Aspo’s guidance upgrade arrived sooner than we expected.
Aspo’s guidance upgrade arrived sooner than we expected.
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.
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.
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.
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.
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).
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.
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).
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.
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).
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.
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).
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.
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.
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.).
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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).
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.
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.
Vaisala’s Q1 result topped our expectations clearly. Both BUs saw double-digit growth and solid order intake indicates the growth to continue.
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.
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).
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.
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).
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.
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.
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.
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.
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.
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
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.
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.
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.
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.
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).
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.
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.
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.
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.
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).
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)
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.
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.
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.
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.
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).
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.
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.
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.
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).
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).
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.
Netum’s H2 results were well in line with expectations. Continued rapid and profitable growth is seen in 2022 despite some potential demand uncertainty.
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).
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.
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.
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.
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.
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.
Endomines met new challenges at Friday, with ore body irregularities mandating further underground drilling. We see renewed ramp-up efforts in mid-2022.
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.
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.
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.
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.
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.
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.
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.
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.
We view the Q4 cost challenge as a temporary issue
Pihlajalinna’s top line grew at a 13% y/y rate. The EUR 155m figure was well in line with the EUR 156m/152m Evli/cons. estimates. Covid-19 services still amounted to a high EUR 10.1m, only a small q/q decline, but the level is set to fade this year. Q4 EBIT was hit by a spike in specialized care costs within complete outsourcing contracts, induced by Covid-19, and the effect amounted to some EUR 2m. The EUR 6.0m adj. EBIT therefore didn’t meet the EUR 9.2m/8.8m Evli/cons. estimates. Pihlajalinna has been negotiating for compensation for increased production costs before and expects to get favorable outcomes this year.
Growth and profitability targets set the bar high
Pohjola Hospital’s FY ’21 figures improved a bit, but EBIT was still EUR 7m red. Pihlajalinna sees EUR 5m in cost synergies and expects break-even during the year; H1 is still soft but H2 could already show results. The acquisition drives growth within private and insurance customers and thus helps margins as these areas are more profitable than public ones. Pihlajalinna revised its long-term financial targets accordingly: the new aim is above 9% EBITA margin and EUR 250m more revenue by the end of 2025 (compared to 2021), which in our view implies ca. 7.5% CAGR for the three years following the closing of the acquisition. Two thirds of the growth is to stem from corporate and private customers, segments where the acquisition is to prove useful. The profitability target can be seen as a small positive revision on the previous one; it will take some time for Pihlajalinna to reach that level, but we estimate by inferring from the guidance that Pihlajalinna could reach 7.5% EBITA margin already in H2’22. The company targets 4-6% margins within outsourcing, while other areas aim for levels comparable with those of Terveystalo.
Overall valuation picture hasn’t been altered
The acquisition limits profitability in H1’22, but Pihlajalinna is valued only around 6-8x EV/EBITDA and 12-18x EV/EBIT on our FY ’22-23 estimates. The multiples represent discounts to peers while our estimates remain moderate relative to long-term potential. We retain our EUR 14 TP and BUY rating.
Vaisala’s Q4 revenue grew strongly, but increased costs drove EBIT below the comparison period. Underlying demand was strong and Vaisala managed to deliver all its orders. We retain our HOLD rating and adjust TP to EUR 41 (43).
Growth was strong, but increased costs tightened margins
Vaisala delivered strong Q4 figures with orders received totaling EUR 119m and order book at a record level of EUR 160m. Strong order intake was driven by IM, while W&E experience a 14% decline partly due to strong comparison figures. Group net sales grew by 17% y/y to EUR 125 driven by both BUs. IM grew by 26% y/y, driven by all its market segments. W&E experienced a 12% increase in net sales, driven by renewable energy and meteorology. Increased usage of spot-priced components decreased the gross margin to 53%. EBIT decreased by 3% y/y to EUR 11.9m, driven by lower gross margin and increased fixed costs. Q4 EBIT included one-time costs worth EUR 1.1m. EPS declined by 11% y/y to EUR 0.21. Board proposed a dividend of EUR 0.68. Despite losing some margins, Vaisala gained market share and “long-wanted” customers from its competitors with its ability to respond to the demand in a difficult environment.
We made some adjustments to our estimates
Despite the problems on the supply side, the underlying demand remains strong. We made minor adjustments to our estimates, reflecting a solid outlook, but also risks stemming from the component shortage. The order book is strong and thus we expect both BUs to grow also during 2022. We expect IM to grow by 16% y/y to EUR 209.8m in 2022, driven by all its market segments. In 2022, we estimate W&E to increase by 6.3% y/y to EUR 273.1m, mostly driven by renewable energy. 2022 group revenue amounts to EUR 482.9m, near the mid-point of the guidance. Vaisala’s management noted that some price increases have been made in Q1’22, but the visibility to component availability remains weak and we expect material costs to increase and gross margin to be a bit lower than in 2021. In our view, IM suffers less from the component shortage with its pricing power, while W&E’s gross margin falls more aggressively. Although the gross margin is a bit softer, we expect EBIT to rise to EUR 59.9m (12.4% margin), driven by scalability. IM contributes the EBIT with EUR 52.4m and W&E with EUR 9m.
HOLD with a TP of EUR 41 (43)
Vaisala’s valuation is quite stretched compared to its peers. With 22E EV/EBITDA of 19x, Vaisala trades with a ~20% premium. We, however, find a premium justified, given Vaisala’s technology leadership, increased market share, and growth outlook. Our new TP values Vaisala at 22-23E EV/EBITDA of 17.6-16.4x. With the acceptable valuation level decreased and uncertainties in component availability, we retain our HOLD rating and adjust our target price to EUR 41 (43).
Solteq's growth remained good in Q4, but investments impacted on profitability. With growth investments on the rise, we lower our profitability estimates for 2022 and our TP to EUR 5.0 (6.2), with our BUY-rating intact.
Growth on track but investments burdened profitability
Solteq reported weaker Q4 results on the profitability side while growth still remained at a good pace. Revenue grew 11.4% to EUR 18.3m (EUR 18.0m Evli) and the operating profit amounted to EUR 1.3m (EUR 2.0m Evli). Compared with our estimates, profitability was weaker in Solteq Software, where adj. EBIT fell to EUR 0.0m (EUR 0.8m Evli). Profitability was impacted by growth investments as well as increases in subcontracting and general costs. Investments were made into software development and into international growth. Solteq’s BoD proposes a dividend of EUR 0.10 per share (EUR 0.11 Evli).
Estimates lowered as investments pick up
Solteq expects its revenue in 2022 to grow clearly and operating profit to improve compared with 2021. We have not made any significant changes to our revenue estimates but have lowered our profitability estimates by quite a bit, now expecting 2022 operating profit of EUR 7.8m (prev. 10.5m). Although it is unfortunate that profitability scaling in Solteq Software is not going as fast as we (in retrospect probably overoptimistically) had expected, prioritizing growth is still more beneficial with demand drivers in place and apart from cost growth from subcontracting the operational profitability still appears to be on track. We expect to see the growth investments weighing more heavily on H1 and with pick-up in growth and recurring revenue we expect to see figures improve towards the end of the year, creating good potential for the following years.
BUY-rating with a target price of EUR 5.0 (6.2)
With our estimates revisions we adjust our target price to EUR 5.0 (6.2), valuing Solteq at approx. 21x 2022e P/E. Solteq has likely been somewhat cautious in its profitability guidance, and we still see potential for some improvement during the year as visibility improves. We retain our BUY-rating.
Vaisala’s Q4 topline was in line with our expectations, but earnings fell short due to declined margins.
Eltel’s profitability continues to improve, but we find valuation still doesn’t leave that much upside.
Positives, negatives, and one-off gains
Eltel’s Q4 revenue, at EUR 226m, topped the EUR 206m/207m Evli/cons. estimates while EBITA came in ca. EUR 2m above estimates. Finland performed much according to our expectations while Sweden topped our estimates; Norway and Denmark were a bit soft. The EUR 2.5m positive one-off in Poland, due to a real estate sale, drove the Other business segment to an EBITA of EUR 1.7m, clearly above our estimates even when excluding the one-off. Eltel’s earnings were, however, much in line with our estimates when adjusted for the one-off. Eltel’s turnaround continues and the company guides increasing operative EBITA margin for FY ’22. Q1, as happens to be the nature of the business, will represent a slow start for the year.
We now estimate a positive rate of growth for the year
Eltel continues to make progress, but there remains much uncertainty with respect to the gradient. Diesel prices, salaries, materials as well as logistics costs are headwinds. Inflation isn’t a problem for the Communication business (more than 60% of revenue), yet it affects Power. We make relatively small estimate revisions, but we now expect Eltel to reach a positive 2% growth this year, whereas we previously expected a 2% decline. Our new FY ‘22 revenue estimate is EUR 829.6m (prev. EUR 774.0m). Our margin estimates are up by only 10bps for the year, but they rise by some EUR 2m in absolute terms due to the growth revision. We however expect Q1 EBITA to remain slightly in the red and see most of the profitability gains accruing over the summer. We believe Eltel is still going to focus on turnaround for a while and thus e.g. M&A may have to wait for a while, but should it occur Denmark and Sweden are perhaps the most potential countries.
Valuation continues to stand neutral
Valuation still doesn’t seem to offer clear upside considering the uncertainty around the improvement pace. We find the 6x EV/EBITDA and 15x EV/EBIT multiples, on our FY ’22 estimates, to be neutral relative to peers. Eltel’s margins remain modest compared to peers; quicker than expected improvement can drive upside, but we wouldn’t expect much more than EUR 22m EBITA at this point. Our TP is now SEK 15 (17); retain HOLD.
Finnair’s Q4 report didn’t include that significant news. Finnair’s profitability is poised to rebound, yet valuation doesn’t seem to leave much upside given the uncertainties.
The Q4 report didn’t deliver any major surprises
Finnair’s Q4 revenue grew to EUR 414m, compared to the EUR 452m/387m Evli/cons. estimates. Adj. EBIT landed at EUR -65m vs the EUR -95m/-90m Evli/cons. estimates. Q4 cargo revenue was very high, but Q1 losses are likely to be well above EUR 100m due to Omicron and ramp-up costs. Finnair sees some delay to the opening of most of Asia, which was to be expected.
The whole airline industry is staging rebound this year
Omicron doesn’t seem to be a major negative, only a short-term issue, but losses still loom in Q2. Meanwhile Finnair implements a EUR 200m investment in improved long-haul experience with refitted seats, and we also expect Finnair’s fixed costs savings will continue to come through; inflation relating to e.g. Helsinki airport charges is modest compared to those of larger hubs. Finnair’s long-term profitability potential is no worse considering the fleet renewal and cost positioning, but high jet fuel prices continue to limit the whole industry’s profitability potential.
Valuations continue to reflect surging earnings levels
We believe other airlines’ valuations will continue to drive Finnair’s multiples: Finnair’s profitability will materialize later due to the Asian reliance, but it will nevertheless come through at a certain level. In our view the most essential uncertainty, for Finnair as well as other airlines, now lingers around overall operating cost levels, particularly with respect to jet fuel prices. Higher ticket prices could compensate, but we view such increases still to be uncertain. Air traffic will continue to rebound across the globe, including Asia as well, and is set to reach the pre-pandemic levels sooner or later. We estimate Finnair’s FY ’22 EBIT is most likely to remain in the red, while some other airlines should be able to reach high profitability this year. We believe the anticipation and materialization of these profits will determine Finnair’s valuation over the course of this year. In our view Finnair’s current valuation, ca. 12x EV/EBIT on our FY ’23 estimates, is somewhat neutral relative to other airlines, however overall sector valuations may still stand on the optimistic side. We retain our EUR 0.60 TP; our rating is now HOLD (SELL).
Innofactor’s Q4 fell well short of our expectations as the company saw challenges relating to organizational changes and employee turnover. We have lowered our 2022 estimates and our TP to EUR 1.6 (2.1), BUY-rating intact.
Challenging last quarter of 2021
Innofactor’s Q4 results fell well short of our estimates, as the company faced challenges with the organizational changes in Finland and employee turnover. Net sales amounted to EUR 17.5m (Evli EUR 18.6m), declining 4% y/y but in comparable terms on par with Q4/20. EBITDA was EUR 1.7m (EUR 2.6m Evli), falling from the Q4/20 adj. EBITDA level of EUR 2.6m. Profitability was effectively down solely due to the challenges noted, although EBIT included larger one-off amortizations. The order backlog was at EUR 72.8m, up 20.6% y/y.
Poised to improve but some concerns remain
Innofactor expects its revenue in 2022 to increase from 2021 while EBITDA is expected to increase from EUR 7.5m, which would have been 2021 EBITDA without proceeds from the Prime business divestment. We have lowered our estimates for 2022, now expecting net sales of EUR 69.0m (prev. EUR 70.1m) and EBITDA of EUR 8.1m (prev. 9.5m). The organizational changes were started during Q3 and should impact to a clearly lesser extent going forward and the employee turnover appears to have peaked in Q3, which led to a spillover in Q4. The situation was more towards the normal in Q4 and the headcount began to grow, but the recruitment market has however been challenging for a while and we see this as a continued concern. Fundamentally Innofactor is in our view in a good position to post improved profitability figures in 2022, with all countries also having posted clearly positive EBITDA figures in Q4.
BUY-rating with a target price of EUR 1.6 (2.1)
On our revised estimates and some uncertainty going into 2022 we cut our TP to EUR 1.6 (2.1), valuing Innofactor at approx. 17x 2022 P/E. We see reasonable potential for higher than estimated profitability with the good order backlog levels should challenges not persist. We retain our BUY-rating.
Pihlajalinna’s Q4 revenue grew as expected but profitability fell short of estimates due to the increased costs within total outsourcing arrangements.
Finnair’s Q4’21 losses were a bit lower than estimated, however the company expects the combination of Omicron and certain other operational expenses to lead to somewhat higher losses again in Q1’22. Finnair expects Omicron to postpone the opening of Asia to some extent.
Eltel’s Q4 report delivered a clear positive surprise after a disappointing Q3 report. Sweden was able to break even, and positive development continues this year as Eltel guides increasing operative EBITA margin.
Innofactor’s Q4 results were below our expectations. Net sales amounted to EUR 17.5m (Evli EUR 18.6m), while EBITDA amounted to EUR 1.7m (Evli EUR 2.6m). Net sales in 2022 are expected to increase from 2021 and EBITDA from comparable 2021 EBITDA of EUR 7.5m. Dividend proposal EUR 0.08 per share (Evli EUR 0.06).
Solteq’s Q4 was below our lowered pre-Q4 expectations, with revenue at EUR 18.3m (Evli EUR 18.0m) and adj. EBIT at EUR 1.4m (Evli EUR 2.0m). Guidance for 2022: group revenue is expected to grow clearly and the operating profit to improve. Dividend proposal EUR 0.10 per share (Evli EUR 0.11).
Aspo’s Q4 adj. EBIT reached EUR 13.9m; we believe ESL’s and Telko’s results are resilient while the guidance doesn’t appear to set the bar very high either for H1 or H2.
Q4 adj. EBIT was very high, outlook still favorable for H1’22
Aspo Q4 revenue grew by 27% y/y to EUR 160m, somewhat above the EUR 153m/148m Evli/cons. estimates. The EUR 13.9m adj. EBIT was clearly above the EUR 10.8m estimates. Aspo’s H2’21 involved, in essence, a couple of positive profit warnings as there were a few impairment losses which burdened the headline EBIT. The cargo market situation was well-known and hence another record ESL EBIT was in the cards; we expect some long-term pressure on the 16.5% ESL H2 EBIT margin, although based on Aspo’s comments there shouldn’t be any imminent negative factors. Forest, steel, and energy industries continue to drive robust cargo volumes also in H1’22. Telko’s EBIT was a bit soft relative to our estimate but still amounted to a very decent 6% margin. Leipurin recorded an impairment loss of EUR 4.3m, but other than that the results were much as we expected.
We estimate EBIT well above EUR 40m in the coming years
The spot market for large vessels has slipped a bit from the recent tops, yet ESL’s focus means results should be resilient even in the face of a marked drop. The geopolitical tensions, should they happen to escalate, would cast some uncertainty around the short-term performance of Telko and Leipurin, but in our view any major long-term adverse effects would be unlikely given the fact that both have a history of operating in challenging Eastern European countries. In our opinion the flat EBIT guidance appears conservative, especially considering the relatively undemanding H1’21 comparison figures and the fact that ESL’s strong H2’21 performance should extend itself well this year. We make only minor estimate revisions; our new FY ’22 EBIT estimate is EUR 43.4m (prev. EUR 42.4m).
Modest multiples given the guidance and LT positioning
We find Aspo’s current valuation level undemanding, not much more than 6x EV/EBITDA and 10x EV/EBIT on our FY ’22 estimates, especially when we view a positive profit warning much more likely than a negative one. We believe ESL can well beat our estimates and our 5.8% EBIT estimate for Telko isn’t that high either. We retain our EUR 14 TP and BUY rating.
Aspo’s headline EUR 8.8m Q4 EBIT missed estimates, however the shortfall stemmed from Leipurin’s EUR 4.3m impairment loss. Telko’s EBIT was a bit soft relative to what we expected, but ESL topped our estimate by a considerable margin.
Exel’s Q4 EBIT was soft relative to estimates, yet demand doesn’t seem to abate and in our view the US unit should, sooner or later, again reach the required performance level. Long-term earnings potential therefore remains significant.
The EUR 1.0m Q4 adj. EBIT was soft relative to estimates
Q4 revenue grew 33% y/y to EUR 36.5m vs the EUR 32.0m/31.8m Evli/cons. estimates. Buildings and infrastructure grew to be the largest industry and the fact highlights how there are many industries besides Wind power driving growth. Order intake was moderated due to the difficulties in the US and inflation had some negative impact on Q4 EBIT, but Exel continues to lift its own pricing and hence raw material price increases are not a major issue, at least not in the long-term perspective. We gather Exel’s raw material inflation pace slowed down somewhat late last year, which is not surprising considering the rate seen earlier during the year. That said, raw material prices don’t seem to be declining either and so the environment can still cause some short-term drag on EBIT. We estimate most of the EUR 0.9m q/q profitability improvement was attributable to the US unit.
We still estimate meaningful growth for this year
The US labor situation remains extraordinarily challenging and thus it will take at least some additional quarters before Exel again reaches the high single-digit EBIT margins it used to enjoy before the problems in the US materialized. Exel is doing the best they can to hire and retain local employees. Meanwhile demand appears to remain very strong across basically all geographies and customer industries. We revise our FY ’22 revenue estimate to EUR 150.7m (prev. EUR 146.8m), while our new EBIT estimate for this year is EUR 10.6m (prev. EUR 12.0m).
Long-term earnings potential continues to stand out
We believe Exel should have no trouble hitting EUR 150m top line especially when the US unit continues to progress. Exel has previously been able to reach 10% EBIT on a quarterly level (long-term target is above 10%). We expect FY ’22 results to still fall a lot short of the implied EUR 15m mark, and hence long-term upside remains significant. Exel is valued around 5.5-7.0x EV/EBITDA and 8.0-11.0x EV/EBIT on our FY ’22-23 estimates. Uncertainty around the US limits upside in the short-term and we thus revise our TP to EUR 9 (10). We retain our BUY rating.
Marimekko delivered strong Q4 figures, outpacing our and consensus estimates. Net sales development was very good in both domestic and international markets. We downgrade our rating to HOLD (BUY) and adjust TP to EUR 79 (84).
Marimekko came in strong with Q4 net sales of EUR 48.1m (+29% y/y). The growth was driven by wholesale and retail sales in Finland as well as wholesale sales in the APAC region and Scandinavia, while the EMEA region declined due to the actions to control grey exports. Retail sales in North America developed very strongly. Higher logistical costs reduced the gross margin to 57.9% (prev. 58.9%). Driven by increased net sales, the adj. EBIT improved by 17% y/y to EUR 7.6m (15.9% margin). Increased personnel (one-time bonus) and other costs weakened the adj. EBIT margin from 17.4% to 15.9%. EPS amounted to EUR 0.72 and the BoD proposed a dividend of EUR 3.60 (including an additional EUR 2 dividend).
Confirmation for international growth
International sales got back on a growth path in Q4’21 and the company guided the segment’s largest market, the APAC region, to grow clearly in FY’22. Segment’s strong development speaks about the increased brand awareness, particularly seen in Asia. In FY’22, we expect int’l net sales to grow by 14% y/y, while expecting domestic growth to slow down to 8% y/y due to the lack of large one-time wholesale deliveries. In our estimates, group revenue amounts to EUR 167.9m, and driven by increased logistical costs the gross margin falls below the comparison period to 60%. Driven by reduced gross margin and increased fixed costs, the adj. EBIT margin of 19.3% (adj. EBIT EUR 32.4m) falls also short of the record high comparison period.
HOLD with a TP of EUR 79 (84)
With our revised estimates, Marimekko trades with a 22-23E EV/EBIT multiple of 19-18x. The company’s valuation has historically varied between EV/EBIT multiple of 17-21x. With the slowdown in the earnings growth within the next few years and the decline in the acceptable valuation level, we downgrade our rating to HOLD (BUY) and adjust TP to EUR 79 (84).
Solteq reports Q4 results on February 17th. We foresee some continued softness due to the current environment but continue to expect earnings improvement in 2022. We retain our BUY-rating with a TP of EUR 6.2 (6.8).
Some softness expected in Q4
Solteq reports Q4 results on February 17th. Solteq’s Q3 results were softer than anticipated, as deliveries for two large-scale retail customers were postponed as a result of the impact of the global component shortage. Revenue still grew by over 10%, mainly organically, and the adj. operating profit margin was at a fairly decent 8.1%. We had previously expected fourth quarter figures to turn back on track with the start-up of the postponed projects. With the macroeconomic uncertainties still present we anticipate some softness to still be seen in the fourth quarter and have slightly lowered our estimates, still expecting fairly good growth but slightly lower margins y/y.
Potential remains but market uncertainties a disturbance
Solteq in our view remains in a good position to continue revenue and earnings growth in 2022. We anticipate the recurring revenue from the implemented Utilities business projects to start to show. We see that the demand for Solteq’s solutions, in particular within utilities and ecommerce, should under normalized circumstances remain at a healthy level. The market environment has however been somewhat challenging and has not appeared to improve significantly going into 2022. With the current uncertainties we have lowered our 2022e EBIT estimates by some 9% but still see room for double-digit y/y growth in operating profit. We expect revenue of EUR 76.3m and an adj. operating profit margin of 13.8%.
BUY with a target price of EUR 6.2 (6.8)
With our estimates revisions and current uncertainties, we adjust our TP to EUR 6.2 (6.8) and retain our BUY-rating. Our TP values Solteq at ~17x 2022 P/E, which is still fairly low, and upside potential remains solid should the market environment not threaten the earnings growth track.
Exel’s Q4 results extended recent earnings reports trends to a certain degree. Top line continued to grow a lot faster than was expected, but profitability was still a bit soft relative to estimates. Exel made some progress with the challenges in the US, but it remains unclear just how quick earnings will improve this year.
Marimekko’s Q4 result outpaced our estimates and the company grew very strongly. The guidance implies the trend to continue in 2022.
• Group net sales increased by 29% y/y to EUR 48.1m (41.6m/42.3m Evli/cons.). The growth was driven by wholesale and retail sales in Finland as well as wholesale sales in the APAC region and Scandinavia. Retail sales in North America developed very strongly.
• Finland: Net sales grew by 32% and amounted to EUR 30.6m (26.8m/26.8m Evli/cons.). Non-recurring promotional deliveries supported the good development of wholesale sales.
• International: Revenue increased by 23% y/y to EUR 17.4m (14.7m/15.5m Evli/cons.), representing 36% of total net sales. Sales development was strong in North America (+57%), Scandinavia (+40%), and the APAC region (+36%). The EMEA region (-21%) declined due to actions to control gray exports.
• Gross profit totaled EUR 27.8m (25.1m Evli). The company reported a gross margin of 57.9% (60.3% Evli). The margin was affected by increased logistical costs.
• Adj. EBIT improved by 35% y/y to EUR 7.6m (5.8m/6.0m Evli/cons.), meaning a 15.8% margin. The improvement in profitability was mainly driven by increased net sales.
• EPS grew by 35.6% y/y to EUR 0.72 (0.54/0.55 Evl/cons.).
• Dividend proposal: The BoD proposes FY’21 DPS of EUR 1.60 and extraordinary DPS of EUR 2.00 (1.60/1.60 Evli/cons.). In addition, the board has decided to pay FY’20 DPS of EUR 1.00.
• Guidance 2022: Revenue is expected to be above that of the comparison period (2021: EUR 152.2m). Adj. EBIT margin is expected to be between 17-20% (2021: 20.5%).
Vaisala reports its Q4 result on Friday. In Q4, we expect revenue growth to scale till bottom rows and earnings improvement of 60% y/y. We retain our HOLD-rating and TP EUR of 43.
Expecting a clear earnings improvement in Q4’21
We expect solid net sales growth of 17.4% from a weak comparison period, topline totaling EUR 125.5m vs. 123.4m cons. The growth is driven by both BUs (W&E +13.4% & IM +24.1%). We expect group adj. EBIT to improve by 29.6% y/y to EUR 18.3m (14.6% margin) vs. 16.8m cons. In our estimates, W&E contributes the EBIT with EUR 7.8m (10.3% margin) and IM with EUR 10.9m (22% margin) respectively. With the profitability improvement, we expect clear 60% EPS growth. We estimate the BoD to propose a dividend of EUR 0.63 vs. 0.64 cons.
Strategy execution continued, but component shortage disturbs topline growth in 2022
The company has successfully continued its strategy execution by its solid revenue growth in both BUs. The company also acquired software company AerisWeather to strengthen its growth in DaaS and SaaS recurring revenue businesses during Q1’22. Vaisala obtains valuable data-service and software development capabilities through the acquisition in addition to a few million recurring revenue impact. In 2022, we expect the growth pace to slow a bit down to 8.3% mainly due to uncertainties regarding component availability. Despite the supply chain issues, we expect solid 16% earnings growth in 2022.
HOLD with a target price of EUR 43
Vaisala has historically been trading with EV/EBITDA multiple around 20x. Currently, with a 21-22E EV/EBITDA of 22-19x, the company trades with a slight premium compared to its peers, but given Vaisala’s quality and lower risk profile, we find the premium justified. With our estimates intact, we retain our HOLD-rating and TP of EUR 43.
Raute’s Q4 report didn’t provide that many news as recent profitability challenges are familiar. Demand stays high, but inflation means H1’22 EBIT is to remain well below potential. We continue to expect gradual improvement.
Results will improve this year (and next)
Raute’s Q4 revenue grew 13% y/y to EUR 44m, while EBIT was EUR 0.5m vs our EUR -0.6m estimate; the gap was due to the allocation of cloud-based IT project costs, which were spread retroactively over many quarters. Raute’s Q4 EBIT was still a far cry from potential, but order momentum continued stronger than we expected and even Raute was surprised by the EUR 50m in Q4 orders. Q1 orders have remained robust, however not quite as high as in Q4, and we expect the figure to top EUR 30m. Raute can meet the current level of demand, but delivery times have naturally been prolonged. Raute guides improving EBIT, but various factors, including inflation, will make the precise gradient hard to gauge. The IT project also continues to burden short-term results yet will contribute to EBIT going forward.
Inflation will still burden near-term results
We make no significant changes to our estimates; we expect Raute to reach around 5% EBIT margin this year. H1’22 EBIT will still suffer from inflation as the orders signed earlier materialize, but the situation should improve somewhat throughout the year as the order book rolls forward and so catches up with higher component prices. We revise our FY ’22 EBIT estimate to EUR 8.6m (prev. EUR 9.0m), while our new FY ’23 estimate is EUR 11.3m (prev. EUR 11.0m). The inflationary environment’s precise impact on the order book’s unfolding remains to be seen, but in our view the current active order level means EBIT is set to improve for at least a few years.
We retain our EUR 22 TP and BUY rating
Raute’s valuation remains undemanding, around 5-6x EV/EBITDA and 6-8x EV/EBIT on our FY ’22-23 estimates, and in our view some caution is in order considering the uncertainty inflation imposes on near-term results. Yet we believe Raute is poised to again reach EUR 10m EBIT in the coming years. That mark would imply only around 6% EBIT margin, a level Raute has managed to top with some EUR 150m annual revenue, while current demand in our view can support a top line EUR 20-30m higher than that.
Etteplan’s Q4 figures were quite in line with expectations. The 2022 guidance implies solid growth, which we currently have some challenges in envisaging.
Q4 quite in line with expectations
Etteplan reported Q4 results quite in line with expectations. Revenue grew some 21% to EUR 85.3m (EUR 82.9m/82.9m Evli/cons.), with organic growth of some 15%. EBIT amounted to EUR 7.8m (EUR 7.9m/8.1m Evli/cons.). Growth was particularly good in Software and Embedded solutions, although profitability suffered slightly from growth investments and the increased use of subcontracting due to the challenges with availability of professionals within certain areas.
Guidance implies solid growth
Etteplan gave a rather good guidance, in particular in terms of growth, with revenue expected to amount to EUR 340-370m and EBIT to EUR 28-32m, with pre-Q4 expectations of EUR 338.3m/326.9m (Evli/cons.) and 29.6m/29.6m (Evli/cons.) respectively. Taking into account the inorganic growth from the recent acquisitions of Cognitas and Syncore Technologies along with acquisitions made during 2021 the mid-range of the guidance would imply organic growth somewhere near 10%, which although certainly not unachievable, currently seems somewhat challenging due to the pandemic and some demand uncertainties. Growth could of course still be boosted by further acquisitions in line with the company’s strategy. The good organic growth in 2021 (8.9% y/y) was also skewed by the weak comparison period. We have made only slight changes to our 2022 estimates, expecting revenue of EUR 344.5m and EBIT of EUR 29.3m. Some weakness is seen during the start of 2022 due to the pandemic but we expect relative profitability and growth to pick up going forward.
HOLD with a target price of EUR 17.5 (17.0)
With only smaller changes to our estimates, we adjust our target price to EUR 17.5 (17.0), valuing Etteplan at approx. 20x 2022e P/E. Current valuation appears quite fair looking at peers and historical multiples. We retain our HOLD-rating.
Raute’s Q4 figures didn’t include that many surprises as the company had already disclosed some preliminary info on FY ’21 results. The EUR 50m order intake was nevertheless a positive surprise considering Raute booked no big orders during the quarter.
The slowdown of consumer electronics market pushed Verkkokauppa.com’s Q4 net sales down by 4% y/y. We expect the softness in the market to continue also during H1’22. We retain our HOLD rating and TP of EUR 6.5.
Tough quarter behind
The company’s net sales decreased by 4% y/y to EUR 168.9m driven by weak demand for its core categories. The growth was good in the B2B segment as well as in Computers, Games, Sports, and Toys products categories. The online transition continued and e-commerce represented 63% of total net sales. Despite tough market conditions, gross margin improved to 15.5% (15.1%), mainly driven by category mix and wise pricing decisions. Adj. EBIT declined by 14% y/y to EUR 5.3m (3.2% margin) due to lower sales. EPS amounted to EUR 0.09 and BoD proposed a dividend of EUR 0.246.
Guidance implies growth to continue
The company guides net sales growth and possible profitability improvement during 2022. Revenue is estimated to reach EUR 590-640m and EBIT EUR 19-15m. Driven by weakened visibility to the consumer electronics market, we have made some adjustments to our estimates. In 2022, we expect net sales of EUR 610.0m and EBIT of EUR 22.3m (3.7% margin). The growth is driven by online transition and good development of the evolving categories. In Q1’22, we expect the core categories to still suffer from weak demand and net sales amount to EUR 133.6m and EBIT totaling EUR 3.9m (2.9% margin). Jätkäsaari’s automated warehouse is estimated to be in production until the end of Q1’22 and we are expecting cost savings to kick in during H2’22 as the utilization rate of Vantaa rental warehouse will decrease.
HOLD with a target price of EUR 6.5
With our revised estimates, the company valuation is still slightly elevated. The company’s peers trade with 22E P/E 14-17x, while Verkkokauppa.com is trading at the upper bound of the range. We retain our HOLD rating and TP of EUR 6.5.
Etteplan's net sales in Q4 amounted to EUR 85.3m (EUR 82.9m/82.9m Evli/cons.) and operating profit to EUR 7.8m (EUR 7.9m/8.1m Evli/cons.). Dividend proposal: EUR 0.40 per share (EUR 0.40/0.40 Evli/Cons.). 2022 guidance: revenue EUR 340-370m and operating profit EUR 28-32m.
Pihlajalinna reports Q4 results on Fri, Feb 18. We make small positive revisions to our Q4 estimates as we expect Covid-19 services to have remained high due to Omicron, but we don’t expect Pihlajalinna to guide much more than flat EBIT for FY ’22 as M&A integration has barely begun.
We make small upward revisions to our Q4 estimates
Pihlajalinna’s EBIT continued to improve in Q3 despite an increase in outsourcing costs for which the company hadn’t yet received much compensation. The Finnish virus situation worsened again in Q4, and we believe Omicron has had a slight positive net effect on Q4 top line and EBIT; we previously expected Covid-19 services revenue to decline some in Q4 but we now estimate it to have remained pretty much flat q/q. We update our Q4 revenue estimate to EUR 156.4m (prev. EUR 153.9m) and thus expect y/y growth to have remained around 14%. We estimate y/y EBIT improvement to have steepened a bit in Q4 and now estimate Q4 EBIT at EUR 9.2m (prev. EUR 8.9m).
The acquisition will limit EBIT guidance in H1’22
Pihlajalinna has just completed the acquisition of Pohjola Hospital, a chain with a focus on orthopaedics and some EUR 60m in revenue, which make it a target of reasonable size and complementary fit for Pihlajalinna. The target turned a loss of EUR 10m in terms of EBIT in FY ’20 due to a dip in volumes; the losses might have narrowed somewhat already in FY ’21, however this hadn’t happened during the first 4 months of the year, but we expect losses or at least margin dilutive impact in H1’22. Margin accretion should occur in FY ’23 as insurance customers drive volumes and Pihlajalinna achieves cost synergies. We expect more specific updates to financial targets either in connection with the Q4 report or later during the spring. We continue to expect meaningful EBIT upside beyond this year and last, although we believe Pihlajalinna will not guide much more than flat or slightly improving EBIT for FY ’22 at such an early point when the target’s integration has only started.
Both margins and multiples remain on the modest side
Our view is unchanged as Pihlajalinna trades ca. 6.5-8.0x EV/EBITDA and 13.0-16.5x EV/EBIT on our FY ’21-22 estimates. The multiples are well below peers’ while margins remain at relatively modest levels. We retain our EUR 14 TP and BUY rating.
Verkkokauppa.com’s Q4 topline fell short of our expectations. Net sales declined by 4% y/y to EUR 168.9m, while adj. EBIT amounted to EUR 5.3m (3.2% margin). The company acquired e-ville.com online store to strengthen its private label offering.
• Q4 revenue declined by 4% y/y, totaling EUR 168.9m vs. 183.4m/183.7m Evli/cons. Growth was good in B2B, Computers, Games, Sports and Toys, while core categories suffered from weak demand. Gross margin improved to 15.5% (prev. 15.1%).
• Online sales represented 63% (prev. 62%) of total sales.
• Consumer segment represented 72% of total sales. B2B sales increased by 11% y/y, representing 20% of total sales. Exports segment is still lacking and represented 7% of total sales.
• Adj. EBIT amounted to EUR 5.3m (3.2% margin) vs. 5.5m/5.5m Evli/cons.
• EPS was EUR 0.09 vs. 0.09/0.12 Evli/cons.
• Board of Directors proposes dividend of EUR 0.246 vs. 0.25/0.25 Evli/cons.
• 2022 guidance: Net sales of EUR 590-640m and EBIT of EUR 19-25m.
• Last night, the company announced its acquisition of Finnish e-retailer e-ville.com. The acquisition supports Verkkokauppa.com's strategy to strengthen and expand its assortment in its own brands. E-ville.com generated net sales of EUR 10m and EBIT of EUR 0.5m (5% margin) during 4/2020-3/2021. The preliminary purchase price amounts to EUR 5.3m and is financed with cash (EUR 3.3m) and a special offering (EUR 2.0m). The parties have also agreed to additional purchase price installments of up to EUR 6.7m if certain sales-related terms are met. The preliminary purchase price is valued at approx. same multiples as Verkkokauppa.com is trading (EV/S: 0.5x vs. 0.5x and EV/EBIT: 11x vs. 14x). We will open the acquisition more in our company update (published tomorrow).
Finnair reports Q4 results Thu, Feb 17. In our view the latest pandemic twists do not stage any significant further operational challenges for Finnair, yet we believe valuation has inched ahead of itself amid cost uncertainty. Our TP is now EUR 0.60 (0.65); our new rating is SELL (HOLD).
Finnair will continue to lag peers especially in H1’22
Q4 RPK was very close to what we had estimated despite the onset of Omicron; the latest variant(s) have indicated how there’s robust pent-up travel demand as traffic figures continued to grow in December despite uncertainty related to restrictions. Meanwhile Finnair’s flows continue to lag those of Western peers as Asian volume recovery is further delayed. We believe China is still set to open in H2’22, but we now expect Japan and South Korea not to contribute much before Q2’22. In our view the Asian lag isn’t a major issue for Finnair considering the measures taken to reinforce balance sheet as well as the fact that cash flow already turned positive in Q3. The short as well as long term effects of Omicron are hard to discern because the infection peak happens to play out over months which are very different in terms of seasonal demand, and it’s still too early to say whether the variant might accelerate the pandemic towards its end.
OPEX cuts help but jet fuel prices have continued to gain
Jet fuel prices have continued to soar, the spot rate up by some 15% in the past three months, meaning the achieved operating expenditure cuts will be valuable in securing profitability during the quarters and years ahead. We expect Q1’22 EBIT to remain in the red similarly as in Q4’21, roughly to the tune of EUR 100m, while we believe some improvement will happen in Q2 but not nearly enough to reach break-even. We make only very minor downward revisions to our volume and revenue estimates, but we revise our FY ’22 EBIT estimate down to EUR -11m (prev. EUR 30m) and that for FY ’23 down to EUR 164m (prev. EUR 232m).
Valuation seems to have turned dear amid cost uncertainty
Many carriers’ valuations have advanced in the past few months, and thus Finnair also arguably deserves some further boost. Finnair’s recovery will however take longer than those of peers; the company close 15x EV/EBIT on our FY ’23 estimates, a slight premium relative to a sector that seems itself fully valued. Our TP is now EUR 0.60 (0.65); our new rating is SELL (HOLD).
Etteplan reports Q4 results on February 10th, with expectations of rather good growth and margins. Growth is set to continue in the double-digits in 2022 with the recent acquisitions.
Rather good Q4 figures expected
Etteplan reports Q4 results on February 10th. Etteplan’s Q3 results were on the softer side due to the vacation season and a slower start to projects as well as the global component shortage. Etteplan’s organic growth investments also started to pick up, with the headcount up some 4% q/q (partly from acquisitions), which had a slight impact on profitability. We expect revenue growth of 17.9% to EUR 82.9m (cons. 82.9m), with pickup in demand from the weaker comparison period and made acquisitions. We expect a quite good level of profitability, although below the comparison period, with growth investments having picked up. We expect an EBIT of EUR 7.9m (cons. 8.1m). The company estimates 2021 revenue to be EUR 295-310m (Evli EUR 297.7m) and EBIT of EUR 25-28m (Evli 25.9m). Our Q4 estimates are intact ahead of the results.
Acquisitions boosting 2022 growth expectations
Etteplan recently acquired technical information lifecycle management company Cognitas GmbH and technology services company Syncore Technologies Ab, focusing on embedded systems. The combined historic revenue of the acquired companies is at around EUR 20m. We have adjusted our estimates for the acquisitions, expecting 2022 revenue of EUR 338.3m, for a y/y growth of 13.6%. We expect EBIT of EUR 29.6m at an 8.8% margin, on par with expected previous year levels. Margin uncertainty relating to growth investments and market environment is present but should the growth investments translate into organic growth as planned, then healthy margins should reasonably be expected.
HOLD with a target price of EUR 17.0
We retain our target price of EUR 17.0 and HOLD-rating. Current valuation on our estimates appears quite elevated compared with peers, with 2022E P/E of ~20x.
Raute reports Q4 results on Fri, Feb 11. Last year was another gap in terms of profitability, but Raute has managed to stack up a record-high order book in the past year or so. We make some estimate revisions but continue to expect steep earnings growth for this year and beyond.
