Administer acquired financial and HR administration services specialist Econia, taking a clear leap towards its 2024 net sales target of EUR 84m.
Administer acquired financial and HR administration services specialist Econia, taking a clear leap towards its 2024 net sales target of EUR 84m.
Acquired Econia and adjusted 2022 guidance
Administer announced the acquisition of Econia Ltd. Econia is a company specialised in financial and HR administration and international services operating in 13 locations in Finland and in Fuengirola, Spain. Econia’s pro forma net sales and EBITDA in 2021 were EUR 19.1m and EUR 1.7m, with corresponding predicted 2022 figures at around EUR 25m and EUR 3m. Growth has been aided by acquisitions, but organic growth has to our understanding been solid. The debt-free purchase price of the acquisition is EUR 20m, of which EUR 18m is paid in cash at the time of closing, with an additional purchase price of max. EUR 4m to be paid by June 30th, 2025. The acquisition is funded by IPO proceeds and long-term debt of EUR 13m.
Back on track to achieve growth targets
In conjunction with the acquisition Administer adjusted its 2022 guidance for net sales to EUR 50-52m (prev. 47-49m) and the EBITDA-margin to 5.5-7.5% (5.0-7.0%). The adjustment is purely related to the completed acquisition and according to management no notable deviations in the underlying business have been seen from what was communicated in the H1 earnings release. The acquisition puts Administer well back on track to achieve its 2024 net sales target of EUR 84m, also providing an additional avenue for growth internationally. Econia will also aid near-term profitability and we expect Administer to move to double-digit EBITDA-margins in 2023. Reaching the 2024 target of 24%, however, still requires significant internal actions to improve efficiency.
BUY with a target price of EUR 3.6
Current valuation levels (0.6x 2023e EV/sales) continue to suggest essentially no expectations of improvement potential. We see continued support for margins picking up through acquisition synergies and improved efficiency, although we still find the 24% EBITDA-margin target challenging.
We attended Vaisala’s investor event in its wind Lidar R&D and production facilities in Saclay, France. The information we got further strengthened our view of W&E’s long-term potential.
Pihlajalinna’s Q3 ramp-up costs were larger than expected, but Q4 should already show a clear y/y EBITA improvement.
There were still many profitability headwinds in Q3
Pihlajalinna’s Q3 revenue was EUR 165m, compared to the EUR 167m/165m Evli/cons. estimates. The 17.5% growth was driven by corporate and private volumes, which grew strong also on an organic basis when considering the headwind from lower Covid-19 services revenue (e.g. surgical procedures grew 61%). The mix was tilted less towards public customers, where profitability improved within outsourcing agreements due to efficiency measures, than we estimated. Private clinic capacity ramp-up costs, in addition to lower Covid-19 revenue, limited profitability as fixed costs were high during the summer months. Personnel-absence related costs, at EUR 1.0m, were lower than before, however there’s still uncertainty as to how these will develop in Q4. The EUR 9.4m adj. EBITA missed our estimate by EUR 2.6m, while the EUR 7.3m adj. EBIT was EUR 2m below the consensus.
Q4 and FY ’23 EBITA are set to see meaningful gains
Pihlajalinna retained its guidance, which now implies ca. EUR 5m y/y EBITA gain for Q4. The comparison figure suffered a EUR 2m hit from high costs within complete outsourcing contracts, so Pihlajalinna should still be able to reach a steep y/y improvement especially when ramp-up costs are to no more burden Q4 that much. Q4 also has some favorable seasonal demand patterns going on, including influenza vaccines, and the capacity additions (high value-added categories like surgical services) should have a significant EBITA contribution throughout next year. Pihlajalinna’s growth strategy is focused on major Finnish urban regions and increasingly relies on remote service paths to drive procedure volumes. Pohjola Hospital cost synergies have been taken in and hence the focus there is also on driving higher volumes. Pihlajalinna has already made some upward pricing adjustments and the tailwind continues to support next year.
Uncertainty around improvement pace, yet plenty of upside
The capacity drive-up has lifted indebtedness, but Q4 should provide a clear demonstration of higher EBITA. Pihlajalinna is valued around 13x EV/EBIT on our FY ’23 estimates, where the 5.6% EBIT margin estimate is still well below peers’ and long-term potential. Our new TP is EUR 11.0 (12.5); retain BUY rating.
Exel’s Q3 results didn’t meet our estimates, but long-term EBIT potential remains significant even if it materializes somewhat slower than we previously estimated.
Top and bottom line a bit shy but no major issues
Exel’s Q3 revenue was EUR 33.8m vs our EUR 37.5m estimate. The two largest regions, Europe and North America, continued to grow at a rate of some 5% y/y while Asia-Pacific declined by 6%. The largest customer segments landed close to our estimates, while relative softness within the smaller segments added up and hence Exel’s volumes were not quite as high as we expected. The relative lack in volumes also left the EUR 1.8m adj. EBIT muted vs our EUR 2.7m estimate. The summer months were quiet in terms of new orders however the levels have begun to improve over the autumn. Exel left its guidance unchanged; in our view Q4 EBIT is set to improve y/y as the comparison figure is low, while there should be potential for at least some improvement q/q.
Long-term CAGR should remain around 5-10%
Exel’s long-term drivers are in place as before and we believe the company has been able to find the right types of customer accounts. The 6.7% adj. EBIT margin seen this year is not too bad, yet there should be plenty of upside left beyond that level. The consolidation of the two Chinese plants yields annual cost savings of EUR 0.7m, while wind power is likely to remain an important driver next year. The Indian JV may prove useful in this respect. The 24% growth seen last year was a rate very difficult to sustain for long, and Exel’s top line may not grow much this year, but in our view Exel’s accounts should still support long-term CAGR of some 5-10%. Such rates, combined with further margin upside, mean there’s still meaningful EBIT potential left.
Valuation not demanding even if growth slows a bit
Exel is valued at slightly above 8x EV/EBIT on our FY ’23 estimates, which is not a particularly high level considering our respective 7.5% EBIT margin estimate is well below the long-term benchmark level of 10% the company has been able to touch on a few occasions with significantly lower top line. In our view Exel’s key customer accounts could help the company grow even in a more challenging macro environment, however short order visibility is one factor limiting earnings multiples potential. We update our TP to EUR 6.5 (8.5) and retain our BUY rating.
Pihlajalinna’s Q3 revenue landed close to estimates, whereas profitability came in on the soft side. In our view the roughly EUR 2m miss in profitability could be at least partly attributable to capacity ramp-up costs.
Eltel is likely to grow at high single-digit rates from here, but valuation already largely anticipates improving EBIT.
Growth and new orders, inflation still a major issue
Eltel’s Q3 revenue grew 7% y/y to EUR 207m vs the EUR 202m/201m Evli/cons. estimates. We find the top line beat was attributable to Norway, which grew 16%. Eltel has recently announced many new contracts, one-third of which are new business, and the EUR 406m orders will help EBIT to bottom out especially when they reflect higher costs. Inflation will, however, have a negative effect of more than EUR 10m this year. Q3 produced an EBIT of EUR 4.1m vs the EUR 3.2m/3.4m Evli/cons. estimates. The inflation challenge may already be easing a bit, but there are additional challenges such as employee turnover. Certain new projects may also come with a learning curve; e.g. Norwegian Q3 profitability was negatively impacted by the mix shift to more remote and smaller Communication projects.
Demand should support high single-digit growth rates
The Q3 report produced no big surprises in the sense that demand was known to be high, as highlighted by the many new contract announcements (further Power agreements have been announced after Q3). Customer investment levels are rebounding after the pandemic, but inflation is more widespread than previously estimated and its precise effect on 2-3 year-long frame contracts is hard to anticipate. Employee turnover is a particular problem in Sweden, but labor shortage issues extend to other countries as well. Profitability development hence remains highly uncertain for at least a couple of more quarters. Long-term demand and profitability drivers are in place like before for both Power and Connectivity. Eltel also announced its aim to capture 10% of the Finnish wind power market by 2025.
Valuation unchallenging from long-term margins view
Valuation isn’t very challenging as EBIT is bottoming out this year, while growth and inflation compensation are likely to drive margins for at least a couple of years. Growth should continue at high single-digit rates from Q4 on, yet we find the 11x EV/EBIT valuation, on our FY ’23 estimates, still neutral relative to peers. Eltel’s EBIT potential extends beyond that, and the 6x EV/EBIT on our FY ’24 estimates isn’t expensive but remains too far in the future. Our new TP is SEK 7.0 (9.0); we retain our HOLD rating.
Exel’s Q3 results came in soft relative to our estimates. There appears to be nothing particularly dramatic, but both top and bottom line landed relatively low after the strong Q2 report.
Aspo achieved again very high profitability, this time even with Russia mostly neutralized. This year makes for tough comparison figures, but valuation isn’t that demanding.
Telko and Leipurin close to estimates, ESL drove the beat
Aspo’s EUR 160m in Q3 revenue and EUR 13m adj. EBIT were both roughly 15% above the respective Evli/cons. estimates. Telko and Leipurin developed relatively close to our estimates, at least in terms of profitability, while ESL’s continued strong performance explained a large part of the earnings beat. ESL has improved a lot in recent years due to both better operational efficiency and market conditions; the latter factor may not provide much more tailwind going forward, while the former still has potential especially in the long run. ESL’s niche positioning means overall cargo demand and pricing environment remains stable even if global spot markets have recently softened. Telko had already close to zero EBIT contribution from Russia and Belarus while the respective top line declines were roughly 40-50%. Leipurin exit process may lag that of Telko a bit, but Aspo’s key figures are already relatively clean of Russia.
ESL and Telko Q3 figures are high but largely sustainable
Telko’s Western EBIT has remained strong y/y and q/q thanks to its focus on more value-added categories. Telko’s EUR 3.7m Q3 EBIT implies an annual run-rate of close to EUR 15m; in our view the current market environment is more likely to soften than strengthen, but for now Telko’s demand and pricing situation stays relatively stable. We continue to estimate Telko’s FY ’23 EBIT at above EUR 13m. ESL has further long-term tailwinds thanks to its specialized positioning as a critical Baltic player; improved route optimization could still support EBIT in the short-term despite high comparison figures, while the hybrid vessels and their pooling will naturally add to long-term EBIT potential. We expect only a small ESL EBIT decline for FY ’23.
Telko H1 figures imply above EUR 10m EBIT gap for FY ‘23
We estimate Q4 EBIT at EUR 12.1m and believe Aspo is headed close to the upper end of its current guidance range. FY ’23 EBIT is thus very likely to decline after an extraordinary year. We make very little changes to our respective EUR 44.5m estimate. We still don’t view Aspo’s current EV/EBIT multiples of around 8x that challenging. We retain our EUR 9.5 TP and BUY rating.
Marimekko's Q3 growth was solid although EBIT fell short of our expectations. With higher-than-expected cost development, we modified our EBIT estimates downwards.
Aspo’s Q3 results topped estimates. In our view the beat was driven by ESL, where Q3 was again a very strong quarter.
Eltel’s Q3 results were somewhat above our and consensus estimates. Demand is now strong and it helps to compensate for high inflation, however Q3 is a seasonally favorable quarter and there are still uncertainties related to improvement pace, including labor shortage issues.
Marimekko delivered solid Q3 figures. Net sales came in with single-digit growth and relative profitability was on a robust level.
Pihlajalinna reports Q3 results on Nov 4. We still expect Q3 EBITA to have remained a bit muted, but Q4 should see earnings growth while multiples and margins imply upside.
High growth to have continued in Q3, EBITA flat y/y
Pihlajalinna grew strong in Q2, due to organic and inorganic growth within corporate and private customers, and we wouldn’t expect Q3 to have been much different in this respect. Capacity has increased a lot over the past few quarters, while Q3 still saw an increase albeit a more marginal one. Demand has kept up with the supply increases, and this should continue to be the case going forward even with self-paying private customers as Pihlajalinna is the lowest cost provider; the company has done some price hikes earlier this year, while prices are to rise further in H2 and especially within private customers next year. We don’t thus expect the inflationary environment to pose major hurdles as Pihlajalinna should be positioned to find compensation for e.g. higher energy costs (which are often not that significant except for certain specialty practices). We estimate Q3 revenue to have grown 19% y/y to EUR 166.8m and see EBITA at EUR 12.0m.
