to 11.3% y/y (organic growth 7.0%).
  • EBITA in Q1 was EUR 6.4m (EUR 4.9m in Q1/18), above our estimates (Evli EUR 5.8m), at a margin of 9.8%.
  • Engineering Solutions: Net sales in Q1 were EUR 35.6m vs. EUR 35.5m Evli. EBITA in Q1 was EUR 3.7m vs. EUR 3.2m Evli.
  • Software and Embedded Solutions: Net sales in Q1 were EUR 17.3m vs. EUR 16.4m Evli. EBITA in Q1 was EUR 1.7m vs. EUR 1.7m Evli.
  • Technical Documentation Solutions: Net sales in Q1 were EUR 12.5m vs. EUR 11.6m Evli. EBITA in Q1 was EUR 1.2m vs. EUR 0.9m Evli.
  • Guidance upgraded: Etteplan expects its revenue and operating profit for the year 2019 to grow clearly (added) compared to 2018.

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Aspo - Sales above our estimate

08.05.2019 - 10.45 | Earnings Flash

Aspo’s Q1 net sales grew 23% y/y, reaching EUR 142m and thus exceeding our EUR 137m estimate. Group operating margin, at 3.5%, fell a little short of our 4.0% expectation. ESL’s top line came in 9% above our estimate (operating margin was in line with our expected 7.2%). In other words, Telko’s and Leipurin’s profitability fell short of our expectations.

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  • Group Q1 net sales amounted to EUR 142m vs. our EUR 137m estimate.
  • Aspo posted EUR 4.9m in EBIT vs. our expectation of EUR 5.4m. Group operating margin therefore amounted 3.5% (vs. our 4.0% estimate).
  • ESL Shipping revenue was recorded at EUR 44m vs. our EUR 40m expectation. ESL managed EBIT at EUR 3.2m (7.3% margin), whereas we expected EUR 2.9m (7.2% margin).
  • Telko posted EUR 72m in net sales (including Kauko) vs. our EUR 69m combined estimate for Telko and Kauko. Meanwhile EBIT stood at EUR 2.4m vs. our EUR 2.5m projection.
  • Leipurin sales were EUR 26m, while we expected EUR 28m. Leipurin achieved EUR 0.5m EBIT (our estimate was EUR 1.0m).
  • Kauko is now included within the Telko figures (effective Jan 1, 2019).
  • Previous guidance stays valid as Aspo expects 2019 EBIT at EUR 28-33m (EUR 20.6m in 2018).

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Endomines - Concentrate production missing in Q1

08.05.2019 - 09.20 | Earnings Flash

Endomines’ revenue and EBITDA in Q1 amounted to SEK 2.1m (Evli 8.0m) and SEK -11.5m (Evli -3.9m) respectively, below our estimates mainly due to our estimates not accounting for the processing plant damage during Q1 and revenue only generated from sale of remaining Pampalo concentrate. No gold concentrate was produced at Friday in Q1 but production is expected to commence in Q2.

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  • Endomines did not produce any gold concentrate in Q1. The revenue was generated by sales of remaining Pampalo gold concentrate. Gold concentrate production at Friday has been delayed due to damage to the tailings area of the processing plant. Concentrate production is expected to commence in Q2.
  • Revenue amounted to SEK 2.1m (29.4m in Q4/18), below our estimates of SEK 8.0m due to our estimates not having accounted for the processing plant damage.
  • EBITDA in Q1 was at SEK -11.5m, below our estimates of SEK -3.9m, mainly due to the lower revenue.
  • Friday’s processing plant repairs expected to amount to USD 400,000 and to take four to six weeks to complete.
  • Guidance reiterated: Annual gold production at the Friday mine in Idaho, USA, is expected to be approximately 9,000oz at a cash cost of 650-900 USD/oz, depending on the area of production, over the life time of the mine. Endomines anticipates production of 5,000 – 8,000oz gold (~156-249kg) in concentrate during the year.

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Talenom - Solid performance to continue

07.05.2019 - 09.15 | Company report

Talenom has seen success in achieving well above market growth while simultaneously vastly improving profitability, relying on technological advances to automate processes and enhance efficiency. We continue to see room for near-term margin improvement, while the fragmented bookkeeping services market offers continued room for growth.

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Focusing on rapid organic growth

Talenom has taken a different approach from the mainly inorganic growth focused competitors in the fragmented bookkeeping services market by successfully focusing on organic growth, having achieved a sales CAGR of 14% during 2015-2018. Growth has been enabled by Talenom’s separation of accountants and sales force, which we expect to continue supported by benefits of digitalization and the market fragmentation. We expect a sales CAGR of 17% during 2018-2021E.

Margin improvements from process efficiency

Talenom has invested heavily in improving the efficiency of its bookkeeping production line. Through centralization of bookkeeping tasks and automation of processes the company has been able to decrease resource needs, resulting in sizeable improvements in margins. We expect further development in 2019 to give a slight boost to margins, with our 2019E operating profit margin estimate at 19.5% (2018: 17.5%).

BUY with a target price of EUR 35.0

We retain our BUY rating and target price of EUR 35.0. Our target price values Talenom at 27.5x 2019E P/E, slightly above our business support services peer group, which we consider warranted due to the highly recurring nature of revenue and stability of the bookkeeping services market. The high valuation is further supported by earnings growth through both sales growth and margin improvements (Evli 2019E sales growth +20.9% and EBIT margin +2 %p).

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Pihlajalinna - ‘19E focus on improving profitability

06.05.2019 - 09.15 | Company update

Pihlajalinna’s Q1 earnings were close to expectations. After a weak ’18, the company was able to improve its profitability and increase its organic growth. Pihlajalinna’s focus in 2019E is to take further actions to improve its operating profit. We keep our rating “BUY” with new TP of EUR 13 (12).

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Profitability improvements continue in 2019E

In Q1, Pihlajalinna improved its operating profit with adjusted EBIT margin of 3.0% (-0.1% in Q1’18). Revenue growth was supported by new customer relationships in occupational healthcare but also by the new partnership with Fennia. Organic growth was 2.8% in Q1. In 2019E, the company continues focusing to improve profitability especially in clinics with weaker profitability levels. The company will also strengthen its services locally in mobile. Pihlajalinna’s interest is to expand its cooperation with municipalities and expand its occupational healthcare network in ‘19E.

SOTE collapsed but change is still needed

The health and social services reform collapsed in March. It is still unsure, whether the new government will start again with the SOTE reform but municipalities still need to find solutions for finding balance of financing health and social services. After the collapse of the reform, Pihlajalinna sees activity from municipalities has increased and expects that there is demand for their healthcare services.

We keep our rating “BUY” with new TP of EUR 13

Pihlajalinna targets to increase its revenue and EBIT in 2019E from 2018 levels. We foresee EBIT of EUR 24m (4.5% margin) and EUR 25m (4.6% margin) in ’19-‘20E. As Q1 revenue was above our expectations, we have increased our revenue expectation in 2019E to EUR 525m (previous EUR 515m). On our estimates, Pihlajalinna trades in 2019-2020E EV/EBITDA multiple of 7.3x and 5.9x. which translates into 23% and 26% discount compared to peer group. We maintain “BUY” with TP of EUR 13.

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Exel Composites - Q1 tailwinds

06.05.2019 - 08.50 | Company update

Exel Composites recorded Q1 sales and EBIT above our estimates as organic growth came in higher than we expected, while DSC also contributed more than we had projected. We make minor adjustments to our estimates. We retain our target price of EUR 5 per share. Our rating remains BUY. Exel is valued at ca. 7x EV/EBITDA ‘19e.

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Q1 topped our estimates due to high wind energy volumes

Exel recorded an 8% organic growth in Q1. DSC (a U.S. company acquired in Apr 2018) contributed another 18%, bringing the total top line increase to 26% y/y. Construction & Infrastructure revenues doubled due to the DSC contribution (the unit has a high wind energy exposure) and strong organic wind energy growth. European sales were stable; the growth was attributable to Rest of the World and APAC geographies. Industrial Applications revenues declined by 18% y/y as the telecommunications market continued challenging.

Cost program helped to lift EBIT from the recent lows

Exel recorded Q1 adj. operating margin at 7.2% (vs. 8.3% a year ago). The margin averaged 2.5% in H2’18 as the DSC acquisition diluted profitability. Exel says it managed cost savings according to its own plans, expecting DSC to reach break-even profitability during 2019. In addition to improving DSC’s performance, Exel has implemented cost savings throughout the group e.g. by closing the German plant in April. Exel expects further synergy savings between the company’s two Chinese production plants, both located in the city of Nanjing. The group-wide cost savings program targets EUR 3m in annual savings and the measures are expected to be fully effective in 2020.

We make minor revisions, reiterate BUY rating and TP

Our growth and profitability estimates do not change materially. We continue to expect Exel to achieve an organic top line growth of around 7% in the coming years, and therefore gradual improvement in operating margins. Our rating remains BUY, our target price being EUR 5 per share.

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Raute - Profitability drop due to inventories

06.05.2019 - 08.30 | Company update

Raute recorded Q1 revenues at a healthy EUR 41.3m level (vs. EUR 35.3m a year ago), yet EBIT margin declined as timing of certain inventory-related items was unfavorable. Order intake, at EUR 32m, more than halved as the comparison period was also rather unfavorable in this regard. We retain our HOLD rating and EUR 27 target price.

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Timing of certain inventory items dragged profitability

According to Raute, the low recorded Q1 EBIT was due to certain exceptional cost items (related to timing of inventories). The company says these amounted to the tune of EUR 0.5-1.0m. As a result, EBIT margin fell to 6.3% (7.8% a year ago). We continue to expect Raute to achieve EBIT margin at slightly above 7% in the coming quarters. Raute’s 2019 guidance remains unchanged.

Russia’s share of order intake high due to a large order

Earlier this spring, Raute announced a relatively large order to be delivered to Russia. The order, valued at over EUR 12m, is for Plyterra’s plywood mill machinery. The order will be delivered in Q1’20. The order pushed Russia’s share of Q1 order intake to 57% (without the order the share would have been around 30%). Raute continues to see Russia and Eastern Europe as promising markets, highlighting Ukraine and Poland as specific countries with good potential. Overall, Raute says the environment has remained stable. There is healthy activity concerning potential capacity expansion projects as well as other larger orders. Demand for maintenance and spare parts continues at a brisk level, signaling high mill capacity utilization rates. Modernization project orders remained low. One source of uncertainty is the rising portion of demand from smaller customers, whose decision-making processes Raute is unable to predict to the same extent as those of a larger customer (e.g. UPM).

Our estimates remain intact, TP at EUR 27 per share

Raute is unable to give very specific guidance. We expect ‘19 sales to decline by some 10% compared to the very high ’18 benchmark figure. We make relatively small adjustments to our estimates based on the report. Our rating remains HOLD, target price at EUR 27 per share.

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Raute - Sales beat, operating margin lower

03.05.2019 - 10.00 | Earnings Flash

Raute managed a 17% y/y top line growth in Q1. Order intake remained at a healthy level considering there were no major mill-scale orders. However, EBIT fell in both absolute and relative terms due to some exceptional cost items (while the comparison period also included some positive items).

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  • Q1 net sales amounted to EUR 41.3m vs. our EUR 32.3m estimate.
  • Order intake was EUR 32m compared to EUR 68m a year ago. The orders mainly consisted of smaller items. Technology services orders grew strongly. Order book totaled EUR 84m (vs. EUR 142m a year ago).
  • Operating profit stood at EUR 2.6m vs. our expectation of EUR 3.5m. Exceptional cost items burdened operating profit.
  • The company managed an operating profit margin of 6.3%, whereas we expected 10.9%.
  • Raute maintains its 2019 outlook, expecting 2019 net sales and operating profit at a similar level compared to the previous year. Overall, activity has remained at a good level.

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Exel Composites - Wind energy pushed top line

03.05.2019 - 09.30 | Earnings Flash

Exel Composites’ Q1 exceeded our expectations. Actual revenues topped our estimate by 12%, and the company also surprised in terms of EBIT margin.

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  • Net sales totaled EUR 27.1m vs. our projected EUR 24.3m. Revenue grew by 26% y/y thanks to the Construction & Infrastructure segment, which was driven by wind energy. Organic growth was recorded at 8.3%.
  • Growth in Construction & Infrastructure as well as Other Applications made up for the decline in Industrial Applications. The telecommunications market continued to be challenging.
  • The wind energy growth and the consolidation of DSC contributed to higher Rest of the World and Asia- Pacific revenues. European sales remained roughly flat.
  • EBIT amounted to EUR 2.0m, beating our EUR 1.4m estimate. EBIT margin was 7.2% vs. our 5.9% expectation. The improvement was due to operational leverage, but also owed to improved efficiency achieved with the help of the cost savings program.

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Etteplan - Upgrade to BUY

03.05.2019 - 09.00 | Company update

Etteplan reports Q1 results on May 8th. We expect continued good margin development in Engineering Solutions, and Software and Embedded Solutions. Project delivery challenges are expected to continue to have an impact on margins in Technical Documentation Solutions. With valuation looking more attractive due to peer multiple elevation we upgrade to BUY (HOLD) with a TP of EUR 9.0.

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Expect stable development

Our estimates ahead of Q1 remain largely intact, with some minor adjustments mainly to incorporate the transition from EBIT from business operations to EBITA as Etteplan’s measure for operational profitability following updated strategic and financial targets in April. Our group level Q1 revenue and EBITA estimates are at EUR 63.5m and EUR 5.8m respectively. We expect continued good margins in Engineering Solutions and Software and Embedded Solutions while still remaining cautious to margin improvement in Technical Documentation Solutions due to project delivery challenges in Germany.

Uncertainty has decreased but remains a key topic

The uncertainty relating to the development of the global economy remains a key topic as the development of macroeconomic indicators and sentiment has been mixed but in general more positive considering the uncertainty during the latter half of 2018. Both customer engineering companies’ and peers’ valuation have been on the rise during 2019. The order intake among engineering companies has also been positive, with the aggregate value for a selection of customer companies up some 7% y/y.

BUY (HOLD) with a target price of EUR 9.0

The valuation of peer companies has been on the rise during 2019, while Etteplan has been largely unaffected, and as such trades on a discount compared to peers. On 2019E P/E Etteplan trades at an in our view unjustifiably large discount of ~20%. We retain our target price of EUR 9.0 but upgrade our rating to BUY (HOLD).

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Pihlajalinna - Q1 revenue above our expectations

03.05.2019 - 08.55 | Earnings Flash

In Q1’19, Pihlajalinna’s revenue amounted to 132.5m vs. EUR 126m/128m Evli/cons estimates, while adj. EBITDA landed at EUR 12.6m vs. EUR 13,0m/13,0m Evli/cons estimates. Organic growth improved y/y. Revenue growth was supported by new customer relationships in occupational healthcare and the insurance company partnership with Fennia.

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  • Q1 revenue was EUR 132.5m vs. EUR 126m/128m Evli/cons estimates. Revenue grew 11.2 y/y%.
  • Growth from M&A was 8.3%. Most significant M&A transactions were the acquisitions of Doctagon and the Forever fitness center chain as well as the acquisition of Terveyspalvelu Verso.
  • Q1 organic growth was 2.8% (EUR 3.4m)
  • Q1 adj. EBITDA was EUR 12.6m (9.5% margin) vs. EUR 13,0m/13,0m (10.3%/10.1%) Evli/cons estimates. Adj. EBITDA increased by 81.6% % y/y. Profitability improved significantly especially in occupational healthcare services, public sector specialized care and private clinic operations.
  • Q1 adj. EBIT was EUR 3.9m (3.0% margin) vs. EUR 5,0m/4,7m (4,0%/3,7%) Evli/cons estimates.
  • Guidance for 2019E: Revenue is expected to increase from the 2018 level and adjusted EBIT is expected to clearly improve from last year.

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Verkkokauppa.com - Competition expected to remain tight in ‘19E

03.05.2019 - 07.55 | Preview

Verkkokauppa.com will report its Q1 earnings on May 10th. As before, our interest is on how competition has developed in the beginning of the year. We have kept our estimates for 2019E intact and retain our rating “BUY” with TP of EUR 4.7 ahead Q1.

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Guidance for 2019E wide

Verkkokauppa.com updated its guidance in February. The guidance seems quite wide; with 10-20% annual revenue growth, operating profit between EUR 11-17m and 2.5-4.5% EBIT margin. Our revenue estimate for 2019E is EUR 519m which lands on the lower half of the range of EUR 500-550m, guided by the company. We expect Q1 revenue of EUR 114m/116m cons. with adj. EBIT of EUR 2.5m/3.0m cons.

Launch of a new product category

In March, Verkkokauppa.com launched a new product category: sporting equipment for more than ten ball games, such as football, floorball and golf. The new range added some 1300 new products to the company’s product range. Verkkokauppa.com aims to lower the prices of the sporting equipment and accessories and be one of the market leaders within the category in the next 3-5 years. Based on Finnish Commerce Federation, Finnish online shopping 2019E growth is expected to be ~9%. Price competition is expected to remain tight and challenging throughout 2019E.

We keep rating “BUY” with TP of EUR 4.7

Verkkokauppa.com published its IFRS 16 updated figures for 2017-2018 earlier in Q1 and our estimates reflect the changes. We have kept our estimates intact. On our estimates, Verkkokauppa.com is trading at 2019-‘20E EV/EBIT multiples of 11.3x and 8.9x, which translate into 70% and 49% discount compared to the peer group. We keep our rating “BUY” with target price of EUR 4.7 ahead Q1.

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Detection Technology - SBU back in business

29.04.2019 - 09.10 | Company update

DT’s Q1 result was in line with our expectations. The updated outlook and comments regarding SBU market support our positive view on DT. On the back of our revised estimates and valuation, we maintain our BUY recommendation with new target price of 23.5 euros (prev. 19).

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Good start to the year, SBU back on track

Q1 result was in line with our expectations. Q1 net sales amounted to EUR 23.1m (+19.3x% y/y) vs. EUR 22.3m/22.6m Evli/consensus estimates. Q1 EBIT was EUR 3.9m (16.7% margin) vs. EUR 4.1m/4.0m Evli/cons. SBU sales grew 22.9% to EUR 14.5m vs. EUR 13.6m Evli estimate. MBU sales were EUR 8.6m vs. EUR 8.8m Evli estimate. R&D costs were EUR 2.5m, up 28% as indicated earlier. SBU market demand has picked up, with increasing CT investments starting in US airports. We have estimated the upcoming airport related EU and US standards to offer DT additional sales in the range EUR 20-30m in the coming years. See our report for more details.

EBIT growth taking a breather this year, longer-term investment case intact

Based on the SBU market pick up, we have moderately raised our sales estimates for ’19-21E. We expect ‘19E net sales to grow 11% to EUR 104m driven by SBU’s return to growth of 17.8% on weak comparables. We expect ‘19E MBU net sales growth to be flat due to the ramp-down of key customer’s product in H2. We expect ‘19E EBIT to be at last year’s level due to increase in R&D spending, increasing share of SBU sales affecting mix, as well as increased pricing competition. Despite flat EBIT this year, longerterm investment case is intact. We see DT’s investments this year securing its growth and profitability drivers for the coming years.

Maintain BUY recommendation with new TP of 23.5 (19)

On our estimates, DT is trading at discounts on EV/EBIT, EV/EBITDA and P/E multiples for ’19-20E. We see discount as unjustified given the attractive longer-term investment case. On the back of our revised estimates and valuation, we maintain our BUY recommendation with new target price of 23.5 euros (19).

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SRV - Biggest troubles now behind

29.04.2019 - 08.30 | Company update

SRV’s operative operating profit remained barely positive, at EUR 0.5m, despite notable FX impact and one-off items burden. SRV specified its guidance for the operative operating profit, implying a range of EUR 0-27m. Our revised estimate for 2019 stands at EUR 21.1m (prev. 32.7m), attributable to a re-evaluation of the impact of on-going lower margin projects. We retain our HOLD-rating with a target price of EUR 1.9 (2.0)

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Earnings impacted by approx. EUR 3m one-offs

SRV’s Q1 revenue amounted to EUR 222.6m, supported by increased housing unit completions. The operative operating profit fell below expectations, at EUR 0.5m, primarily due to approx. EUR 3m expense entries for REDI Majakka’s water damage and the dissolution of the VTBC fund. The operating profit was aided by a stronger ruble and amounted to EUR 3.3m. SRV further specified its operative operating profit guidance for 2019, expecting it to be positive but below the EUR 27m operative operating profit in 2017.

Downwards revisions on our estimates

We have lowered our 2019 revenue estimates by approx. 5% to EUR 1,029m, mainly through lowered business construction estimates. We have also lowered our operative operating profit estimates to EUR 21.1m (prev. 32.7m) in accordance with the specified guidance. We note that in our pre-Q1 estimates we underestimated the impact of on-going lower margin projects, which are expected to continue to have an effect during 2019. With the delay of REDI Majakka we expect a bulk of housing units to be completed in late-2019 and such our estimates, especially for earnings, are heavily skewed towards Q4/19.

HOLD with a target price of EUR 1.9 (2.0)

The introduction of IFRS 16 and the treatment of plot leases, causes severe comparability uncertainty for peer multiples, as for SRV the change increased net interest-bearing debt by more than 50%, and for now we refrain from relying on per multiples. With the downward revisions of our estimates we lower our target price to EUR 1.9 (2.0) and retain our HOLD-rating.

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Next Games - Making headway

29.04.2019 - 08.00 | Company update

Next Games Q1 EBIT and adjusted operating result amounted to EUR -2.4m and -1.3m respectively, while revenue grew 104% y/y to EUR 9.8m. The company’s cost savings program started to show, and further notable progress is expected in Q2. We retain our HOLD-rating with a target price of EUR 1.5

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Positive TWD: Our World signs

Next Games’ Q1 results saw profitability remaining in the red, with EBIT at EUR -2.4 (Evli -2.1m) and the adjusted operating result at EUR -1.3m. Q1 revenue grew 104% y/y to EUR 9.8m. TWD: No Man’s Land continued on a steady pace while implementation of new sales strategies in TWD: Our World saw the games ARPDAU and daily conversion rates improve towards the end of the quarter and reached an ARPDAU of EUR 0.31 in March (Q1: EUR 0.26). Management comments point towards a prolonged soft launch period for Blade Runner Nexus due to the nature of the game mechanics. Our estimates assume launch during Q3/2019.

Cost savings starting to show

Next Games’ expects to achieve annual cost savings in fixed costs of approximately EUR 6.5m and monthly fixed costs excluding game marketing investments to amount to EUR 1.1-1.2m during 2019 after achieving the targeted cost savings. As the held consultation proceedings still affected Q1 results, a reduction in the cost base is expected to be seen in Q2. On our revised estimates we expect an EBIT and adjusted operating result of EUR -4.8m and EUR -0.5m respectively in 2019. Actions taken to stabilize the operational cash flow saw the company’s cash position start to stabilize during the quarter.

HOLD with a target price of EUR 1.5

Next Games has made progress in scaling down its cost base and we expect further progress in Q2. A major boost in revenue would be necessary for further improving profitability which despite positive signs from Our World and the expected Launch of Blade Runner Nexus still seems challenging in the near-term. we retain our HOLD-rating with a target price of EUR 1.5

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Consti - Single project still causing troubles

29.04.2019 - 07.30 | Company update

Consti’s Q1 saw good sales growth of 18%, while performance obligations relating to a building purpose modification project kept earnings in the red, with a Q1 EBIT of EUR -0.4m. With the project still on-going the earnings outlook for 2019 continues to appear somewhat meagre, despite otherwise decent profitability development.

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Solid sales growth but earnings still slightly negative

Consti’s first quarter revenue beat expectations, growing 18.0% y/y to EUR 73.5m supported by strong sales growth in Housing Companies. Profitability only just remained negative, with EBIT at EUR -0.4m, with remaining performance obligations relating to a building purpose modification project still affecting results. Pick up in order intake compared to H2/18 aided in pushing the order backlog to a healthy EUR 237.8m. Stricter tendering criteria in Building Technology continued to weigh in on revenue and order backlog but management considers the quality of the order backlog to have improved.

On-going project still casting a shadow on 2019 earnings

With the good growth in Q1 we adjust our 2019 revenue estimate to EUR 337m (prev. EUR 324.1m) while the stagnant order backlog development prompts us to remain cautious on growth in the mid-term. We expect growth above all in the Housing Companies and Public Sector business areas. With the profitability burdening building purpose modification project still on-going (expected completion during Q2/19) we lower our Q2 EBIT estimates while keeping our H2/19 estimates intact for a 2019 EBIT estimate of EUR 5.9m (prev. EUR 7.1m).

HOLD with a target price of EUR 6.0

On our estimates Consti trades in line with the construction company peer group on 2019E P/E but on a significant discount on 2020E multiples. With the profitability burdening on-going obligations and uncertainties relating to Consti’s earnings capacity under a healthier project pipeline, without major negative margin projects, we retain our HOLD-rating with a target price of EUR 6.0

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Tokmanni - Focus on improving profitability in ‘19E

26.04.2019 - 10.00 | Company update

Tokmanni’s focus in 2019E is to increase profitability and profit margin. Tokmanni’s revenue and LFL growth grew well in Q1 driven by campaigns and clearance sales. We see valuation of being moderate. Hence, we retain TP of EUR 9.0, but downgrade our rating to “HOLD”

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LFL growth was clearly above expectations

Tokmanni’s Q1 revenue grew by 8.3% and was EUR 188m vs. EUR 186m our expectation. LFL growth continued to be high with 4.1 % growth vs. 1 % our view. Sales was driven by clearance sales, Nettopäivät campaign and the change in assortment of newly-aqcuired Ale-Makasiini stores. Sales development was particularly good in clothing and tool products categories. At the same time, discounted prices weighed down gross margin (31,2% vs. 33,3% our view). Tokmanni’s target is to increase its gross margin and profitability and reduce the relative share of fixed costs in 2019E.

Focus on new store openings and increase in profitability

Tokmanni’s target to expand its store network has been efficient. In Q1’19 Tokmanni’s store network was 188 stores (175 stores in Q1’18). Tokmanni reiterates its guidance and targets to increase its retail space by some 12,000 square meters annually which means approximately five new store openings per year. Tokmanni has agreed on opening of seven new stores and two relocated stores during 2019, hence, Tokmanni will exceed its targets in 2019E.

Retaining TP of EUR 9 with “HOLD”

Tokmanni’s figures were impacted by the changes of IFRS 16. We have updated our figures to reflect the changes. Based on Q1 results, we have slightly adjusted upwards our estimates. We now see revenue of EUR 936m and EBIT of EUR 63m for 2019E compared to previous estimates of EUR 921m and EUR 58m. In 2019E Tokmanni trades at 13x EV/EBIT which is some 18% discount to Nordic grocery focused peers. We retain our TP of EUR 9, but downgrade our rating to “HOLD”.

Open report

Detection Technology - Q1 result in line, updated outlook

26.04.2019 - 09.20 | Earnings Flash

Q1 net sales at EUR 23.1m (+19.3% y/y) vs. EUR 22.3 m/22.6m Evli/consensus estimates. MBU sales were EUR 8.6m (EUR 8.8m our expectation) and SBU sales were EUR 14.5m (EUR 13.6m our expectation). DT’s Q1 EBIT came in at EUR 3.9m, which is in line with our estimates of EUR 4.1m (EUR 4.0m cons).

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  • Group level results: Q1 net sales amounted to EUR 23.1m (+19.3x% y/y) vs. EUR 22.3m/22.6m Evli/consensus estimates. Q1 EBIT was EUR 3.9m (16.7% margin) vs. EUR 4.1m/4.0m Evli/cons. R&D costs amounted to EUR 2.5m or 10.8% of net sales.
  • Medical Business Unit (MBU) delivered net sales of EUR 8.6m which was in line with our estimate of EUR 8.8m. Net sales of MBU increased by 13.8% y/y due to continued good demand from key customers and successful shipments.
  • Security and Industrial Business Unit (SBU) had net sales of EUR 14.5m vs. EUR 13.6m Evli estimate. SBU sales grew 22.9% y/y due to increased demand for security solutions.
  • Updated outlook: sales of both business units will grow in line with the company's financial targets in the second quarter. The company expects demand to decline in the MBU business in the second half of 2019, as a significant customer will ramp down production of a device that uses DT's solution. Despite this, the company's total net sales are expected to grow in the second half of the year. There is uncertainty regarding demand, and the intensification of competition might be reflected in product prices.
  • Medium-term business outlook is unchanged: Detection Technology aims to increase sales by at least 15% per annum and to achieve an operating margin at or above 15% in the medium term.

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Scanfil - Slow start for the year

26.04.2019 - 09.10 | Company update

Scanfil’s Q1 EBIT, at EUR 6.8m, came in below our EUR 8.0m estimate, while the EUR 130m sales topped our EUR 125m estimate. Scanfil did warn Q1 would be slow due to a few major customers and still expects clear pick-up in activity in Q2. We leave our growth and margin estimates unchanged, retaining our TP of EUR 4.75 and BUY rating.

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The 7% y/y revenue decline was due to two segments

Scanfil reorganized its segments in the beginning of 2019. The new structure includes Communication (previously Networks & Communications; 14% of Q1 sales), Consumer Applications (parts of Urban Applications and Other Industries; 18% of Q1 sales), Energy & Automation (some contracts added from other segments; 20% of Q1 sales), Industrial (parts of Urban Applications and Other Industries; 28% of Q1 sales), and Medtec & Life Science (21% of Q1 sales) segments. The Q1 revenue decline was attributable to the Consumer Applications (35% y/y decrease) and Communication (20% y/y decrease) segments. The other three segments’ revenues were either flat or increasing. Scanfil also expects Consumer Applications’ top line to grow in 2019 despite the plan to halt the production of a single major product where demand has been low since Q3’18.

Q1 EBIT margin low due to volumes and product mix

Scanfil managed a meagre 5.3% operating margin in Q1 (7.4% a year ago) owing to both low sales volumes and a suboptimal product mix. Although Scanfil has now posted substandard margins for two consecutive quarters (Q4 EBIT was similarly low due to product mix), we continue to expect 6-7% operating margins going forward. Scanfil targets 7% operating margin.

Our target price remains unchanged at EUR 4.75 per share

Scanfil’s peer group valuation multiples have stayed largely flat since the previous earnings report. Scanfil currently trades at 6.1x EV/EBITDA ‘19e and 7.8x EV/EBIT ‘19e, a valuation level in line with the peer group. Moreover, as we see no changes to Scanfil’s longer term outlook, we retain our target price of EUR 4.75 per share and leave our rating BUY.

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Consti - EBIT still slightly negative

26.04.2019 - 09.05 | Earnings Flash

Consti’s Q1 EBIT was in line with consensus but slightly below our estimates, at EUR -0.4m (EUR 0.1m/-0.3m Evli/cons.). Consti’s Q1 revenue of EUR 73.5m beat both our and consensus estimates (EUR 64.4m/62.4m Evli/cons.). Consti’s order backlog amounted to EUR 237.8m.

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  • Net sales in Q1 amounted to EUR 73.5m (EUR 62.3m in Q1/18), beating both our and consensus estimates (EUR 64.4m/62.4m Evli/cons.). Sales growth in Q1 was 18.0 % y/y.
  • EBIT in Q1 amounted to EUR -0.4m (EUR -0.2m in Q1/18), slightly below our estimates but in line with consensus (EUR 0.1m/-0.3m Evli/cons.). EBIT remained negative due to performance obligations relating to a building purpose modification project while profitability development otherwise was mainly positive.
  • The order backlog at the end of Q1 was EUR 237.8m, down 5.0 % y/y.
  • Guidance reiterated: Consti estimates that its operating result for 2019 will improve compared to 2018.

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Next Games - Revenue miss, EBIT negative as expected

26.04.2019 - 08.30 | Earnings Flash

Next Games Q1 revenue and EBIT amounted to EUR 9.8m (Evli EUR 12.0m) and EUR -2.4m (Evli EUR -2.1m) respectively. Next Games expects to achieve annual savings of approx. EUR 6.5m from its cost savings program. The company’s cash position was at EUR 4.8m at the end of the quarter.