Q4 results were still burdened by various factors
Raute gave preliminary info on FY ’21 results, according to which EBIT remained negative. A large part of this negative revision was due to the agenda decision on cloud-based IT systems, which dictates Raute to expense EUR 2.9m of costs associated with a project capitalized earlier. EUR 2.0m will be booked for FY ’21 and EUR 0.9m retroactively for FY ’20. The booking decision is not a major issue from financial performance standpoint, but Q4 figures were also burdened by certain problems of varying acuteness, including infections which halted the main production plant’s operations. Labor issues exacerbated the problem during a busy season, and component availability challenges reduced top line while price inflation weakened EBIT.
We expect improving EBIT over the year and beyond
Raute’s order book reached a record EUR 150m in Q3 and hence the company is poised to turn a profit again this year. Just how much Raute’s profitability will improve in FY ’22 is by far the most important question because there’s not that much to discuss with respect to the adequacy of current demand and workload. Raute’s business model does not make very specific guidance practical and so we believe Raute will at this point guide only improving profitability. We would be surprised by any stronger wording this early in the year. We have made only relatively small revisions to our estimates. We now estimate FY ’22 revenue at EUR 164.0m (prev. EUR 162.2m) and EBIT at EUR 9.0m (prev. EUR 10.0m). This represents a steep gain from last year yet still well short of the company’s long-term potential.
Earnings multiples appear by no means demanding
Raute trades at multiples of some 6.0-7.5x EV/EBITDA and 8.5-10.5x EV/EBIT on our FY ’22-23 estimates. Raute is the leader in a cyclical niche and so there aren’t that relevant peers, but the multiples are low relative to Nordic capital goods names at a time when Raute’s profitability is expected to remain subdued. Our TP is now EUR 22.0 (26.5); we retain our BUY rating.
Consti’s Q4 results were on the softer side, with some performance challenges in two regional business units. The guidance implies rather healthy margins in 2022. We retain our BUY-rating with a TP of EUR 14.0 (14.5).
Q4 results on the softer side
Consti reported Q4 results that were on the softer side. Revenue amounted to EUR 82.6m (EUR 86.9m/86.4m Evli/Cons.), with growth of 5.8% y/y. Profitability declined y/y with EBIT amounting to EUR 3.0m (EUR 3.7m/3.4m Evli/cons.). Profitability was impacted by the performance of two regional business units, where corrective actions are ongoing. The order backlog development was on a good track, with new orders of EUR 66.9m and the order backlog up 28.4% y/y to EUR 275.1m. Consti’s BoD proposes a dividend of EUR 0.45 per share (EUR 0.35/0.41 Evli/cons.).
Expect revenue and earnings growth in 2022
Consti’s estimates that its operating result for 2022 will be EUR 9-13m, in line with our and consensus pre-Q4 estimates (EUR 11.0m/11.5m Evli/cons.). No guidance was given on revenue but activity is seen to be higher going into this year compared with the same time in the previous year. The acquisition of RA-Urakointi is also set to boost revenue. We have only made small tweaks to our 2022 estimates, expecting revenue of EUR 309.7m (prev. EUR 314.3m) and EBIT of EUR 10.9m (prev. EUR 11.0m). The situation with construction material prices and availability still pose some margin risks going into 2022, with prices still on elevated levels and material availability uncertainty. The market demand situation appears to be rather adequate, but uncertainties due to the pandemic continue to impact on demand from corporations
BUY with a TP of EUR 14.0 (14.5)
With only small estimate revisions we finetune our TP to EUR 14.0 (prev. 14.5) per share, valuing Consti at approx. 14.0x 2022 P/E, and retain our BUY-rating. Our target price puts valuation quite in line with both the Nordic construction company peer and building installations and services company peers.
Verkkokauppa.com reports its Q4 result next Thursday. We have made some revisions to our near-term estimates as a result of soft market condition in consumer electronics goods. We downgrade our rating to HOLD (BUY) and adjust TP to EUR 6.5 (10).
Soft market environment seems to continue
After strong H1’21 the consumer electronics market turned soft and the market participants have indicated that the trend has continued also in Q4. Part of the consumer expenditure has moved from consumer goods to services as COVID restrictions were removed during H2’21 and Finland’s decreased consumer trust might indicate the lower attraction for consumption in general. In our understanding, market performance was below expectations during important campaigns and the new Omicron variant has increased the uncertainty during higher-margin Christmas sales.
Estimate revision ahead of Q4
Based on the weakened market conditions, we have tweaked our near-term estimates, expecting Q4 net sales of EUR 184.3m (prev. 194.5m) vs. 188m cons. and an EBIT of EUR 5.5m (prev. 6.5m) vs. 5.9m cons. Our Q4 growth estimate of 4.7% is driven by strong performance in B2B and evolving categories. The increased share of evolving categories partially offsets the decline in the margin caused by price-driven competition. In 2021, we expect net sales of 589.8m vs. 594m cons. and an EBIT of EUR 20.5m vs. 21m cons. For 2022-23E, we are expecting a net sales growth of 7.2% and 8.1% respectively as well as an EBIT margin of 3.7% and 4.2% respectively. We expect the soft market to continue, lowering the growth pace during H1’22. We estimate a dividend proposal of EUR 0.25 vs. 0.25 cons.
HOLD with a target price of EUR 6.5
With our revised estimates, the company is trading with a P/E multiple of 17.5x (22E), which is above its peer group median. Given the weakened market environment, we have taken more cautious stand. We don’t see room for upside in the valuation, and the expected return is not met with a 3.7% dividend yield. We downgrade our rating to HOLD (BUY) and adjust TP to EUR 6.5 (10).
SRV’s Q4 results were on the weaker side but operatively slightly above our estimates. With the current uncertainties we struggle to see realization of valuation upside and downgrade to HOLD (BUY) with a TP of EUR 0.54 (0.60).
Operatively slightly better than expected
SRV reported Q4 results, which operatively in fact slightly beat our estimates. Revenue amounted to EUR 336.3m (EUR 316.0m/316.0m Evli/Cons.) while the operative operating profit amounted to EUR -4.6m (Evli EUR -5.5m). The operating profit however fell below expectations to EUR -11.5m (EUR -5.5m/-0.8m Evli/cons.). SRV also wrote down the entire value of its holdings and receivables relating to the shopping centre 4Daily, due to weak occupancy rates and profitability, which had an EUR 6.1m negative impact on financial expenses. The company estimates revenue in 2022 to amount to EUR 800-950m and operative operating profit to improve on 2021. The profitability guidance could have signalled more strength but reflects the current market uncertainties.
Profitability potential but also uncertainties
We now expect revenue of EUR 863.8m (prev. EUR 938.5m) and operative operating profit of EUR 21.0m (prev. 29.1m). We expect revenue to decline within housing construction given the still low number of developer contracted housing unit start-ups. Uncertainty relating to profitability development is quite high. Development could be substantial y/y, as the implied underlying profitability excl. the Tampere Areena project in 2021 would have been fair. The situation with construction material pricing and availability however still poses a risk. Lower volumes and fewer expected potentially higher margin developer contracted housing unit completions are also to be taken into consideration.
HOLD (BUY) with a target price of EUR 0.54 (0.60)
On our lowered estimates and the prevailing geopolitical uncertainties and additional shopping centre woes we see that the potential realization of valuation upside from exits and profitability improvement is currently beyond grasp. We lower our target price to EUR 0.54 (0.6) and rating to HOLD (BUY).
Suominen’s Q4 performance didn’t meet estimates, at least in terms of profitability, and FY ’22 guidance also disappointed as the issues which surfaced last summer continue to trouble in the short-term.
Certain customers still suffer from high inventories
Suominen’s Q4 revenue grew by 4% y/y to EUR 115.6m, ahead of the EUR 113.0m/113.3m Evli/cons. estimates. Europe amounted close to what we expected, while Americas was ahead, but gross profit was only EUR 8.4m vs our EUR 14.4m estimate. Suominen’s pricing improved but not to the extent we expected, and hence high variable costs ate margins. The pandemic also caused plant-level problems. The EUR 9.0m EBITDA benefited from cost cuts but didn’t meet the EUR 12.1m/12.6m Evli/cons. estimates. Some customers’ high demand resumed, but others continued to languish as inventories remained elevated. There’s now a short-term see-saw pattern in demand which manifests itself in y/y lower Q1’22 top line. The demand issues are very customer-specific but happen to impact Americas for the most part. There seem to have been no major changes in this respect. Suominen expects end consumer demand to remain above pre-pandemic levels, and the picture should again improve in Q2.
We cut especially H1’22 estimates
Raw materials prices have overall stabilized, but there’s been mixed development as e.g. pulp has declined while viscose has advanced. Meanwhile US logistics issues persist, and transportation costs remain high. The completed investments, on the other hand, pose no major ramp-up costs. We cut our FY ’22 revenue estimate to EUR 455m (prev. EUR 467m) and that for EBITDA to EUR 40.8m (prev. EUR 50.9m). We cut FY ’23 profitability estimates by ca. EUR 2-3m. The estimate cuts concern particularly H1’22, from where we expect improvement.
Margins and multiples are low relative to peers
Suominen’s multiples remained low before the report, but they still didn’t sufficiently reflect the persistent current uncertainty. Suominen is valued around 5.0-6.5x EV/EBITDA and 8.0-12.5x EV/EBIT on our FY ’22-23 estimates. The absolute multiples are not that low for this year, but we expect improvement over the year; Suominen remains valued below peers while margins are also low. Our new TP is EUR 5 (6); we retain our BUY rating.
Consti's net sales in Q4 amounted to EUR 82.6m, below our and consensus estimates (EUR 86.9m/86.4m Evli/cons.), with growth of 5.8% y/y. EBIT amounted to EUR 3.0m, below our and consensus estimates (EUR 3.7m/3.4m Evli/cons.). The BoD proposes a dividend of EUR 0.45 per share (EUR 0.35/0.41 Evli/cons.). Operating result in 2022 is expected to be EUR 9-13m.
CapMan’s Q4 profitability beat expectations to finish an overall solid year. Earnings are set to pick up further in 2022 driven by carried interest and our views on CapMan remain clearly positive.
2021 was a solid year overall
CapMan reported solid Q4 results, rounding of a year of clear earnings improvement. The operating profit amounted to EUR 12.2m, beating both our and consensus estimates (EUR 10.7m/9.4m Evli/cons.). Y/y the operating profit improved by 262%. The Management Company business saw good continued growth, aided by a ~EUR 700m net increase in AUM during 2021, with management fees surpassing EUR 10m during the last quarter. The Services business also continued good growth, with CaPS showing profitable growth and JAY Solutions profitability seen to start to pick up. The Investment business returns were strong also in the final quarter and the main driver behind CapMan’s 2021 earnings. CapMan as expected proposes a dividend of EUR 0.15 per share (0.15 Evli/cons.).
Carried interest expected to boost earnings further
We have not made any substantial revisions to our estimates post-Q4. We expect continued growth in the Management Company and Service businesses, with the former expected to pick up clearly in earnings due to carried interest as the NRE-I fund is set to enter carry and the outlook for further funds entering carry also appearing to be quite favourable. We are still somewhat cautious to investment returns compared with the strong 2021 figures but still expect to see a good level. Should the pace continue CapMan would be well set to continue on an over EUR 40m annual operating profit track excluding carry. In 2022 we expect a y/y increase in operating profit of some 30% driven largely by the expected carried interest.
BUY with a target price of EUR 3.4
Absolute valuation on our estimates is very affordable and even excl. the highly unpredictable carried interest is not too challenging. Dividend yields also continue to support the investment case. We retain our BUY-rating and TP of EUR 3.4.
Suominen’s Q4 revenue topped expectations, but profitability didn’t reach estimates. Suominen also guides decreasing EBITDA for FY ’22, particularly due to challenging Q1, while we had expected flat development.
SRV's net sales in Q4 amounted to EUR 336.3m, above our estimates and above consensus estimates (EUR 316.0m/316.0m Evli/cons.). EBIT amounted to EUR -11.5m, below our and consensus estimates (EUR -5.5m/-0.8m Evli/cons.). Group revenue in 2022 is expected to be EUR 800-950m and the operative operating profit is expected to improve on 2021.
CapMan's net sales in Q4 amounted to EUR 14.7m (EUR 14.5m/15.0m Evli/cons.) and EBIT to EUR 12.2m (EUR 10.7m/9.4m Evli/cons.). CapMan proposes a dividend of EUR 0.15 per share (EUR 0.15/0.15 Evli/Cons.).
Detection Technology came in strong with topline growth in all its BUs, but the growth pace was restricted by issues in the supply chain. The demand was strong in medical and industrial applications, while security saw the demand to pick up. We retain our HOLD-rating and adjust TP to EUR 26 (28).
Strong growth but some sales were postponed in H2’21
In Q4’21, underlying demand continued strong and DT saw a topline increase of 24.3% y/y, totaling EUR 24.7m. Driven by strong demand for high-end CT devices and investments in health care, the medical business grew by 24% y/y to EUR 13.6m. IBU continued strong performance in all its segments and with new customers, the segment grew by 21.7% y/y to EUR 3.4m. SBU faced strong growth figures and net sales increased by 26.5% y/y to EUR 7.8m, driven by all segments except aviation. DT’s management noted that over EUR 3m of sales were postponed due to the lack of components. EBIT improved by 26% y/y to EUR 3.0m (12% margin), falling short of the company’s and our expectations. The profitability was lower than expected due to increased fixed costs.
Demand for detectors continues strong
The underlying demand in all BUs continues strong, but component shortages seem to restrict and postpone some of the H1’22 deliveries. Risks regarding component availability have increased, which might in the worst case lead to customer outflow. We have adjusted our estimates, now expecting revenue growth of 13.3% y/y in 2022, driven by a strong performance of SBU (22.1%) and IBU (16.2%), while MBU’s growth pace (7.6%) sees a slight slowdown due to component shortage. We estimate EBIT to improve to EUR 15.0m (14.8%) but fall slightly short of the company’s medium-term target of 15% margin in 2022.
HOLD with a target price of EUR 26 (28)
With our revised estimates, DT is trading above its peer group and we don’t find the premium justified given the uncertainties regarding component availability. In our view, now it’s not the time to increase the position, rather wait for the supply chain issues to ease. We retain our HOLD-rating and adjust TP to EUR 26 (28).
DT’s Q4 result fell slightly short of our estimates. Growth accelerated in all BUs, but the component shortage had an impact on sales. Demand was strong in the medical and industrial applications, while the security segment also grew and saw the demand picking up.
• Group results: Q4 net sales grew by 24% y/y to EUR 24.7m vs. 25.8m/25.6m Evli/cons. Profitability improved and adj. EBIT grew by 28% y/y, totaling EUR 3m (12% margin) vs. 3.9m/3.9m Evli/cons. R&D costs amounted to EUR 2.9m and were 11.8% of net sales (Q4’20: EUR 2.2m, 11.3%).
• Medical (MBU): net sales came in strong and grew by 24% y/y to EUR 13.6m vs. 14.2m (Evli). The growth was driven by investments in healthcare and strong demand for high-end CT devices.
• Security (SBU): the demand picked up and the topline grew by 26.5% y/y to EUR 7.8m vs. 8m (Evli). The growth was seen in all segments except aviation, but the demand for aviation solutions has evolved positively.
• Industrial (IBU): net sales increased by 22% y/y, totaling EUR 3.4m vs. 3.6m (Evli). The demand was strong in DT’s all main IBU segments.
• Dividend proposal: EUR 0.35 (0.38/0.35 Evli/cons.)
• DT reported that the risks of component shortage have increased and the company has started actions to enhance operative efficiency and find other components suppliers.
• FY’22 outlook: demand will continue to be strong in all of the company’s main markets. The company expects double-digit growth in total net sales both in Q1 and Q2’22.
• No changes in medium-term targets: at least 10% net sales growth and an EBIT-margin at or above 15%.
Consti reports its Q4 results on February 4th. We expect double-digit growth, with some margin uncertainty due to the situation with construction materials. Growth is set to continue in 2022 supported by the order backlog and previous acquisition, with some potential for margin improvement depending on the market situation.
Expecting double-digit growth, some margin uncertainty
Consti will report its Q4 results on February 4th. Q3 saw growth accelerate to double-digit figures compared with growth of 1.4% during H1/21. Growth has been supported by the strengthened order backlog, up 15% y/y at the end Q3. The order backlog has received support from the first projects within new construction services, were Consti signed its first projects after the addition to being part of the company’s strategy. Consti also made its first acquisition in a long time, that of RA-Urakointi Oy, a company specializing in the repair of apartments and row houses. We expect growth in Q4 to have remained at a good pace supported by the order backlog and expect a net sales growth of 11.3%. We expect the adjusted operating profit to be slightly below previous year levels due to uncertainties related to construction material prices and availability, at a margin of 4.2%.
Seeing continued good growth in 2022
We expect growth to continue in 2022 supported by the order backlog and acquisition of RA-Urakointi, with our growth estimate at 7.3%. Consti has typically only given a guidance for operating profit, and we expect for Consti to estimate an improvement in operating profit during 2022 compared with 2021. We currently estimate adjusted operating profit margins on par with 2021e, at 3.5%. There is potential for improvement, and we will be keeping an eye on management comments relating to the situation with construction material.
BUY with a target price of EUR 14.5
We have made no changes to our estimates ahead of Q4. On our estimates Consti currently trades at a 2022e P/E of 12.3x, which we do not see as overly challenging. We retain our target price of EUR 14.5 and retain our BUY-rating.
CapMan is set to finish a year of solid performance. With the news on CapMan’s NRE fund we have shifted our end of the year carry expectations to 2022 but our views on CapMan remain unchanged.
CapMan’s NRE fund set to enter carry early 2022
CapMan will report its Q4 results on February 3rd. We expect to see a steady q/q earnings trend and overall good finish to a year of solid performance. CapMan announced in early January that the CapMan Nordic Real Estate fund had made exits in several properties, with the fund set to start distributing carry after the completion of those transactions. After the transactions the fund will have four assets remaining in Denmark and Sweden. As such, we have shifted most of the carry we had estimated in Q4/21 to Q1/22. Apart from that, our estimates remain essentially intact. We expect an operating profit of EUR 10.7m. During 2021 CapMan has seen y/y comparable earnings improvement across the board, most notably within Investment services due to the weak comparison year. We expect a dividend proposal or EUR 0.15 per share (2020: EUR 0.14), for an implied dividend yield of 5.1%..
Room for further earnings improvement in 2022
CapMan does not give a numeric guidance and we do not expect one to be given for 2022. We expect carried interest to be a key driver in further earnings improvement, with the NRE fund moving into carry. Growth in AUM is expected to contribute to continued growth in fee-based earnings, with several on-going and planned fundraising projects. Investment returns have been strong during 2021, and we remain more modest in our expectations for 2022.
BUY with a target price of EUR 3.4
Apart from the shift in carried interest we have made no notable changes to our estimates ahead of the Q4 results. The recent market uncertainty potentially presents some headwind but at the same time the news on carried interest provides an additional confidence factor. We retain our BUY-rating and target price of EUR 3.4.
Suominen reports Q4 results on Thu, Feb 3. We leave our Q4 estimates unchanged but make small upward revisions to our FY ’22 estimates due to FX changes.
Q4 figures should improve a lot from the Q3 lows
Suominen’s Q3 figures fell a lot more than was expected, but the report provided encouraging comments on outlook; performance should improve significantly already in Q4, and we continue to expect about EUR 8m q/q gain in Q4 EBITDA. We estimate the figure at EUR 12.1m, while we see top line grow 2% y/y and close to 15% q/q from the Q3 lows. We expect European revenue to reach new highs, while we see Americas still somewhat down from the peak levels but up 16% q/q. The relatively modest and completed investments in Italy and the US support growth this year, and we expect revenue to surpass the record set in FY ’20, but profitability is unlikely to reach the recent peaks during the next few years.
We expect only marginal profitability improvement from Q4
We find Suominen’s key raw materials prices basically flatlined q/q in Q4; this supports our view according to which incremental margin gains continue from Q4 onwards. USD has strengthened some 5% in the past three months and thus we raise our FY ’22 revenue estimate to EUR 467m (prev. EUR 455m). We continue to expect 6.5% EBIT margin for this year and hence flat absolute profitability, in other words EUR 50.9m in EBITDA. We expect Suominen to loosely guide flat profitability for FY ’22; negative wording seems unlikely considering the softness of Q3’21, while any commitment to positive development appears premature as many key variables remain much in flux.
Peer margins are expected to gain some 200bps in FY ‘22
Suominen’s valuation and estimates haven’t changed much in the past few months. The company continues to trade around 5.5x EV/EBITDA and 9x EV/EBIT on our FY ’21-22 estimates. The FY ’21 multiples are significantly below those of peers because the group is expected to gain some 200bps in FY ‘22 EBIT margin. Meanwhile we estimate Suominen’s FY ’22 EBIT margin down a bit due to the high figures seen in early FY ’21. Suominen’s multiples discount narrows this year due to the peers’ earnings accretion. We retain our EUR 6 TP and BUY rating.
Detection Technology will report its Q4 results next Wednesday. Driven by robust topline growth, we expect the company to see strong earnings improvement. We retain our HOLD-rating and adjust our TP to EUR 28.0 (30.5).
Expecting high double-digit growth
Driven by strong double-digit growth in all BUs, we expect Q4 revenue of EUR 25.8m (cons. 25.6m), meaning an increase of 30.1% y/y. We expect MBU to grow by 30.3% y/y, driven by strong demand for CT-scan devices. We estimate the earlier growth in SBU’s order book to realize and expect topline increase of 30.5% y/y, totaling EUR 8m. With new customerships, we estimate IBU to grow by 28.5% y/y to EUR 3.6m. Despite the issues in the supply chain, we expect the revenue growth to scale and EBIT to improve by 66% y/y to EUR 3.9m (cons. 3.9m).
Strong earnings growth despite the cost pressures
We expect the increased volume of air passengers and the growth of cross-border e-commerce to support the growth in the number of SBU’s orders. We estimate the security market to exceed pre-COVID levels within the next few years. The company and other players expect the component shortage to continue also in 2022. To reach its EBIT-margin target of 15%, the company must be able to enhance operative efficiency and show some pricing power. We expect the company to be able to shift some of the increased costs to customer prices during the new pricing period. Regarding the outlook, we remain waiting for the management's comments on the pace of recovery in the security markets and clarification of the company's earlier guidance for H1’22 (expecting double-digit growth).
HOLD with a target price of EUR 28.0 (30.5)
The fundaments of DT’s business haven’t changed and we made no changes to our estimates ahead of Q4. Market drivers remain bright, but the recovery of aviation still includes some uncertainty in the short-run. With recent market turbulence and depreciation of peer group valuation, we adjust our TP to EUR 28.0 (30.5) and retain our HOLD-rating.
Netum made some smaller adjustments to its guidance, with our main takeaway being the continued solid growth pace. We adjust our TP to EUR 4.3 (4.6) following recent market turbulence and peer multiple depreciation.
Some smaller tweaks to guidance
Netum specified its guidance for 2021 on January 24th, with the revisions appearing to be rather small in relation to our expectations. The company now expects revenue for FY 2021 to amount to slightly over EUR 22m, having previously expected EUR 20-22m. The comparable EBITA is expected to be EUR 3.1m (prev. EUR 3.1m-3.5m). The revised revenue forecast is due to the integration of Cerion Solutions (as of 1.10.2021) and stronger than expected organic growth. Netum’s profitability has been affected by new recruitments, with around 90 new employees during 2021 (12/2020: 130 employees), along with weaker margins in a single fixed-price customer project.
Solid growth prospects
We noted in conjunction with the Cerion Solutions acquisition, that the revenue guidance being kept intact despite the expected EUR 1m positive impact on 2021 revenue was somewhat surprising. Fortunately, with the revised guidance the concerns of implied slower growth are clearly reduced. The comparable EBITA was somewhat below our previous EUR 3.4m expectations, with the project challenges not accounted for. Considering the challenging recruiting environment, the rapid growth in personnel is commendable and sets the foundation for continued strong growth, and we expect a growth of 22% in 2022. We see some need for caution in profitability improvement expectations due to the rapid growth and for now expect similar unadj. margins as in 2021.
HOLD with a target price of EUR 4.3 (4.6)
The guidance revision was overall slightly positive news, should the noted project challenges not impact further. However, with the recent market turbulence and peer multiple depreciation we adjust our target price to EUR 4.3 (prev. EUR 4.6) and retain our HOLD-rating, valuing Netum at approx. 16x 2022e adj. P/E.
Enersense’s Q3 report was soft and left doubts with respect to the FY ’21 guidance. The company has now made upgrades to the guidance, but these seem to have been to a large extent driven by acquisition-related revaluations. Enersense nevertheless continues to progress with long-term strategy and is about to close two investments.
We make some updates to our Q4 adj. EBIT(DA) estimates
Enersense revised its FY ’21 earnings guidance upwards. Enersense still expects EUR 215-245m in revenue, but now sees adj. EBITDA over EUR 19m (prev. EUR 17-20m) and adj. EBIT over EUR 11m (prev. EUR 8-11m). We leave our revenue estimate unchanged, update our Q4 adj. EBITDA estimate to EUR 7.4m (prev. EUR 5.6m) and that for adj. EBIT to EUR 5.1m (prev. EUR 3.3m). The underlying performance remains somewhat unclear because the guidance update was driven by revaluations related to the Enersense Offshore Oy acquisition.
Long-term earnings growth outlook should solidify
Enersense is about to expand its renewable energy solutions scope with the closure of two acquisitions in a month or so. The company will buy a significant stake in a green hydrogen producer called P2X and acquire an onshore wind farm developer in an all-share transaction. The latter target will be earnings accretive already in FY ’22; the acquisition of Megatuuli will contribute a cumulative EUR 20-40m in EBIT by 2025. Meanwhile an ERP investment will burden results this year along with a process related to the integration and development of Enersense Offshore, however the latter initiative should contribute to results in FY ’23. We leave our estimates for FY ’22 and ’23 unchanged for now, but Enersense will update its long-term financial targets in Q1.
Valuation remains undemanding
Enersense’s peer multiples have stayed pretty much unchanged over the past few months. Enersense continues to trade at modest multiples relative to peers. We believe Enersense’s vertical integration within the renewables value chain beyond construction and maintenance activities will help balance business risks, and hence long-term upside remains significant. Meanwhile short-term visibility isn’t still that great and thus we lower our TP to EUR 10 (11). Our rating remains BUY.
SRV issued a profit warning due to the materialization of cost risks in the Tampere Arena project and postponement of the expected Pearl Plaza divestment, creating a dent in the improved progress so far during 2021.
Profitability guidance lowered
SRV issued a profit warning on Monday, December 13th. The company now expects its operative operating profit to be positive (prev. EUR 16-21m). The revenue guidance of EUR 900-1,000 remains unchanged. The guidance revision is mainly due to cost risk materialization in the Tampere Arena project. The impact on 2021 figures has been approx. EUR -20m, of which EUR -13m was already included in Q3/2021 figures. Further affecting the guidance revision is the postponement of the sale of the Pearl Plaza shopping centre, which was earlier expected to be finalized during 2021.
Project risks continue to materialize
SRV has previously had challenges in managing certain projects of significant size, with these risks unfortunately materializing again. The project has been completed and further risks should be limited to certain final cost calculations. The P&L impact is unfortunate but shouldn’t cause financial risks, especially with the completion of the Loisto tower project and subsequent cash flows during Q4. The significant negative impact of the Tampere Arena project does continue to highlight that the underlying construction profitability is actually at rather good levels, but this is unfortunately of little consolation when risks in single major projects continue to materialize. We have lowered our 2021 operative operating profit estimate to EUR 4.4m (prev. EUR 17.2m) but apart from that our estimates remain largely unchanged.
BUY with a target price of EUR 0.6 (0.7)
With the risks to the company’s turnaround at elevated levels we lower our target price to EUR 0.6 (0.7). Upside potential is in our view still clearly in place but appears more remote with the postponement of expected Pearl Plaza divestment. Our rating remains BUY.
Scanfil’s earlier guidance suggested Q4 to be highly profitable, and we had estimated 6.9% EBIT margin, but well-known challenges have proved persistent for now.
The fresh guidance implies some 5.1% Q4 EBIT margin
Scanfil issued a negative profit warning. Plants’ productivity has suffered due to continued component availability challenges, and the worsened Covid-19 situation has also bothered production. Q4 EBIT is further hit by the FX exposure due to the relatively high inventories, which the company build up earlier this year to be better able to meet demand by anticipating needs early on. Scanfil’s previous guidance suggested EUR 166-206m in Q4 revenue and EUR 11-14m EBIT. The new range implies EUR 176-196m top line and EUR 8-11m EBIT. We don’t view the news as a major issue in the long-term context because the challenges are to a large extent transitory in nature, although the pandemic and component shortage situations will persist at least during the early part of next year. Scanfil however doesn’t have to struggle with cost inflation since the contracting logic covers component purchases. Customer demand has also remained strong in Q4.
We continue to expect strong performance for next year
We make only small revisions to our top line estimates, but we revise our Q4 EBIT estimate down to EUR 9.7m from EUR 12.5m. We revise our FY ’22 EBIT estimate down to EUR 46.3m (prev. EUR 48.5m). The Hamburg restructuring measure by itself should help some EUR 2.5m in terms of cost savings; we hence expect 17% EBIT improvement for next year as the component and Covid-19 issues will begin to ease. Scanfil is set to achieve a robust double-digit top line growth this year, and we continue to estimate 7% growth for FY ’22. In our opinion 7% EBIT margin remains very much an appropriate long-term profitability target for Scanfil, and the company is unlikely to make any changes around that specific figure.
Earnings multiples are not expensive relative to peers
Scanfil is valued 9.5x EV/EBITDA and 13x EV/EBIT on our FY ’21 estimates. The levels aren’t particularly low, but in our view both demand and earnings growth outlook remain robust enough to warrant a longer perspective. The multiples are 8.5x and 11x on our FY ’22 estimates. We retain our EUR 9 TP and BUY rating.
Fellow Finance lowered its guidance, with transaction costs relating to the planned merger a key part. Loan volumes have continued to grow but the relative growth of lower margin business financing and reduction of Lainaamo’s loan portfolio limit revenue growth.
Lowered its 2021 guidance
Fellow Finance issued a profit warning on Thursday, December 2nd. The company now expects revenue in 2021 to be at previous year levels and the result to be clearly unprofitable. Previously the company expected slight growth compared to 2020 and for the result to be slightly unprofitable. The lowered revenue guidance is driven by the relative growth in lower margin business financing and lower interest income from a reduction of the Company’s subsidiary’s, Lainaamo’s, loan portfolio. The profitability is greatly affected by transaction costs relating to the combination agreement with Evli Bank Plc, which are estimated to be around EUR 950,000 in 2021. Profitability is further affected by growth investments.
Loan volumes continuing steady growth
In relation to our earlier estimates, the main change is due to the expected transaction costs, which are clearly higher than we had anticipated, while our 2021 revenue growth estimates are down by a few percentage points. Although profitability is affected by the non-recurring transaction costs the underlying business appears to be performing quite decently. Monthly facilitated loan volumes have surpassed EUR 20m in the past few months, although fee income growth has been slower due to stronger growth in business financing. Should the merger be completed as planned and focus shift to balance sheet lending, the growth would also start to show in profitability figures.
BUY with a target price of EUR 3.5 (3.8)
Excluding the one-off costs, Fellow Finance is showing rather good progress and exhibits profitability upside, should the merger be completed as planned. In light of the near-term challenges, however, we adjust our TP to EUR 3.5 (3.8) with our BUY-rating intact.
Aspo held its CMD, where the key message was that focus is more towards add-on M&A as opposed to exits (except for the sale of Kauko and Leipurin’s Vulganus machines).
EBIT margin target raised to 8% from the previous 6%
Aspo’s EBIT has gained a lot in the past year. Telko already had a strong ‘20, while the recovery has come through in ESL’s figures this year. The revised ESL and Telko EBIT targets, both up by 200bps to 14% and 8% respectively, are thus not very surprising. Aspo introduced a 5-10% p.a. growth target, and we view this the major update because it signals a commitment to hold and grow Telko. We make upward estimate revisions to reflect the targets. ESL reached a 15% EBIT in Q3, and while demand remains strong, we believe the next quarters will see some softening since AtoB@C time charter costs are growing. ESL’s performance is otherwise solid (e.g. contracts are better optimized from a logistics POV), and it has retained an advisor to source investors for a portion of the hybrid vessel capex. Leipurin retains its 5% EBIT target. There’s still way to go until the target is reached, but Leipurin has a profit boost initiative (e.g. category management) while the Food Industry is a good growth driver.
Aspo remains very committed to Telko and exit is unlikely
Aspo’s new 5-10% growth target reflects especially Telko add-on M&A potential. There’s no major change in the sense that Eastern performance is to rely on organic growth, but it seems Telko is now ready for somewhat larger deals should a fitting target come up for sale. Telko’s own profitability is already running so high that not every acquisition will provide an immediate boost to EBIT margin. The geographic scope has also been expanded a bit westward beyond the Nordics and Baltics. Aspo remains committed to the current three segments within logistics (ESL) and trade (Telko & Leipurin), however a new stand-alone subsidiary with an EV of some EUR 20-50m is also likely (B2C targets are not off the table). Aspo’s focus is still to hold and grow its segments without any definite exit plans/schedules.
Earnings growth outlook is attractive
We now expect FY ’22 EBIT margin at 7.0%, or EUR 42.4m (prev. EUR 40.9m). This represents an EV/EBIT of only about 11x, and there’s still further earnings potential in the following years. We retain our EUR 14 TP. Our rating is now BUY (HOLD).
Cibus continued to perform as expected. Our view doesn’t change much as valuation appears tight unless further yield compression continues to drive more upside potential.
Not many surprises in Q3 performance and figures
Cibus’ Q3 was a bit better than expected due to lower-than-estimated costs. Net rental income was EUR 19.3m vs our EUR 19.0m estimate and the difference was due to lowish property expenses. The EUR 18.0m operating income was marginally above the EUR 17.8m/17.9m Evli/cons. estimates, while the EUR 12.5m net operating income topped our EUR 11.9m estimate as net financial costs were EUR 0.4m lower than we estimated (there was a EUR 0.2m positive FX item).
The organization is competitive and continues to scale up
Cibus entered Norway through an acquisition of 8 small grocery properties, most of them located in the vicinity of Oslo; the EUR 27.6m price is high in terms of per sqm but is explained by high rents and the properties’ condition. The characteristics are otherwise similar across the Nordics and we assume the Norwegian portfolio yields almost 6%, in other words close to Cibus’ other recent acquisitions. Cibus is now set to complete more than EUR 160m in add-ons this year and a few more deals could materialize by the year-end (we are yet to include the AB Sagax deal in our estimates as it involves an issue of 2m shares). Annual admin costs will increase by only EUR 0.4m by the end of this year and hence will decrease a bit relative to the higher net rental income. In our view this testifies to Cibus’ organizational efficiency and the operation will scale even better once the Norwegian portfolio grows. Danish entry is also likely sometime.
1.3x EV/GAV continues to limit further upside potential
Nordic property sector valuations have remained pretty much unchanged in the past few months; we continue to view Cibus’ book value a major limitation to further upside from the current levels. Cibus’ equity is sensitive to yield assumptions due to the 60% LTV ratio; if Nordic property yields continue to compress, not to mention possible advances in the grocery property market, then Cibus’ shares follow up in the wake, but there would be a major equity-level headwind in a widened Nordic yield scenario even when the portfolio continues to perform as expected. Our TP is now SEK 215 (205) and we retain our HOLD rating.
Endomines is set to start showing serious production figures in the coming quarters, with Friday having started up and Pampalo set to follow during the start of 2022. Cash flows remain crucial, as the company’s financial position remains weak.
Friday restarted; full capacity seen to be reached in 2021
Endomines reported its Q3 results which, as production was still starting up, were not particularly eventful in terms of production. Revenue* amounted to SEK 1.7m (Evli 0.0m) and EBIT* to SEK -38.2m (Evli -33.0m) *not reported, derived from Q1-Q3 and H1. At Friday initial production started up during the quarter, with most of the technical challenges that have faced the commissioning of the mill having been addressed. The planned production capacity of 150 tons per day is expected to be reached the end of Q4. The re-opening of Pampalo has gone largely as planned. According to current schedules ore production will start in December 2021. Ore processing at the mill is expected to commence early 2022.
Financial position remains challenging
As a result of refocusing the Pampalo production schedule to Q1 2022 from previously planned Q2 2022 Endomines adjusted its short-term Q4 2021 production guidance to 1,200 oz (prev. 1,500oz) and we have adjusted our short-term estimates accordingly. Production should pick up clearly during 2022, with our estimates for Friday and Pampalo at approx. 8,300oz and 6,300oz respectively (co’s mid-term full production goals 7,800-9,000oz and 10,000-11,500oz respectively). The cash flows remain essential, as Endomines has been without production the last 12 months and has had to seek financing several times. The liquid assets at the end of the period were only SEK 8.4m.
HOLD with a target price of SEK 2.7 (2.8)
We have made some adjustments to our SOTP-model relating to share issues and changes in the financial position, based on which we adjust our target price to SEK 2.7 (2.8). Financing remains a key concern but the company is steadily nearing decent production figures, which would sort out some concerns.
Initial production at Friday commenced during Q3, with planned milling capacity seen to be reached at the end of Q4. The Pampalo startup is progressing well, ore production at the mine and ore processing at the mill are expected in Q4 2021 and Q1 2022 respectively.
Cibus’ Q3 report served no big surprises, however net operating income ended up being EUR 0.6m higher than we had estimated as both property expenses and net financial costs were a bit lower than expected.
Exel’s Q3 EBIT fell way more than estimated, but guidance implies improvement is already happening and we expect Exel to be back on its earlier EBIT track soon enough.
Q3 EBIT was weak but Q4 will already be a lot better
Q3 revenue grew 28% y/y to EUR 33.4m vs the EUR 30.4m/30.6m Evli/cons. estimates. Buildings and infrastructure, the most significant contributor, grew 64% but positive top line development was broad; Exel also sees stabilization in Transportation, where the pandemic hit demand. Inflation had only a limited impact as Exel was able to transfer the effect of higher raw material prices forward, and Exel’s pricing continues to advance. Profitable growth thus continued excluding the US unit, where a high-volume Wind power product’s ramp-up costs ate all other EBIT. Exel’s Q3 adj. EBIT was EUR 0.1m vs the EUR 1.9m/1.7m Evli/cons. estimates. The US labor market challenges exacerbated the production problem. The US unit’s performance is expected to improve already in Q4, but in our view it will not perform according to requirements at least before Q2’22.
We make relatively small revisions to our FY ’22 estimates
Exel announced its long-planned Indian expansion. We view the Indian JV a practical step to serve existing global customers in a new growth geography and a chance to sign new accounts. We reckon the Indian plant (which we expect to be driven by Wind power but not entirely) has an output smaller than that of Exel’s existing assets. We expect the JV to add ca. EUR 5m in annual revenue starting next year, considering Exel owns 55% of the entity, and we believe valuation is below 1x EV/S. Exel’s FY ’21 adj. EBIT margin is to remain a modest 5%, but profitability should already improve by 400bps q/q in Q4. We raise our FY ’22 revenue estimate to EUR 147m (prev. EUR 139m) due to the continued strong outlook as well as the Indian contribution.
In our view annual EBIT is to rebound above EUR 10m soon
FY ’21 EBIT isn’t meaningful since Exel has managed above EUR 2.5m quarterly EBIT many times with a significantly lower top line than what will be seen next year. In our view Exel is unlikely to reach the 10% target margin in FY ’22 as the US unit probably doesn’t fully perform in the early part of the year. We don’t view Exel’s 7x EV/EBITDA and 10x EV/EBIT multiples (on our FY ’22 estimates) challenging. We retain our EUR 10 TP and BUY rating.
Top line drove EBIT as higher outsourcing costs remained a drag on relative profitability. Corporate and private volumes were still below pre-pandemic levels, meaning business normalization is set to support further gains.
Adj. EBIT gained EUR 1.3m y/y despite outsourcing costs
Revenue grew 13% y/y in Q3; the EUR 141m figure topped the EUR 136m/138m Evli/cons. estimates. Public sector revenue grew 18%, more than estimated. Corporate and private customer revenues were a bit soft relative to estimates; the former was up 11% y/y while the latter was down 5%. Adj. EBIT improved to EUR 10.0m vs the EUR 10.6m/9.0m Evli/cons. estimates despite the mix being tilted more towards the public sector than expected while the outsourcing EBIT margin declined by 330bps y/y to 3.5% (higher service care requirements raised costs). We also gather Pihlajalinna is making progress on this front to receive better compensation in the future. Q3 adj. EBIT margin improved only by 10bps y/y to 7.1% due to the outsourcing cost drag; going forward there should be good scope for meaningful improvement as private volumes continue to improve and Pihlajalinna gets more compensation for outsourcing costs.