Q4 EBITA should see a significant y/y increase
We don’t expect EBITA to have yet increased y/y, despite high growth and positive results from Pohjola Hospital, as we understand employee sick leave rates to have remained relatively high in Q3 although a bit more moderate than in H1. We continue to expect further improvements in capacity utilization rates to drive Q4 EBITA to a gain of some EUR 3m y/y. Our H2 EBITA estimate is in line with guidance; we don’t expect Pihlajalinna to make changes to its guidance at this point, but in our view Q4 results could still end up driving FY ’22 EBITA higher than the current guidance implies. In any case, longer term earnings drivers are in place; Pihlajalinna has plenty of margin potential left as demand picks up while Pohjola Hospital continues toward above 20% EBITDA margins.
Valuation very much on the undemanding side
Pihlajalinna is unlikely to make further M&A moves in the short and medium term as organic growth potential remains plentiful. The 12x EV/EBIT valuation, on our FY ’23 estimates, isn’t challenging as we estimate the margin at 6%, still well below many peers. We retain our EUR 12.5 TP and BUY rating.
Etteplan’s operative performance was good in Q3 although bottom-line figures were weaker than expected. The market outlook appears to be taking some toll on growth ambitions and uncertainty is increasing. We lower our rating to HOLD (BUY) with a target price of EUR 13.5 (15.0).
Operatively good quarter, bottom-line below estimates
Etteplan reported operatively good Q3 results. Net sales in Q3 were EUR 80.3m (EUR 78.1m/78.4m Evli/Cons.), with growth of some 20% y/y (12.0% organic excl. FX). EBIT amounted to EUR 5.8m (EUR 4.7m/5.2m Evli/cons.) and some EUR 6.5m excl. one-offs (Evli EUR 5.7m). Bottom-line figures were below our expectations, as financial items relating to the Semcon offer were clearly larger than anticipated. As a result, despite the better operating performance, EPS was negative at EUR -0.03 (EUR 0.04/0.01 Evli/cons.). Etteplan adjusted it guidance, expecting revenue of EUR 345-360m (340-370m) and EBIT of EUR 28-31m (28-32m).
Taking growth ambitions down a notch
Etteplan’s comments related to the market outlook were slightly on the negative side. Further softness is seen in China and Etteplan has also pre-emptively taken a more conservative approach to recruitments. Expectations are still good for the remainder of the year and signs of a significant decline in demand remain somewhat limited, although fluctuations in different customer segments are high and visibility going forward is lower. Our 2022 operative estimates are slightly up given the better than anticipated Q3 figures, currency hedging still poses a risk for the bottom line. We have also slightly lowered our estimates for the coming years based on an anticipated slow-down in growth.
HOLD (BUY) with a target price of EUR 13.5 (15.0)
Uncertainty going forward is clearly increasing, and although we for now do not see a reason to interpret the company’s comments in Q3 as indicative of any major downswing, some added caution is warranted. We lower our TP to EUR 13.5 (15.0) and our rating to HOLD, valuing Etteplan at ~14.0x 2023e P/E.
Enersense Q3 report didn’t contain major surprises. Profitability is set to improve with growth and inflation compensation, but at least Q4 may see muted bottom line.
Not many surprises while order backlog is now tall
Q3 revenue was EUR 64.4m vs our EUR 65.4m estimate. The 10.5% y/y growth was driven by all segments except Smart Industry, where the lower volumes of the OL3 project left a gap soon to be filled by the EUR 200m Helen contract. Low volumes, inflation, and Offshore ramp-up hurt margins, while the segment’s EBITDA gained from EUR 2.1m in items due to a capital gain as well as a change to the considerations related to an acquisition. Enersense’s headline EUR 4.3m EBITDA was above our EUR 2.0m estimate, but in line considering the one-offs. There were some items, such as Power’s costs with Megatuuli, which weren’t there to burden the comparison period. Connectivity EBITDA increased, however orders remained muted for now as top line is driven by long-term agreements, some of which should be signed soon. Meanwhile Power backlog doubled.
Both organic and inorganic growth to be seen
We would expect Enersense’s organic growth to help it reach healthy profitability levels in FY ’23, while the Baltics are likely to continue to dilute margins for a while. The Voimatel deal’s EUR 130m revenue and EUR 4m EBITDA, at an EV of EUR 10m, would add a lot of value with significant cost synergies but is yet to be approved by the competition authorities. The expansion to EV charging technology is another strategic addition. The initial Unified Chargers price tag is negligible, while it remains to be seen just how much value the deal will add (competition includes e.g. Kempower). The ERP project will continue next year while Offshore projects should begin to contribute then.
Q4 margins uncertain, but bound to get better next year
In our view Enersense is positioned for at least a high single-digit growth next year. Enersense’s guidance suggests there’s still a lot of uncertainty around Q4 profitability, in our view due to inflation and the fact that seasonal project patterns have been different this year. Enersense is valued some 5x EV/EBITDA and 10x EV/EBIT, which are not high levels compared to peers while there remains uncertainty around the improvement pace. We retain our EUR 6.0 TP and HOLD rating.
Etteplan's net sales in Q3 amounted to EUR 80.3m, slightly above our and consensus estimates (EUR 78.1m/78.4m Evli/cons.). EBIT amounted to EUR 5.8m, above our estimates and above consensus estimates (EUR 4.7m/5.2m Evli/cons.). Guidance for 2022 specified: revenue EUR 345-360m (EUR 340-370m) and EBIT 28-31m (EUR 28-32m).
Finnair touched a milestone, but there’s more to go before EBIT reaches adequate levels while valuation remains full.
High passenger yields drove a revenue and EBIT beat
Finnair’s Q3 revenue reached EUR 719m, clearly above the EUR 645m/667m Evli/cons. estimates as passenger revenues were some EUR 50m higher than we estimated. Seasonally strong Q3, including EUR 56m in other operating income mostly attributable to wet leases, coupled with improving unit revenues helped Finnair’s EBIT to EUR 35m vs the EUR -7m/-4m Evli/cons. estimates. In our view the top line and EBIT beats were driven by higher than estimated passenger yields. The positive EBIT was an important milestone for Finnair, but there’s still distance left to go until profitability reaches a firm footing.
Improvement to continue, but not as steep as in Q3
Q3 EBIT was a major improvement q/q as passenger yields increased by some 10% over Q2. Q4 will be a bit softer in terms of volumes; October bookings look good, but November is seasonally soft before December’s seasonal travel volumes. We estimate 5% q/q passenger yield decline for Q4, but high jet fuel prices should still provide some ticket pricing tailwind in addition to a rebound in corporate travel, which has reached around 80% of the pre-pandemic level when adjusted for capacity. Meanwhile Finnair’s strategy includes efforts to secure high unit revenues (e.g. the share of direct distribution has already roughly doubled to 60%). Passenger yields are therefore likely to stay relatively high, but there’s also uncertainty around next year’s passenger volumes as China’s opening may be further delayed.
Valuation well anticipates long-term improvement
There’s a lot of uncertainty around factors such as yields, volumes as well as costs (including fuel prices) going forward. Finnair should achieve a positive FY ’23 EBIT, but it’s likely to be muted due to a certain lag in passenger volumes and wouldn’t in any case be enough to justify current valuation, which still isn’t cheap. Finnair’s valuation seems based on the assumption that it will eventually catch up with peer profitability levels; valued about 12x EV/EBIT on our FY ’24 estimates, clearly above peers while EBIT margin is to lag by many percentage points. The assumption may be fair, but leaves Finnair pretty much fully valued. We update our TP to EUR 0.40 (0.36); retain HOLD rating.
The strong demand for Vaisala’s solutions continued with the order received increasing by 25% in Q3. Net sales saw double-digit growth and EBIT was on a solid level. We believe Vaisala to enjoy solid growth during H2’22-H1’23 but H2’23 being somewhat gloomy.
Enersense’s Q3 profitability topped our estimates as EBITDA development was favorable in all other segments except International Operations, where we believe inflation continues to be more of a problem than in Finland.
Consti reported Q3 figures that were in line with our estimates. The company was able to defend its margins in a difficult market environment. Consti’s order backlog decreased slightly but remains at healthy levels, which supports the company’s near-term development. Although the construction market outlook is quite grim, the near-term growth outlook for renovation construction remains decent. We retain our BUY-rating and TP of EUR 11.0.
Q3 results in line with our estimates
Consti Q3 results were in line with our estimates. Net sales in Q3 were EUR 79.0m (EUR 76.0m in Q3/21), in line with our and consensus estimates (EUR 79.8m/79.6m Evli/Cons.). Sales grew 4.0% y/y. Adj. operating profit in Q3 amounted to EUR 3.3m (EUR 3.1m in Q3/21), in line with our and consensus estimates (EUR 3.2m/3.3m Evli/cons.). The company was able to defend its margins in a difficult market environment as the operating margin stood at 4.2% (4.1% in Q3/21). The guidance for operating profit is intact at EUR 9-13m for FY 2022.
Strong backlog, market remains uncertain
Even though order intake and backlog decreased slightly y/y, both were still at a healthy level supporting the company’s near-term development especially during the rest of the year. According to the CFCI estimates, the Finnish renovation construction market is expected to grow 2% in 2023 while Euroconstruct expects volume growth of 1.3%. A survey study conducted by Talotekniikkaliitto in September, however, pointed towards a slower market development especially in the non-residential renovation building technology. The market environment also remains uncertain due to the higher construction costs and rising interest rates, although the labour-intensity of renovation alleviates some concerns.
BUY with a target price of EUR 11.0
Consti has been able to perform well in the turbulent market and the healthy backlog supports continued good near-term development. We find the story still attractive because of the supportive long-term drivers and undemanding valuation.
Solteq’s Q3 was somewhat below our expectations and most notably, challenges were seen now also in Solteq Digital. We adjust our TP to EUR 1.2 (1.5), rating still HOLD.
New challenges from Solteq Digital
Solteq reported Q3 results below our already rather low expectations. Net sales declined 3.7% y/y to EUR 14.4m (Evli EUR 14.7m). The operating profit and adj. operating profit amounted to EUR -5.0m and -0.5m respectively (EUR 1.1m/1.2m in Q3/21), below our estimates (Evli EUR -4.1m/0.3m). Solteq Software’s EBIT was negative as expected while the modest growth was a positive. Solteq Digital unexpectedly showed a rather notable 9.6% y/y growth decline and profitability as a result was also on the weaker side. Problems appear to relate market demand and some delays and hesitation in customer activity.
Near-term outlook not the best
With the added woes of Solteq Digital, the near-term for Solteq looks rather challenging. Fortunately, Solteq Software showed some signs of the product development related challenges being alleviated and customer demand remains healthy. Nonetheless, with the problems being more fundamental in nature a clear recovery appears more likely to materialize during H1/2023. The market sentiment driven challenges in Solteq Digital are quite worrisome, with the segment having been the main driver of profitability. The challenges are likely to continue to some extent going forward as customers review investment needs, but a larger deterioration still appears unlikely supported by necessity-based investments. With the challenges, our expectations for 2023 remain on the softer side. Visibility is also subdued by the market environment and the pace at which Solteq Software, with the key Utilities business, is able to ramp-up growth again.
HOLD with a target price of EUR 1.2 (1.5)
With the added concerns and reduced visibility near-term upside remains somewhat limited although Solteq still exhibits significant and proven potential. On our estimates valuation upside relies on mid-term potential or significant improvements next year. We lower our TP to EUR 1.2 (1.5), HOLD-rating intact.
Preliminary figures given with the positive profit warning, Vaisala’s Q3 result came in strong and included no large surprises. Net sales saw a double-digit growth while EBIT remained on a good level.
Finnair’s Q3 results came in clearly above estimates as strong development in unit revenues drove top line as well as profitability. Finnair turned in a positive EBIT for the first time since Q4’19.
SRV’s Q3 was rather uneventful and construction profitability remained at reasonable levels. Near-term upside remains limited in the challenging market, and we lower our TP to EUR 4.3 (5.0), HOLD-rating intact.