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  • Next Games’ revenue in Q1 amounted to EUR 9.8m, below our estimates of EUR 12.0m. Revenue growth y/y on was 104%.
  • EBIT in Q1 amounted to EUR -2.4m, slightly below our estimate of EUR -2.1m. The adjusted operating profit amounted to EUR -1.3m. As a result of the company’s cost savings program, annual savings of approx. EUR 6.5m compared to H2/18 averages are to be achieved.
  • TWD: No man’s land: DAU during Q1 was 225k (Q4/18: 253k). MAU during Q1 was 669k (Q4/18: 728k). ARPDAU was EUR 0.22 during Q1 (Q4/18: 0.25).
  • TWD: Our world: DAU during Q1 was 211k (Q4/18: 223k). MAU during Q1 was 982k (Q4/18: 759k). ARPDAU was EUR 0.26 during Q1 (Q4/18: 0.28).
  • The company’s cash position at the end of the quarter amounted to EUR 4.8m and has according to the company began to stabilize.
  • Next Games expects to get at least two games into testing phase during 2020.

Open report

CapMan - Outlook remains positive

26.04.2019 - 08.00 | Company update

CapMan posted solid Q1 results, although slightly below our estimates. Of particular interest were comments relating to carried interest, with potential materialization from H2/19 onwards. The fundraising of the newest Buyout fund is progressing well, while Infra has also seen positive development, with AUM now at EUR 270m. We retain our BUY-rating with a target price of EUR 1.85 (1.80)

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Comparable operating profit at a solid EUR 5.6m

CapMan’s Q1 results fell slightly below our estimates, with group turnover at EUR 9.3m (Evli 10.7m) and operating profit of EUR 4.7m (Evli 5.5m). The comparable operating profit, excluding one-off costs relating mainly to the acquisition of JAM Advisors, amounted to EUR 5.6m. The combined revenue of the Management Company business and Services business grew 27% y/y. No significant carried interest was booked during the quarter, but Scala success fees aided the Services business turnover. The operating profit was aided by a EUR 1.5m fair value change of the company’s market portfolio, with EUR 20m of the portfolio remaining at the end of the quarter.

Positive comments on carried interest outlook

Management comments regarding the carried interest outlook were positive. Carried interest materialization already during H2/19 appears plausible and potential in the coming years remains solid in both private equity funds and real estate. Near-term interest also remains on the progress of fundraising of the new Buyout fund and development of the first Infra fund, with total AUM in Infra already at EUR 270m, while management also hinted on new projects in the pipeline.

BUY with a TP of EUR 1.85 (1.80)

We have made no major revisions to our estimates post-Q1. We expect an operating profit of EUR 23.4m, supported by carried interest during the latter half of the year. Although uncertainties with carried interest are always present, the encouraging management comments alleviate some uncertainty concerns. We retain our BUY-rating with a target price of EUR 1.85 (1.80).

Open report

SRV - Results quite in line, guidance specified

26.04.2019 - 00.25 | Earnings Flash

SRV’s Q1 results were in general quite in line with our and consensus estimates. The operating profit was EUR 3.3m (EUR 3.8m/2.8m Evli/cons.) and operative operating profit EUR 0.5m (Evli 4.8m). Revenue was EUR 222.6m (EUR 224.7m/232.7m Evli/cons.). SRV specified its guidance, adding that the operative operating profit is expected to be lower than in 2017 (EUR 27m).

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  • SRV’s revenue in Q1 amounted to EUR 222.6m (EUR 215.7m in Q1/18), quite in line with our and consensus estimates (EUR 224.7m/232.7m Evli/cons.). Growth in Q1 amounted to 3.2% y/y.
  • The operating profit in Q1 amounted to EUR 3.3m (EUR -8.7m in Q1/18), slightly below our estimates but above consensus (EUR 3.8m/2.8m Evli/cons.), at an operating profit margin of 1.5 %. The operative operating profit amounted to EUR 0.5m (Evli EUR 4.8m) and includes an expense entry of approx. EUR 3m relating to REDI Majakka’s water damage and the dissolution of the VTBC fund.
  • The order backlog strengthened to EUR 1,782.5m (Q1/18: EUR 1,634.0m)
  • Guidance specified: SRV expects the full-year consolidated revenue for 2019 to grow compared to 2018 (EUR 959.7m). The operative operating profit is expected to improve compared to 2018 (EUR -10.0m) and to be positive, but lower than operative operating profit in 2017 (EUR 27m).
  • SRV is investigating the possibility to strengthen its balance sheet through the issuance of a new hybrid bond with an estimated size of EUR 45-60m.

Open report

Tokmanni - LFL growth continues to be impressive

25.04.2019 - 09.30 | Earnings Flash

Tokmanni had revenue of EUR 188,1m, which beats EUR 186/184m Evli/consensus estimates by ~ 1 %. LFL growth continues to be clearly above estimations at 4.1% vs. 1% our expectation. Strong revenue and LFL growth were driven by Nettopäivät campaign, change of assortments of Ale-Makasiini stores and clearance sales. Gross margin was 31,2 % vs. our 33,3% expectation. Due to the changes of IFRS 16, adj. EBITDA of 12.8 is not comparable with our estimate of 5.1. Tokmanni 2019E guidance reiterated; profitability and adj. gross margin are expected to increase from last year.

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  • Q1 revenue was EUR 188m vs. EUR 186m/184m Evli/cons, ~1 % above estimates. Revenue grew by 8.3% y/y, driven by 4.1% LFL growth (Evli LFL expectation 1%) and new openings.
  • Q1 adj. gross profit was EUR 58.8m (31.2% margin) vs. EUR 62.0m (33,3%) Evli expectation.
  • Q1 adj. fixed costs in total were EUR 46.8m (24.9% of revenue) vs. EUR 57.8m (31.1% of sales) Evli view.
  • Q1 adj. EBITDA was EUR 12.8m (6.8% margin) vs. EUR 5.1m (2.7%) Evli and EUR 5.3m (2.9%) consensus.
  • 2019 guidance intact: revenue will grow in 2019 based on new openings in 2018 and in 2019. Profitability (adj. EBITDA margin) will increase y/y in 2019E.

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CapMan - A solid start to the year

25.04.2019 - 09.00 | Earnings Flash

CapMan’s Q1 results were slightly below our estimates. Group turnover amounted to EUR 9.3m (Evli EUR 10.7m) and the operating profit amounted to EUR 4.7m (Evli 5.5m), while the comparable operating profit was at EUR 5.6m. CapMan continued reallocation of its market portfolio capital, with EUR 20.0m remaining. Capital under management rose to EUR 3.2bn.

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  • Group turnover in Q1 amounted to EUR 9.3m (EUR 7.3m in Q1/18), below our estimates (Evli EUR 10.7m). No significant carried interest was booked during the quarter.
  • Operating profit in Q1 was EUR 4.7m (EUR 4.1m in Q1/18), below our estimates (Evli EUR 5.5m). Operating profit excl. IAC was EUR 5.6m
  • Management Company business revenue in Q1 was EUR 6.4m vs. EUR 7.2m Evli. Operating profit in Q1 was EUR 0.8m vs. EUR 1.8m Evli.
  • Investment business: Revenue in Q1 was EUR 0.0m vs. EUR 0.2m Evli. Operating profit in Q1 was EUR 3.9m vs. EUR 2.9m Evli.
  • Services business: Revenue in Q1 was EUR 2.9m vs. EUR 3.3m Evli. Operating profit in Q1 was EUR 1.8m vs. EUR 1.3m Evli.
  • Capital under management by the end of Q1 was EUR 3.2bn. Of the capital under management EUR 1.9bn was attributable to real estate funds, EUR 0.9bn to private equity funds and EUR 0.3bn to Infra.
  • CapMan continued reallocation of its market portfolio funds and had EUR 20.0m remaining at the end of Q1.

Open report

Scanfil - Sales beat, EBIT subdued

25.04.2019 - 09.00 | Earnings Flash

Scanfil missed our Q1 EBIT estimate of EUR 8.0m, the figure coming in at EUR 6.8m. The company said earlier Q1 will be relatively slow, citing low demand among a few significant customers. Scanfil continues to expect customer demand to pick up during Q2, holding on to its earlier guidance for the year.

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  • Q1 revenue amounted to EUR 130m vs. our expectation of EUR 125m. Revenue declined by 7% y/y due to customer-specific considerations.
  • The sales decrease was attributable to the Consumer Applications and Communication segments. Other customer segments’ revenues were stable or developed positively.
  • Q1 EBIT stood at EUR 6.8m (5.3% margin) vs. our estimate of EUR 8.0m (6.4% margin). The operating profit declined by a third on an annual basis due to lower turnover and unfavorable product mix.
  • Scanfil retains 2019 guidance for EUR 560-610m in revenue and EUR 36-41m in EBIT. The company expects Q2 to be much stronger in terms of revenue and EBIT.

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Pihlajalinna - Profitability expected to increase in Q1

25.04.2019 - 08.20 | Preview

Pihlajalinna will report its Q1 earnings on May 3rd. As before, profitability and new contract pipeline are of interest but also comments on the failure of SOTE reform and its impacts. Our estimates reflect the IFRS 16 changes. We keep our rating “BUY” with target price of EUR 12.0 ahead of Q1.

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No major pipeline changes in Q1

Pihlajalinna expects its profitability and organic growth to increase in 2019E. The company will continue its expansion especially into regional capitals in 2019E-2020E. However, the failure of SOTE reform keeps the pipeline uncertain as municipalities’ eagerness to strike new contracts is impacted by SOTE. Provision of occupational healthcare services for Stora Enso started in Jan 2019 (we estimate value at EUR ~4m).

Acquisition of fitness centers continued in Q1

Pihlajalinna has expanded its services into wellbeing and preventative occupational healthcare. The company bought Forever fitness center chain in Feb 2018. The acquisition of Leaf Areena in Turku further expanded Pihlajalinna’s wellbeing services and the first Forever LITE fitness center was opened in Tampere in late 2018. Following the strategy, Pihlajalinna acquired FIT1 chain in Q1’19, adding five new fitness centers to its portfolio.

Retaining “Buy” with TP of EUR 12 ahead of Q1

Pihlajalinna published its restated financials for 2018 with IFRS 16 changes. Right-of-use assets increased by EUR 86.7m and interest-bearing debt by EUR 88m. We have updated our model to be in line with the restated figures but kept the underlying estimates unchanged. We expect Q1 revenue of EUR 126m and adj. EBITDA of EUR 13 (10.1 % margin). We expect profitability to increase in 2019E from last year’s weaker results caused by high start-up costs, transfer and M&A fees as well as high public specialized care costs. Our rating and target price (“Buy”, TP EUR 12) are unchanged ahead of Q1.

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Vaisala - Focus on integration and execution in H2

25.04.2019 - 08.15 | Company update

Vaisala’s Q1 missed our estimates, but overall our expectations for full year 2019E remain intact. After two recent acquisitions and subsequent increase in operating expenses, Vaisala needs to succeed in integrating the acquired business. Strong received orders and pick up in larger projects support outlook. We maintain HOLD recommendation with target price of 18 euros.Vaisala’s Q1 missed our estimates, but overall our expectations for full year 2019E remain intact. After two recent acquisitions and subsequent increase in operating expenses, Vaisala needs to succeed in integrating the acquired business. Strong received orders and pick up in larger projects support outlook. We maintain HOLD recommendation with target price of 18 euros.

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Q1 miss, but order book and projects support outlook

Vaisala’s Q1 result miss was due to lower than expected seasonal net sales in Weather & Environment. W&E net sales were 49.6 MEUR vs. 55 MEUR our expectation, while Industrial Measurements net sales were 34.6 MEUR vs. 33 MEUR our expectation. On Group level, Q1 EBIT came in at 0.0 MEUR vs. our expectation of 2.3 MEUR. Despite Q1 miss, the outlook for both BU’s looks supportive with strong orders received (+30%) and recent pick up in larger W&E projects (15 MEUR Argentina and 7 MEUR Sweden deals announced).

Estimates unchanged, OPEX increase to weigh on 2019E EBIT

Post Q1, our estimates are unchanged. We expect 2019E net sales to be 382 MEUR (10% growth yoy) and EBIT to be 31 MEUR (41 MEUR adjusted for PPA and one-offs), representing 8.1% EBIT margin (10.8% adj. EBIT margin). Estimated EBIT decline in 2019E is due to acquisitions related increase in operating expenses, which we estimate to increase roughly 16% to 172 MEUR (vs. 148 MEUR 2018).

HOLD maintained with target price of 18 euros

On our estimates, Vaisala is trading at adjusted EV/EBIT and EV/EBITDA multiples of 17x and 14x for 2019E, which is 4-8% lower than our peer group. Looking at 2020E multiples, valuation looks slightly more attractive given our estimated EBIT improvement, but we are not ready to put emphasis on next year due to the on-going process of integrating the acquired businesses. We see current valuation as fair, thus we maintain HOLD and target price of 18 euros.

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Finnair - Global traffic expected to grow in ‘19E

25.04.2019 - 08.15 | Company update

Finnair’s Q1’19 results fell short of expectations. Comparable EBIT was EUR -16.2m vs. -6m our view. Especially passenger growth in China was low. The company expects increased competition due to increased capacity especially on routes between Europe and Asia. Finnair reiterates its guidance: 10 % capacity growth in 2019 and revenue growth of slightly slower. We keep our “HOLD” rating with TP of EUR 8.0.

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Q1: costs and fuel weighed down the result

Finnair’s revenue was in line with our expectation (EUR 673m vs. 679m our view). The company’s Q1 adj. EBIT was clearly below expectations at EUR -16.2m vs. EUR -6m Evli and EUR -6m cons. Compared to our estimates the loss was driven by increased costs. Operating costs (excl. fuel and staff costs) were EUR 353m vs EUR 339 our view. Increase in OPEX was driven by higher passenger and handling costs as well as increased aircraft materials and overhaul costs. Fuel costs increased from the year end but was below our expectations (EUR 145m vs. 155m our view).

Competition expected to increase in 2019

Finnair guides 10 % ASK growth in 2019 with passenger revenue slightly behind. This will be driven by Feb-2019 delivered A350 and a second A350 which will be delivered in Q2’19. Added capacity will be mostly put to Asian routes. Finnair expects increased competition due to added capacity especially on routes between Europe and Asia. Based on Q1 results, we have made small adjustments to our cost estimates but revenue remains intact. We expect EBIT 2019E to be EUR 195m (previous estimate EUR 203m).

Retaining “Hold” with TP of EUR 8

It is notable that the peer multiples might not reflect the changes of IFRS 16 yet which makes the comparison challenging. On our estimates Finnair trades at an EV/EBITDA of 3.4x and P/B of 1.1x in FY19E-20E, while generating ROCE of ~7% with a WACC of 8.9. We see valuation as fair and hence retain “Hold” with TP of EUR 8.0.

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Suominen - Improvement on the cards

25.04.2019 - 08.00 | Company update

Suominen has disappointed expectations several quarters in a row. The company now posted EUR 3.0m Q1 EBIT, a figure clearly above our EUR 2.0m estimate. The earnings beat was driven by improved gross margin; the product of price hikes and stabilizing raw materials costs. Volume outlook is still uncertain, yet in our view Suominen’s earnings have now bottomed out. We increase our target price to EUR 2.85 (2.40) per share, while retaining our HOLD rating.

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2019 volume outlook remains uncertain

The company has managed to improve its gross margin through price hikes, however this has meant losing volumes. We expected the company to lose Q1 volumes by around 5% y/y. Therefore the 9% Q1 volume decline we estimate from the disclosed figures came as a negative surprise. We had previously expected volume declines of around 8% for the remaining quarters of 2019, while estimating 7% volume decline for the whole year. We now expect 2019 volumes to decline by 9%.

History suggests 11-12% gross margin potential

Suominen achieved an 8.1% Q1 gross margin (vs. our 7.0% expectation and 7.4% a year ago). The GM had previously touched the low of 6.2% in Q4’18. We expect the 2019 GM to improve to 8.7% as higher prices continue to pass through. We estimate Suominen to reach a roughly 11% GM by 2021 as the recent years’ oversupply situation balances out. According to our analysis, this would imply an EBIT margin of ca. 5% in 2021E.

We increase our target price to EUR 2.85 per share

We expect Suominen to reach 3.1% EBIT margin in 2019, while estimating further margin upside to the tune of 200bps by 2021 on the back of stabilizing nonwovens market. In our view a 5% EBIT margin is a reasonable assumption in a long-term valuation context. However, given the company’s recent challenges we are not yet ready to fully weight this long-term potential in our TP. We do note that the 5% margin assumption would justify a share price materially above EUR 3 per share. Suominen now trades at 6.1x EV/EBITDA ‘19e, a 20% discount to peer multiples.

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Suominen - The results look promising

24.04.2019 - 16.00 | Earnings Flash

Suominen posted Q1 adj. EBIT, at EUR 3.0m (vs. our EUR 2.0m estimate), substantially above our expectations. The company’s gross profit (and margin) improved due to higher prices and stabilizing input costs. Volumes were lost, yet the results point to Suominen having achieved a turnaround in earnings.

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  • Q1 revenue amounted to EUR 110m vs. our estimate of EUR 116m. Revenue grew by 3% y/y (EUR 3.2m in absolute terms). The EUR/USD exchange rate accounted for EUR +4.7m, quite in line with our EUR 4.3m positive expectation. This means organic growth was roughly EUR -1.5m. We expected clearly positive organic growth (around EUR 4m), estimating improved pricing would outweigh volume losses.
  • Gross profit totaled EUR 8.9m (8.1% margin) vs. our EUR 8.0m (7.0% margin) projection.
  • In other words, even though Suominen lost substantial volumes, price hikes and stabilizing input costs helped the company to achieve a major profitability improvement.
  • Adj. EBIT reached EUR 3.0m (2.7% margin) vs. our EUR 2.0m (1.8% margin) estimate.
  • Suominen retains its 2019 guidance for flat revenue and improving adj. EBIT.
  • The company also announced the appointment of Mr. Toni Tamminen as CFO (effective 30 Jul 2019).

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Vaisala - Q1 below our expectations

24.04.2019 - 14.20 | Earnings Flash

Vaisala’s Q1 net sales at 84.2 MEUR vs. 87 MEUR our expectation and 88.5 MEUR consensus. Q1 EBIT was 0.0 MEUR vs. our expectation of 2.3 MEUR. Adjusted EBIT was 3.0 MEUR vs. our 5.0 MEUR adjusted EBIT expectation.

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  • Group level results: Q1 net sales at 84.2 MEUR vs. 87 MEUR our expectation and 88.5 MEUR consensus. Q1 EBIT was 0.0 MEUR vs. our expectation of 2.3 MEUR. Adjusted EBIT was 3.0 MEUR vs. our 5.0 MEUR adjusted EBIT expectation
  • Gross margin was 53.2% vs. 51.3% last year
  • Orders received was 113 MEUR vs. 87.1 MEUR last year
  • Weather & Environment (W&E) net sales was 49.6 MEUR vs. 55 MEUR our expectation. EBIT was -4.3 MEUR
  • Industrial Measurements (IM) net sales was 34.6 MEUR vs. 33 MEUR our expectation. EBIT was 4.6 MEUR
  • CEO comment: “Integration of Leosphere is proceeding according to plan and integration of K-Patents has started well during the first quarter. We expect to complete these integration projects during the second half of this year.”
  • Business outlook for 2019 unchanged: 2019 net sales to be in the range of EUR 380–400 million and operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract.

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Finnair - EBIT below expectations

24.04.2019 - 10.05 | Earnings Flash

Finnair’ Q1 adj. EBIT was clearly below what we expected at EUR -16.2 vs. our expectation of EUR -6m. Consensus was at -6m. Finnair 2019E guidance reiterated; 10% capacity growth and revenue growth somewhat behind capacity. Especially transfer traffic between Asia and Europe grew well as well as cargo. Finnair expects the competition to increase especially between Europe and Asia and in Asian traffic as the capacity increases. Finnair’s figures were largely impacted by IFRS 16 changes.

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  • Q1 revenue was EUR 673m vs. EUR 679m/680m Evli/cons.
  • ASK grew by 10.4 % whereas RASK decreased 4.9 % in Q1.
  • Q1 adj. EBIT was EUR -16m vs. EUR -6m/-6m Evli/cons. The difference is caused by increased expenses and higher price of fuel compared to the previous year.
  • Q1 comparable EBITDA was 60m vs. 75m our view. Pre-tax profit was -49m vs. -31m our view. The difference comes partly from financial expenses that were EUR 31.6m vs. EUR 25m our view.
  • Absolute costs: Fuel costs were EUR 145m vs EUR 155m our view. Staff costs were EUR 130 vs. 128m our view. All other OPEX combined were EUR 429m vs. 339m our view.
  • Unit costs: CASK was 6.46 eurocents vs. 6.42 our view while CASK ex fuel was 5.02 eurocents vs. 4.97 our view.

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Talenom - Smooth sailing

24.04.2019 - 08.45 | Company update

Talenom’s Q1 earnings brought no larger surprises. The acquisition of Sweden-based Wakers Consulting and the upgraded guidance greatly reduced two of the in our view main uncertainties and the outlook continues to look solid. We retain our BUY-rating with a TP of EUR 35 (24.5).

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No larger surprises in Q1 results

Talenom’s Q1 results did not deviate substantially from our estimates, with revenue at EUR 14.8m (Evli 14.7m) and EBIT at EUR 3.4m (Evli EUR 3.2m). Talenom revised its guidance earlier in Q1 and expects net sales growth in 2019 to increase (prev. remain at a similar pace) compared to 2018 (18.0%) and the operating profit margin to improve (prev. improve slightly) (2018: 17.5%). The hidden gem in our view is the profitability guidance upgrade, as the improvement is expected to stem from development of the accounting production line during H2/19, which we expect to support margin improvement in 2020.

Viewing expansion with caution

Talenom acquired Wakers Consulting during Q1, opening up its first operations outside Finland. The characteristics of the acquired firm in our view proves to show a continued healthy sense of risk aversity, as by size Wakers Consulting is not far from what we would consider a minimum for soundly being able to implement the intended organically driven growth strategy. Management comments on expansion plans imply limited investment needs and erases the in our view biggest uncertainties related to the expansion.

BUY with a target price of EUR 35 (24.5) per share

We have pre-Q1 been cautious to margin improvement potential, which now looks probable also in 2020 through accounting line development during H2/19. Although share price inclines have stretched valuation, with the lower expansion and margin improvement uncertainty we are prepared to accept higher multiples and value Talenom at 27.5x and 22.1x 2019E and 2020E P/E respectively, for a TP of EUR 35 (24.5), reiterating our BUY-rating.

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Talenom - Minor earnings beat

23.04.2019 - 13.50 | Earnings Flash

Talenom’s first quarter results were quite in line with our expectations. Net sales amounted to EUR 14.8m (EUR 14.7m Evli) while the operating profit was slightly above our estimates, at EUR 3.4m (EUR 3.2m Evli). The guidance was revised already earlier during Q1 and Talenom expects net sales growth to be greater than in 2018 and the operating profit margin to improve compared to 2018.

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  • Talenom’s net sales in Q1 amounted to EUR 14.8m (EUR 12.7m in Q1/18), in line with our estimates (Evli EUR 14.7m). Q1 revenue growth was at 16.1% y/y.
  • The operating profit in Q1 was EUR 3.4m (EUR 2.6m in Q1/18), above our estimates (Evli EUR 3.2m), at a margin of 23.3%.
  • Talenom revised its guidance after the acquisition of Wakers Consulting during Q1, now expecting the net sales growth rate to be greater than (prev. same rate) in 2018 and the operating profit margin to improve (prev. improve slightly) compared to 2018
  • Net investments during Q1 increased to EUR 10.5m due to adoption of IFRS 16, with the adjusted net investments (excl. IFRS 16) at EUR 2.3m compared to 3.3m in Q1/18.

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Tokmanni - LFL growth expected to normalize

18.04.2019 - 09.15 | Preview

Tokmanni will report its Q1 earnings on April 25th. Last year’s LFL growth was surprisingly high and for Q1’19 we expect LFL growth to normalize. Tokmanni’s Q1 revenue should be driven by the positive retail growth in early 2019. We retain our “Buy” rating with TP of EUR 9.0

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Store network growing fast in 2019

Tokmanni’s store network was 186 at the end of 2018 and in Q1’19 the store network grew by four new stores in Northern Finland through acquisitions. In February Tokmanni agreed on the opening of three new stores in 2019 and on one store reopening. Tokmanni’s revised target is to increase its store network to cover more than 200 stores, which implies of five new store openings or relocated stores each year. With this year’s store network growth Tokmanni should clearly exceed its yearly target.

LFL growth expected to normalize in Q1

As retail market is highly seasonal, Q1 is normally weaker than other periods. Tokmanni’s LFL growth hit records in 2018 with annual LFL growth of +5.6%. In Q1’18 Tokmanni’s reported LFL growth was as high as of 6,1%. We have kept our expectations conservative in 2019E and foresee of LFL growth of 1%. We have retained our gross margin expectation for Q1 at 33,3% even though Tokmanni’s target is to increase the gross margin in 2019.

Retaining estimates intact with “Buy” and TP of EUR 9

We foresee Q1 revenue of EUR 186m (7.2% growth y/y, of which LFL 1.0%) and adj. EBITDA of EUR 5.1m. (EUR 0.9m Q1’18). We retain “Buy” rating with TP of EUR 9.0. On our estimates Tokmanni trades 10.7x and 9x EV/EBIT in FY19-20E (prior IFRS 16 changes) and offers attractive dividend yield in FY19-20E. Our estimates do not reflect IFRS 16 changes yet but will be updated when Q1 results are out.

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SSH - Strategy proceeding but painfully slow

18.04.2019 - 09.05 | Company update

SSH’s Q1 result missed our expectations due to lackluster software fees in the period. Q1 net sales were 2.7 MEUR and operating loss was -1.3 MEUR vs. our expectation of 3.6 MEUR net sales and -0.9 MEUR operating loss. We maintain SELL recommendation with revised target price of 1.10 euros (previously 1.60).

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Q1 miss puts pressure on closing licensing deals

Q1 net sales missed our estimates due to the lack of larger licensing deals in the period. Software fees were EUR 0.5 million (1.1m Evli), Professional services were EUR 0.1 million (0.3m Evli), and Recurring revenue was EUR 2.1 million (2.2m Evli). Although there is still plenty of time left to catch up for the miss, this puts pressure on closing several larger licensing deals in the coming quarters to reach the guided 10% growth for 2019E. According to management UKM pipeline looks good.

Strategy proceeding but painfully slow

No material new news was provided in conjunction with result regarding sales ramp up of PrivX and NQX. PrivX remains at the heart of SSH’s growth strategy, but revenue is not expected to be material yet. We have made small downward changes to our estimates after the Q1 result. We estimate SSH’s 2019E net sales to decline -7% to 17.1 MEUR (reaching guidance though) and 2019E EBIT to be 0.2 MEUR. Our estimates for the coming years are also broadly intact, with net sales growth expectations at 12% for 2020E and 2021E and EBIT improving towards 2021E.

Risk/reward still not attractive, SELL maintained

On our estimates, SSH is trading at 2019-20 EV/Sales multiples of 3.0x and 2.6x. Given the slow growth pace, lack of profitability and uncertainty to our sales estimates, we see valuation still challenging from a risk/reward perspective. We maintain SELL recommendation with revised target price of 1.10 euros (previously 1.60). Our target price is based on EV/Sales multiples of 2.5x and 2.2x on our 2019 and 2020 estimates.

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SSH - Q1 result below our expectations

17.04.2019 - 09.15 | Earnings Flash

SSH Q1 result was below our expectations. No larger licensing deals were announced during Q1, which led to Software fees being clearly lower than last year. Comparables were high, due to last year’s Q1 figures including 1 MEUR Sony related patent income.

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  • Q1 net sales totaled EUR 2.7 million (3.6m our expectation)
  • Software fees were EUR 0.5 million (1.1m Evli), Professional services were EUR 0.1 million (0.3m Evli), and Recurring revenue was EUR 2.1 million (2.2m Evli)
  • Q4 operating loss was EUR -1.3 million (-0.9m our expectation)
  • EPS was -0.04 (vs. -0.03 our estimate)
  • Liquid assets were EUR 12.3m (vs. 12.6m Q1/18)

Business outlook for 2019 unchanged: SSH expects double digit percentage growth from software business (software fees, professional services, and recurring revenue) at comparable exchange rates

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Finnair - Capacity growth as expected

17.04.2019 - 09.15 | Preview

Finnair’s capacity growth in Q1 was in line with the guidance for 2019E (10.4% vs. guidance 10%) and with our Q1 expectation of 11 %. Passenger growth on the other hand was weaker than expected. We have implemented the IFRS 16 changes to our estimates and kept Q1 expectations mainly intact. We keep our rating “HOLD” and target price of EUR 8.0 ahead the Q1.

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Soft start in Q1 traffic information

Finnair’s traffic continued soft in Q1. Overall capacity (ASK) grew by 10.4 %, which is somewhat in line with our 11 % expectation. Sold capacity (RPK) growth was only 4.2 % which stayed clearly below our estimation of 7 %. As a result of that, passenger load factor (PLF) continued decline by 4.6 % percentage points in Q1 to 78,3 %. Largest drop was in Asia (-6.2pp) but also in Europe (-3.2pp) and domestic (-3.2pp).

Fuel prices rising from its lowest point

Jet fuel prices reached its lowest point during the turn of the year but has increased since then. Average price moved on q/q basis by -7% in EUR and by -8% in USD compared to the average prices of 4Q18. Also, on a y/y basis the prices moved by -3% in USD when compared to the average price of 1Q18. However, the average price in EUR was 5% higher.

IFRS 16 changes implemented to our estimates

The effects of IFRS 16 to Finnair’s financials are noteworthy. Lia-bilities in 2018 increased by 1,1b euros and assets by 992 million euros. 2018 EBIT improved from EUR 169m (margin 6,0 %) to EUR 218m (margin 7.7%). We have kept Q1 estimates largely un-changed apart from the changes caused by IFRS16 and the changes in the accounting principle of aircraft frame components. We expect Finnair’s Q1 revenue to be EUR 679m (6 % growth) while foreseeing adj. EBIT of -6m (margin -0.9 %). We keep our rating “HOLD” and TP (EUR 8.0).

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Detection Technology - Expecting to fire on both cylinders in Q1

17.04.2019 - 08.20 | Preview

Detection Technology will report Q1 earnings next week on Friday April 26th. We expect both business units to perform well in Q1, with SBU growth coming back on track and MBU’s good momentum continuing. Our focus will be on the expected pick up of the security market and market comments. Our rating and TP remain intact ahead of Q1.

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Security market expected to pick up again

DT said in their Q418 result that they saw signs of security market picking up again and overall the beginning of the year is expected to be strong in all markets. Consequently, DT expects double digit sales growth in the first half, but second half is however more uncertain, with of one of MBU’s major customers ramping down manufacturing of a certain device. We expect both BU’s to perform well in Q1, with SBU growing 15% and MBU 17% yoy. We expect Q1 net sales to be 22.3 MEUR (19.3 MEUR Q118) and Q1 EBIT to be 4.1 MEUR (3.7 MEUR Q118). Consensus is expecting Q1 net sales of 22.6 MEUR and EBIT of 4.0 MEUR.

Varex acquiring Direct Conversion AB for 75 MEUR

DT’s peer company, Varex Imaging, recently announced its intent to acquire 90% of Direct Conversion AB for a price of 75 MEUR for the whole company. The Swedish company had net sales of 16 MEUR in 2018, which means a 4.7x EV/Sales deal multiple. This further proves the potential seen in direct conversion and photon counting, an area which DT is also investing in with its asset purchase deal of the French MultiX.

BUY rating and TP of 19 euros maintained ahead of Q1

For 2019E, we expect DT’s net sales to grow 7.5% to EUR 100.9m driven by SBU’s return to growth of 11.5% on slightly weaker comparables. We expect 2019E MBU net sales growth to be flat due to the ramp-down of key customer’s product in H2. We estimate 2019E EBIT to be EUR 18.9m (19.1m 2018) and EBIT margin to decrease to 18.8% from 19.7% level of 2018 due to higher R&D costs (30% higher vs. 2018). Our rating “BUY” and TP EUR 19.0, remain unchanged ahead of Q1.

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Suominen - Results finally on the horizon?

16.04.2019 - 09.10 | Preview

Suominen reports Q1 results next week, on Wed, Apr 24. Q4 proved another miss in a long series, however there are tentative signs pointing to earnings having bottomed out. The company has hiked prices since last autumn (although volumes are likely to be lost as a result), and raw materials pricing pressure has become a less acute problem with all the major inputs registering double-digit price declines during the last six months.