Organic improvement in addition to the Pohjola acquisition
Q3 is the most profitable quarter and the EUR 11.8m in Covid-19 services revenue was an additional help. We believe Covid-19 revenue will decline a bit q/q in Q4 but should still reach a meaningful level. Pihlajalinna continues to make additions to its facility network but capex levels are to remain modest while focus is more towards digital services. The Pohjola Hospital acquisition is set to close early next year and Pihlajalinna will provide an update on financial targets near the completion. Pihlajalinna expects to realize sizable cost synergies while insurance co-operation drives volumes. The target’s revenue fell in part due to the pandemic, but size was also diminished because of the decision to divest occupational health activities.
Good earnings as well as multiple expansion potential
We make minor estimate revisions. Our FY ’21 EBIT estimate stands almost unchanged at EUR 32.1m. Valuation is undemanding relative to peers in the short-term (8x EV/EBITDA and 16x EV/EBIT on our FY ’21 estimates) while margin potential underpins further upside. Our TP is EUR 14.0 (13.5); rating is BUY.
Exel’s top line continued to grow very fast in Q3, while the ramp-up of a Wind power product in the US impacted profitability more than estimated. Exel expects profitability improvement already for Q4 and specifies guidance.
Eltel’s long-term earnings growth continues, however we make big cuts to our estimates following the Q3 report as the pace doesn’t seem nearly as quick as we had estimated. Our TP is now SEK 17.0 (29.5) and new rating HOLD (BUY).
The Q3 report produced mostly negative surprises
Eltel Q3 revenue fell 14% y/y and was EUR 194m vs the EUR 224m/214m Evli/cons. estimates. The top line miss stemmed from all the reporting units and caused margin pressure, resulting in a EUR 4.0m EBIT vs the EUR 9.0m/8.3m Evli/cons. estimates. The 80bps y/y decline in operative EBITA margin was also due to challenges in the Polish High Voltage business and cost inflation as steel prices have doubled. The cost increases had a negative EUR 2m effect on Polish profitability. Low Danish customer volumes hit local profitability, while Norwegian EBITA margin remained good. Another positive was the narrowing of losses in Sweden, and Finland reached a strong result despite cost inflation (seen especially in Power while not in Communication).
Earnings growth continues, but not as quick as estimated
Eltel remains set for long-term earnings growth, however the gradient now seems to be much less steep than we had estimated before. We cut our Q4 EBITA estimate from EUR 8.3m to EUR 4.8m. We revise the following years’ EBITA estimates down by some EUR 7-8m. In our view Eltel is set to reach above 2% EBITA margins going forward, but we revise our FY ’22 estimate down to 2.6% from 3.3%. We expect soft development for Denmark until next year; we see the Norwegian situation a bit better as the local fiber market should bounce back. We expect Sweden to break even soon enough, while Finland should continue to perform strong (street lighting being one area of interest). There’s no fixed timeframe for the possible Polish exit and so any decision will likely have to wait until next year.
Improving performance seems to be fully valued for now
We cut our TP to SEK 17.0 (29.5) as earnings improvement continues to materialize at a slower pace than we had estimated prior to the Q3 report. Margin improvement potential should remain solid as Eltel’s margins are still considerably below those of peers. Multiples are lower than peers’ in terms of EV/EBITDA (7x on our FY ’22 estimate) and higher in terms of EV/EBIT (around 18x). Our rating is now HOLD (BUY).
Pihlajalinna’s Q3 report produced a top line beat while profitability was close to our estimates and above the consensus. The revenue surprise was attributable to public sector customers while Covid-19 services grew a lot y/y but also meaningfully q/q.
Marimekko released strong Q3 figures that overall outpaced our estimates. Development was strong in its domestic market, but Int’l business was sluggish due to temporal challenges and seasonality. We made only minor adjustments to our estimates.
Strong domestic growth and a record EBIT
Marimekko’s Q3 result came in strong compared to our expectations. Net sales growth of 11% y/y was driven by strong wholesale sales in Finland (+25% y/y). Controls of grey exports and lower licensing revenue decreased international net sales by 10% y/y. Despite the increased fixed costs, the company delivered its record EBIT, totaling EUR 13.3m (31.3% margin). Profitability was boosted by improved gross margin and increased net sales.
Int’l sales to get back on a growth path
We see the decline in international sales to be temporal and expect the company to get back on a growth path in Q4’21. Although the int’l revenue declined, the brand sales increased by 40% y/y in Q3 which indicates that the popularity of the brand is still up and keeps growing. Marimekko has positioned well in its domestic market, but we also expect that new and ongoing brand collaborations are set to increase brand awareness abroad, which eventually grows the share of int’l business. Like most of companies, Marimekko is also facing some challenges in logistics and material availability. Cost inflation has woken up and is raising its head. Due to relatively large inventories, the cost inflation shows in figures with a lag. After considering above mentioned factors, we made only minor adjustments to our estimates, now expecting 21E net sales of EUR 145.7m and adj. EBIT of EUR 30.2m (20.7% margin). During 2022-23, we expect Marimekko to grow by 10.8% and 8.5% respectively as well as reach an adj. EBIT margin of 18.9% and 17.8% respectively.
BUY with a target price of EUR 84.0
In our view, Marimekko has room for an upside as it's valued with a 22E EV/EBIT multiple of 19.8x, reflecting a 20% discount to its luxury peers. We retain our BUY-rating and TP of EUR 84.0.
Marimekko’s Q3 result outpaced our expectations. Net sales grew by 11% y/y to EUR 42.4m and adj. EBIT amounted to EUR 13.3m (31.3% margin). The company reiterated its FY’21 guidance.
• Group result: net sales topped our estimates by growing 11% y/y to EUR 42.4m vs. 40.9m/42.3m Evli/cons. The growth was driven by a favorable trend in wholesales in Finland. Adj. EBIT improved to EUR 13.3m vs. 8.1m/10.1m Evli/cons. with a 31.3% margin. EPS totaled EUR 1.30 and grew by 32% y/y.
• Finland: Marimekko brand’s popularity seemed to continue in Finland and net sales increased by 25% y/y to EUR 28.8m (Evli: 25.3m). The growth was driven by a favorable trend in wholesale sales (+65% y/y).
• International: One of Marimekko’s strategy’s backbones, international sales, fell short of our expectations and was a bit disappointment. Net sales decreased by 10% y/y to EUR 13.6m (Evli: 15.6m). Sales development was weak in the EMEA and APAC regions, but Scandinavia and North-America managed to increase their revenue y/y.
• Adj. EBIT: Adj. EBIT was very strong, totaling EUR 13.3m (31.3% margin) vs. 8.1m/10.1m Evli/cons. Profitability was boosted by net sales growth and improved gross margin. Worth to notice is that fixed costs increased in Q3 and the trend is expected to continue in Q4.
• No changes in FY’21 guidance (revised on Sep 23rd): expecting net sales and adj. EBIT margin to be above that of the comparison period.
• Marimekko’s strong performance in Finland provides continuity, but international sales especially in the APAC region cause some concerns. Our aim is to find more information for the weak performance of international sales in Marimekko’s Q3 webcast (today at 2 pm Finnish time).
Eltel’s Q3 results were burdened by lower top line, continued challenges in the Polish High Voltage business and cost inflation. Operative EBITA declined y/y while our and consensus estimates expected improvement. Eltel retains its FY ‘21 guidance and expects operative EBITA margin to improve y/y.
Enersense Q3 figures didn’t meet our estimates, but the company retained its guidance, and we see the Q3 softness was to a large extent attributable to project timing issues.
Q3 figures were not as strong as we had expected
Enersense Q3 revenue was EUR 58.3m, compared to our EUR 63.8m estimate. The softness was due to Smart Industry, where top line was EUR 18.7m vs our EUR 23.9m estimate. July was slow and pretty much according to the company’s own expectations, as certain projects did not start until later. Power continued to reach good profitability, while Connectivity still has some work ahead on that front. International Operations’ profitability was burdened by challenges in the Baltic states, where e.g. inflation is more of a problem than in Finland. Enersense Q3 adj. EBITDA was EUR 4.4m vs our EUR 6.5m estimate. The company retained its guidance, which implies relatively strong Q4. In our view Enersense continues to progress well and according to their own plan, and the Q3 softness was to a large extent attributable to project timing issues.
Q4 estimates up a bit, some downward annual revisions
Enersense sees Q4 margin gains to be driven by Finland and we expect improved results already from Connectivity. The Baltic countries are a market where Enersense will find more attractive projects long-term, however we don’t expect alleviation to short-term profitability challenges during Q4. We now estimate Q4 adj. EBITDA at EUR 5.6m (prev. EUR 5.3m) and Q4 adj. EBIT at EUR 3.3m (prev. EUR 3.1m), and hence our FY ‘21 adj. EBITDA estimate is down to EUR 17.3m (prev. EUR 19.2m) and that for adj. EBIT to EUR 9.5m (prev. EUR 10.8m). The recent small acquisition of Pori Offshore Constructions got off to a good start as the company won a contract for a port of HaminaKotka project. Enersense still looks for additional smaller or larger M&A targets, and the company had some EUR 27m in cash at the end of Q3.
Peer group discount remains significant
We revise our FY ’21 profitability estimates down by some 10%, while we downgrade our FY ’22-23 estimates by only a few percentage points. Enersense’s peers’ earnings multiples have decreased by around 5% in the past few months, and thus we update our TP to EUR 11 (13). Enersense’s earnings-based valuation remains unchallenging; we retain our BUY rating.
Enersense Q3 figures came in soft compared to our estimates, but the company nevertheless retains its FY ’21 guidance, which implies stronger than expected Q4. The Q4 tilt is due to project cycles and the result is a more balanced quarterly performance since Q3 is often the strongest quarter.
Pihlajalinna releases Q3 results on Nov 4. Our estimates remain intact for now. We continue to see good upside potential due to earnings growth and multiple expansion.
Solid Q2 gains represented a minor earnings beat
Pihlajalinna’s Q2 figures were pretty much in line with estimates. Top line grew 24% y/y from a soft comparison period. Private customer volumes recovered but remained below pre-pandemic levels. Private revenue fell 18% in FY ’20, but corporate and public sector revenues held up. Q2’20 was nonetheless a bit soft for the two as well and thus the corporate and public sector groups were able to post respective 31% and 18% y/y growth rates in Q2’21. The Q3 comparison base is higher but we still expect 10% y/y growth. Q2 profitability improved by some EUR 6m y/y and was a bit better than estimated. Q3 is seasonally the most profitable quarter due to low public sector costs and our EUR 10.6m EBIT estimate is ahead of the EUR 9.0m consensus.
EBIT potential to materialize in the short and long term
Covid-19 services added EUR 8.1m in Q2 revenue and the Q3 level should remain high (with some cost uncertainty), yet it will be of interest to hear to what extent Pihlajalinna expects the level to decline from Q4 onwards as the Finnish vaccination rate reaches 80%. The fading will cause its own top line headwind but the private volume normalization as well as the public side handling of queues, further stretched by the pandemic, should compensate. There’s more profitability potential going forward even with current volume levels. We reckon the Pohjola Hospital acquisition advances pretty much as planned, and thus should be completed by the end of the year or early next year at the latest. We have already added the EUR 60m revenue target to our FY ’22 estimates. The smallish target has been loss-making, but Pihlajalinna seemed confident with respect to achieving rapid results. We hence expect earnings accretion for next year as well.
Current valuation is by no means challenging
Pihlajalinna hasn’t completed significant acquisitions for a while; we estimate 13% growth for FY ’21. We see FY ’21 EBIT at EUR 31.9m and on this basis the multiples stand at ca. 8x EV/EBITDA and 16x EV/EBIT. Both profitability estimates and multiples remain well below those of peers: we continue to consider valuation attractive. We retain our EUR 13.5 TP and BUY rating.
SRV reported weaker than estimated Q3 results, as project margin woes pushed EBIT into the red. Progress is however being made and Q4 completions and potential Pearl Plaza divestment should further strengthen the balance sheet. We adjust our TP to EUR 0.7 (0.8), BUY-rating intact.
Q3 results well below our estimates
SRV reported Q3 results below our estimates. Revenue amounted to EUR 191.1m (EUR 261.1m/235m Evli/cons.), falling below our estimates due to the timing of recognization of income of the Loisto-project but also due to the lower activity in business construction showing more clearly. The operating profit fell to EUR -1.6m (EUR 5.3m/4.6m Evli/cons.), as the weak financial development of the Tampere Areena project and construction material costs and availability impacted on profitability. Actions to strengthen the balance sheet saw the IB net-debt decrease further by almost EUR 53m. In light of the weak Q3 SRV revised its guidance, expecting 2021 revenue of EUR 900-1,000m (prev. 900-1,050) and operative operating profit of EUR 16-21m (prev. 16-26m).
Further strengthening of balance sheet seen
Our revenue estimates for 2021 remain rather unchanged, now at EUR 912.2m, as we were already near the lower end of the guidance range. Q4 will see a clear increase in housing construction revenue with the completion of Loisto. Our revised estimates put 2021 operative operating profit at EUR 17.2m (prev. 21.1m) with the weaker profitability in Q3. SRV targets to close a deal in regards to the divestment of Pearl Plaza during 2021, which together with housing completions in Q4, namely Loisto, would free up a considerable amount of capital and further strengthen the balance sheet.
BUY with a target price of EUR 0.7 (0.8)
With the setback in margins in Q3 and uncertainty from construction material availability and prices we lower our target price to EUR 0.7 (0.8) but retain our BUY-rating.
Suominen’s Q3 gross margin was hit hard, but the guidance and comments on Q4 volumes prompt us to make some positive estimate revisions for next year.
Q3 figures were hit hard, but situation is already improving
Q3 revenue fell by 14% y/y to EUR 99m vs the EUR 96m/100m Evli/cons. estimates. Americas’ top line declined by 21% y/y and that for Europe 4%. There weren’t that many surprises in terms of volumes, but the decline hit gross margin more than expected as the figure fell to 5.5% (vs our 12.0% estimate). Q3 EBITDA thus came in at EUR 4.2m, compared to the EUR 9.5m/9.0m Evli/cons. estimates. Certain (mostly) transient cost measures helped to the tune of EUR 1-2m. According to Suominen there is considerable variation within US customer accounts’ demand, which in our view reflects the local logjam situation where certain non-branded wipes inundated the retail channels and thus blocked many Suominen’s brand wipe customers’ sales.
Our new FY ’22 revenue estimate is EUR 455m (EUR 431m)
We estimate Q4 revenue at EUR 113m (prev. EUR 95m); Suominen sees Q4 volumes a bit lower than in Q2’21, and we expect the respective revenue figures to be similar as nonwovens pricing adjusts to higher raw material prices. Underlying wiping demand remains robust, but there’s still a lot of uncertainty regarding short as well as long term financial performance. Pricing adjusts up in Q4 and we believe margins will continue to improve also early next year. The guidance implies Q4 EBITDA will be roughly in the EUR 9-15m range. The midpoint suggests EUR 48m annual EBITDA, and in our view the figure has a good chance of landing in the EUR 45-50m range: we expect continued q/q improvement from Q4, meaning FY ’22 EBITDA should be well above EUR 40m even if Q4 EBITDA lands at the low end of the range. We previously estimated FY ’22 EBITDA at EUR 48.5m and our revised estimate stands at EUR 50.1m.
We expect annual EBITDA to stabilize around EUR 50m
The volume recovery also means the completed Cressa line as well as the other two projects will not have to suffer from low utilization rates. Suominen is valued around 5.5x EV/EBITDA and 9.5x EV/EBIT on our FY ’21-22 estimates as we expect flat annual profitability development and meaningful volume improvement from the Q3 lows. We retain our EUR 6 TP and BUY rating.
Solteq’s Q3 was weaker than expected due to two project postponements. Uncertainty has increased but Solteq is still well on its way toward solid growth and profitability.
Two project postponements drove weaker Q3 figures
Solteq’s Q3 results took an unfortunate turn from the solid development trend so far during 2021. Net sales grew slower than expected by 12.2% y/y to EUR 14.9m (Evli EUR 16.4m). The adj. operating profit declined slightly to EUR 1.2m (Evli EUR 2.0m). Solteq Digital grew 4.3% to EUR 9.5m (Evli EUR 10.4m) and the adj. EBIT improved slightly to EUR 0.9m (Evli EUR 1.1m) while Solteq Software grew 29.7% to EUR 5.4m (Evli EUR 6.0m) and the adj. EBIT declined slightly to EUR 0.3m (Evli EUR 1.0m). The Q3 results were mainly impacted by the postponement of two larger customer deliveries in the retail-segment due to the prevailing component shortage situation and to some extent by an increase in subcontracting costs due to a lack of specialists in the IT-sector.
Larger part of Q3 concerns look to be temporary
At least on paper the challenges faced in Q3 appear to be of temporary nature. The postponements should have a clearly smaller impact on Q4. The prevailing demand uncertainty due to the pandemic, the component shortage and lack of industry specialists, however, are a concern, but to our understanding no new postponements are seen right now. The share of subcontracting is relatively low but has been increasing and future growth could come at the cost of margins and vice versa. Potential cost increases may in the future ultimately end up being absorbed by the customer. We have made some minor downward tweaks to our Q4 estimates but no larger changes to our coming year estimates.
BUY with a target price of EUR 6.8 (8.0)
We see good potential for Solteq returning back on its H1 track but with our minor estimates and higher uncertainty we lower our target price to EUR 6.8, with our BUY-rating intact. Our TP values Solteq on a slight premium to IT-services peers on 2021e P/E and on par with peers on 2022e P/E.
Vaisala’s 3rd quarter was in our view well-executed considering issues Vaisala is facing in the supply chain. With our revised estimates, we retain our HOLD-rating and raise our target price to EUR 43.0 (42.0).
Vaisala received a fair number of orders (EUR 109.9m, +29% growth y/y) and the order book was on a record level at EUR 164.8m (+22% growth y/y). Topline growth was strong (+19% y/y), totaling EUR 111.5m (Evli: 111.5m). Industrial instruments, life-science, and power industry segments drove the IM to grow by 35% y/y, totaling EUR 47.1m (Evli: 48.1m). W&E grew by 9% y/y to EUR 64.4m (Evli: 63.4m), driven by renewable energy and aviation. Gross margin remained flat and was on a good level at 57.7%. Vaisala’s EBIT margin weakened from 20.7% to 17.3% due to exceptional costs relating to old M&A activities and settlement payments. EBIT ultimately amounted to EUR 19.2m. In Q3, Vaisala invested EUR 12.5m in R&D (11% of net sales).
Some segments are still in recovery mode
The demand in Vaisala’s target segments is one after another brightening up, but there are still some segments stalling. W&E’s meteorology in developing countries is expected to take a longer time to recover. After crawling for a while, IM’s liquid measurements are expected to continue to recover. The good news is that aviation has given some signs of life and the segment is expected to recover gradually. There are still some uncertainties regarding component availability and the company has noted that the visibility has weakened. Vaisala expects the component shortage to last at least to H1’22. So far, Vaisala has been capable to compensate the additional costs of spot priced components by revenue scalability. However, the growth outlook is improved and therefore we have raised our Q4’21 estimates so that the FY’21 figures add up to the upper limit of the company’s guidance. We expect FY’21 revenue to grow by 15.5% y/y to EUR 438.5m and an EBIT margin of 12.5%. During 2022-23, we expect revenue to grow by 8.3% and 6.8% respectively. We estimate the company to reach an EBIT margin of 12.8% and 13.9% respectively.
HOLD with a target price of EUR 43.0 (42.0)
We made minor adjustments to our 2021-23 estimates, based on target markets’ outlook and the company’s recent performance which gives a ground for a target price revision. On our new target price and a 22E P/E multiple of 29.3x, Vaisala is trading approx. in line with its peer group. Given Vaisala’s strong performance during difficult times, technology leadership, and IM’s growth potential, we find a premium to peer group justified during less uncertain times. We raise our TP to EUR 43.0 (42.0) and retain our HOLD-rating.
Etteplan’s Q3 fell slightly short of our estimates. Investments into growth should bear fruition in 2022 but near-term cost and demand uncertainty is seen.
Consti reported good Q3 results, with growth picking up better than anticipated and profitability improving y/y. Construction material costs and availability cause some concern for margins in coming quarters but overall, the outlook still remains favourable. We retain our target price of EUR 14.5 and BUY-rating.
Overall better than expected Q3 results
Consti reported overall good Q3 results and the anticipated pick up in growth was clearly visible. Revenue grew 11.4% to EUR 76.0m (EUR 73.3m/73.0m Evli/cons.), with clear growth in housing companies’ revenue. Profitability also beat our expectations, with EBIT of EUR 3.1m (EUR 2.7m Evli/cons.) and a 0.2pp y/y increase in the EBIT-margin. The order backlog continued to develop favourably, up 15% y/y at EUR 217.9m. Consti reiterated its 2021 EBIT guidance of EUR 4-8m.
Growth picking up, some margin uncertainty
We have slightly raised our estimates in light of the accelerated growth in Q3. We expect an average annual growth of approx. 7% during 2021-2022 (prev. ~3.5%). Growth is driven by the improved order backlog and activity levels and also by the acquisition of RA-Urakointi during the quarter. Demand in the housing market appears to be at healthy levels again, while demand within commercial premises is still seeing recovery. In terms of margins we still remain somewhat on the cautionary side, expecting similar levels during 2021-2022 as seen in 2020 (adj. EBIT-%: 3.4%). The impact of construction material costs and availability did not significantly impact Q3 but will according to the company have a larger impact in Q4. We assume that the impact could also be visible at least during the first quarter of 2022.
BUY with a target price of EUR 14.5
With our estimates revisions ultimately relatively small, we retain our target price of EUR 14.5 and BUY-rating. Our target price values Consti at 14.1x 2022E P/E, roughly on par with the construction peers.
Vaisala had given preliminary figures ahead of Q3 and as such contained no surprises on group level. Net sales grew by 19% y/y to EUR 111.5m and EBIT amounted to EUR 19.2m. Order received grew by 29% y/y and order book remained on a record level.
Suominen’s Q3 revenue was close to estimates, but gross margin plunged 5.5%. EBITDA therefore fell to EUR 4.2m, way below estimates. Suominen nonetheless sees demand recovery is already underway. Suominen’s guidance implies Q4’21 EBITDA will roughly triple q/q.
Etteplan's net sales in Q3 amounted to EUR 66.9m, slightly below our estimates and below consensus (EUR 69.3m/71.0m Evli/cons.). EBIT amounted to EUR 4.6m, below our consensus estimates (EUR 5.2m/5.6m Evli/cons.). Guidance specified: Etteplan expects revenue to amount to EUR 295-310m (prev. EUR 295-315m) and operating profit (EBIT) to amount to EUR 25-28m.
SRV's net sales in Q3 amounted to EUR 191.1m, below our estimates and below consensus (EUR 261.1m/235m Evli/cons.). EBIT amounted to EUR -1.6m, below our estimates and below consensus (EUR 5.3m/4.6m Evli/cons.).
Aspo’s Q3 EBIT was EUR 12.8m without the one-offs. Valuation is still not very high as we see scope for well above EUR 40m EBIT next year, but we consider multiples neutral. Our TP is EUR 14.0 (12.5), rating HOLD (BUY).
There were some EUR 5.2m in one-off Q3 items
ESL posted a record EUR 7.1m Q3 EBIT vs our EUR 4.5m estimate. The market is very favorable as cargo volumes grew by 26% y/y and freight rates are now good across the entire fleet. In our view the Supramaxes are already generating very high margins, while smaller vessels’ pricing should continue to advance from here on. Leipurin results were a bit better than we expected, while Telko achieved EUR 5.9m EBIT (vs our EUR 4.9m estimate) excl. the EUR 3.4m Kauko impairment. There was also the EUR 1.75m one-off item due to the CEO change-related costs.
Strong performance should continue for quite some time
We revise our estimates and now see EUR 10.8m in Q4 EBIT (prev. EUR 9.8m). The guidance constitutes in essence a positive revision and we wouldn’t be surprised to see Aspo upgrade the range more in the coming months (Q4 hasn’t historically paled in comparison to Q3). Port logistics challenges may limit ESL’s Q4 potential, but we view our EUR 6.5m EBIT estimate conservative. ESL and Telko now enjoy very favorable markets, therefore some softening could be due next year. Both subsidiaries nonetheless continue to progress strategy-wise. ESL’s new EUR 70m investments (financing will be some combination of own cash and external pooled funds) are to be ready in ’23 and we view the six small hybrid vessels a good strategy fit. Meanwhile Telko continues to focus on higher margin solutions with its latest acquisition of a small Estonian lubricant distributor.
FY ’22 EBIT should have no trouble topping EUR 40m
Our new FY ’22 EBIT estimate is EUR 40.9m (prev. EUR 39.7m), and on this basis Aspo is valued ca. 13x EV/EBIT. The level is not that high considering cash flow generation and further value creation potential yet reflects present strong conditions. We view our EUR 40.9m estimate a bit conservative as we model only flat EBIT for ESL: we see a reasonable chance for a well above EUR 25m ESL FY ‘22 EBIT. Telko has continued to surprise but for now we don’t expect much more than EUR 18m EBIT going forward. Our new TP is EUR 14.0 (12.5), and our rating is now HOLD (BUY).
Solteq’s Q3 was below our expectations, with revenue at EUR 14.9m (Evli EUR 16.4m) and adj. EBIT at EUR 1.2m (Evli EUR 2.0m). Figures were affected by customer project postponements due to the on-going component shortage. Guidance intact: group revenue in 2021 is expected to grow clearly and the operating profit to improve clearly.
Despite the issues in the supply chain, Detection Technology grew in all of its BUs and achieved double-digit growth rates in Q3. Net sales grew by 12.5% driven by strong demand in medical and industrial applications, while security took the first steps towards growth. We retain our HOLD-rating and adjust the target price to EUR 30.5 (32.5).
Q3 fell short of our expectations
DT’s Q3 net sales grew by 12.5% y/y to EUR 23.2m (Evli: 21.7% y/y, 25.1m). Healthcare investments continued globally and demand for high-end CT equipment drove the MBU’s growth of 18.8% y/y. IBU scored record sales in Q3 by growing 21.5% y/y and managed to win new strategic customers and projects. Despite challenges in the availability of materials, SBU sales were ultimately positive and the market has taken an upward turn towards growth. SBU grew by 0.2% y/y from a weak comparison period. Adj. EBIT improved by 26.5% to EUR 3.3m (14.1% margin) and was below our estimates (Evli: 3.7m).
We made some adjustments
Despite the weaker Q3 result than expected, the growth outlook has brightened up and the company expects double-digit growth from all of its BUs in Q4. However, the component shortage is postponing revenue through prolonged delivery times and increasing cost pressures that eventually might narrow the margins. After considering such issues, we have decided to adjust our FY’21 and long-term estimates, now expecting FY’21 net sales of EUR 90.9m and an EBIT margin of 12.7%. During 2022-23, we expect DT to grow by 16.3% and 12.9% respectively as well as reach an EBIT margin of 16.3% and 17% respectively.
HOLD with a target price of EUR 30.5 (32.5)
Given the estimate revision, the current target price (EUR 32.5) doesn’t reflect the fair value of DT. On our new target price, the company is still traded with a premium (22E EV/EBIT 11% premium to peer median), but on our view, it’s justified given the brightened outlook and growth potential. We retain our HOLD-rating and adjust TP to EUR 30.5 (32.5).
CapMan reported solid quarterly figures once again. Our estimates remain largely intact, with expected near-term carry set to boost profit levels further.
A strong quarter
CapMan reported its Q3 results, which on group level were slightly better than expected. Revenue grew 67% to EUR 14.9m (EUR 12.2m/12.6m Evli/cons.). Operating profit amounted to EUR 10.9m (EUR 10.7m/8.9m Evli/cons.). Business area figures corresponded rather well with our estimates, the largest differences deriving from the EUR 2.2m carried interest from CapMan’s Mezzanine V fund and the Investment business operating profit coming in below our estimates (EUR 5.9m/7.9m act./Evli). Capital under management remained on par with previous quarter levels at EUR 4.3bn, but with EUR 250m raised in October and on-going fundraising growth is well set to pick up. In terms of new products CapMan launched the CWS Investment Partners investment programme in co-operation with AlpInvest, with some USD 90m committed to the first programme and more scheduled for 2022.
Small estimate tweaks
Our estimates have seen only small tweaks post-Q3, for FY 21 a slight increase in management fees in light of the good fundraising progress, seeing >EUR 10m quarterly levels within grasp. Based on management comments we remain fairly confident in a clear increase in carry during the coming quarters, as multiple funds are expected to enter carry in the next six months. For 2022 we expect to see continued growth in management fees and Management company operating profit through carry and >10% growth in the Services business. The fair value changes of own funds (1-9/2021: 26%) has been exceptionally good, and as such we expect a smaller profit contribution in 2022.
BUY-rating with a target price of EUR 3.4
With only smaller estimates revision we retain our target price of EUR 3.4, BUY-rating intact. Q3 in our view continued to prove CapMan’s potential and the outlook remains very promising.
Detection Technology’s Q3 result delivered some double-digit growth, but the result fell short of our expectations. The company expect to see double-digit growth in all of its BUs during Q4’21.
• Group level results: Q4 net sales grew by 12.5% y/y to EUR 23.2m vs. EUR 25.1m/25.2m Evli/cons. Adj. EBIT grew by 26.5% y/y and amounted to EUR 3.3m (14.1% margin) vs. EUR 3.7m/3.9m Evli/cons. R&D costs totaled to 2.6m and were 11.2% of net sales (Q3’20: EUR 2.3m, 11.1%)
• Medical (MBU): sales growth of the MBU was mainly generated by next-generation CT products and net sales grew by 18.8% y/y, totaling EUR 11.9m (Evli: 35.3% y/y, 13.6m).
• Security (SBU): the normalization of demand has started in all segments, and demand has taken an upward turn also in the aviation. Net sales increased by 0.2% y/y from weak comparison period and amounted to EUR 7.5m (Evli: 7.5% y/y, 8m).
• Industrial (IBU): demand was strong in all of the company’s main segments and net sales grew by 21.5%, totaling EUR 3.8 (Evli: 11.6%, 3.5m).
• Component shortage has been affecting DT’s sales and margins throughout the year and was also postponing product deliveries during 3rd quarter of 2021.
• FY’21 outlook: DT expects the demand to continue strongly both in the medical and industrial applications, and the double-digit growth of the MBU and IBU will be greater in Q4 than in Q3 of 2021. The demand in security applications will improve, and the company expects the SBU to have double-digit growth in net sales in Q4 of 2021. DT expects double-digit growth in its total net sales also in H1 2022.
• No changes in medium-term targets: at least 10% net sales growth and an EBIT margin at or above 15%.
Aspo’s headline EUR 7.6m Q3 EBIT didn’t meet estimates, but the figure includes a EUR 3.4m Kauko impairment loss. Both ESL and Telko recorded new profitability highs.
Finnair’s Q3 results and updated outlook didn’t provide major surprises considering the persistent uncertainty around long-haul air travel, however the operating loss guidance until the end of H1’22 was a minor negative.
Some initial steps towards profitability
Q3 revenue amounted to EUR 199m, compared to the EUR 264m/247m Evli/cons. estimates. Passenger revenue came in lower than we estimated, but cargo continued to support operations and in our view the freight performance explains a large part of the narrowing in Q3 operating loss. Q3 EBIT was EUR -109m vs the EUR -149m/-144m Evli/cons. estimates. Demand is right now focused on European leisure travel, while business travel has taken some tentative initial steps in Northern Europe. Finnair’s operating cash flow already turned positive in Q3, the first time since Q4’19. The company has built a EUR 1.2bn cash position; the buffer stands high in part to meet loan repayments due next year. Finnair doesn’t expect any major narrowing in Q4 operating loss. Our updated Q4 EBIT estimate is EUR -76m (prev. EUR -65m).
Profitable RPK levels will still have to wait many quarters
Finnair opens routes to Thailand and the US in November, while Japan and South Korea should follow around year-end. China may not open before H2’22; China is an important destination for Finnair and thus decent profitability will probably have to wait until H2’22. Q1’22 at least will remain in the red, but we would expect losses to narrow considerably already in Q2’22 if destinations excluding China are able to support adequate volumes. Q2’22 is still likely to result in an operating loss. Finnair’s updated outlook wasn’t a huge surprise as it was well known Asian passenger volume recovery will lag those of Western routes. We revise our FY ’22 RPK estimate down by 12%. We now estimate FY ’22 EBIT at EUR 30m (prev. EUR 75m), however we make only minor revisions to our FY ’23 estimates.
We consider FY ’23 multiples to be in line with peers’
Finnair is valued high relative to peers on our FY ’22 estimates (6x EV/EBITDA and 70x EV/EBIT) due to slow Asian route recovery, but on our FY ’23 estimates the multiples narrow to 4x EV/EBITDA and 10x EV/EBIT. We find the levels to be, overall, in line with peers. We retain our EUR 0.65 TP and HOLD rating.
Consti's net sales in Q3 amounted to EUR 76.0m, slightly above our and consensus estimates (EUR 73.3m/73.0m Evli/cons.), with growth picking up clearly to 11.4% y/y. EBIT amounted to EUR 3.1m, above our and consensus estimates (EUR 2.7m Evli/cons.). The order backlog continued to grow well, up 15.0% to EUR 217.9m.
Scanfil’s Q3 EBIT faced some headwinds, but Q4 EBIT is set to improve and outlook for FY ‘22 doesn’t seem bad either.
We expect the Q3 margin softness will prove temporary
Scanfil’s Q3 revenue grew by 18.5% y/y and amounted to EUR 167.8m vs the EUR 165.5m/171.2m Evli/cons. estimates. The growth was for the most part attributable to Advanced Consumer Applications and Energy & Cleantech segments, while Medtech & Life Science continued to grow at a 12% y/y pace. Advanced Consumer Applications had to make many spot components purchases and excluding all such transitory items top line grew by 10.2% y/y. Component availability issues limited Scanfil’s ability to meet customer demand and the challenges also hurt relative profitability. We understand the component scarcity situation limited profitability to the tune of EUR 1.0-1.5m. Q3 EBIT amounted to EUR 9.5m (5.7% margin), compared to the EUR 10.8m/10.9m Evli/cons. estimates. The challenging component situation will not fade away for quite some time, however Scanfil’s comments indicate there should be no major earnings drag going forward.
Spot purchases’ margin dilution is likely to be transient
Inventories increased by 63% y/y and 24% q/q as Scanfil wanted to secure necessary components to meet strong customer demand. This had a negative impact on cash flow, but Scanfil sees the situation is under control and inventories should not grow much more from here on. The new normal, in terms of component availability challenges, might mean revenue streams related to component spot sourcing will begin to generate adequate margins already during the next few quarters.
In our view earnings growth is set to continue next year
We expect Scanfil’s Q4 EBIT to improve q/q and y/y; our EUR 12.5m estimate translates to a very good 6.9% margin. The company’s comments on customer demand and component pricing dynamics suggest favorable outlook for next year’s earnings. We expect organic growth to continue in FY ’22 at a 7% pace; we see Scanfil reaching a 6.6% EBIT margin then, which would translate to EUR 48.5m in EBIT. The Hamburg restructuring also supports earnings growth going forward. Scanfil is valued 7.8-8.6x EV/EBITDA and 10.1-11.7x EV/EBIT on our FY ’21-22 estimates. We retain our EUR 9 TP and BUY rating.
CapMan's net sales in Q3 amounted to EUR 14.9m, above our estimates and above consensus estimates (EUR 12.2m/12.6m Evli/cons.). EBIT amounted to EUR 10.9m, in line with our estimates and above consensus estimates (EUR 10.7m/8.9m Evli/cons.).
Innofactor’s Q3 profitability remained at good levels but growth was not quite as good as expected due to organizational restructuring causing a sales dip in Finland. Recruitments pose some concerns for future growth but all in all the Q3 report did not change much.
Some weakness in sales but profitability remained good
Innofactor reported its Q3 results, which fell slightly short of our expectations. Revenue declined 2.0% y/y but grew 3.0% organically to EUR 13.7m (Evli 14.5m). Revenue growth was affected by organizational restructuring in Finland, which led to a slight dip in domestic sales. EBITDA and EBIT amounted to EUR 1.7m (Evli 1.8m) and EUR 0.9m (Evli EUR 1.0m) respectively, with all other countries except Sweden showing positive EBITDA. With no significant new orders, the order backlog growth halted q/q, but was still up 24% y/y at EUR 72.0m. Innofactor reiterated its guidance, expecting revenue and EBITDA to increase compared to 2020. The Q3 report was in our view slightly more on the negative side, as although profitability remained on good levels the slower sales growth and lower headcount (-9.0% y/y) adds some pressure to growth expectations going forward.
Expect modest growth, new recruitments a slight concern
We have made some minor downward tweaks to our estimates but overall no notable changes. We expect growth of 1.9% and some 5-6% organically (excl. Prime divestment) in 2021. We expect EBITDA (excl. NRI’s) to improve to EUR 8.3m (2020: 7.2m), at a sound margin of around 12%. Our growth estimates for 2022-2023 remain quite low, at 4% and 3% respectively, given the company’s 20% long-term growth target. The lower headcount in Q3 and the noted challenges in the recruitment market raises some additional concerns for growth and is something that we will be monitoring during the coming quarters.
BUY with a target price of EUR 2.1 (2.2)
With the slight additional pressure on growth we adjust our TP to EUR 2.1 (2.2) and retain our BUY-rating. Our target price values Innofactor at approx. 19x 2021e adj. P/E.
Innofactor’s Q3 results were close to our expectations. Net sales amounted to EUR 13.7m (Evli EUR 14.5m), while EBITDA amounted to EUR 1.7m (Evli EUR 1.8m). The order backlog growth halted due to a lack of new significant orders but was still up 24% y/y at EUR 72.0m.
• Net sales in Q3 amounted to EUR 13.7m (EUR 14.0m in Q3/20), slightly below our estimates (Evli EUR 14.5m). Net sales in Q3 declined 2.0% y/y but grew 3.0% organically. Revenue growth in Finland saw a minor negative impact caused by organizational restructuring.
• EBITDA in Q3 was EUR 1.7m (EUR 1.6m in Q3/20), in line with our estimates (Evli EUR 1.8m), at a margin of 12.3%. EBITDA was positive in Finland, Norway and Denmark.
• Operating profit in Q3 amounted to EUR 0.9m (EUR 0.4m in Q3/20), in line with our estimates (Evli EUR 1.0m), at a margin of 6.7%.
• Order backlog at EUR 72.0m, up 24% y/y. Q3 saw no new significant orders received and as such the order backlog remained on previous quarter levels.
• At the end of August, Innofactor decided to renew its strategy to support growth even more strongly, tightening its offering according to the growth areas in question: Digital Services, Business Solutions, Information and Case Management, Data and Analytics, Cloud Infrastructure and Cybersecurity.
• Guidance reiterated: Innofactor’s net sales and EBITDA in 2021 are estimated to increase compared to 2020 (net sales and EBITDA EUR 66.3m and EUR 7.2m respectively).
Etteplan reports its Q3 results on October 28th. We expect to see solid growth figures on the weak comparison period and continued good profitability, with some reservation for potential cost inflation. We retain our HOLD-rating and target price of EUR 17.5.
Growth on weak comparison figures in H1
Etteplan’s H1 started off on quite positively, with revenue growing 10.3%, albeit on weaker comparison period figures due to the impact of the pandemic. Growth was supported by recovery in demand but largely by inorganic growth. Good operational efficiency kept the group EBITA-margin above the target 10% level at 10.5%. Etteplan raised its revenue guidance range to EUR 295-315m (prev. EUR 285-305m), with the EUR 25-28m EBIT guidance range intact. Etteplan has during Q2-Q3 made several mainly smaller acquisitions, F.I.T. (DE) and Skyrise.tech (PL) in Q2 and BST Buck Systemtechnik (DE) and Adina Solutions (FI), strengthening especially the company’s Technical Documentation Solutions and Software and Embedded Solutions service areas and the company’s presence in Europe.
Potential minor cost inflation concerns
Etteplan is set to grow well on the weak comparison period figures, with our Q3 growth estimate at 25.4%. We estimate a group EBIT of EUR 5.2m, at a 7.6% margin. We remain slightly more on the conservative side in particular in regard to profitability in comparison to previous quarters, as some potential triggers for cost inflation were seen in Q2 from new recruitments and own growth initiatives picking up. Q3 is also seasonally slower which will have an impact on figures compared to previous quarters. For the full year we estimate revenue of EUR 300m and an EBIT of EUR 26.4m, quite near the mid-point of the guidance.
HOLD-rating with a target price of EUR 17.5
We have made no significant changes to our estimates ahead of the Q3 report and retain our HOLD-rating and target price of EUR 17.5. Our TP values Etteplan at ~20x 2022e P/E.
Finnair’s Q3 operating loss was smaller than estimated despite certain top line softness. Slow Asian traffic recovery nevertheless continues to limit potential and losses will not subside in Q4. Finnair might not be back to black before H2’22.
• Q3 revenue grew by 105% y/y and was EUR 199.4m vs the EUR 263.7m/246.7m Evli/consensus estimates.