Reasonable profitability given market conditions
SRV’s Q3 results were largely rather uneventful. Revenue in Q3 was EUR 186.8m (EUR 176.7m/194.0m Evli/Cons.), near previous year levels. The operating profit amounted to EUR 5.5m (EUR 3.1m/2.7m Evli/cons.). The difference was due to capital gains from the sale of a commercial centre and the operating profit margin in construction was slightly below our expectations (2.6%/2.9% act./Evli). Profitability was supported by improved controllability of projects, successful inflation control and ensuring the availability of materials. The order backlog at the end of the review period stood at EUR 717.1m, down some 30% y/y. SRV announced the initiation of change negotiations to meet the current market demand situation.
Heading into challenging market conditions
SRV is heading into a quite tough market, with construction material costs and inflation continuing to cause some hassle along with expectations of a decline in new building construction volumes. The pipeline for business construction appears to be somewhat fruitful but we see little support for the generally more profitable housing construction volumes. The visibility into 2023 is weak and currently we expect a sales decline of some 6%. There is still some potential for margin improvement potential, although we see the current headwinds limiting that in the short-term, and the completed financing arrangements will support bottom-line figures.
HOLD with a TP of EUR 4.3 (5.0)
Although valuation looks cheap, with the market challenges we see little potential for materialization of valuation upside compared with peers in the near-term. In the mid-term, improved margins and initiation of dividend payments could act as a catalyst, again however limited by current uncertainties. We retain our HOLD-rating with a TP of EUR 4.3 (5.0).
Verkkokauppa.com’s Q3 result came in soft as expected. The current market includes a significant portion of uncertainty, and we find it better off to wait for the first signs of market recovery. We downgrade our rating to SELL (HOLD) and adjust TP to EUR 2.2 (3.5).
Topline came in above expectations, but EBIT was modest
Due to the challenging market, Verkkokauppa.com’s Q3 result came in modest. Net sales declined by 2.3% y/y to EUR 137.8m. The decline was mostly driven by the consumer segment and core categories. Sales grew in the Export and B2B segments. B2B growth pace slowed down to 5% with reduced activity of SMB clients and Export growth was mostly supported by new customers gained. Evolving categories performed well in a challenging market and managed to grow by 3.1% y/y. Unfavorable sales mix and increased price competition showed in a weaker gross margin of 14.6%. The profitability was further harmed by increased cost pressures through investments in personnel and elevated logistics costs. Q3 adj. EBIT amounted to EUR 2.1m (1.5% margin).
2023 going to be challenging as well
The company guides for 2022: net sales of EUR 530-560m and adj. EBIT of EUR 5-9m. Lots of tasks must be done to reach the guidance since the weak market doesn’t provide much support. At this moment, large inventory burns cash, and the company has pressures to release capital from expanded inventories. A side effect of inventory clearance, namely margin investments possibly hurt profitability. We expect the inventory clearance to continue also in 2023. With low sales volumes and existing cost pressures, we expect the profitability to lag also in H1’23.
Negative view with elevated valuation
We decreased our estimates after the Q3 result. We see the upcoming year as challenging and our previous 2023 estimates seemed quite optimistic. With decreased topline estimates our 23 EBIT estimate saw a ~50% drop. We see it challenging for the company to stay profitable in H1’23, but EBIT to notably improve in H2’23. However, we find the current market as too uncertain. With our revised estimates, uncertain market environment and high valuation, we downgrade our rating to SELL (HOLD) and adjust TP to EUR 2.2 (3.5).
CapMan continued its good performance in Q3 and results apart from carried interest corresponded to expectations. With some near-term softness seen in fundraising and transaction activity, we lower our TP to EUR 3.1 (3.4), BUY-rating remains intact.
Results apart from carried interest as expected
CapMan continued its good performance in Q3 and apart from carried interest (EUR 1.0m/5.0m act./Evli) coming in lower than we expected, the results were well in line with our expectations. Revenue amounted to EUR 15.9m (EUR 19.7m/19.2m Evli/Cons.) and operating profit to EUR 12.7m (EUR 16.5m/12.3m Evli/cons.). Capital under management increased to EUR 4.9bn. Investment returns continued to be at good levels despite valuation level decreases, aided by a few significant exits and strong operational performance in several portfolio companies. Carried interest was earned from Growth Equity and NRE funds.
Near-term softness seen in fundraising and transactions
In the near-term, some softness is anticipated in fundraising and transaction activity, although the overall sentiment still remains rather solid. Alternative asset AUM growth is forecasted to decline 3%p during 2021-2027e compared with 2015-2021, but the estimated growth of 11.9% p.a. is still at healthy levels. In terms of our estimates, we have made slight downward tweaks to our end of year expectations for carried interest and investment returns but otherwise no significant changes. We expect operating profit levels of EUR 50-60m during 2022-2023e with further potential in the mid- to long-term should fundraising activity remain at forecasted levels. Timing of carried interest realization and investment returns remain key short-term uncertainties.
BUY with a target price of EUR 3.1 (3.4)
CapMan’s investment case continues to remain favourable in our view and valuation still remains attractive. With some anticipated near-term softness and the potential impact on non-recurring income we lower our TP to EUR 3.1 (3.4), BUY-rating still intact.
Consti's net sales in Q3 amounted to EUR 79.0m, in line with our and consensus estimates (EUR 79.8m/79.6m Evli/cons.), with growth of 4.0% y/y. EBIT amounted to EUR 3.3m, in line with our and consensus estimates (EUR 3.2m/3.3m Evli/cons.). Guidance reiterated: operating result in 2022 is expected to be EUR 9-13m.
Consti's net sales in Q3 amounted to EUR 79.0m, in line with our and consensus estimates (EUR 79.8m/79.6m Evli/cons.), with growth of 4.0% y/y. EBIT amounted to EUR 3.3m, in line with our and consensus estimates (EUR 3.2m/3.3m Evli/cons.). Guidance reiterated: operating result in 2022 is expected to be EUR 9-13m.
Suominen’s margins remained very low in Q3, but the worst of cost pressures are easing and continued high demand, especially in the US, should begin to drive significant gains.
High growth but still low profitability margins in Q3
Suominen’s EUR 131.9m Q3 revenue grew by 34% y/y and topped the EUR 123.0m/121.5m Evli/cons. estimates. Growth was attributable to higher volumes, sales prices, and currencies in roughly equal portions. Early part of the quarter was still difficult especially due to low volumes in the US, but August and September were better as demand improved toward the end of Q3. There are still account-specific differences in the US with regards to the inventory build-up situation, but overall demand is clearly improving over the course of Q4. Meanwhile cost pressures remained larger than we estimated as profitability missed our estimates despite the high revenue. Gross profit was only EUR 5.2m vs our EUR 9.2m estimate, while the EUR 5.1m Q3 EBITDA (vs our EUR 7.0m estimate) benefited from tax credits.
US likely to continue to drive growth for some time
Americas already grew by 41% y/y to EUR 80m, while there should still be plenty of additional capacity to utilize in the US. It remains to be seen at how high a level Americas’ growth continues, but we would expect it to remain well above 20% for at least a couple of quarters. Meanwhile Europe’s growth should moderate over the course of next year as sales prices are no more to increase with raw materials prices (there’s also not that much additional capacity to utilize in Europe). We update our Q4 revenue estimate to EUR 145m (prev. EUR 129m).
US recovery and cost compensation to drive earnings up
Q3’s relative softness and the comments regarding the pattern of demand in the US over the quarter suggest Q4 will see steeper q/q improvement than we previously estimated. Earnings are set to increase from here, however considerable uncertainty persists around where the level will land next year. Further top line growth should be expected, due to demand volume trends, while energy costs will remain another profitability hurdle for at least a few quarters. We estimate 7.5% growth for next year, which in our view appears to be on the conservative side. Suominen remains valued a bit above 3x EV/EBITDA and 5.5x EV/EBIT on our FY ’23 estimates. We retain our EUR 3.0 TP and BUY rating.
SRV's net sales in Q3 amounted to EUR 186.8m, above our estimates and below consensus (EUR 176.7m/194.0m Evli/cons.). EBIT of EUR 5.5m was a positive, beating expectations (EUR 3.1m/2.7m Evli/cons.).
Dovre posted Q3 results above our estimates; in our view earnings growth should continue next year, while valuation still leaves enough upside potential.
Especially high growth in Norway during Q3
Q3 revenue grew to EUR 59.7m, above our EUR 54.1m estimate. The 28.5% growth was driven by all three segments. High demand in Norway continued to support both Project Personnel and Consulting, and in our view the latter’s 33% growth was encouraging as it was driven by several larger projects within the Norwegian public sector as well as energy. Consulting continues to grow in Finland, but Suvic’s wind farm projects remain the more significant Dovre business. Dovre's EUR 3.0m EBIT topped our EUR 2.2m estimate (due to all three); Renewable Energy EBIT declined y/y (as the combination of busy construction season and inflation causes some challenges) but was nevertheless above our estimate. Dovre also made an upward revision to its guidance.
Renewable Energy and Consulting to drive FY ’23 EBIT
Dovre says this year has seen extraordinarily high growth (in our view the note concerns particularly Project Personnel) and such a level is not to be expected next year. This is no surprise, and we expect organic growth to slow to 7% in Q4. We have previously estimated an organic CAGR of 5% to be a reasonable long-term pace for Dovre, and we continue to expect such a rate for next year. We also see there to be further earnings growth potential especially within Renewable Energy; Suvic has managed well in terms of profitability despite the inflationary environment, and we see scope for margin improvement next year as wind farm demand remains high while the operating environment should be more normal. We continue to expect flattish profitability for Project Personnel going forward, while Consulting should be able to achieve earnings growth also next year.
Multiples are down, earnings growth potential attractive
We see a 5% growth rate realistic for next year and wouldn’t be surprised by a high single-digit rate, whereas such an organic double-digit rate as seen this year shouldn’t be expected. Dovre’s valuation is reasonable, around 8x EV/EBIT on our FY ’22 estimates, while we expect 50bps EBIT margin gain for next year. Peer multiples have retreated a bit, but we retain our EUR 0.75 TP and BUY rating as we make some upward estimate revisions.
CapMan's net sales in Q3 amounted to EUR 15.9m, below our estimates and below consensus (EUR 19.7m/19.2m Evli/cons.). EBIT amounted to EUR 12.7m, below our estimates and in line with consensus (EUR 16.5m/12.3m Evli/cons.). Apart from carried interest (Act./Evli EUR 1.0m/5.0m), results were well in line with our expectations.
Scanfil’s Q3 results were largely as expected. Demand remains strong and EBIT should continue to increase as the gradually easing component shortage situation further helps plant productivity.
Q3 figures and management comments largely as expected
Scanfil Q3 revenue grew to EUR 212m, compared to the EUR 210m/209m Evli/cons. estimates. Growth continued to stem across all customer segments. The 26% y/y growth (23% without the EUR 20m transitory spot component purchases) was a record pace and may not be reached again as it was driven by a very high level of customer demand as well as inflation. EBIT amounted to EUR 11.5m vs the EUR 12.3m/11.5m Evli/cons. estimates, and EBIT margin was a decent 6% when excluding the spot purchases. The amount of these transitory items already declined by a third q/q and thus suggests component availability challenges continue to ease, yet the situation will still take a while to wholly normalize.
Underlying growth should moderate a bit but remain strong
Scanfil’s business model allows incremental capacity additions, and hence supply-demand balance is unlikely to be altered too unfavorably even if EMS players, including Scanfil, expand their footprint in response to a particular phase of high demand. The Atlanta investments (EUR 4m in an SMT line as well as additional production space), in addition to production space increases in other locations, will mostly address needs current customers have, although Scanfil is also active in new customer acquisition. Customer demand forecasts remain strong across all key markets, at least for now, and Scanfil’s diverse customer base means demand risks are manageable even in the case of softening.