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Focus will be on the gross margin and volume dynamics

Gross margin continued to decline in Q4, hitting a low of 6.2%. We expect the Q1 gross margin at 7.0% (vs 7.4% a year ago). With the onset of nonwovens price hikes and recent declines in raw materials prices the gross margin is bound to increase, yet it is hard to say to what extent volumes might have been lost. We are forecasting 5% y/y volume decline for Q1. We expect Q1 revenue at EUR 116m (8% y/y increase) and adj. EBIT at EUR 2.0m, or 1.8% margin (vs EUR 1.5m and 1.5% a year ago). Our forecast could be topped on the gross margin level as input prices have been weaker than expected. However, we leave our operative estimates unchanged as the gross margin positives and volume negatives should cancel each other out on the absolute gross profit level.

First quarter with the new CEO behind the wheel

Mr. Petri Helsky (previously CEO of Metsä Tissue) has held the seat as Suominen’s President & CEO since Jan 7. Suominen guides flat revenue and improving adj. EBIT for 2019. We expect 2019 revenue to increase by 3% (mostly due to FX), and EBIT at EUR 12.5m (EUR 4.6m) as gross profit is set to improve.

Estimates remain largely intact, FX basically flat

We retain our HOLD rating and target price of EUR 2.40 per share ahead of the Q1 report. We stay cautious for now despite expected gross margin improvement as it is unclear how much volume might be lost. Peer group multiples have gained sharply in recent months, meaning there is solid upside potential should Suominen manage to turn around earnings trajectory in 2019.

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Exel Composites - Initiating coverage with BUY

12.04.2019 - 09.20 | Company report

Exel Composites has grown mainly through acquisitions in recent years. Organic growth has been weak due to challenges in telecommunications and infrastructure markets. Moreover, the company’s EBIT margin, at ca. 5% last year, has declined to way below the desired level. A recent acquisition further cut profitability. Volume visibility is limited, yet we take a constructive view based on Exel’s repositioning towards the wind energy sector, where longterm fundamentals are strong and carbon fiber reinforcements are gaining further market share.

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The wind energy sector is now Exel’s top customer industry

The wind energy sector recently claimed the position as Exel’s most important customer industry. Exel has selected wind turbine blade reinforcements as the main application to drive order volumes. We estimate this market to grow at low double-digit rates in the coming years, and thus expect Exel to be able to add EUR 3-5m in sales p.a. within the segment. According to our analysis, operational leverage should help Exel to achieve a 7% EBIT margin in 2021 (up from adjusted 2018 operating margin of 5.2%) despite a 100bps gross margin decline due to the increased share of lower margin wind energy sector deliveries.

Execution is key, the company needs to win large accounts

In our view Exel is to gain from volume tailwinds within select customer industries and thus set to grow especially within the Construction and Infrastructure segment. While efficiency measures such as the cost reduction program targeting EUR 3m in annual savings by 2020 are important for improving the operating margin, we recognize higher volumes as the main value driver. To move the needle, Exel should add such new customers that could generate annual revenues in the EUR 5m ballpark.

Our rating is BUY, target price EUR 5 per share

We initiate coverage with BUY based on our multiple and DCF analysis. Our target price implies a 2019E EV/EBITDA multiple of 8x vs. historic average of almost 9x and the peer group currently trading at around 9-10x.

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Consti - Time to regain profitability

29.03.2019 - 00.00 | Company report

Consti has had project management related issues, which has dented earnings during the past year, and has been taking measures to improve profitability. We expect margin recovery, although risks to future earnings still remain. We downgrade to HOLD (BUY) with a target price of EUR 6.0.

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Leading renovation company seeking to regain profitability

Consti is a market leader in the less cyclical Finnish renovation market, where the demand outlook remains good due to among other things an ageing building stock. Consti’s performance has during the past years however been hampered by internal project management and execution related issues, which has left a dent in profitability. Consti has been implementing changes towards a more customer-centric organization and to increase operational efficiency, expected to also aid profitability through cost-savings.

Expecting margin recovery

We expect Consti’s focus to be on improving margins and as such estimate only slight sales growth for the coming years, with our estimated 2018-2021E sales CAGR at 2.2%. Sales growth has been affected by the implementation of stricter tendering criteria, which we expect to continue to have an effect, but on the other hand has a reductive effect on possible further unprofitable projects. A larger share of the unprofitable projects have been completed but open risks still remain. We expect profitability to be supported by a lesser impact of the unprofitable projects along with an alleviation of the pressure from subcontractors and suppliers following boom years in building construction volumes. Our EBIT-margin estimate for 2019E is 2.2%.

HOLD (BUY) with a target price of EUR 6.0

Consti trades at a 22%/31% discount on 2019E EV/EBIT to our mainly Nordic construction and building installations and services peer groups. With and elevated risk profile due to internal project management issues and the on-going arbitration proceedings in the Hotel St. George project we consider a discount justifiable. We value Consti at 9.2x 2019E EV/EBIT for a target price of EUR 6.0 and downgrade to HOLD (BUY).

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CapMan - Gaining momentum

20.03.2019 - 09.00 | Company report

CapMan has been continuing to show signs of its business moving in the right direction, having successfully launched several important funds and signed new and additional mandates and recently seen AUM again passing the EUR 3bn mark. 2018 saw earnings fall due to negative returns on the non-core market portfolio but the earnings outlook for 2019 onwards remains attractive with core business area earnings picking up pace. We retain our BUY rating with an ex-div target price of EUR 1.80 (1.75).

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Additional earnings stability through increased fee income

CapMan is seeking to create a healthier earnings base, with the role of volatile carried interest decreasing and the more stable fee income increasing. CapMan is further seeking to expand its investor base, currently consisting mainly of local tier 1 investors. 2018 in our view was a year of clear signs of the business improving as intended, although profitability fell due to negative returns on the non-core market portfolio. Several important funds have been launched in the past few years along with the signing of new and additional mandates, for instance the additional EUR 320m BVK mandate, that will have a positive impact on growth and earnings in early 2019 and over time.

Dividends an important part of the investment case

CapMan has raised the absolute DPS now six years in a row and revised its dividend policy, targeting to annually increase DPS. We expect CapMan to distribute a dividend of EUR 0.13 per share in 2019E, corresponding to an estimated dividend yield of 7.7%.

BUY with a target price of EUR 1.80 (1.75)

Our sum-of-the-parts approach implies a fair value of EUR 1.75 per share. On earnings-based multiples, primarily P/E, valuation compared to the three by size comparable peers appears fair. The dividend yield on our estimates however shows a clear disparity, with CapMan’s dividend yield on our estimates approx. 20% above the peers. We retain our BUY-rating with an ex-div (post equity repayment of EUR 0.06) target price of EUR 1.80 (1.75).

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Innofactor - Slightly below estimates

05.03.2019 - 09.30 | Earnings Flash

Innofactor’s Q4 earnings were as expected negative and the results as a whole were slightly below our estimates. Innofactor’s net sales in Q4 amounted to EUR 15.9m (Evli 16.4m) and EBITDA was -0.9m (Evli -0.7m). Innofactor expects its net sales and EBITDA in 2019 to increase from 2018 levels (EUR 63.1m and EUR -1.0m respectively). Innofactor reported an order backlog of EUR 32m, up some 40% y/y.

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  • Innofactor’s net sales in Q4 were EUR 15.9m, slightly below our estimates of EUR 16.4m. Sales growth in Q4 was -7.3 % y/y.
  • The EBITDA in Q4 amounted to EUR -0.9m, falling slightly below our estimates (Evli EUR -0.7m), at an EBITDA-margin of -5.7 %. The weaker profitability was according to Innofactor due to weaker Dynasty product sales, weaker than anticipated revenue in Denmark and some project write-downs.
  • Guidance: Innofactor’s net sales and EBITDA in 2019 are expected to increase from 2018 levels, when the net sales and EBITDA amounted to EUR 63.1m and EUR -1.0m respectively.
  • Dividend proposal: Innofactor’s BoD proposes that no dividend be paid for 2018 (Evli EUR 0.0).
  • Operating cash flow during 2018 was EUR -0.6m.
  • Active personnel at the end of the period 550 (2017: 601)
  • Order backlog at around EUR 32m, up around 40% y/y. Has not previously been reported.

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Aspo - Larger EBIT gain to materialize in ‘20

01.03.2019 - 13.15 | Company update

We met with Aspo’s management to discuss near term outlook for ESL and Telko. Based on the discussions, we revise our estimates for 2019-20. While in our view Aspo companies are on a steady track towards higher EBIT margins, we acknowledge that our estimates have been too optimistic, especially for 2019. We update our projections to reflect the fact that the earnings improvement trajectory for ESL and Telko is likely to play out over a longer period than we previously expected.

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We now expect flat H1’19 EBIT for ESL Shipping

Whereas we previously expected close to EUR 7m quarterly EBIT for ESL starting from the beginning of Q2’19, we now expect the second quarter to stay relatively muted (EUR 4m EBIT). Compared to our initial expectations, we now see it will take longer for ESL to reach the two new LNG vessels’ optimal performance level. While the crane issue should be fixed by the end of Q1, it will be a few more months before operational efficiency will achieve the desired standards. We expect ESL to demonstrate more significant EBIT improvement during the second half of 2019, and we estimate a quarterly EBIT above EUR 6m to be feasible after 2019.

Telko’s 2019 EBIT margin to improve by 30bps

Telko’s EBIT margin improved by 40bps in 2018, reaching 4.5%. Whereas we previously expected further margin expansion to the tune of 100bps in 2019, we now moderate our estimate to equal a 30bps increase. Procurement efficiency will improve slower than we estimated earlier. Telko’s stated target for 2020 is an EBIT margin of 6-7%. We now expect Telko to reach this target only during the last quarter of 2020.

Our rating is BUY, target EUR 9.50 (9.75) per share

Aspo now trades at 13.6x our 2019e EBIT. We update our target price to EUR 9.50 (9.75) per share based on SOTP and DCF valuations. Our rating remains BUY.

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Cibus Nordic - Property income to grow further

28.02.2019 - 09.15 | Company update

Cibus updated its dividend policy. Dividend payments will now increase on a quarterly basis (at a 5% annual pace). While there have been no major changes in the underlying portfolio fundamentals, the company has managed to increase its cash flow by 10% since the March 2018 IPO due to acquisitions and refinancing activities. The portfolio now holds 132 Finnish properties with a gross asset value of EUR 816m; 2019 pipeline might add another EUR 50m.

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NOI capacity unchanged at EUR 47.8m, income at EUR 31m

Profit from property management was 1.5% below our expectations. Administration costs were higher during Q4, amounting to EUR 1.4m vs the budgeted EUR 0.9m cost. The higher expenses were attributable to the CEO departure. Cibus has now shifted to financial year that follows the calendar year. Dividends will be paid out on a quarterly basis; the first 2019 payment has a June record date. From now on, Cibus targets a 5% annual increase in dividends. In our view, Cibus has ample capacity to increase its annual payments. The proposed 2019 distribution of EUR 0.84 per share implies a total dividend of EUR 26.1m, or a 7.8% yield. We have estimated that the current portfolio has an annual distribution capacity amounting to close to EUR 30m. Cibus estimates its operating income capacity at EUR 31m, up from the previous EUR 30.6m figure.

EPRA NAV amounted to EUR 11.1 (11.2) per share

The central portfolio metrics were basically flat. Occupancy rate improved slightly to 96.0% (95.8%), with LTV at 58.4% (58.3%). Cibus has increased its bank financing to EUR 354m (EUR 325m), while the margin has decreased by 20bps, to 1.9%, and the weighted average tenor increased to 2.9 years (2.3).

Our target still stands at SEK 120, downgrade to HOLD

Our expectations for Cibus’ portfolio remain unchanged. We expect Cibus’ 2019 acquisition pipeline (approximately EUR 50m) to comprise mainly of grocery properties let to Kesko. We are waiting to see the acquisitions materialize. We retain our target price of SEK 120 per share and update our rating to HOLD (BUY).

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Marimekko - Downgraded to “Sell”

28.02.2019 - 08.55 | Company update

Marimekko’s soft international sales in Q4 were largely attributed to timing issues of wholesale deliveries . While growth appears to remain on the right track also in 2019E, flat adj. EBIT in 2019E is not enough to carry the recent clear increase in valuation multiples – “Sell” (”Buy”).

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15% int. revenue drop largely attributed to timing issues

Marimekko’s international revenue declined by 15%, or by EUR 2.0m in Q4. This was driven primarily by APAC (-26%, EUR -1.4m) but also by EMEA (-11%, EUR -0.3m) and North America (-12%, EUR -0.3m). Management attributed to decline in APAC largely to a timing issue, as certain wholesale deliveries were postponed to Q1’19. The decline in EMEA and Norther America was also largely attributed to timing of wholesale deliveries.

Finland still strong and a bit better than we expected in Q4

Revenue in Finland grew by +12%, split to +8% own retail (own retail LFL +6%) and +22% wholesale. Wholesale was supported by non-recurring promotional deliveries, but retail revenue continued good growth, even though comps are tougher.

Adj. EBIT in 2019E weighted down by growth investments

Marimekko guides revenue to grow and adj. EBIT to remain flat in 2019E. Revenue will be flat in Finland, as non-recurring promotional deliveries will not reach the level of 2018. Revenue in APAC is expected to grow, supported by start of online sales in China and new stores. Despite revenue growth adj. EBIT will remain flat, as marketing and other growth spend is increased to spur growth in 2019E and beyond. CAPEX will also increase with store refurbishments, IT and HQ premise improvements.

Downgraded to “Sell” (“Buy”), ex-div TP intact at EUR 22

We have slightly cut estimates for 2019E. On our estimates Marimekko now trades at a clear premium to the peer group. While growth appears to remain on the right track also in 2019E, flat adj. EBIT in 2019E is not enough to carry the recent clear increase in valuation multiples, in our view. We downgrade to “Sell” (“Buy”) and keep our ex-div TP at EUR 22.

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Cibus Nordic - Dividend proposed at EUR 0.84 (0.80)

27.02.2019 - 11.35 | Earnings Flash

Cibus disclosed a new dividend policy with quarterly increases. From now on, the company targets a 5% annual increase in dividends.

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  • Rental income for the Jul-Dec 2018 period amounted to EUR 25.0m, and NOI totaled EUR 23.4m. Occupancy rate was 96%.
  • The portfolio had a year-end gross asset value of EUR 816m.
  • Cibus expects to make acquisitions to the tune of EUR 50m during 2019.
  • The quarterly increasing dividend means that the first partial payment will be EUR 0.2062 per share, the second EUR 0.2087 per share, the third EUR 0.2113 per share and the fourth EUR 0.2138 per share.
  • NOI capacity remains at EUR 47.8m.
  • Since the March 2018 IPO, acquisitions and refinancing have helped cash flow to improve by 10%. While the portfolio is currently exclusively invested in Finnish properties, Cibus restates its long-term plan to enter other Nordic markets.

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Marimekko - Weak international sales

27.02.2019 - 09.00 | Earnings Flash

Marimekko’s Q4 revenue was EUR 29.7m vs. EUR 31.6m/31.1m Evli/cons expectations, while adj. EBITDA landed at EUR 2.2m vs. EUR 2.3/2.6m Evli/cons views. International sales surprisingly declined by as much as 15% in Q4, explained in part by a timing issue of deliveries in APAC. However, international revenue declined somewhat in others markets as well. Dividend is in line. Guidance is mostly as expected, although the flat adj. EBIT guidance looks somewhat cautious vs. our estimates: we have expected adj. EBIT of EUR 13.1m in 2019E vs. EUR 12.2m in 2018A. Consensus for 2019E has been EUR 12.4m.

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  • Finland: revenue was EUR 18.3m vs. EUR 17.6m our expectation. Revenue grew by +12% y/y, split to +8% own retail (own retail LFL +6%) and +22% wholesale.
  • International: revenue was EUR 11.4m vs. EUR 14.0m our view. Int. revenue decreased by 15% y/y, driven primarily by APAC (-26%), but also EMEA (-11%) and North America (-12%). Sales in APAC were weakened by a timing issue related to deliveries.
  • Adj. EBITDA was EUR 2.2m vs. EUR 2.3m/2.6m Evli/cons.
  • 2018 dividend: EUR 1.85 per share, consisting of EUR 0.60 ordinary and 1.25 extra. Dividend is in line.
  • 2019E guidance: revenue will increase, while adj. EBIT will be flat in 2019E. We have expected adj. EBIT of EUR 13.1m in 2019E vs. EUR 12.2m in 2018A. Consensus for 2019E has been EUR 12.4m.

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Finnair - Delivering on Asian strategy

27.02.2019 - 08.25 | Company report

Finnair’s Asian strategy has proven successful and the remaining seven A350s deliveries in 2019-2022E support strategy execution and growth further. Evolution of competition in short-to-mid-term remains a key risk, in our view. We expect earnings to weaken slightly in 2019E and consider valuation as largely fair. We retain “Hold” rating.

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A350 fleet carries from Asia to Europe via shortest route

Finnair’s strategy is based on the geographic location of Helsinki hub, as the shortest route from (North-East) Asia to Europe goes over Helsinki. Finnair is able to serve most Asian routes in 24h rotations, which enables high utilization rate of planes and reduces the need for additional crew. New A350s, 12/19 of which were delivered by the end of 2018, are an essential part of the Asian strategy and form the cornerstone of cost management as they have higher seat capacity, lower maintenance cost and better fuel efficiency vs. the replaced A340s. The remaining seven A350s will be delivered in 2019-2022E, enabling further growth.

New A350s enable growth and balance capacity in 2019E

For 2019E Finnair guides 10% capacity growth (largely based on new A350s) and revenue growth slightly behind capacity. New capacity will be mostly put to Asian routes. This should enable further growth and improve weakened PLFs in European traffic, as a good part of capacity adds in 2018 was short-haul. Key risks for 2019E are demand and competition: demand could soften with economic growth, while competition is expected to increase in traffic between Europe and Asia and in intra-European traffic. Fuel is no longer at record levels, although hedged price should continue to edge up. At present we see adj. EBIT, excl. impact of IFRS 16, to weaken slightly in 2019E, assuming steady fuel.

Valuation appears fair - “Hold” reiterated

On our estimates Finnair’s current P/E multiples are 10.8x for 2019E and 9.7x for 2020E, vs. the 3yr historical NTM average of 10.1x. On P/B Finnair trades 1.2-1.1x when the EUR 200m hybrid removed from equity, while generating ROCE of 8.8% in FY19E vs. our WACC of 8.9%. Overall, Finnair’s current valuation appears largely fair to us. We hence retain “Hold” rating with an ex-div TP of EUR 8.0 (7.3). Our TP values Finnair close to par with Finnair’s 3yr historical NTM P/E (10.1x) on our FY19E estimates.

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Pihlajalinna - More favorable outlook for 2019E

25.02.2019 - 09.10 | Company report

Pihlajalinna’s organic growth, profitability and outlook for 2019E improved towards the end of 2018. The new contract pipeline improved somewhat, and clarity on SOTE in the coming weeks might increase activity in the municipality field, further boosting the pipeline. We think valuation looks attractive considering the recovery in margins and somewhat more promising outlook.

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Profitability recovered to reasonable levels

Pihlajalinna’s profitability weakened in 2018 with to weak H1, but recovered to reasonable level in H2 as cost savings from co-determination negotiations kicked in, negative EBITDA-contribution from new clinic openings contracted and as organic growth turned back to positive territory in H2 with insurance revenue drop levelling off. Improved performance of H2 supports the outlook for 2019E, for which co. guides adj. EBIT to improve significantly. While competition has increased in certain service areas and cities, Pihlajalinna’s altered expansion plan and OP’s retreat from expansion plans should reduce risk of further capacity increases burdening profitability in the mid-term.

Growth prospects somewhat brighter; clarity on SOTE needed

Pihlajalinna started production of residential services in Laihia in Sep 2018. Provision of occupational healthcare services for Stora Enso started in Jan 2019. Additionally co. has been negotiating with Laitila, Ruovesi and Kristiinankaupunki, although at present each remain undecided. Overall, municipalities’ eagerness to strike new contracts remains impacted by the lack of clarity on how the SOTE reform turns out. Improved clarity on SOTE in the coming weeks might improve activity in the municipality field. Additionally, Pihlajalinna’s geographical reach has expanded in 2017-2018, improving its positioning to win new business.

“Buy” with TP of EUR 12 intact

On our estimates Pihlajalinna is now valued 8.4x EV/EBITDA in FY19E, which translates into 10% discount to its own 3yr NTM historical average (9.3x) and to 16% discount to the peer group. We think valuation looks attractive considering the recovery in margins and a more promising outlook since H2’18. We retain “Buy” rating with TP of EUR 12. Our TP values the shares 9.0x EV/EBITDA on 2019E estimates, close to 3yr historical avg (9.3x).

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Gofore - Downgrade to HOLD

20.02.2019 - 09.30 | Company update

Gofore’s profitability in H2 fell below our estimates (EBITA EUR 3.0/4.1m act./Evli) largely due to a lower billing rate. Growth is expected to continue to be rapid in 2019, with net sales guidance of EUR 71-79m (2018: 50.6m). We have lowered our profitability estimates, expecting EBITA-margins of around 13.5% in the near to mid-term. With fairer valuation on our revised estimates we downgrade to HOLD (BUY) with an ex-div TP of EUR 8.5 (9.8).

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Profitability impacted by a lower billing rate

Gofore’s profitability in H2 fell below our expectations, with EBITA at EUR 3.0m (Evli EUR 4.1m), at an EBITA-margin of 11.5%. The weaker profitability was largely due to a lower billing rate, with wage inflation, the integration of Solinor, and the sales mix also having an impact. Gofore’s guidance for net sales in 2019 is EUR 71-79m, revised from the previous EUR 65-73m mainly due to the acquisition of Silver Planet, with no profitability guidance given.

Margin development uncertainty remains

We have raised our sales estimates to account for the Silver Planet acquisition, while lowering our profitability estimates. Although some elements of the weaker profitability in H2 in our view could be seen as temporary, we take a more conservative stance to margin development and expect EBITA-margins slightly below the 15% long-term financial objective. We expect the Silver Planet acquisition to have a minor positive impact on margins. Our revised estimates for 2019 net sales and EBITA are 73.3m (prev. 67.5m) and 9.8m (prev. 10.4m) respectively. Our estimates assume EBITA-margins of around 13.5% in the near to mid-term (prev. ~15.5%).

HOLD (BUY) with an ex-div target price of EUR 8.5 (9.8)

On our revised estimates Gofore trades at a slight premium on 2019E EV/EBITDA. We continue to see a premium to peers as justifiable due to the expected rapid growth but with our lowered estimates valuation appears fairer. We downgrade to HOLD with an ex-div target price of EUR 8.5 (9.8).

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Gofore - Profitability below expectations

19.02.2019 - 09.30 | Earnings Flash

Gofore’s EBIT in H2 amounted to EUR 2.6m, falling below our estimate of EUR 3.8m due to among other things a lower billing rate and increase in subcontracting. Gofore expects net sales in 2019 between EUR 71-79m. The dividend proposal is at EUR 0.19 per share (Evli 0.18).

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  • Gofore H2 net sales amounted to EUR 25.9m, with sales growth in H2 at 32.2% compared to H2/17 figures. The company’s international business net sales amounted to EUR 5.7m, corresponding to 11.3% of total net sales.
  • EBIT in H2 was EUR 2.6m, falling below our estimates (Evli EUR 3.8m), at an EBIT-margin of 9.9%. Profitability was affected by a somewhat lower billing rate during the autumn and integration of acquired companies along with an increase in subcontracting and volume of low-margin cloud capacity.
  • Guidance: Gofore expects net sales in 2019 between EUR 71-79m. The guidance before the acquisition of Silver Planet was EUR 65-73m.
  • Dividend: Gofore’s BoD proposes a dividend of EUR 0.19 per share (Evli 0.18).
  • The number of personnel at the end of the period was 495 (2017: 374).

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Verkkokauppa.com - Upgraded to “Buy”

19.02.2019 - 09.00 | Company update

While Verkkokauppa.com’s revenue growth is unlikely to come for free in 2019E either, we think normalizing OPEX growth and increasing margin support from Apuraha should support an earnings improvement after two years of flattish development, even if price pressure tightens further. We upgrade to “Buy” (“Hold”) , TP of EUR 4.7 (4.2).

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Q4: strong growth via market share take, but not for free

Verkkokauppa.com’s Q4 revenue growth (+22%) remained solid from Q3 (+11%). Some part of the 22% growth was due to increased wholesale/B2B deliveries as we expected, but most of the growth was attributed to clearly increased market shares in the B2C market. Strong growth in a flattish market (+0.7% in Q4 according to GfK) did not come for free, however: the gross margin declined to 14.7% from 15.8% y/y, while OPEX grew by 22%, due to increased marketing and the Raisio store.

Guidance for 2019E EBIT is wide, reflecting uncertainties

Verkkokauppa.com guides 5-15% revenue growth and 11-17m EBIT for 2019E. EBIT was EUR 13.3m in 2018A. Vague guidance appears to reflect uncertainties related to potentially softening demand and competition. While visibility into how competition evolves remains short, we expect OPEX growth to normalize in 2019E as Raisio’s ramp-up costs will be reflected in comps.

Apuraha financing should grow further, supporting margins

Apuraha financing grew in 2018: company-financed Apuraha income was reported at EUR 3.1m in 2018 vs. EUR 1.5m in 2017. We understand the company will continue to increase Apuraha financing, which would support margins.

Upgraded to “Buy” (“Hold”), ex-div TP of EUR 4.7 (4.2)

We have converted our model to IFRS (16) reporting from 2017 onwards. Additionally, we no longer assume a 5th store opening in our 2020E estimates. On our estimates the shares trade 11.4x and 9.0x EV/EBIT in 2019-2020E. While growth will most likely not come for free in 2019E either, normalizing OPEX growth and increasing margin support from Apuraha should support an earnings improvement after two years of flattish development, even if price pressure tightens further. We upgrade to “Buy”.

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Finnair - Visibility remains short

18.02.2019 - 09.15 | Company update

Finnair’s Q4 was surprisingly strong, but guidance for 2019E indicates the operating environment will remain at least as tough as in H2. Valuation appears largely fair to us – we hence retain “Hold” rating.

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Q4: fuel and yield behind the earnings beat

Finnair’s Q4 adj. EBIT came in well above estimates at EUR +9m vs. EUR -9m Evli and EUR -6m cons. Compared to our estimates the beat was driven by somewhat stronger revenue (EUR 683m vs. EUR 671m) and fuel costs, which were EUR 10m less than what we expected. On the revenue side the beat was driven by unit revenues –RASK declined less than we expected, and yield surprisingly grew by 3.5% while we expected yield decline to continue as increased competition had been flagged during H2.

Increasing competition and potentially softer demand

For 2019E Finnair guides ASK growth of 10% and revenue growth slightly behind ASK. We expected only 5% ASK growth for 2019E. Finnair will receive both of its 2019-delivered new A350s during H1, on top of which the Dec 2018 -delivered A350 will contribute to ASK growth. Added capacity will be mostly put to Asian routes. However, at the same time competition is expected to increase further with capacity increases, especially on routes between Europe and Asia and in intra-European traffic, even though Norwegian’s planned capacity cuts may impact Finnair positively on some routes. At the same time, demand is seen to be at risk of softening with slowdown in economic growth. Increasing competition and potentially softer demand keep visibility short even though fuel appears to have stabilized.

Retaining “Hold”

On our estimates Finnair trades at an EV/EBITDA discount, but at a P/E premium to its primary peers. On P/B Finnair trades 0.9x in FY19E, or 1.1x when the EUR 200m hybrid removed from equity, while generating ROCE of ~8.5% in FY19E, close to our WACC (8.9%). We continue to think valuation does not look too attractive and hence we retain “Hold” rating with TP of EUR 7.3 (6.8). Our TP values the shares at par with Finnair’s 3yr historical P/E on our FY19E estimates.

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Scanfil - Q4 softness unlikely to persist

18.02.2019 - 09.05 | Company update

Scanfil’s Q4 EBIT didn’t meet our expectations. However, the weakened operating margin was attributable to Scanfil’s account idiosyncrasies. Certain contracts with above average profitability lacked volumes in Q4. Overall, the company sees business continuing as before, and we expect organic revenue growth to add around EUR 20m in 2019. 2020 sales target stands at EUR 600m. We update our target price to EUR 4.75 (4.60); our rating stays BUY.

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Individual contracts determine quarterly segment results

Although Other Industries segment grew 18% in 2018, the segment’s Q4 results were weak due to a significant decrease in demand from a certain notable customer. Urban Applications Q4 top line declined by 12% y/y due to one or two accounts’ seasonal variation. In other words, the Q4 EBIT margin weakness was entirely attributable to a couple of accounts that are above average in terms of profitability. Broadly speaking, demand continued to develop positively and the company’s guidance for 2019 is in line with our earlier expectations. While individual accounts may have large impact on specific segment results, we expect MedTech, Life Science and Environmental Measurement to be the most stable performer. Conversely, within a segment such as Networks and Communication, it is hard to say when larger order volumes may materialize (i.e. when a standard such as 5G starts to have an impact).

Scanfil expects Q1 to be slower, demand to pick up in Q2

Scanfil says the year will have a sluggish start; the company expects clear demand pick up during the second quarter. The company is adding new customers particularly in Sweden. In addition to organic growth, initiatives such as a EUR 50m acquisition in e.g. Germany are not off the table.

Our rating is BUY, update target to EUR 4.75 (4.60)

Our long-term expectations for Scanfil are intact. Increased peer multiples provide lift for valuation, and thus we update our target price to EUR 4.75 (4.60) per share.

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Pihlajalinna - Limited surprises

18.02.2019 - 08.35 | Company update

Pihlajalinna’s Q4 financials were close to estimates and guidance did not surprise. While new outsourcing contracts from previous or ongoing negotiations remains uncertain, the expanded geographical reach should improve prerequisites for growth in other areas as well. We think valuation continues to look attractive. We retain “Buy” rating with TP of EUR 12.

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Profitability at reasonable level in Q4

Pihlajalinna’s adj. EBITDA margin improved y/y in Q4, after improving to flat y/y level in Q3 from weaker H1. However, of the EUR 2.6m y/y adj. EBITDA improvement EUR 2.4m was explained by improved profitability in public specialized care, which seemed to be largely due to service provider refunds from hospital districts related to cost accruals. Amount of these refunds has fluctuated a lot historically. Profitability thus looked better than it was in underlying terms, but it was still at a reasonable level in our view.

Not much new to tell of the new contract pipeline

Pihlajalinna has been in negotiations over new potential contracts with Laitila, Ruovesi and Kristiinankaupunki. While decisions from some of these were expected by the end of 2018, each remains undecided. Overall, municipalities’ eagerness to strike new contracts remains impacted by the uncertainty related to the SOTE reform. Activity could increase if SOTE fails in the coming weeks, but overall visibility for how municipal activity develops is not great, in our view. Yet with the expanded clinic network the company should be better positioned to win new business for example in occupational healthcare, in our view.

Retaining “Buy” with TP of EUR 12

On our estimates Pihlajalinna trades 7.7x and 6.8x EV/EBITDA in FY19-20E, respectively. We think valuation continues to look attractive. We retain “Buy” rating with TP of EUR 12.

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Next Games - Shroud of uncertainty yet to lift

18.02.2019 - 00.00 | Company update

Next Games’ had pre-announced Q4 revenue and EBIT of EUR 11.3m and EUR -1.6m and the most significant news was the discontinuation of a games project that had proceeded to production. We have lowered our 2019 and 2020 revenue estimates by 15 % and 21 % respectively. We retain our HOLD rating with a target price of EUR 1.5 (2.0)

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One project discontinued, another started

Next Games revenue and EBIT in Q4 amounted to EUR 11.3m and EUR -1.6m. Profits improved significantly from the Q3 operating loss of EUR 10.3m, that was burdened by TWD: Our World marketing cost, but remained negative due to product development costs. Next Games announced that the game project with Universal Games and Digital Platforms has been discontinued. The project had proceeded to production and was after Blade Runner: Nexus the game furthest in the pipeline. Next Games started a new game project, that currently does not have an external IP attached to it, focusing on a new game concept.