• Adjusted EBIT amounted to EUR -109.1m, compared to the EUR -149.3m/-144.0m Evli/consensus estimates.
• Fuel costs were EUR 48m vs our EUR 77m estimate. Staff costs were EUR 58m vs our EUR 72m estimate. All other OPEX+D&A combined amounted to EUR 212m, compared to our EUR 275m estimate.
• Cost per Available Seat Kilometer was 9.37 eurocents vs our estimate of 12.50 eurocents.
• Finnair expects Q4 operating loss to be of similar magnitude as in Q3. This is not a major surprise compared to the EUR -65.5m/-59.8m Evli/consensus estimate for Q4. Finnair estimates positive operating cash flow for Q4.
• Finnair estimates operating losses will continue during H1’22 due to the slow recovery of Asian traffic. Finnair doesn’t expect return to pre-pandemic traffic levels before 2023, although the H2’22 operational environment could be already closer to that era.
Scanfil’s Q3 revenue landed close to expectations, but the EUR 9.5m EBIT fell a bit short of estimates. Scanfil’s FY ’21 guidance, however, implies Q4 EBIT will be considerably higher.
• Q3 revenue grew by 18.5% y/y to EUR 167.8m, compared to the EUR 165.5m/171.2m Evli/consensus estimates. EUR 11.7m of revenue amounted to transitory separately agreed low-margin customer invoicing due to component availability issues. Most of this transitory revenue was located within Advanced Consumer Applications. Revenue growth excluding the transitory items was 10.2% y/y.
• Advanced Consumer Applications’ top line was EUR 55.4m, while we expected EUR 46.7m. Energy & Cleantech amounted to EUR 43.5m vs our EUR 41.7m estimate. Automation & Safety was EUR 32.5m, compared to our EUR 38.1m.
• Scanfil Q3 adjusted EBIT amounted to EUR 9.5m vs the EUR 10.8m/10.9m Evli/consensus estimates. EBIT margin was 5.7% vs our 6.5% estimate. According to Scanfil material constraints and the Hamburg factory closure caused about a EUR 2m negative EBIT impact for the quarter. Scanfil’s guidance midpoint also suggests Q4 EBIT will be some EUR 3m higher q/q.
• Scanfil guides FY ’21 revenue at EUR 670-710m and adjusted EBIT at EUR 41-44m (unchanged).
• Scanfil retains its long-term financial targets for now (EUR 700m revenue on an organic basis in FY ’23 with a 7% EBIT margin).
With strong growth figures, Verkkokauppa.com achieved its 33rd consecutive quarter of growth, but the competitive environment pressed margins below our estimates. We retain our BUY-rating and adjust target price to EUR 10 (10.8).
Sales mix and increased costs pressed the margins
Verkkokauppa.com delivered strong growth figures, but decreased gross margin, additional warehousing, and marketing costs pressed the profitability below our estimates. Top line grew by 9.1% y/y to EUR 141m (Evli: 139.7m). Online sales grew at an 18.7% y/y pace, while B2B sales were up 22% y/y. Export business returned to the growth path with a sales increase of 4.5% y/y. Gross profit remained even y/y and amounted to EUR 20.9m (Evli: 23m). Gross margin weakened to 14.8% (Evli: 16.5%) and was affected by stronger sales in lower-margin categories. Increased price competition pressed the margins further down. EBIT fell short of our expectations (EUR 6.8m) and decreased by 17% to EUR 4.7m (margin of 3.3%).
We made minor adjustments
While core categories performed well, growth was also seen in evolving categories. Despite the softened markets, the company also gained some market share in traditional consumer electronic markets. The Q4 has usually been price-driven, meaning that coming campaigns might have an impact on the company’s margins. Considering the increased cost pressures, marketing investments, and changes in warehousing, we made only minor adjustments to our FY’21-22 estimates.
BUY with a target price of EUR 10 (10.8)
Verkkokauppa.com reiterated its FY’21 guidance and expects revenue of EUR 570-620m and adj. EBIT of EUR 20-26m. We expect revenue of EUR 600.1m and an adj. EBIT of EUR 21.4m (3.6% margin). Our view on the company’s growth path remains bright, but increased competition made us tweak the profitability down for 21-22E. On our adjusted target price, the company’s valuation is approximately in line with its peer group. We retain our BUY-rating and adjust TP to EUR 10 (10.8).
Raute’s profitability already improved. There’s uncertainty as to how much more margins will improve in the short-term, but we remain confident Raute’s positioning is favorable while the next expansion cycle has now begun.
Still shy of long-term profitability potential
Q3 top line was EUR 38m vs our EUR 36m estimate. Russia drove projects’ 28% y/y growth, while services grew 50% y/y from a low comparison base. Raute has booked many modernization orders in recent quarters and the pace didn’t falter, in fact Q3 modernization orders helped services’ intake to a record high of EUR 21m. EBIT improved to EUR 1.9m, vs our EUR 1.4m estimate, a reasonable level but still short of long-term potential. Other operating costs remained high, at EUR 4.6m, as Raute continued to invest in R&D, digitalization, and marketing. These efforts should help Raute’s emerging markets presence in the long-term.
Strong growth supports improving profitability estimates
We expect FY ’21 orders to top the record seen in ’18. Raute’s advanced markets (Europe, North America & Russia) now drive activity, and there are two big potential Russian projects to further secure outlook for the coming years. Pandemic restrictions still limit potential within maintenance services, and the pandemic has postponed emerging markets prospects, but we view Raute’s long-term position favorable and there’s reason to conclude competitiveness has improved due to the acquisition of Hiottu (a small vendor of e.g. machine vision solutions). We don’t expect Q4 EBIT to be yet that great, but we see Raute is set to achieve EBIT margins clearly above 5% in the coming years.
We make only marginal adjustments to our estimates
Raute has plenty of workload and outlook for further orders remains strong. Project execution and margins are hence major short-term focus areas. Raute had certain project execution issues in ’18, but this time the challenges will be different and not Raute-specific. We expect Raute to reach EUR 10m in FY ’22 EBIT. There’s still uncertainty regarding how much Raute’s EBIT will improve in the short-term (cost inflation is a risk), but we believe the company to be able to achieve more than EUR 12m in FY ’23 (for now we estimate the figure at EUR 11.8m). Raute is valued 6.2-7.5x EV/EBITDA and 8.4-10.1x EV/EBIT on our FY ’22-23 estimates. We retain our EUR 26.5 TP and BUY rating.
Consti will report its Q3 results on October 27th. We expect to see growth to start picking up supported by the good order intake during H1 and for profitability to remain at healthy levels. We retain our BUY-rating and TP of EUR 14.5.
Slight growth and healthy profitability (excl. NRI’s) in H1…
Consti’s first half of 2021 got off to a decent start. Revenue grew y/y, albeit at a minor pace of 1.4%, with slight pick-up in the second quarter. The order intake improved well, up 30.5% to EUR 168m. As a result, the order backlog was also up y/y by 11.5% at 236.2m. Q2 saw an unfortunate hit to profitability due to the unfavourable outcome of the Hotel St. George arbitration proceedings resulting in a one-off loss of EUR 3.4m. Nonetheless the H1 adj. EBIT-margin remained on par with previous year levels of 2.6% and improved slightly in Q2. Consti lowered its guidance due to the arbitration proceedings ahead of Q2, expecting an EBIT of EUR 4-8m in 2021 (prev. EUR 7-11m).
… with expectations of pick-up in growth during H2
We expect growth to pick up in H2 supported by the good order intake during the first half of the year and a good activity level. Consti’s order intake was aided by its first new construction projects and although demand in certain commercial areas still remain affected by the pandemic, the housing company market has been recovering well and should support demand going forward. We expect growth of 7.5% in Q3 and 4.3% for FY 2021. In regard to profitability Consti achieved rather decent margins already during the previous year and with minor uncertainty due to the recent fluctuations in construction material costs we expect little improvement in margins during H2. We expect Q3 EBIT of EUR 2.7m and FY 2021 EBIT of EUR 5.9m, at the mid-point of Consti’s guidance range.
BUY-rating with a target price of EUR 14.5
We have made no adjustments to our estimates ahead of the Q3 report. We retain our BUY-rating and target price of EUR 14.5 Our target price values Consti at approx. 17x 2021 P/E (excl. arbitration proceedings items).
Verkkokauppa.com’s Q3 earnings fell short from our estimates, while revenue growth topped the estimates. Top line grew by 9.1% to EUR 141m, gross profit remained steady y/y at EUR 20.9m and adj. EBIT amounted to EUR 4.7m.
• Net sales topped our estimates (EUR 139.7m) and grew by 9.1% y/y to EUR 141m, driven by all business segments.
• The strategic growth area, B2B, grew strongly by 22% in quarter. Growth came from the customer segments of large as well as small and medium sized enterprises. The export business returned to the growth path once travel restrictions were relieved, and export sales increased 4.5% during the period, representing 6% of total sales. The company succeeded well in converting many online visitors to regular buying customers during the comparison period, with an improvement of conversion rate.
• Gross margin was 14.8% and fell below our estimates (16.5%). Gross profit ultimately amounted to EUR 20.9m and was on the same level as in comparison period. Gross margin was affected by tightened competition in lower-margin categories like phones, computers, and home appliances. Also, the share of low-margin products was increased in Q3.
• Adj. EBIT was below our estimates (EUR 6.8m) and was mostly affected by tightened gross margin. The EBIT saw a decline of 17% and amounted to EUR 4.7m (margin of 3.3%).
• Adj. EPS amounted to EUR 0.08 (Evli: EUR 0.12) and saw a decline of 15%.
• The company guides EUR 570-620m revenue and EUR 20-26m adj. EBIT for FY ’21 (unchanged)
Detection Technology will report its Q3 result on October 27th. We have made no changes to our estimates ahead of Q3, expecting revenue to grow by 21.7% to EUR 25.1m and an EBIT margin of 14.7%.
Q2 included some seasonality
The Q2 result was good on a group level, but there were deviations between BUs. The company expected and saw pick-up in SBU’s growth towards the end of the quarter, but with the sluggish performance of aviation SBU’s top line still declined by 11.7% y/y. MBU had a strong quarter and saw a growth of 37% y/y while IBU faced some short-term seasonality and declined by 10.4% y/y. The company grew by 11.4% y/y to EUR 23.5m driven by MBU. The EBIT margin improved from 12.3% to 12.6% y/y and
EBIT ultimately amounted to EUR 3m.
Medical expected to be in the driver’s seat
We expect Q3 net sales to grow from a pretty weak comparison period by 21.7% y/y to EUR 25.1m. We estimate MBU to grow by 35.3% driven by strong demand for CT equipment. We expect IBU to recover from the seasonal decline in Q2 and grow by 11.6% while we expect SBU to reverse the sales decline trend
and grow by 7.5%. We expect EBIT to improve to EUR 3.7m (margin of 14.7%) driven by stronger revenue growth. The component shortage is still tightening the margins as
component prices have increased. To our understanding, the shortage has affected DT’s sales volumes. Depending on the source, the shortage is expected to last at least until H1’22.
HOLD with a target price of EUR 32.5
We have made no changes to our estimates ahead of Q3. With 22E EV/EBIT 24.8x and P/E 33.7x, DT’s premium to peer median is 15% and 25% respectively. The stock is not cheap, but we see long-term potential in the business as the security market growth kicks in and still emerging technologies develop and commercialize. We retain our HOLD-rating and TP of EUR 32.5.
Raute reached an already reasonable EUR 1.9m EBIT in Q3. Both revenue and profitability beat our estimates. Q3 order intake did not quite reach our estimate, but Raute’s order book touched an all-time high of EUR 150m.
Suominen releases Q3 results on Oct 28. The company issued a negative profit warning just before the release of its Q2 report; we make no changes to our lowered estimates ahead of the Q3 report.
We leave our estimates unchanged for now
Suominen’s Q2 was still good in terms of revenue and profitability, although the US inventory pile-up already began to have an effect and led to some top line softness. Americas’ Q2 revenue declined by 13% y/y and thus Suominen’s EUR 114m top line fell short of the EUR 120m estimates (Europe still grew by 3% y/y). Suominen’s gross margin however remained a strong 14.7%, which helped the company to reach EUR 15.3m in EBITDA, in other words somewhat above estimates. We revised our H2’21 as well as FY ’22 estimates down, and we leave our estimates unchanged ahead of the report. We still expect Americas’ Q3 revenue to have dipped by 24% y/y; we estimate 6% y/y drop for Europe. We estimate Q3 EBITDA at EUR 9.5m.
Focus will be on the US volume recovery from Q4 onwards
We see Suominen H2’21 revenue down by 16% y/y. The effect, when combined with our estimated ca. 400bps y/y softening in gross margin, is a EUR 12m y/y decrease in H2’21 EBITDA to EUR 19.6m. We find raw materials prices relevant for Suominen did not gain that much during Q3, at least compared to the surge seen in Q2. The Q3 report’s focus will be on how the US inventory situation looks now and to what extent the supply jam can be expected to dissolve by the end of Q4. We also expect Suominen to have either completed or to be near completing the announced investments in Italy and the US.
Some y/y softness in FY ’22 EBITDA due to strong H1’21
We estimate FY ’22 revenue at EUR 431m, which implies on average 13% higher quarterly revenue going forward from H2’21. We expect this growth to help operating margins up by ca. 100bps from our estimated Q4’21 levels, and we therefore estimate FY ’22 EBITDA at EUR 48.5m, down by some EUR 5m y/y. Suominen is now valued around 5.5x EV/EBITDA and 9x EV/EBIT on our FY ’21-22 estimates. We consider these levels very modest despite the uncertainties related to volumes and gross margins. We retain our EUR 6 TP and BUY rating.
Vaisala revised its guidance for FY 2021 and disclosed preliminary figures for Q3’21. The company is now expecting revenue of EUR 425-440m (prev. 400-420m) and an operating profit (EBIT) of EUR 48-58m (prev. 40-50m).
Strong 3rd quarter
Preliminary orders received and net sales were strong, EUR 109.9m (growth 29% y/y) and EUR 111.5m (growth 19% y/y) respectively. Preliminary EBIT was a bit weaker at EUR 19.2m (19.5m), 17.3% (20.7%) of net sales. To our understanding, the profitability was burdened by increased material costs. The company had a robust Q3 and demand for Vaisala’s offering continued strongly in both BUs, especially in Industrial Measurements. Despite the component shortage, Vaisala found solutions to most availability issues together with suppliers and by purchasing higher-priced components from the spot market.
The component shortage is expected to continue
The global shortage of components is expected to continue during the fourth quarter and the first half of next year. Vaisala estimates, that component shortages will continue to generate additional material costs during the fourth quarter of 2021. We have revised our net sales and EBIT estimates for 2021-23E to reflect the company’s strong performance and a solid outlook. We expect the company to grow by 14.5% to EUR 434.5m driven by 26.1% growth in IM, while we expect W&E to grow by 7.4% in 2021. We estimate the company to reach an EBIT margin of 12.6% in 2021. For 2022-23E we expect Vaisala to grow by 8.3% and 6.8% respectively.
TP of EUR 42 (prev. EUR 38) with HOLD-rating
On our revised FY 22 estimates, Vaisala trades at a premium compared to its peers. Vaisala has performed well during FY 21 but considering the uncertainties relating to component shortage and availability, we do not find the valuation overly stretched (premium of 27% and 9% to 2022E EV/EBIT and P/E peer median). With our raised estimates, we adjust our TP to EUR 42 (prev. EUR 38) and retain our HOLD-rating.
Finnair reports Q3 results on Oct 26. Losses remain large and focus is on narrowing them from Q4 onwards. We expect Finnair to achieve break-even EBIT in H1’22 even if traffic still continues to normalize throughout H2’22.
Q3 losses are going to be steep like before
Q3 traffic figures show revenue passenger kilometers doubled y/y and tripled q/q but were still only 13% of Q3’19 levels. The Q3 passenger volumes were also significantly below our estimates and hence we revise our revenue estimate down to EUR 264m (prev. EUR 332m). We now expect EUR 149m Q3 operating loss (prev. EUR 132m). Jet fuel prices have also advanced by some 25% during the past three months (average prices increased by about 10% q/q in Q3). We still expect losses will begin to narrow in Q4, however we don’t see the recovery quite as fast as before and now estimate Q4 operating loss at EUR 65m (prev. EUR 13m). Somewhat slower-than-anticipated recovery should not be a major issue for Finnair, considering e.g. the recent sale-and-leaseback transaction which untied more than USD 400m.
We expect FY ’23 RPK to be 95% of FY ’19 levels
Important destinations like Japan and South Korea have progressed with vaccinations, but Finnair’s Asian passenger volumes remain low for now. Asian Q3 RPK was only 4% of Q3’19 levels, while European RPK had already reached 21% of similar comparable levels. North American RPK also progressed to 19%, however Finnair does only marginal volumes on those routes. The Asian reliance means Finnair’s volume recovery takes at least a bit longer than that for many other Western airlines. We expect Finnair to reach break-even EBIT in H1’22, and decent profitability should be possible during H2’22. The company could therefore achieve modest profitability next year, but more significant annual EBIT may have to wait until FY ’23. We cut our FY ’22 EBIT estimate from EUR 150m to EUR 75m, while our FY ’23 estimate remains basically unchanged at around EUR 200m.
The inevitable passenger volume recovery is fully valued
Finnair is bound to make a strong operational recovery sooner or later, but in our view this outlook is pretty much fully valued already. Finnair is valued ca. 30x and 11.5x EV/EBIT on our FY ’22-23 estimates, a level we find to be well in line with primary European peers. We retain our EUR 0.65 TP and HOLD rating.
Verkkokauppa.com reports its Q3 results on Fri, the 22nd of Oct. Preliminary figures show a solid third quarter and our attention will concentrate on the comments regarding end of the year as crucial campaign season arrives and temporary supply chain problems still exist.
Q2 figures topped estimates
Verkkokauppa.com’s strong Q2 result topped estimates. Top line grew by 6% y/y to EUR 131m, driven by strong B2B sales and online transition. Growth in consumer sales was moderate and export sales decreased due to COVID-19 restrictions. The pandemic restrictions still strengthened online sales share, not to mention the positive effects of consumer purchase behavior. Profitability was boosted by increased gross margin through strong sales in higher margin evolving categories like Sports, Home & Lighting, and BBQ & Cooking. EBIT eventually amounted to EUR 5.1m (EBIT margin of 3.9%).
Waiting for further evidence on strategy execution
The company guides EUR 570-620m revenue and EUR 20-26m adj. EBIT for FY ‘21. We expect Q3 net sales to grow by 8% y/y to EUR 139.7m (EUR 138.6m cons.) and an adj. EBIT margin of 4.8% (4.5% cons.). Our FY ‘21 net sales estimate is approx. at the midpoint of the company’s guidance, at EUR 599m (EUR 592m cons.), and adj. EBIT estimate at the upper bound of the guidance, at EUR 24.8m (EUR 23.5m cons.). Verkkokauppa.com’s CMD elaborated on its strategy execution. The execution plans sound reasonable on paper, but further evidence is needed before we raise our estimates nearer the company’s long-term targets.
Current valuation leaves long-term upside potential
Verkkokauppa.com’s absolute valuation has slightly increased since our last update, but the company is still valued at a discount compared to its Nordic and European online-focused peers. On our FY ‘22 estimates the company trades at an EV/EBIT of 12.6x (12% discount to online-focused Nordic and European peers). We retain our TP of EUR 10.80 and BUY-rating.
Raute reports Q3 results on Oct 22. We make only minor revisions to our estimates to reflect recent new orders and continue to expect strong earnings growth from here on.
We estimate Q3 order intake at EUR 63m
Raute’s environment showed considerable signs of improvement already in Q2. The company booked one large EUR 30m Lithuanian order back then and the flow continued in Q3 with two meaningful Russian orders worth a total of EUR 34m. It will be of interest to hear Raute’s comments on current Russian and Eastern European activity levels, not to mention the pace of potential recovery in other geographies, but the fact is Raute now has enough workload for the foreseeable future. The three mentioned orders will all be delivered next year and thus it’s very clear both top line and profitability will continue to improve.
We make only minor order intake updates to our estimates
Raute began Q3 with an already very high EUR 129m order book and we estimate the figure to have increased further to EUR 156m by the end of the quarter. We understand this would be a new record high (Raute had a EUR 142m order book at the end of Q1’18) and thus the company is in an excellent position to achieve steep earnings growth during the next few years. We expect Raute to post EUR 1.4m in Q3 EBIT; this level is still far below potential since in our view Raute should be able to reach at least EUR 2-3m EBIT per good quarter. The company was able to post some EUR 3-4m quarterly levels during its previous boom cycle (Q3’18 was a record with EUR 5.6m in EBIT). We expect profitability will continue to improve from here on and estimate FY ’22 EBIT at EUR 10.5m.
Valuation is modest at a point where figures are improving
In our view Raute is now valued at undemanding multiples after a period of few years during which both new orders and profitability came under pressure. There are still uncertainties e.g. to what extent the pandemic might bother business, but we reckon our steep earnings estimates for the coming years are reasonable considering Raute was able to achieve EUR 11-15m EBIT in FY ’17-18. On this basis next year’s multiples can be described on the low side, at around 7x EV/EBITDA and 9x EV/EBIT, and even more attractive beyond that point. We retain our EUR 26.5 TP and BUY rating.
Scanfil made a minor guidance update and by implication organic growth rate will reach well into the double digits this year. We upgrade our FY ’21 growth estimate by 4% and expect the positive momentum to spill over to next year as well. We retain our EUR 9 TP; our new rating is BUY (HOLD).
FY ’21 revenue guidance midpoint increases by 5%
Scanfil issued a small guidance update. The new range is EUR 670-710m in FY ’21 revenue and EUR 41-44m in adj. EBIT, while the previous guidance was respectively EUR 630-680m and EUR 41-46m. Most important recent trends, namely strong customer demand and climbing component prices, have persisted. Scanfil continues to flag the supply chain risk related to semiconductor availability and the guidance update is not in our view that big news. Our previous estimates for this year were EUR 658m in revenue and EUR 43m in adj. EBIT. Our updated revenue estimate stands at EUR 681m; we make no changes to our absolute FY ‘21 adj. EBIT estimates.
Strong growth supports absolute profitability estimates
Scanfil H1’21 growth amounted to 12% y/y; we previously estimated H2’21 y/y growth at above 8% and now expect more than 16%. We reckon the positive surprise extends beyond this year and we have updated our FY ’22 growth estimate to 7.0% (prev. 5.8%). The improved growth outlook supports our absolute profitability estimates for the coming years to the tune of EUR 1-2m. The updated outlook also means the EUR 700m organic revenue target for FY ’23 is now pretty much irrelevant as the company might well break through that threshold already this year. We expect Scanfil to communicate a new long-term target at some near future date, however we don’t expect the company to make any revisions to its long-term 7% EBIT margin target.
In our view valuation has now turned more attractive
Scanfil’s share price has slipped a bit since the previous update while growth outlook has improved an additional notch. On our updated estimates for FY ’21-22 Scanfil is now valued 8.0-8.6x EV/EBITDA and 10.3-11.8x EV/EBIT. The multiples remain slightly above those of a typical peer, but we continue to view the premium warranted. We retain our EUR 9 TP; our rating is now BUY (HOLD).
In its first-ever Capital Markets Day, Verkkokauppa.com presented details on its new (revealed in Feb 2021) strategy’s implementation. The company’s target is to achieve EUR 1bn revenue, EUR 50m operative profit (>5% EBIT margin), and to lower its fixed costs to <10% of revenue by the end of 2025. We retain our TP of EUR 10.80 and BUY-rating.
New sources for growth and improved margins
The management introduced factors to accelerate growth rate: a focus on the assortment (core, evolving, and untapped categories), improved customer experience, the capture of shift to online, and new business through acquisitions or new private label products. Moreover, the company aims to speed up delivery performance to maintain its market-leading position and offer new financial, near-product, and standalone services to generate more profitable growth.
By improving its gross margin and lowering fixed costs the company expects to reach EUR 50m in operative profit by the end of 2025. According to the company, the focus on increasing the amount of the evolving and untapped categories in its assortment is set to contribute to higher gross margins. Fixed costs will be lowered through the enhancement of logistics, the automation of supply chain and product management, in addition to the improvement in marketing performance as well as segmentation. These initiatives are also set to deliver better operational efficiency and scalability.
No changes in the big picture
The CMD revealed further details on strategy execution, but the process is still in the early stages and the event didn’t change the big picture. Outlook remains bright and the management has confidence on strategy implementation. We keep our estimates intact, expecting revenue in 21E-22E to reach EUR 599m and EUR 644m respectively, and an adj. EBIT margin of 4.1% and 4.3% respectively. With our estimates intact we retain our TP of EUR 10.80 and BUY-rating.
Marimekko specified its outlook for FY 2021, now expecting adj. EBIT margin to be above that of the comparison period (2020: 16.3%). Revenue guidance remains intact and is expected to grow from the previous year (2020: EUR 123.6m). Our estimates were already in line with the new guidance; we make no changes to our estimates or recommendation.
In its Capital Markets Day, Vaisala presented its revised strategy and financial targets for 2021-2024. Revenue growth and EBIT-margin targets were raised to 7% (5%) and 15% (12%) respectively.
Continuity by increasing growth ambition
According to the company’s management Vaisala’s strategy has so far been successful and thus the renewed strategy saw no significant changes. What is new in the strategy, is the increased ambition to grow and scale the businesses. The company will continue investing in R&D, maintain a leading position in flagship markets, grow in growth markets and generate new business in emerging markets. The company’s management noted some factors to create synergies between BUs and scale the business such as: units using common software and hardware modules and platforms in their products, continuously developing the company’s production system, and improvement of processes, tools, and competences.
Targets are set relatively high
During 2021-2024, Vaisala aims for an average annual revenue growth rate of 7% (prev. 5%). The profitability target is to achieve a 15% EBIT-margin (prev.12%) during the strategy period. During 2015-2020 Vaisala has achieved an annual growth rate of ~3% and achieved an EBIT-margin of ~10% on average. The new target is set relatively high, which reflects a higher ambition level. The company’s management highlighted that increases in revenue will scale and improve the EBIT-margin. According to the company’s management, the target growth rate doesn’t include inorganic growth, and thus our focus is on organic performance of IM and W&E’s capabilities to generate new businesses such as renewable energy and air quality. In fact, IM has grown relatively well in past few years and there is potential in W&E’s new emerging markets and applications, such as renewed energy and Data/Software as a service (DaaS/SaaS). We see the targets to be achievable should the company continue to perform well in its flagship markets and growing and generating new growth/emerging markets.
HOLD with a TP EUR 38.0 (36.0)
We increased our estimates for FY 2022 and 23 and expect the company to grow 7.7% and 6.8% respectively. We expect the EBIT-margin to gradually improve towards the long-term target level and estimate a 13.9% EBIT-margin in FY 2023 driven by scalability and revenue growth in both business units. Vaisala’s valuation is quite stretched compared to peers. We still accept a premium to Vaisala’s valuation due to the company’s technology leadership, good market position, and increased growth and profitability outlooks. We retain our HOLD recommendation and increase our target price to EUR 38.0 (36.0).
Exel’s margins take a hit this year, but we see Exel’s favorable positioning will remain intact and next year’s results should more than make up for the interim dip.
The negative factors have been discussed earlier
Exel issued a negative profit warning yesterday. The company’s earlier outlook guided revenue as well as adj. EBIT to increase, whereas the updated guidance says revenue is to increase significantly while adj. EBIT is to decrease. We don’t view the revenue update a major surprise but the FY ‘21 profitability downgrade is negative news. According to Exel raw material availability has weakened, and both material as well as logistics costs have increased. Exel also says certain high volume carbon fiber Wind power customer applications have generated low margins during their ramp-up phase. These negative factors were discussed already over the spring and summer, but we expected margin improvement in H2 after some softness seen in Q2.
We expect profitability back to high levels in FY ‘22
We already expected strong top line growth for this year and thus we revise our estimate only a bit, from EUR 124.9m to EUR 125.8m. Our previous adj. EBIT estimate for FY ’21 was EUR 10.8m, which we now revise down to EUR 8.9m. We estimate 17% y/y revenue growth for Q3 (Exel grew 23% y/y in Q2). We now expect EUR 1.9m in Q3 adj. EBIT (prev. EUR 2.7m), a bit below the EUR 2.0m comparison figure. We therefore estimate Q3 EBIT margin to have softened to 6.3%. We now expect 6.8% margin for Q4, in other words EUR 2.1m EBIT (prev. EUR 3.2m). In our view Exel’s composites pricing will adjust to higher raw materials prices going forward and hence the company should be able to make up for the interim profitability drop next year when the raw materials and logistics markets have normalized.
We still consider valuation not very demanding
Our FY ’22 revenue estimate is EUR 139.0m (prev. EUR 137.4m), while we revise our EBIT estimate down to EUR 12.4m (prev. EUR 13.5m). The 8.9% EBIT margin estimate is in line with the figure seen last year while our corresponding top line estimate is 28% above the EUR 108.6m in FY ’20 revenue. Exel is valued 9x EV/EBITDA and 15x EV/EBIT on our FY ’21 estimates. These levels are not that low but turn attractive at ca. 7x and 10x on our FY ‘22 estimates. Our new TP is EUR 10.0 (11.5); retain BUY rating.
Scanfil hosted its first-ever CMD yesterday, during which the company elaborated on customer service and internal processes. Long-term financial targets were left unchanged.
The focus was on Scanfil’s positioning and latest trends
The CMD added color on Scanfil’s comprehensive manufacturing service model and value chain positioning. Scanfil’s service has over the years evolved to cover the entire life cycle for many high-mix low-volume industrial electronics products. Scanfil’s own processes now appear well harmonized across the factory network. Scanfil can take care of the final product’s delivery to end-use location, as highlighted in the case of TOMRA’s reverse vending machines and grocery stores. Established OEM customers amount to 85% of accounts (95% of revenue) while start-ups make up the rest. Each factory has its own P&L and Scanfil monitors their strategic position as well as financial performance. The divested plant in Hangzhou was performing well in financial terms but no more seemed a great fit strategy-wise, whereas in the Hamburg closure case the reverse was true. According to Scanfil the Connectivity segment should have the highest relative growth potential, not a big surprise considering it is still by far the smallest of the five. Semiconductor sourcing challenges seem set to last at least until 2022 and affect accounts across all the segments. Scanfil doesn’t see any internal bottlenecks an issue; business has mostly managed to stay on course thanks to extended planning and demand forecasts.
Organic growth potential is strong for the coming years
Scanfil recently announced the EUR 6m planned investment in Suzhou to double the current plant’s production capacity. We consider this an efficient way to address organic growth opportunities driven by Chinese demand. Scanfil has also added new staff in China and the US to help capitalize on local sales potential. We continue to expect ca. 7% organic CAGR going forward, a strong figure in the EMS context.
The overall valuation context has not changed
Scanfil left its long-term financial targets intact for now and we make no changes to our estimates. Valuation hasn’t changed much since the last update; Scanfil trades around 8.5-9.0x EV/EBITDA and 11-12x EV/EBIT on our FY ’21-22 estimates. We retain our EUR 9.0 TP and HOLD rating.
Fellow Finance’s H1 revenue fell short of our expectations as a result of the business financing driven growth. We expect a return to growth in H2 but have lowered our 2022-2023 growth expectations by some ~10%. We adjust our TP to EUR 3.8 (4.0) and retain our BUY-rating.
Loan mix driven revenue decline in H1
Fellow Finance reported somewhat twofold H1 results. With the loan mix having shifted more towards business financing and the relative fee income to loan volume lower than anticipated revenue was below our estimates, declining 5.3% y/y to EUR 5.5m (Evli EUR 6.2m), despite the 31% y/y growth in intermediated loan volume. EBIT of EUR 0.5m was still in line with our estimate (Evli EUR 0.5m) as a result of reduced costs from lower broker fees and credit losses from Lainaamo as well as a downsizing of Fellow Finance’s own balance sheet stock. Costs did see some additional burden from growth investments, with new and up-coming product launches and slight growth in personnel.
Set to return to growth but pace still somewhat lackluster
We have slightly lowered our 2021 estimates, now expecting revenue of EUR 11.7m (prev. 13.1m) and EBIT of EUR 1.0m (EUR 1.4m) and lowered our 2022-2023 revenue estimates by ~10%. We expect double-digit growth in H2 but for costs increases due to growth investments and the announced combination agreement to keep bottom-line figures at similar levels as in H1. We expect intermediated loan volumes to rebound to 2019 levels but a lower revenue level with the growth in business financing. The easing of temporary regulations domestically and abroad provides support for continued growth in fee income in the near-term, while interest income should see declines with the downsizing of the balance sheet lending.
BUY-rating with a target price of EUR 3.8 (4.0)
In light of our slightly lowered estimates, mainly on the growth side, we adjust our target price to EUR 3.8 (4.0). With the new growth initiatives and loan volume rebounds Fellow Finance is set for a return to growth. We retain our BUY-rating.
Fellow Finance’s H1/21 results fell short from our estimates on the growth side, with revenue of EUR 5.5m (Evli EUR 6.2m), driven by the loan mix due to growth in lower margin business financing. EBIT amounted to EUR 0.5m (Evli EUR 0.5m). The guidance for 2021 remains intact, expecting growth in 2021 but for the result to remain slightly unprofitable due to growth investments.
Netum grew faster than expected in H1 but otherwise showed little other surprises. Deal flow and growth in headcount provide good support for continued clear double-digit growth. We retain our HOLD-rating and adjust our target price to EUR 4.6 (4.4).
Growth surpassed expectations, no larger surprises
Netum reported its H1 results, which all in all were slightly better than expected. Revenue grew organically at a good pace of 21.7% to EUR 10.4m (Evli EUR 9.8m). The comparable EBITA grew to EUR 1.6m (Evli EUR 1.5m). The comp. EBITA-margin declined slightly y/y to 15.4% (H1/20: 17.2%), which can be largely explained by significant new recruitments. The company’s IPO had a negative impact of EUR 0.9m on earnings figures and the comparable EPS was at EUR 0.12 (H1/20: 0.15).
Growth prospects looking good
Netum has been very successful in new recruitments and the personnel grew by nearly 50% y/y to 171. As such the company has been able to manage profitability well given the quite minor dip in relative profitability. The deal flow has been good, including several significant long-term contracts, which with the success in recruitments should support growth remaining well in the double-digits in the near-term. The for Netum strategically important cyber security business was made a separate business area at the start of the year and has according to the company performed well, which in terms of relative growth has been a driver in our growth estimates. We have made minor, relatively insignificant upwards adjustments to our near- to mid-term estimates. Our 2021 estimates for net sales and comp. EBITA of EUR 21.6m and EUR 3.4m remain quite near the top of the company’s guidance of 2021 net sales and comp. EBITA of EUR 20-22m and EUR 3.1-3.5m respectively.
HOLD with a target price of EUR 4.6 (4.4)
In light of our minor estimates revisions and the good first half of 2021 we adjust our target price to EUR 4.6 (4.4). Our target price values Netum at approx. 20x 2021 adj. P/E (excl. IPO expenses and goodwill amortization). We retain our HOLD-rating.
Netum’s H1 was slightly above our expectations. Net sales grew 21.7% organically to EUR 10.4m (Evli EUR 9.8m) while the comparable EBITA amounted to EUR 1.6m (Evli EUR 1.5m). Netum reiterated its 2021 guidance, expecting net sales and comparable EBITA in 2021 to amount to EUR 20-22m and EUR 3.1-3.5m respectively.
Endomines’ Q2 was focused on production start-up and with delays at Friday serious production figures will have to wait until 2022. We adjust our target price to SEK 2.8 (2.9) with our rating now HOLD (BUY).
Working on production start-up
Endomines reported its Q2 results. With Friday still under care and maintenance during Q2, Endomines as expected did not produce any new gold concentrate and no revenue. Costs were higher than anticipated as the ramp-up of operations progressed and with significant D&A, relating largely to the Friday mine, Q2 EBIT of SEK -76.9m was clearly below our expectation of SEK -20.0m. Endomines continued its efforts to bring the Friday-mine back into production, having invested one million USD on upgrading the Orogrande Processing facility and enhancing the production capacity of the mine. Endomines has also begun n exploration surface drilling program for the Montana gold assets, a fundamental part of Endomines’ long-term value creation potential.
Seeing Friday + Pampalo production of ~20k oz in 2023
Endomines updated its mid-term goals for the Friday and Pampalo assets, expecting annual gold production of 7,800-9,000 oz and 10,000-11,500 oz respectively, at full production. Full production for Friday is expected by Q4 2021/Q1 2022 and Q2/Q3 2022 for Pampalo. The new Friday estimate is slightly softer than the previous 9,000 oz initial production target but future capacity expansion could still be viable. We have now also included estimates for Pampalo, expecting production to rise to some 20k oz in 2023 as both sites should have reached target capacity by then. With further near-term delays in the start-up of the mill at Friday (expected in late August) the 2021 production estimate was lowered to 1,500 oz (prev. 3,000-4,000 oz), which given pre-Q2 news was not completely surprising.
HOLD (BUY) with a target price of SEK 2.8 (2.9)
We have made some adjustments to our SOTP-model, based on which we adjust our target price to SEK 2.8 (2.9). With the recent share price increases we lower our rating to HOLD (BUY).
Marimekko’s Q2 figures came in above estimates. The company is still only laying out the foundation for sustained international expansion, and we believe this underpins earnings growth potential for years to come.
EBIT margin potential will not fully materialize this year
Finland’s 61% y/y growth drove Q2 top line to EUR 32.7m, up 40% and above the EUR 29.3m/29.3m Evli/cons. estimates (last year’s store closures softened the comparison period). Both Finnish Retail and Wholesale advanced a lot while International, up 20% y/y, was mainly driven by Wholesale. Home wares continued to sell well and in our opinion the offering’s breadth is one point that testifies to Marimekko’s strengths. Q2 EBIT was EUR 5.5m vs the EUR 2.9m/4.0m Evli/cons. estimates; we find the positive surprise relative to our estimates stemmed from the EUR 2.4m gross profit beat. Digital and omnichannel customer experience projects will add to costs in H2 and Marimekko’s guidance moderates estimates for the rest of the year.
We see there is a long earnings runway ahead
Collaborations like the Adidas one show how the strategy works as the Marimekko brand is enjoying a rejuvenation period. We understand the Adidas deal generated ca. EUR 1m in revenue and profits in Q1; we expect license revenue will remain below EUR 3m this year, but the brand benefits extend beyond direct financial gains. Marimekko doesn’t have that much more growth potential in Finland but is still very modest in the global fashion & apparel context; upside potential remains considerable and from this perspective the long-term 10%+ CAGR target doesn’t seem very challenging. Marimekko began to gather pace towards long-term ambitions a few years before the pandemic and has already been able to post above 15% EBIT margins. In our view the company should be able to sustain long-term profitability at least a few percentage points above the stated target level.
Valuation remains reasonable considering the potential
Marimekko’s earnings-based multiples, roughly in the 19-25x EV/EBIT range on our FY ’21-23 estimates, have continued to climb and are now near those of luxury goods peers. Multiples are also high relative to their own historical levels, but we view this justified since the company’s profile now stands on a whole new level. Our new TP is EUR 84 (63); we retain our BUY rating.
Due to some delays and changes the production guidance for 2021 was lowered to around 1,500 oz (prev. 3,000-4,000 oz). Production is set to start again in Q3 after a 12-month halt.
Cibus’ strategy proceeds according to plan and further Nordic expansion seems inevitable. We find Cibus’ premium justified, while gains beyond the current point seem unlikely without additional property market revaluations. Our TP is now SEK 205 (195); our rating is HOLD (SELL).
Portfolio performance was again very close to estimates
Cibus’ portfolio continued to perform as expected and there were very little changes to key metrics. Q2 net rental income amounted to EUR 18.5m, the same as our and consensus’ estimates. Administration expenses were EUR 1.8m, as we estimated, and included EUR 0.4m in one-offs (for the most part related to the Nasdaq Stockholm transition). Net financial costs were EUR 5.9m, a bit higher than our EUR 5.4m estimate.
We view Cibus the premier Nordic grocery property owner
The Nasdaq Stockholm switch has, among other developments, rendered Cibus’ shares more liquid and attractive for acquisitions. We consider Cibus the leading owner for Nordic daily-goods properties and thus the company is in a great position to gain further property mass within selected markets. We would expect Cibus to expand to either Norway or Denmark (or both) next year at the latest. This would be straightforward in the sense that the Nordic markets are all quite similar. Meanwhile acquisitions within Finland and Sweden should continue and Cibus has already announced more than EUR 130m in add-ons this year. Cibus was able to purchase these at a 6% yield. Cibus sees the price level remains stable for now and expects to make many more small deals in addition to possible larger portfolio acquisitions, for which it can tap equity and debt.