Further earnings growth with an undemanding valuation
The plant network is performing well, and no plant is lagging. The guidance midpoint suggests y/y growth will continue at a 14% pace in Q4; Scanfil should reach an above 6% EBIT margin even with some spot purchases. The estimated Q4 run-rate EBIT implies well above EUR 50m figure for FY ’23, which should be achievable even if top line growth turns negative due to the lost transitory invoicing items. Meanwhile Scanfil’s valuation is not too demanding, below 9x EV/EBIT on our FY ’22 estimates and around 7x next year. Our updated TP is EUR 7.0 (8.0); retain BUY.
Preliminary figures given, Verkkokauppa.com’s Q3 report included no large surprises. Net sales continued in decline and profitability was hit by lower volumes, weaker sales mix, price competition and elevated cost levels. Guidance intact (revised ahead of Q3 result).
Solteq’s Q3 was below the already weak expectations, with revenue at EUR 14.4m (Evli EUR 14.7m) and adj. EBIT at EUR -0.5m (Evli EUR 0.3m). The weakness relates to earlier communicated challenges in Solteq Utilities’ software development and lower revenue and profitability in Solteq Digital.
Detection Technology’s Q3 result was strong in terms of growth. Yet, profitability deteriorated due to continued cost pressures and one-time provision made. With increased volumes and elevated costs easing down, DT's profitability is expected to improve.
Margins under powerful pressure despite solid growth
After soft Q2 DT delivered solid growth figures with SBU and MBU growing by double-digits while IBU’s low single-digit growth was restricted by a very strong comparison period. Group net sales increased by 17.5% y/y and amounted to EUR 27.3m (Evli: 27.1m). Q3 growth was supported by solid demand for medical CT devices, postponed Q2 deliveries, and strong aviation security sales. Despite strong growth, profitability was weak due to elevated material, logistics, and R&D costs. In addition, DT made EUR 1.3m provision due to the credit issues of its North American customer which eventually deteriorated DT’s profits further. Q3 EBIT accounted for EUR 0.6m (2.3% margin) which fell significantly short of our expectations (Evli: 3.8m).
Outlook implies growth to continue
The outlook for security seems bright. Aviation CT equipment upgrades have proceeded both in the US and Europe. Visibility to SBU’s demand continues far but medical OEMs have indicated market growth slowing down. In addition, visibility to industrial demand is somewhat foggy. In total, we expect DT to show double-digit growth both in 2022 and 2023. With spot-component purchases diminishing and additional R&D projects ending, we see DT’s profitability improving significantly. The company guides double-digit growth for Q4’22 and Q1’23 in all its business units.
Valuation neutral with our revised estimates
We made some minor downward adjustments to our 2023-24 estimates considering recent news. DT is currently trading approx. in line with its peers, and we see the valuation as not challenging. Security business provides visibility but uncertainty concerning medical growth and general downward economic development keeps us cautious. We retain our HOLD-rating and adjust TP to EUR 16.5 (prev. 17.0).
Detection Technology’s Q3 topline came in strong. Net sales growth continued but profitability was harmed by supply chain issues and one-time provision made.
Suominen’s Q3 profitability improved a bit from the recent lows but remained very modest and below our estimate as energy costs seem to have been a bigger challenge than we expected. Revenue topped estimates as sales volumes grew again in North America.
Innofactor showed promising progress in Q3, boding well for 2023, and now needs to provide further signs of sustained performance given recent challenges. We retain our target price of EUR 1.25 and BUY-rating intact.
Clear growth boost in Q3
Innofactor reported better than expected results. Growth clearly picked up a notch, 21.5% y/y (13.4% organic), with net sales of EUR 16.7m (Evli 14.9m). Growth was aided by improved invoicing rates following actions implemented after the weaker H1. Profitability came in line with our expectations, with EBITDA of EUR 1.8m (Evli EUR 1.9m). Relative profitability was in our view slightly soft but still at good levels. Subcontracting expenses increased y/y and the improvement in invoicing was gradual throughout the quarter, with September having been strong according to the company. The order backlog was up 7.3% y/y.
Potential for 2023 but too early to get overly excited
The achieved sales growth in Q3 along with the gradually improved invoicing rate provides very good support for the end of the year and confidence for Q4 appears to be strong. With the demand situation looking unchanged and should the achieved efficiency be sustained, Innofactor is set for notable earnings improvement potential heading into 2023. The sustainability of the higher operative performance remains a key concern given recent challenges, and further proof is warranted. We currently estimate a ~2%p increase in the EBITDA-margin in 2023 should the late-Q3 performance be sustained in the near future, although H1/22 was soft, and the potential is bigger than that.
BUY with a target price of EUR 1.25
Innofactor currently trades below peers. In our view this is not fully unjustified given the sub-par performance during 2022. We, however, still see that the shown improvement signs and potential still supports valuation upside. We retain our target price of EUR 1.25, valuing Innofactor near the peer median, and our BUY-rating intact. We note that peer multiples have come down recently and in absolute terms, the implied 2023 target P/E of ~10.5x is not overly challenging.
Dovre’s Q3 results were clearly above our estimates as all three segments recorded figures higher than we had expected. Dovre also issued a positive guidance update yesterday; our latest estimates would still be in line with the new guidance, but the very strong Q3 report suggests our Q4 estimates are too modest.
Scanfil Q3 results landed largely in line with expectations as top line was up 26% y/y and EBIT margin amounted to a decent 5.4%. Scanfil expects further improvement for Q4.
Innofactor’s Q3 results were better than expected. Net sales turned to a clear growth of 21.5% y/y to EUR 16.7m (Evli EUR 14.9m) aided by improved invoicing rates after the more challenging first half of 2022. Q3 EBIT of EUR 1.0m was in line with our estimates (Evli EUR 1.1m).
Finnair reports Q3 results on Oct 28. We make only small adjustments to our estimates ahead of the report.
We make no big estimate revisions before the report
Finnair’s Q3 RPK was as we expected, while the 80% load factor was about 5 percentage points higher than we estimated. North Atlantic RPK was already more than 40% above the Q3’19 comparison figure, which is one of the clearest demonstrations of the recent (necessary) updates to strategy. We estimate the continued recovery in passenger volumes, along with some increases to ticket prices, to have helped Finnair’s revenue to EUR 645m in Q3. Jet fuel prices seem to have stabilized lately but remain still very high in the historical context. We expect Finnair’s EBIT to have continued to improve, however we estimate it to have remained slightly negative in Q3.
Qatar Airways partnership one of the major recent updates
Finnair formally announced the keys of its updated strategy in September. Many of the points had been already discussed over the spring and summer months, including the pivot to North America and India, but Finnair has also signed a partnership with Qatar Airways which is to better connect Nordic capitals with the Middle East. The updated network as well as favorable terms on leased out planes and crew help Finnair’s continued recovery after the pandemic, but the Russian airspace closure still forces the company to make some downsizing choices. We estimate Finnair to reach positive EBIT next year, however our 2.3% EBIT margin estimate remains well shy of the 5% level the company aims to reach in H2’24. Finnair’s liquidity position is adequate, although the recent blows will leave their mark on the balance sheet. Then again, Finnair has no need to make major fleet refurbishments in the short to medium term. We look forward to comments regarding ASK and LFs in the coming quarters.
Valuation has moderated a bit, but still not cheap
Finnair continues to trade at high FY ’23 earnings multiples relative to peers as the pandemic already hurt the (legacy) Asian strategy more than those of other airlines. Finnair is valued around 12x EV/EBIT on our FY ’24 estimates, while other airlines are valued roughly that level on FY ’23 estimates. In our view this puts Finnair’s valuation in the fair to fully valued range. We retain our EUR 0.36 TP; our rating is now HOLD (SELL).
Consti reports Q3 results on October 27th. Financials are of lesser interest, with some cost impact likely, while the currently mixed market outlook is of key interest.
Expecting uneventful Q3, some cost impact likely
Consti reports its Q3 results on October 27th. Progress during the first half of 2022 was at a rather good level despite some negative impact from rising material prices and inflationary pressure. Apart from some minor tweaks, our estimates remain intact. We expect continued modest growth supported by the order backlog and profitability levels similar to the comparison period given the slight strains from construction material increases. Consti’s 2022 operating profit guidance is at EUR 9-13m, with our estimate at EUR 10.2m.
Mixed signals on market outlook
The market outlook remains rather favourable for the on-going year aided by order backlogs, while the outlook going forward is showing mixed signs. The Confederation of Finnish Construction Industries RT (CFCI), in its October business cycle review, estimates the renovation volumes to grow by 1.5% and 2.0% in 2022e and 2023e respectively. On the other hand, a survey conducted by Talotekniikkaliitto during autumn 2022 regarding the Finnish renovation building technology market shows an increase of respondents expecting a slow-down of near 12%p to 31.4% compared with the survey conducted in spring 2022. The new residential building construction outlook is grimmer, with CFCI estimating a volume decline of 5.8% in 2023e. Data on construction cost development from Statistics Finland suggests a clear slow-down in cost growth during Q3, although still at a clearly elevated level on y/y basis.
BUY with a target price of EUR 11.0 (12.0)
Consti currently trades clearly below peers, which in our view remains hard to justify given the exposure to the more stable renovation market compared with the new construction focused peers. The continued high construction costs, economic uncertainty and inflationary environment, however, remain a threat, and we lower our target price to EUR 11.0 (12.0).
Raute’s Q3 figures were encouraging, and although profitability may still be muted for a few quarters we view valuation conservative enough to leave adequate upside.
Some encouraging profitability development
Raute’s Q3 revenue grew 10% y/y to EUR 42m, above our EUR 34m estimate. The beat was due to both projects and services, driven by Europe, and in our view the high EUR 19m service revenue also helped EBIT back to black (EUR 1.4m vs our EUR -0.3m estimate) as inflation has been more of a problem on the project front. Inflation eased a bit, but we believe Raute has also learned to better price in inflation within projects over the past year. The unwinding of the Russian book has had an adverse effect on working capital, hurting cash flow, but the issue is by nature temporary and Raute’s overall workload situation is not too bad despite the fact that Russia was an important market.
Top line may not grow next year without larger mill orders
Raute booked EUR 35m in new orders for the quarter, compared to our EUR 38m estimate. Services orders were soft compared to our estimate as modernization orders declined from the recent high figures, but we find it encouraging Raute has managed to gather solid order amounts for many quarters in a row without any larger mill orders. Smaller orders from North America are especially helpful at this point, while there’s a bit more uncertainty around Europe, the current largest market, going forward. There’s a need to add capacity in order to fill the gap left by the end to Russian imports. It’s unclear how this trend continues to play out in the short-term, but demand for large mill projects remains in place along the Eastern flank of Europe. Latin America is also showing signs of improvement, although it’s likely to remain a smallish market at least in the short-term.
We see more upside than downside from this point forward
Q4 is in our view still unlikely to be a great quarter in terms of profitability, but overall development appears favorable going towards next year, when the EUR 4-5m in cost efficiency measures should materialize, in addition to the benefits of the ERP project. Raute is valued around 6x EV/EBIT on our FY ’23 estimates, which we don’t view a challenging level considering our EUR 5.6m EBIT estimate is still far from long-term potential. We update our TP to EUR 11 (9); our new rating is BUY (HOLD).
Verkkokauppa.com publishes its Q3 result on Thursday, 28th Oct. In addition to the consumer segment and contrary to its performance in H1, we expect the B2B segment to see some softness in H2. Due to no signs of market recovery yet, we adjusted our short-term estimates downwards ahead of Q3 result.
Raute’s Q3 top line and profitability topped our estimates. Inflation pressures eased up a bit while Western demand remained high.
DT releases its Q3 result on Wednesday, 26th of Oct. With weakened macroeconomic outlook and increased cost pressures, we adjusted our short-term estimates but still expect DT to deliver solid growth in coming years.
Suominen reports Q3 results on Oct 26. We make only minor estimate revisions ahead of the report as we continue to expect improvement over the coming quarters.
H1 profitability was very weak, but H2 is set to be better
Suominen’s Q2 profitability proved a lot worse than we expected as margins continued to decline. Higher raw materials and energy prices hurt while there was still no remarkable recovery in US volumes. In our view US volumes are no more such a big problem in H2, whereas the cost side developments are twofold. Raw materials prices seem to have already reached their peak, while it’s far from clear how much higher energy costs may climb over the coming winter months.