2019/2020 revenue estimates lowered by 15%/21%

We have lowered our 2019 and 2020 revenue estimates by 15 % and 21 % respectively due to the discontinued game project and lowered Our World estimates. Although ARPDAU metrics in particular improved favourably during Q4 (both NML and OW), we have yet to see signs of significant growth in OW active users, which would be much needed for sales and profitability improvement. The new games pipeline still remains decent, with two projects tied to a third-party IP along with the new game concept project in concepting and Blade Runner: Nexus in soft launch. We expect profitability in 2019 to improve due to the savings program but to remain negative, with our estimate at EUR -5.3m.

HOLD with a target price of EUR 1.5 (2.0)

The near-term uncertainty in our view remains high due to the estimated negative profitability in 2019 and Next Games’ decreased cash position. We retain our HOLD rating with a target price of EUR 1.5 (2.0).

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Taaleri - Opportunities but also concerns ahead

15.02.2019 - 09.45 | Company update

Taaleri’s H2 results were affected by the impact of market volatility on Financing and Wealth Management. Fundraising has begun for the second SolarWind fund, with target investment capital at EUR 300m. New product launches are expected also in PE funds and Financing. Market turbulence remains a concern for the performance of Wealth Management.

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Market volatility impacted on segment results

Taaleri’s group income in H2/2018 amounted to EUR 37.3m (Evli 37.9m) and EBIT to EUR 11.5m (Evli EUR 10.7m). Wealth Management’s profitability declined to EUR 2.7m (H2/17: EUR 8.8m) mainly due to lower performance fees and investment income but lower costs mitigated part of the impact. Profitability in Financing also fell due to lower investment income while the insurance operations continued to report solid results. The group results were aided by the impact of the listing of Fellow Finance.

Fundraising for second SolarWind fund started

Taaleri has started fundraising for its second SolarWind fund, seeking to raise investment capital of EUR 300m. Taaleri will most likely seek to sell the Truscott-Gilliland wind project to the fund during 2019, which would significantly boost Energy’s profitability. New product launches are also to be expected in Wealth Managements PE funds and Financing. The market turbulence has increased concerns relating to the performance of Wealth Management and AUM development was somewhat dissatisfactory, partly due to the write down of the geothermal fund. We have revised our estimates and now expect group income and revenue of EUR 74.8m and 23.4m respectively. We have not yet included estimates for the likely sale of the Truscott-Gilliland wind project but include it through our SOTP.

BUY with a TP of EUR 8.5 (11.4)

On our estimates and revised valuation metrics, with the multiples for Wealth Management lowered due to the increased uncertainty, our SOTP-value is EUR 8.9 per share while peer EV/EBIT valuation suggests an implied price of EUR 8.0. We retain our BUY rating with a target price of EUR 8.5 (11.4).

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Finnair - Strong earnings

15.02.2019 - 09.45 | Earnings Flash

Finnair’ Q4 adj. EBIT was clearly better than we expected at EUR +9m vs. our expectation of EUR -9m. Consensus was at -6m. Compared to our estimates the beat looks to be driven by EUR 10m lower fuel costs, and by better revenue. For 2019E Finnair guides 10% capacity growth and revenue growth somewhat behind capacity. We have expected 5% growth for both and hence there is upside to our estimates. Finnair also expects competition to tighten, especially in EU-Asia routes and in short-haul traffic. Dividend is close to estimates. Overall, a good report.

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  • Q4 revenue was EUR 683m vs. EUR 671/674m Evli/cons.
  • Q4 adj. EBIT was EUR +9m vs. EUR -9m/-6m Evli/cons views. Compared to our estimates the beat looks to come from lower fuel costs and better revenue in Q4.
  • Absolute costs: actual fuel cost (incl. hedging) was EUR 145m vs. EUR 155m our view. Staff costs were EUR 102m vs. 102m our view. All other OPEX combined were EUR 364m vs. 364m our view.
  • Unit costs: CASK was 6.43 eurocents vs. 6.49 our view, while CASK ex fuel was 5.05 eurocents vs. 5.01 our view. CASK in fixed FX and excl. fuel declined by 4% y/y.
  • Dividend is EUR 0.274 per share vs. 0.30/0.26 Evli/cons.
  • 2019E guidance: Finnair expects capacity growth of about 10% and revenue growth somewhat behind capacity. Adj. EBIT guidance will be provided with Q2 earnings, as usual.

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Raute - Flat guidance above our expectations

15.02.2019 - 09.30 | Company update

While we are cautious with our estimates for the next few years, expecting declining sales and EBIT, the company guides flat sales and EBIT for 2019. Meanwhile Raute’s balance sheet is strong enough for the distribution of EUR 1.40 per share as 2018 dividends. The 5.5% dividend yield, along with other valuation metrics, reflects the company’s current cyclical positioning where further growth is not expected. Excluding a development such as a major entry into the Chinese market, we continue to estimate declining sales for the time being. Our cautious stance is supported by the fact that Raute’s order book seems to have peaked in early 2018.

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Demand still buoyant, yet uncertainty is rising

Raute disclosed already in January that 2018 sales and EBIT would be higher than previously expected. Consequently, yesterday’s results presentation provided little new concrete information. Many of Raute’s pre-existing customers have already invested heavily during the past few years. While the major markets have been developing positively and Raute’s customers’ mills have been running at high utilization rates, we are waiting to see how the company’s order book will develop during the first months of 2019.

We maintain our HOLD rating and EUR 27 target price

Raute’s flat guidance for 2019 gives us pause to consider if our own estimates are too pessimistic. Yet we are not updating our projections this time. We will revise our estimates if Raute’s order intake for the beginning of 2019 comes in higher than we are currently expecting.

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Verkkokauppa.com - Wide guidance range for EBIT

15.02.2019 - 09.10 | Earnings Flash

Verkkokauppa.com Q4 headline financials were known before this morning’s earnings release. Hence the information content of the Q4 report is mostly in the dividend and guidance. Dividend proposal is EUR 0.198 per share, marginally above estimates. Guidance implies 5-15% revenue growth for 2019E. EBIT in 2019E is to be between EUR 11-17m (2018A with IFRS: EUR 13.3m) – this is a wide range and leaves room for weakening. It is not specified whether guidance includes estimated impact of IFRS 16, but considering the upper range it looks to be included. Guidance should not surprise estimates, in our view.

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  • Dividend was EUR 0.198 vs. EUR 0.19 Evli and cons.
  • Guidance for 2019E: revenue is expected to be between EUR 500-550m and EBIT between EUR 11-17m (2018A with IFRS: EUR 13.3m). Revenue range implies growth of 5-15% for 2019E.
  • Wholesale deliveries increased y/y, and were partly behind the strong sales growth in Q4 as we expected. However most of growth is attributed to successful Black Friday campaign and Christmas season. The gross margin remained at fairly good level of 14.7% vs. 15.8% last year.
  • Headline financials were known prior to the Q4 report, as figures were pre-announced.
  • Apuraha’s earnings impact specified: company-financed customer financing grew in Q4 and proceeds totaled EUR 0.9m (EUR 0.5m y/y) including both interest income and fee income.
  • Financial targets were updated: annual revenue growth 10-20% (intact), growing EBIT and EBIT margin between 2.5-4.5%, and growing dividend. Previously co. targeted for adj. EBITDA margin between 3-5%.

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Aspo - Teething problems with cranes

15.02.2019 - 09.05 | Company update

Aspo’s Q4 EBIT didn’t meet our expectations as ESL Shipping suffered from serious technical problems with cranes. Both MS Viikki and MS Haaga, the two new LNG vessels, were impacted, leading to inefficient operation. The warranty repairs should be completed by the end of Q1’19. Telko’s Q4 results were in line with our estimates, while Leipurin fell short. We update our rating to BUY (HOLD).

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ESL is on path to EUR 25-30m EBIT in the coming years

The deployment of ESL Shipping’s new LNG vessels has been slowed down by both ships’ mechanical problems with cranes. The problem concerns all the six cranes. In the meantime, other ESL ships have been filling in the slack for the SSAB contract. The crane supplier, Cargotec MacGregor, is expected to fix the problem by the end of Q1. In other words, the first quarter of 2019 will be similarly sluggish for both vessels. While this is an inconvenient setback, the company expects the vessels to meet the high requirements starting from the second quarter. ESL Shipping has a target of net sales above EUR 200m and an EBIT margin of 12-15% by 2020. We expect ESL to reach an EBIT of EUR 23m in 2019 and EUR 28m next year. We previously expected comparable figures of EUR 25m and EUR 29m.

Telko should accelerate margin gains during 2019

Aspo has set Telko a 2020 sales target of EUR 300-350m, while the EBIT margin should be in the 6-7% range. One of the key measures for reaching this profitability level is the improvement of procurement efficiency. The company expects to see results regarding the planning and rationalization of raw material purchases by the end of 2019. Telko was able to reach an EBIT margin of 4.5% in 2018, improving by about 40bps.

Aspo long-term outlook intact, higher multiples boost SOTP

Our expectations for ESL and Telko are unchanged. Valuation multiples have lifted since late December, when Aspo revised its outlook for the final quarter. As a result, we see the sum-of-the-parts valuation providing added support for the shares. We raise our target price to EUR 9.75 (9.25) and upgrade to BUY rating.

Open report

Next Games - Game project discontinued

15.02.2019 - 08.45 | Earnings Flash

Next Games Q4 revenue and EBIT amounted to EUR 11.3m and EUR -1.6m respectively (pre-announced). Next Games announced the termination of collaboration on the game project with Universal Games and Digital Platforms. The company concluded consultation proceedings.

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  • Next Games’ revenue during H2 amounted to EUR 24.8m (pre-announced). Revenue growth y/y on was 90 %. Revenue in Q4 amounted to EUR 11.3m
  • EBIT in H2 amounted to EUR -12.0m. Next Games pre-announced H2 figures (FAS). Next Games has adopted IFRS reporting in its 2018 financial statements bulletin. EBIT in Q4 amounted to EUR -1.6m.
  • TWD: No man’s land: DAU during Q4 was 253k (Q3/18: 275k). MAU during Q4 was 728k (Q3/18: 800k). ARPDAU was EUR 0.25 during Q4 (Q3/18: 0.24).
  • TWD: Our world: DAU during Q4 was 223k (Q3/18: 386k). MAU during Q4 was 759k (Q3/18: 2.1m). ARPDAU was EUR 0.28 during Q4 (Q3/18: 0.25).
  • Next Games and Universal Games and Digital Platforms have agreed to terminating their collaboration on the game project that had proceeded to production.
  • The company concluded consultation proceedings and the company’s headcount will decline to 117 from 143.
  • The company initiated a new project that does not have an external IP attached to it at the moment.

Open report

Scanfil - EBIT below our expectations

15.02.2019 - 08.45 | Earnings Flash

Scanfil’s Q4 results didn’t reach our estimates. We expected an EBIT margin of 6.0%, while the company delivered 5.4%. Nevertheless, the full year saw robust growth and operating profit development. The BoD proposes a dividend of EUR 0.13 per share for 2018 (vs our expectation of EUR 0.14).

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  • Q4 sales increased by 6.3% compared to Q3, supported by almost all customer segments. Energy and Automation, Medtec and Life Science and Other Industries segments achieved over 10% growth.
  • The quarterly decrease in operating margin was mainly due to significantly decreased demand from a few notable customers, and partly due to seasonal variation.
  • The demand decline was restricted to a few customers. Overall, demand has remained steady. Customers’ forecasts are looking strong.
  • Guidance: Scanfil estimates 2019 revenue will be EUR 560-610m, expects operating profit will amount to EUR 36-41m. These figures are in line with our estimates.
  • Scanfil’s target is to reach EUR 600m sales in 2020 and an EBIT margin of 7%.

Open report

Pihlajalinna - Little surprises

15.02.2019 - 08.35 | Earnings Flash

Pihlajalinna’s Q4 revenue and adj. EBITDA were close to both our and consensus estimates. Profitability improved y/y, but looks to be largely explained by service provider refunds, which have involved a lot of fluctuation historically. Organic growth remained positive (+1.3%) from Q3. Dividend proposal is EUR 0.10 per share, marginally better than expected. Guidance for 2019E looks to be largely reflected in consensus: revenue is to improve while adj. EBIT is to improve clearly. Overall, the Q4 report looks just fine.

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  • Revenue was EUR 127m vs. EUR 127m/125m Evli/cons estimates. Revenue grew by 17.6% y/y, of which 16.3% was due to M&A. This implies organic growth of +1.3%. Organic growth was similar to Q3 (+1.1%).
  • Adj. EBITDA was EUR 11.1m (8.7% margin) vs. EUR 10.9m/11.2m (8.6%/8.9%) Evli/cons estimates. Adj. EBITDA improved by EUR 2.6m y/y, of which EUR 2.4m looks to be explained by service provider refunds from hospital districts for public sector specialized care cost accruals. Volumes and profitability of clinic and surgical operations were lower y/y, due to the competitive situation and patient guidance by insurance companies. New clinics still had a negative EBITDA contribution (as expected), but this now lower than in previous quarters at EUR -0.4m in Q4.
  • Dividend is EUR 0.10 per share vs. EUR 0.08 Evli and EUR 0.09 consensus.
  • Guidance for 2019E looks to be largely reflected in consensus: Revenue will increase and adj. EBIT will improve clearly.

Open report

Fellow Finance - Upgrade to BUY

15.02.2019 - 07.20 | Company update

Fellow Finance’s H2 revenue and EBIT amounted to EUR 6.4m (Evli 6.7m) and EUR 1.7m (Evli 1.7m) respectively. Fellow Finance expects revenue in 2019 to grow over 30% and the adjusted operating profit to grow compared to 2018. Consumer loans in Finland still accounted for the majority loan volume but international operations and business financing saw growth picking up. We upgrade to BUY (HOLD) with a TP of EUR 9.0 (8.0).

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Revenue grew 38.2% and adj. EBIT 41.7% in 2018

Fellow Finance’s H2 revenue and EBIT amounted to EUR 6.4m (Evli 6.7m) and EUR 1.7m (Evli 1.7m) respectively. Full year revenue growth amounted to 38.2% and fee income growth to 50.1%. Fellow Finance estimates revenue in 2019 to grow over 30% and the adjusted operating profit (2018: EUR 3.5m) to grow compared to 2018. Focus in 2019 will be on continuing the expansion in Europe and broadening the product offering to investors. Fellow Finance expanded its services to Denmark during early 2019. In absolute terms growth in 2018 still derived mainly from Finland but growth was also solid in particular in Germany, were the company’s services only kicked off properly in the latter half of 2018. Growth in business financing has also been good, with the relative share of loan volume at 27%.

Expect continued solid growth and margins

We have made only slight adjustments to our near-term estimates. We expect sales of EUR 16.5m in 2019, with growth of 38%, and adjusted EBIT of EUR 4.5m. We expect relative profitability to be slightly below 2018 levels driven by rapid expansion of services to new markets and ramp-up of existing ones but above the long-term strategic goal of 25%.

BUY (HOLD) with a TP of EUR 9.0 (8.0)

On 2019E figures valuation appears challenging but with signs of pick-up in international operations and a good outlook for business financing we are prepared to emphasize 2020E peer multiples. We value Fellow Finance at 16.4x 2020E P/E, closer to the payment processing and financing platform peers, for a target price of EUR 9.0 (8.0) and upgrade to BUY (HOLD).

Open report

Endomines - Minor bumps on the ramp-up road

15.02.2019 - 07.00 | Company update

Endomines commenced mining operations at the Friday-mine. Equipment delivery delays have put production ramp-up slightly behind schedule. Production of gold concentrate at the Friday-mine in 2019 is estimated at 5,000-8,000oz. The leasing rights to the Unity mine were acquired, which we expect to be the next area of focus in Idaho along with the adjacent Rescue property. Endomines commenced the sale of a EUR 5m bond, which we expect to cover near-term needs but anticipate a need for additional financing.

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Friday gold production 5,000-8,000oz in 2019

Endomines’ gold production in Q4 amounted to 27.9kg (98.7kg), impacted by the suspension of mining operations at Pampalo. Revenue and EBITDA in Q4 amounted to SEK 7.9m (Evli 5.4m) and SEK -6.1m (Evli -6.4m) respectively. Mining operations at the Friday-mine have commenced but production has seen slightly behind schedule due to delays in equipment deliveries at the processing plant. The project’s capex estimate was revised to USD 9.5-10m (prev. 7.7m) due to cost overruns. Production of gold concentrate in 2019 is estimated at 5,000-8,000oz.

Acquired additional assets, seeking to secure financing

Endomines acquired leasing rights to the Unity mine adjacent to its Rescue property. We expect the company’s development operations during 2019 to focus on Unity/Rescue along with Friday. We have shifted our production estimates as we view any significant production figures (apart from Friday) to be achieved during 2020 unlikely. Endomines commenced the sale of an up to EUR 5m bond with associated warrants (strike price EUR 0.90). Although the financing covers at least the near-term investment needs we expect Endomines to need additional financing to develop additional assets.

BUY with a target price of SEK 8.0 (7.2)

The gold price saw favourable development during H2/2018, returning to above 1,300USD/oz levels, driven by the increased market uncertainty. Our revised estimates put our NAVPS at SEK 8.5. We retain our BUY-rating with a target price or SEK 8.0 (7.2).

Open report

Fellow Finance - EBIT above expectations

14.02.2019 - 11.25 | Earnings Flash

Fellow Finance’s H2/2018 revenue and EBIT amounted to EUR 6.4m (Evli EUR 6.7m) and EUR 2.3m (Evli EUR 1.7m) respectively. Fellow Finance expects revenue in 2019 to grow by over 30 % and the adjusted EBIT to grow compared to 2018. The dividend proposal is EUR 0.04 per share (Evli EUR 0.10).

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  • Revenue in H2 amounted to EUR 6.4m (EUR 4.7m in H2/17), slightly below our estimates (Evli EUR 6.7m).
  • Fellow Finance facilitated loans during 2018 for a total of EUR 172m (Evli 164m).
  • EBIT in H2 amounted to EUR 2.3m (EUR 1.5m in H2/17), above our estimates (Evli EUR 1.7m). The adjusted EBIT amounted to EUR 2.5m excluding expenses related to the company’s IPO.
  • EPS in H2 amounted to EUR 0.0 per share. The for listing expenses adjusted EPS amounted to EUR 0.14.
  • Dividend: Fellow Finance’s BoD proposes a dividend of EUR 0.04 per share (Evli EUR 0.10)
  • Guidance: Fellow Finance expects revenue in 2019 to grow by over 30 % and the adjusted EBIT to grow compared to 2018.
  • Fellow Finance expanded its service offering to Denmark during early 2019, now having a presence in five countries.

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Aspo - ESL operating profit disappoints

14.02.2019 - 10.50 | Earnings Flash

Back in December, Aspo restated its 2018 EBIT guidance. The company announced that the figure will land at the lower end of the initial range. ESL and Telko both topped our Q4 revenue estimates, while ESL’s operating profit failed to match our expectations (even after we adjusted our estimate following the December profit warning).

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  • Group headline figures: Q4 net sales amounted to EUR 156.6m vs our EUR 154.0m estimate. Q4 EBIT stood at EUR 2.6m vs our EUR 3.9m expectation.
  • ESL Shipping: Q4 sales recorded at EUR 46.4m vs our EUR 42.2m estimate. Q4 EBIT came in at EUR 4.2m vs our EUR 5.3m estimate.
  • Telko: Q4 revenue amounted to EUR 69.5m vs our EUR 68.8m estimate. EBIT stood at EUR 3.4m, exactly as we expected.
  • Leipurin: Q4 sales totaled EUR 31.6m vs our EUR 33.0m estimate. EBIT was EUR 0.8m vs our EUR 1.1m estimate.
  • Kauko: sales were EUR 9.1m vs our EUR 10.1m estimate. EBIT (including the impairment loss) was EUR -4.4m vs our EUR -4.8m expectation.
  • Guidance: Aspo guides 2019 EBIT at EUR 28-33m. This compares to the EUR 25.4m 2018 figure adjusted for the EUR 4.8m impairment loss on Kauko’s goodwill. ESL Shipping aims at net sales of more than EUR 200m and an EBIT margin of 12-15% by 2020.
  • The BoD proposes 2018 dividend per share at EUR 0.44, to be paid in two installments.

Open report

Raute - Optimistic guidance and dividend

14.02.2019 - 09.40 | Earnings Flash

Raute already disclosed in January that 2018 sales and EBIT would be higher than previously expected. Raute confirmed the previously announced strong numbers. The proposed dividend came in slightly above our estimate, while the company expects flat figures for 2019. Our stance for 2019 and beyond has been more cautious as the market has been going through a very favorable cycle.

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  • Q4 sales amounted to EUR 54.2m vs EUR 39.4m a year ago.
  • Q4 operating profit stood at EUR 3.4m vs EUR 3.1m a year ago.
  • Q4 order intake was EUR 28m vs EUR 60m a year ago.
  • Order book amounted to EUR 95m vs EUR 110m a year ago.
  • Raute proposes that a dividend of EUR 1.40 (EUR 1.25) per share be paid for financial year 2018. The amount was slightly above our EUR 1.35 per share estimate.
  • Guidance: Raute expects 2019 net sales and operating profit to stay at similar levels compared to 2018. The company cites high order book and sustained brisk demand.

Open report

Endomines - No major surprises

14.02.2019 - 09.30 | Earnings Flash

Endomines’ revenue and EBITDA in Q4 amounted to SEK 7.9m (Evli 5.4m) and SEK -6.1m (Evli -6.4m) respectively. Endomines expects to produce 5,000-8,000 oz gold (~156-249kg) in concentrate during 2019. Endomines further announced that it has commenced the sale of a up to EUR 5 million senior secured bonds and warrants.

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  • Endomines gold production in Q4 amounted to 27.9kg (98.7kg), affected by the suspension of the Pampalo mine in October. Milled ore amounted to 7,559 tonnes (39,692), at head grades of 2.6g/t (3.0g/t). Cash cost was 948 USD/oz (1,264).
  • Revenue amounted to SEK 7.9m (28.5m in Q4/17), above our estimates of SEK 5.4m.
  • EBITDA in Q4 was at SEK -6.1m (Evli -6.4m) and EBIT at SEK -14.2m (Evli -11.7m).
  • Total cash flow was SEK -43.5m (1.8m).
  • Guidance: Annual gold production at the Friday mine in Idaho, USA, is expected to be approximately 9,000oz at a cash cost of 650-900 USD/oz, depending on the area of production, over the life time of the mine. In the first quarter of 2019, Endomines has commenced ramp-up of the mine and anticipates producing 5,000 – 8,000oz gold (~156-249kg) in concentrate during the year.
  • Endomines has commenced the sale of a up to EUR 5 million senior secured bonds and warrants. The bond carries a coupon of 12.0 per cent and has 3-year maturity. The number of the associated warrants is 5,555,555 and their exercise price is EUR 0.90 per warrant.

Open report

Vaisala - Pressure on profitability in 2019

14.02.2019 - 09.00 | Company update

Vaisala’s dividend proposal was in-line with expectations, but outlook was slightly weaker than expected. Due to increase in R&D and sales & marketing spend, we’ve cut our EBIT estimates for 2019. We maintain HOLD recommendation with new target price of EUR 18 (prev. 19).

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Outlook for 2019

Vaisala expects market for traditional weather solutions to be flat in 2019, while market for industrial measurement solutions is expected to continue to grow in all regions. Increasing investments in R&D and sales & marketing are expected to burden profitability in 2019. Vaisala estimates its full-year 2019 net sales to be in the range of EUR 380–400 million and its operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract. The new outlook with an adjusted EBIT range of EUR 35-47m was slightly weaker than what we had expected; our previous EBIT estimate of EUR 45m (46m cons) being in the higher end of the range.

Estimates revised down for 2019

We expect Vaisala’s 2019E net sales to be EUR 385m representing +10% growth y/y. Sales growth will be driven by the recent acquisitions, Leosphere and K-Patents, which we estimate to add around 24 MEUR and 12 MEUR to top line in 2019E. We’ve adjusted our 2019E EBIT estimates downwards to reflect increase in R&D and sales & marketing spend. We estimate 2019E reported EBIT to be EUR 31m (EUR 42m adjusted for EUR 11m PPA and one-off expenses). For 2020-21 we expect 3.6% and 4.3% growth, with operating margin improving to 11.6% and 11.8% respectively.

HOLD maintained with new TP of 18 (prev. 19)

On our revised estimates Vaisala is trading at EV/EBIT and EV/EBITDA multiples that are ~10% lower than our peer group, but we see this as fair given the near-term weaker outlook. We maintain HOLD recommendation with TP of EUR 18 (prev. 19).

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Taaleri - Market volatility visible in segment results

14.02.2019 - 09.00 | Earnings Flash

Taaleri’s group income in H2/2018 amounted to EUR 37.3m (Evli 37.9m) and EBIT to EUR 11.5m (Evli EUR 10.7m). EBIT in Wealth Management declined largely due to declines in performance fees while the market volatility affected investment income in Financing. Group EBIT was aided by the listing of Fellow Finance.

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  • Income in H2 amounted to EUR 37.3m (EUR 42.3m in H2/17), in line with our estimates (Evli EUR 37.9m). The group’s continuing earnings grew 5.4 per cent.
  • EBIT in H2 was EUR 11.5m (EUR 11.6m in H2/17), slightly above our estimates (Evli EUR 10.7m). Taaleri had pre-announced the EBIT -margin in 2018 to be at similar levels to 2017.
  • The Wealth Management segments income in H2 was EUR 19m (H2/17 EUR 30.7) and EBIT EUR 2.7m (H2/17 EUR 8.8m). EBIT was affected by declines in performance fees.
  • The Financing segments income in H2 was EUR 6.3m (H2/17 EUR 10.1m) and EBIT EUR 2.5m (H2/17 EUR 6.0m). EBIT was affected by weaker income from investment activities.
  • The Energy segments income in H2 was EUR 1.2m (H2/17 EUR 1.0m) and EBIT EUR -1.4m (H2/17 EUR -0.9m).
  • Income from other operations in H2 amounted to EUR 10.3m (H2/17 EUR 0.9m) and EBIT EUR 7.7m (H2/18 EUR -1.9m). EBIT positively impacted by the listing of Fellow Finance (EUR 13.8m) and negatively impacted by the write-off on a geothermal project (EUR -3.1m)-
  • Assets under management at the end of H2/18 amounted to EUR 5.7bn
  • Dividend: Taaleri’s BoD proposes a dividend of EUR 0.30 per share (Evli EUR 0.29)

Open report

SSH - Growth remains an issue

13.02.2019 - 09.10 | Company update

SSH’s Q4 result missed our expectations. On a positive, the company issued an outlook for 2019 and proclaimed the end of further litigation. We see current valuation as stretched given the relatively low and uncertain sales growth, thus we downgrade to SELL with target price EUR 1.6 (prev. 1.8).

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Q4 misses our expectations

SSH Q4 missed our expectations, with net sales being EUR 6.4m (7.2m Evli) and EBIT being EUR 1.3m (1.8m Evli). The miss was due to abnormally low underlying software fees (0,6m excluding 1.5m license deal in Q4). Excluding patent income (2.7m) and a few larger license deals (2.8m), growth in 2018 would have been ~10% negative.

Outlook for 2019 given

In 2019 SSH expects double digit percentage growth from its core software business exceeding the projected annual cyber security market growth of approximately 10 %. In the medium term, SSH expects similar or faster growth and will also explore avenues for accelerated growth through inorganic growth opportunities. We had previously modeled 16% growth for 2019E based on the attractive growth opportunity apparent in the PAM market.

Estimates cut, slow growth with prudent cost control ahead

We’ve cut our net sales estimates for 2019-2021. We expect net sales in 2019E to be EUR 17.5m (-4% decline y/y) due to absence of patent income. For 2021E and 2022E we model 11% and 12% net sales growth respectively. No growth this year and slight growth in the coming years coupled with less litigation costs and a prudent cost control, means SSH will slowly start reaching organic profitability. We estimate EBIT of EUR 0.8m and EUR 1.9m in 2020 and 2021.

Downgrade to SELL with TP of 1.6 (prev. 1.8)

On our revised estimates, SSH is trading at EV/Sales 2019-20 of 3.9x and 3.5x. Our DCF indicates fair value of EUR 1.6. We see valuation as stretched given the uncertainty in sales growth, thus we downgrade to SELL with target price of EUR 1.6 (prev. 1.8). Our target price represents EV/Sales of 3.4x and 3.1x for 2019 & 2020.

Open report

SSH - Q4 result below expectations, outlook provided

12.02.2019 - 09.25 | Earnings Flash

SSH Q4 result was below our expectations. On a positive, company is providing business outlook for 2019 and medium term.

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  • Q4 net sales totaled EUR 6.4 million (7.2m our expectation)
  • Software fees were EUR 2.1 million (2.9m Evli), Professional services were EUR 2.1 million (2.0m Evli), and Recurring revenue was EUR 2.2 million (2.3m Evli)
  • Q4 operating profit was EUR 1.3 million (1.8m our expectation)
  • EPS was 0.03 (vs. 0.04 our estimate)
  • Business outlook for 2019: SSH expects double digit percentage growth from software business (software fees, professional services, and recurring revenue) at comparable exchange rates, exceeding the projected annual cyber security market growth of approximately 10 %.
  • In the medium term, SSH expects similar or faster growth and will also explore avenues for accelerated growth through inorganic growth opportunities. Possible significant quarterly variation in revenue growth is still to be expected due to timing of larger deals over the financial year.

Open report

Vaisala - Outlook for 2019 disappoints

12.02.2019 - 00.00 | Earnings Flash

Vaisala had previously announced preliminary Q4 results, so the focus was on dividend proposal and outlook. The outlook guides for clearly lower EBIT than what we or consensus were expecting.

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  • Dividend proposal is 0.58 (0.55 Evli / 0.58 consensus)
  • Business outlook for 2019: Vaisala estimates its full-year 2019 net sales to be in the range of EUR 380–400 million and its operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract.
  • Our estimates for 2019E are net sales of EUR 387m (382m cons.) and EBIT of EUR 45m (46m cons.)

Open report

Tokmanni - Towards improving profitability in 2019E

11.02.2019 - 08.55 | Company update

Tokmanni’s focus is shifting towards improving profitability in 2019E. We continue to consider valuation is being moderate against the margin improvement potential and hence we retain “Buy” rating with an ex-div TP of EUR 9.

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Q4 was just fine

Tokmanni’s Q4 revenue grew broadly as expected, with LFL still strong at 4.7% vs. our 4.0% expectation. However, adj. EBITDA missed estimates by EUR 3m, driven by one-off costs due to a product recall in the quarter (adj. EBITDA impact EUR -1.4m) and other one-off costs related to integration of the acquisitions carried out in late 2018. Integration costs should not have a meaningful impact on Q1’19, we understand. The negative impact of the product recall on gross profit was estimated at EUR 1.1-1.2m – excluding this the gross margin would have been in line with our estimate of 34.8%. Overall, Q4 looked just fine.

Focus shifting towards improving profitability in 2019E

Tokmanni’s 2018 was about improving customer trust by investing in prices, marketing and selections. In 2019E focus is shifting towards improving profitability by increasing the revenue share of direct imports (ie. increasing the gross margin) and pushing OPEX as % of sales down. Certain real estate - related costs have already been negotiated down.

Now targeting above 200 stores

Tokmanni updated its financial targets to reflect IFRS 16. These included no drama, but at the same time the target for the store network was revised to “above” 200 stores vs. “about” 200 stores previously. This is based on a view that demand will be sufficient.

Retaining Buy” with ex-div TP of EUR 9

We continue to consider valuation is being moderate against the margin improvement potential and hence we retain “Buy” rating with an ex-div TP of EUR 9.

Open report

Etteplan - Remaining on track

08.02.2019 - 21.45 | Company update

Etteplan posted good Q4 results, although slightly below our estimates, with net sales at EUR 62.9m (Evli 66.0m) and EBIT at 5.7m (Evli 6.2m), affected at least partly by the impact of vacation timing and activities of two major customers in December. The market outlook remains encouraging and Etteplan expects revenue and operating for 2019 to grow compared to 2018. Our estimates remain largely unchanged and we retain our HOLD-rating with a target price of EUR 9.0.

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Market outlook and guidance remaining favourable

Etteplan posted good Q4 results, although falling slightly below our estimates due at least partly to the impact of vacation timing and activities of two major customers in December. The Technical Documentation continued to see challenges while Embedded Systems and IoT saw solid development, as actions to improve profitability have taken effect. Etteplan expects the revenue and operating profit for the year 2019 to grow compared to 2018. Comments regarding the market outlook were encouraging, as Etteplan continues to see favorable development in all market areas but with demand growth in Europe expected to slow down slightly. The BoD’s dividend proposal for 2018 is EUR 0.30 per share, in line with expectations.