We find valuation full barring further property revaluations
In our opinion a premium to book is justified, but we consider Cibus’ 1.25x EV/GAV already significant, and at least any additional big gains would seem hard from these levels. We view Cibus’ shares pretty much fully valued, but we note the Nordic property sector’s revaluation could continue to drive further gains also for Cibus’ shares. Cibus already has a competitive organization for managing the leading Nordic grocery property portfolio, however we find Cibus’ valuation has in the past followed other Nordic property portfolios’ yields very closely. Our TP is now SEK 205 (195) and our new rating is HOLD (SELL).
Marimekko’s Q2 results came in above our and consensus’ estimates. Top line was driven by 61% growth in Finland and gross margin was also some 120bps above our estimate. Marimekko thus reached high absolute and relative profitability. The company however left its guidance intact, which moderates H2 estimates.
Cibus’ property portfolio performance once again matched estimates as net rental income amounted to EUR 18.5m in Q2. Administration costs were as we expected, while net financial costs were slightly higher than expected.
Cibus reports Q2 results on Wed, Aug 18. We make estimate revisions to include the already closed deals. We view Cibus as the leading ownership structure for Nordic grocery properties, but we consider valuation too steep. Our TP is now SEK 195 (175) and our rating is SELL (HOLD).
Very busy deal-making in Q2
Cibus has announced, after the release of Q1 report, a total of EUR 124m in acquisitions. The total comprises 88 properties and so the average lot is small even by Cibus’ standards. Only some EUR 32m of these were closed so that they had time to generate rental income during Q2 (we estimate the contribution to have been EUR 0.2m), and an additional EUR 20m will add to Q3 numbers. We assume Cibus has been able to purchase all the EUR 124m at a 6% yield and so estimate together they will add some EUR 7.4m to next year’s net rental income. We expect Cibus’ Q2 admin costs to have been elevated, at EUR 1.8m, due to the busy deal-making. We thus see Q2 operating income at EUR 16.7m.
Cibus is a great home for small grocery store properties
The latest announced large acquisition, valued at EUR 72m (or 5% of Cibus’ GAV), is set to close in Q4 and involves an equity issue of 2m shares to the seller, AB Sagax; we are yet to include this portfolio in our estimates (Cibus has already issued a EUR 30m hybrid bond). The AB Sagax deal comprises 72 small grocery stores across Finland. The average asset is less than 600sqm in size and all but one feature Kesko as the tenant. Cibus’ typical Kesko property has been a 3,000sqm supermarket store, but Cibus is also a natural owner for such smaller properties.
A high price to pay for public market liquidity
Cibus’ valuation has been driven up, in our opinion, to a large extent in the wake of other Nordic property companies. Cibus’ 4% yield is still competitive relative to the 3.25% level seen around the wider property sector, but in our view Cibus’ current 1.3x EV/GAV and 1.9x P/NAV multiples limit further upside potential. The Nordic grocery property market’s potential revaluation could begin to lift book value, however we view Cibus’ 4% yield simply too tight and ahead of the underlying market as long as the company is still able to acquire additional assets at a 6% yield. Our SEK 195 (175) TP values Cibus at some 1.2x EV/GAV and 1.6x P/NAV. Our rating is now SELL (HOLD).
Gofore continued to grow profitably and despite some minor bumps on the road EBITA was quite as expected at EUR 6.8m (Evli EUR 7.0m). We continue to expect above 30% in 2021. We retain our HOLD-rating and target price of EUR 21.
Continued profitable growth in H1
Gofore reported its H1 results, continuing on a track of profitable growth. Revenue grew 38 % to EUR 51.7m driven mainly by inorganic growth, as organic growth fell short of the around 10% long-term target. Gofore’s EBITA and adj. EBITA in H1 amounted to EUR 6.8m and EUR 6.9m respectively, rather in line with our estimates (Evli EUR 7.0m/7.2m). Billing rates were slightly weaker mid-H1 due to the transition between agreement periods with one of Gofore’s largest customers but improved towards the end of the first half of the year. Gofore also experienced an increase in personnel turnover during H1. Profitability in H1 was still at a good level although below the 15% EBITA margin target.
Some uncertainty from increased personnel turnover
We have made smaller downward revisions to our 2021 profitability estimates while our revenue estimate remains quite intact at over 30% y/y growth driven mainly by inorganic growth. Some uncertainty is present from the sector-wide increase in personnel turnover, as the wariness of switching jobs during the pandemic has started to decrease. Gofore is in our view still well positioned in the labour-market as an employer. Although an increase in turnover may be unavoidable, Gofore should still fare well in new recruitments in the rather challenging environment. Short-term this may still cause some pressure on growth and margins.
HOLD-rating with a target price of EUR 21
In our view the H1 report didn’t really change much in Gofore’s investment case and the noted increase in employee turnover is something we currently don’t view as a major risk but will keep an eye on. We reiterate our target price of EUR 21 and retain our HOLD-rating.
Suominen’s earnings will now correct to a lower level from their recent peak. We believe, despite the setback and increased uncertainty, that Suominen’s value chain positioning is still good, and decent margins will remain.
US delivery volumes will take a big hit in H2’21
Q2 revenue fell 7% y/y to EUR 114m and missed the estimates, which were at EUR 120m. In our view the softness was due to Americas; the US supply chain has lately been saturated with wipes as the local retailers sourced as much product as possible, including unbranded wipes which then didn’t move forward from the shelves and thus blocked volumes for many brand wipes. Suominen’s US brand name customers were pushing for max delivery volumes as late as May and June, and by the end of Q2 stocks began to pile up. Suominen says the logjam hasn’t for the most part spread beyond the US; LatAm has continued to develop as before while there has been some jamming in Europe. In our view the 14.7% GM was an encouraging sign, considering the metric also benefits from high volumes, as revenue was soft compared to estimates. Suominen thus reached EUR 15.3m in Q2 EBITDA, compared to the EUR 14.8m/13.5m Evli/cons. estimates.
We believe GM will remain near 13% going forward
Suominen’s nonwovens pricing is now to a large extent locked into mechanisms and so we believe gross margin will remain at a decent level going forward, at around 13% or so. We estimate Q3 revenue to decline by 17% y/y as we see Americas down by 24%. We expect gross margin to decline to 12%, which translates to EUR 9.5m in EBITDA. We expect some stabilization already in Q4, but we revise our FY ’22 revenue estimate down to EUR 431m (prev. EUR 473m) and that for EBITDA to EUR 48.5m (prev. EUR 56.0m). It is now clear earnings have peaked and Suominen may not reach EUR 15m quarterly EBITDA for a while. We however believe Suominen can achieve above EUR 10m quarterly EBITDA again soon enough.
The sell-off already neutralized earnings multiples
Suominen’s earnings multiples were low already before the profit warning, at about 6x EV/EBITDA and 9x EV/EBIT. We find the net effect of the sell-off and our earnings downgrade has been a marginal increase in multiples. We consider these levels very reasonable. Our TP is now EUR 6 (6.8). We retain our BUY rating.
Enersense’s Q2 was much as expected. Margins are already decent, and we see plenty of scope for long-term gains.
Q2 figures did not reveal many surprises
Enersense’s Q2 revenue amounted to EUR 61.6m, compared to our EUR 57.5m estimate. We find the top line beat was for the most part due to International Operations (EUR 14.8m vs our EUR 11.5m estimate) as the other three segments were all close to our estimates. The positive surprise was in our view due to strong development in the Baltics, but France also contributed. Connectivity faced challenging winter conditions in Q2, but the segment’s revenue was nonetheless a bit above our estimate. There are no meaningful comparison figures due to the Empower acquisition, however Q2 profitability was as we expected. Adj. EBITDA came in at EUR 4.8m vs our EUR 4.7m estimate, while adj. EBIT was EUR 2.8m vs our EUR 2.6m estimate.
We make limited updates to our estimates
Empower integration proceeds according to plan and add-on acquisitions are possible already near-term. Enersense reiterated its current guidance and sees EUR 215-245m in revenue while adj. EBITDA should be in the EUR 17-20m range (adj. EBIT EUR 8-11m). We have made only minor revisions to our estimates and expect Enersense to land near the upper end of the guidance range. Enersense has a long-term EBITDA margin target of 10% (by 2025); we see the company is headed close to 8% already this year and 8.5% doesn’t seem that challenging to achieve in the year following. We continue to expect 4.6% organic growth in FY ’22, meaning Enersense should reach at least EUR 21m in EBITDA and EUR 12m in EBIT then.
Organic performance and low multiples underpin upside
Enersense is valued 5x EV/EBITDA and 9x EV/EBIT on our FY ’22 estimates. We find the earnings multiples imply a sizeable discount relative to peers while Enersense’s organic growth outlook and profitability are, in our view, in line with the general sector estimates. Our EBITDA margin estimates are also on the conservative side compared to Enersense’s 10% target and we expect only some 3.5% organic CAGR for the coming years, whereas Enersense’s own EUR 300m long-term organic top line target implies a CAGR many percentage points above our estimates. We retain our EUR 13 TP and BUY rating.
Pihlajalinna’s Q2 served a small positive surprise relative to estimates. We are confident operating margin and multiple expansion potential enable solid long-term upside.
Small earnings beat as profitability continued to improve
Pihlajalinna’s Q2 revenue grew 24% to EUR 142.5m, compared to the EUR 140.7m/139.4m Evli/cons. estimates. There were no major surprises in terms of customer group revenues; we find the small revenue beat was due to the public sector. Private customer revenue recovered 44% from last year’s dip, but appointments remained 24% below 2019 levels, while within corporate customers visits were already close to pre-pandemic levels. Higher costs continued to limit outsourcing’s profitability y/y, but there was improvement q/q. Q2 operating margin excluding outsourcing improved by almost 700bps y/y. The combination of higher volumes and COVID-19 services drove profitability, but there’s still potential for further gains, depending on the type of service, even on current volume levels. Pihlajalinna reached EUR 6.5m adj. EBIT vs the EUR 5.6m/6.2m Evli/cons. estimates. The company retained its guidance.
We make only minor revisions to our estimates
Oral care is one practice area where profitability can be improved even without any increase in capacity utilization rates. COVID-19 services will remain high in Q3, while there’s some associated cost uncertainty. Overall clinical seasonality patterns should remain intact, but the current virus situation probably limits standard services’ volume potential for now. We now estimate FY ’21 growth at about 13% and adj. EBIT at EUR 31.9m.
Significant long-term upside potential is on the horizon
The Pohjola acquisition adds capacity and improves Pihlajalinna’s ability to compete with the two larger Finnish rivals. The focus will initially be on private customers, but public sector growth is also likely long-term. The target had by itself too limited scale to be profitable. Pihlajalinna will return with more details on the deal, but in our view the target seems a good fit and synergies should materialize already next year. Pihlajalinna remains valued 8x EV/EBITDA and 16x EV/EBIT on our FY ’21 estimates. These are below peers’, and Pihlajalinna also has more margin expansion potential considering its relatively modest profitability. Our new TP is EUR 13.5 (13.2); we retain our BUY rating.
Enersense’s Q2 report didn’t offer many surprises. Enersense’s operations and strategy seem to proceed pretty much according to plan.
Suominen’s Q2 margins remained strong, but focus is now on the color Suominen provides on demand slowdown and inventory build-up in North America. The issue prompted the company to revise down its FY ’21 profitability outlook just ahead of the report.
Gofore’s EBITA/adj. EBITA of EUR 6.8m/6.9m in H1 were rather in line with expectations (Evli 7.0m/7.2m). Revenue grew 38.3% to EUR 51.7m in H1 (pre-announced). Revenue and adj. EBITA in 2021 are expected to grow compared with 2020.
Solteq grew faster than expected in Q2, with Solteq Digital returning to clear growth. The outlook is now looking even better with the pick-up in demand in Solteq Digital and we expect good performance across the board. We raise our TP to EUR 8.0 (7.2), BUY-rating intact.
Rapid growth in Q2, Solteq Digital surprised positively
Solteq reported Q2 figures above our estimates. Revenue growth was clearly faster than expected, with growth of 23% to EUR 18.5m (Evli EUR 17.1m). Solteq Software as expected continued at a very rapid growth pace of 43%, while to our surprise Solteq Digital moved to double-digit growth, aided by good demand in retail, after having posted lower growth figures for the past year. The adj. EBIT was quite in line with our estimates at EUR 2.5m (Evli EUR 2.3m). Our overestimation of Solteq Software’s profitability was compensated by the over 15% EBIT-margin (target >8%) in Solteq Digital supported by the growth in the quarter.
Poised for double digit growth and margins in 2021
We have slightly raised our 2021 estimates for revenue and EBIT to EUR 71.4m (prev. 68.3m) and EUR 9.6m (prev. 9.2m). We expect Solteq Software to continue to grow very rapidly supported by the backlog of Utilities project deliveries. With the large projects sizes the recurring revenue should start to show more strongly in 2022 and we estimate only minor EBITDA-margin improvement in 2021. We expect the good demand in Solteq Digital to continue to show throughout the year and for the growth also to be reflected positively in the segment’s profitability. Positive signs were also seen in the commercialization of the Solteq Robotics solutions through a few pilot projects, with the pandemic having slowed down development in the near past.
BUY-rating with a target price of EUR 8.0 (7.2)
On our minor estimates revisions and overall good progress we raise our target price to EUR 8.0 (7.2). Valuation of ~17x 2022 P/E is not particularly challenging given the growth and profitability. We retain our BUY-rating.
Pihlajalinna’s revenue and profitability continued to improve and were slightly above estimates. The company reiterates its existing guidance.
Etteplan’s Q2 results were quite in line with expectations. Growth is set to return to double digits this year and Etteplan is taking steps to keep the momentum going. Etteplan also raised its 2021 revenue guidance on the positive H1 development to EUR 295-315m (285-305m).
Q2 quite in line with expectations
Etteplan reported its Q2 results, which overall were quite in line with expectations. Revenue grew 19% y/y to EU 75.0m (EUR 73.7m/73.6m Evli/cons.). EBIT amounted to EUR 6.7m (EUR 6.5m/7.3m Evli/cons.). Good operational efficiency kept the group EBITA-margin above the target 10% level at 10.4% (Evli 10.2%). On our estimates the stronger performers of the quarter were the Technical Documentation Solutions and Software and Embedded Solutions service areas, which both surpassed expectations on growth and profitability. Customer order intake has continued favourably and although the pandemic still causes uncertainty, Etteplan raised its revenue guidance range to EUR 295-315m (prev. EUR 285-305m), with the EUR 25-28m EBIT guidance range intact.
Preparing for continued growth
We have made only minor revisions to our estimates. For 2021 we have slightly raised our expectations for the Technical Documentation Solutions and Software and Embedded Solutions service areas in light of the good traction in Q2. We now expect revenue of EUR 299.8m (prev. 294.9m) and EBIT of EUR 26.3m. The number of employees has increased by over 200 since the end of 2020 to 3,491 and recruitment is actively on-going, which together with other growth ambitions will cause some cost inflation on H2 but also support organic growth going forward given a continued healthier demand situation. Double-digit growth also in 2022 is most certainly within grasp but will require continued M&A activity.
HOLD-rating with a target price of EUR 17.5
We have made no significant changes to our estimates and retain our HOLD-rating and target price of EUR 17.5. Our TP values Etteplan at ~20x 2022e P/E.
Aspo’s Q2 group-level EBIT was known before the report. We make minor upward revisions to our estimates, and we see Aspo on a firm track towards full profitability potential.
H1’21 results display a solid foundation to build on
Aspo’s Q2 revenue grew 24% y/y to EUR 142.9m vs the EUR 133.6m/134.5m Evli/cons. estimates. ESL’s top line was up 40% y/y; the EUR 5.4m EBIT was a bit above our estimate as utilization and rates continued to improve throughout the fleet. That said, there should be more potential as efficiency obstacles like port congestion, varying loading demand, virus measures and high dockings limited Q2 profitability. We expect ESL’s EBIT to decline by EUR 0.9m q/q in Q3 as dockings will be roughly double of those seen in Q2. We believe ESL’s EBIT has now reached a firm foundation since cargo volumes were still not abnormally high (some 8% lower than in Q2’19 but up 19% y/y). Meanwhile the Baltic Dry Index has reached multi-year highs and we believe the Supramax vessels’ freight rates are now stabilizing. Telko’s revenue topped our estimate and the 7.7% EBIT margin also marked another record. Strategy work at Leipurin continues but Q2 figures remained soft compared to our estimates. We understand admin costs were a bit elevated e.g. due to the CEO recruitment; Aspo’s long-time CEO Mr Aki Ojanen is retiring and the successor, Mr Rolf Jansson, will begin his work next week.
The EUR 30-36m EBIT guidance moderates H2’21 estimates
We wouldn’t be very surprised to see Aspo top the current EBIT guidance range set for this year. There’s still some uncertainty regarding Q4 results, but we believe ESL’s contribution will then help Aspo reach another record quarterly EBIT. We make minor revisions to our estimates; we remain at the upper end of the FY ‘21 range while we now estimate FY ’22 EBIT at EUR 39.7m (prev. EUR 38.9m). Telko may find it hard to achieve further margin gains (in our view some softness is to be expected), but growth could help sustain high absolute profitability going forward.
Progression and cash flow generation back up valuation
Aspo is valued around 8x EV/EBITDA and 14x EV/EBIT on our FY ’21 estimates. We don’t view these levels challenging considering the profitability potential that is not yet quite fully realized. Our TP is now EUR 12.5 (11.5); we retain our BUY rating.
Solteq’s Q2 was slightly above expectations, with revenue at EUR 18.5m (Evli EUR 17.1m) and adj. EBIT at EUR 2.5m (Evli EUR 2.3m). Guidance intact: group revenue in 2021 is expected to grow clearly and the operating profit to improve clearly.
Etteplan's net sales in Q2 amounted to EUR 75.0m, in line with our and consensus estimates (EUR 73.7m/73.6m Evli/cons.). EBIT was also quite in line with our estimates and slightly below consensus, at EUR 6.7m (EUR 6.5m/7.3m Evli/cons.). Guidance specified: Etteplan expects revenue to amount to EUR 295-315m (prev. EUR 285-305m) and operating profit (EBIT) to amount to EUR 25-28m.
Aspo released preliminary information regarding Q2 results already last week and so the Q2 report was no news event in terms of group-level EBIT. Telko’s profitability was higher than we expected.
Pihlajalinna reports Q2 results on Fri, Aug 13. Our FY ’21 estimates remain intact, but we note the latest announced acquisition which is set to be closed by the end of this year.
COVID-19 testing probably plays a big role also in Q3
Q1 top line grew 5% y/y, driven by public sector and corporate customers. COVID-19 testing contributed a major share of the revenue increase within the two groups. Meanwhile private customer revenue fell by 10% y/y, although COVID-19 testing had a small positive contribution there as well. COVID-19 testing added a total of EUR 8.2m in revenue, while overall net revenue growth was EUR 6.9m. We expect the tests to have played a similar important role in Q2 as the acute situation restrains other volumes. Finnish vaccination coverage was negligible in Q1 but improved a lot in Q2; testing levels might otherwise begin to fade in Q3 were it not for the fact that the virus situation has once again turned for the worse over the summer. We believe the testing business does not in any case reach abnormal margins and thus the back and forth with other services should have a neutral effect on Pihlajalinna’s profitability going forward.
On track towards higher profitability levels
The Q2 comparison figures are very low because the onset of the pandemic cut non-urgent healthcare demand a year ago. We estimate Q2 revenue to be up 23% y/y as there has been a rebound in private and corporate customer volumes. We expect EBIT to have gained by EUR 5.0m y/y to EUR 5.6m. For FY ’21 we estimate 12% y/y growth and some EUR 10m gain in EBIT.
Low multiples and profitability levels imply solid potential
Pihlajalinna is again active in M&A since the bid by Mehiläinen was curbed. The latest target is Pohjola Sairaala, for which Pihlajalinna pays EUR 32m in cash. The acquisition will add some EUR 60m in revenue next year and so the 0.5x EV/S valuation looks modest relative to Pihlajalinna’s 0.9x multiple. The target has been lately generating negative EBITDA and Pihlajalinna will provide more color on its development in the coming months. Pihlajalinna is valued 8x EV/EBITDA and 17x EV/EBIT on our FY ’21 estimates. The company has plenty more profitability potential and thus the multiples should decrease to 6.5x and 13x already next year. Both earnings multiples and margin levels are clearly below those of peers. We retain our EUR 13.2 TP and BUY rating.
Etteplan reports Q2 results on August 11th and we expect notable improvement from the weak comparison period. Etteplan has continued its growth strategy, acquiring three smaller companies since Q1. We adjust our TP to EUR 17.5 (16.0) on elevated peer multiples, HOLD-rating intact.
Expect clear improvement from weak comparison period
Etteplan reports its Q2 results on August 11th. Q1 results were still somewhat mixed, with group revenue turning back to slight growth but organic growth still negative at 4%. Relative profitability was well above comparison period levels, with cost cutting measures made due to the pandemic having a notable impact. As Q2/20 was the first quarter to bear the brunt of the impact of the pandemic we expect clearly higher growth figures in Q2/21 from the weak comparison period. We expect revenue to grow some 17% to EUR 73.7m, of which we expect some 6% inorganic growth. We expect EBITA to remain above the 10% target level at 10.2%.
Several smaller acquisitions to continue growth strategy
Etteplan has made two acquisitions during Q2, software development company Skyrise.tech and technical documentation specialist F.I.T. Fahrzeug Ingenieurtechnik GmbH, and Adina Solutions after the review period, specialized in planning and implementation of technical documentation of software. The revenue impact on group level in 2021 should be rather marginal but we have made minor tweaks to our estimates to account for the acquisitions. We now expect 2021 revenue of EUR 294.9m and EBIT of EUR 26.3m, quite in the middle of company guidance (revenue EUR 285-305m and EBIT EUR 25-28m). We expect relative profitability to improve y/y in H1 but to revert back to comparison period levels in H2 as previously implemented cost savings measured are eased.
HOLD-rating with a target price of EUR 17.5 (16.0)
Etteplan’s valuation has risen clearly since our previous update, now trading well above historical levels. Peer multiples have also increased quite a bit and we raise our TP to EUR 17.5 (16.0), valuing Etteplan at ~20x 2022e P/E and retain our HOLD-rating.
Scanfil’s Q2 top line was close to estimates while EBIT didn’t quite reach expected levels. We make only minor estimate revisions. Our rating is now HOLD (BUY).
Some softness in Q2 EBIT margin, but nothing major to flag
Q2 revenue, incl. transitory invoicing, grew 11% y/y to EUR 173m. The figure was EUR 166m excl. the component-related items and can be compared to the EUR 165m/169m Evli/cons. estimates. Automation & Safety top line remained flat while both Advanced Consumer Applications and Energy & Cleantech grew by more than 30%. Advanced Consumer Applications had account ramp-ups and high demand persisted for familiar favorably positioned customers. Energy & Cleantech performed strong even without big ramp-ups as the customers’ markets expand, and we believe Scanfil has gained share within attractive accounts like TOMRA. Component availability challenges remain, but the shortage situation didn’t have any big negative effect on Q2 performance; the situation may now be improving or at least isn’t worsening. The EUR 10.6m Q2 EBIT was a tad soft compared to the EUR 10.9m/11.1m Evli/cons. estimates. In our view the Hamburg plant closure costs explain a large part of the shortfall.
Our FY ’21 estimates remain close to the guidance midpoint
We make only very small revisions to our estimates. In our view cost inflation is not an issue for Scanfil, while component availability is for now a challenge for pretty much all EMS companies. Scanfil will host its first ever CMD in September and we wouldn’t be surprised to see an upgrade to the current organic growth target. We now see Scanfil is headed for the EUR 700m figure a year in advance. Scanfil can top the 7% EBIT margin target at least on a quarterly level, but we would view any upgrade to this target ambitious because growth in the EMS business often doesn’t scale that much in terms of relative profitability. This is one of the major factors that limit valuation.
We view current valuation picture neutral
Scanfil is now valued ca. 9x EV/EBITDA and 12x EV/EBIT on our FY ’21 estimates. We believe growth continues to drive absolute earnings up in the coming years and so the multiples should be down to around 8x and 11x already next year. The valuation represents a premium relative to peers, but in our opinion is warranted. We retain our EUR 9.0 TP; rating now HOLD (BUY).
CapMan reported higher than expected profitability figures due to solid investment returns. Operating profit remains well on track towards a whole new level. We raise our TP to EUR 3.4 (3.1) with our BUY-rating intact.
Q2 operating profit beat driven by investment returns
CapMan reported better than expected Q2 results mainly due to higher than anticipated operating profit in the Investment business. Revenue was in line with expectations at EUR 11.9m (EUR 11.7m/11.8m Evli/Cons.), growing some 36% y/y. Growth in the Management company business and Services business (excl. Scala) was clearly in the double digits during the first half of the year. The operating profit amounted to EUR 11.3m, clearly beating expectations (EUR 9.4m/7.5m Evli/cons.). Compared with our expectations the clear positive was the Investment business operating profit (EUR 9.4m/5.9m Act./Evli). On the other hand personnel expenses increased clearly more than expected, and Management company business operating profit was lower than expected (EUR 2.4m/3.1m Act./Evli) despite higher revenue (EUR 9.9m/9.1m Act./Evli).
Operating profit pushing towards new levels
Q2 brought further good news in AUM growth, up 1.2bn y/y to EUR 4.3bn driven mainly by Real estate, supporting continued healthy revenue growth in coming years. We expect some EUR 45-50m in operating profit in the coming years, with Investment business returns expected to decline somewhat from the anticipated strong 2021 but operating profit increases in the other segments to largely make up for the expected decrease. We have made some smaller changes to our 2021 estimates to account for cost inflation and higher investment returns, expecting an operating profit of EUR 48.5m and a clear increase in EPS from the weak comparison period to EUR 0.24 (0.03).
BUY-rating with a target price of EUR 3.4 (3.1)
Valuation upside is supported by peer multiples and the dividend yield, with the solid financial performance and financial position potentially enabling faster dividend growth in coming years. We raise our target price to EUR 3.4 (3.1), BUY-rating intact.
Scanfil’s Q2 didn’t offer many surprises. Top line was close to expectations while there was a small shortfall in operating margin relative to estimates.
Scanfil Q2 revenue was EUR 172.9m, compared to the EUR 165.3m/168.6m Evli/consensus estimates. Top line grew by 11% y/y and included EUR 7.4m of transitory separately agreed, low margin customer invoicing. This was related to the ongoing component shortage situation and excluding these items revenue grew by 6.4% y/y to EUR 165.5m.
Advanced Consumer Applications’ revenue amounted to EUR 53.4m vs our EUR 47.7m estimate. Meanwhile Energy & Cleantech was EUR 44.8m, compared to our EUR 40.9m estimate. Automation & Safety top line stood at EUR 36.8m vs our EUR 39.5m estimate.
Q2 EBIT stood at EUR 10.6m vs the EUR 10.9m/11.1m Evli/consensus estimates. EBIT margin was 6.1% vs our 6.6% estimate. According to Scanfil the production transfer and planned closure of the Hamburg factory, which will happen by the end of September, generated additional costs.
Scanfil guides EUR 630-680m revenue and EUR 41-46m adjusted operating profit for FY ’21 (issued on Jun 11). Especially semiconductor availability continues to create uncertainty around the outlook.
Aspo specified guidance and told Q2 EBIT was headstrong. In our view the latest update dispels any remaining doubts about ESL’s and Telko’s financial performance.
Aspo now guides EUR 30-36m in FY ’21 EBIT
The guidance range midpoint is a positive surprise compared to the EUR 31.2m/30.9m Evli/cons. estimates before the release, not by that much but the guidance appears on the conservative side considering Aspo achieved EUR 9.6m in Q2 EBIT. This record quarterly EBIT topped the EUR 7.1m/7.0m Evli/cons. estimates by a mile and in our opinion Aspo seems poised towards the upper end of the new guidance range. Steel and forest industry customers in particular drive high cargo volumes for ESL. We also believe Telko has once again reached an above 7% EBIT margin; there might still be some long-term downward pressure on such a high profitability level, but nonetheless the prolonged strong performance makes the long-term 6% target seem a bit modest.
Both ESL and Telko are hitting long-term margin targets
We estimate EUR 35.7m in FY ’21 EBIT. We see H2 EBIT at EUR 18.2m and so only a bit above the EUR 17.5m H1 figure. H2 EBIT has tended to be meaningfully higher than that for H1, and perhaps Telko’s recent high profitability faces some headwinds going forward. ESL’s dockings this summer will dent Q3 EBIT, but Q4 is shaping up to be another record and in our view the carrier’s Q4 EBIT could touch EUR 6m. We estimate ESL to reach its 12% long-term EBIT target this year, thus see ESL FY ’21 EBIT at EUR 20.1m (prev. EUR 18.3m) and estimate another EUR 1.5m gain next year. We expect Telko to reach EUR 18.4m (prev. EUR 16.2m) in FY ’21 EBIT. Telko may find it hard to improve from such levels, at least in terms of margin expansion, as it has already reached the 6% long-term EBIT margin target level.
Stable performance and cash flow turn valuation attractive
Aspo could reach EUR 40m annual EBIT in a few years. We expect EBIT to gain some further EUR 3m next year. Going forward we see relatively stable performance for ESL and Telko, while it remains to be seen how much Leipurin can improve. Aspo is valued ca. 7x EV/EBITDA and 13x EV/EBIT on our FY ’21 estimates; we see further earnings growth and deleveraging, thanks to cash flow generation, helping the multiples lower in the years to come. Our TP is now EUR 11.5 (10.5), retain our BUY rating.
CapMan's net sales in Q2 amounted to EUR 11.9m, in line with our estimates and consensus (EUR 11.7m/11.8m Evli/cons.). EBIT amounted to EUR 11.4m, above our estimates and above consensus estimates (EUR 9.4m/7.5m Evli/cons.). Capital under management grew strongly to EUR 4.3bn, up 1.2bn y/y.
DT’s Q2 results were quite in line with our expectations. Growth is picking up, with double-digit growth seen in all BU’s during H2, which should push H2 profitability close to the 15% target level. We raise our TP to EUR 32.5 (30.0) and retain our HOLD-rating.
Group results quite in line with our expectations
Detection Technology reported its Q2 results, which were broadly in line with our expectations. Net sales grew 11.5% to EUR 23.5m (EUR 23.8m Evli/cons.). SBU net sales were still in decline but less so than in Q1 and security sales started to grow in late Q2. DT has seen good traction in order intake from its customers, in particular in security CT applications. Quarterly fluctuations saw IBU sales growth turned negative, but the overall market remained stable. MBU continued its strong growth supported by the demand situation in healthcare infrastructure and CT equipment. EBIT In Q2 amounted to EUR 3.0m (EUR 3.0m/3.3m Evli/cons.).
Double-digit growth seen in all BU’s in H2
DT’s business outlook has improved, and double-digit growth is expected in all BU’s in H2. IBU and MBU are expected to grow double-digit in Q3 while SBU is seen to take a turn towards growth in Q3 but demand uncertainty remains at elevated levels. On group level we have made minor upward tweaks to our estimates, expecting growth of 26% in H2. We are somewhat cautious to H2 profitability given the situation with component availability, but still expect improvements due to the higher sales and estimate a H2 EBIT-margin of 14.3%. DT is nearing its 15% target level and a stronger than estimated sales growth could rather easily push margins above the target during the latter half of the year.
HOLD with a target price of EUR 32.5 (30.0)
With the minor estimates revisions and improved H2 outlook and visibility we raise our target price to EUR 32.5 (30.0), valuing DT at 35x 2022 P/E. Valuation is not cheap but DT still exhibits a nice amount of potential in EPS growth considering target and pre-COVID profitability levels. Our rating remains HOLD.
Suominen reports Q2 results on Fri, Aug 13. We make only small adjustments to our estimates and continue to view valuation not too demanding.
There’s downward pressure from the late profitability peak
Suominen’s Q1 marked a record high profitability despite raw materials and logistics challenges. Raw materials prices began to spike in Q1, but inventories and nonwovens pricing dynamics meant the negative effect was not yet large. Raw materials prices however continued to surge in Q2, and we now expect Suominen’s Q2 gross margin to have declined by 350bps q/q to 14%. We estimate Q2 revenue at EUR 120m, down by 2% y/y, and EBITDA at EUR 14.8m. Raw materials prices have shown some cooling signs over the summer and we continue to expect gross margin to settle around 13.5% going forward.
Additional investments appear forthcoming
Suominen’s business has received a pandemic boost, but high demand seems to persist. The company has also sharpened its own operational performance. Suominen recently issued a EUR 50m bond to be used for general corporate purposes. In our opinion the company had more than ample liquidity already before the transaction, and thus we see the extended financing hinting at growth plans. Suominen may be planning organic investments, but M&A is not off the table and we believe new geographies, in particular Asia, are now on the radar screen.
We still see some upside to current valuation multiples
Glatfelter, which in our view is the most relevant listed Suominen peer, has just announced the acquisition of Jacob Holm for an EV of USD 308m. Glatfelter estimates Jacob Holm’s Jun-21 LTM EBITDA of USD 45m includes pandemic demand benefit to the tune of USD 10-15m and expects to realize some USD 20m in annual cost synergies within 24 months of closing. These figures suggest, in the most optimistic scenario where the pandemic benefits persist and synergies are fully realized, an EV/EBITDA as low as 4.7x. If the benefits vanish the synergized multiple settles between 5.6x and 6.2x. Suominen is now valued around 6x EV/EBITDA and 9x EV/EBIT on our estimates; these levels are somewhat below those of Glatfelter and other peers. In our opinion Suominen’s valuation still appears conservative. Our new TP is EUR 6.8 (6.5) per share; we retain our BUY rating.
DT’s Q2 result was broadly in line with our estimates. The net sales grew 11.5% on a group level to EUR 23.5m (EUR 23.8m/23.8m Evli/cons.). The operating profit grew to EUR 3.0m (EUR 3.0m/3.3m Evli/cons.). DT’s business outlook for the end of the year has improved, and the company expects double-digit growth in all business units in H2.
Talenom reported Q2 figures quite in line with expectations. With the on-going solid momentum, we have raised our 2022-2023 sales growth estimates, expecting continued solid double-digit growth. We adjust our target price to EUR 15.0 (13.3) and retain our HOLD-rating.
No major surprises in Q2 figures
Talenom reported its Q2 results, which were quite in line with expectations. Revenue grew 29.6% to EUR 21.4m (EUR 21.0m Evli/cons.). Of the growth during H1/21 around two-thirds were inorganic and the rest organic growth. The operating profit improved 15% y/y to EUR 4.1m but was slightly below expectations EUR 4.3m/4.4m Evli/cons.). Guidance remains intact, with net sales expected to amount to EUR 80-84m and operating profit to amount to EUR 14-16m. During the review period Talenom announced its expansion to Spain through the acquisition of accounting firm Avail Services SL and continued to grow through acquisitions in Finland and Sweden.
Growth prospects looking as good as ever
Growth in Q2 continued strong and a positive remark was the continued sign of improvement in organic growth, with new customer acquisitions having recovered to pre-pandemic levels. Talenom has also seen good traction in the new small customer concepts, which we expect to pick up further once all steps have been taken to enable acceleration of growth. Our 2021 estimates remain mostly intact, but we have raised our 2022 and 2023 revenue estimates by 8% and 13% respectively, expecting continued inorganic growth and improved organic growth supported by accelerated new customer sales and sales from consulting work. We expect revenue of EUR 82.4m and EBIT of EUR 15.0m respectively (co’s guidance 80-84m and 14-16m).
HOLD-rating with a target price of EUR 15.0 (13.3)
With the solid momentum in sales growth, we raise our target price to EUR 15.0 (EUR 13.3) and retain our HOLD-rating. Valuation remains a challenge, with 2022e P/E of ~52x, but a case like Talenom is hard to come by and the outlook in terms of profitable growth remains clearly positive.
Talenom's net sales in Q2 grew 29.6% to EUR 21.4m, in line with our and consensus estimates (EUR 21.0m Evli/cons.). EBIT amounted to EUR 4.1m, slightly below our and consensus estimates (EUR 4.3m/4.4m Evli/cons.).
Detection technology will report is Q2 results on August 3rd. Q1 started off rather slow and expectations are for growth to pick up in the coming quarters. We expect the trend of net sales decline to be reversed in Q2 and sales to grow 12.8% y/y. We retain our target price of EUR 30.0 and HOLD-rating.
Q1 started off rather slow
Detection Technology will report its Q2 results next Tuesday on August 3rd. In Q1 net sales in MBU and IBU saw double-digit growth y/y while SBU saw net sales decline with the continued challenging situation in the security market. MBU showed good momentum in sales growth driven by investments in healthcare infrastructure and increased demand for CT applications. Group net sales overall declined 8.0% y/y. Relative profitability increased y/y to a 7.5% operating margin (Q1/20: 5.9%) but remained clearly below pre-COVID levels.
Growth seen to pick up in coming quarters
Detection Technology noted in Q1 that although the beginning of the year was slow, the worst challenges are seen to have been left behind and growth is expected to pick up again during 2021. MBU is seen to grow more in Q2 and H2 than in Q1 while IBU should turn to growth during H2. SBU is seen to head for growth in late Q2 and grow in H2 but demand is characterized by uncertainty. We estimate group net sales of EUR 23.8m for a growth of 12.8% y/y. We expect growth to be driven by MBU (35.4% y/y) and a clearly smaller y/y growth decline in SBU (-10.1% y/y). We expect group operating margins to remain quite on par with previous year levels.
HOLD with a target price of EUR 30.0
We have made no changes to our estimates ahead of Q2. Valuation is quite elevated, with 2022E P/E of ~36x, and growth recovery is still coupled with uncertainty. Potential is however still large, with good market growth expectations. We retain our HOLD-rating with a target price of EUR 30.0.
Eltel’s margins continued to gain in Q2 y/y. The report had no big surprises; Eltel makes progress according to plan. We make some downward revisions to our revenue estimates while we are a bit more positive on margins.
The 2.1% operative EBITA margin met our estimate
Q2 revenue declined by 14% y/y to EUR 210m, vs the EUR 228m/223m Evli/cons. estimates. Other business made up 9% of top line, while Communication still drove growth in Finland. Revenue declined in all other countries, and Swedish EBITA didn’t improve as the comparison period had a positive EUR 0.9m one-off item. The pandemic delayed Norwegian fiber activity, and together with tough winter produced some softness in local results. Meanwhile Denmark saw a positive EUR 0.8m one-off in profitability. Q2 EBIT landed at EUR 4.3m vs the EUR 4.4m/4.1m Evli/cons. estimates. Operative EBITA margin was 2.1% vs our 2.0% estimate. Q3 tends to be the most profitable quarter and we see the respective ‘21 margin at 4.1%, up 110bps y/y. We estimate FY ’21 EBITA margin improving by 130bps to 2.5%.
FI & NO drive short-term, SE & DK hold long-term promise
We moderate our Norwegian estimates a bit but still see the business similarly important for near-term results as Finland. Denmark is for now the smallest of the four but already achieves good margins and probably has the best long-term growth prospects. In our view traffic lighting presents a solid source of business for all four (Finnish street lighting in particular). Finland, Norway and Denmark also offer fiber opportunities, while in Sweden that market is more challenging. There’s scope for M&A, but we believe it probably takes many quarters before anything materializes. We expect Sweden to weigh figures at least in Q3. Eltel is however making progress there, and we see group-level growth turning positive in Q4 thanks to Finnish and Norwegian strength. We estimate Eltel’s Q3 growth to remain negative.
Current valuation leaves solid upside potential
Eltel is valued ca. 7.5x EV/EBITDA and 16x EV/EBIT on our FY ’22 estimates. We see the respective FY ‘23 multiples at 6.5x and 13x. These are somewhat neutral levels compared to peers, but we continue to view valuation attractive as Eltel advances towards its long-term 5% EBITA margin target (we estimate 3.9% for FY ’23). We retain our SEK 29.5 TP and BUY rating.
Eltel’s Q2 produced a sixth consecutive annual improvement in operative EBITA and the result was close to estimates. Eltel maintains its previous guidance and expects similar development for the rest of the year.
Fellow Finance signed a combination agreement with Evli Bank to merge with Evli’s banking services, intended to be carried out during H1/2022. In the more near-term, Fellow Finance has seen a healthy rebound in loan volumes during H1/2021, looking to get back on a growth trajectory.
Signed combination agreement to create “Fellow Bank”
Fellow Finance and Evli Bank signed a combination agreement, by which Evli Bank will demerge through a partial demerger and Fellow Finance will merge with the company that will carry on Evli Bank’s banking services and form “Fellow Bank”. A main idea behind the merger is to combine Evli’s banking and risk management expertise with Fellow Finance’s expertise in lending and assessment of creditworthiness. The combination would in our view create clear synergies and provide a sturdier foundation but with the shift to balance-sheet lending Fellow Finance’s original idea of a scalable lending platform would be less valid. The arrangement is intended to be carried out during the first half of 2022.