Higher margins driven by volumes and cost compensation
We find Suominen’s raw materials prices (a composite including pulp, polyester, and polypropylene) declined by a couple of percentage points q/q in Q3. The development helps H2 margins as Suominen’s mechanism pricing continues to catch up with the price inflation seen earlier this year. Meanwhile energy costs, especially for the two Italian plants but also in other locations including the US, have continued to soar. Suominen has also implemented additional energy surcharges in Q3 which will help profitability over the coming winter months. Q3 profitability will nevertheless remain very much subdued; we make only minor estimate revisions ahead of the report, and now estimate Q3 revenue at EUR 123m (prev. EUR 121m) and EBITDA at EUR 7.0m (prev. EUR 7.4m). We expect Americas’ revenue to have grown by 28% y/y, helped by strong USD as well as a recovery in volumes (partly thanks to production line conversions to better address current demand) and higher sales prices. We estimate line upgrades in Italy to have helped Europe to a 20% y/y growth.
US volume recovery is a key value driver from now on
Mechanism pricing and energy surcharges mean Suominen’s margins adjust to inflation incrementally and hence will rebound from the lows. US volume recovery is thus the crucial operational profitability driver from now on. In our view nonwovens wipes’ consumable nature helps their demand to stick high after the initial pandemic boost. Suominen’s valuation remains undemanding, some 3x EV/EBITDA and 5.5x EV/EBIT on our FY ’23 estimates. Our new TP is EUR 3.0 (3.5); we retain our BUY rating.
Raute reports Q3 results on Oct 21. We expect gradual improvement amid inflation and shift to Western markets.
Cost inflation will continue to burden Q3 results
Raute’s Q2 bottom line was burdened by some EUR 11m in one-off items mostly related to Russian orders, in addition to which cost inflation was a bigger challenge than we had expected. Q3 figures should be clear of exceptional provisions, but we expect inflation will still be a major limiting force on profitability even if Raute has learned to better anticipate cost issues since late last year. We estimate EUR 34m top line and EUR -0.3m in EBIT for Q3, which implies q/q improvement but clearly below the y/y comparison period. Q2 report saw a high level of EUR 40m in order intake as a bright spot; there have now been a few quarters with such healthy order levels in a row without any larger projects, and we expect EUR 38m in Q3 order intake.
Orders have developed favorably even without larger ones
Small order demand should have remained at a good level especially in North America, while Europe is now Raute’s most important market. European demand doesn’t currently appear quite as strong as in America, except for the Baltics and Eastern Europe, but Raute’s order book should remain above EUR 100m going into next year. We thus estimate FY ’23 revenue roughly flat at around EUR 140m. In our view such a workload should be more than enough to help the company reach positive EBIT next year, especially given the fact that Raute has recently implemented cost savings measures. Raute could reach positive EBIT already in Q4’22 assuming services demand remains high.
Downside is limited, but upside still waits a few triggers
We estimate some EUR 4m in FY ’23 EBIT, which we believe Raute should be able to achieve even if top line remains modestly below EUR 140m. Such figures would still fall clearly short of longer-term potential, and the 7.5x EV/EBIT valuation on our FY ’23 estimates doesn’t seem very challenging. Any changes to Raute’s competitive positioning appear unlikely, and hence downside should be limited given the current low expectations. The upside potential, however, is likely to be triggered only once Raute has demonstrated results after the recent burst of inflation as well as continued solid demand in Western markets. Our new TP is EUR 9 (11); we retain our HOLD rating.
Aspo upgraded its FY ‘22 guidance, thanks to ESL’s continued strong performance, and gave an update on exits. We continue to see FY ’23 EBIT well above EUR 40m.
The guidance upgrade, due to ESL, wasn’t a major surprise
Aspo’s upgraded guidance has a midpoint of EUR 54.5m as ESL will continue to drive high profitability also in H2. We view ESL’s current operating environment relatively normal in the sense that the war has had only a very limited impact (we note ESL’s performance is not sensitive to raw materials price changes), however it should also be noted the dry cargo market has gained strength since H2’20 and ESL may now have reached a point where it’s not easy to improve without additional capacity; short term outlook remains strong, while some softening may be due in the medium term. The hybrid vessel investments will support long term profitability potential. The Baltic Dry Index is down by double digits from its recent highs, but this may have only muted implications for ESL due to its differentiated positioning compared to large global dry bulk cargo carriers.
We make only small upward estimate revisions
Aspo disclosed progress regarding Telko’s Russian exit, for which the company is set to receive some EUR 9.5m from a local industrial buyer after the authorities have approved the deal. An exit from Belarus is also in the works. Leipurin is similarly in the process of looking for an exit, but in our view the integration with Kobian is a more significant short to medium term development. We previously estimated EUR 52.7m for FY ’22 adj. EBIT and our revised estimate stands at EUR 55.1m. Our updated estimate for next year is EUR 44.4m (previously EUR 43.4m). Leipurin’s EBIT will likely continue to improve thanks to the Kobian deal, whereas we estimate ESL’s EBIT to decline by some EUR 3m next year. In our view Telko’s H2’22 and FY ‘23 performance remains the biggest question mark as possible price declines could hit margins along with lower volumes.
Valuation not challenging on our ca. EUR 45m FY ’23 EBIT
We expect FY ’23 EBIT to remain well below EUR 50m, mostly due to Telko’s softening, but the below 8x EV/EBIT valuation levels are not that challenging especially when Telko and Leipurin continue to tilt West and ESL still has long term potential left thanks to its upcoming investments. We retain our EUR 9.5 TP and BUY rating.
We revise our estimates due to the financial impact of the unsuccessful Semcon acquisition and accordingly lower our target price to EUR 15.0 (18.0).
One growth leap came to an end
Etteplan’s ambitions to acquire Semcon through a public offer were halted earlier in October after a competing offer came in from Ratos AB. Etteplan had announced that the offer price would not be increased, and the offer ended as Etteplan’s offer was not accepted to an extent that would have enabled ownership of more than 90% of outstanding shares. One-time costs related to the preparation of the transaction are booked in the third quarter of the current year. The financial guidance for 2022 remains unchanged, with revenue estimated to be EUR 340-370m and EBIT EUR 28-32m. Currency hedging risks relating to the transaction will have a significant negative impact on Q3 EPS and the final effect is recorded in Q4.
2022 earnings impacted by one-offs relating to the offer
The unsuccessful offer is unfortunate given our assessment of the mid- and long-term potential of the combined companies and the associated costs will weigh on 2022 financials. We have revised our 2022 EBIT estimate to EUR 28.2m (prev. EUR 29.2m) based on the perceived transaction costs and EPS to EUR 0.74 (prev. EUR 0.90), with our adj. EPS estimate still at EUR 0.90. The one-offs have increased profit warning risks for H2 should market conditions deteriorate but on the other hand, with the guidance still intact, slight added confidence is provided for the level of operative performance.
BUY with a target price of EUR 15.0 (18.0)
With the offer for Semcon not being successful we adjust our target price to EUR 15.0 (EUR 18.0) based on the perceived missed out value creation potential. Continued market uncertainty has further had a slight impact on peer multiples. Our TP values Etteplan at ~16.5x 22e adj. P/E, above the peer median given Etteplan’s historical and anticipated performance but below recent year historical averages due to the market outlook. We retain our BUY-rating.
Vaisala upgraded its 2022 guidance and published preliminary figures for Q3’22. With no major changes made to 2023 estimates, we retain our HOLD-rating and TP of EUR 40.0 ahead of Q3 result.
Endomines EGM was held on 26 September 2022 which resolved on a reverse share split through which forty existing shares will be consolidated into one share. We update our TP to SEK 64.0 (1.6) due to the reverse split. HOLD-rating intact.
The updated strategy sets the company’s focus back to Finland. We see potential upside through successful exploration and mining efforts in the Karelian gold line, on the other hand, we see clear risks in the value realization of the company’s United States asset portfolio. The increasing real interest rates put further pressure to gold prices and the investment case. We decrease our TP to SEK 1.6 (1.7), HOLD-rating intact.
Issues in the United States have continued to weaken the performance
During the recent years, the company has faced issues in the Friday mine and processing plant ramp-up. According to the new strategy, the company’s assets in the United States are developed through partnerships, additionally, divestments are considered as a potential option. In our view, the company’s ability to realize value in the United States is essential for the investment case.
Focus on the Karelian gold line
Production in Pampalo mine was commenced in Q1 2022 supported by the current favorable gold prices. Endomines was able to produce 2 227 ounces of gold in the second quarter of 2022 and posted a positive EBITDA for the Pampalo operations. In the coming years, Endomines is planning to commence production from the satellite deposits and conduct a wide scale exploration campaign in the Karelian gold line. There is also likely to be life of mine increases in Pampalo underground mine as the company is currently extending the decline deeper. We see potential upside for the valuation via successful exploration and mining efforts.
HOLD with a target price of SEK 1.6 (1.7)
We decrease our target price to SEK 1.6 (1.7). The positive assumptions changes regarding the Pampalo underground potential and the Karelian Gold Line satellite deposits are outweighed by adjustments to gold price estimates driven by souring gold market sentiment.
Solteq issued its second profit warning for 2022, with challenges in both segments and significant write-offs relating to the Solteq Robotics business. We downgrade our rating to HOLD (BUY) with a TP of EUR 1.5 (2.7).
Second profit warning for 2022
Solteq issued its second profit warning this year. With the new guidance Solteq expects group revenue to stay at the same level as in the previous year (prev. grow) and operating profit to be negative (prev. weaken). A key item in the downgrade is the write-off of product development investments made into the Solteq Robotics business, resulting in a one-off impact of approx. EUR 4.4m in the third quarter off 2022. Product development costs of Solteq Utilities have also continued to affect the business and project and service delivery costs of Solteq Utilities have increased. The revenue and profitability of the Solteq Digital segment have also weakened.
Some challenges across the board
Solteq had issued a profit warning in May, largely relating to challenges in the Utilities business. The challenges relate to productization of the solutions and performance was hampered by resourcing challenges relating to deliveries and customer project fixes. The previous guidance put quite some catch-up pressure on operational performance in H2/2022 after the weak Q2 results. Those risks appear to have materialized and with Solteq Digital also seeing some continued weakness, the overall market uncertainties may be starting to show. The Solteq Robotics business has seen commercialization challenges due to the pandemic and we have not emphasized any potential in our estimates. The write-off is still notably negative given previous fairly upbeat comments.
HOLD (BUY) with a target price of EUR 1.5 (2.7).
On our revised estimates, excl. the one-offs, valuation on current expected current year performance is quite stretched. Uncertainty is clearly elevated and overshadows coming years earnings improvement potential. We downgrade our rating to HOLD (BUY) with a target price of EUR 1.5 (2.7).
Marimekko elaborated the details of its revised strategy in its CMD and increased its targets to a more ambitious level. We left our estimates broadly intact with the uncertain market restricting future visibility. With the declined stock price, Marimekko’s valuation seems quite attractive, and we raise our rating to BUY (HOLD) but adjust TP to EUR 12.0 (13.2) reflecting the uncertain market environment.
Vaisala’s journey has developed well and with its revised strategy the company continues to seek scalable growth within high-end measurement solutions. We find Vaisala’s valuation stretched but a solid expected 14% annual EPS growth is in favor of holding the stock.
CapMan somewhat ambitiously set its sights on doubling AUM over the next five years, but the CMD provided good insight into measures to achieve the target.
Seeking to double AUM over the next five years
CapMan held its Capital Markets Day 2022 event on September 7th. CapMan has somewhat ambitiously set its sights on doubling AUM over the next five years and raised the combined growth objective for the Management Company and Service businesses (excl. carried interest) to more than 15% p.a. on average (prev. >10%). The company is now also more proactively seeking M&A opportunities, which to our understanding would lean towards the investment product scope. CapMan is also clearly making sustainability an even more integral part of its operations and seeking to act as a frontrunner in the industry. CapMan kept its ROE target of over 20% p.a. on average and its objective to pay annually increasing dividends intact, adjusting its equity ratio target to over 50% (prev. >60%).