Estimates largely unchanged post-Q4

Our estimates remain largely unchanged post-Q4. We have raised our estimates for profitability for Embedded Systems and IoT after the solid performance in Q4. We expect net sales and EBIT BO of EUR 251.6m and EUR 24.7m respectively, with margins near Etteplan’s strategic target of 10%. We do not expect the growth target of 15% to be reached without acquisitions.

HOLD with a target price of EUR 9.0

On our estimates Etteplan trades largely in line with peers on 2019E EV/EBIT and P/E. With our estimates largely unchanged we retain our HOLD-rating with a target price of EUR 9.0.

Open report

Tokmanni - Adj. EBITDA misses due to one-offs; dividend beats; guidance in line

08.02.2019 - 12.40 | Earnings Flash

Tokmanni’s revenue grew broadly as expected, with LFL still strong at 4.7% vs. our 4.0% expectation. Adj. EBITDA misses estimates (EUR 28.2m vs. EUR ~31m Evli and cons), driven by one-off costs due to a product recall in the quarter (impact EUR -1.4m) and other costs related to integration of Ale-Makasiini and by prerarations related to the purchase of stores in Northern Finland. Dividend is a bit better than expected, while guidance for 2019E is unsurprising. Tokmanni updated its financial targets to reflect IFRS 16, and now targets “above” 200 stores vs. “about” 200 stores previously. Overall, the report looks just fine.

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  • Q4 revenue was EUR 268m vs. EUR 267/269m Evli/cons. Revenue grew by 8.0% y/y, driven by 4.7% LFL growth (Evli exp. 4.0%) and new openings.
  • Q4 adj. EBITDA was EUR 28.2m (10.5% margin) vs. EUR 31.0m (11.6%) Evli and EUR 31.3m (11.7%) consensus. The miss is driven by one-off costs due to a product recall in the quarter (impact EUR -1.4m) and other costs related to integration of Ale-Makasiini and by preparations related to the purchase of stores in Northern Finland.
  • 2018 dividend: EUR 0.50 vs. EUR 0.45/0.47 Evli/cons.
  • 2019 guidance is unsurprising: Tokmanni expects good revenue growth for 2019, based on the revenue from the new stores acquired and opened in 2018 and new stores to be opened in 2019, as well as on slight growth in LFL revenue. Group profitability (comparable EBIT margin) is expected to improve on the previous year.

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Consti - Upgrade to BUY

08.02.2019 - 09.00 | Company update

Consti’s Q4 EBIT remained negative in Q4 at EUR -2.2m, impacted further by the impact of a building purpose modification project. Consti initiated a program to improve profitability and is also renewing it segment reporting. Consti expects the operating profitability to improve in 2019 compared to 2018. We upgrade to BUY (HOLD) with a TP of EUR 6.0

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Renewing segment reporting

Consti’s Q4 results were further burdened by costs relating to a demanding building purpose modification project and EBIT was negative at EUR -2.2m, below our expectations (Evli EUR -1.0m). Consti estimates that its operating result for 2019 will compared to 2018 (EUR -2.1m). Consti launched a program to improve profitability and will renew its segment reporting with the intention of moving towards a customer-oriented organisation structure. The current segments will be re-organised into customer specific business areas, which is intended to among other things benefit in sales by offering a larger part of the relevant services from one entity. The program’s costs are estimated at approx. EUR 0.5m with the aim of achieving savings of EUR 2m from 2020 onwards.

Estimates mainly intact post-Q4

Our earnings estimates remain mainly intact post-Q4, with our sales estimates up by some 3%. We continue to expect profitability improvements in 2019 as the effects of the projects that impacted 2018 diminishes, although we note that risks related to the projects are not all resolved. We further expect the slow-down in new construction to alleviate some of the supply chain pressure and enable margin improvement.

BUY (HOLD) with a TP of EUR 6.0

On our estimates Consti trades at a 33%/28% discount on 2019E EV/EBITDA and EV/EBIT. We note that there are risks associated with our estimated profitability improvement, but we see the measures taken during recent years, including among other things stricter tendering processes, to support profitability. We upgrade to BUY (HOLD) with a target price of EUR 6.0.

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Consti - Revenue beat, earnings below expectations

07.02.2019 - 09.00 | Earnings Flash

Consti’s EBIT was below expectations, at EUR -2.2m (EUR -1.0m/-1.3m Evli/cons.), while Q4 revenue of EUR 96.8m was higher than expected (EUR 87.0m/87.8m Evli/cons.). Consti estimates that its operating result for 2019 will improve compared to 2018. The BoD proposes that no dividend be paid.

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  • Net sales in Q4 amounted to EUR 96.8m (EUR 86.3m in Q/17), beating both our and consensus estimates (EUR 87.0m/87.8m Evli/cons.). Sales growth in Q4 was 12.1 % y/y.
  • EBIT in Q4 was EUR -2.2 (EUR -2.6m in Q4/17), falling below both our and consensus estimates (EUR -1.0m/-1.3m Evli/cons.). EBIT was negative due to weaker than expected profitability in the housing repair unit included in the Building Facades business area.
  • Technical Building Services: Net sales in Q4 were EUR 31.0m vs. EUR 30.1m Evli.
  • Renovation Contracting: Net sales in Q4 were EUR 28.5m vs. EUR 24.1m Evli.
  • Building Facades: Net sales in Q4 were EUR 42.5m vs. EUR 36.8m Evli.
  • Order backlog at the end of Q4 was EUR 225m, down 0.3 % y/y.
  • Guidance: Consti estimates that its operating result for 2019 will improve compared to 2018.
  • Dividend: Consti’s BoD proposes that no dividend be paid for 2018 (Evli/cons. expectation no dividend)
  • Consti announced the initiation of a cost savings program with a target of EUR 2m annual savings, expected to be achieved by 2020.

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SSH - Expecting a solid Q4

07.02.2019 - 08.45 | Preview

SSH will report Q4 earnings next week on Tuesday, the 12th of February. We expect a solid Q4 result driven by patent license agreement and UKM license deal. Our focus in the Q4 report will be on strategy execution and actions to further accelerate SSH´s growth in 2019. Our HOLD rating and target price of EUR 1.80 remain intact ahead of Q4.

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Expecting a solid Q4 result driven by patent and UKM deals

SSH announced in the end of last year that it had entered into a patent license agreement with a leading provider of patent risk management solutions. SSH has received a one-time payment of approximately EUR 1.75m which will be recognized in Q418. In addition, SSH previously announced a UKM license deal with a major global retail company, which is expected to contribute roughly EUR 1.5m in revenue in Q4.

Raising estimates for Q418, estimates for 2019 unchanged

We raise our Q4 estimates to take into account the EUR 1.75m patent license agreement. We now expect Q4 net sales to be EUR 7.2m (prev. 5.4m) and Q4 EBIT to be EUR 1.8m (prev. 0.3m). Our estimates for 2019 and onwards remain intact. We expect FY2018E net sales to be EUR 19.1m (vs. 16.2m 2017) and EBIT to be EUR 1.0m (vs. -1.8m 2017).

HOLD rating and target price of 1.80 euros maintained

Our focus in the Q4 call will be on strategy execution and actions to further accelerate SSH´s growth in 2019. We’re also keen on hearing an update on PrivX sales development, as SSH announced several partnerships regarding PrivX during the end of last year. We do not expect SSH to give any revenue or earnings guidance for 2019 (guidance ceased in 2017). We maintain our HOLD rating and target price of EUR 1.80 ahead of Q4.

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SRV - Leaving first unprofitable year behind

07.02.2019 - 08.15 | Company update

SRV’s Q4 profitability was below our expectations mainly due to additional REDI shopping centre costs. We continue to expect significant profitability improvement in 2019 but have lowered our estimates due to expected slower shopping centre development in Russia and continued higher construction costs during 2019. We retain our HOLD-rating with a TP of EUR 2.0 (2.4).

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Weak profitability in Q4

SRV’s Q4 earnings fell below our estimates, with operating profit at EUR 0.1m (Evli EUR 7.8m). The operating profit was affected by EUR 11.1m additional costs from the REDI shopping centre along with an EUR 4m impairment charge in International Operations but aided by the EUR 14m capital gain of the sale of SRV Kalusto. The operational profitability in Operations in Finland, adjusted for the REDI impact, remained rather weak despite the high revenue and many completed developer-contracting housing units, affected by weaker margins in certain projects.

2019 profitability estimates lowered

SRV expects revenue to grow in 2019 compared to 2018 and the operative operating profit to improve compared to 2018 and be positive. The profitability in 2019 is expected to be affected by higher construction costs due to long-term procurement agreements. We have lowered our 2019E operative operating profit estimate to EUR 32.7m (EUR 40.2m) due to both expected lower profitability in International Operations from slower shopping centre development in Russia and Operations in Finland due to the expected higher construction costs.

HOLD with a target price of EUR 2.0 (2.4)

On our revised estimates valuation looks challenging based on peer multiples, with SRV trading at a larger premium to peers, but is still supported by our SOTP. The balance sheet remains excessive, although some EUR 90m in capital employed was released during the year and with the uncertainty regarding shopping centre divestments we retain our HOLD rating with a TP of EUR 2.0 (2.4).

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Etteplan - Expecting revenue and operating profit growth to continue

07.02.2019 - 00.00 | Earnings Flash

Etteplans Q4 revenue (EUR 62.9m/66.0m Act./Evli est.) and EBIT (EUR 5.7m/6.2m Act./Evli est.) fell slightly below our estimates but remained at good levels nonetheless. Etteplan expects its revenue and operating profit for the year 2019 to grow compared to 2018. The BoD proposes a dividend of EUR 0.30 per share (Evli EUR 0.30).

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  • Net sales in Q4 were EUR 62.9m (EUR 58.5m in Q4/17), slightly below our estimates (Evli EUR 66m). Growth in Q4 amounted to 7.5 % y/y.
  • EBIT in Q4 was EUR 5.7m (EUR 4.6m in Q4/17), below our estimates (Evli EUR 6.2m), at a margin of 9.1 %.
  • Engineering services: Net sales in Q4 were EUR 34.6m vs. EUR 37m Evli. EBIT BO in Q4 was EUR 3.3m vs. EUR 3.8m Evli.
  • Embedded systems and IoT: Net sales in Q4 were EUR 16.5m vs. EUR 16.2m Evli. EBIT BO in Q4 was EUR 2.0m vs. EUR 1.7m Evli.
  • Technical documentation: Net sales in Q4 were EUR 11.7m vs. EUR 12.8m Evli. EBIT BO in Q4 was EUR 1.0m vs. EUR 1.2m Evli.
  • Etteplan sees its business environment continuing to develop favorably in all market areas while demand growth in Europe is expected to slow down slightly due to political uncertainty.
  • Dividend proposal: Etteplan’s BoD proposes a dividend of EUR 0.30 per share (Evli EUR 0.30).
  • Guidance: Etteplan expects its revenue and operating profit for the year 2019 to grow compared to 2018. The guidance is in line with our expectations

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SRV - Profitability below expectations

06.02.2019 - 09.10 | Earnings Flash

SRV’s Q4 profitability fell below our expectations, with the operating profit at EUR 0.1m (Evli EUR 7.8m). Revenue was EUR 299.8m (Evli 299.6m). Profitability was burdened by additional costs from the REDI shopping centre and impairment charges in International Operations. SRV expects revenue to grow in 2019 compared to 2018 (EUR 959.7m) and the operative operating profit to improve compared to 2018 (EUR -10.0m) and be positive.

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  • Revenue in Q4 was EUR 299.8m (EUR 338.7m in Q4/17), in line with our estimates (Evli EUR 299.6m). Growth in Q4 amounted to -11.5 % y/y.
  • Operating profit in Q4 was EUR 0.1m (EUR 11.2m in Q4/17), below our estimates (Evli EUR 7.8m), at a margin of 0 %. The operative operating profit amounted to EUR 1.5m and was affected by rising costs, additional REDI costs of EUR 11.1m, an impairment of EUR 4m in International Operations, and a EUR 14m capital gain for the sale of SRV Kalusto.
  • The order backlog strengthened to EUR 1,832m (2017: EUR 1,574.9m)
  • Guidance: SRV expects the full-year consolidated revenue for 2019 to grow compared to 2018 (EUR 959.7m). The operative operating profit is expected to improve compared to 2018 (EUR -10.0m) and to be positive. A total of 809 developer-contracted housing are estimated to be completed in 2019 (526 in 2018).
  • Dividend proposal: SRV proposes that no dividend be paid for FY2018.

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Talenom - Upgrade to BUY

05.02.2019 - 09.30 | Company update

Talenom’s Q4 results were quite in line with our estimates, with net sales and operating profit at EUR 12.5m and EUR 1.5m respectively (Evli EUR 12.6m/EUR 1.3m). Talenom’s guidance exceeded our expectations, with net sales growth expected to remain at 2018 levels (18.0%) and the operating profit margin to increase slightly. We upgrade to BUY (HOLD) with an ex-div TP of EUR 24.5 (19.2)

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Upbeat guidance

Talenom’s Q4 results were quite in line with our estimates, with revenue at EUR 12.5m (Evli 12.6m) and EBIT at EUR 1.5m (Evli EUR 1.3m). The dividend proposal is EUR 0.55 per share (Evli EUR 0.50). Talenom’s guidance for 2019 is for net sales growth to remain at a similar pace to 2018 (18.0%) and the operating profit margin to improve slightly (2018: 17.5%), exceeding our expectations of slightly slower sales growth and flattish operating margin development.

Franchising network expansion supporting growth

In absolute figures, net sales growth is mainly expected from new bookkeeping customers. Talenom signed a large number of new franchising contracts during the latter half of 2018, which is expected to increase inflow of new customers during 2019. Growth in other businesses is expected to continue to be rapid, in our view driven largely by staffing services. We expect profitability improvements from further increases in the efficiency of bookkeeping services. We have raised our 2019E and 2020E net sales growth and operating profit estimates by 3%pts/15% and 5%pts/21% respectively. Our 2019E net sales and operating profit estimates are at EUR 57.5m and EUR 10.6m respectively.

BUY (HOLD) with an ex-div target price of EUR 24.5 (19.2)

Talenom trades at a 2019E P/E of 19.8x. We have previously viewed P/E levels of around 20x as reasonable but with the growth expected to remain strong and operating profit margins to increase we justify slightly higher valuation levels. We value Talenom at 21x 2019E P/E for an ex-div target price of EUR 24.5 (19.2) and upgrade to BUY (HOLD).

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Talenom - Guiding continued strong growth

04.02.2019 - 13.45 | Earnings Flash

Talenom’s fourth quarter results were quite in line with our expectations. Net sales amounted to EUR 12.5m (EUR 12.6m Evli) while the operating profit beat our estimates slightly, at EUR 1.5m (EUR 1.3m Evli). The dividend proposal for 2018 is EUR 0.55 per share (EUR 0.50 Evli). Talenom expects net sales growth to continue at a similar pace as in 2018 (18.0%) and the operating profit margin to improve slightly compared to 2018.

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  • Net sales in Q4 were EUR 12.5m (EUR 10.7m in Q4/17), in line with our estimates (Evli EUR 12.6m). Growth in Q4 amounted to 16.5% y/y.
  • The revenue from additional services in Q4 amounted to EUR 3.4m, with a growth of 62.8%.
  • Operating profit in Q4 was EUR 1.5m (EUR 0.9m in Q4/17), above our estimates (Evli EUR 1.3m), at a margin of 11.8 %. Talenom had pre-Q4 guided 2018 operating profit to be in the range of EUR 8.2-8.7m, with actual 2018 figures at EUR 8.5m
  • Dividend proposal: Talenom proposes a dividend of EUR 0.55 per share (Evli EUR 0.5).
  • Guidance for 2019: Talenom expects net sales growth to continue at a similar pace as in 2018 (18.0%) and the operating profit margin to improve slightly compared to 2018.
  • Net investments during 2018 amounted to EUR 9.5m compared to EUR 7.4m in 2017.

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Detection Technology - Outlook favorable with attractive pockets of growth

04.02.2019 - 08.30 | Company update

Detection Technology’s Q4 result was in line with our expectations. Post Q4, our estimates for 2019E and 2020E remain intact. DT is trading at a discount, which we see as unjustified given the attractive longer-term investment case. We raise our recommendation to BUY with a target price of 19 euros (16.5).

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Q4 result in line with our expectations

DT’s Q4 net sales amounted to EUR 25.7m (-6.8% y/y) vs. EUR 25.8m/27.7m Evli/consensus estimates. MBU sales were EUR 10.1m (EUR 10.8m our expectation) and SBU sales were EUR 15.5m (EUR 15.0m our expectation). DT’s Q4’18 EBIT came in at EUR 4.9m, which was in line with our estimates of EUR 5.2m (EUR 5.8m cons). Dividend proposal was 0.38, which was lower than our estimate of 0.45.

Outlook favorable with attractive pockets of growth

Our estimates for 2019E and 2020E remain intact post Q4. We expect DT’s 2019E net sales to grow 7.5% to EUR 100.9m driven by SBU’s return to growth of 11.5% on weak comparables. We expect MBU net sales growth to be flat due to the ramp-down of key customer’s product. We estimate 2019E EBIT to be EUR 18.9m (19.1m 2018) and EBIT margin to decrease to 18.8% from 19.7% level of 2018 due to higher R&D costs (30% higher vs. 2018). Despite our modest sales growth and flattish margin expectations for 2019E and the uncertainty around the extent of the ramp-down impact on MBU in H2, DT has several interesting pockets of growth (such as the MultiX acquisition, CMOS flat panel detectors for dental applications, and the Aurora product family for lower mid SBU clients), which are not reflected in our estimates but if materialized, offer clear support for the investment case.

Upgrade to BUY and target price of 19 euros (16.5)

On our estimates, DT’s 2019E-2020E EV/EBIT, EV/EBITDA and P/E are roughly 30%, 20%, 20% respectively below our peer group median. Despite a small cap discount, we see discount as unjustified given the attractive longer-term investment case. We raise our recommendation to BUY with a target price of 19 euros (16.5).

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Detection Technology - Q4 result in line, outlook stable

01.02.2019 - 09.30 | Earnings Flash

Q4 Net sales amounted to EUR 25.7m (-6.8% y/y) vs. EUR 25.8m/27.7m Evli/consensus estimates. MBU sales were EUR 10.1m (EUR 10.8m our expectation) and SBU sales were EUR 15.5m (EUR 15.0m our expectation). DT’s Q4’18 EBIT came in at EUR 4.9m, which is in line with our estimates of EUR 5.2m (EUR 5.8m cons). Dividend proposal is 0.38, which is lower than our estimate of 0.45.

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  • Group level results: Q4 net sales amounted to EUR 25.7m (-6.8% % y/y) vs. EUR 25.8m/27.7m Evli/consensus estimates. Meanwhile, Q4 EBIT was EUR 4.9m (19.2% margin) vs. EUR 5.2m/5.8m Evli/cons. R&D costs amounted to 9.3% of net sales.
  • Medical Business Unit (MBU) delivered net sales of EUR 10.1m which was slightly above our estimate of EUR 10.8m. Net sales of MBU increased by 24.3% y/y due to well-developed demand from key customers.
  • Security and Industrial Business Unit (SBU) had net sales of EUR 15.5m vs. EUR 15.0m Evli estimate. SBU sales declined by -19.9% y/y due to Chinese transport infrastructure projects being on hold and intensified competition.

Outlook: DT expects sales to grow in both business units and geographically in all markets and believes that the company will achieve double-digit revenue growth. However, the second half of the year will be challenging for MBU sales, because one of DT’s major customers will ramp down manufacturing of a device that uses a DT solution.

Medium-term business outlook is unchanged: Detection Technology aims to increase sales by at least 15% per annum and to achieve an operating margin at or above 15% in the medium term.

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CapMan - Picking up the pace with M&A

01.02.2019 - 00.00 | Company update

CapMan’s Q4 results were as expected weaker and in line with our expectations, despite our underestimation of the negative impact on the market portfolio. The acquisition of JAM Advisors (60%) is seen by CapMan as a means to expanding its customer base but we expect CapMan to also seek to rapidly grow the business. We retain our BUY rating with an ex-div TP of EUR 1.75 (1.80).

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Weaker results, raises dividend

CapMan’s Q4 results were quite in line with our expectations, with revenue of EUR 8.9m (Evli 8.2m) and EBIT of EUR -2.9m (Evli -2.8m). Despite having underestimated the market portfolio decline positive fair value changes in especially Real estate and Infra aided Investment business returns. The dividend proposal is EUR 0.12 per share as expected (2017: 0.11).

Acquisition of the majority of JAM Advisors

CapMan announced the acquisition of 60% of JAM Advisors, to be paid for with 5.11m CapMan shares. The company, established in 2012, had EUR 3.3m revenue in 2018 and EBITDA was barely positive. Valuation appears reasonable as it is to be expected that CapMan will seek for rapid expansion of the business, likely also internationally. CapMan will also use JAM Advisor’s customer network to expand its own offering towards tier 2 and 3 investors.

BUY-rating with an ex-div target price of EUR 1.75 (1.80)

CapMan has during Q4, through among other things the additional BVK mandate and second Infra mandate, seen AUM growth of EUR over 400m, that will contribute with over EUR 4m annual fee income. Together with the acquisition of JAM Advisors this will boost revenue and profitability in 2019 and we have raised our 2019 estimates for revenue and operating profit by 13% and 5% respectively. We expect management fee growth of 23% in 2019. Despite the negative Q4 earnings from the impact of the non-core market portfolio CapMan is in our view continuing to show solid progress. With valuation still looking attractive we retain our BUY rating with an ex-div target price of EUR 1.75 (1.80).

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CapMan - Earnings weaker as expected

31.01.2019 - 09.15 | Earnings Flash

CapMan’s Q4 results were weaker as expected due to the market volatility. A dividend of EUR 0.12 per share is proposed (Evli EUR 0.12). AUM grew to over EUR 3bn driven by the additional BVK mandate. CapMan further announced the acquisition of 60% of analysis and wealth management company JAM Advisors.

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  • Income in Q4 was EUR 8.9m (EUR 8.8m in Q4/17), above our estimates (Evli EUR 8.2m).
  • Operating profit in Q4 was EUR -2.9m (EUR -3.4m in Q4/17), quite in line with our estimates (Evli EUR -2.8m).
  • Management Company business revenue in Q4 was EUR 6.2m vs. EUR 6m Evli. Operating profit in Q4 was EUR 0.5m vs. EUR -0.1m Evli.
  • Investment business: Revenue in Q4 was EUR 0.2m vs. EUR 0.2m Evli. Operating profit in Q4 was EUR -4m vs. EUR -3.2m Evli.
  • Services business: Revenue in Q4 was EUR 2m vs. EUR 2m Evli. Operating profit in Q4 was EUR 0.8m vs. EUR 1m Evli.
  • Dividend proposal: CapMan proposes a dividend of EUR 0.12 per share (Evli EUR 0.12).
  • Guidance: CapMan does not provide a numeric guidance for 2019.
  • Capital under management by the end of Q4 was EUR 3.0bn. Of the capital under management EUR 1.9bn was attributable to real estate funds, EUR 0.8bn to portfolio companies and EUR 0.3bn to Infra and Credit.
  • CapMan announced that it has acquired 60% of analysis and wealth management company JAM Advisors. The acquisition will provide opportunities for CapMan to expand into new customer segments. The company’s turnover in 2018 was approx. EUR 3.3m and EBITDA barely positive.

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Etteplan - Outlook in focus

30.01.2019 - 09.15 | Preview

Etteplan reports Q4 results on February 7th. With signs of slower growth in the global economy the market outlook and guidance are of key interest. We expect the Q4 results to show good performance, with our revenue and EBIT BO estimates at EUR 66.0m and 6.7m (Q4/17: 58.5m and 5.4m) respectively. We expect a dividend proposal of EUR 0.30 per share. With valuation looking fairer after share price inclines we downgrade to HOLD (BUY) with a target price of EUR 9.0.

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Comments on market outlook and guidance of key interest

The growth in the global economy has been showing signs of slowdowns due to among other things the US-China trade war and changes in GDP growth forecasts for the near-term have been seeing a slightly declining trend. An adverse shift in engineering companies’ willingness to make investments would have an effect on the engineering services sector. As the effect of any weaker demand is not yet clearly comprehensible Etteplan’s comments on the market outlook along with the guidance for 2019 are of key interest. Despite increased uncertainty we still expect guidance to reflect growth in revenue and operating profit.

Expect DPS proposal of EUR 0.30

Our estimates ahead of Q4 remain intact. Our Q4 revenue and EBIT BO estimates are at 66.0m and 6.7m respectively. Etteplan has not specified a dividend policy but as the dividend has typically corresponded to around 50 % of EPS, we expect a dividend proposal of EUR 0.30 per share.

HOLD (BUY) with a target price of EUR 9.0

Etteplan’s share price has seen increases during 2019 and valuation when comparing to peers seems fair. We value Etteplan at 8.8x 2019E EV/EBITDA. We downgrade our rating to HOLD (BUY) with a target price of EUR 9.0.

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Pihlajalinna - Profitability and pipeline in focus

29.01.2019 - 09.10 | Preview

Pihlajalinna will report its Q4 earnings on Feb 15th. Profitability development and news flow regarding the new contract pipeline are of interest, as before. Our rating and target price (“Buy”, TP EUR 12) are unchanged ahead of Q4.

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Company lost two small contracts during Q4

Kymijoen Työterveys, which Pihlajalinna acquired in early 2018, lost two customer contracts (Kouvola and Kotka) in Q4, following tendering processes. Contracts were transferred to Terveystalo from start of 2019. Personnel of Kymijoen Työterveys was given protection against dismissal for two years. Pihlajalinna plans to utilize the resulting personnel surplus in other undersupplied regions as well as in its other private service provision within the region. Management has estimated that the revenue impact of the two lost contracts is about EUR -2m in total annually. We assume the negative earnings impact at EUR 1m+ for 2019E.

Terveyspalvelu Verso acquired in Q4

Pihlajalinna executed on its altered expansion plan by acquiring Terveyspalvelu Verso, which produces occupational healthcare services at 17 clinics in Northern Savo region. Price tag was not disclosed. Transaction was completed at the end of Q4.

We expect profitability to improve in Q4

Pihlajalinna’s profitability and organic growth showed signs of turning to better in Q3, supported by a streamlined cost structure and the drop of insurance revenue leveling out. We expect cost savings to continue supporting profitability and foresee adj. EBITDA margin improving y/y in Q4.

Rating and TP unchanged ahead of Q4

We expect Q4 revenue of EUR 127m (growth 18%) and adj. EBITDA of EUR 10.9m (margin 8.6%) vs. EUR 8.5m (margin 7.9%) last year. We expect a dividend to be cut to EUR 0.08 vs. EUR 0.16 last year, due to higher leverage and lower earnings in 2018E. Our rating and target price (“Buy”, TP EUR 12) are unchanged ahead of Q4.

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Innofactor - Second profit warning for 2018

28.01.2019 - 09.30 | Company update

Innofactor issued a second profit warning, expecting net sales to decline from 2017 and EBITDA to be negative, from previously having expected net sales to be at a similar level to 2017 (EUR 65.7m) and EBITDA in between EUR 0.0-1.3m. Our revised 2018 net sales and EBITDA estimates are at EUR 63.7m and -0.9m respectively. We retain our HOLD-rating with a target price of EUR 0.4.

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Lowered guidance for 2018

Innofactor issued its second profit warning for 2018 on January 25th. Innofactor now expects its net sales to decline from 2017 and EBITDA to be negative. Innofactor’s previously expected its net sales to be at a similar level to 2017 and the operating margin to be positive but weaker than in 2017. Innofactor’s net sales and EBITDA in 2017 amounted to EUR 65.7m and EUR 1.3m respectively. The weaker than expected sales is according to Innofactor due to the timing of customer’s purchases related to the Dynasty product family along with lower sales in Denmark. Profitability is affected by the lower sales along with some write offs related to project deliveries, of which to our understanding the lower sales have a bigger impact. Innofactor further held co-operation negotiations during Q4 that is expected to have affected profitability.

Expect improvements in 2019

Following the updated guidance, we have revised our 2018 estimates, with our net sales and EBITDA estimates at EUR 63.7m and EUR -0.9m respectively, with our other estimates largely intact. We expect to see a minor improvement in sales going into 2019 and a more notable profitability improvement, mainly from the organizational changes made in late 2018.

HOLD with a target price of EUR 0.4

On our estimates valuation continues to appear justifiable on EV/EBITDA multiples, as the improvement we expect to see in profitability in 2019 is still well below historically seen levels. We retain our HOLD-rating with a target price of EUR 0.4.

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CapMan - Weaker finish to otherwise solid year

24.01.2019 - 09.15 | Preview

CapMan will report Q4 results on January 31st. We expect Q4 to based on earnings be a weaker end to an otherwise solid year, driven by the impact of the market volatility on CapMan’s trading portfolio. Our revised Q4 estimates for revenue and operating profit are at EUR 8.2m and EUR -2.8m respectively. We expect a dividend of EUR 0.12 per share. We retain our BUY-rating with a target price of EUR 1.80 (1.75).

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Market volatility to weigh on Q4

We expect CapMan to report weaker Q4 earnings due to the effect of market volatility on the trading portfolio during the quarter. CapMan has been shifting funds from the trading portfolio to own funds, with some EUR 20m transferred during H1/18, but was still at near EUR 60m at the end of Q3. As to our understanding some 60% of the portfolio is hedged, we expect an EUR 3m fair value loss. We also do not expect any notable carried interest or success fees for the quarter. We have revised our Q4 revenue and operating profit estimates to EUR 8.2m (10.0m) and EUR -2.8m (5.0m) respectively. Although we anticipate a weaker result in 2018 compared to 2017, we expect CapMan to increase dividends to EUR 0.12 (2017: 0.11) per share.

BVK mandate addition to support management fee growth

During Q4 CapMan reported the increase of the BVK mandate to EUR 820m (prev. 500m), which we expect to have an additional earnings contribution of around EUR 1.5m p.a. The whole mandate is to our understanding close to being fully invested and will boost management fees from 2019 forward.

BUY-rating with a target price of EUR 1.80 (1.75)

Looking at 2019E and 2020E P/E multiples, coupled with the high dividend yield, valuation in our view does not yet appear challenging, with a ~15% discount to peers on P/E. We retain our BUY-rating with a target price of EUR 1.80 (1.75).

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Detection Technology - Focus on outlook for 2019 and China

24.01.2019 - 08.50 | Preview

Detection Technology will report Q4 earnings next week on Feb 1st. Our focus will be on the latest comments regarding China and the overall medical and security market outlook for 2019. We expect a dividend of EUR 0.45, which corresponds to a 40% EPS payout and 3% dividend yield. Our rating and target price remain intact ahead of Q4.

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SBU net sales to decline in Q4, MBU still going strong in Q4

Due to a slowdown in China’s security market and tightening competition, DT has said it expects SBU sales to decline y/y in Q4’18, in contrast to the earlier guided single-digit y/y growth for H2’18. The visibility is limited due to the suspension of many Chinese infrastructure projects. We expect SBU Q4 net sales to be 15.0 MEUR (vs. 19.4 MEUR Q417). We expect continued good growth in MBU with Q418E net sales of 10.8 MEUR (vs. 8.1 MEUR Q417).

2019 outlook in focus, especially comments on China

DT expects net sales to grow moderately at the beginning of 2019. This estimate is based on the growth outlook for the overall X-ray imaging market, which is similar for 2019 as 2018, according to DT. In the Q4 call we look forward to hearing an update on the outlook and the Chinese market, as well as any new news regarding the recently released Aurora X-ray detector family (expected to support SBU’s net sales at end of 2019).

Estimates unchanged ahead of Q4, HOLD rating and target price of 16.5 euros maintained

We expect Q4 net sales to be 25.8 MEUR (vs. 27.5 MEUR Q417) and Q4 EBIT to be 5.2 MEUR (vs. 7.0 MEUR Q417). Thus, we expect 2018E net sales to grow 6% to 94.1 MEUR from last year’s 89 MEUR and EBIT to decline 3% from last year (19.3 MEUR 2018 vs. 19.9 MEUR 2017) due to lower SBU sales and higher R&D costs. We expect a dividend of EUR 0.45, which corresponds to a 40% EPS payout and 3% dividend yield. Our rating and target price, “HOLD” and target price EUR 16.5, remain unchanged ahead of Q4.