Good loan volume growth during H1
H1 has seen loan volumes rebound quite nicely, with the monthly average during H1 at around EUR 15m compared with EUR 11m during H2/20, and most recent months nearing all-time high. We have raised our 2021 estimate to EUR 201m (prev. EUR 160m). The growth should not translate as well into revenue given the growth being driven by lower-margin business lending, but we still expect growth of 18.6% from the weak comparison period. The business lending driven growth should also not burden costs as much, but earnings are still expected to remain low due to growth investments.
BUY with a target price of EUR 4.0 (3.8)
The combination agreement could value Fellow Bank at EUR 50.8m (FF 25.2m, Evli banking serv. 13.9m and 11.7m added capital through share issue), and with at least EUR 30m equity would give a max 1.7x P/B. We will treat Fellow Finance as is for now. On our revised estimates we raise our target price to EUR 4.0 (3.8) and retain our BUY-rating.
Raute’s Q2 profitability was still weak, but in our opinion the mix of stabilizing costs and very high order book are bound to drive steep earnings growth going forward.
Demand is improving somewhat faster than we expected
The EUR 35.5m in Q2 revenue was close to our EUR 36.0m estimate and had a favorable tilt towards services (EUR 16.3m vs our EUR 12.0m estimate), but EBIT nonetheless remained EUR -1.0m (vs our EUR 1.6m estimate). Employee costs grew by EUR 2.8m y/y and EUR 1.0m q/q, while other operating expenses grew by EUR 1.8m y/y and EUR 0.9m q/q (due to e.g. a proprietary marketing event). The EUR 65m order intake surpassed our estimate by EUR 10m. The higher-than-expected order intake stemmed, in geographic terms, across the board and so there were no major individual surprises. Both project deliveries and technology services orders topped our estimates. Modernizations drove services orders again to a high EUR 18m figure. Demand is overall improving a bit faster than we expected, order book is already a lofty EUR 129m and we expect it to swell further during the remainder of this year. The book is also now less dependent on large projects than it used to be just a while ago.
Traditional important markets now drive results
Raute’s guidance remains unchanged. Employee costs should stabilize going forward and we also believe other expenses have now peaked. The big order book will thus begin to drive higher profitability. Raute sees potential supply chain challenges in H2, but in our view components and logistics issues are not a major long-term topic in the context of Raute considering the company’s strong value chain position. We make only small estimate revisions. We see Raute reaching EUR 163m in FY ‘22 revenue with a 6.5% EBIT margin, whereas we previously estimated a 7% margin, and further potential from there on.
Valuation is not stretched given the long-term potential
We continue to expect steep earnings climb for FY ’22. We make a small moderation in our profitability estimates, on which Raute now trades some 8x EV/EBITDA and 10x EV/EBIT; we see the FY ‘23 multiples contracting to about 7x and 9x. In our view these are attractive levels considering Raute’s leading position in advanced markets as well as long-term emerging markets opportunities. We retain our EUR 26.5 TP and BUY rating.
Consti reported rather good Q2 results on an adj. basis, with both growth and underlying profitability slightly better than expected. The solid order intake also bodes well for continued growth during the latter half of the year. We raise our target price to EUR 14.5 (13.0) and upgrade our rating to BUY (HOLD).
Q2 better than expected on adj. basis
Consti reported overall slightly better than expected Q2 results. Revenue grew 2.3% y/y (5.9% excl. IAC) to EUR 70.9m (EUR 68.5m/69.2m Evli/cons.). The operating profit and adj. operating profit amounted to EUR -0.5m (EUR -0.4m/-0.7m Evli/cons.) and EUR 2.9m (EUR 2.6m Evli) respectively. The operating profit included EUR 3.5m of IAC’s relating to the Hotel St. George project arbitration proceedings, which should no longer materially affect costs during H2. The order backlog was back to growth, up 11.5% y/y to EUR 236.2m, supported by a solid order intake of EUR 98.5m.
Growth picking up
We have made minor upward revisions to our estimates, now expecting 2021 revenue of EUR 286.4m (prev. EUR 278.0m) and operating profit of EUR 5.9m (prev. 5.7m). The growth exceeded our expectations in Q2 and with the solid order intake Consti is poised to continue the growth during the latter half of the year. The increases in building material costs could potentially affect costs during H2 and we for now assume a very minor impact as prices have been going recently. With the new construction venture having gotten off to a good start with the recently signed deals we expect continued growth of some 3% p.a. during 2022-2023 with relatively stable margins on adjusted basis.
BUY (HOLD) with a target price of EUR 14.5 (13.0)
With the signs of pick-up in growth and slightly better than estimated underlying profitability (excl. IAC’s) we raise our target price to EUR 14.5 (13.0) and upgrade our rating to BUY (HOLD). Our TP values Consti at a quite reasonable 14.7x 2022 P/E.
Vaisala reported its Q2 results which came with little surprises as preliminary figures had been given, although the underlying profitability did exceed expectations. We have made some upwards revisions to our estimates and adjust our target price to EUR 36.0 (35.0) with our HOLD-rating intact.
Solid growth driven by Industrial Measurements
Vaisala reported its Q2 results, which with the preliminary figures given ahead of the quarter did not come as a larger surprise. Revenue growth was at a solid 20% and the operating result also improved clearly y/y to EUR 10.9m (Q2/20: EUR 7.9m). Both BU’s posted double-digit growth figures, with IM growth at 31% and W&E at 14%. Orders received grew 25% to EUR 120.1m and the order backlog as a result was up 14% to EUR 165.3m. Vaisala updated its guidance ahead of Q2, expecting revenue of EUR 400-420m and EBIT of EUR 40-50m. Vaisala will hold its Capital Markets Day on September 21st.
Underlying profitability better than expected
We have raised our estimates slightly, now expecting revenue of EUR 418.4m (prev. EUR 409.9m) and an operating result of EUR 48.2m (prev. EUR 45.0m). Vaisala’s Q2 result included an additional of EUR 2.2m relating to an update of the valuation of contingent considerations and the underlying profitability as such was clearly better than the reported operating result figures. The availability and cost of components was highlighted as a potential concern for H2, which we have reflected also in our estimates. Should the impact turn out to be small or negligible, the current guidance would appear to be rather conservative.
HOLD with a target price of EUR 36.0 (35.0)
On our revised estimates we adjust our target price to EUR 36.0 (35.0) and retain our HOLD-rating. Vaisala’s performance in Q2 was solid, but the already stretched valuation (30.3x 2022 P/E) and uncertainty relating to component cost and availability is something to consider.
Vaisala had given preliminary figures ahead of Q2 and as such contained no surprises on group level. Orders received and revenue grew well in both BU’s, but more strongly in Industrial Measurements. Faster than expected recovery from the pandemic had a positive effect on demand, in particular in APAC and Europe.
Raute’s Q2 order intake grew even more than we expected, while profitability remained weak.
Consti's net sales in Q2 amounted to EUR 70.9m, in line with our and consensus estimates (EUR 68.5m/69.2m Evli/cons.). EBIT amounted to EUR -0.5m, in line with our and consensus estimates (EUR -0.4m/-0.7m Evli/cons.). The order backlog was up 11.5% to EUR 236.5m. Excluding one-offs the report was in our view rather upbeat, in particular on order intake.
Innofactor’s Q2 results were well in line with expectations. We have made essentially no changes to our estimates and continue to expect modest growth and notable profitability improvement. We retain our BUY-rating and target price of EUR 2.2.
Q2 well in line with our expectations
Innofactor reported its Q2 results, which were well in line with our expectations. Revenue grew 3.2% y/y, 7.6% organically, to EUR 17.3m (Evli 17.3m). Revenue growth turned positive again in all countries. EBITDA and EBIT amounted to EUR 2.1m (Evli 2.2m) and EUR 1.3m (Evli EUR 1.4m) respectively, with all other countries except Sweden showing positive figures. The order backlog continued to grow nicely, up 28% y/y to EUR 72.7m. Innofactor reiterated its guidance, expecting revenue and EBITDA to increase compared to 2020. Innofactor made an early repayment of loans for EUR 2.7m, improving the equity ratio and net gearing to 49.9% and 30.5% respectively, while still leaving the cash position on par with 2020 year-end figures. All in all, the Q2 report was quite neutral and held little significant new information.
No notable changes to our estimates
We have made essentially no changes to our estimates. We expect revenue in 2021 to grow 3.4% EUR 68.4m and EBIT (excl. PPA and Prime divestment) to improve to EUR 6.0m (2020: EUR 4.4m). We expect slight pick-up in growth during H2 accounting for the impact of COVID-19 on 2020 comparison figures supported by the solid order backlog. Positive signs in the other Nordic countries speak for a potential pick-up in the growth pace, with growth recently having been driven to a larger extent by Finland.
BUY with a target price of EUR 2.2
With no essential changes to our estimates or view on Innofactor as an investment case we retain our BUY-rating and target price of EUR 2.2. Our target price values Innofactor at a slight discount to peers on adj. multiples, which we still consider fair given the lower growth pace.
Innofactor’s Q2 results were as expected. Net sales amounted to EUR 17.3m (Evli EUR 17.3m), while EBITDA amounted to EUR 2.1m (Evli EUR 2.2m). The order backlog continued to grow well, up 28% y/y to EUR 72.7m.
SRV’s Q2 results were fairly in line with expectations and held little new information. Progress is being made slowly but steadily and the company is quite well on track to regain decent profitability levels. We retain our BUY-rating and target price of EUR 0.8.
No surprises in Q2
SRV reported Q2 results that were fairly well in line with expectations. Revenue declined some 18% y/y to EUR 218.0m (EUR 232.1m/243.0m Evli/cons.) mainly due to lower business construction revenue. The operating profit was fairly good, at EUR 6.3m (EUR 5.8m/5.0m Evli/cons.), and the operative operating profit stood at EUR 5.7m (Evli 5.8m). The order backlog was down 21% y/y at EUR 1,048m. The guidance for 2021 of EUR 900-1,050m in revenue and operative operating profit of EUR 16-26m remains intact. The second quarter was rather limited in new information content, one highlight being the completed financing arrangements that clearly improved the maturity structure.
Estimates largely intact, potential minor headwind in H2
We have made some smaller adjustments to our 2021 estimates, now expecting revenue of EUR 907.2m (prev. 904.3m) and operating profit of EUR 22.1m (23.9m). Revenue in H2 is expected to improve clearly on H1 with for instance the completion of the second Kalasatama tower, Loisto, but relative profitability is expected to be weaker due to lower margins in key projects. Elevated building material costs and availability could cause some headwind in the latter half of 2021 but so far, the impact does not appear to be material. Start-ups of developer-contracted housing units continued on a slight positive trend, with the financing arrangements opening up potential for accelerated pace given sufficient demand.
BUY with a target price of EUR 0.8
Q2 was quite neutral and did not affect our view of SRV as an investment and SRV’s potential is being unlocked, although slowly. We retain our target price of EUR 0.8 and BUY-rating.
Vaisala reports its Q2 results on July 23rd. Preliminary figures show a solid second quarter and our attention will be drawn toward the rest of the year and comments regarding the impact of component availability/costs.
Exel Q2 margins were close to what we expected, while the growth extension turns us overall more positive. In our view the company isn’t that far from 10% annual EBIT margins.
Q2 margins declined pretty much as expected
Sales mix (tilt to carbon fibers) as well as volumes continued to improve and Q2 top line grew by 23% y/y. The EUR 33.5m figure surpassed our EUR 30.4m estimate despite certain quarterly softness in Wind power, which in our view testifies to Exel’s extended wide positive development. Buildings and infrastructure, a highlight customer industry, was driven by the conductor core application and reached EUR 8.7m top line (vs our EUR 5.9m estimate). Q2 gross margin declined by almost 400bps y/y and 200bps q/q to 56.3%, which wasn’t a surprise per Exel’s comments in connection with the Q1 report. Higher raw materials costs and certain growth category products’ ramp-up had a negative margin impact, but Exel’s 7.3% adj. EBIT margin was in fact a bit above our 7.2% estimate. The resulting EUR 2.5m adj. EBIT topped our EUR 2.2m estimate thanks to the high revenue. Exel retained its previous FY ‘21 guidance.
Prolonged high growth further lifts profitability potential
Order intake didn’t show any signs of cooling and leaped by 90% y/y. The Q2 comparison figure was soft, but nevertheless the latest EUR 43.5m figure gained another 4% q/q and can be compared to the EUR 30m quarterly levels that used to be common. We now expect Exel to reach 15% growth this year. In our view H2 growth is bound to top 10% and thus we estimate H2 EBIT margins to increase by ca. 100bps y/y. We still expect Exel’s composites pricing to adjust for higher raw materials costs and see annual EBIT margin reach close to 10% already next year. It’s a bit early to say much about FY ’22, but the recent order intake levels suggest Exel might then grow another 10% or so. We therefore see EBIT gaining almost another EUR 3m.
We now estimate EUR 13.5m FY ’22 EBIT (prev. EUR 12.7m)
Exel’s valuation has turned, in our view, more attractive now that recent strong growth outlook has been extended. Exel is now valued ca. 9x EV/EBITDA and 14x EV/EBIT on our FY ‘21 estimates. These are still somewhat high in the historical context, but we expect them to contract to around 7.5x and 11x in one year’s time. Our TP is now EUR 11.5 (11.0), new rating BUY (HOLD).
SRV's net sales in Q2 amounted to EUR 218.0m, below our and consensus estimates (EUR 232.1m/241.0m Evli/cons.). EBIT amounted to EUR 6.3m, above our and consensus estimates (EUR 5.8m/5.0m Evli/cons.).
Consti reports its Q2 results on July 23rd. The Q2 figures will be burdened by the outcome of the Hotel St. George renovation project arbitration proceedings but operational performance should remain steady. The venture into new building construction has gotten off to a good start with the signing of a larger office construction project.
Arbitration proceedings outcome to burden Q2 results
Consti will report its Q2 results on July 23rd. Profitability figures are expected to be rather grim due to the unfavourable outcome of the arbitration proceedings relating to the Hotel St. George renovation project but apart from that no larger deviations should be expected. The impact of the arbitration proceedings on the operating result should be some EUR 3.0m and we expect an operating result of EUR -0.4m. The impact is partly reflected also in revenue, due to which we expect a slight decline in revenue y/y to EUR 68.5m (Q2/20: EUR 69.3m). Excluding the impact our estimates reflect slight improvement in both revenue and operating result.
Promising start to new construction venture
Apart from the news regarding the arbitration proceedings, the other notable news during the quarter was the announcement of Consti’s first significant new building construction project. The project, consisting of two new office buildings, is valued at approx. EUR 30m. New building construction was implemented as part of Consti’s revised strategy, with the aim for 10-15% of revenue to come from such projects in 2023, and the signing of a deal of such size provides a solid foundation for achieving the target. With Consti having implemented steps to improve profitability, our sights have been turned toward the unfavourable revenue development, and revenue from new construction could well be a driver in Consti’s investment case.
HOLD-rating with a target price of EUR 13.0
We have made no adjustments to our estimates ahead of the Q2 report. We retain our HOLD-rating and target price of EUR 13.0. Our target price values Consti at approx. 16.6x 2021 P/E (excl. arbitration proceedings items).
Exel Composites’ Q2 report was throughout better than we expected. Absolute profitability remained higher than we estimated as top line development was once again very strong. Relative profitability was close to what we expected, while order intake reached a new high.
Verkkokauppa.com’s Q2 marked a sixth consecutive earnings improvement. In our opinion the company remains well positioned to improve plenty more long-term.
Earnings a small positive surprise, retains FY ’21 guidance
Verkkokauppa.com’s Q2 revenue increased by 6% y/y to EUR 131m, compared to the EUR 130m/130m Evli/cons. estimates. Growth was driven by wide positive development as traditional product categories like computers and cameras sold well but evolving categories such as sports and home & lighting were also popular. Online sales grew at a 15% y/y pace while B2B sales were up by 38% and thus made up 22% of total revenue. Overall top line, excluding export sales, advanced some 160bps faster than the market and in our view highlights the strength of the Verkkokauppa.com brand. The 17.2% gross margin topped our 16.8% estimate, and the resulting EUR 0.6m difference in gross profit helped the EUR 5.1m Q2 adj. EBIT beat our EUR 4.6m estimate (same as the consensus) and reach a record high.
We believe strong positioning will deliver further results
Verkkokauppa.com has performed strong and steady for a while. Export sales have been the only soft area, due to the pandemic, and according to the company will probably not bounce back sharp this year. The company has recently built inventories to buffer up for the busy autumn season and important Q4. Verkkokauppa.com retains a strong position in the Finnish B2C channel but has also gained traction in B2B, where volumes stem from many SME customers. The EUR 4m small-item logistics investment is relatively small and will only have a negligible operative impact in H2’21 when inventories have to be moved to accommodate the Jätkäsaari construction phase. We make small revisions to our estimates and expect Verkkokauppa.com to achieve 8% growth and 4.1% EBIT margin this year. We also make some upward revisions to our long-term estimates.
Overall valuation picture is still attractive
In our opinion Verkkokauppa.com’s valuation remains attractive considering the steady performance and long-term potential. We see solid high single-digit CAGR performance for the coming years and potential for positive surprises. We continue to view current valuation picture overall very reasonable against this backdrop. We retain our EUR 10.8 TP and BUY rating.
Finnair’s Q2 report didn’t contain major news, considering the big picture. We revise our volume estimates down, however additional cost savings support our EBIT estimates.
No big surprises, but Q3 profitability will not much improve
Finnair’s Q2 revenue amounted to EUR 112m, below the EUR 142m/145m Evli/cons. estimates. Passenger, ancillary and cargo revenues were all soft compared to our estimates, but travel is resuming as passenger revenue topped that for cargo in June. Working capital situation is beginning to improve due to growing bookings and Finnair expects monthly OCF to turn positive by the end of this year. The situation, however, remains challenging from profitability perspective. Finnair’s Q2 adj. EBIT was EUR -151m, compared to the EUR -144m/-144m Evli/cons. estimates. Finnair sees similar losses for Q3 as well. We revise our Q3 adj. EBIT estimate to EUR -132m (prev. EUR -91m).
Cost savings support profitability amid volume challenges
Finnair turned more cautious regarding the following years’ travel rebound, not a big surprise considering the latest developments. Asian vaccination rates have begun to pick up and important Northeast Asian countries are expected to have fully vaccinated 70% of their population during Q4. Finnair’s passenger volume rebound will lag those of Western short-haul focused carriers, but meaningful recovery should begin to materialize during the next few quarters. We now expect Finnair to reach ca. 90% of FY ’19 business levels (in terms of ASK & RPK) in FY ’23. We revise these estimates down a few percentage points and now expect EUR 2.8bn top line for FY ’23 (prev. EUR 3.0bn). Meanwhile Finnair’s upsized permanent cost savings projection supports our EBIT estimates. In our view the company could achieve healthy EBIT margins already next year and we see potential for 7% profitability in FY ’23. We have made only very small revisions to our absolute profitability estimates.
In our view profitability potential has been fully valued
In our opinion Finnair is set to return to good profitability levels, however this potential has been appreciated for a while. Finnair is valued roughly 15x EV/EBIT on our FY ’22 estimates, not an unreasonable level compared to other airlines but nonetheless fully valued given the persistent level of uncertainty. Our TP is now EUR 0.65 (0.7) and we retain our HOLD rating.
Verkkokauppa.com reported Q2 results that were overall somewhat above estimates. Top line was close to the expected levels, while the strong gross margin helped adj. EBIT to surpass estimates by some EUR 0.5m.
Finnair’s Q2 losses were pretty much as expected. The company estimates Q3 operating loss will also be roughly EUR 150m, in other words comparable to recent quarters.
Raute’s environment has improved faster than we expected, as seen in the recent signing of two large orders. We don’t expect the ongoing year to be that great, but from here on profitability gains appear inevitable. In our view FY ‘22 results could already touch the previous record levels.
EUR 46m in larger disclosed orders set the stage for FY ‘22
Raute has disclosed two new orders over the past couple of months, in total some EUR 46m worth of business for FY ’22. Raute knows both customers well. The EUR 30m Lithuanian LVL mill order will be delivered before the end of Q3’22. The delivery schedule looks much the same for the EUR 16m Russian order. The projects didn’t arrive as a complete surprise since we had already expected meaningful improvement in H2’21 orders, however we now see solid profitability potential for FY ’22 and beyond. We do not expect Q2’21 to have been that great yet, what with EUR 36m in revenue and EUR 1.6m EBIT, but we see profitability can only improve from the recent lows.
We expect about EUR 160m top line for next year
The new orders will not affect Raute’s FY ’21 results. The previous guidance, according to which both top line and operating profit will improve, remains valid. We have made only minor revisions to our FY ’21 profitability estimates. In our opinion annual operating profit will still not be great this year as revenue stays at a somewhat modest level while pandemic restrictions also remain a nuisance. The business is, for now, reliant on a large Russian order and the associated low margin profile limits profitability. We believe, however, that Raute is set to top EUR 10m in EBIT once again next year as the recent negative factors will remain no more. We revise our FY ’22 revenue estimate from EUR 141m to EUR 159m, while our respective EBIT margin estimate increases from 5.6% to 7.0%. We thus see Raute reaching EUR 11m in EBIT, a figure close to that of FY ’17.
Multiples turn attractive with EBIT north of EUR 10m
Our EUR 160m revenue estimate and corresponding 7% EBIT margin imply EBIT in the EUR 11-12m range, which translates to around 7x EV/EBITDA and 9x EV/EBIT multiples for FY ’22-23. We also note Raute reached EUR 15m EBIT in FY ’18, although that level would be difficult to pull off in a steady fashion. Our TP is now EUR 26.5 (21). Our new rating is BUY (HOLD).
Verkkokauppa.com reports Q2 results on Fri, Jul 16. We leave our estimates unchanged ahead of the report and continue to view current valuation levels attractive.
Q1 met expectations, FY ‘21 growth seen around 7-8%
Verkkokauppa.com had a strong Q1. Top line grew by 7% y/y, in line with estimates, and was driven by many product categories. Online sales grew by 33% while B2B sales advanced by 12%. Gross margin amounted to a strong 16.2% (a bit above our 15.9% estimate), driven by good contribution from higher margin categories. The company thus achieved a small profitability beat with its EUR 5.2m adj. EBIT (3.9% margin), compared to the EUR 5.0m/4.8m Evli/cons. estimates. We made only minor revisions to our Q2 estimates following the Q1 report and we leave our estimates unchanged for now. We expect Verkkokauppa.com to post EUR 130m in Q2 revenue (5.5% y/y growth) and EUR 4.6m in EBIT (3.6% margin).
Strategy is ambitious, but initial moves have been laid out
Verkkokauppa.com reiterated its FY ’21 guidance in connection with the Q1 report. The company guides EUR 570-620m top line and EUR 20-26m adj. EBIT. Our EUR 594m revenue estimate touches the midpoint and thus we see the company reaching above 7% growth this year. Our EUR 24m EBIT estimate (4% margin) is a bit above the respective midpoint. The company has also announced a EUR 4m investment in fully automated small item warehouse in Jätkäsaari, Helsinki. In our opinion the plan seems a relatively low risk and efficient way to help organic expansion. We expect Verkkokauppa.com will continue to grow at a high single-digit rate for years to come, however the company’s own very ambitious target is to achieve EUR 1bn top line and 5% EBIT margin by ’25.
12-15x EV/EBIT for FY ’21-23 isn’t high given the potential
Verkkokauppa.com trades ca. 15x EV/EBIT on our FY ’21 estimates. This level represents a 25% discount compared to the Nordic & European online peer group. The 14x EV/EBIT level on our FY ’22 estimates however turns into a 10% peer premium and reflects the fact that we have taken a conservative approach to our long-term estimates. We view the overall valuation picture undemanding given the company’s growth potential. We retain our EUR 10.8 TP and BUY rating.
Finnair reports Q2 results on Jul 15. Capacity is being scaled up while passenger numbers have bottomed out, but there’s a lot of uncertainty with regards to a meaningful recovery. The rebound will arrive in the years to come, however in our view valuation doesn’t leave much upside. Our TP is now EUR 0.7 (0.75); we retain our HOLD rating.
Recovery may materialize somewhat slower than expected
Finnair’s Q2’21 passenger figures show strong recovery relative to the exceptional halt witnessed in Q2’20, but in the big picture the volumes remained very modest. International volumes increased towards the quarter’s end, however they remained at only around 5% of those seen in e.g. Q2’19 (in terms of RPK). Western passenger flows may pick up further in Q3, but strategically important Asian flights will in our view have to wait at least until Q4’21, if not even beyond that. Slow Asian vaccination rates may not matter that much because the delta variant now seems to act as an additional speed bump on the path to recovery. In our view Finnair’s EBIT is likely to remain in the red until the end of this year. It’s unclear how quick the pent-up passenger flight demand will materialize, but airlines are unlikely to return to normal before next year. We don’t expect Finnair to see pre-pandemic EBIT levels before the year 2023.
We make some downgrades to our long-term estimates
Finnair’s Q2 passenger numbers were somewhat below our expectations as the pandemic situation has proved very resilient. Cargo volumes, nonetheless, were higher than we estimated. We thus make only small revisions to our Q2 estimates. We expect EUR 142m in revenue and EUR 144m in operating losses. We revise our long-term estimates down a bit due to the continued uncertainty that stems from the latest pandemic updates. We also note jet fuel spot prices increased another 13% q/q in Q2.
Valuation recognizes Finnair’s long-term potential
In our opinion Finnair continues to hold a solid long-term strategic position as an airline that connects Europe with Northeast Asia. This seems well recognized as current valuation is not cheap. Finnair trades ca. 15x EV/EBIT on our FY ’22 estimates. We believe Finnair’s EBIT has plenty of room to improve beyond that, however the pandemic is unlikely to alter the inherent competitive nature of the airline industry.
Enersense completed its directed share issue and thus raised some EUR 16m in gross proceeds. The company is looking into some growth initiatives that would deploy the capital. These could involve organic growth prospects but in our opinion M&A is also high on the agenda. We have made small adjustments to our estimates. Our TP is now EUR 13 (11) and we retain our BUY rating.
Current markets offer both organic and M&A potential
Enersense already had a healthy balance sheet with a positive net cash position and there wasn’t any acute pressing need to raise additional cash. The company had some EUR 23m in cash at the end of Q1. This suggests there will now be close to EUR 40m in available funds plus possible additional debt facilities. In our opinion such an amount could enable Enersense to acquire targets with around EUR 100m in revenue, considering the relatively low EV/S multiples seen across the relevant sectors. At this point it remains unclear which segment Enersense might be looking to bolster. In our view Enersense has wide M&A opportunities in both Finland and abroad. The Finnish Power market is currently driven by e.g. wind power investments, while 5G will remain a major driver for Connectivity for years to come. Enersense is already a big Finnish player in these two related construction and maintenance markets, and there remain some smaller service suppliers the company might be contemplating to acquire. The Finnish smart industry market, by contrast, represents a much wider opportunity set, not to mention the potential overseas scope.
Long-term financial target amounts to EUR 30m in EBITDA
We make small adjustments to our estimates following the transaction. We understand Empower synergies continue to materialize well and we see the company is on track to reach annual EUR 20m run-rate EBITDA in the near-term, while the long-term target implies EUR 30m.
Valuation remains undemanding relative to potential
Enersense still trades at modest multiples, and the ca. 6x EV/EBITDA and 11x EV/EBIT on our estimates for next year represent meaningful discounts compared to peers. Our new TP is EUR 13 (11) and we retain our BUY rating.
The arbitration proceedings relating to the Hotel St. George project unfortunately came to a for Consti unfavourable conclusion. As a result, Consti lowered its 2021 operating result estimate to EUR 4-8m (EUR 7-11m). Our 2021 estimate is now EUR 5.7m (EUR 8.7m), TP of EUR 13.0 and HOLD-rating intact.
Arbitration proceedings to an end
The arbitration proceedings between Consti’s subsidiary Consti Korjausrakentaminen Oy and Kiinteistö Oy Yrjönkatu 13 relating to the Hotel St. George construction project came to a conclusion. Compensations amounted to EUR 0.7m for the former and EUR 0.9m for the latter, along with penalty interest. The net receivable related to the project in Consti’s balance sheet was approximately EUR 3m at the end of Q1/2021. Costs relating to the arbitral award will be recorded in Consti’s Q2/2021 results. The positive impact on cash flow is approximately EUR 2m. As a result of the arbitral award Consti lowered its operating result estimate range for 2021 to EUR 4-8m from the previous 7-11m.
Operating result estimate for 2021 down by EUR 3m
With the net compensation close to even the impact on the operating result will be around EUR 3m due to the cancellation of receivables in Consti’s balance sheet. The income statement will be partly effected through revenue and partly costs and we have revised our Q2/2021 estimate for revenue and operating result to EUR 68.5m (EUR 70.5m) and EUR -0.4m (EUR 2.6m). Our revisions solely reflect the outcome of the arbitration proceedings, as operational performance appears to have remained in line with expectations. The outcome, although unfortunate, is essentially a one-off item and ultimately did have a positive cash flow impact.
HOLD with a target price of EUR 13.0
We make no adjustments to our target price or rating based on the outcome of the arbitration proceedings due to the one-off nature. Our target price of EUR 13.0 values Consti at 16.6x 2021 P/E (excl. arbitration proceedings items).
Scanfil upped guidance as demand remains strong and component supply risks haven’t materialized. The upgrade isn’t a big surprise, but in our view supports the long-term story. Our new TP is EUR 9.0 (8.5), rating now BUY (HOLD).
Not a big surprise, but hints at extended strong demand
Scanfil upgraded its FY ’21 guidance. The revision wasn’t a big surprise since in our view Scanfil already seemed, following the Q1 report, bound towards the upper end of its then current guidance range. The revenue midpoint increases by 5.6% with the upgrade. Our old EUR 630m revenue estimate lands at the lower bound of the new EUR 630-680m range. We revise our estimate up by 2.5% to EUR 646m. Our old EUR 41.7m adj. EBIT estimate can be seen in the context of the new EUR 41-46m range. Our new estimate is EUR 43.2m. In our opinion the new outlook’s key meaning is in the fact that it lends long-term estimates even more relevance. Our absolute EBIT estimates for FY ’22-23 increase by only ca. EUR 1m, but in our view Scanfil’s outlook now warrants some additional expansion in multiples.
We see organic CAGR outlook has moved to 7% from 5%
Scanfil’s long-term organic growth target, which implies ca. 5% CAGR by the end of FY ’23, has gained relevance ever since last fall. Scanfil has an unblemished operational track record, its segments’ outlooks are either good or great, and macro tailwinds continue to push many industrial sectors. From this perspective Scanfil should have no trouble reaching EUR 700m top line in FY ’23. The updated FY ’21 guidance range’s midpoint implies 10% growth for this year. We consider this a bumper year for Scanfil and the situation is not unlike that for many other companies operating within the industrial manufacturing value chain. We would not extrapolate such growth rates very long into the future, but nonetheless the general outlook suggests Scanfil is positioned for around 7% CAGR in the years to come.
In our view some further multiple expansion is justified
Scanfil’s 8.5x EV/EBITDA and 11.5x EV/EBIT multiples, on our FY ’21 estimates, are high in the historical context, but growth outlook warrants looking further into the future. The multiples decrease to ca. 8x and 10.5x already next year. In our view Scanfil’s performance and positioning also warrant a peer premium. Our new TP is EUR 9.0 (8.5), rating now BUY (HOLD).
Netum is a Finland-based strongly growing and profitable IT services company with over 20 years of experience of demanding IT projects. The company seeks to grow sales to EUR 30m by 2023 (20% p.a. implied) while maintaining an EBITDA margin of above 15%. We initiate coverage with HOLD and a target price of EUR 4.4, valuing Netum at approx. 18.4x 2021e adj. P/E.
Strong track record of profitable growth
Netum has been growing strongly in the past years, through both organic growth and M&A, with a CAGR of 22% in 2016-2020. Strong growth has been coupled with high margins as the average EBITA and EBIT margins between 2016-2020 have been 16.7% and 11.4% respectively. Both growth and profitability have been above the average level of Finnish competitors.
Proceeds from the IPO will be used to accelerate growth
Netum aims to grow rapidly organically and according to its financial targets, the company aims to achieve net sales of EUR 30m in 2023, which corresponds to 20% annual organic growth. In addition to organic growth, the company is actively looking for opportunities for inorganic growth and seeks to grow through selective acquisitions, aided by funds raised in the recently completed IPO. A core part of Netum’s strategy is to continue to achieve a good level or profitability while growing, and the target is to achieve an EBITDA margin of at least 15%.
HOLD with a target price of EUR 4.4
We initiate coverage of Netum with a HOLD-rating and target price of EUR 4.4. The share price rose clearly after the IPO and current valuation multiples are rather in line with the Finnish peers. In our view, Netum’s strong track record of growth, relatively high net sales/employee ratio and above-average profitability could even warrant a premium to our peer group. On the other hand, Netum’s smaller size, competition for skilled employees, concentrated customer base, and intensifying competition are factors to be taken into consideration when looking at valuation.
Marimekko showed its strengths once again and delivered very strong Q1 figures. Development was good internationally but also in Finland. Adj. EBIT was clearly above expectations at EUR 5.6m. We have increased our FY21E-23E estimates and keep our rating “BUY” with TP of EUR 63 (58.2).
Clear estimates beat in Q1
Marimekko delivered a very strong Q1 result. Net sales increased by 17% y/y to EUR 29.1m vs. EUR 27.7m/27.6m Evli/cons. Sales were boosted by good wholesale sales development in APAC region, Finland and Scandinavia as well as increased licensing income in EMEA. Net sales in Finland amounted EUR 14.5m (7% y/y) vs. our EUR 14.0m and international sales were EUR 14.6m (29% y/y) vs. our EUR 13.7m. The continuing pandemic situation continued to hamper customer flows in stores, but retail sales were supported by good growth in online sales. Marimekko’s adj. EBIT was 130-140% above expectations at EUR 5.6m. Profitability was supported by increased net sales, improved relative sales margin and reduced fixed costs. EPS was EUR 0.55 vs. EUR 0.21/0.18 Evli/cons.
Aiming to accelerate international growth
Marimekko has constantly been able to deliver solid results, even during times like this. The company has a strong positioning in Finland, but its brand awareness has increased internationally as well which was shown also in Q1 figures. Marimekko plans to accelerate its long-term international growth in 2021 and to invest especially in digital business, seamless omnichannel customer experience, sustainability and brand awareness. This year, the company turns 70 years old, and this should increase brand visibility even more. Despite the strong performance in Q1, we expect a peak in sales once the vaccination coverage increases and restrictions are being lifted. Even though Marimekko had an excellent start of the year, the company indicated that majority of its net sales and earnings will be generated during H2’21E.
“BUY” with TP of EUR 63 (58.2)
Marimekko expects 2021E adj. EBIT margin to be approx. on a par with last year or higher. Net sales are expected to increase from last year. We expect revenue growth of 12% in 21E and 8% in 22E and adj. EBIT margins of 16.7% and 17.0%. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 19.9x and 17.9x which is 40-50% discount compared to the luxury peers. We keep our rating “BUY” with TP of EUR 63 (58.2).
No major surprises were seen in Endomines Q1 results and operations startup appears to be progressing according to plans. We raise our target price to EUR 2.9 (2.7) and upgrade our rating to BUY (HOLD).
No major surprises in figures
Endomines revenue was as expected insignificant (Act/Evli SEK 0.1m/0.0m), as operations were still at a halt. Costs were somewhat higher than expected and EBITDA of SEK -14.5m lower than our estimate (Evli SEK-11.0m). Focus during the year has so far been on ramp-up of operations and strengthening the organization through key recruitments. To our understanding the startup of operations has proceeded quite according to plans and the issues with the tailings dewatering system at the Orogrande processing facility have reportedly been addressed.
2021 production guidance 3,000-4,000oz
Endomines gave a production guidance for 3,000-4,000oz during 2021, above our previous estimate of 2,869oz. Our revised estimate puts production at 3,061oz, not yet including estimates for Pampalo, which given the likely startup in late 2021 and the low-grade development ore should be quite limited. With the mill at Friday seen to reach full capacity by year end the production figures are expected to pick up clearly in 2022. Cash flow from operations was at SEK -63.0m but around half of it was due to transactions relating to the US Grant and Kearsarge projects. Liquid assets stood at SEK 68.0m. The financing package with LDA Capital (subject to AGM approval) could bring a further EUR 14m, which should cover financing needs until sufficient own cash flows are achieved.
BUY (HOLD) with a TP of SEK 2.9 (2.7)
We have not made larger changes to our estimates or SOTP model apart from the slightly increased production figures for 2021. With the anticipated lower financial risk from the LDA Capital financing package (not yet included in our estimates) and favourable gold price development we adjust our target price to SEK 2.9 (2.7) and upgrade our rating to BUY (HOLD), noting however the significant risks relating to junior gold miners.
Marimekko’s Q1 result was very strong and it clearly outpaced the expectations. Net sales increased by 17% and were EUR 29.1m vs. EUR 27.7m/27.6m Evli/cons. Sales were driven by good wholesale sales development in APAC region, Finland and Scandinavia as well as increased licensing income in EMEA. Adj. EBIT was EUR 5.6m vs. EUR 2.4m/2.3m Evli/cons.
Marimekko upgraded its 21E earnings guidance last week as sales outlook for the full year has improved. The company said that Q1 has been very strong. We have increased our 21E adj. EBIT estimate by ~9% and keep our rating “BUY” with TP of EUR 58.2 (57). Marimekko reports its Q1 result on this week’s Thursday.
Upgraded guidance due to improved sales outlook
Marimekko upgraded its 21E earnings guidance last week. The company now expects 21E adj. EBIT margin to be similar compared to last year (2020: 16.3%) or higher. Sales guidance remains unchanged and the company expects 21E sales to be higher than last year. Based on the earlier guidance given in February, the company expected 21E adj. EBIT margin to be in line with the company’s long-term target of 15%. According to Marimekko, the upgrade is due, in particular, to improved sales outlook for the full year, supported by a very strong Q1’21. Despite the strong figures in Q1, the company still estimates that the major portion of net sales and earnings are generated during H2’21 due to the seasonality of Marimekko’s business.
We have increased our 21E adj. EBIT estimate by ~9%
We would have hoped more detailed information about the improved sales outlook, but we expect to get more color on this during the Q1 result. Earlier, we expected 21E sales growth of 9.5% y/y and adj. EBIT margin of 15.2% (EUR 20.5m). As a result of the guidance upgrade, we have increased our estimates, especially our Q1’21E estimates. We increased our Q1E sales expectation by ~2% and expect sales of EUR 28m while we have more than doubled our adj. EBIT expectation. We now expect Q1’21E adj. EBIT of EUR 2.4m (8.7% margin). We have increased our FY21E adj. EBIT estimate by ~9% and we expect it to be EUR 22.4m (16.5% margin) while we expect sales growth of ~10% y/y.
“BUY” with TP of EUR 58.2 (57)
Marimekko reports its Q1 result on this week’s Thursday, 20th of May. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 19.0x and 17.1x which is ~50% discount compared to the luxury peers. We keep “BUY” with TP of EUR 58.2 (57) ahead the Q1 result.
Cibus’ portfolio continued to perform as expected. Nordic daily-goods properties remain valued at attractive levels, which in our view highlights the underlying assets’ illiquid and idiosyncratic nature. Our new TP is SEK 175 (170).
Q1 was uneventful like so many other quarters
Cibus’ EUR 18.2m Q1 net rental income was in line with our EUR 18.1m estimate. Admin costs were EUR 1.7m (vs our EUR 1.3m estimate) as some EUR 0.1m related to the Nasdaq Stockholm main list transfer added to costs, in addition to certain seasonal variation. Net financial costs were only EUR 4.9m, compared to our EUR 5.4m estimate, as there was a EUR 0.5m FX gain. Net operating income, at EUR 11.6m, was therefore a bit above our EUR 11.4m estimate. Q1 was not unlike all other Cibus quarters despite the pandemic and somewhat extraordinary economic developments. Cibus also didn’t close new acquisitions in Q1.
Relatively few buyers help maintain the markets cool
Cibus has made a couple of small acquisitions after Q1. The four properties (three ICA and one Tokmanni) amounted to a total purchase price of EUR 8.7m. We assume a 6% yield and thus update our estimates accordingly. We understand Cibus’ acquisition pipeline remains plentiful beyond these few small deals. Cibus will have no problem financing even larger portfolio acquisitions as credit is available through various channels and equity can be accessed with a directed share issue (an exercise completed twice last year) or by a hybrid bond. Cibus also continues to act with restraint and is wary of paying a lot more than the levels it has gotten used to in the past few years.