Mid-term estimates slightly raised in light of growth target
We have made revisions to our mid-term estimates based on the new targets, having raised our AUM growth estimates and Management company business turnover and operating profit estimates accordingly. Reaching the AUM target will in our view require M&A activity at some point in time and continued good traction for private asset allocations. Growth will still rely on further scaling of CapMan’s private equity strategies, having successfully built the foundations during the previous strategy period, and new investment products indeed seem to be in the pipeline across the board. The CMD overall acted as a further confidence boost to the investment case and CapMan demonstrated that CapMan is a force to be reckoned with.
BUY with a target price of EUR 3.4
The CMD further reaffirmed our positive views on CapMan’s investment case and demand appears to remain fairly solid overall. Although we have slightly raised our estimates, with the overall market uncertainty we retain our target price of EUR 3.4 and BUY-rating.
Marimekko raises its long-term financial targets and reveals its focus areas for the new strategy period of 2023-27.
Administer reported better H1 results than we had expected. With on-going uncertainties and challenges we have somewhat dimmed our coming year expectations and lower our TP to EUR 3.6 (4.0), BUY-rating intact.
H1 results better than anticipated
Administer reported better H1 results than we had anticipated. Net sales in H1 amounted to EUR 23.9m (EUR 21.9m in H1/21) (Evli EUR 21.9m) and grew 20.5% y/y driven by acquisitions. Net sales were burdened by the impacts of general economic uncertainty on customer activity as well as by the customer losses in Adner in 2021. EBITDA amounted to EUR 1.0m (Evli EUR 0.5m), at a margin of 4.2%. Profitability was burdened by higher than anticipated overlapping costs for the old and new system stemming from Administer’s subsidiary Adner’s system reform.
Somewhat dimmed expectations for coming years
Administer remained on track on its inorganic growth strategy, with five acquisitions announced/completed YTD (2022 target 5-10). Investments are being made into technology and strengthening the organization as part of the strategy. Administer lowered its guidance on August 12th, expecting net sales of EUR 47-49m and an EBITDA-margin of 5-7%. Our estimates remain at the midpoint of the guidance ranges. We have somewhat lowered our 2023 expectations, still expecting rapid, largely inorganic growth. We expect profitability to improve because of a lower impact of Adner’s system reform and small overall improvements. With the current uncertainties we expect a more normalized run-rate level of profitability in 2023, while further profitability improvements through Administer’s strategy and acquisition synergies appears more distant.
BUY-rating with a target price of EUR 3.6 (4.0)
Administer currently trades clearly below peers. We have and continue to see a clear discount as warranted given recent year challenges and rather low profitability. Current valuation levels (0.6x 2022e EV/sales), however, suggest little to no improvement potential. With somewhat lowered expectations for coming years, we adjust our TP to EUR 3.6 (4.0), BUY-rating intact.
Administer’s H1 figures were better than expected. Revenue amounted to EUR 23.9m (Evli EUR 21.9m), growing 20.5% mainly due to completed acquisitions. EBITA amounted to EUR 0.6m (Evli EUR 0.1m), adversely affected by Administer’s subsidiary Adner’s system reform but still better than anticipated.
Fellow Bank’s H1 figures were weak due to ECL changes driven by the loan book growth and non-recurring items but operatively decent. Additional capital (T2) is sought to support growth. Early growth figures look promising and profitability scaling potential remains, albeit at a slower pace than we previously expected.
Weak H1 earnings but operatively decent figures
Fellow Bank reported H1 results which operatively were slightly better than we estimated but the change in expected credit losses due to the loan book growth clearly exceeded our expectations and as such the profitability was below expectations (PTP act./Evli EUR -7.4m/-2.3m). Realized credit losses were on a moderate level (EUR 0.7m). Total income of EUR 2.4m (Evli EUR 2.8m) was skewed by the old P2P loans while NII of EUR 2.5m exceeded our expectations (Evli EUR 2.0m). Total OPEX excl. non-recurring items was quite in line with our expectations. After starting the banking operations, Fellow Bank’s business lending and consumer lending volumes increased by 49% and 35% respectively compared with the beginning of the year, supported by competitiveness of the new operating model.
Additional capital needed to support loan book growth
Fellow Bank estimates that the loss in H2 will be clearly smaller than in H1. Potential for positive monthly profit levels during H1/23 is seen, assuming a loan portfolio of around EUR 180m and the bank’s estimated cost level and lending interest margin. The total capital ratio was at 19.4% and the need for additional capital to continue growth kicked in sooner than we anticipated due to the H1 losses. Fellow Bank announced actions aiming at the issue of a Tier 2 debenture in the early autumn.
HOLD with a target price of EUR 0.42
Apart from the clear difference to our estimates in the non-cash ECL changes and the faster than anticipated need for additional capital, performance was quite as expected, and growth figures look promising. Profitability scaling due to growth ambitions appears slightly slower than we previously anticipated but intact. We retain our HOLD-rating and TP of EUR 0.42.
Fellow Bank started its banking operations in April and financial figures were accordingly burdened. Lending volumes showed positive signs aided by the new, more competitive business model. Fellow Bank started actions to strengthen the capital adequacy to support growth after the reporting period.
Etteplan announced a recommended cash offer for Swedish technology company Semcon. The transaction would strengthen the market position and appears favourable for shareholders of both companies. We adjust our TP to EUR 18 (16) and upgrade our rating to BUY (HOLD)
Cash offer for Swedish technology company Semcon
Etteplan announced a recommended cash offer of SEK 149 per Semcon’s share, for a total value of approx. SEK 2,699m. The Board of Directors of Semcon has unanimously recommended that the shareholders of Semcon accept the offer. The offer is conditional among other things upon the offer being accepted to more than 90 percent and approval from the Swedish Competition Authority. Semcon is an international technology company with more than 2,000 employees and 2021 revenue of SEK 1,711.3m and operating profit of SEK 175.1m. The combined entity would on consensus estimates have a combined 2022e revenue of over EUR 500m and have a strong market position in particular in the Nordics. Synergy effects are estimated to amount to EUR 5m on an annual basis.
Financing secured, planning EUR 110-125m rights issue
The completion of the offer is not subject to any financing condition and Etteplan is furthermore planning a rights issue of EUR 110-125m. Both the offer and rights issue appear to have good support from existing shareholders of Both Semcon and Etteplan. We see that the transaction would benefit both Etteplan as a company as well as shareholders.
BUY (HOLD) with a target price of EUR 18 (16)
Considering consensus estimates for Etteplan and Semcon along with valuation considerations and the impact of the transaction on net debt and nr. of shares, we see a potential of some 10-20% in the coming years depending on realization of synergy effects. Despite uncertainty, the offer appears favourable for shareholders and with the size and geographic presences of both companies and geographic presences the likelihood of regulatory obstacles appears limited. We adjust our TP to EUR 18 (16), rating upgraded to BUY (HOLD). Our estimates remain intact for now.
Etteplan announced a recommended cash offer of SEK 149 per Semcon’s share, for a total value of approx. SEK 2,699m. Semcon would in our view be a suitable fit for Etteplan, strengthening the service offering and international presence along with offered synergy effects.
Dovre’s Q2 EBIT came in above our estimate due to Project Personnel. There were no big surprises; we expect earnings growth to continue also next year.
Another strong quarter for Project Personnel
Dovre grew 38% y/y to EUR 47.3m top line vs our EUR 50.5m estimate. Project Personnel and Consulting landed close to our estimates, while Renewable Energy fell EUR 3m short. We reckon late Finnish spring to have caused Suvic project delays, but the segment didn’t disappoint in terms of EBIT as it posted a big y/y improvement despite Q2 being relatively slow and this year also challenged by an inflation spike. Consulting EBIT was as expected as progress continued in both Norway and Finland. Consulting is still mostly driven by early-stage reviews of Norwegian civil & infrastructure projects, however the acquisition of eSite has added a new angle to serve Finnish industrial clients with VR solutions. Extended high demand in Norway also helped Project Personnel to top our EBIT estimate, and as a result Dovre’s EUR 1.7m EBIT came in easily above our EUR 1.2m estimate.
Renewable Energy could still drive another positive revision
Dovre revised its guidance only two weeks ago, so it came as no surprise there was no further upgrade despite the continued high Q2 profitability and demand outlook for H2. Oil prices stay high, which supports oil & gas capex levels and hence Project Personnel, but risks seem to tilt more towards downside from here on. We estimate 4.5% FY ‘22 EBIT margin for Project Personnel, which is more than a satisfactory level yet still short of long-term potential. We continue to expect only flat PP EBIT development for next year. Covid-19 may still cause some sick leaves, while extraordinary inflation rates tend to be more of an issue for Renewable Energy than the other two segments. Q3 is seasonally the best one for Suvic but it may not achieve y/y EBIT improvement this year due to a very strong comparison period.
EUR 7.5m EBIT leaves ample room for earnings growth
We see Dovre headed towards the upper end of its EBIT guidance range. Suvic’s H2 performance could yet lead Dovre to top the range, while Consulting should be able to resume earnings growth next year. Renewable Energy’s expansion is also set to continue. We see potential for EBIT to improve to EUR 9m next year and thus we revise our TP to EUR 0.75 (0.70); retain BUY.
Endomines saw good development on the production front in Finland in H1. The updated strategy adds more emphasis on production in Finland while the US operations are planned to be run through partnership models. We lower our TP to SEK 1.7 (2.2), HOLD-rating intact.
Operative H1 figures quite in line with expectations
Endomines reported H1 operative figures well in line with our estimates. Pampalo gold production amounted to 3,478 oz vs our estimate of 3,622 oz. Revenue amounted to SEK 59.1m (Evli SEK 60.4m) while EBITDA amounted to SEK -38.0m (Evli SEK -36.6m). EBIT of SEK -107.1m came below our estimate (SEK -73.6m) due to amortizations of Friday assets. EBITDA of Pampalo operations turned positive in Q2, at SEK 7.7m. Endomines expects production in H2/2022 to increase by 30-70% compared with H1, putting the full year estimate at roughly 8,000-9,400 oz (Evli updated estimate 8,847 oz). No production is expected from Friday in H2.
Strategy focusing on Finland and partnerships in the US
Endomines updated its strategy, with focus on Pampalo and development and exploration along the Karelian Gold Line. Focus in the US will be on partnership models, meaning that Endomines will not operate any assets by itself. We expect production to rely on Pampalo in the near-term, with potential to bring Hosko and/or Rämepuro to production in H2/2023, not yet included in our estimates. A significant amount of resources will be used for exploration along the Karelian Gold Line and the further funding in the near-term remains on the agenda. The new strategy brings further uncertainty to the future of the US assets but given the company’s resources and funding needs the logic is sound.
HOLD with a target price of SEK 1.7 (2.2)
With the new focus and corresponding changes to our SOTP- model, having lowered the implied value of Friday and revisions to gold price estimates due to recent volatility and changing interest environment, we adjust our TP to SEK 1.7 (2.2). Our HOLD-rating remains intact.
Ramp-up of Pampalo progressed quite in line with our expectations. Friday operations remain halted and appear to be on hold for the unforeseeable future. The updated strategy revolves more heavily around Finland and the future of the US operations remain a big question mark.
Dovre’s Q2 profitability topped our estimates mostly thanks to Project Personnel, where demand remained high particularly in Norway.
Marimekko’s Q2 result was strong and broadly in line with expectations. The outlook provided for H2 is solid, but the upside potential is in our view restricted.
Marimekko delivered strong Q2 result, with net sales broadly in line with and EBIT beating our estimates. The growth was strong in domestic market with y/y growth of 25% while int’l sales grew by 5% y/y.
• Q2 group result: net sales increased by 16% y/y to EUR 38.0m, which was broadly in line with our and consensus expectations (37.0/36.6m Evli/cons.). The growth was driven by domestic sales while international growth was a bit moderate. Gross margin was approx. flat y/y. With increased revenue, adj. EBIT amounted to EUR 5.7m (5.3/5.8m Evli/cons.), reflecting an EBIT margin of 15%. EPS amounted to EUR 0.12 (0.10 Evli/ cons.).