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Tokmanni - Expecting growth in revenue, earnings and dividend

23.01.2019 - 09.05 | Preview

Tokmanni will report its seasonally strong Q4 earnings on Feb 8th. As usual LFL growth and margins are of interest. We expect revenue and earnings to grow with continued LFL growth and stable gross margin. We foresee the dividend at EUR 0.45, which corresponds to 70% EPS payout and yields 5.6%. Our rating and target price (“Buy”, TP EUR 9) remain intact ahead of Q4 earnings.

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Store network approaching 200 stores with acquisitions

Tokmanni acquired 4 stores in Northern Finland in December with combined revenue of some EUR 9m in 2017. The stores were transferred to Tokmanni at the beginning of 2019. These together with the earlier Ale-Makasiini acquisition (9 stores, revenue EUR 20m in 2017) put Tokmanni's store count at 190 vs. the target of about 200 stores. At the targeted opening pace of ~5 stores per year, Tokmanni is set to reach its 200 store target in the next couple of years. Growth beyond this was not addressed at the CMD in December, but plans are likely to receive increased attention going forward.

Expecting continued LFL growth and stable GM in Q4

Tokmanni’s LFL growth has surprised positively in Q1-Q3 (+6%), considering the company has had zero or slightly negative LFL growth in recent years. Solid LFL growth has been supported by weak comparables, better weather, assortment improvements and somewhat more active take on campaigning. Revenue guidance was raised to reflect good LFL performance with Q3 earnings. We expect LFL growth to continue at solid 4% level in Q4, but for 2019E we maintain a more conservative 1% LFL growth assumption. We foresee the gross margin at 34.8% in Q4, which is in line with the average level of Q4s in 2015-2017.

Expecting growth in revenue, earnings and dividend

We expect Q4 revenue of EUR 267m (7.5% growth y/y, of which LFL 4.0%) and adj. EBITDA of EUR 31.0m (EUR 28.6m y/y). We expect a dividend of EUR 0.45, which corresponds to ~70% EPS payout and yields 5.6%. Our rating and target price (“Buy”, TP EUR 9) remain intact ahead of Q4 earnings.

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Verkkokauppa.com - Guidance downgrade by surprise

18.01.2019 - 08.35 | Preview

Verkkokauppa.com downgraded its guidance yesterday for 2018E adj. EBITDA. The warning came as a surprise, even if major turmoil took place in the wider retail industry in Q4. We have cut estimates for Q4 and for 2019-2020E.

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Guidance downgraded for adj. EBITDA

Verkkokauppa.com downgraded its guidance yesterday and gave preliminary figures for full-year revenue and adj. EBITDA. FY18E revenue was EUR 477m, in line with the guided range of EUR 460-500m and somewhat above EUR 467-468m Evli and consensus estimates. However, adj. EBITDA landed at EUR 10.2m, below previously guided range of EUR 11-14m and below EUR 12.7m Evli and cons expectation. Full-year figures imply Q4 revenue of EUR 155m (growth 22%) and adj. EBITDA of EUR 3.4m (EUR 5.9m y/y). Adj. EBITDA for Q4 thus lands at its lowest level since 2014. Seasonally strong Q4 has thus clearly disappointed. Tight price competition and higher marketing costs were mentioned as negative contributors in 2018E.

We expect wholesale volumes to have increased y/y in Q4

Federal Customs Service of the Russian Federation announced on Dec 7th that starting from Jan 2019 the duty-free limit for private goods imports will be reduced to EUR 500 from EUR 1000 previously. We expect this to have supported wholesale volume sales for Verkkokauppa.com in Q4 and consider this as a likely contributor to the Q4 revenue beat.

Estimates cut - target price to EUR 4.2 (4.7)

We have cut 2019 and 2020E estimates by 12% and 9% respectively. We continue to expect a growing dividend of EUR 0.19 vs. EUR 0.18 for 2017. This represents 122% of EPS, but can be backed by the sizeable net cash position. We cut target price to EUR 4.2 (4.7), which corresponds to 12x 2019E EBIT. Our “Hold” rating is intact. Our estimates do not yet reflect the upcoming IFRS 16 changes.

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Raute - Higher sales, lower order intake

17.01.2019 - 09.10 | Preview

Raute announced 2018 sales and EBIT to be higher than previously expected. The company reported 2018 sales at EUR 181m and EBIT at EUR 14.9m. Our respective estimates previously stood at EUR 171m and EUR 15.1m. The higherthan- estimated sales were the result of strong execution throughout the entire delivery chain during the last months of the year. Services sales were also higher than estimated. However, the order book amounted to EUR 95m vs. our estimate of EUR 114m.

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Higher revenue negated by lower margin and order intake

Stronger than expected Q4 project deliveries (EUR 39m vs. EUR 33m in the previous quarter, according to our estimates) pushed the company to book a record quarter. On the other hand, the released figures reflect a lower EBIT margin on project deliveries. We estimate the Q4 project deliveries EBIT margin at below 5%, while previously the business has averaged margins above 6%. It should be noted that the lower margin may be due to possible conservative assumptions by the company regarding the unfinished projects. Whereas Q4 sales came in EUR 10m higher than our expectations, the order intake fell short by EUR 9m (at EUR 28m vs. our estimate of EUR 37m).

We maintain HOLD with a TP of EUR 27.0 (27.5)

All in all, we don’t see material changes in the company’s operating environment. We continue to expect negative sales and EBIT development for the next couple of years following a very strong investment cycle by Raute’s customers. Our estimates for 2019 sales and EBIT remain at EUR 149m and EUR 12m, respectively. We make no significant changes to our longer-term estimates and maintain our HOLD rating, lowering our target price as peer valuation multiples have declined during the recent months. In our view an EBIT level of around EUR 10m and EV/EBIT multiple of 8x remain the relevant yardsticks for long-term over-the-cycle valuation.

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Vaisala - Positive profit warning

15.01.2019 - 09.20 | Preview

Vaisala issued a positive profit warning yesterday, with operating result being better than previously guided (EBIT range 30-36 MEUR). Operating profit for 2018 was 39 MEUR vs. 35.5 MEUR our estimates. Net sales for 2018 was 349 MEUR vs. 349 our estimate. W&E net sales in Q4 were 78 MEUR vs. 78 MEUR our estimates, IM net sales in Q4 were 31 MEUR vs. 30 MEUR our estimates. Most of the profitability beat was due to better than expected profitability in W&E, were EBIT was 10 MEUR vs. 5.2 MEUR our estimates (IM EBIT 6 MEUR vs. 5.5 MEUR our estimate).

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Favorable mix in W&E and higher sales in IM impacted EBIT

In the fourth quarter 2018, operating result was higher than estimated due to higher than estimated gross profit and other operating income. In W&E, gross margin was higher than estimated due to favorable sales mix. In IM, net sales were higher than estimated resulting in higher operating result. Other operating income included EUR 1.5 million of reversal of earn-outs and other contractual liabilities related to acquisitions in the recent years.

2019E growth mainly non-organic, TP 19 and HOLD recommendation maintained

We estimate Vaisala’s net sales to grow 11% to 387 MEUR in 2019E. Growth is mainly driven by the Leosphere and K-Patents acquisitions (adding 24 MEUR and 12 MEUR to top line in 2019E). We estimate 2019E EBIT to be 45 MEUR. On our estimates Vaisala is trading at 2019/20E at P/E 20.4 and 17.9, which is ~17% higher than peer group. On our estimates, EV/EBIT multiples for 2019/20E are 14.5 and 12.8 respectively, which are in line with peer group. We await some more color from the Q4 call, especially regarding China and the W&E project outlook. We retain our HOLD recommendation and target price of 19 euros.

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Consti - 2018 earnings to be in the red

15.01.2019 - 09.00 | Preview

Consti issued a profit warning, expecting the operating result for 2018 to be negative and decline compared to 2017. The profitability in Q4 will be burdened by higher than expected costs of a building purpose modification project. We expect EBIT of EUR -1.0m (prev. 1.5m) in 2018. We do not expect Consti to distribute dividends for FY 2018. We retain our HOLD-rating with a target price of EUR 6.0 (7.5).

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Lowered guidance

Consti lowered its guidance, now expecting the operating result to be negative and decline (prev. grow) compared to 2017, when the operating result was EUR -0.4m. Consti’s Q4 results will be negative due to weaker than expected profitability in the housing repair unit included in the Building Facades business area. The profitability issues relate to higher than expected costs of a building purpose modification project. The project will be finalized during H1/2019.

2018E EBIT EUR -1.0m (1.5m)

We have cut our Q4 profitability estimates, with both our Q4/18 and 2018E EBIT estimates now at EUR -1.0m (prev. 1.5m). Due to the weaker result we have revised our dividend estimate and do not expect Consti to distribute dividends for FY 2018. We have cut our 2019E EBIT estimate and now expect EBIT of EUR 7.0m (8.7m). We anticipate further profitability impacts of the building purpose modification project during 2019E but continue to expect notable profitability improvements as the projects that have burdened profitability are completed.

HOLD with a target price of EUR 6.0 (7.5)

On our estimates Consti trades at a 2019E EV/EBIT of 8.4x, at a ~10/20 % discount to the Construction peers and Building Installations and Services peers. Given the profitability challenges and weaker visibility into near-term profitability we see the discount as justified and retain our HOLD-rating with a target price of EUR 6.0 (7.5).

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Next Games - Upbeat Q4 figures, initiating savings program

11.01.2019 - 09.00 | Company update

Next Games released preliminary Q4 figures and announced an intention to streamline operations, expecting annual cost savings in the range of EUR 4-8m. Next Games is still reviewing financing options but no update on the situation was given with the releases. Financing remains a concern but with a stronger than expected cash position we upgrade to HOLD (SELL) with a target price of EUR 2.0 (1.8).

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Q4 losses smaller than anticipated

Next Games announced preliminary Q4 figures. Revenue amounted to EUR 11.3m (Evli EUR 12.2m) while EBITDA amounted to EUR -1.3m (Evli -3.6m). The gross margin improved more than we had expected, at 37% in Q4 (-11% in Q3). User acquisition and marketing costs relating to Our World have normalized, which helped boost the gross margin. The company’s cash position at the end of Q4 was EUR 7.3m.

Seeking to streamline operations

Company management has been authorized to initiate a program to review the company’s cost structure, including consultation proceedings covering the entire organization. The company estimates annual cost savings in the range of EUR 4-8m during the full year 2019. Next Games is further still looking into alternatives to strengthen its financial position.

HOLD (SELL) with a target price of EUR 2.0 (1.8)

We have revised our estimates, with our 2019E sales estimate lowered to EUR 67.2m (prev. 73m) due to expected lower Our World revenue and EBIT estimate raised to EUR -5.7m, to account for the cost savings program and lower than expected UA costs. Although the financing situation remains a concern, we view the situation as less dire than previously anticipated. We expect the cost savings program to further alleviate the financing situation but will likely have some impact on new game launches. We upgrade to HOLD with a target price of EUR 2.0 (1.8).

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Finnair - Soft traffic continued

10.01.2019 - 09.15 | Preview

Finnair’s traffic came in below our (and consensus) expectations in Q4 and the company appears to have slightly missed its FY2018 guidance ranges for capacity growth (14.8% vs. guidance “above 15%”) and passenger growth (11.6% vs. guidance 12-13%). We have cut Q4 estimates with weaker than expected traffic, whereas our 2019E estimates remain largely unchanged.

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Q4 traffic softer than we expected

Finnair’s traffic continued soft in Q4. Overall Q4 capacity (ASK) grew by 9% vs. our 12% expectation, while sold capacity (RPK) grew by only 4% vs. our 10% expectation. Thus passenger load factor (PLF) declined quite notably by 3.4 percentage points in Q4 to 76.9%. This was driven by weakening PLFs in European (- 3.6pp), Asian (-3.5pp) and domestic (-3.0pp) traffic. Finnair flagged in Q3 that competition had tightened especially in the Nordics, which is a likely contributor to soft traffic performance. Finnair stopped reporting unit revenue (RASK) with end-quarter monthly traffic, but we expect it to have continued to decline in Q4.

Fuel price eased somewhat q/q in Q4

As a positive the price of jet fuel eased in November and December, after climbing to a multi-year high in October. On a q/q basis average price moved by -5% in USD and by -3% in EUR compared to average price of Q3. Yet average price for Q4 was still 15% higher y/y in USD and 18% higher in EUR.

Q4 estimates cut

We have cut Q4 estimates and expect Finnair’s Q4 revenue to be EUR 671m (4% growth), while foreseeing adj. EBIT at EUR -9m (margin -1.4%). We foresee FY2018 revenue growth at the low-end of the guided “about 10-11%” range. Our rating (“Hold”) and TP (EUR 6.8) remain intact, with 2019E estimates largely unchanged.

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Aspo - Guides EBIT at the range’s low-end

19.12.2018 - 09.05 | Company update

Aspo announced the restructuring of its subsidiary Kauko. Effective in 2019, Aspo will no longer report Kauko as a separate segment. The corporate action does not come as a major surprise, yet Aspo also restated its 2018 EBIT guidance at the lower end of the initial range. We adjust our estimates for Kauko accordingly, while making small adjustments to ESL’s estimates due to the new LNG vessels taking longer than initially expected to reach their full operational efficiency.

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Kauko plays a minor role in the sum-of-the-parts analysis

According to the plan, Kauko’s energy solutions business will be either sold off or terminated, while the offering for mobile knowledge work as well as Kauko’s administration will be restructured. The energy solutions business generates approximately one third of Kauko’s revenue. It was expected that Aspo might take more concrete measures regarding Kauko as the subsidiary has not been able to reach its targets. We recognize the announced EUR 5m goodwill impairment in Kauko’s Q4 EBIT.

We expect ESL’s acquisitions to lift 2019 EBIT to EUR 25m

We make slight adjustments to ESL’s estimates, reflecting the longer learning curve for the new LNG vessels to reach their full operational efficiency (Q4 EBIT EUR 1.2m lower than previously expected, 2019 EBIT lower by EUR 0.4m). Nevertheless, the new LNG vessels and the acquisition of AtoB@C are expected to be major contributors to next year’s EBIT growth. Our EBIT estimates for Telko and Leipurin remain unchanged.

Lower peer multiples cut our target to EUR 9.25 (EUR 10)

Overall, we don’t see any significant changes in Aspo’s operations. We expect Aspo’s 2018 EBIT at EUR 21.9m (including the EUR 5m impairment of Kauko). We retain our HOLD rating but decrease our target price to EUR 9.25 (EUR 10). The change in our target price mainly reflect’s Telko’s lowered peer multiple, while the write-down of Kauko figures only as a minor loss in the sum-of-the-parts valuation.

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Talenom - Issued positive profit warning

13.12.2018 - 09.00 | Company update

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

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Guidance for 2018 EBIT raised

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

Remain cautious to margin improvement

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

HOLD with a target price of EUR 19.2 (18.5)

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

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Innofactor - Waiting for signs of a turnaround

11.12.2018 - 08.30 | Company report

Innofactor has in the near past seen sales growth declines and profitability being burdened by internal problems. Actions to decrease organizational levels and improve decision-making are being taken and we expect profitability to see some recovery in 2019, while signs of accelerated sales growth remain to be seen. We retain our HOLD rating with a target price of EUR 0.40 (0.55).

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Sales growth uncertainty

Innofactor has seen sales declining in the near past due to weaker sales activity, with the organizational structure having had an effect. Actions have been taken to decrease the organizational levels and improve decision-making, but we remain wary to sales growth being remedied in 2019 and expect flat sales growth.

Market outlook remains supportive

The Nordic IT-services market has seen healthy growth in recent years and is expected to continue in the coming years. Furthermore, Microsoft has shown solid performance within enterprise solutions, expected to grow at a double-digit pace.

Expect to see margin improvement

The weaker sales in the near past along with other factors have had a negative effect on profitability. Organizational actions being taken are expected to have both a direct and indirect positive effect on profitability from 2019 onward and we expect to see margin improvement in the coming years.

HOLD with a target price of EUR 0.40 (0.55)

On our estimates valuation is quite in line with peers on 2019E EV/EBITDA while on 2020E multiples valuation appears more attractive. As profitability has been an issue in the near past and evidence of significant margin improvements are still lacking we emphasize the 2019E peer EV/EBITDA multiple and value Innofactor at 8.6x 2019E EV/EBITDA, giving a target price of EUR 0.40 and HOLD-rating.

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Tokmanni - CMD: strategy and targets reaffirmed

05.12.2018 - 09.10 | Company report

Tokmanni’s CMD provided an update into the company’s strategic focus areas and targets. The CMD reaffirmed that the sourcing improvement potential, which has been key to our investment case, remains intact and is of high importance in management’s agenda. We continue to expect margins to improve in upcoming years and hence retain “Buy” rating with TP of EUR 9 for the shares.

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Targeting EUR 1bn in sales by 2020E

Tokmanni targets EUR 1bn in sales by 2020E with further store network expansion and LFL growth. After the recent Ale- Makasiini acquisition the store count is now 186 stores vs. the target of 200 stores. At the targeted expansion pace (12,000m2 or ~5 stores annually) the target of 200 stores will be reached within the next few years. Growth plans beyond this were not addressed.

EBITDA to 10% via improved sourcing and OPEX scalability

Tokmanni continues to target 10% adj. EBITDA margin. This does not include impact of upcoming IFRS 16. The target implies 2- 3% margin improvement compared to the level reached in recent years. 1-2% of this is to come from the gross margin, which is to improve primarily driven by increased direct sourcing and by increased share of private label products in the mix. The targeted gross margin improvement is in line with what we had already incorporated into our estimates and it reaffirms the validity of further sourcing improvement potential. OPEX scalability should contribute the remaining 1-1.5%. Positive LFL growth is expected to be a key driver behind OPEX scalability.

Maintaining “Buy” on margin improvement potential

We have included the acquired Ale-Makasiini into our estimates, but for other parts our estimates remain broadly intact. We expect earnings to improve in 2019-2020E driven primarily by gross margin improvements via more efficient sourcing. We consider valuation moderate against the margin improvement potential and hence retain “Buy” rating for the shares.

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CapMan - CMD notes

29.11.2018 - 09.00 | Company update

CapMan’s CMD revolved around the strategic changes that have taken place during the past few years and CapMan’s position going forward. Key emphasis will, based on our take on the CMD, lie on earnings stability, asset diversification, and broadening of the investor base.

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Multi-asset manager

CapMan’s CMD clearly signaled the continued strive towards an increasing Nordic presence and to a larger extent becoming a multi-asset manager. In our view key areas of interest will be the fairly recently established areas of Growth equity and Infra. The presented performance metrics for exits in CapMan Growth are impressive, with significant further potential going forward. The Infra fund has had a good start and a second mandate, still subject to approval, has been signed.

Broadening of investor base

Another strategic area of focus lies in the broadening of the investor base. Currently some 85 % of AUM stems from local tier 1 investors. CapMan is seeking to increase the share of tier 2 and 3 investors along with international tier 1 investors. Targeting investors with smaller ticket sizes could likely be reflected in new product launches similar to the open-ended NPI fund.

Seeking earnings stability, carry potential remains

CapMan’s financial objective remain unchanged. Currently the average ROE of 20 % in our view remains the most challenging. Realization of mid- to long-term carry potential remains a key factor but CapMan is also seeking to increase the share of fee income to achieve more stability in earnings.

BUY with a target price of EUR 1.75

Our estimates remain unchanged, with earnings expected to improve in the coming years. The effect of recent market uncertainty on CapMan is in our view currently mostly neutral. We expect several new products to be launched during 2019 and the uncertainty could impact on fundraising, although fund track records remain supportive. We retain our BUY-rating and target price of EUR 1.75.

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Etteplan - More than just an engineering company

29.11.2018 - 09.00 | Company report

Etteplan has seen favourable development in the past few years following improving market conditions. Market uncertainty has increased recently and we expect organic growth figures to slow down going in to 2019. Acquisitions remain essential in achieving the 15 % average growth target. Margins are close to the 10 % EBIT from business operations target, under some pressure but with room for improvements. We retain our BUY-rating with a target price of EUR 9.0 (9.5).

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Market uncertainty casting a shadow on sales growth

Etteplan’s revenue in 2017 and during Q1-Q3/2018 increased by 16.8 % and 11.1 %, of which organic growth amounted to 10.4 % and 7.6 %, supported by improved market conditions from early 2017 onward. With some uncertainty relating to market development visible we expect organic growth to slow down going in to 2019 and achieving the target of an average growth of 15% would in our view require further acquisitions.

Margins near 10 % target

Etteplan has during 2018 been able to achieve group EBIT from business operations margins of close to the 10 % target (9.1 % during Q1-Q3/2018). A key driver for profitability has been Engineering Services due to the good demand situation and improved operational efficiency. We see some pressure on the already exceptionally good margins in the service area, while Embedded Systems and IoT as well as Technical Documentation in our view still have room for margin development.

BUY with a target price of EUR 9.0

Compared to peer 2019E and 2020E multiples Etteplan trades at a discount. Increased uncertainty in coming years market development warrants some caution but the ’19- ‘20E discount of ~20 % to peer ‘19E and ‘20E EV/EBITDA does not appear justified. We value Etteplan at 8.8x 2019E EV/EBITDA, giving a target price of EUR 9.0 (9.5) and BUY recommendation.

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Cibus Nordic - A routine trip for groceries

28.11.2018 - 09.10 | Company update

Cibus’ quarterly results closely reflected the company’s earnings capacity. We update our estimates to account for the acquisition of six properties the company announced in early November. The add-on properties are expected to contribute ca. EUR 2m in annual rental income. We retain our BUY rating and target price of SEK 120 per share.

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The portfolio now includes 132 properties

Following the company’s latest acquisition of six Finnish daily-goods properties (all let to Kesko and Tokmanni), the portfolio now has a total lettable area of some 477,000 sqm and NOI capacity of EUR 47.8m. The latest add-on portfolio was acquired at a total cost of EUR 30m, the acquisition yield estimated at 6.5%. Consequently, Cibus’ portfolio gross asset value currently stands at around EUR 815m. After subtracting the central administration and net financial costs, Cibus now has capacity to pay ca. EUR 30m in annual dividends. The dividend guidance currently remains at EUR 0.2 per share per quarter, or EUR 24.9m on an annual basis.

EPRA NAV increased to EUR 11.2 (11.0) per share

Going forward, Cibus’ financial year will follow the calendar year. This means the company’s next year-end report will be published in late February 2019 for the period covering the second half of 2018. Meanwhile board member Jonas Ahlblad will serve as an interim CEO until a new CEO has been appointed. During the coming months we are expecting the company to announce the refinancing of two bank loans. Cibus might increase its borrowings and use the proceeds to acquire additional daily-goods properties in Finland. We expect the completed refinancing to meaningfully cut the company’s average borrowing rate, which currently stands close to 3%.

Retain BUY rating with TP of SEK 120 per share

We update our estimates to reflect the latest add-on acquisition. We expect the company to announce further portfolio acquisitions during the next quarters. We retain our BUY rating and target of SEK 120 per share.

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Cibus Nordic - No surprises; updated earnings capacity provides color on the latest transaction

27.11.2018 - 11.40 | Earnings Flash

Cibus’ Jul-Sep 2018 quarter proceeded in-line with estimates. Net rental income and operating income came in as guided by the company’s earnings capacity. From now on, dividends will be paid on a quarterly basis.

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  • Operating income during the quarter, at EUR 7.2m, was consistent with the annual earnings capacity previously communicated by the company for the period (EUR 28.8m).
  • Cibus previously announced an acquisition of six daily-goods properties in Finland at a cost of EUR 30m. The updated earnings capacity hints at an acquisition yield of ca 6.5%, i.e. an increase of EUR 2.0m in rental income. Correspondingly, the annual NOI capacity now stands at EUR 47.8m vs. EUR 45.8m previously. The six recently acquired properties are all let to Kesko and Tokmanni.
  • Going forward, Cibus will pay dividends quarterly. Moreover, Cibus’ financial year will now follow the calendar year, meaning that the company’s next year-end report will be published in Feb 2019 for the period Jul-Dec 2018. Meanwhile board member Jonas Ahlblad (Sirius Capital Partners) will serve as an interim CEO until a new CEO has been appointed.

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Gofore - Upgrade to BUY

22.11.2018 - 09.30 | Company update

Gofore specified guidance for 2018 and gave an outlook on net sales for 2019, at EUR 50-52m (prev. 48-52m) and EUR 65-73m respectively. The long-term financial objectives remain unchanged. The demand outlook in broad has remained good. On our revised estimates we expect net sales of EUR 67.5m and EBITA of EUR 10.4m in 2019. On our estimates Gofore trades at a nearly 20 % discount to peers on ‘19E EV/EBIT, which we do not consider justified. We upgrade to BUY (HOLD) with a target price of EUR 9.8 (9.2).

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Guidance for 2018 specified and 2019 forecast given

Gofore’s BoD specified guidance for 2018, expecting net sales to be EUR 50-52m (prev. 48-52m). An outlook for 2019 was also given, according to which net sales are expected to grow to EUR 65-73m, excluding any potential acquisitions in 2019. The long-term financial objectives remain unchanged, at 15-25 % net sales growth in the next few years and an EBITA margin of 15 %. The demand situation has in broad remained good and growth is expected across the board of customer areas.

2019E net sales EUR 67.5m and EBITA EUR 10.4m

We have revised our estimates, now expecting net sales of EUR 67.5m (prev. 62.9m), to include for the Solinor acquisition. Our revised EBITA estimate is EUR 10.4m (prev. 9.6m). Our 2019E net sales estimate is on the lower side of the 2019 outlook, leaving sales growth upside along with any potential acquisitions. The availability of skilled professionals remains a limiting factor and the lower range of the 2019 outlook would imply limited organic growth when accounting for the Solinor acquisition.

BUY (HOLD) with a target price of EUR 9.8 (9.2)

Valuation levels have seen declines following recent market uncertainty but, on our estimates, Gofore trades on a nearly 20 % discount to peer on ‘19E EV/EBIT. Having been among the strongest performers both in sales growth and profitability we do not see the discount as justifiable and upgrade to BUY (HOLD) with a target price of EUR 9.8 (9.2).

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Fellow Finance - Initiating coverage with HOLD

22.11.2018 - 08.15 | Company report

Fellow Finance is a P2P lending platform with high scalability at the core of its business model, seeking rapid organic and profitable growth domestically and internationally, with a proven track of growth and profitability. We initiate coverage with HOLD and a target price of EUR 8.0.

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Seeking rapid and profitable growth

Fellow Finance is a P2P consumer and business lending platform aiming at rapid organic and profitable growth domestically and internationally. The company has during its rather short existence been able to achieve solid growth while retaining good profitability. The financial targets by the end of 2023 are net sales of over EUR 80m, an EBIT-margin of over 25 per cent, annual loan facilitations of EUR 1.5 billion, and to facilitate loans in ten countries in Europe. The alternative financing market generally still accounts for only a small share of total lending but companies like Fellow Finance are seeking to challenge the traditional financial markets through innovation and technology.

Business model relies on highly scalable platform

Fellow Finance’s business model relies on its self-developed platform, which enables high scalability. The platform further enables expansion into new markets and launching of new products with little investment. Fellow Finance’s subsidiary Lainaamo functions as a financing company and acts as a market maker when entering new markets.

Initiate coverage with HOLD and target price of EUR 8.0

We initiate coverage of Fellow Finance with a HOLD rating and target price of EUR 8.0. Our valuation is based mainly on payment processing and financing platform peer multiples, emphasizing 2019E P/E ratios. Our target 2019E P/E of 21.9x values Fellow Finance above the lending platform peers, that on average have a lower expected growth rate and profitability. The internationalization plans offer significant upside but in our view Fellow Finance still needs to show proof of international success.

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Endomines - Ramp-up phase ahead

15.11.2018 - 09.15 | Company update

Endomines’ gold production in Q3 amounted to 81.6kg and revenue to SEK 25.9m. EBITDA remained barely positive at SEK 0.6m, aided by higher head grades and lower costs due to suspension of the mining operations. Production at the Friday mine is expected to begin in December 2018. We retain our BUY rating with a target price of SEK 7.2 (7.8).

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EBITDA positive despite mining operation suspension

Endomines gold production amounted to 81.6kg in Q3. Production figures were aided by the high head grades of 3.9g/tonne. Revenue and EBITDA in Q3 were SEK 25.9m and 0.6m respectively. Mining operations at the Pampalo mine were suspended in mid-September, which along with the higher head grades contributed to a positive EBITDA, despite lower volumes. Gold production during 1-9/2018 was 303.5kg, with another 15kg produced in October and the total 2018 output expected to exceed 320kg.

Limited new information in the earnings release

Endomines’ third quarter earnings release contained limited new information regarding the Idaho projects. The start-up timetable of the Friday mine was updated, with production anticipated to start in December. Details on the progress of the exploration activities in the vicinity of Pampalo were given, noting some samples with anomalies warranting further evaluation. Endomines had earlier specified the expected cash costs of the Friday mine, estimated to be around USD 650-900 per oz following ramp-up. We have updated our estimates for the cash costs for Friday and expect levels of around 900 USD/oz during 2019 and a decrease to 700-800 USD/Oz levels towards later production phases.

BUY with a target price of SEK 7.2 (7.8)

Following our revised estimates, we lower our target price to SEK 7.2 (7.8) but retain our BUY rating. The gold price has hovered at around 1,200 USD/oz following declines in Q3 but has seen slight upward pressure following recent stock market uncertainty.

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Endomines - EBITDA remained positive

14.11.2018 - 09.15 | Earnings Flash

Endomines’ revenue and EBITDA amounted to SEK 25.9m and SEK 0.6m respectively. Initial production at Friday is anticipated to commence in December 2018 but no substantial volumes are expected until 2019.

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  • Endomines had pre-announced Q3 production figures, with gold production of 81.6kg (94.1kg). Milled ore amounted to 26,876 tonnes (37,422), at head grades of 3.9g/t (3.0g/t). Cash cost was 768 USD/oz (1,081).
  • Revenue amounted to SEK 25.9m (26.7m in Q3/17), above our estimates of SEK 21.1m, driven by the higher head grades.
  • EBITDA in Q3 was at SEK 0.6m (Evli -11.4m) and EBIT at SEK -11.2m (Evli -21.7m), with depreciations and write-downs of assets of SEK -11.8m. The suspension of mining activities in mid-September and higher revenue contributed to the higher than anticipated EBITDA. Adjusted EBITDA, excluding costs associated with the TVL acquisition and co-operation negotiations amounted to SEK 4.3m.
  • Total cash flow was SEK -27.7m (1.6m).
  • Guidance: Gold production in January-October amounted to 318.5kg. Total output from Pampalo, including additional gold recovery in connection with maintenance of the processing facility, is expected to exceed 320kg.
  • Initial production at Friday is anticipated to commence in December 2018. No substantial production volumes are expected before the year-end.

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Next Games - Downgrade to SELL

06.11.2018 - 09.15 | Company update

Next Games Q3 results were weak and highlighted the volatility in earnings stability when developing and launching new games. The company’s cash assets have taken a big dent and with the existing games not being able to finance the development of new games Next Games is looking into other funding options. With the financing situation overshadowing the long-term potential we downgrade to SELL with a target price of EUR 1.8 (8.5).

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Our World launch burdened results

Next Games Q3 results were weak, with EBIT at EUR -10.7m. Profitability was significantly affected by user acquisition and marketing costs relating to Our World, released in mid-July, along with development costs. Revenue in Q3 was EUR 13.4m (NML 5.6m, Our World 7.8m). Our World saw a good start after release, but a growing number of active users lead to technical issues and a weaker second half of the quarter. The technical issues have decreased, and key metrics saw stabilization towards the end of the quarter. A new license agreement was signed during the quarter and Next Games now has four games in development.

Financial situation in focus

With the larger than anticipated loss in Q3, impacted by the weaker sales of Our World, Next Games is looking into options for securing its financing. The company’s cash balance at the end of the quarter was EUR 8.8m along with an unused credit limit of EUR 5m. Next Games did not comment further on the types of financing sought, but we note that the effect of dilution in the case of a share emission at current share prices could be significant.

SELL (BUY) with a target price of EUR 1.8 (8.5)

At the current development pace and with only two live games the need for financing in the near future appears evident. We now expect clearly deeper losses and we emphasize the financing risk. We downgrade to SELL (BUY) with a TP of EUR 1.8 (8.5).