1.2x EV/GAV begins to beg some underlying asset inflation
There has been no marked heating in the Nordic daily-goods property markets; the Swedish market shows some modest yield compression while Finland has remained much the same. We wouldn’t be surprised to see some acceleration in yield compression over the year, but in our view Cibus’ valuation already reflects such expectations to an extent. Cibus is valued almost 1.2x EV/GAV and 1.5x P/NAV, and in our opinion the levels don’t leave further upside even though Cibus’ absolute yield remains competitive relative to other listed Nordic properties. We update our TP to SEK 175 (170) as Swedish yield compression still provides additional minor support for Cibus’ valuation.
Cibus’ Q1 was quiet in terms of completed acquisitions but preparations continued for the Nasdaq Stockholm main list move as well as the long pipeline of potential property purchases. Meanwhile Cibus’ property portfolio performed according to expectations.
On Thursday, Enersense announced the transition to IFRS reporting and new guidance. Enersense expects net sales to amount to EUR 215-245m, adj. EBITDA of EUR 17-20m, and adj. EBIT of EUR 8-11m in 2021. We have updated our estimates in accordance with IFRS reporting and retain our TP of EUR 11 and BUY-rating.
Staff Leasing segment will be discontinued
Enersense announced the transition to IFRS reporting and published consolidated financial statements for 2020 and 2019. With the transition, the company updated its guidance and expects net sales to amount to EUR 215-245m, adj. EBITDA of EUR 17-20m, and adj. EBIT of EUR 8-11m in 2021. Enersense also announced that it has agreed to sell the entire share capital of its subsidiary Värväämö Oy to Citywork Oy. Staff Leasing segment will be discontinued and it will be reported as part of Smart Industry. Thus, the company will report its revenue in the future based on four segments; Power, Smart Industry, Connectivity, and International Operations.
We expect net sales of EUR 235.1m, adj. EBITDA of EUR 18.8m and adj. EBIT of EUR 10.4m in 2021E
We have adjusted our estimates with the transition to IFRS. Due to the divestment of Värväämö, we have decreased our net sales estimate for 2021E to EUR 235.1 million (prev. EUR 242m). Our growth estimates of 4.6% and 3.9% for 2022E-23E are unchanged. In 2021E, we expect adj. EBITDA of EUR 18.8m (8% margin) and adj. EBIT of EUR 10.4m (4.4% margin), respectively. We note that Enersense has not provided IFRS figures for Q1/21 and Q1/21 figures below are our estimates.
No changes to our recommendation
Based on our updated estimates, we have not made changes to our recommendation. We retain our TP of EUR 11 and BUY-rating.
Pihlajalinna - High hopes for H2 Equity Research Read full report here → Pihlajalinna’s Q1 result outpaced the expectations. Revenue increased by ~5% and adj. EBIT by ~59% y/y. We have slightly increased our 21E estimates and keep our rating “BUY” with TP of EUR 13.2 (13.0).
Q1 earnings outpaced expectations
Pihlajalinna’s Q1 result outpaced the expectations. Revenue increased by 5.2% y/y to EUR 140m which was in line with the Factset consensus estimates but above our EUR 137m. Revenue was once again supported by COVID-19 testing (revenue increase of EUR 8.2m). Testing volumes increased by 65% q/q. On the other hand, customer volumes of private clinics remained in a lower level. Revenue of corporate customer group increased by ~12% y/y while revenue of private customers was down by ~10% y/y. Revenue of public sector customer group increased by ~8% y/y. Adj. EBITDA amounted EUR 15.2m vs. EUR 14.4m/14.7m Evli/cons. and adj. EBIT was EUR 6.7m vs. EUR 5.6m/6.1m Evli/cons. EPS improved clearly to EUR 0.20 (Q1’20: EUR 0.06) vs. EUR 0.15/0.17 Evli/cons.
High hopes for H2’21
Pihlajalinna’s margin improvement in the private sector is right on track. The company has successfully renewed its sales strategy, and this was shown in Q1 figures. In the public sector, Pihlajalinna transitioned from the outsourcing market to the service sales market, in which the impact of the planned SOTE reform is low. The virus situation worsened towards the end of the first quarter and nearly all Pihlajalinna’s fitness centers were closed during April which will continue to hamper private customer segment in Q2. The situation has since improved and the vaccination coverage is gradually increasing. We expect the situation to normalize during H2’21 and the pent-up demand starting to release in late summer.
“BUY” with TP of EUR 13.2 (13.0)
Pihlajalinna reiterated its 2021 guidance and expects revenue and adj. EBIT to increase clearly compared to 2020. We have increased our 21E adj. EBIT expectation by ~7%. We expect 2021E revenue to grow by ~12% y/y and adj. EBIT of EUR 30.7m (5.4% margin). In 22E-23E, we expect adj EBIT margins of 5.6%. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.8x and 13.5x which is ~15-20% discount compared to the peers. We keep “BUY” with TP of EUR 13.2 (13.0).
Pihlajalinna’s Q1 figures beat our estimates. Q1 revenue amounted EUR 140m (+5.2%) vs. EUR 137m/140m Evli/cons, while adj. EBIT landed at EUR 6.7m vs. EUR 5.6m/6.1m Evli/cons estimates. COVID-19 testing volumes continued to grow during Q1 but customer volumes of private clinics are still lagging behind.
ESL and Telko extended recent quarters’ strong figures. In our view Aspo now warrants more long-term valuation perspective. Our TP is EUR 10.5 (9.5), rating BUY (HOLD).
Aspo already reached 6% long-term EBIT target in Q1
Aspo’s EUR 132m Q1 revenue was in line with estimates while the EUR 7.9m EBIT represented a record high and topped the EUR 6.8m/6.2m Evli/cons. estimates. In our view the positive surprise was for the most part due to ESL, but Telko also once again reached a record high EBIT. ESL managed a record Q1 EBIT despite the cold winter, which caused challenges especially for the smaller vessels. Cargo volumes remained flat y/y while shipping freight rates increased for smaller and larger vessels alike. Supply challenges in plastics and chemicals limited Telko’s revenue prospects but contributed to sharp price increases and so helped profitability (in addition to mix improvement). The pandemic continued to limit foodservice as well as machinery potential and thus Leipurin’s profitability remained muted.
Vague guidance for now but long-term potential remains
The vague guidance is warranted by the chaotic conditions in the raw materials and logistics markets. Historically H2 has been the more profitable part of the year but now the effect may be more muted. ESL’s demand continues to look good for the summer months while high docking levels will have a negative effect on Q2 and Q3 EBIT. We expect Telko to reach a 6% EBIT margin going forward (vs the 7.4% Q1 EBIT margin) as the environment begins to normalize. We are now more confident towards ESL’s and Telko’s long-term profitability levels and see how Aspo’s EUR 7.9m Q1 EBIT hints at some EUR 35m annual potential.
ESL’s peer multiples now undervalue the niche carrier
In our view Aspo’s SOTP valuation doesn’t fully reflect ESL’s FV as the dry bulk carrier has a special value chain position compared to a typical peer. In Telko’s case the situation is more nuanced as the peers are large global players. It’s nonetheless clear Telko’s FV has risen a lot in the past few years. Leipurin also has plenty of yet to be realized potential. We saw ESL’s EV at ca. EUR 300m before the pandemic and view that figure still relevant. Meanwhile Telko’s EV has increased from some EUR 150-175m to above EUR 200m. We see Aspo’s EV now at around EUR 500m. Our TP is now EUR 10.5 (9.5), our new rating is BUY (HOLD).
Etteplan reported better than expected Q1 figures and raised its sales and EBIT guidance. The market situation has continued to develop favourably and Etteplan is seen to move towards a new normal during the latter half of the year. We adjust our TP to EUR 16.0 (13.9) and upgrade our rating to HOLD (SELL).
Better than expected start to the year
Etteplan reported better than expected Q1 figures. Revenue grew slightly y/y to EUR 73.0m (EUR 71.1m/71.3m Evli/cons.) but decreased 4% organically. EBIT amounted to EUR 6.6m, above our and consensus estimates (EUR 5.4m/5.5m Evli/cons.), with the EBITA-% at 10.5% (co’s fin. target 10%). Demand across Etteplan’s markets continued to develop favourably, with China unaffected by the pandemic and hours sold up 121% y/y from the weak comparison period. With the strong start to the year and confidence in continued improvement in the market situation throughout the year Etteplan also raised its guidance for 2021, expecting revenue of EUR 285-305m (280m-300m) and EBIT of EUR 25-28m (23-26m).
Moving towards a new normal
We have slightly raised our 2021 sales estimate to EUR 292.6m and our EBIT estimate by approx. 7% to EUR 26.1m, mainly due to the stronger than expected Q1. Margins in the past two quarters have been exceptionally good due to the strict cost control and with operations shifting back towards a new normal cost will be on the rise and we as such expect weaker margins y/y in H2. Organic growth is still somewhat of a concern but with market conditions improving and the company actively recruiting as well as having increased usage of subcontracting, the already begun more positive trend should pick up.
HOLD (SELL) with a target price of EUR 16.0 (13.9)
Looking at the solid start of the year we have been too bearish on Etteplan and the development of the overall market situation. This being said, we still see limits in valuation upside with Etteplan already trading rather clearly above peers. We adjust our target price to EUR 16.0 (13.9) and upgrade to HOLD (SELL).
Etteplan's net sales in Q1 amounted to EUR 73.0m, in line with our estimates and consensus (EUR 71.1m/71.3m Evli/cons.). EBIT amounted to EUR 6.6m, above our estimates and above consensus estimates (EUR 5.4m/5.5m Evli/cons.). Guidance specified: Etteplan expects revenue to amount to EUR 285-305m (280-300m) and operating profit (EBIT) to amount to EUR 25-28m (23-26m).
Aspo’s Q1 profitability was a clear positive surprise relative to estimates. EBIT reached a record high and both ESL and Telko topped our expectations.
Enersense reported a better-than-expected Q1 result and 9% increase in the order backlog compared to the end of Q4/20. The company also announced that it has concluded negotiations on a new financing package. We have made upward revisions to our estimates and raise our TP to EUR 11 (9.7), BUY-rating intact.
Orders increased especially in Power and the Baltics
Enersense’s Q1 net sales and profitability beat our expectations. Net sales amounted to EUR 52.4m (Evli EUR 44.5m) and adj. EBITDA was EUR 1.7m (Evli EUR 0.5m). Order backlog increased by 9% from EUR 292m at the end of 2020 to EUR 319m at the end of Q1. Orders increased especially in the Power segment and the Baltics. Enersense also announced that it has concluded negotiations on a new financing package, which will be used to develop operations and manage working capital.
Our revised estimates are at the upper end of the guidance
Q1 is typically a challenging quarter for Enersense due to the weather conditions, and revenue and profitability are expected to increase towards the end of the year. The order backlog continued to grow rapidly in Q1 and according to the management, the market outlook is very positive as demand is expected to remain strong especially in Power and Smart Industry. Supported by increased orders and good outlook, we have raised our 2021E net sales estimate to EUR 242m (prev. EUR 230m). We have also made upward revisions to 2022-23E sales estimates, and forecast 4.6% and 3.9% growth, respectively. We expect adj. EBITDA to increase from EUR 8.9m to EUR 14.4m in 2021E. Both our net sales and adj. EBITDA estimates are at the upper end of guidance for 2021 (net sales: EUR 215-245m, adj. EBITDA: EUR 12-15m).
BUY with a target price of EUR 11 (9.7)
On our estimates for 2022E, Enersense is trading at EV/EBITDA of 5.6x and adj. P/E of 10.8x, which translate into discount of 23-30% to our peer group median. Better-than-expected results in Q1, renegotiated short-term financing and continued growth in the order backlog increase our confidence in the investment case, and we raise our TP to EUR 11 (9.7), BUY-rating intact. Our TP values Enersense at EV/EBITDA of 6.3x and adj. P/E of 12.3x for 2022E, which are still at 13-21% discount to peer group, reflecting Enersense’s currently lower profitability profile. If Enersense manages to increase net sales and improve margins in line with the midterm financial targets, we see further upside potential in valuation.
Enersense’s Q1 net sales and profitability beat our expectations. Net sales amounted to EUR 52.4m (Evli EUR 44.5m) and adj. EBITDA was EUR 1.7m (Evli EUR 0.5m). Enersense also announced that it has concluded negotiations on a new financing package.
Fellow Finance’s intermediated loan volumes have picked up nicely in past months, supported by improved availability of financing and less aggressive competition. We now expect growth of 18.1% in 2021. We raise our target price to EUR 3.8 (2.8) and upgrade to BUY (HOLD).
Favourable loan volume development
Fellow Finance has been seeing intermediated loan volumes developing favourably since the second half of 2020, with the growth pace having picked up clearly in recent months. The average monthly volumes in March-April were up close to 100% compared to the volume seen during the early stages of the pandemic. The increase in volumes has to our understanding been largely due to an increased availability of financing and an increase in institutional investor volumes. Within consumer loans the competition also appears to have eased and the competitiveness of Fellow Finance’s offering improved as the more aggressive competitors have taken less aggressive approaches.
Growth seen to pick up to double digits
We have raised our 2021 intermediated loan volume estimate to EUR 186m (prev. 160m), for a 40% y/y growth, and our sales growth estimate to 18.1% (prev. 7.5%). Our profitability estimates remain mostly intact, with the company having estimated for growth projects to keep net earnings slightly negative, which is looking to materialize for instance through the expansion to credit card solutions in cooperation with Enfuce.
BUY (HOLD) with a target price of EUR 3.8 (2.8)
Current valuation puts the intermediation business 2021e EV/Sales at ~1.3x (assuming Lainaamo at BV). Near-term earnings multiples are challenging but with growth picking up, shifting the 2023 targets (sales ~EUR 23m and 15% EBIT-margin) more within grasp, we still see a higher valuation being justified. We raise our target price to EUR 3.8 (prev. 2.8) and upgrade our rating to BUY (HOLD).
Exel’s record Q1 orders surprised. In our view the next quarters’ orders determine how much forward-look the multiples warrant. Our TP is EUR 11, now rate HOLD (BUY).
The EUR 42m order intake sets a new benchmark level
Exel’s Q1 revenue grew 11% y/y to EUR 31m and was a bit above our EUR 30m estimate. Customer industries performed close to our expectations while Asia-Pacific contributed most of the growth. Adj. EBIT was EUR 2.5m vs our EUR 2.4m estimate. Strong demand was to be expected, yet the EUR 42m order intake (up 22% y/y from a high comparison figure) is a record and can be compared to the EUR 30m level Exel has averaged in the recent past. The orders stemmed from many industries and no large orders drove the intake. Operations ran almost as usual despite the pandemic, raw materials, and logistics issues. Exel managed to balance its raw material pool across the eight plants.
Organic CAGR outlook now closer to 10% than 5%
Exel already saw some raw materials inflation affecting Q1 margins. We expect a more pronounced negative effect in Q2 (we now estimate 7.2% Q2 EBIT vs our prev. 10.4% estimate), but also see EBIT margins bounce back to ca. 9-10% levels in H2. Exel has been able to pass raw materials inflation forward before and this is to be expected again considering the value chain position. Profitability slope remains attractive especially if the Q1 order levels continue to persist over the summer. We don’t consider the EUR 42m figure just a fluke and even if Exel may not quite reach such high orders in the coming quarters we nevertheless see the company is now positioned for high single-digit organic CAGR for years to come. In our view Exel might well reach double-digit top line growth this year and we see such growth rates driving long-term EBIT margins meaningfully above 10%.
Earnings multiples have already rerated for a valid reason
Exel is valued ca. 9.5x EV/EBITDA and 15x EV/EBIT on our FY ’21 estimates. The multiples are a bit high compared to the historical respective averages of 8x and 13x but in our view warranted by the current growth prospects. Top line growth continues to drive profitability and the multiples are some 8.5x and 12x on our FY ’22 estimates. In our opinion the next few quarters’ orders will determine how much forward into the future the multiples may lean. We retain our EUR 11 TP, rating now HOLD (BUY).
Consti reported Q1 results slightly below our estimates, with EBIT below our estimates driven by legal costs relating to the St. George arbitration proceedings. We continue to expect minor growth and margin improvement in 2021. We retain our HOLD-rating and target price of EUR 13.0.
Legal costs clearly affected profitability
Consti reported Q1 results that were slightly below our estimates. Revenue grew slightly to EUR 59.3m (EUR 60.2m/60.2m Evli/cons.) while EBIT fell y/y to EUR 0.1m (EUR 0.5m/0.6m Evli/cons.). EBIT was affected by legal costs relating to the St. George arbitration proceedings of EUR 0.4m (0.1m), without which relative profitability would have been close to previous year levels. The coronavirus pandemic also had an impact, with more worksite interruptions despite a lower number of cases. Consti had a positive start to the year in terms of order intake, with new orders of EUR 69.8m in the quarter, although the order backlog was still down slightly y/y.
Expect minor growth and margin improvement
Apart from adjustments due to the lower than expected Q1 figures, we make no changes to our estimates. The demand situation in general does not appear to have shown clear improvements yet and was at a reasonable level in Q1. Consti still sees that a higher share of the order backlog will be recognized during the on-going financial year compared to the same time last year and as such we continue to expect minor growth of 1.9%. We expect slight improvement in relative profitability and a 2021 EBIT of EUR 8.7m.
HOLD with a target price of EUR 13.0
The Q1 report did not in any material way affect our view of Consti in the near-term. Valuation in our view continues to appear fair given current limited growth prospects and valuation upside drivers. With our estimates largely intact we retain our HOLD-rating and target price of EUR 13.0.
Pihlajalinna reports its Q1 report on next week’s Friday, 7th of May. Despite the worsened COVID-19 situation during Q1, we expect fairly good quarterly figures. We keep our rating “BUY” with TP of EUR 13.
We expect revenue to increase by 3%
We expect Pihlajalinna to report relatively good Q1 result, with sales growth of 3% y/y (EUR 137m). We expect the COVID-19 testing is once again boosting sales. However, as the virus situation worsened towards the end of Q1 and new restrictions came into force, we expect private demand is still in lower levels than normally. As we saw at the end of last year, the company’s efficiency improvement actions have paid off and we expect Q1’21E profitability to improve from Q1’20. We foresee Q1 adj. EBIT of EUR 5.6m, resulting in adj. EBIT margin of 4.1% (Q1’20: 3.2%).
Market drivers offer new opportunities
Pihlajalinna held its CMD in late March where it highlighted its strategic priorities for the upcoming years as the market is changing in many ways. The company aims to continue to strengthen its already strong partnership with the public side and to engage in close cooperation with the future wellbeing services counties. In addition, Pihlajalinna will make renewals to its private services with new service concepts and digital innovation. Further, the company will continue to strengthen digitalization. The market drivers have remained unchanged (aging population, digital solutions, individuals’ interest in their own health etc.) offering many new opportunities to Pihlajalinna.
“BUY” with TP of EUR 13
We have included the acquisition of Työterveys Virta to our estimates from Q2’21E onwards. We expect 21E sales growth of ~11% (EUR 564m) and adj. EBIT of 28.8m (5.1% margin). We expect Pihlajalinna’s profitability to improve further in 22E-23E and adj. EBIT margin of 5.6% in both years. With our estimates, the company trades with 21E-22E EV/EBIT multiple of 17.8x and 13.4x which is 8-20% discount compared to the peers. We keep our rating “BUY” with TP of EUR 13.
CapMan reported better than expected Q1 results. Q1 EBIT was clearly above our estimates driven by investment returns. We have raised our 2021 EBIT estimate to EUR 46.8m (prev. 38.2m). Improvement is being seen across the board but 2021 earnings look to be driven less by recurring profits and more by investment returns and carry. We raise our TP to EUR 3.1 (2.7) and upgrade to BUY (HOLD).
Estimates beat on profitability figures
CapMan posted better than expected Q1 results. Revenue was slightly below expectations at EUR 11.3m (EUR 12.5m/11.9m Evli/cons.) but the EBIT of EUR 10.1m clearly beat expectations (EUR 7.8m/7.6m Evli/cons.). The EBIT beat was driven by higher that expected fair value changes (EUR 8.2m/3.5m Act./Evli) while the Management Company business EBIT was lower than expected (EUR2.5m/3.9m Act./Evli). Capital under management stood at EUR 3.9bn, up 20% y/y. The Buyout XI fund held a final close at EUR 190m, with a new Real Estate product of for CapMan significant size in the pipeline.
Expect clear earnings improvement in 2021
CapMan’s development continues to look bright after the challenges faced in the previous year. In terms of absolute profits, the Investment business has in the near past been the clear driver, but good progress can be seen more or less across the board. The performance of the own funds has during the start of the year surpassed the collective return target. We have raised our 2021 operating profit estimate to EUR 46.8m (prev. 38.2m), noting that some two-thirds consists of the more unpredictable investment returns and carried interest.
BUY (HOLD) with a target price of EUR 3.1 (2.7)
Following adjustments to our estimates we raise our target price to EUR 3.1. Compared with the Finnish peers the 2021e P/E is certainly not challenging, but on our estimates a high share of the profit is from more uncertain sources and thus remain somewhat on the cautious side.
Exel’s Q1 report was close to our expectations in terms of top line and profitability. Order intake was very high. Exel also highlights the risk that global raw materials challenges may hurt short-term profitability.
Vaisala’s Q1 result beat our and consensus expectations thanks to a better than expected and solid performance in both BU’s. The improved market environment and strong order book attributed to net sales growth and profitability improved thanks to higher sales and lower OPEX level due to Covid-19. We have increased our estimates for 2021-23E to reflect the expected market improvement. Based on our renewed estimates and improved outlook, we raise our target price to €33 (prev. €32), our rating is now HOLD (prev. SELL).
Strong start to the year
Vaisala’s Q1 result beat our and consensus expectations thanks to solid performance in both BU’s. Q1 net sales increased by 5% to 92 MEUR (86.5 Evli / 85.7 cons). Q1 EBIT came in at 8.1 MEUR (5.9 Evli / 5.0 cons), resulting in 8,8% EBIT-margin (Q1’20: 5.2 MEUR, 6% EBIT-margin). Orders received grew by 18% to 106.1 MEUR (Q1’20: 88.7 MEUR). As a result of strong order intake, order book was record high at 155.4 MEUR (Q1’20: 141.6 MEUR). IM continued its strong performance; net sales grew 12% to 39.7 MEUR (39.5 MEUR Evli). IM EBIT was 9.4 MEUR (8.9 MEUR Evli), resulting in 23,8% EBIT-margin (Q1’20: 21,4%). IM net sales growth was strong in life science and power industry market segments and good in industrial instruments, but net sales declined in liquid measurements. IM’s order intake growth was 22% coming from all market segments and boosted by the economic recovery in China. W&E net sales increased by 1% to 52.2 MEUR (47 MEUR Evli). W&E EBIT was -0.9 MEUR (-2.6 MEUR Evli). W&E net sales grew in renewable energy, ground transportation, and meteorology market segments, but decreased in aviation, where market is still weak due to Covid-19. W&E’s orders received grew nicely by 15%. W&E orders received increased in renewable energy and ground transportation market segments, whereas meteorology market segment was flat, and aviation decreased compared to previous year.
Outlook updated, more positive outlook upgrades likely to follow
As a result of strong start to the year, Vaisala raised the lower limits of its business outlook for 2021; net sales are expected to be between 380–400 MEUR and EBIT between of 35–45 MEUR (earlier net sales 370-400 and EBIT 30-45). The outlook update did not come as a surprise given the strong orders received and order book end of last year. We see further positive guidance improvements likely given the strong order intake and order book, improving market environment, and deliveries proceeding well.
Target price €33 (prev. €32) with HOLD rating
We have increased our net sales and EBIT estimates for 2021-23E to reflect the expected market improvement. In 2021E, we expect +4,6 net sales growth driven by +7% growth in IM, while we expect W&E growth to be around 3%. We expect EBIT of 44.6 MEUR (11,2 % margin), driven by good performance in IM. Both our net sales and EBIT estimates are at guidance upper range. For 2022-23E we expect similar net sales growth and Vaisala to achieve above 12% EBIT margins as IM continues strong and W&E’s profitability improves. On our renewed estimates, Vaisala is still trading at clear premiums compared to our peer group and we continue to see valuation stretched given Vaisala’s weaker financial performance compared to peer group. Based on our renewed estimates and improved outlook, we raise our target price to €33 (prev. €32), our rating is now HOLD (prev. SELL). Our TP values Vaisala at 22-23E EV/EBIT multiples of 22x and 21x which is above the peer group, reflecting Vaisala’s technology leadership position, strong sustainability profile, healthy dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.
Raute’s environment is improving a bit faster than we expected, but FY ’21 profitability will still not be great. Valuation reflects earnings gains for many years to come. In our view further upside appears elusive for now.
New capacity projects are yet to materialize
Raute’s Q1 order intake was EUR 30m, a 20% y/y increase and way above our EUR 22m estimate. There were no big orders. Project deliveries’ EUR 11m figure was close to what we expected while the EUR 19m in services orders beat our EUR 12m estimate due to high North American modernization orders. Pent-up US demand drove the figure and thus we see cautious extrapolation is in order, but mills’ utilization rates are improving worldwide. Raute sees European demand to be at a normal level. Russian order intake was muted in Q1 while demand potential remains in place. Q1 revenue amounted to EUR 25m vs our EUR 34m estimate. Raute foresaw Q1’s relative slowness. Pandemic restrictions also remain a nuisance. The low top line also meant EBIT was EUR -2.5m, compared to our EUR 1.6m estimate.
Orders are picking up, albeit from low levels
Raute also highlighted potential component shortages, however the company is addressing the challenge and in our view the issue is not that meaningful given Raute’s long-term story and overall competitive positioning. We make some revisions to our estimates, however the overall valuation picture remains unaltered. It’s clear Raute’s business is now picking up from the recent lows and the favorable order intake development also begins to support FY ’22, for which we now expect ca. 5% growth. It nevertheless seems the approximately EUR 160m revenue figure (of which some EUR 100m projects and EUR 60m services) that helped Raute to achieve above EUR 10m EBIT in the past remains many years in the future.
In our view valuation still doesn’t leave meaningful upside
The pick-up in orders turns us more confident towards next year. We expect Raute to reach only some EUR 2m in EBIT this year, compared to the potential that is many times the number. We estimate the figure to rise close to EUR 8m next year, however Raute is already trading about 9x EV/EBITDA and 13x EV/EBIT on those estimates. Full long-term earnings potential in our view remains too many years away. Our TP is EUR 21, retain HOLD.
Consti's net sales in Q1 amounted to EUR 59.3m, in line with our and consensus estimates (EUR 60.2m/60.2m Evli/cons.). EBIT amounted to EUR 0.1m, below our and consensus estimates (EUR 0.5m/0.6m Evli/cons.). 2021 operating profit guidance of EUR 7-11m intact.
Solteq posted solid Q1 figures, clearly above our estimates. We have made clear upward revisions to our estimates with on better than expected growth and profitability. We adjust our target price to EUR 7.2 (4.5), BUY-rating intact.
Clear earnings beat across the board
Solteq reported solid Q1 figures, clearly beating our estimates. Net sales grew 10.9% to EUR 17.4m (Evli 16.5m) and EBIT improved to EUR 2.2m (Evli EUR 0.9m). A clear highlight for the first quarter was the mainly organic 43.1% growth of Solteq Software, aided by deliveries of the orders received within the Utilities business. The profitability figures of Solteq Digital were surprisingly good, with EBIT doubling compared to the comparison period, to our understanding mainly driven by high utilization rates and streamlining of operations. Solteq upgraded its profitability guidance ahead of Q1, now also expecting the operating profit to grow clearly (prev. grow). This was not too surprising, as we had already in conjunction with Q4 questioned the guidance softness.
Estimates raised quite a bit
We have clearly raised our estimates after the solid first quarter figures. We now expect revenue growth of 13.0% (prev. 8.9%), driven mainly by Solteq Software and customer deliveries in the Utilities business. We expect pick-up in growth of Solteq Digital in the latter half of the year, as easing of the pandemic should increase demand in some of the harder hit sectors. We have also raised our EBIT estimate to EUR 9.2m (prev. 6.7m). We see limited margin upside potential going forward in the less scalable Solteq Digital segment while Solteq Software still has a lot more potential once the recurring revenue from the deliveries now being made start ramping up.
BUY with a target price of EUR 7.2 (4.5)
Solteq has seen a rather hefty share price rally in the past year, being up over 400%. On our revised estimates valuation for the “new” Solteq still does not appear overly challenging. We raise our target price to EUR 7.2 (4.5), valuing Solteq at 24x 2021 P/E and retain our BUY-rating.
SRV’s Q1 revenue was slightly below expectations but profitability beat our estimates. The continued positive margin development is essential while we remain rather dubious about construction volumes during 2021. We raise our target price to EUR 0.80 (0.64), BUY-rating intact.
Revenue slightly below estimates but good profitability
SRV’s Q1 results were somewhat in line with expectations, as although revenue came in a bit short at EUR 187.1m (EUR 205.7m/196.0m Evli/Cons.), EBIT amounted to a rather solid EUR 5.2m (EUR 4.4m/3.2m Evli/cons.). The order backlog stood at EUR 1,061m (Q1/20: EUR 1,362m). Order intake was quite weak at EUR 85.4m but on a positive note these included new developer contracted housing units, with start-ups picking up again after the break during Q1-Q3/2020. The most positive news in our view was the continued improvement in the Construction segments EBIT-margins (Q1/21: 3.7%, Q1/20: 3.0%) and the already earlier announced approx. EUR 730m Laakso Joint Hospital alliance project, to which SRV was chosen to develop and build (not yet final).
Favourable margin development, volumes a slight concern
With the lower than expected revenue and rather meager order development we have lowered our 2021 sales estimates near the lower bound of the EUR 900-1,050m sales guidance. Although SRV anticipates improved order intake in Q2 along with the increase in completion of developer contracted housing units later on in 2021 a more conservative approach still appears warranted. On the current profitability track and even if revenue were to decline clearly the upper bound of the profitability guidance is well within reach assuming no major surprises in the Investments-segment.
BUY with a target price of EUR 0.80 (0.64)
Although construction volumes are a slight concern going forward, the main thing for SRV is that margins have continued to develop positively and even better than we had expected. We raise our target price to EUR 0.80 (0.64), BUY-rating intact.
Raute’s Q1 remained low in terms of revenue and profitability but order intake grew by some 20% y/y due to mid-size production line and modernization orders.
Vaisala’s Q1 result beat our and consensus expectations. Both Bu’s performed better than expected thanks to good market environment. As a result of strong start to the year, Vaisala raises lower limit of its business outlook for 2021: net sales will be in the range of 380–400 MEUR and EBIT in the range of 35–45 MEUR (earlier was net sales 370-400 and EBIT 30-45). Outlook update did not come as a surprise and our 2021e estimates were already within new guidance.
Eltel’s Q1 results fell short of our expectations. Q1 is typically a weaker quarter due to seasonality and we expect net sales and profitability to increase towards the end of the year. We retain our BUY-rating but adjust TP to SEK 29.5 (30).
Profitability improved y/y despite the decline in net sales
Eltel reported a Q1 result that was below our expectations. Net sales decreased by 23.1% to EUR 182m (Evli EUR 209.9m), while operative EBITA improved y/y from EUR -2.1m to EUR -0.7m (Evli EUR 1.0m). Net sales continued to decline due to the divestments made last year (EUR -15m), lower activity and postponements among customers as a result of COVID-19 and harsh winter conditions. Q1 was good in Finland (+3.2%), while last year’s loss of a major agreement affected the volumes in Sweden and the ramp-up phase of the Telenor frame agreement was reflected in lower sales in Norway. Good resource and production planning, increased efficiency and better project management supported profitability, while the effect of divestments was EUR -0.9m.
Sales and EBITA are expected to grow towards the end of the year
Eltel’s business is subject to seasonality and Q1 is typically a weaker quarter. Net sales and profitability are expected to increase towards the end of the year and according to management, the order backlog looks good, especially in Finland and Norway. Based on the report, we have cut our net sales estimate for 2021E from EUR 916.8m to EUR 890.6m. We see the targeted growth rate of 2-4% in the Nordics achievable from 2022 onwards. In 2022-23E, we forecast net sales to grow by 1.7% and 2.0%. Currently, the focus is on profitability and Eltel has managed to increase its operative EBITA (y/y) for five consecutive quarters. We expect Eltel to continue its efforts to improve operational efficiency and in line with the guidance, we forecast operative EBITA margin to grow from 1.2% in 2020 to 2.4% (prev. 2.6%) in 2021E.
BUY with a target price of SEK 29.5 (30)
Despite lower-than-expected Q1 results, there have been no changes in the big picture. Eltel has continued its transformation journey with a focus on improving operational efficiency, profitability, financial position, and restructuring of non-performing businesses, which will be negatively reflected in this year’s sales. On our updated estimates for 2022-23E, Eltel is trading at EV/EBITDA of 7.9x and 7.0x, which translate into discount of 4-10% to our peer group median. On our revised estimates, we adjust our target price to SEK 29.5 (30) and retain our BUY-rating, which still values Eltel slightly below peers, reflecting Eltel’s lower profitability profile and as we look for more signs of further transformation progress.
SRV's net sales in Q1 amounted to EUR 187.1m, below our estimates and slightly below consensus (EUR 205.7m/196.0m Evli/cons.). EBIT amounted to EUR 5.2m, above our and consensus estimates (EUR 4.4m/3.2m Evli/cons.).
Suominen reached very high margins once again. We expect margins to settle in H2’21 and continue to view earnings multiples attractive on such stabilized levels.
Suominen once again topped previous profitability records
Suominen’s EUR 115.3m Q1 revenue was close to expectations while the EUR 18.5m EBITDA topped the EUR 15.3m/15.2m Evli/cons. estimates. Gross margin hit a record due to high volumes and improved production as well as raw materials efficiency. Favorable sales mix helped pricing levels to improve a bit y/y. There were some raw materials and logistics challenges, especially in the US, which had a negative impact on production. The Texan winter disrupted oil-based raw materials’ supply, but in our view the effect on overall results wasn’t that big. Suominen carries some raw materials inventories, which in part explains why the raw materials price spike didn’t yet have any notable negative effect on profitability.
Suominen has increased its mechanism pricing exposure
The pandemic led to a wipes demand bump on both sides of the Atlantic; although the US is ahead of Europe in vaccination rates the higher demand shows very little signs of abatement. The raw materials inflation picture also looks similar on both continents. Suominen increased its share of mechanism pricing clauses already last year to protect itself against raw materials price inflation. These measures, coupled with strong wiping demand and improved sales mix, enhance our confidence regarding H2’21 gross margin, which we now expect to settle around 13-14%. Suominen expects to complete the three announced investments in H2’21. Two of these will add capabilities to existing lines while one restarts and modernizes an idle line and so adds capacity.
We expect gross margin to settle around 13-14% in H2’21
Suominen is set to reach EUR 60m EBITDA this year even when raw materials inflation begins to erode margins. This year is also proving extraordinary in its own way as the raw material and logistics markets have been outright chaotic. In our view H2’21 results should show stable gross margin levels. We estimate ca. 14% GM for H2’21 that translates to some 12% EBITDA and 7.5% EBIT margins. We expect Suominen to reach such figures in FY ’22. Suominen is valued below 6x EV/EBITDA on our FY ’21-22 estimates. We retain our EUR 6.5 TP as well as our BUY rating.
CapMan's net sales in Q1 amounted to EUR 11.3m, below our and consensus estimates (EUR 12.5m/11.9m Evli/cons.). EBIT amounted to EUR 10.1m, clearly above our estimates and above consensus estimates (EUR 7.8m/7.6m Evli/cons.).
Solteq’s Q1 was clearly above expectations, with revenue at EUR 17.4m (Evli EUR 16.5m) and comp. EBIT at EUR 2.2m (Evli EUR 0.9m). Solteq raised its guidance ahead of Q1, expecting that Group revenue in 2021 will grow clearly and that the operating profit will improve clearly.
Etteplan reports Q1 results on May 5th. We expect a relatively decent start to the year and our focus will be less on current figures and more on demand development and future growth drivers. We retain our target price of EUR 13.6 and SELL-rating.
Expect a decent start to the year
Etteplan reports Q1 results on May 5th. 2020 was a challenging year for Etteplan due to the Coronavirus pandemic, with the organic decrease in revenue at 8.3%. Due to rapid and efficient cost savings measures Etteplan was still able to maintain solid profitability, with the EBITA-margin at 10.1% (2019: 9.9%). To our understanding the customer demand during the beginning of the year has continued to move in the right direction, with customer companies having adapted to operating under the current environment. We have made no changes to our estimates ahead of the Q1 results, expecting revenue of EUR 71.1m and EBITA of EUR 6.4m.
Demand situation and growth drivers’ key themes
Going into 2021 key themes will be the development of customer demand and pick up in Etteplan’s internal growth initiatives, with quite some work left to reach the target of EUR over 500m in revenue in 2024. As earlier mentioned, customer demand has been developing positively and has for instance been at a good level in China, while demand in other countries could still see notable improvement. We expect growth of 11.2% in 2021, aided largely by the Tegema and TekPartner acquisitions. Our organic growth assumptions remain rather modest and an improvement in the demand situation could warrant higher estimates. We expect the EBITA-margin to remain near previous year levels at 9.9% (2020: 10.1%).
SELL with a target price of EUR 13.6
We have made no changes to our estimates and retain our target price of EUR 13.6 and SELL-rating. Etteplan currently trades above peers and with the prevailing uncertainty due to the pandemic and growth pick-up we find the >21x 2021 P/E multiples hard to justify.
Suominen’s Q1 profitability remained very strong and the quarter was actually better, in terms of EBITDA and EBIT, than the previous record seen in Q3’20. Suominen retains its full-year outlook.
Innofactor reported Q1 results well in line with our estimates. We expect sales growth to pick up during the year in comparable terms supported by the healthy order backlog and expect to see continued margin improvement. We retain our BUY-rating and TP of EUR 2.2.
Q1 well in line with our estimates
Innofactor reported Q1 results that were well in line with our expectations. Revenue grew 3.8% to EUR 17.8m (Evli EUR 17.9m) while EBITDA amounted to EUR 4.7m (Evli EUR 4.8m). EBITDA included the EUR 2.6m one-off relating to the Prime business divestment and the adj. EBITDA of EUR 2.1m showed growth of 7.3% y/y. The order backlog in Q1 was at a record level of EUR 68.9m (+27.4% y/y), aided by the biggest individual deal in Innofactor’s history signed with the Finnish Tax Administration. The report overall did not hold any material negative news in our view. Management comments on the impacts of the COVID-19 pandemic and sales development outside Finland, were sales have been more challenging, were modestly upbeat.
No notable changes to our estimates
Our estimates remain essentially intact apart from minor adjustments due to lower than estimated acquisition amortizations in Q1. We expect sales in 2021 to grow 3.4% y/y (comparable growth 6.3%) to EUR 68.4m and EBITDA (excl. Prime div.) to amount to EUR 8.7m. In relation to the past years performance our growth assumptions appear unmerited and the company still has quite a lot to prove in terms of growth. With the record-high order backlog and management comments on the impacts of the pandemic and sales development outside Finland, pick-up in sales growth should certainly be within grasp.
BUY with a target price of EUR 2.2
With no major changes to our estimates or the investment case we retain our target price of EUR 2.2 and BUY-rating. Our TP values Innofactor slightly below peers, which we see justified given its track-record in previous years.
There were no surprises with Finnair’s Q1 result. The company expects Q2 comparable operating loss to be similar compared to the previous quarters and gradual recovery to start from late summer. Finnair also increased its cost savings target to EUR 170m. We keep “HOLD” with TP of EUR 0.75.
Restrictions continued to hamper Q1 figures
Finnair’s Q1 result was relatively similar compared to the previous quarters. Tight travel restrictions remained, and Finnair operated with limited network and frequencies in January-March (approx. 75 daily passenger flights). Revenue decreased by ~80% y/y to EUR 114m vs. EUR 96m/103m Evli/consensus. Once again, revenue was supported by strong cargo demand (cargo revenue represented ~54% of total revenue). ASK was down by ~88% y/y and PLF was 25.5% (-47.1pp). Adj. EBIT amounted EUR -143m and was slightly better than expectations (EUR -155m/-159m Evli/cons.).
Increased cost savings target
Previously, Finnair was targeting permanent costs savings of EUR 140m by 2022 (compared to 2019 levels) but as the savings program is proceeding well the company increased the target to approx. EUR 170m. This is good news as it is extremely important to be well positioned in the post COVID-19 world. Despite the blurry outlook regarding the recovery of air travel, there are positive signs in the market as the vaccination coverage is gradually increasing. Finnair starts to accept vaccination certificates from mid-May onwards and will be adding destinations and frequencies towards the summer. In summer, the company’s plan is to operate over 60 destinations. However, we note that it is important that European countries lift travel restrictions at a same pace but also that traveling from non-EU countries becomes easier.
