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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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).
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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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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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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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.
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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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).
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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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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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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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.
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.
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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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.
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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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).
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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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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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).
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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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.
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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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).
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.
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.
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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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.
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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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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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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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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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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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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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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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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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).
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.
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.
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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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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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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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).
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.
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.
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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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.
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.
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.
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.
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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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.
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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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.
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.
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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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.
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.
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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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.
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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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.
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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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.
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.
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).
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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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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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.
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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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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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.
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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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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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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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.
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.
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.
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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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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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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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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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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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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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.
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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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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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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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.
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.
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).
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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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.
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.
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.
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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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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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).
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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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.
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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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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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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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.
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.
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).
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.
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.
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.
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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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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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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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.
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.
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.
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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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.
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.
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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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.
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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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.
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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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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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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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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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.
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.
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.
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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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.
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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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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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.
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.
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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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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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).
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).
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.
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.
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.
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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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.
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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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.
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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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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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).
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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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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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.
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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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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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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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).
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).
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).
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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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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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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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.
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.
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.
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.
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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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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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.
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).
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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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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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.
Marimekko raises its long-term financial targets and reveals its focus areas for the new strategy period of 2023-27.
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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.
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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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.
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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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.
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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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.
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.
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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Dovre’s Q2 profitability topped our estimates mostly thanks to Project Personnel, where demand remained high particularly in Norway.
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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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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%.
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).
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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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.
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.
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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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.
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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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.
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.
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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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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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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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.
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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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.
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.
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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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.
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.
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.
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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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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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.
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.
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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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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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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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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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.
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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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.
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.
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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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.
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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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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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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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.
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.
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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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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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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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).
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.
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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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.
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.
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).
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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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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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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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.
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.
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.
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.
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.
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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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.
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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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.
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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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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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).
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.
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.
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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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.
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).
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.
Pihlajalinna’s Q1 revenue came in 4% above estimates and helped profitability land some EUR 3m higher than was expected.
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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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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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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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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.
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.
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.
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.
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).
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.
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.
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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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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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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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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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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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.
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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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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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.
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.
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).
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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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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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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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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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.
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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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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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.
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.
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.
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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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.
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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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.
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.
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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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).
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.
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).
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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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).
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.
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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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).
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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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.
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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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.
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.
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).
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.
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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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.
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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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.
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
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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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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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.
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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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 w