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Marimekko - Maintaining “Buy”

05.11.2018 - 08.50 | Company update

Marimekko had a strong Q3 and the company is now on an improved growth trajectory, following own actions that are now bearing fruit. We consider Marimekko’s outlook as being positive and retain “Buy” rating for the shares.

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Guidance gives room for only EUR 1.4m EBIT in Q4

Marimekko had a very strong Q3. Performance remained solid in most markets. Despite strong Q3 guidance of max EUR 12m adj. EBIT in 2018E was kept intact. EUR 10.6m has been reached after Q3, implying guidance gives room for only EUR 1.4m for Q4. Earnings in Q4 are to be weakened by a revenue timing issue (part of revenue was timed from Q4 into Q3) and higher costs.

Shares could reach EUR 30 level if EBIT margin meets 15%

Marimekko revised its financial targets. Most notable change is in EBIT margin target, which is now 15% vs. 10% earlier. The 10% will be reached in 2018E. If 15% was reached, our DCF model and multiple exercises imply shares could reach EUR ~30 level, even without assuming higher growth than currently.

Extra dividend of EUR 1.25 to be distributed

Marimekko board proposes to distribute an extra dividend of EUR 1.25 per share, which is EUR ~10m. This corresponds to the divestment proceeds of the Herttoniemi real estate. Net cash was EUR 17m at the end of Q3. The remaining EUR 7m is reserved for general business development needs.

Maintaining “Buy” with an ex-div TP of EUR 22 (18)

We have raised FY19-20E estimates and expect a dividend of EUR 1.85 (0.60 ordinary + 1.25 extra) to be distributed for FY18E. We continue to see Marimekko’s outlook to be positive and valuation attractive. Our TP of EUR 22 (18) values the shares at 12.7x EV/EBIT with our 2019E estimates, or at 11% premium to the peer group, justified by a clear turn in sales and further margin upside upon continued growth.

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CapMan - On a healthy development track

02.11.2018 - 09.15 | Company update

CapMan’s Q3 results were good and the EBIT of EUR 4.8m beat our estimates (Evli EUR 4.1m). In our view the Q3 progress continued to show a move towards realizing built up long-term potential and developing into a healthier business in terms of earnings stability. We retain our BUY-rating with a target price of EUR 1.75.

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Q3 EBIT beat, first closing of Infra fund

CapMan’s Q3 earnings beat our expectations, with EBIT at EUR 4.8m (Evli EUR 4.1m). The earnings were driven by CapMan Growth Fund’s successful exit from Fluido. Revenue in Q3 was EUR 7.2m, below our estimates of EUR 8.6m, as no major carried interest was booked. CapMan further announced the first closing of CapMan Infra’s Nordic midcap infrastructure fund, with committed funds of EUR 115m.

Showing continued healthy development

CapMan in our view is nearing a point were some of the long-term potential is starting to realize and the business is becoming healthier in terms of recurring earnings, as opposed to high quarterly variability witnessed in previous years. Management comments regarding the NRE I-fund were positive, with foreign investor interest remaining good and on-going discussions regarding properties. The BVK mandate is set to reach full utilization in 2019 along with the Infra fund expected to reach the target of raising EUR 300+m, which along with growth in other on-going newer ventures will benefit fee income. The NPI-fund saw slower growth amid internal sales focus on the Infra-Fund, with investor demand still remaining good. Although predictability of materialization of carried interest is low, we continue to see good potential for 2019.

BUY with a target price of EUR 1.75

It is worth noting that the recent stock market uncertainty, were it to increase further, would undoubtedly also affect CapMan. In our view the risks due to the PE exposure are smaller and mainly long-term, as market uncertainty could affect ability to raise funds and exit timing and valuations. We retain our BUY-rating with a target price of EUR 1.75.

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Next Games - Earnings flash - EBIT deep in the red

02.11.2018 - 09.00 | Earnings Flash

Next Games’ Q3 results fell significantly off expectations, with EBITDA at EUR -10m (EUR -2.0m Evli/cons.), driven by investments into the Our World -game. Revenue beat expectations, at EUR 13.4m (EUR 11.5m Evli/cons.). Next Games is considering options to strengthen its financial status.

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  • Next Games’ revenue in the second quarter came in at EUR 13.4m (EUR 11.5m Evli&cons). Revenue growth y/y on was 110 %. Q3 was the first quarter with Our World significantly contributing to revenue.
  • EBITDA in Q3 was as expected negative, but the magnitude of the loss was significantly larger than our and consensus expectation, at EUR -10.0m and EBIT EUR –10.7m. Development costs during Q3 amounted to EUR 2.0m. The No Man’s Land -game remained profitable, with EBITDA of EUR 1.0m, while the large negative results were mainly affected by investments into promoting the Our World -game, with the game’s EBITDA at EUR -7.7m. According to management both games are currently operated at positive EBITDA but the combined revenue is not enough to cover games in development.
  • The company is considering options to strengthening its financial status as a part of its risk-management plan.
  • The number of employees grew to 143.
  • DAU during Q3 was 669k compared to Q3/17 figures of 371k. MAU was 3.2m compared to 1.14m during Q3/17. ARPDAU (EUR) was 0.26 compared to 0.21 during Q3/17. Key metrics saw significant growth due to the launch of the Our World -game.
  • Next Games announced that it has signed a new license agreement with a leading partner in the entertainment industry.

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Pihlajalinna - Upgraded to “Buy”

02.11.2018 - 08.25 | Company update

Pihlajalinna profitability turned to positive in Q3. Growth prospects now also look better, with new contracts and a more promising pipeline. We think valuation is now attractive against improving growth and profitability prospects. We upgrade to “Buy” (“Hold”) with TP of EUR 12.

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Profitability turned to the better

The main surprise in Pihlajalinna’s Q3 report was better than expected profitability. Adj. EBITDA margin was at last year’s level in Q3, after weakening clearly in H1. Organic growth also turned positive (+1%), after being negative in H1 (-2%). Profitability is still not at the targeted level, but the worst should now be behind. Management sees potential to improve profitability both in the private and public sides of the business.

Growth prospects now look brighter

Pihlajalinna started production of residential services in Laihia in Sep 2018, with an annual value of about EUR 5m. Provision of occupational healthcare services for Stora Enso will start in Jan 2019 (we estimate value at EUR ~4m). Negotiations for provision of residential services with about EUR 5m value are ongoing in Laitila. Ruovesi is considering joining Pihlajalinna’s existing Mänttä-Vilppula contract, with potential value of some EUR 15m, and a decision from the Kristiinankaupunki tendering should arrive by the end of the year.

Less risk of profitability pressure

Pihlajalinna altered its expansion plan and no longer expects to open new surgical units this or next year. Expansion will be primarily based on M&A and potential municipal projects, rather than new larger clinic openings. Additionally, OP recently announced its retreat from expansion plans. These reduce the risk of added capacity burdening profitability in the mid-term.

Upgraded to “Buy” (“Hold”), TP intact at EUR 12

On our estimates Pihlajalinna now trades 8.6x and 7.2x EV/EBITDA in FY19-20E, which translate into 12-17% discount to the peer group. We consider valuation attractive against improving growth and profitability prospects and upgrade to “Buy” (“Hold”) with an intact TP of EUR 12.

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Marimekko - Very strong Q3; distributes extra dividend; revises financial targets

01.11.2018 - 09.10 | Earnings Flash

Marimekko’s Q3 headline numbers are very strong for both revenue and profits. The company keeps 2018E guidance intact, but the max EUR 12m limit for adj. EBIT gives room for only EUR 1.4m adj. EBIT in Q4, which would be weaker than what has been reached during the last two years. Extra dividend of EUR 1.25 is proposed, and financial targets are revised.

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  • Finland: revenue was EUR 17.2m vs. EUR 16.2m our expectation. Revenue grew by +14% y/y, split to +11% own retail (own retail LFL +9%) and +24% wholesale. Strong retail sales growth was implied by the guidance upgrade in Sep 2018. Wholesale growth of 24% was primarily due to non-recurring promotional deliveries.
  • International: revenue was EUR 12.7m vs. EUR 12.3m our view. Revenue increased by +4% y/y, driven primarily by growth in EMEA (+20%). Growth in APAC excl. royalties was also strong at 14%.
  • Adj. EBITDA was EUR 6.9m (margin 23.2%) vs. EUR 4.5m our view and EUR 5.2m consensus. The beat is driven primarily by stronger than expected revenue, good trend in retail sales in Finland and growth in regular-priced sales.
  • Extra dividend: Board proposes of EUR 1.25 per share.
  • New financial targets: EBIT margin 15% (prev: 10%), net debt/EBITDA max 2.0x (new), annual sales growth over 10% (intact), dividend at least 50% of EPS (intact).
  • 2018 guidance intact: revenue and adj. EBIT will increase y/y. Adj. EBIT will be max EUR 12m. Marimekko expects revenue to grow in Finland and in APAC. License revenues are expected to remain flat in 2018E. Marketing costs will increase.

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Pihlajalinna - Profitability beats

01.11.2018 - 08.40 | Earnings Flash

Pihlajalinna’s revenue is in line, but profitability improved more than expected. Organic growth also now turned positive and was +1.1%, after being negative in H1. Guidance for 2018E is intact.

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  • Revenue was EUR 116m vs. EUR 117m/116m Evli/cons estimates. Revenue grew by 17.0% y/y, of which 15.9% was due to M&A, implying organic growth of +1.1%. Organic growth was -1.8% in H1.
  • Adj. EBITDA was EUR 10.7m (9.2% margin) vs. EUR 9.6m/9.7m (8.2%/8.4%) Evli/cons estimates. Adj. EBITDA improved by EUR 1.7m y/y, of which EUR 1.6m came from M&A. Profitability was hurt by EUR -0.8m start-up costs related to new clinics, while we had incorporated EUR -0.6m. Profitability excl. the clinics’ impact thus improved more than we expected, supported by profitability improvements in occupational healthcare and higher volumes of diagnostics.
  • Guidance for 2018E is intact: Revenue will increase clearly from 2017 level (2017A: EUR 424m) especially due to M&A transactions. Adjusted EBIT is expected to fall short of the 2017 level (2017A: EUR 20m).

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CapMan - Continued solid earnings

01.11.2018 - 00.00 | Earnings Flash

CapMan’s posted good Q3 results. EBIT was EUR 4.8m vs. Evli EUR 4.1m. The exit from Fluido significantly contributed to earnings. Net sales were EUR 7.2m (Evli 8.6m) and no larger carried interest was booked. CapMan held the first closing of its Nordic mid cap infrastructure fund, receiving commitments of EUR 115m.

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  • CapMan’s Q3 net sales amounted to EUR 7.2m, below our estimates of EUR 8.6m. No larger carried interest was booked in Q3. Management Company and Service businesses fees grew 24 % during Jan-Sep 2018.
  • EBIT in Q3 amounted to EUR 4.8m, above our estimates of EUR 4.1m. The Management Company business EBIT was EUR 0.8m, Service business EBIT EUR 0.6m, Investment business EBIT EUR 3.8m, and Other EUR -0.4m. The exit from Fluido had a significant positive impact on Q3 earnings.
  • Capital under management by the end of Q3 was EUR 2.7b. Of the capital under management EUR 1.7b was attributable to real estate funds and EUR 0.8b to portfolio companies and EUR 0.2b in Infra and Credit.
  • The first closing of CapMan Infra’s Nordic mid cap infrastructure fund was held. The fund received commitments of EUR 115m. CapMan’s commitment to the fund is EUR 30m. Target size of EUR 300m is believed to be reached next year.

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Etteplan - Continued improvement

31.10.2018 - 09.20 | Company update

Etteplan’s Q3 results on group level were quite in line with our estimates. Engineering services and Embedded Systems and IoT continued to improve, while Technical documentation saw continued problems in Germany. The market outlook remains favourable albeit with increased uncertainty. We retain our BUY-rating with a TP of EUR 9.5 (10.0).

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Continued improvements

Etteplan’s Q3 results were on group level quite in line with our expectations. Revenue amounted to EUR 52.6m (Evli EUR 54.5m) and EBIT from business operations EUR 4.8m (Evli EUR 4.7m). Engineering services continued on a very good track, with sales growth of 11.4 % and an EBIT BO margin of 10.0 %. The measures to improve profitability in Embedded Systems and IoT have shown results and the EBIT BO margin increased to 9.8 % (7.4 % in Q3/17). Technical documentation was weighed down by continued challenges in Germany, with the EBIT BO margin at 8.0 %.

Market outlook remains favourable, increased uncertainty

No major changes were noted in the market outlook, although uncertainty has increased, and Etteplan expects a favourable end of the year. We have not made any major changes to our estimates. We remain cautious to improvements in profitability in Engineering services due to already solid levels. We expect improvement in Technical documentation as the problems in Germany appear to have been alleviated. Embedded Systems and IoT has seen improvements but still lies below previously achieved levels. The availability of professionals in the area is limiting growth and we see continued M&A activity in the area as likely. Our 2018 net sales and EBIT BO estimates are EUR 239.5m and EUR 22.9m respectively.

BUY with a target price of EUR 9.5 (10.0)

Etteplan trades on a ~20 % and ~15% discount on 19E EV/EBITDA and P/E, which we do not consider as justifiable. We retain our BUY-rating with a target price of EUR 9.5 (10.0)

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Innofactor - Still a lot to prove

31.10.2018 - 00.00 | Company update

Innofactor’s Q3 results were below our estimates, mainly on profitability, with EBIT at EUR -1.2m (Evli -0.3m). Focus lies on reorganization and with the measures taken Innofactor expects a positive impact on EBITDA of 2.4m from 2019 onwards. We retain our HOLD rating with a TP of EUR 0.55 (0.70).

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Profitability affected by lower sales

Innofactor’s Q3 results fell below our estimates. Revenue amounted to EUR 13.8m (Evli 14.2m) while EBIT fell to EUR -1.2m (Evli -0.3m). The low profitability was at least partly due to the lower sales. Innofactor completed cooperation negotiations and combined with reorganizations expects a positive impact on EBITDA of EUR 2.4m from 2019 onwards. Reorganizations are expected to contribute EUR 1.0m, to be achieved through reorganizing tasks, enabling more customer work hours. The Finnish delivery organization is being scaled down from seven to four organizational levels. The Finnish organization will further be reorganized into smaller self-organized teams. To our understanding one key goal is to enhance decision making especially in sales.

Profitability upside potential, sales growth a question mark

We expect EBITDA to turn positive in Q4, which typically is a stronger quarter for Innofactor. Our 2018 sales and EBITDA estimates are at EUR 65.1m and EUR 0.3m respectively. The organizational actions being taken in our view give prerequisites for improved profitability in 2019. The scaling down of the organization alone should prove beneficial, as the organization has been growing faster than sales. We remain conservative on sales growth in 2019, as we expect the changes to have some negative short-term impact and with the sales track recently Innofactor still has a lot to prove.

HOLD with a target price of EUR 0.55 (0.70)

The reorganization measures, if successful, would provide some breathing room for Innofactor, but pick-up in sales in our view remains a key driver for normalizing profitability. We retain our HOLD-rating with a target price of EUR 0.55 (0.70).

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Etteplan - In line with expectations

30.10.2018 - 13.20 | Earnings Flash

Etteplan posted solid Q3 results, largely in line with our estimates. Net sales amounted to EUR 52.6m (Evli 54.5m) and EBIT from business operations was EUR 4.8m (Evli 4.7m). Development was good in Engineering services and Embedded Systems and IoT, while Technical documentation continued to see some weakness. The demand situation is expected to remain good throughout the end of year despite some market uncertainty.

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  • Net sales in Q3 were EUR 52.6m (EUR 47.1m in Q3/17), slightly below our estimates (Evli EUR 54.5m). Sales growth in Q3 was 11.6 % y/y.
  • EBIT in Q3 was EUR 4.4m (EUR 2.9m in Q3/17), slightly above our estimates (Evli EUR 4.2m), at an EBIT-margin of 8.3 %.
  • Engineering services: Net sales in Q3 were EUR 28.8m vs. EUR 29m Evli. EBIT BO in Q3 was EUR 2.9m vs. EUR 2.5m Evli. The MSI-% in Q3 was 52 % compared to 53 % in Q3/17.
  • Embedded systems and IoT: Net sales in Q3 were EUR 13.6m vs. EUR 14.4m Evli. EBIT BO in Q3 was EUR 1.3m vs. EUR 1.2m Evli. The MSI-% in Q3 was 46 % compared to 53 % in Q3/17.
  • Technical documentation: Net sales in Q3 were EUR 10.1m vs. EUR 11.1m Evli. EBIT BO in Q3 was EUR 0.8m vs. EUR 1m Evli. The MSI-% in Q3 was 74 % compared to 78 % in Q3/17.
  • The demand situation is expected to remain good in Q4 despite some market uncertainty.

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Innofactor - EBIT misses estimates

30.10.2018 - 09.20 | Earnings Flash

Innofactor’s Q3 results were below our estimates. Net sales amounted to EUR 13.8m (Evli 14.2m) while EBIT was weak, at EUR -1.2m (Evli -0.3m), partly due to the lower net sales. Innofactor concluded co-operation negotiations and reorganizations, expecting a total positive impact on group EBITDA of EUR 2.4m beginning in 2019.

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  • Net sales in Q3 amounted to EUR 13.8m, slightly below our estimates of EUR 14.2m. Sales growth in Q3 was -2.5 % y/y.
  • EBIT in Q3 was EUR -1.2m, falling below our estimates (Evli EUR -0.3m), at an EBIT-margin of -8.6 %. The weaker profitability was partly due to lower than expected sales.
  • Guidance (updated 8.10.2018) intact: Innofactor’s net sales are expected to remain at 2017 levels (EUR 65.7m) and operating margin (EBITDA) in 2018 is estimated to be weaker than in 2017 (EUR 1.3m) but positive.
  • Operating cash flow during Jan-Sep 2018 was EUR -1.9m.
  • Active personnel at the end of the period 591 (2017: 623)
  • Innofactor concluded co-operation negotiations and reorganizations, expecting a total positive impact on group EBITDA of EUR 2.4m beginning in 2019.

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Verkkokauppa.com - Back to double-digit growth

29.10.2018 - 09.00 | Company update

Verkkokauppa.com returned to double-digit growth in Q3 as we expected. The company also delivered a surprisingly strong gross margin, considering active campaigning by competitors during the quarter. However, competition is seen tightening even further, which keeps the outlook somewhat uncertain when going into the seasonally strong Q4. We continue to see the shares quite fairly valued at present and hence retain “Hold” with TP of EUR 4.7 (4.5).

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Back to double-digit growth, as expected

Verkkokauppa.com returned to double-digit 11% revenue growth in Q3, after only 3% growth in H1. Growth was in line with expectations. Wholesale volumes were broadly flat as guided and no longer provided headwind as in H1. Revenue growth is guided to continue at a stronger level in Q4 than in H1. We expect revenue growth of 15% in Q4, supported by both Raisio and underlying growth.

Surprisingly strong GM despite tightening competition

Verkkokauppa.com’s earnings beat in Q3 was fully driven by the gross margin, which improved to 14.9% from last year’s very low level of 13.2%. We expected 14.3%. Stronger than expected margin improvement came despite competition tightened from Q2 as we expected. The company responded to increased campaigning by competitors as expected, but managed its campaigns more efficiently and had better terms with suppliers. Also, a part of the actions to boost sales was marketing, which was visible in OPEX.

“Hold” with TP of EUR 4.7 (4.5)

Our estimates are slightly up for Q4 and FY19-20E after the Q3 report. On our base case estimates Verkkokauppa.com trades 14x,11x and 10x EV/EBIT in FY18-20E. We see valuation as fairly neutral at present and hence retain “Hold” rating with TP of EUR 4.7 (4.5) for the shares.

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Consti - Profitability remains a concern

29.10.2018 - 08.45 | Company update

Consti’s third quarter results were affected by lower profitability in a limited number of projects, with group EBIT at EUR -1.4m. The weaker profitability was largely related to electrical installations and project delays leading to additional costs from catching up with timetables and in our view of more temporary nature. Sales growth continued at a slower pace, as Consti has tightened tendering criteria. We retain our HOLD-rating with a target price of EUR 7.5 (8.2).

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A fraction of projects driving weak profitability

Consti’s third quarter EBIT was EUR -1.4m, affected by lower than expected profitability in project deliveries of the technical installations business included in the Technical Building Services business area and the housing repair business included in the Building Facades business area. The problems related largely to electrical installations and projects being delayed, resulting in additional catch up costs. The issues concern a limited number of projects, of which most will be completed during 2018. The profitability issues in our view are more of a temporary nature. Of some concern is the communication between worksites and management, as the problems appear to have come as a complete surprise.

Seeking to further tighten project tendering criteria

Consti’s Q3 sales growth continued at a slower pace, at 1.4 % y/y, as Consti has been tightening project tendering criteria. Consti will also continue to tighten criteria, with building purpose modification projects being one area under scrutiny, having seen a EUR 4.0m negative impact from two such projects during 2018.

HOLD with a target price of EUR 7.5 (8.2)

Our estimates post-Q3 remain unchanged. We remain conservative on Q4 profitability due to the project issues but see potential for notable improvement. We retain our HOLD-rating with a target price of EUR 7.5 (8.2).

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Finnair - Competition and fuel concerns

29.10.2018 - 08.40 | Company update

Finnair’s Q3 earnings were somewhat better than expected, but guidance for FY18E adj. EBIT was cut to reflect increased competition and fuel. Combination of increased competition and higher fuel price keeps the outlook tough. We retain “Hold” rating with TP of EUR 6.8 intact.

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Guidance cut due to increased competition and fuel

Finnair cut its guidance for adj. EBIT. Company now expects adj. EBIT to somewhat weaken vs. be flat previously. Guidance was cut to reflect increased competition, especially in the Nordics, and the fuel price increase. Increased capacity by competitors was visible in Q3 traffic and suggests yield compression is likely to continue at least in European traffic in the short-term, despite fuel price has been increasing for almost two years now.

Fuel price looks to be moving up further in Q4

Fuel price looks to be moving up further in Q4, with USD spot prices in October averaging 8% higher compared to the average spot of Q3. Current spot price is 4% higher than the Q3 average.

Challenging outlook – “Hold” intact

On our estimates Finnair trades at an EV/EBITDA discount, but at a P/E premium to its primary peers. On P/B Finnair trades 0.8x in FY18-19E, or 1.0-0.9x when the EUR 200m hybrid removed from equity, while generating ROCE of ~7-8% in FY18-19E, slightly below our WACC. We think valuation does not look too attractive, considering increasing competition and fuel. We retain “Hold” rating with TP of EUR 6.8. Our TP values the shares at a discount to Finnair’s 3yr historical average NTM EV/EBITDA, but close to par with P/E on our FY19E estimates.

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Consti - Profitability burdened by older projects

26.10.2018 - 09.15 | Earnings Flash

Consti had pre-announced Q3 revenue and EBIT of EUR 78.9m and EUR -1.4m respectively. Profitability was weakened by a limited number of projects launched in 2016 and 2017 within the Technical Building Services and Building facades business areas. Revenue growth continued at a slow pace, but the order backlog remains strong, at EUR 270m.

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  • Consti had pre-announced Q3 revenue and EBIT on October 17th
  • Net sales in Q3 were EUR 78.9m (EUR 77.8m in Q3/17). Sales growth in Q3 was 1.4 % y/y.
  • EBIT in Q3 was EUR -1.4m (EUR -0.8m in Q3/17), at an EBIT-margin of -1.8 %. The weaker profitability concerns a limited number of projects launched in 2016 and 2017 in project deliveries within the Technical Building Services and Building Facades business areas, with the majority of projects to be completed in 2018.
  • Free cash flow was negative, at EUR -3.5m (2.9m).
  • Technical Building Services: Net sales in in Q3 were EUR 25m vs. EUR 23.9m Evli.
  • Renovation Contracting: Net sales in in Q3 were EUR 23.8m vs. EUR 22.7m Evli.
  • Building Facades: Net sales in in Q3 were EUR 34.1m vs. EUR 36.4m Evli.
  • Order backlog at EUR 270m, up 35.9 % y/y.
  • Guidance intact, Consti estimates that its operating result for 2018 will grow compared to 2017.

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Verkkokauppa.com - Profits beat

26.10.2018 - 08.30 | Earnings Flash

Verkkokauppa.com delivered a profit beat on revenues that were as expected. Compared to our estimates the beat is fully driven by better than expected gross margin. OPEX were in line. Guidance for 2018E is kept intact.

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  • Q3 revenue was EUR 117m vs. EUR 117m Evli and EUR consensus. Sales grew by 11%. Wholesale volumes were broadly flat y/y. Market growth was 2% in Jul-Sep, according to GfK.
  • Q3 gross profit was EUR 17.4m (14.9% margin) vs. EUR 16.5m (14.1%) Evli.
  • Q3 adj. EBIT was EUR 3.4m (2.9% margin) vs. EUR 2.3m/2.0m (2.0%/1.7%) Evli/cons estimates.
  • 2018 guidance intact: revenue is expected to be EUR 460-500m and adj. EBITDA between EUR 11-14m. Raisio store opening costs will mainly accrue in H1’18. Wholesale revenue in H2 is expected to be more in line with the previous year. Revenue growth and profitability will be clearly higher in H2’18 vs. H1’18.
  • CEO comments: “The company expects the market to get even tougher because of flat summer sales for the whole sector.”

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SRV - Moving towards positive profitability

26.10.2018 - 08.10 | Company update

SRV’s Q3 results were slightly better than we expected. Revenue fell slightly short of our estimates due to lower revenue in business construction. Profitability was better than expected, mainly due to a smaller impact of the REDI project than we had anticipated. Further cost exceeding in the project is still possible but unlikely and with the project having been completed the potential additional costs should be significantly smaller. We retain our HOLD rating with a target price of EUR 2.4 (2.7).

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Q3 slightly better than anticipated

SRV’s Q3 revenue came in at EUR 208.4m (Evli 216.8m), while the operative operating profit amounted to EUR -3.1m (Evli EUR -6.9m). The revenue was mainly in line with expectations but fell short of our estimates in business construction in Finland. The profitability beat was mainly due to the negative impact of the REDI project being smaller than we had anticipated. SRV’s order backlog remained solid at EUR 1,678.5m, up 9.3 % y/y. SRV made agreements for releasing capital tied on the balance sheet for approx. EUR 50m, of which around EUR 20m will materialize in Q4 along with an additional goal of EUR 20-30m.

Estimates revisions minor

We have made minor changes to our estimates, with our 2018E revenue and operative operating profit figures at EUR 959.3m (prev. 960.5m) and EUR -2.3m (prev. -5.2m). SRV expects revenue in 2018 to decline compared to 2017 (EUR 1,114.4m) and the operative operating profit to be negative. We have also checked down our 2019E sales growth estimates by approx. 2 percentage points, mainly in business construction in Finland.

HOLD with a target price of EUR 2.4 (2.7)

On our estimates SRV trades at EV/EBIT and P/E 2019E of 10.8x and 7.7x respectively. SRV trades at a discount to peer P/E 2019E multiples, which we currently consider reasonable following the profitability issues. We retain our HOLD-rating at a target price of EUR 2.4 (2.7).

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Finnair - Guidance cut

25.10.2018 - 09.40 | Earnings Flash

Finnair’ Q3 adj. EBIT came in at EUR 108m, above our estimate (EUR 102m) and consensus (EUR 105m). However, Finnair cut its FY18E guidance and now expects adj. EBIT to be somewhat below last year’s level of EUR 170m, vs. flat previously. Finnair states it is experiencing increased competition in its main markets. We have expected EUR 159m adj. EBIT in 2018E, ie below last year’s EUR 170m. Consensus has been EUR 160m. However, separately released discontinuation of incentive plan for pilots will have a positive EUR 11m adj. EBIT impact in Q4, which with new guidance seems to imply underlying estimates for Q4 adj. EBIT may be too optimistic.

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  • Q3 adj. EBITDAR was EUR 184m vs. EUR 177m our view.
  • Q3 adj. EBIT was EUR 108m vs. EUR 102m/105m Evli/cons views. Compared to our estimates the beat comes from lower fuel and staff costs in the quarter.
  • Absolute costs: actual fuel cost (incl. hedging) was EUR 163m vs. EUR 166m our view. Staff costs were EUR 109m vs. 116m our view. All other OPEX combined were EUR 363m vs. 359m our view.
  • Unit costs: CASK was 6.01 eurocents vs. 6.06 our view, while CASK ex fuel was 4.60 eurocents vs. 4.62 our view. CASK in fixed FX and excl. fuel declined by 6.4% y/y. After Q1-Q3’2018 CASK in fixed FX and excl. fuel is down by 6.9%.
  • 2018E guidance cut: Finnair expects capacity growth at least 15% (intact), passenger volume growth of 12- 13% (prev: in line with capacity growth) and revenue growth of 10-11% (prev: slightly lower than capacity growth). Adj. EBIT is expected to be somewhat below last year’s level of EUR 170m (prev: to remain broadly flat). Finnair is experience increased competition in its main markets. We have expected 11% revenue growth and adj. EBIT of EUR 159m for 2018E.

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Vaisala - Leosphere and order intake reflect on W&E estimates

25.10.2018 - 09.15 | Company update

In Q3’18, Weather and Environment (W&E) order intake was y/y lower for the second consecutive quarter, partly due to the absence of large orders. Vaisala maintained its cautious view on the Chinese demand for traditional weather observation solutions during 2018. We have updated our estimates particularly for W&E. On our estimates, the positive net sales and EBIT margin impact of the recently acquired Leosphere is partly offset by more cautious growth estimates for the rest of W&E. We maintain HOLD rating with a TP EUR 19 (21).

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Timing of W&E projects caused some surprises

After the Q2’18 result, Vaisala estimated that the high share of project revenue will negatively affect W&E’s profitability during H2’18. However, Q3’18 turned out to be an exception: the timing of W&E projects resulted in weaker net sales but supported gross margin and EBIT margin, as the share of typically low margin project deliveries fell to 25% (37% in Q3’17) in W&E. According to Vaisala, project gross margins also happened to be better y/y.

Low W&E order intake continued in Q3’18

In Q3’18, W&E order intake amounted to 48.7 MEUR (-33% y/y) which was the second consecutive weak quarter, even when we adjust for the 6.3 MEUR Vietnamese contract order in Q3’17. According to Vaisala, the demand for W&E products in China has not changed significantly from Q2’18 to Q3’18. The company repeated its view that the Chinese demand for traditional weather observation equipment is expected to decline moderately y/y in 2018. Vaisala sees that the main Chinese customer for traditional weather stations may have saturated its network, which could explain the weaker demand in 2018. Meanwhile, Vaisala sees that sales to Chinese airports are a growing business.

HOLD maintained with a TP of EUR 19 (21) per share

We have updated our estimates, which now reflect the acquired Leosphere. In addition, we lower W&E sales growth estimates for other segments due to the continued weak development in order intake and continued cautiousness regarding the Chinese market. In our estimates the weak W&E order intake partly offsets the estimated growth boost from Leosphere. Our 2019E estimates and peer EV/EBIT multiples imply a value of 18.8 EUR per share when we adjust for Vaisala’s net debt. We maintain HOLD rating with a target price of EUR 19 (21) per share.

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SRV - EBIT above expectations

25.10.2018 - 09.10 | Earnings Flash

SRV’s Q3 results were slightly better than expected. Although revenue fell slightly short of our estimates, EUR 208.4m vs. Evli EUR 216.8m, EBIT came in above our estimates, at EUR -5.7m vs. Evli EUR -8.4m. The earnings impact of REDI was slightly smaller than we had anticipated in Q3. SRV expects a positive operative operating profit and cash flow in Q4/18.

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  • SRV’s revenue in Q3 amounted to EUR 208.4m, compared to EUR 216.8m/233.7m Evli/cons. Sales declined 22 % y/y.
  • EBIT in Q3 was EUR -5.7m compared to EUR -8.4m/-7.6m Evli/cons. International Operations stood for EUR -3.7m of EBIT. The EBIT-margin in Q3 was -2.7 %. The operating operative profit amounted to EUR -3.1m vs. EUR -6.9m Evli.
  • Order backlog at EUR 1,678.5m, up 9.3 % y/y.
  • Negative impact of the REDI project on earnings during Jan-Sep 2018 was EUR 29.7m, and EUR 9.4m in Q3.
  • In its preliminary outlook SRV expects the operative operating profit and cash flow to be positive in Q4.
  • Operations Finland: Business construction revenue EUR 159.1m (Evli 167.1m), housing construction revenue EUR 47.4m (Evli 48.2m). Operative operating profit EUR -1.8m (Evli -4.7m)
  • International operations: Revenue EUR 1.8m (Evli EUR 1.5m) and operative operating profit EUR -1.1m (Evli EUR -1.2m)
  • The completion of the REDI Majakka housing project I expected to be delayed from May 2019 to June-July 2019.