“HOLD” with TP of EUR 0.75
Due to the week visibility, Finnair did not provide a full year guidance but expects Q2’21E comparable operating loss to be similar compared to the previous four quarters. The company expects gradual recovery to start in late summer. As the company has additional funding available if needed (e.g. hybrid loan from the State of Finland) we expect the company is rather well positioned once the market reopens. We expect 21E revenue of EUR ~1287m and adj. EBIT of EUR -372m. Profitability should quickly improve once the recovery starts due to the cost savings. We keep our rating “HOLD” with TP of EUR 0.75.
Eltel’s Q1 results were below our expectations. Net sales amounted to EUR 182m (Evli 209.9m). Operative EBITA improved y/y to EUR -0.7m (EUR -2.1m in Q1/20) but was also below our expectations. (Evli EUR 1.0m)
DT believes that worst challenges in SBU are behind and security will head toward growth starting in Q2. As the security market is slowly starting to recover and demand in medical market remains strong, we remain positive towards the investment case given both the market drivers as well as DT’s strategy and execution capabilities. Based on increased confidence in security market recovery and strong outlook in medical, we raise our target price to €30 (prev. €28.5) but maintain HOLD recommendation.
A slow start to the year
DT’s Q1 result was broadly in line regarding net sales, but EBIT clearly missed ours and consensus expectations, although EBIT improved somewhat y/y. Q1 net sales amounted to EUR 18.3m (-8% y/y) vs. EUR 19.2m/19.2m Evli/consensus estimates. Q1 EBIT was EUR 1.4m (7,5% margin) vs. EUR 2.2m/1.94m Evli/cons. R&D costs amounted to EUR 2.4m or 13% of net sales (Q1’20: 2,6m, 13%). SBU net sales decreased -37,7% to EUR 5.8m vs. EUR 6.0m Evli estimate. Decrease was mainly due to COVID-19 situation continuing to affect the security market. IBU net sales increased +11% to EUR 2.4m vs. EUR 2.7m Evli estimate. MBU net sales increased +20% to EUR 10.1m which was broadly in line with our estimate of EUR 10.5m. Growth was driven by continued good demand for medical CT applications, especially in China.
Strong medical to continue, security also starting to recover
The increased investments in healthcare infrastructure and demand for CT applications have kept momentum for MBU strong. As a result, DT expects MBU sales to grow over 20% in Q2 and H2. DT is also seeing early positive signals in the security market after a difficult year. DT believes that worst challenges in SBU are behind and security will head toward growth starting in Q2 and continue to grow in H2. IBU sales is expected to be at the same level as in the comparison period in Q2 but to grow in H2. In total, DT expects total net sales to grow double-digit in Q2 and in H2 of 2021 driven mainly by the strong medical demand.
Target price of €30 (prev. €28.5), HOLD rating
Our estimates are broadly unchanged after the report. As the security market is slowly starting to recover and demand in medical market remains strong, we remain positive towards the investment case given both the market drivers as well as DT’s strategy and execution capabilities. We expect both net sales and EBIT growth to recover in 2021E, but accurately predicting the slope of the recovery is challenging. We expect 2021E to be a year of recovery, and DT to resume above 15% margins from 2022E onwards. Based on increased confidence in security market recovery and strong outlook in medical, we raise our target price to €30 (prev. €28.5) but maintain HOLD recommendation.
Consti will report Q1 results on April 30th. Our attention is drawn towards any comments on demand development. Following share price increase we downgrade to HOLD (BUY), target price of EUR 13.0 intact.
Looking for signs of growth
Consti will report Q1 results on April 30th. Consti posted stable profitability figures throughout 2020 after challenges in previous years and with the pandemic focus has shifted towards order intake and growth. The order backlog development has been on a slightly declining throughout 2020, while order intake development was essentially flat. With the housing company General Meeting season kicking off any comments thereto could give some indication of demand development within housing companies. In terms of top and bottom line figures Q1 is typically the seasonally slowest quarter and we expect sales of EUR 60.2m and EBIT of EUR 0.5m.
Expect slight growth and profitability improvement in 2021
Consti has not given a sales guidance for 2021 while the guidance for EBIT is at EUR 7-11, a wider range due to still present COVID-19 uncertainties. Consti indicated in conjunction with Q4 that the activity level going forward is expected to be higher compared with the same period a year ago despite no clear growth in the order backlog. Our estimates assume only a rather minor growth of 2.3%, quite in line with historic pre-COVID market growth. Focus has in the past been on organizational improvements and profitability, but we expect Consti to increasingly adding attention towards sales growth. In terms of profitability we expect a slight improvement in EBIT-margins, 20bps y/y, to 3.2%.
HOLD (BUY) with a target price of EUR 13.0
Consti’s valuation is currently rather in line with peers although still lower compared to building installations and services peers. Consti is a solid case in terms of cash conversion but on current growth outlook valuation appears quite fair. We have not made changes to our estimates and retain our target price of EUR 13.0. With Consti’s share price up slightly over 10% since our previous update we downgrade to HOLD (BUY).
Finnair’s Q1 result was similar compared to the previous quarters. Q1’21 adj. EBIT was EUR -143m vs. our expectation of EUR -155m and consensus of EUR -159m. Revenue decreased by ~80% y/y and was EUR 114m vs. our expectation of EUR 96m and consensus of EUR 103m.
DT’s Q1 result was broadly in line regarding net sales, but EBIT clearly missed ours and consensus expectations, although EBIT improved somewhat y/y. Most importantly, DT is seeing early positive signals in the security market. DT believes that worst challenges in SBU are behind and company will head toward growth starting in Q2 of 2021. DT expects total net sales to grow double-digit in Q2 and in H2 of 2021 driven mainly by the strong medical demand.
Innofactor’s Q1 results were in line with our expectations. Net sales amounted to EUR 17.8m (Evli EUR 17.9m), while EBITDA amounted to EUR 4.7m (Evli EUR 4.8m). EBITDA included a one-off of approx. EUR 2.6m related to the Prime business divestment.
Talenom is more strongly seeking to supplement its organic growth strategy with inorganic growth, supported by the favourable market conditions. Near-term margin upside appears limited due to the increased M&A activity, but margins are set to remain healthy. We retain our HOLD-rating and adjust our target price to EUR 13.3 (12.0).
Organic growth supplemented by acquisitions
Talenom has in the past years focused clearly on organic growth and achieved double-digit growth figures in doing so. With favourable conditions for acquisitions Talenom is now clearly seeking to supplement the organic growth, which has slowed down slightly due to the pandemic, with inorganic growth. With the acquisitions made so far during 2021 we expect growth of 25.2% y/y and a sales CAGR of 16% during 2020-2023E, not including any likely new acquisitions.
Healthy margins but M&A limits near-term upside
Talenom has invested heavily in improving the efficiency of its bookkeeping production line. Through digitalization and automation of bookkeeping tasks and processes the company has been able to better allocate personnel resources, resulting in sizeable improvements in margins. We expect further development to be limited in the near-term due to the increased M&A activity, with the typically lower margins of acquirees and integration costs burdening profitability. Likely future efficiency improvements and thus profitability should also be of smaller magnitude, with a larger share of actions already taken.
HOLD with a target price of EUR 13.3 (12.0)
We retain our HOLD-rating and adjust our target price to EUR 13.3 (12.0). Our target price values Talenom at 50x 2021E P/E. Valuation is certainly not on the cheaper side but the multi-year track of rapid growth and profitability improvement along with the very defensive nature of the business and pick-up in M&A activity in our view justify the high valuation.
Talenom's net sales in Q1 grew 17.0% to EUR 20.3m, in line with our and consensus estimates (EUR 19.9m/20.3m Evli/cons.). EBIT amounted to EUR 4.4m, in line with our and consensus estimates (EUR 4.4m/4.3m Evli/cons.).
Verkkokauppa.com’s Q1 result was as expected. Strategy implementation has started well, and the outlook remains bright. We have made only small adjustments to our estimates and keep our rating “BUY” with TP of EUR 10.80 (10.5).
Q1 result in line with expectations
Verkkokauppa.com delivered a solid Q1 result which was in line with expectations. Q1 revenue increased by 7% y/y to EUR 134m (vs. EUR 135m/134m Evli/cons.). Growth was good especially in major domestic appliances, small domestic appliances, office & supplies, gaming & entertainment and sports. Online sales (excl. export) increased by 33%, representing 64% of total sales. Further, sales to B2B customers increased by 12%. Export continued to be in a lower level due to the travel restrictions (6% of sales). Gross profit totaled EUR 21.7m (16.2% margin) vs. our EUR 21.4m (15.9% margin). Gross margin was driven by increased share of higher margin categories in total sales. Adj. EBIT amounted EUR 5.2m (3.9% margin) vs. our EUR 5.0m (3.7% margin) and consensus of EUR 4.8m (3.6% margin).
Everything is right on track
The market has continued to be favorable for Verkkokauppa.com as the COVID-19 situation has prolonged and consumer behavior is changing (shift to online). In early 2021, the company published its refined, rather ambitious strategy for 2021-2025. The company targets a giant leap in revenue while improving profitability. As a part of the strategy, the company will invest in the logistics automation of the warehouse located in Jätkäsaari. The first stage of the investment is to build a fully automated small item warehouse and the building process will start this summer and is expected to be completed in early 2022. The total investment is expected to be completed by the end of 2022 and the estimated capex is approx. EUR 4m.
“BUY” with TP of EUR 10.80 (10.5)
Verkkokauppa.com reiterated its guidance and expects revenue of EUR 570m-620m and adj. EBIT of EUR 20m-26m in 2021. We have made only minor adjustments to our estimates after the result and expect 21E revenue of EUR 594m and adj. EBIT of EUR 24.0m (4% margin). Implementation of the strategy has started well, and the outlook remains positive. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.8x and 15.8x which is 15% discount compared to the Nordic & European online peers in 21E and 16% premium in 22E. We keep “BUY” with TP of EUR 10.80 (10.5).
Scanfil’s Q1 featured very few surprises. The company remains well-positioned and many customer megatrends continue to drive demand in the short as well as long term perspective. Our TP is now EUR 8.5 (8), rating HOLD (BUY).
All five segments have developed positive since Q3’20
Scanfil’s EUR 163m Q1 revenue was above the EUR 152m/151m Evli/cons. estimates even when excluding the discontinued trade in Hangzhou. Organic growth was 7% y/y when excluding the discontinued business. Scanfil renewed its segment structure as the previous Industrial segment had become too diverse. Advanced Consumer Applications and Energy & Cleantech, the two largest segments, both grew rapid. The former’s demand stemmed e.g. from elevators (as well as new customers) while the latter was driven by e.g. reverse vending machines. The other three segments have also continued to develop well since Q3’20, demand overall improved throughout Q1 and March was especially strong and profitable. Scanfil posted EUR 10.0m in Q1 EBIT, in line with the EUR 10.5m/10.0m Evli/cons. estimates.
Strategy and day-to-day execution continue to work
In our view Scanfil is headed for the upper end of its FY ’21 revenue guidance range. Demand outlook supports Scanfil’s long-term organic growth target and implies 5-6% CAGR in the years ahead. The accounts are unlikely to build up inventories, rather there seems to be solid demand that stems from many megatrends. Component bottlenecks are possible but so far these haven’t had a negative impact on Scanfil. The company takes proactive measures to better anticipate demand and so secure relevant components early on. Scanfil also reports no gross margin pressure and remains able to pass price inflation forward to customers. M&A options remain relevant in the long-term.
In our view further upside is not found in the short-term
Scanfil is valued ca. 9x EV/EBITDA and 12x EV/EBIT on our FY ‘21 estimates. In terms of EBITDA the share trades at a peer premium while the EBIT multiples are in line. Scanfil is thus valued at a small premium and we see this well justified. Scanfil’s and peers’ multiples have alike rerated recently. EMS companies used to be valued very low, and in our view the current higher multiples are warranted at least in Scanfil’s case. We view Scanfil’s valuation now neutral. Our new TP is EUR 8.5 (8) and rating HOLD (BUY).
Innofactor is set to post solid Q1/21 figures with the one-off from the Prime business divestment. With a solid cash position and ambitious long-term growth targets we expect to start seeing measures to boost growth. We retain our BUY-rating with a target price of EUR 2.2 (1.75).
Q1 boosted by divestment one-off
Innofactor will publish its Q1 results on April 27th. Innofactor earlier announced that it had agreed to sell its resource management software solution business, Innofactor Prime, to Total Specific Solutions. The transaction is to have a positive impact of approx. EUR 2.6m on Q1/21 EBITDA and a negative impact of approx. EUR 2.0m on 2021 sales. As such, Innofactor should report exceptionally strong EBITDA in Q1/21, with our estimate at EUR 4.8m. We expect sales to continue on the modest growth trend seen in late 2020 and expect sales to grow 4.4% to EUR 17.9m. Growth is supported by the positive development of the order backlog, which at the end of 2020 was up some 21% y/y.
Expecting to see measures to boost growth
With the divestment of Innofactor Prime we have lowered our 2021 sales estimates and slightly lowered our profitability figures (excl. Prime div.). We now expect sales of EUR 68.4m (2020: 66.2m) and EBITDA (excl. Prime div.) of EUR 8.9m (2020: EUR 7.2m). Innofactor expects net sales and EBITDA in 2021 to grow compared with 2020. Innofactor’s cash position was at a healthy level already at the end of 2020, now further strengthened by the proceeds from the Prime divestment, and it is likely only a matter of time until acquisitions start picking up again to speed up growth.
BUY with a target price of EUR 2.2 (1.75)
Innofactor’s share price has now recovered from the dip in previous years and valuation is no longer quite as cheap. Compared to peers, valuation is still not too stretched. We expect to start seeing measures to boost growth further, which would further warrant higher multiples. We adjust our TP to EUR 2.2 (1.75) and retain our BUY-rating.
Scanfil’s Q1 was a clear positive surprise in terms of revenue. Profitability was more in line with expectations. Scanfil did not revise its guidance but updated the segment structure.
Verkkokauppa.com’s Q1 result was in line with expectations. Q1’21 revenue grew by 7% y/y and was EUR 134m vs. Evli EUR 135m and consensus of EUR 134m. Adj. EBIT was EUR 5.2m vs. EUR 5.0m/4.8m Evli/consensus. EPS was EUR 0.09 vs. EUR 0.08 Evli and consensus. Verkkokauppa.com reiterated its guidance.
Finnair reports its Q1 result on next week’s Tuesday, 27th of April. We expect Q1’21E to be relatively similar compared to the previous quarters. We keep our rating “HOLD” with TP of EUR 0.75 (0.60).
Quiet quarter, as expected
In Q1, Finnair carried 259k passengers which is 90% decline compared to Q1’20. Average Seat Kilometers (ASK) decreased by 87.6% y/y and Revenue Passenger Kilometers (RPK) decreased by 95.6% y/y. Passenger Load Factor (PLF) declined by 47.1%-points y/y and was 25.5%. The pandemic situation worsened during the first quarter of the year and strict travel restrictions remained. We expect Q1E revenue of EUR 96m (-83% y/y) and adj. EBIT of EUR -155m.
Towards better times
Even though the coronavirus situation has continued severe in the beginning of the year, there is light at the end of the tunnel as the vaccination pace has slowly improved. However, it is still unclear when traveling can start to normalize and how to make it safe. Possible vaccination certificates could be a crucial solution to this as it is important that European countries, including Finland lift travel restrictions at the same pace. Currently, it is estimated that majority of Finnish people have been received the first vaccine dose by the late summer thus air travel is expected to remain in a low level also during April-June. Therefore, we have cut our Q2’21E estimates. Our H2’21E and 22E-23E estimates are largely unchanged at this point.
“HOLD” with TP of EUR 0.75 (0.60)
The hybrid loan by the State of Finland to Finnair (max. of EUR 400m) was approved by the EU Commission in March. Approx. EUR 350m of the loan can be used by Finnair if its cash or equity position drop below specific limits. The remaining approx. EUR 50m share needs the Commission’s approval at a later stage. The interest rate of the hybrid loan has not been specified. We expect the recovery of air travel to begin in H2’21 but highlight that there are still significant uncertainties due to the changing pandemic situation. We expect 21E revenue to increase by 72% y/y and adj. EBIT of EUR -336m. We keep our rating “HOLD” with TP of EUR 0.75 (0.60) ahead the Q1 result.
Raute reports Q1 results on Thu, Apr 29. We haven’t made changes to our estimates. We continue to expect gradual improvement in Raute’s operating environment. We retain our EUR 21 TP. Our rating is now HOLD (SELL).
The improvement gradient remains unclear
Recent news flow has been very encouraging across many sectors, and we believe the improving conditions also apply to Raute at least to some extent. This assumption is by no means a stretch given how meagre levels project deliveries’ small order intake reached in H2’20. Raute’s business environment is bound to improve this year. There is even a relevant chance for an order boom in the coming years, given the fact that Raute’s customers’ (plywood and LVL mills) demand is mostly driven by the construction industry. We however continue to estimate Q1’21 to have been relatively muted, albeit with some definite improvement in small project orders relative to the few previous quiet quarters.
Pickup may prove fast, but we see this year as another gap
We leave our previous estimates unchanged. We estimate smaller equipment orders to have been EUR 10m in Q1’21. The figure implies improvement on the EUR 3m Q4’20 number that excludes the EUR 55m Russian mill order but remains below the EUR 14m seen in Q1’20. We expect order book to have remained at a decent EUR 82m level and revenue to have amounted to a likewise good EUR 34m. These relatively strong figures reflect reliance on big Russian projects in an otherwise still weak demand environment. We also expect Raute to climb back to black this year in terms of EBIT and see the Q1 figure at EUR 1.6m. Raute’s global competitive position means plenty more potential in the long-term perspective, but we believe FY ’21 results will still be somewhat modest in the historical context.
In our view valuation now lands within a neutral range
The current context might warrant some stretch in valuation multiples considering the potential for a rapid improvement in orders, not to mention Raute’s strong competitive positioning. We nevertheless do not see upside on the current ca. 8-10x EV/EBITDA and 12-16x EV/EBIT multiples on our estimates for FY ’21-22. We retain our EUR 21 TP. Our rating is now HOLD (SELL).
Suominen reports Q1 results on Wed, Apr 28. We leave our operative estimates unchanged ahead of the report and retain our EUR 6.5 TP and BUY rating.
Demand remains strong but costs are also rising
Suominen’s FY ’21 outlook, issued in February, guides flat comparable EBITDA development y/y. We didn’t find this guidance surprising and revised our FY ’21 EBITDA estimate up only a tad from EUR 55.3m to EUR 56.5m (Suominen posted EUR 60.9m in FY ’20 EBITDA). The guidance however contained a disclaimer with respect to the present uncertainty in the raw materials and cargo markets. Suominen had assumed pricier raw materials going forward, but the recent ca. 20% quarterly level gains seen in inputs such as pulp, polyester and polypropylene may have been larger than the company expected. It’s also unclear how e.g. the Suez Canal blockage might have disrupted the relevant supply chains.
We expect gross margin declines over the year
The recent raw materials price gains exert clear negative pressure on Suominen’s gross margin for their part, but on the other hand the company should still be able to defend its own nonwovens pricing to some extent. The pricing dynamics will also register with a certain lag. We leave our operative estimates unchanged ahead of the Q1 report. We continue to expect gradual decrease in gross margin throughout the year. We estimate Q1’21 gross margin at 14.5% and arrive at EUR 15.3m EBITDA with our revenue and operative cost assumptions. Suominen recently announced the sale of its minority stake in Amerplast, a plastic packaging business, and the transaction will have a positive EUR 3.7m impact on financial items. The sale is not all that meaningful in the big picture given the fact that Suominen divested the majority share already in 2014 to focus on nonwovens. It will however further strengthen the already strong balance sheet.
Cautious earnings multiples following the record year
Suominen remains valued at modest multiples of around 6x EV/EBITDA and 10x EV/EBIT on our estimates for this year. We continue to see upside on these levels as Suominen’s earnings are stabilizing and cash flow generation is strong. We retain our EUR 6.5 TP and BUY rating.
Detection Technology will report its Q1 result next Tuesday, April 27th, at 9:00 EET. As usual, we look forward to hearing the latest developments and outlook regarding the security, industrial and medical imaging markets. We expect DT to return to net sales and EBIT growth path this year, with the help of continued good performance in MBU and a recovery in SBU. We maintain our previous target price of €28.5 ahead of the earnings report, our recommendation is now HOLD (prev. BUY).
Light in the end of the SBU tunnel
In its Q4 report, DT was cautiously optimistic that SBU growth is turning a corner. SBU sales will still decrease in Q1 y/y, but start growing in Q2, although demand is still uncertain, as for example China’s critical infrastructure and rail transport recovery projects have progressed slowly. MBU sales are expected to grow double digit in H1/2021. DT’s total net sales are expected to decrease in Q1 and grow in H1 of 2021. We expect Q1 net sales to decline 4% to 19.2 MEUR (19.1 MEUR cons) and Q1 EBIT of 2.2 MEUR (1.9 MEUR cons).
SBU split into two separate segments: SBU and IBU (Industrial Solutions Business Unit)
DT announced in conjunction with its Q4 result that it is splitting SBU into two separate business units to better boost both BU’s development. The new SBU focuses solely on security application sales, while the newly launched Industrial Solutions Business Unit (IBU) focuses on the industrial segment. In 2020, IBU accounted for EUR 11.6m (27%) of SBU sales and 14% of total sales. As a result of the new segment, MBU currently represents the biggest segment with approximately 50% of sales thanks to strong momentum in MBU and pandemic headwinds in SBU. Industrial market is categorized as higher margin, but smaller volumes, a more fragmented customer base, and a variety of end applications. DT has said it aims to complement its industrial portfolio with software and algorithms. DT expects IBU sales to grow in H1. We have incorporated the new segment data with 2020 comparison figures into our models.
We maintain our previous target price of €28.5
Based on the new segment data, we have slightly calibrated our estimates upwards, but overall picture looks the same. We expect both net sales and EBIT growth to recover in 2021e with the help of continued good performance in MBU and a recovery in SBU. We maintain our previous target price of €28.5 ahead of the earnings report, our recommendation is now HOLD (prev. BUY).
Gofore’s Q1 showed slight weakness y/y due to working day differences and lower billing rates due to changes in a customer’s deliveries, but overall progress remains good. With the recent share price rally, we lower our rating to HOLD (BUY), with a TP of EUR 21.0.
Slight weakness in relative profitability
Gofore reported Q1/21 net sales of EUR 25.2m (Evli EUR 23.5m), for a growth rate of 34.1% y/y, and adj. EBITA of EUR 3.5m (Evli 3.7m). The relative profitability was slightly lower than expected and lower than in the comparison period, with an adj. EBITA-% of 13.9% (Q1/20: 16.8%). This was due to the lower number of working days and changes in project deliveries relating to Gofore’s largest customer, which led to a lower than expected billing rate. On a general level, apart from the slightly weaker relative profitability, the Q1 report did not contain any noteworthy negatives, and customer demand appears to have continued to be at a healthy level.
Growth pace still set to continue strong
We expect net sales of EUR 103.2m and an adj. EBITA of EUR 14.3m in 2021, a y/y sales and adj. EBITA growth of 32.4% and 31.0% respectively. According to Gofore’s guidance the net sales and adj. EBITA are expected to grow in 2021 compared to 2020. Growth is mainly driven by the Qentinel Finland acquisition in September 2020 and the CCEA + Celkee acquisition in March 2021. Furthermore, we expect for Gofore to continue on its track of good organic growth and aided by a good order intake achieve double-digit organic growth figures. With the slight weakness in relative profitability in Q1 and potential further weakness in Q2 from the project delivery changes of Gofore’s largest customer we expect full-year margins to decrease slightly compared with 2020.
HOLD (BUY) with a TP or EUR 21.0
Gofore’s share price has rallied some 20% since our previous update in March. With our estimates and the investment case overall intact we retain our target price of EUR 21.0. With valuation pushing clearly above 30x 2021 P/E and ahead of peers we downgrade our rating to HOLD (BUY).
Verkkokauppa.com reports its Q1 result on this week’s Friday, 23rd of April. We have made small estimate adjustments and expect Q1 sales to grow by 7.5% y/y to EUR 135m. We expect adj. EBIT of EUR 5m. We retain our rating “BUY” with TP of EUR 10.5 (9.5).
We expect sales growth of 7.5% in Q1
We expect Verkkokauppa.com to report strong Q1 figures on Friday. The coronavirus situation remained severe during the first quarter and due to the restrictions people have stayed more at home. This should continue to support online sales, benefiting Verkkokauppa.com. Additionally, most of Finland had a proper winter which we expect to boost sales of sport and outdoor equipment. Lower level of wholesale sales should also have a positive impact on gross margin. We have slightly increased our H1’21E estimates ahead the Q1 result. We expect Q1’21E sales to grow by 7.5% y/y to EUR 135m (cons. EUR 134m) while we expect adj. EBIT of EUR 5.0m (cons. EUR 4.8m).
Domestic purchases are expected to remain high during ‘21
The coronavirus situation has prolonged and even though the Finnish population is currently being vaccinated the pace is slow and it will take a while to get back to normal life. We expect the situation to normalize towards the end of the year, but we expect that for instance traveling abroad will remain in a low level throughout 2021. Thus, consumption will continue to be more focused on domestic purchases, supporting 2021 sales. The company introduced its refined strategy for 2021-2025 earlier this year and it targets to reach sales of EUR 1bn and EBIT margin of 5% by the end of 2025. We expect the company’s good momentum to continue with 21E-23E sales growth of 6-7% and adj. EBIT margin of ~4%. We however highlight that the competition is likely to continue tight after the pandemic thus profitable growth doesn’t come easy.
We keep our rating “BUY” with TP of EUR 10.5 (9.5)
We expect 21E sales to grow by ~7% to EUR 594m (cons. EUR 592m) and adj. EBIT of EUR 23.6m (cons. EUR 23m). On our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.8x and 15.6x, which is 17% discount compared to the online-focused Nordic and European peers in 21E and 11% premium in 22E. We keep our rating “BUY” with TP of EUR 10.5 (9.5).
Talenom acquired Balance-Team Oy, a specialist in financial management for associations, and raised its 2021 sales guidance to EUR 80-84m (prev. EUR 78-82m). We now expect growth of 24.6% in 2021. We retain our HOLD-rating with a target price of EUR 12.0 (11.5).
Acquired Balance-Team Oy and raises sales guidance
Talenom expands its operations in Finland by acquiring Helsinki-based Balance-Team Oy, a specialist in financial management for associations. The acquisition will make Talenom a leading provider of financial management services for nonprofit organisations in Finland. The sales and EBITDA in 2020 of the transferring operations were EUR 2.7m and EUR 1.0m respectively. The share capital of the transferring operations was transferred to Talenom on April 15th. The transaction price is EUR 5.3m, implying an approx. price of 5.0x EV/EBITDA on 2020 figures, to be paid 50/50 in cash and shares. Due to the acquisition Talenom raises its sales guidance for 2021 from EUR 78-82m to EUR 80-84m. The EBIT guidance (EUR 14-16m) remains intact.
Rapid growth in 2021 with our estimate at 24.6%
The guidance revisions did not come as a major surprise given the guidance being raised already in March due to acquisitions, while the EBIT guidance quite as expected remains intact. The pace of acquisitions has been rapid so far during H1 and a further guidance revision is not completely unlikely if the pace continues. We have adjusted our 2021 sales estimate to EUR 81.2m, implying a growth of 24.6%, with our EUR 15.3m EBIT estimate intact. Talenom reports Q1 results on April 26th, with our sales and EBIT estimates at EUR 19.9m and EUR 4.4m respectively.
HOLD with a target price of EUR 12.0 (11.5)
In light of the accelerating growth pace we adjust our target price to EUR 12.0 (11.5) and retain our HOLD-rating. Our target price values Talenom at approx. 45x 2021 P/E, which we see as justifiable given the stability of the business and the rapid profitable growth.
Exel continued to perform despite the pandemic. In our view the company remains positioned for strong organic growth in the years to come. The strategic priorities now work solid. Our TP is EUR 11 (10); retain BUY rating.
The strategic priorities have already delivered results
In our view Exel Composites is a competitively positioned player in the materials value chain and operates in a niche that has a strong long-term growth outlook. The company manufactures composites for demanding industrial applications. Strategy execution paid off in 2019-20 as adjusted operating profit almost doubled to EUR 9.7m in FY ’20 from the level seen in FY ’18. The excellent financial performance was due to a pick-up in organic growth as well as successful cost reduction measures, both of which helped the company to scale the relatively high fixed cost base. Exel seems to have found an advantageous positioning within the Wind power customer industry but also in areas like Buildings and infrastructure, among many others.
Growth outlook continues to support profitability gains
Exel posted a 5% organic top line growth last year despite the pandemic. Wind power was a big driver but there were other notable positives such as Machinery and electrical. Transportation and Telecommunications were the only two customer industries, out of the seven, with revenue declines. The pandemic may still hurt Transportation demand this year but in our view the area has good long-term outlook. Telecommunications is the one industry with a bit muted outlook but even there the situation may improve with the rollout of 5G. Exel guides increasing revenue and adjusted EBIT for this year. We estimate 7% growth and an additional EUR 1m EBIT gain. We view Exel positioned for ca. 5-6% CAGR in the years to come.
We see more room for earnings-based multiple expansion
Exel has been historically valued around 8x EV/EBITDA and 0.9x EV/S. The current valuation is ca. 8.5x EV/EBITDA on our estimates for this year, in other words not that high in the historical context even though the shares have appreciated a lot. Profitability gains have justified the rally. The valuation is now historically rich in terms of EV/S, but we also find this justified since the strategy is poised to deliver more in the years to come. Our TP is now EUR 11 (10) per share. We retain our BUY rating.
Pihlajalinna held its CMD yesterday, 30th of March. The focus of the event was on the company’s strategic priorities and the future of the social and healthcare market. Financial targets remained unchanged. Thus, there were no changes in the big picture. We keep our rating “BUY” with TP of EUR 13.0 (12.0).
New opportunities in both, public and private side
Pihlajalinna highlighted its strategic priorities for the upcoming years as the market is changing in many ways (SOTE-reform, aging population etc.). The company aims to strengthen its already strong partnership with the public side and to engage in close cooperation with the future wellbeing services counties. In addition, Pihlajalinna will make renewals to its private services with new service concepts and digital innovation. Further, the company will continue to strengthen digitalization. The company has already had a strong focus on this and the importance of developing new digital solutions has only increased during the pandemic. The long-term financial targets (EBIT margin of over 7% and net debt/EBITDA under 3x) remained unchanged.
Big picture is unchanged
The main market drivers are unchanged as the Finnish population is rabidly aging which increases social and healthcare expenditures. Digitalization offers new opportunities and can improve efficiency. In addition, individuals’ interest in their own health is increasing which creates new opportunities in the preventive social and health care. The company seemed to be relatively positive about the future wellbeing services counties and cooperation opportunities stemming from these. However, Pihlajalinna has also strengthened its positioning e.g. in the occupational healthcare market and has widened its cooperation with insurance companies which reinforces our view that the company can grow in both, public and private side. Expanding the service network should also provide support for future partnerships.
“BUY” with TP of EUR 13 (12)
We have kept our estimates intact and expect 21E revenue growth of ~10% and adj. EBIT of EUR 27.3m (adj. EBIT margin of 4.9%). In 22E and 23E, we expect revenue growth of 5% and 3%. We expect profitability improvement to continue and expect adj. EBIT margin of 5.4% in 22E and 5.6% in 23E. With our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.3x and 13.8x which is 14% discount compared to the peers. We keep our rating “BUY” with new TP of EUR 13 (12).
Eltel has signed an agreement to divest its German High Voltage business to ENACO, a German service provider in the energy sector. Eltel classified its German High Voltage business as assets held for sale at the end of 2020 and the revaluation had EUR -5.7 million impact on Group EBIT in Q4/2020. The transaction is estimated to have negative cash flow effect of EUR 3.8 million. Eltel will as part of the divestment engage ENACO as a subcontractor for the completion of certain projects, which are expected to be completed during 2021 and 2022. The divestment is subject to customary approvals, and the transaction is expected to close during Q2/2021.
The divestment is in line with Eltel’s strategy and strengthens Eltel’s focus on the Nordic countries in which it has a market-leading position and the business model is more stable and repetitive. In 2020, Eltel’s German High Voltage business had about 75 employees and net sales of about EUR 10 million. After the divestments of the High Voltage and Communication business (in Q2/2020), Eltel has only the Smart Grids business left in Germany, which accounted for a smaller share of German net sales in 2020.
The divestment is relatively small and therefore has no effect on our current forecasts. In our estimates, we have already forecast the net sales of other business to decrease by EUR 26.9 million and we expect the share of other business to be ~10% of group net sales in 2021E. We maintain our TP of SEK 30 with BUY.
Talenom announced the acquisition of two accounting firms in Sweden and raised its net sales guidance to EUR 78-82m (prev. EUR 75-80m). We retain our HOLD-rating and target price of EUR 11.5.
Two acquisitions in Sweden, net sales guidance raised
Talenom continues to expand in Sweden by acquiring accounting firms Crescendo AB and Progredo AB and raised its net sales guidance for 2021. The acquired businesses had combined net sales of EUR 2.3m in 2020 and operating profit of EUR 0.3m. With the acquisitions Talenom expands to two new municipalities in Sweden, Östersund and Åre. As a result of the acquisitions Talenom raised its net sales guidance to EUR 78-82m (prev. 75-80m). The acquired businesses will be transferred to Talenom on April 1st, 2021. The acquisitions will not increase operating profit in the short term due to integration costs and the depreciation of the transaction and the operating profit guidance remains intact at EUR 14-16m. The purchase price at maximum corresponds to 1.1x and 8.0x net sales and EBIT respectively.
Minor increase to sales estimates
We have raised our 2021 net sales estimate to EUR 78.9m (prev. 76.7m) due to the acquisition and an overall minor increase in net sales expectations, with our operating profit estimate intact at EUR 15.3m. With the net sales guidance being revised this early on in the year, potential further acquisitions could likely prompt further revisions later on during the year, although the impact on earnings would likely not be as significant. The increased growth through the acquisitions, however, provide an additional base for continued organic growth and ramp up of operations in Sweden in the coming years.
HOLD-rating and target price of EUR 11.5
With only rather minor revisions to our estimate revisions we retain our target price of EUR 11.5 and HOLD-rating. Our target price values Talenom at approx. 43.5x 2021e P/E.
We initiate coverage of Enersense with a BUY rating and a TP of EUR 9.7. Enersense’s turnaround in profitability progressed well in 2020 and, in our view, the valuation looks moderate considering Enersense’s increased and healthier order backlog as well as potential synergies of the Empower acquisition.
2020 was a big year for Enersense
Enersense International Oyj is a service provider of emission-free energy solutions in the industry, energy, telecommunication, and construction sectors. In 2020, Enersense’s business changed significantly. Enersense acquired Empower, thus expanding its business from recruiting and resource management services to a solution provider for the Smart industry, Power, and Connectivity markets. Enersense also managed to improve its EBITDA from EUR -0.8m in 2019 to EUR 7.2m in 2020. The focus in 2021 is on improving profitability, growing in domestic and selected international markets, and continuing the integration of the Empower acquisition.
Our estimates for 2021E are at the midpoint of the guidance
In 2021E, we expect Enersense’s net sales to grow strongly as Empower’s figures are included in net sales for the full year. The order backlog has increased significantly from EUR 130m in August 2020 to EUR 300m at the end of 2020 and we expect this strong order inflow to support Enersense in reaching net sales of EUR 230m. In 2022-23E, we forecast the group revenue to grow by 3.2% and 3.0%, respectively. We estimate adj. EBITDA to increase from EUR 8.9m (6.2% margin) to EUR 13.5m (5.9% margin) in 2021E driven by the consolidation of Empower’s full-year figures, a healthier project portfolio, and streamlining of operations. We expect the synergies of the Empower integration to be more visible in Enersense’s profitability from 2022 onwards and EBITDA margin to increase to 6.5% in 2022E and 6.8% in 2023E.
BUY with a target price of EUR 9.7
In our view, the valuation looks moderate considering Enersense’s increased and healthier order backlog as well as potential synergies of the Empower acquisition. On our estimates for 2022E, Enersense is trading at EV/EBITDA of 5.5x and adj. P/E of 10.7x, which translate into discount of 21-28% to our peer group median. We initiate coverage with a BUY-rating and a target price of EUR 9.7. Our TP values Enersense at EV/EBITDA of 6.1x and adj. P/E of 11.8x for 2022E, which are still at 13-21% discount to peer group, reflecting Enersense’s lower profitability profile and as we look for more signs of further margin improvement and faster organic growth. If Enersense manages to increase net sales and improve margins in line with the midterm financial targets, there is further upside potential in valuation.
Gofore’s H2 results showed little signs of weakness and with the more recent acquisitions the growth pace is set to continue well into double-digit figures. We upgrade our rating to BUY (HOLD) with a target price of EUR 21.0 (16.0).
Strong organic growth in 2020 despite pandemic
Gofore reported H2 revenue of EUR 40.6m (pre-announced) and EBITA and adj. EBITA figures of EUR 5.0m/5.1m respectively (Evli EUR 4.8m/5.5m). The BoD proposes a dividend distribution of EUR 0.24 per share (Evli EUR 0.25). In 2021 Gofore expects that its revenue and adj. EBITA in 2021 will grow compared to 2020. Despite the pandemic, Gofore posted solid organic growth figures of 15.5% for the full-year 2020 and total growth of 21.7%.
Rapid growth to continue
Gofore completed the acquisition of change execution consulting specialist CCEA and its fully owned subsidiary Celkee, expected to have a revenue impact of approx. EUR 6m in 2021. With the newest acquisition and the Qentinel Finland acquisition in the latter half of 2020 as well as expectations of around 10% organic growth we now expect revenue growth of 28% in 2021, rapidly closing in on over EUR 100m annual sales. We expect adj. EBITA margins to remain relatively flat near the 15% adj. EBITA-% target, with the low scalability of the business model providing little further upside. Gofore had a healthy cash position of EUR 21m at the end of 2020, supporting potential further acquisitions. Overall demand appears to have remained at good levels after the initial dip in the early stages of the pandemic and the outlook remains favourable.
BUY (HOLD) with a target price of EUR 21.0 (16.0)
On our revised estimates we adjust our target price EUR 21.0 (16.0), valuing Gofore at approx. 30x 2021 P/E, and raise our rating to BUY (HOLD). Compared to peers, near-term valuation is quite stretched, but the solid performance and expectations of rapid growth along with further M&A potential certainly merits a higher valuation.
Gofore’s EBITA/adj. EBITA of EUR 5.0m/5.1m in H2 were somewhat in line with expectations (Evli 4.8m/5.5m). Revenue grew 32.5% to EUR 40.6m in H2 (pre-announced). Revenue and adj. EBITA in 2021 are expected to grow compared with 2020. Gofore’s BoD proposes a dividend of EUR 0.24 per share (Evli EUR 0.25).
Cibus’ Q4 report didn’t serve surprises. Our view on Cibus remains to a large extent unchanged, however we update our TP to SEK 170 (165) to reflect minor yield compression in the Swedish market. We retain our HOLD rating.
Transfer to the Nasdaq Stockholm main list happens in H1
Cibus’ EUR 16.7m Q4 net rental income was in line with our EUR 16.6m estimate. Administration expenses amounted to EUR 1.8m vs our EUR 1.5m estimate (there were non-recurring costs to the tune of EUR 0.5m). The planned switching to the Nasdaq Stockholm main list, to be completed in H1’21, as well as costs for conducting an inventory of fittings and equipment in the Swedish portfolio elevated administration expenses temporarily. Operating income was therefore EUR 14.8m vs our EUR 15.1m estimate. Net financial costs amounted to EUR 5.5m, compared to our EUR 5.2m estimate. There was a negative EUR 0.5m charge due to currency exchange rates. Net operating income then amounted to EUR 9.3m while we expected EUR 9.9m.
Still plenty of smaller property deals in the pipeline
Portfolio net rental income performance remains stable. Cibus has some small-scale plans to develop e.g. parking lots attached to the properties. The company also says it has plans for some adjacent residential developments in the Swedish portfolio. We understand these would entail only limited balance sheet risks. Cibus sees the Finnish market values stable and slight yield compression in the Swedish market. Last year was a banner for Cibus in terms of acquisition volume. The EUR 386m spree however doesn’t eat from this year’s target; Cibus is confident about completing another EUR 50-100m of add-ons in 2021.
There is upside if the underlying market yields compress
Cibus remains valued at 1.12x EV/GAV and 1.35x P/NAV. We view this premium level appropriate as Cibus still delivers high yields in comparison to other listed Nordic property portfolios. In our opinion the Nordic grocery and daily-goods store property space has some additional yield compression potential, considering the attractive 6% valuation levels where Cibus has been lately able to transact even relatively large (above EUR 100m) portfolios. We update our TP to SEK 170 (165) in anticipation of modest Swedish yield compression.