• Finland: driven by strong retail sales, Finnish net sales increased by 25% y/y to EUR 23.0m (Evli: 20.5m). Wholesale sales were flat y/y.
• Int’l: with y/y growth of 5%, net sales amounted to EUR 15.0m (Evli: 16.5m). The growth was driven by Scandinavia, the EMEA region, and the APAC region while North America saw low double-digit y/y decrease in its net sales. Int’l business was negatively impacted by a different kind of weighting of wholesale deliveries.
• Category split: Fashion sales amounted to EUR 12.0m (+6% y/y). Home category grew by 11% y/y to EUR 16.9m. Bags and accessories showed strong y/y growth of 48% and amounted to EUR 9.0m.
• Market outlook: Marimekko expects domestic sales to grow as well as APAC sales and int’l sales to increase significantly. Both retail and wholesale revenue are expected to increase in 2022. Licensing income is also estimated to be higher than that of the comparison period. In percentage terms, net sales growth is expected to be stronger at the beginning of 2022 than in H2.
• FY’22 guidance intact: expecting revenue to grow and an EBIT margin ranging between 17-20%.
Netum’s H1 brought no surprises due to given preliminary figures but provided further reassurance of a solid growth outlook. We adjust our target price to EUR 4.5 (4.3) and upgrade our rating to BUY (HOLD).
Investments into growth in H1
Netum had provided preliminary figures ahead of H1 and the earnings report as such held no notable surprises. Net sales grew 47.8% y/y to EUR 15.4m, of which 22.6% was organic growth. The comp. EBITA increased by 14.0% y/y to EUR 1.8m, but the comp. EBITA-margin declined by 4.0%p. The number of employees grew to 263 (H1/21: 171) mainly from successful new recruitments but also the Cerion Solutions acquisition. H1 organic growth was supported by the increased workloads under long framework agreements and the continued high level of demand, while profitability was affected by front-loaded growth investments and increased sick leaves due to the pandemic.
Public sector exposure proving to be beneficial
Demand in the public sector, accounting for the majority of Netum’s net sales, has been and appears to continue to be at a high level, while the private sector has shown some more fluctuation. New recruitments have notedly become more challenging, but with the large number of recruitments made during H1, domestic geographical expansion, and high public sector demand coupled with long framework agreements, the near-term growth prospects remain solid. The wage inflation/customer pricing equation currently appears to be well manageable and although the current environment creates some margin pressure, we expect profitability to remain at healthy levels. We have made limited revisions to our estimates, expecting net sales growth of 42.5% (guidance >30%) and an EBITA-margin of 12.5% (guidance 12-14%).
BUY (HOLD) with a target price of EUR 4.5 (4.3)
Netum currently trades quite in line with peers. With continued confidence in the growth outlook through the public sector exposure, we adjust our TP to EUR 4.5 (4.3), valuing Netum at ~17x 2022e adj. P/E, and upgrade our rating to BUY (HOLD).
Netum had provided preliminary figures before the H1 results and the earnings report held no surprises. Revenue grew 47.8% y/y (22.6% organic) while the comp. EBITA-margin fell by 4.0%p y/y to 11.4%. The number of employees grew 53.8% y/y.
Pihlajalinna’s Q2 didn’t deliver many surprises; we expect further improvement to materialize over the course of H2.
Q2 results were overall quite close to estimates
Pihlajalinna grew 22% y/y; the EUR 174m revenue topped the EUR 170m/167m Evli/cons. estimates thanks to strong corporate as well as private customers, although the latter volumes are still lagging relative to 2019. Outsourcing profitability improved by EUR 0.7m y/y, despite continued high costs, due to efficiency measures, index adjustments and service fee refunds. H1 employee costs were exceptionally high by EUR 2.5m; the burden was slightly higher in Q1 than in Q2, but together with capacity additions (including four new private clinics) meant profitability excluding outsourcing fell by EUR 2.3m y/y in Q2. The EUR 16.9m adj. EBITDA was in line with estimates while the EUR 5.2m EBIT was a bit soft relative to the EUR 5.9m/6.3m Evli/cons. estimates.
We expect H2 improvement to be visible in Q4 profitability
Q3 absences have been lower so far, but the situation could again change over the fall. Capacity scales further up, however Pihlajalinna has already added most of its targeted level and hence higher utilization rates should drive profitability in H2. Pihlajalinna has also increased prices while inflation appears to be manageable. Q3 EBITA will remain burdened y/y, yet Q4 could achieve significant y/y improvement (Q4’21 was negatively affected, by some EUR 2m, by a spike in complete outsourcing specialized care costs while Covid-19 services revenue was still at a high level). High demand continues to support profitability, and H2 tends to be seasonally favorable, but short-term cost issues and Pohjola Hospital’s improvement pace create some uncertainty around H2 results. Meanwhile NIBD/EBITDA has been elevated, at least in the short-term, due to the various recent investments for which Pihlajalinna now looks to reap gains.
Long-term margin potential remains the big upside driver
We still don’t view the guidance challenging, although a positive revision may not arrive until around Q4; earnings growth should in any case continue next year. The 13x EV/EBIT valuation, on our FY ’23 estimates, is some 15% below peers’ while Pihlajalinna’s EBIT margin is likely to stay at least a third below a typical peer. Long-term upside potential hence continues to be meaningful. We revise our TP to EUR 12.5 (13.0) and retain our BUY rating.
Administer lowered its guidance for net sales and profitability in 2022. The mid-term potential remains but with the near-term uncertainty we lower our TP to EUR 4.0 (4.7), BUY-rating intact.
Net sales and profitability seen to be weaker than expected
Administer issued a profit warning on Friday, Aug 12th. The company now expects 2022 net sales of EUR 47-49m (prev. >EUR 51m) and an EBITDA-margin of 5-7% (prev. >8%). The lowering of the guidance is based upon the general economic uncertainty and the impact on customer activity. Higher than anticipated overlapping costs for the old and new system stemming from Administer’s subsidiary Adner’s system reform have also impacted profitability negatively during the current year. In addition, net sales from system consulting and expert services in connection with EmCe’s client projects have been slightly lower than the company had expected.
Organic growth and transactional volumes a concern
We have for now adjusted our estimates towards the mid-range of the new guidance and our 2022 EBITDA estimate is as such down by near 40%. In our view the lower customer activity due to the general economy is of more concern, as costs relating to the system reform should ease at some point and we hypothesize that the lower project-based revenue may at least partially be due to higher sick-leaves that have been seen in Finland during H1 due to the pandemic. Administer reports its H1/2022 results on August 31st. Inorganic growth plans have progressed according to communicated plans, with four acquisitions so far during 2022, and our interest in the results will be primarily oriented towards the noted factors affecting growth and the development of organic growth ambitions.
BUY-rating with a target price of EUR 4.0 (4.7)
Administer’s 2022 financials were known to be sub-par in 2022 due to previous challenges but the guidance downgrade brings an unfortunate dent in the growth and profitability trajectory. The company’s mid-term potential remains, but with the noted challenges we lower our TP to EUR 4.0 (4.7), BUY-rating intact.
Marimekko releases its Q2 result on Wednesday. The company delivered strong Q1 result, and we expect the trend to continue also in Q2. The demand for lifestyle products has been favorable in H1, but strong comparison figures, low consumer trust, and an inflationary environment might affect the magnitude of H2 growth.
Solteq reported weak Q2 figures, mainly due to challenges in the Utilities business. Despite near-term uncertainty, the investment case in terms of focus areas, demand, and increased share of software still looks favourable.
Q2 figures well below expectations
Solteq reported weak Q2 figures. Revenue declined 3.0% y/y to EUR 17.9m (Evli EUR 19.9m) while EBIT fell clearly y/y to EUR 0.4m (Evli EUR 2.0m). Solteq Software performed well below expectations, with revenue of EUR 6.5m (Evli EUR 7.3m) and adj. EBIT of EUR -0.9m (Evli EUR 0.1m). Solteq Digital was also slightly below expectations due to some delays in the start of certain customer projects, but relative profitability still remained at a good level. Solteq still kept its guidance intact, expecting Group revenue to grow and profit to weaken.
Challenges to overcome in Utilities business
The main reason behind the weak Q2 figures was challenges relating to product development in the Solteq Utilities business. The Utilities business to our understanding suffered from a combination of rapid growth, having previously signed several significant orders, and non-sufficient standardization of products. As a result, resources were in sub-optimal use due to more time having to be spent on developing and improving products as opposed to project deliveries. The situation is being alleviated but we see that some catch-up will be seen during H2. The more fundamental issue relating to product development and standardization will likely be a lengthier process, and Solteq noted an updated strategy being worked on. Notably, Solteq did not amend its guidance, which implies expectations of good performance during H2.
BUY-rating with a target price of EUR 2.7 (3.4)
Valuation on our 2022e estimates is stretched, but we still see that the market demand, strategic focus on the Utilities business and recurring revenue potential support the investment case in the mid-term. With the near-term challenges and uncertainty, we adjust our TP to EUR 2.7 (3.4), BUY-rating intact.
Pihlajalinna’s Q2 results came in largely according to expectations. Top line growth continued strong and certain cost items remained high.
Aspo’s record high H1 results are to face headwinds in H2, but in our view EBIT may well stay above EUR 40m also next year thanks to ESL and developments in Leipurin.
Telko especially will meet headwinds in H2 and FY ‘23
Aspo’s Q2 revenue grew by 16% y/y to EUR 161m vs the EUR 142m/148m Evli/cons. estimates. All segments hit revenues above our estimates, and the EUR 16.0m adj. EBIT clearly topped the EUR 9.3m/9.5m Evli/cons. estimates. H2 has typically been Aspo’s stronger half in terms of profitability but this year will be different, however the company seems headed close to EUR 50m FY ‘22 EBIT despite some softening in H2. It’s still very early innings in terms of Aspo’s updated compounder strategy, but the company appears poised to make further progress with M&A as well as ESL’s vessel pooling partnership.
ESL and Leipurin to deliver robust results in H2 and FY ‘23
ESL may not improve next year given the EUR 17m adj. EBIT in H1’22, yet outlook remains strong enough so that we wouldn’t expect a large EBIT decline either. Meanwhile Telko’s quarterly EBIT has recently jumped to the EUR 7-8m ballpark, compared to earlier levels of EUR 4-5m before raw materials prices shot up. Telko’s H2’22 EBIT may stay relatively high as most prices are yet to decline, but there’s a risk of reversion to more moderate levels by next year. Telko has many different product categories, and the overall price outlook appears stable although the risks tilt more towards downside. Telko has also placed more Western volumes recently, and against this backdrop our ca. EUR 4m quarterly EBIT estimates seem conservative. Leipurin closes the Kobia acquisition on Sep 1, which adds to our estimates in addition to the recent relatively strong organic performance.
Valuation continues to be undemanding
Our estimate revisions for H2’22 and FY ’23 come in relatively small. We estimate H2’22 EBIT at EUR 21.4m (prev. EUR 20.2m), while we see FY ’23 EBIT at EUR 43.4m (prev. EUR 39.0m). The increases are especially due to Leipurin as the company is making progress with its acquisition as well as the divestiture of the machinery business. Multiples are still not demanding, despite the inevitable short to medium term softening in EBIT, as Aspo is valued only around 8x EV/EBIT on our FY ’23 estimates. We update our TP to EUR 9.5 (8.5); we retain our BUY rating.
Etteplan continued to post good growth figures in Q2, but profitability came in slightly soft. Etteplan expects the demand situation to remain fairly good throughout 2022, but we see some added uncertainty going forward.
Continued good growth, profitability on the softer side
Etteplan reported fairly good Q2 results despite some softness in profitability. Revenue grew 18.9% y/y (10.3% organic excl. FX) to EUR 89.3m (88.8m/89.9m Evli/cons.) and EBIT amounted to EUR 6.8m (7.4m/8.0m Evli/cons.). The performance in Engineering Solutions was very good and slightly above our estimates while Technical Documentation Solutions and Software and Embedded Solutions performed below expectations. Group profitability overall was affected by increased travel and personnel event/training related expenses along with increased sick leaves and holidays. Organizational restructuring measures were implemented in Software and Embedded Solutions due to a weakened operational efficiency. Guidance kept intact, expecting revenue of EUR 340-370m and EBIT of EUR 28-32m in 2022.