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Tokmanni - Delivering LFL growth

25.10.2018 - 08.00 | Company update

Despite adj. EBITDA miss Tokmanni’s Q3 report looked quite good overall, with solid LFL growth, upgraded guidance and stable gross margin. Sourcing did not improve, but work continues. More efficient sourcing remains key to our investment case in the mid-term. We think valuation looks attractive against the margin/sourcing improvement potential, and hence retain “Buy” rating with TP of EUR 9.

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Continued LFL growth prompted a revenue guidance upgrade

Tokmanni delivered 4% LFL growth in Q3 vs. our 2% expectation, and thereby continued good performance from H1. Assortment improvements and investment in prices were mentioned as positive contributors, as earlier. Continued LFL growth improves trust on own actions yielding results and prompted a revenue guidance upgrade for 2018E.

Adj. EBITDA missed due to OPEX

Despite a sales beat adj. EBITDA missed estimates in Q3, driven by OPEX. Store refurbishments and changes to the store network burdened OPEX, which increased slightly as % of revenue in Q3 vs. decreased in H1. Management was not happy with the development and seeks to turn the trend.

More efficient sourcing remains key to our investment case

Tokmanni’s gross margin improved slightly in Q3 and was broadly as we expected. Yet the share of direct imports and PL products of sales was flat in Q3. More efficient sourcing remains key to our investment case in the mid-term, as without this Tokmanni is unlikely to meet the gradual gross margin improvement we have incorporated in our estimates for 2019-2020E.

Estimates largely unchanged – “Buy” retained, TP EUR 9

Our estimates remain largely unchanged after Q3. On our estimates Tokmanni is valued at par to its Nordic peers in FY19- 20E on EV/EBITDA, but at a discount on EV/EBIT and EV/FCF. Our DCF model yields fair value of EUR 11, but this is with a 6.5% terminal EBIT margin assumption that has not been reached historically – using 5% our DCF model would yield a fair value of EUR 9 per share (company has reached ~6% each year in 2013- 2016). We retain “buy” rating with TP of EUR 9.

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Tokmanni - Adj. EBITDA miss despite revenue beat; upgrades guidance

24.10.2018 - 09.00 | Earnings Flash

Tokmanni beat estimates on revenue, but missed them on adj. EBITDA. Stronger revenue is driven by LFL growth of 4.0% vs. our 2.0% expectation, whereas the adj. EBITDA miss is driven by higher than expected OPEX. Tokmanni upgrades its guidance after the third quarter for revenue: revenue growth will be “strong” (prev: “good”) in 2018, based on new openings and “good” (prev: “low single-digit”) LFL growth. Adj. EBITDA margin guidance is intact. The change in guidance wording improves trust for seasonally strong Q4, in our view. Despite the adj. EBITDA miss we consider the report to be fairly good, due to stronger LFL growth and stable gross margin.

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  • Q3 revenue was EUR 211m vs. EUR 207m/208m Evli/cons, 1-2% above estimates. Revenue grew by 7.8% y/y, driven by 4.0% LFL growth (Evli exp. 2.0%) and new openings. Good LFL growth is attributed to assortment improvements and investments in prices.
  • Q3 adj. gross margin was 34.2% vs. 34.4% Evli estimate. the share of direct imports and PL products of total sales remained flat y/y.
  • Q3 adj. fixed costs in total were EUR 54.9m (26.1% of revenue) vs. EUR 52.6m (25.4% of sales) Evli view.
  • Q3 adj. EBITDA was EUR 18.2m (8.6% margin) vs. EUR 19.6m (9.5%) Evli and EUR 19.2m (9.2%) consensus.
  • 2018 guidance upgraded: revenue growth will be “strong” (prev: “good”) in 2018, based on new openings and “good” (prev: “low single-digit”) LFL growth. Profitability (adj. EBITDA margin) is expected to increase in 2018E (intact). CAPEX will be at the level of depreciations in 2018.

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Cibus Nordic - Initiating coverage with BUY

23.10.2018 - 09.05 | Company report

We initiate coverage on Cibus with BUY rating and target of SEK 120. We expect the grocery retail portfolio to generate stable and predictable inflation-linked cash flows while from a valuation standpoint there is room for further yield compression.

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Solid grocery retail portfolio with anchoring tenant strategy

Cibus’ property portfolio is largely occupied by three leading Finnish daily-goods retailers. A natural outcome due to the market’s oligopolistic structure, we view the portfolio’s tenant risk as negligible. We expect the average lease duration to remain at its current level of ca. 5 years and the occupancy rate to stay at 95%. The portfolio’s rental income is fully linked to inflation while the properties’ operating costs are mostly borne by the tenants owing to the contracts being largely net lease in nature.

We like the portfolio’s large exposure to supermarkets

In our view the supermarket-size store is the most attractive and resilient type of daily-goods store, offering a good balance between logistic efficiency and daily convenience. 43% of the portfolio’s rental income is attributable supermarkets spread around Finland, while another 25% is contributed by discount stores located for the large part in Southern Finland.

Groceries to manage e-commerce in cities and rural areas

In our view e-commerce currently represents a manageable tail risk for grocery retailers. The economics of grocery e-commerce remain challenging, especially in a country as sparsely populated as Finland. We think supermarkets as particularly well-positioned to weather the e-commerce threat and even benefit owing to their status as a distribution network.

Initiating coverage with a BUY rating and TP of SEK 120

We expect Cibus’ income to grow in-line with the Finnish CPI and property expenses to stay at ca. 7%, paving the way for a highly predictable financial performance. As the shares currently trade slightly below par in terms of EV/GAV, we see potential for both price gain as well as solid income from dividends.

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Talenom - Solid quarter, investments ahead

23.10.2018 - 09.00 | Company update

Talenom’s Q3 profitability beat expectations. Based on Jan-Sep profitability development potential for guidance beat is strong but investments in Q4 are expected to affect profitability. We anticipate a further impact during early 2019 and expect slower EPS growth. Continued increases in new customers support continued robust sales growth. Our 2019E estimates do not give significant support for valuation increases and we retain our HOLD-rating with a target price of EUR 18.5 (18) per share.

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Solid earnings, investments to impact from Q4

Talenom’s Q3 results beat profitability expectations, with EBIT at EUR 1.9m vs. EUR 1.0m Evli, improving some 136 % y/y. Sales were in line with expectations, at EUR 11.1m, growing 19.8 % y/y. With Jan-Sep EBIT at EUR 7.1m, the FY 2018 guidance of EUR 7.4-8.0m appears conservative, but investments into the additional services are expected to impact in Q4. We anticipate the investments to continue to show during early 2019. We expect profitability to remain at solid levels but with slower EPS growth, with our 2018E and 2019E EPS growth estimates at 55 % and 6 % respectively.

No signs of larger sales growth slow down

We expect sales growth to remain good, supported by growth in new customers and pick-up in the sales of additional services, mainly in staff leasing. We have mainly made minor estimates adjustments post-Q3 but increase our 2019E sales growth estimates by 2 percentage points. We also raise our DPS estimates, with our FY 2018E estimate at EUR 0.45. Our 2018E sales and EBIT estimates are at EUR 49m and EUR 7.9m respectively.

HOLD with a target price of EUR 18.5 (18)

We retain our HOLD rating with a target price of EUR 18.5 (18). On our estimates and target price Talenom’s 2019E target P/E and EV/EBIT are at 20.5x and 17.3x respectively and do not give support for significant valuation increases.

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Talenom - Clear earnings beat

22.10.2018 - 13.45 | Earnings Flash

Talenom earnings were clearly better than expected. Net sales in Q3 were in line with our estimates, at EUR 11.1m (EUR 10.9m/11.0m Evli/cons.). Profitability beat both our and consensus estimates, with EBITDA at EUR 3.1m compared to EUR 2.2m/2.3m Evli/cons.

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  • Talenom’s net sales in Q3 amounted to EUR 11.1m, compared to EUR 10.9m/11.0m Evli/cons. Sales growth amounted to 19.8 % y/y.
  • The revenue from additional services during Jan-Sep 18 amounted to EUR 2.4m, with growth of 66 % to the comparison period.
  • EBITDA in Q3 was EUR 3.1m compared to EUR 2.2m/2.3m Evli/cons. EBITDA improved 59 % y/y. The EBITDA-margin in Q3 was 27 %.
  • EBIT in Q3 was EUR 1.9m compared to EUR 1.0m/1.1m Evli/cons. The EBIT-margin in Q3 was 16.6 %.
  • Net investments in Q3 were EUR 1.6m compared to EUR 1.6m in Q3/17.
  • Talenom’s guidance was kept intact, expecting sales to grow clearly faster than in 2017 (12.1 %) and the EBIT to be between EUR 7.4-8.0m.

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Raute - Initiating coverage with HOLD

22.10.2018 - 09.30 | Company report

In the last 3 years, Raute’s strong performance has been largely driven by European investment activity. We estimate that the activity normalizes in 2019, which reflects negatively on Raute’s net sales and EBIT-% in 2019-2020. Meanwhile, we estimate that the share of technology services grows and drives Raute’s long-term growth and profitability. We initiate coverage of Raute with a HOLD rating and a target price of EUR 27.0 per share. The rating and target price are based on Raute’s historical valuation and our DCF model.

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Recent growth driven by project deliveries to Europe

In 2017, 67% of Raute’s net sales was project sales which are highly cyclical and drive Raute’s EBIT-% together with fixed costs. During the last 3 years, Raute’s sales and EBIT have hit new records, largely driven by European investment activity. We estimate that order intake from Europe normalizes in 2019 since growth in the European construction output is estimated to decelerate in 2018. As a result, we estimate y/y declining net sales and EBIT-% in 2019 and 2020.

We estimate that tech services drive long-term growth

In 2021-2023, we estimate that Raute’s net sales grow at a CAGR of 3.6%, driven by growth in technology services (5.0% CAGR). Raute has not disclosed the profitability of technology services but, based on peer data, we estimate that the increasing share of services supports Raute’s long term EBIT-%. In contrast, we estimate that project sales grow at a CAGR of 2.5%, limited by slow GDP growth in developed economies and challenging competitive environment in emerging economies.

HOLD with a target price of EUR 27.0 per share

In our valuation approach, we emphasize 2020 estimates since we see that they represent Raute’s performance at a neutral stage of the investment cycle. On our estimates, Raute’s 2020E EV/EBIT amounts to 9.7x. This is clearly above the 2012-2017 median trailing 12m EV/EBIT of 7.0x and limits valuation upside, even though the growing share of technology services reduces volatility and risks. Meanwhile, our DCF model implies EUR 28.0 per share, assuming a 6.5% terminal EBIT margin.

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Etteplan - Upgrade to BUY

22.10.2018 - 00.00 | Preview

Etteplan reports Q3 earnings on October 30th. Etteplan has apart from smaller problems in the Technical documentation and Embedded Systems and IoT business areas seen steady progress and we do not expect Q3 to have changed the trend. Profitability in Engineering Services has reached solid levels and we expect to see margin development slowing down in the near future. With recent share price development valuation looks more attractive. We upgrade to BUY (HOLD) with a TP of EUR 10.

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Profitability at healthy levels, still room for improvement

Etteplan’s EBIT from business operations margin improved to 9.7 (8.6 in Q2/17) per cent in Q2/18, driven by profitability developments in Engineering Services, while margins in Technical documentation and Embedded Systems and IoT saw flattish development y-on-y. The EBIT BO margin in Engineering services reached 10.7 % and has according to management reached solid levels. We expect margin improvement in Embedded Systems and IoT due to a weaker comparison period. In Technical documentation delays in a significant project delivery has impacted on margins and we expect this to still have some effect on Q3.

Seasonally slower quarter

We have not made changes to our estimates ahead of Q3. Market conditions have remained favorable and along with the acquisition of Eatech we expect continued good growth in Q3. Our net sales and EBIT BO estimates for Q3 are EUR 54.5m and EUR 4.7m respectively.

BUY (HOLD) with a target price of EUR 10

Following recent share price development valuation again looks more favourable. We upgrade to BUY (HOLD) with a target price of EUR 10.

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Verkkokauppa.com - Estimates cut ahead of Q3

12.10.2018 - 09.00 | Preview

We cut estimates ahead of Q3 on anticipation of tighter competition. Peer multiples have also dropped notably since our latest update in mid-Aug. We conclude risk/reward is still not attractive enough, and keep “Hold” rating intact.

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Revenue growth has been guided to improve in H2

Verkkokauppa.com reached only 3% revenue growth in H1 as wholesale volumes declined significantly compared to last year. Market growth was also limited in H1 at ~2%, according to GfK. We understand market growth in Q3 has offered no better tailwind than in H1. However, in H2 wholesale volumes should no longer give headwind as they have been guided flat in H2. We expect revenue growth to improve to 11% in Q3 from the 3% in H1, driven primarily by the new store in Raisio but also by slight underlying growth. Stronger growth has been guided for H2.

Competition seems to have intensified during Q3

Based on a talk with management intensity of competition seems to have increased during Q3 with more active campaigning by competitors. Verkkokauppa.com has repeatedly reminded that it stands ready to respond should pricing tighten and to use price as tool to speed up growth. We expect a modest gross margin of 14.1% in Q3, which is better than last year’s multi-year low of 13.1%, but slightly below 14.3% of Q2.

Raisio to continue burdening margins in H2

Verkkokauppa.com’s new store in Raisio had a somewhat disappointing start with higher than expected OPEX and slower than anticipated ramp-up. The company has stated it will continue to invest in prices and OPEX to boost the store in H2.

Estimates cut ahead of Q3 – “Hold” intact, TP EUR 4.5 (5.7)

We have cut estimates and expect Q3 revenue of EUR 117m with adj. EBITDA of EUR 2.6m. Our FY18E adj. EBITDA estimate is down by 6%. Corresponding FY19-20E estimates are down by 3%. Peer multiples for FY18-20E have also dropped by ~10-15% since our latest update in mid-Aug. We reflect lower estimates and peer valuation in our scenario analysis and conclude risk/reward is still not attractive enough, considering there is little room for disappointments in H2 for guidance to hold, and as the risk of Amazon remains an overhang on the stock.

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Tokmanni - LFL growth should normalize

11.10.2018 - 09.00 | Preview

Tokmanni will report its Q3 business review on October 24th. In Q3 comparables no longer provide tailwind as in H1, which should make the quarter more normal and better representative of how assortment improvements and other development actions yield results. Our estimates, rating and TP are intact ahead of the Q3 report.

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Non-grocery market growth figures indicate softer demand

PTY statistics indicate the non-grocery market grew by -4.2% in July and by -1.4% in August. Still in H1 non-grocery market grew by +1.5%. PTY statistics thus seem to indicate somewhat softer demand in the market in Q3 vs. H1.

We expect positive LFL growth to continue from H1

Tokmanni delivered 7.0% LFL growth in H1, supported by weak comparables, better weather, assortment improvements and somewhat more active take on campaigning and their better management. In Q3 comparables no longer help and hence LFL growth should normalize. We have incorporated LFL growth of +2.0% for Q3.

Estimates, rating and TP intact ahead of Q3

We expect revenue of EUR 207m (6.1% growth y/y, of which LFL 2.0%) and adj. EBITDA of EUR 19.6m (EUR 16.1m y/y) in Q3. Our “Buy” case and TP EUR 9 remain intact ahead of the Q2 report, as valuation remains attractive against the sourcing improvement potential and related gross margin improvement potential, in our view.

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Finnair - Weaker traffic, more expensive fuel

10.10.2018 - 09.00 | Preview

Finnair’s traffic performance in July-September indicate Q3 revenue of EUR 801m. We expected EUR 814m while consensus was at EUR 816/817m. On the cost side fuel moved up further in Q3. We expect earnings to weaken in Q3 after 15 quarters of improvement and have cut FY18- 19E adj. EBIT estimates by ~10%.

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Q3 traffic: capacity growth in line, PLF below our estimates

Finnair’s capacity (ASK) continued double-digit growth in Q3 at +14% and was close to our +15% expectation. Sold capacity (RPK), however, grew somewhat less than we expected at +11% vs. +14% our expectation and hence passenger load factor (PLF) came in below our estimate at 84.5% vs. 86.5%. Unit revenue (RASK) declined by 4.6%, ie. at about the same rate as in H1 and what we expected in Q3. Overall, Jul-Sep traffic and revenue came in slightly below our expectations driven by weaker PLF.

Fuel moved up and reached multi-year high at end of Q3

Jet fuel moved up further in Q3. Average price increased by +1% in USD and by +4% in EUR compared to average price of Q2. Average price for Q3 was ~37% higher than last year in USD and ~39% higher in EUR. Fuel reached new multi-year high at the end of Q3. We foresee EUR 60m+ negative earnings impact from higher fuel price in 2018E (incl. FX and hedges but excl. impact of capacity growth), assuming price remains at the average level of Q3 for the remainder of the year.

Estimates cut

Finnair has improved its adj. EBIT for 15 straight quarters, but we expect this trend to turn in Q3, due to higher fuel costs. We foresee Q3 adj. EBIT at EUR 102m vs. EUR 119m last year. Following estimate cuts our FY18-19E adj. EBIT estimates are down by ~10%. With lower estimates and somewhat lower multiples among peers, we cut TP to EUR 6.8 (8.0) and keep “Hold” intact ahead of Q3. We think valuation still does not look too attractive considering the weakening earnings trend.

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SRV - Initiate coverage with BUY

05.09.2018 - 09.00 | Company report

We initiate coverage of SRV with a BUY rating and target price of EUR 3.2. We expect profitability to see recovery during H2/18 with the completion of the REDI project. We expect sales growth of 14.5 % in 2019E, driven by an increase in developer contracting housing unit completions, and an EBIT margin of 3.7 %, supported by improved business construction profitability and a smaller foreign exchange rate impact.

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Profitability expected to see recovery in H2/18

SRV’s sales have declined during H1/18 following fewer completed developer contracting units along with a lowered construction activity in international operations. EBIT was negative at EUR -14.3m due to a negative impact of EUR 20.3m from exceeding costs in the REDI project along with exchange rate impacts. Profitability is expected to see recovery during H2/18 with the completion of the REDI project and increased housing completions.

Sales growth and profitability improvement in 2019

We expect sales to see growth in 2019, with our sales growth estimate at 14.5 %. Growth is mainly expected from an increase in developer contracting housing unit completions, supported by a large number of start-ups in 2017. We expect the increased sales, along with the completion of the REDI project in 2018 and reduced exchange rate impact from redenomination of loans to support profitability improvements in 2019 and expect an EBIT of EUR 41.1m, at an EBIT-margin of 3.7 %.

BUY with a target price of EUR 3.2

We initiate coverage of SRV with a BUY-rating and a target price of EUR 3.2. Our sum-of-the-parts and DCF values are at EUR 3.8 per share. On peer 2019E EV/EBIT SRV trades at a slight premium but taking into consideration an estimate range for the earnings impact of a potential Pearl Plaza exit valuation looks more attractive.

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Taaleri - Good outlook for 2018

17.08.2018 - 09.15 | Company update

Taaleri’s H1 results exceeded our estimates following higher than expected investment income and performance fees in in Wealth Management, while Financing saw lower profits following weaker investment income. The outlook for 2018E looks promising following the H1 results. We retain our BUY-rating with a target price of EUR 11.4 (11.0)

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Wealth Management drives profits

Taaleri’s operating profit in H1 amounted to EUR 12.4m. Wealth Management’s operating profit was EUR 14.1m, driven by performance fees and investment income of EUR 5.6m and EUR 4.9m respectively. Performance fees were higher than anticipated, as the mutual funds continued to contribute significantly despite a weaker first half of the year in comparison to the previous year. Financing’s operating profit was below previous year levels, at EUR 2.4m compared to EUR 7.9m in H1/17. The operating profit was affected by investment income, with return on investment at fair value of -0.1%, as high-yield bonds saw a shaky first half of the year. Energy’s operating profit remained negative as expected, at EUR -0.9m, due to ramp up of the business. A new product launch remains likely in H2/18.

Good 2018E outlook following solid Q2 results

We have revised our full-year estimates upwards following the good H1 results. While our H2 estimates remain mostly without significant changes we have adjusted downward our estimates for Financing to reflect an expected lower investment income also in H2. AUM growth was stronger than expected, despite stagnating PE funds development due to slower commitment calls, and we expect to see AUM growth in PE funds during H2. Our 2018E sales and EBIT estimates are EUR 73.2m and EUR 23.1m respectively.

BUY with a target price of EUR 11.4 (11.0)

Following our revised estimates and a stronger than previously expected result in 2018E we adjust our target price to EUR 11.4 (11.0) and retain our BUY-rating.

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Suominen - Waiting for earnings to turn

17.08.2018 - 09.15 | Company report

Suominen has faced clear challenges in recent years and there is way to go to reach the historical earnings level. Own efforts and Bethune’s improving outlook support the outlook for earnings gradually turning to the better. Valuation on 2019E multiples looks moderate, but evidence of earnings turning remains to be delivered. We retain “Hold” rating for Suominen’s shares.

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Business has suffered in recent years

Capacity increases by competitors in certain product areas have had a clear negative impact on Suominen’s business in 2016, 2017 and H1’18. Particularly price/mix and profitability have been key issues. Suominen addresses these via its 3P program. Some early results were delivered in H1’18. Bethune’s increasing contribution should help in gradually turning price/mix to the better. We expect earnings in 2018E to remain modest, in line with guidance, but expect earnings to gradually improve in 2019-2020E, driven by both Bethune and Suominen ex-Bethune.

Bethune’s outlook seems to be finally improving

After a lengthy period of ramp-up troubles, Suominen’s new production line in Bethune finally reached positive gross profit towards the end of Q2’18. Management indicated production volumes in July 2018 were good, which improves outlook for a gradual turn finally taking place. We expect Bethune to have a more significant topline impact from H2’18 and its gross profit contribution to turn to positive in H2’18.

Waiting for earnings to turn - “Hold” reiterated

Suominen’s valuation looks unattractive with 2018E multiples, but on 2019E multiples valuation looks much more moderate: on our 2019E estimates Suominen trades 5.4x EV/EBITDA, 10.3x EV/EBIT and 13.1x P/E, which are close to Suominen’s historical multiples. While valuation does not look particularly challenging on 2019E estimates, evidence of earnings turning to better is needed to justify material upside. With 2019E multiples close to historical valuation we keep “Hold” rating intact with target price of EUR 3.4 (3.5). If Suominen was to move towards its financial targets, there would be clear upside to valuation.

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Taaleri - Clear earnings beat

16.08.2018 - 09.00 | Earnings Flash

Taaleri’s H1 results clearly beat our estimates, with income of EUR 35.2m vs. 31.9m Evli and EBIT of EUR 12.4m vs. 6.9m Evli. The earnings were attributable to the Wealth Management segment, mainly due to investment income.

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  • Net sales in H1 were EUR 35.2m (EUR 38.7m in H1/17), beating our estimates (Evli EUR 31.9m). The group’s continuing earnings grew seven per cent.
  • EBIT in H1 was EUR 12.4m (EUR 15.4m in H1/17), well above our estimates (Evli EUR 6.9m). The higher than expected earnings were attributable to the Wealth Management segment, where performance fees and investment income of EUR 5.6m and EUR 4.9m respectively were recorded, along with growth in fee income.
  • The Wealth Management segments net sales in H1 were EUR 28m vs. EUR 23.2m Evli and EBIT EUR 14.1m vs. EUR 6.1m Evli.
  • The Financing segments net sales in H1 were EUR 6.2m vs. EUR 9m Evli and EBIT EUR 2.4m vs. EUR 4.8m Evli.
  • The Energy segments net sales in H1 were EUR 1.1m vs. EUR 1.4m Evli and EBIT EUR -0.9m vs. EUR -0.5m Evli.
  • Net sales from other operations in H1 were EUR -1.5m vs. EUR -1.7m Evli and EBIT EUR -3.3m vs. EUR -3.5m Evli.
  • Assets under management at the end of H1/18 amounted to EUR 6.0m.

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Vaisala - Initiating coverage with HOLD

28.06.2018 - 09.45 | Company report

We estimate net sales to grow at a CAGR of 4.1% in 2018E-2020E, driven by Industrial Measurements and growth areas in Weather and Environment. Meanwhile, we estimate that improving sales mix and economies of scale raise Vaisala’s EBIT margin to 13.7% in 2020E. We initiate coverage with a HOLD rating and a target price of EUR 21 per share.

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Industrial Measurements - Strong growth and profitability

In 2010-2017, Industrial Measurements (IM, 33% of sales) net sales grew at a CAGR of 8.2%. In the past five years, IM’s operating margin has improved from 12 to 20 percent, driven by scale economies. The business area follows a product leadership strategy and the current focus is on the power transmission and life sciences markets.

Weather and Environment – Focusing on growth areas

In 2010-2017, Weather and Environment (W&E, 67% of sales) net sales grew at a CAGR of 2.3%. Operating margin was 8.2% in 2017E. W&E is currently focusing on meteorological projects in developing countries, digital solutions, and air quality related solutions. Meanwhile, growth is relatively slow for traditional meteorological equipment in the developed countries.

Estimating EUR 376m sales, 13.7% EBIT margin in 2020E

Vaisala targets 5% CAGR sales growth (4.0% CAGR in 2010-2017) and 15% EBIT margin (12.3% in 2017) in the long term. We estimate 4.1% CAGR sales growth for 18E-20E, driven by IM sales and growth areas in W&E. We estimate that Vaisala’s EBIT margin improves to 13.7% in 2020E, driven by economies of scale and the increasing share of IM sales.

Initiating coverage with a HOLD rating and TP of EUR 21

Our 2019E estimates and peer EV/EBIT multiples imply a value of 20.4 EUR per share. Meanwhile, our DCF model implies a value of EUR 21.3 per share. We see that Vaisala’s current share price already reflects our expectations of continued growth and gradual profitability improvements. We initiate coverage with a HOLD rating and a target price of EUR 21 per share.

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Taaleri - Initiate coverage with BUY

29.05.2018 - 00.00 | Company report

We initiate coverage of Taaleri with a BUY-rating and target price of EUR 11. We expect continued growth in continuing earnings while viewing stronger investment and performance based return potential in the mid- to long-term. Taaleri has seen considerable profitability improvements and we expect profitability to remain at good levels.

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Growth in continuing earnings

We expect to see growth in continuing earnings in all three segments. In Wealth Management we expect growth to be supported by increasing AUM, driven by private equity funds, and in Financing from growth in the insurance portfolio. Growth in Energy is supported by the newly completed SolarWind fund. We expect continuing earnings to grow at a CAGR of some 13 % during 2017-2020E. We expect performance and investment returns to decline in 2018 following strong returns in 2017 and expect the returns to increase in the mid- to long-term. Our revenue estimate for 2018 is EUR 72.2m.

Expect continued good profitability

Taaleri’s profitability has seen improvements in recent years, with 2017 being an exceptionally strong year in terms of both revenue and profitability. We expect profitability to remain at good levels but to decline slightly in 2018 due to lower revenue. In 2019-2020 we expect profitability to pick up following higher revenue and cost discipline. We expect to see the largest profitability increases in Wealth Management and Energy, with Energy expected to be profitable from 2019 onwards.

BUY with a target price of EUR 11

We initiate coverage of Taaleri with a BUY-rating and target price of EUR 11, based on our SOTP and DCF valuation. On our estimates Taaleri trades at P/E of 17.9x and 12.3x for 2018E and 2019E respectively. On our estimates relative valuation is somewhat elevated on 2018 multiples following expected weaker earnings. On 2019E multiples valuation is in line. We expect stronger mid and long-term potential.

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SSH - Initiate coverage with HOLD

26.03.2018 - 09.30 | Company report

We initiate coverage of SSH with a HOLD-recommendation and a target price of EUR 2.0. Our target price is based on our DCF value and 4.5x EV/Sales multiple on our 2019 revenue estimates. Current valuation is high, but we see compelling longer-term revenue and profitability potential which supports valuation.

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Transformation in process

Under the management of the new CEO Ms. Kaisa Olkkonen, the company has taken a new strategic direction to reposition SSH into a more inclusive strategic PAM vendor for companies of all sizes operating in all IT-environments. With the launch of PrivX and further developing its PAM offering, the company intends to drive its growth by increasing its focus towards the subscription model, faster deployments and expanding into new customer segments.

Building up momentum in 2018

We expect only slight revenue growth for 2018, but see growth accelerating during towards the end of ’19-’21 period as sales of PAM offering picks up speed. We expect EBIT-margin to improve, but to remain negative during 2018-2020 due to further investments in growth. We have not included potential patent income and possible firewall related revenue in our estimates. If these projects were to materialize, they represent an upside risk to our estimates.

HOLD with a target price of EUR 2.0

On our estimates 2019E-2020E, SSH is trading at EV/Sales 4.3x and 3.7x, which is in line with the average 4.5x and 3.6x EV/Sales multiples for our small sample peer group. Current valuation is high, given that that the company is in the beginning of its transformation phase and risks are elevated, but we see compelling longer-term revenue and profitability potential which supports valuation.

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Endomines - Initiate coverage with BUY

22.03.2018 - 09.00 | Company report

Through a recent transaction Endomines acquired American entity TVL Gold and the five gold assets it holds. Along the completed rights issue and financing arrangements the company is in a stronger position to continue production as resources at the Pampalo mine have neared depletion. We initiate coverage of Endomines with a BUY rating and target price of SEK 9.3

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Acquisition and strengthening of balance sheet

Endomines recently acquired TVL Gold and its five gold projects in the Orogrande mining district in Idaho, USA. In conjunction with the acquisition and completed rights issue, with net proceeds of some SEK 180m, Endomines completed a series of financial transactions after which the company has no remaining bank debt.

Production focus to shift to the acquired assets

With the current reserves Endomines targets production of 250-300kg gold at the Pampalo mine after which investments into an extension would need to be made. Production at the first of the acquired assets is expected within a year of the acquisition and within 2-5 years at the other assets.

Potential coupled with uncertainty

The acquisition and a planned expansion of the exploration program offer increased potential but we note a high uncertainty relating to the TVL Gold assets as resource estimates are limited and no production is currently on-going at the assets and resources at Pampalo are nearing depletion.

Initiate coverage with BUY and target price of SEK 9.3

We initiate coverage of Endomines with a BUY rating and a target price of SEK 9.3. Our target price is based on a 0.95x multiple to our NAVPS estimate, taking into consideration the stability of the operating jurisdictions and the early stages of the assets.

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Gofore - Initiate coverage with buy

23.01.2018 - 08.30 | Company report

We initiate coverage of Gofore with a BUY rating and target price of EUR 9.2. We expect growth to continue strong in 2018-19E and profitability to remain at good levels.

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Targeting above market growth rate in the IT-services sector

Gofore aims to grow faster than the company’s target IT-services market. Gofore’s long-term profitability target is to generate an EBITA-margin of 15%. We expect Gofore to have good possibilities to reach its profitability target during 2017E-2018E mainly supported by price increases and a good cost discipline due to a competitive personnel cost structure. Our EBITA-margin estimate for 2018E is 18.0 %. Historically, Gofore has grown faster than its main competitors and profitability has been above the competitor average in 2012-2016.

Recruitments in 2017 support good growth in 2018

Gofore’s personnel increased to 374 in 2017 from 196 in 2016. The increase came mostly from new recruitments and a smaller part from the acquisition of Leadin. The recruitments will support the continued growth in 2018E, with our sales growth estimates at 46.2 %. We also expect Gofore to continue expansion internationally, giving further support for continued good near-term growth. We expect sales growth to slow down going forward from 2018. The certain sector-wide difficulties in recruitments could put pressure on further slow-down of growth.

BUY with a target price of EUR 9.2

We initiate coverage of Gofore with a BUY-rating and target price of EUR 9.2. Our target price is based on our DCF-value and the peer multiples for 2018E. Gofore trades at a discount on earnings-based multiples for 2018E. Our target price values Gofore at 12.2x EV/EBIT 2018E.

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