Earnings uncertainty increased heading into H2
Based on management comments the market environment is expected to remain at fairly decent levels despite the uncertainty and some fluctuations. Our estimates remain largely unchanged, having slightly lowered our profitability expectations following continued weaker profitability in Technical Documentation Solutions and Software and Embedded Solutions. A normalization of the high level of travel and personnel expenses in Q2 should slightly benefit profitability but the faced challenges relating to operational efficiency appear unlikely to be fixed in the very short-term.
HOLD-rating with a target price of EUR 16.0 (17.0)
Etteplan’s Q2 report overall was slightly on the softer and we perceive a slight increase in uncertainty related to the market environment, due to which we adjust our target price to EUR 16.0 (17.0), HOLD-rating intact. Etteplan’s valuation currently remains justifiably above the peer median but potential upside remains limited in the current environment.
Solteq’s Q2 fell short our expectations, with revenue at EUR 17.9m (Evli EUR 19.9m) and adj. EBIT at EUR 0.6m (Evli EUR 2.0m). Challenges were caused by the development of software products in the Solteq Utilities business and the resulting increase in project delivery costs.
Etteplan's net sales in Q2 amounted to EUR 89.3m (EUR 88.8m/89.9m Evli/cons.), with continued solid growth of 19% y/y (10.3% organic). EBIT amounted to EUR 6.8m (EUR 7.4m/8.0m Evli/cons.), with lower relative profitability y/y due to among other things increases in personnel events as well as sick leaves and holidays.
Aspo’s Q2 results were broadly higher than expected as all three segments reached record-high quarterly profitability levels. ESL’s H2 looks to remain strong, while Telko needs to manage with decreasing top line due to the exit from Russia.
Suominen’s Q2 earnings missed estimates, but valuation isn’t very demanding on moderate estimate levels.
Suominen’s pricing will need to catch up some more in H2
Suominen’s Q2 revenue grew 4% y/y to EUR 118m, compared to the EUR 116m/118m Evli/cons. estimates. Americas’ EUR 64m top line was soft relative to our estimate despite the EUR 8m FX tailwind, however Europe continued to grow at a 16% y/y pace. We note neither Europe nor Brazil have seen inventory-related demand issues like the US. Group sales volumes improved just a bit q/q, in both Americas and Europe, but remained below the level seen a year ago as US customers still suffered from high inventories which have been blocking up the retail channel. The problem arose last summer and Suominen’s customers expected earlier inventories to have melted by the middle of this year. The problem has since eased somewhat, although not as fast as was expected. Sales prices continued to follow raw materials but not enough to fully compensate for the cost inflation, which resumed at a high single-digit q/q level in Q2. EBITDA thus fell to EUR 1.9m vs the EUR 7.0m/6.7m Evli/cons. estimates. Raw materials prices may now be stabilizing, however energy prices, especially in Italy, will continue to climb in H2.
Volumes are growing, yet cost inflation remains a nuisance
Q3 will mark an improvement thanks to growing volumes, as seen already in July, and higher prices as they continue to catch up with raw material inflation. Moist toilet tissue volumes are set to rise over the course of H2 thanks to US production line conversions, while Suominen has recently completed incremental investments in Italy and announced a EUR 6m production line upgrade in Finland. We do not hence view capacity utilization levels a pressing risk, however cost inflation remains an acute issue. We make some upward revisions to our H2 revenue estimates, but we revise our Q3 EBITDA estimate to EUR 7.4m (prev. EUR 10.8m). We see H2’22 EBITDA at EUR 20.5m.
Multiples aren’t demanding in the light of H2 improvement
We estimate a marked improvement for H2, although the level is still quite modest. Suominen is valued 4x EV/EBITDA and 7x EV/EBIT on our FY ’23 estimates, which aren’t very high levels on moderate estimates. We retain our EUR 3.5 TP and BUY rating.
Suominen’s Q2 profitability fell clearly below estimates as cost inflation continued again relatively strong. Profitability will nevertheless improve in Q3 and especially in Q4.
Pihlajalinna reports Q2 results on Fri, Aug 12. Q2 earnings will remain modest due to the integration process and a couple of other cost issues highlighted in the Q1 report.
Q1 results were better than expected despite many burdens
Pihlajalinna’s Q1 results delivered a positive surprise as both revenue and EBIT topped estimates. Organic growth amounted to 7%, driven by corporate customers where the Pohjola Hospital acquisition was an additional help to top line. The integration process went clearly better than expected over the first few months while outsourcing profitability also improved. Surgical operations performed better than the company expected in Q1. There were a few factors in Q1, in addition to the integration process, which limited profitability and are likely to do so at least to some extent also in Q2. High levels of sick leaves (+50%) due to the pandemic led to exceptionally high employee costs as Pihlajalinna had to resort to substitutes. Meanwhile Covid-19 services revenue continues to decline and is no more very profitable. Pihlajalinna is at the same time scaling up capacity in anticipation of near future demand, all of which means Q2 profitability will remain modest relative to long-term potential.
Focus rests on improvement over the course of H2
We make only marginal estimate revisions ahead of the report. We expect flat profitability q/q, at EUR 7.9m in terms of adj. EBITA, or down by EUR 1.0m y/y. We estimate top line growth to have increased to 19% y/y as Q2 was the first quarter in which Pohjola Hospital was included from the beginning. The report will update on the integration process; the acquisition reached positive results in two months, and progress has likely continued over the summer. The report may also provide an update on certain outsourcing restructuring negotiations. We do not view the FY ‘22 guidance for flat adj. EBITA challenging and, although there are many moving parts, we consider a guidance upgrade likely during or after Q3.
Valuation not demanding considering the margin upside
Pihlajalinna’s valuation is still not too challenging as the earnings multiples are well below peers’ (by some 20%) while profitability margins only begin to catch up. Peer multiples have however faced headwinds in the past three months and hence we adjust our TP to EUR 13 (14). We retain our BUY rating.
Netum lowered its earnings guidance for 2022 following elevated H1 costs, while preliminary figures showed faster than expected growth, with the news in our view overall on the neutral/slightly positive side. We retain our target price of EUR 4.3 and HOLD-rating.
Solid growth in H1 but softness in profitability
Netum provided preliminary information on its H1 results and lowered its earnings guidance. Netum’s revenue growth was faster than anticipated, up 47.8% y/y to EUR 15.4m (Evli EUR 14.1m). EBITA amounted to EUR 1.7m (Evli EUR 2.0m), with the EBITA-margin falling to 11.2% of revenue (H1/2021: 17.1%). Netum lowered its earnings guidance for 2022, now expecting an EBITA-margin of 12-14%, having previously expected to achieve an EBITA-margin of at least 14%. The company’s revenue is intact, with revenue expected to grow over 30% y/y. The lowered earnings guidance is due to larger than expected investments in personnel growth made in the first half of 2022, a higher than usual volume of subcontracting, sick leaves caused by the coronavirus and the general cost increase.
Announcement in our view neutral/slightly positive
The lower relative profitability is slightly on the negative side but given that the cost increase appears to be largely related to enabling growth, coupled with a good demand and faster than anticipated H1 growth, the development in our view is more on the neutral/slightly positive side. The revised guidance also implies profitability improvements in H2, but the development of the company’s cost base will still be something to watch going forward. We have revised our estimates, now expecting 2022 revenue of EUR 31.9m (prev. 29.6m), a y/y growth of 42.4%, and an EBITA of EUR 3.9m, (prev. 4.2m) for a 12.4% EBITA-margin.
HOLD-rating with a target price of EUR 4.3
We retain our target price of EUR 4.3 and HOLD-rating. Our TP values Netum at 16.1x and 11.9x 2022e and 2023e P/E (goodwill amort. adj.). We consider a premium to peers justified given the rapid growth and still rather healthy profitability, with the current valuation level rather fair given some uncertainty.
Netum provided preliminary H1/2022 figures, with growth better than we had expected while profitability was slightly weaker due to personnel growth, increased subcontracting, sick leaves and general cost increase. Netum still expects over 30% growth in 2022, EBITA now expected to be 12-14% of revenue (prev. over 14%).
Scanfil’s Q2 report didn’t reveal big surprises, although there were a couple of profitability headwinds which should not limit performance that much going forward.
Q2 profitability faced a couple of headwinds
Scanfil Q2 top line grew 23% y/y to EUR 213m vs the EUR 202m/213m Evli/cons. estimates. Growth was 11% when excluding the spot component purchases; 3% was due to inflation and thus underlying comparable growth was ca. 8%, neatly above the 5-7% long-term organic target. Advanced Consumer Applications didn’t achieve much growth without the transitory invoicing items, but other than that demand remained favorable for all segments. EBIT landed at EUR 10.1m vs the EUR 11.3m/11.2m Evli/cons. estimates. The miss can be attributed to the FX loss which was mainly due to strong USD; Scanfil has since put hedges into place, although it’s still not entirely immune to FX moves. Lockdowns in China also hit profitability in Suzhou during the spring, but the situation has since normalized.
Component shortages seem to be easing already
The component availability situation has been a nuisance for well over a year, but there are now signs of improvement. Scanfil sees Q3 spot market purchases already lower than in Q2 yet still somewhat high. The stabilizing component situation will help productivity and profitability going forward, and Scanfil looks to manage its elevated inventory levels down. This easing should be a major factor in helping H2 EBIT higher; Scanfil’s guidance implies meaningful EBIT margin improvement for H2 without any significant changes in product mix. Late increases in production space mean Scanfil can meet high customer demand at least in the short-term, while M&A remains a likely tool for potential larger increases in manufacturing footprint.
Profitability has room to improve quite a bit more
Scanfil may not achieve significant top line growth next year as the spot market purchases fade away, however that should not limit absolute profitability potential. Scanfil’s 7% long-term EBIT margin target remains a relevant benchmark, but it is likely to take at least a few more years to reach that level. Scanfil is valued 7.5x EV/EBITDA and 10x EV/EBIT on our FY ’22 estimates. The multiples are in line with peers’ while Scanfil’s margins top those of the typical peer. We retain our EUR 8 TP and BUY rating.
CapMan showed good progress across the board in Q2. The Services business is showing signs of bringing the growth pace up a notch and the overall expectations remain favourable. We retain our BUY-rating and TP of EUR 3.4.
Q2 results slightly better than expected
CapMan reported slightly better than expected Q2 results. Turnover amounted to EUR 17.7m (EUR 16.5m/17.8m Evli/cons.) while operating profit amounted to EUR 14.1m (11.5m/11.9m Evli/cons.). The Management company business performance was in line with expectations (EBIT 6.1m/6.1m act./Evli), with 3.2m in carried interest (Evli EUR 3.0m) mainly from CapMan’s growth Equity fund. The Services business growth pace increased, and the business area exceeded our expectations on growth and profitability. The main deviations to our estimates came from fair value changes (EUR 9.8m/6.0m act./Evli) aided by the Picosun exit, CapMan’s largest exit measured by exit value. A one-off cost of EUR 1.4m due to the early vesting of CapMan’s 2020 performance share plan had a negative impact on costs.
Good overall expectations for H2/2022
Our 2022 estimates revisions roughly correspond to the deviation in our Q2 estimates and actual figures, now expecting an operating profit of EUR 65.1m (2021: 44.6m). The carry potential remains in place, noting however the uncertainty relating to timing and magnitude. On-going and completed deals post-Q2 provide additional support for continued solid investment returns. AUM growth is supported by the Infra II fund (recent first close) and the new Social Real Estate strategy fund (first close H2/22e) along with other on-going fund raisings and open-ended products. We expect the net AUM growth pace to slightly slow down following increased exits.
BUY-rating with a TP of EUR 3.4
Without larger changes to our estimates or views we retain our TP of EUR 3.4. Valuation remains favourable, with 2022e P/E at just below 10x. The high share of uncertain earnings from carry and investment returns remains a limiting factor for valuation upside, support is provided by growing dividend payments.
Enersense’s Q2 was weak, and H2 is set to remain modest. There’s still much uncertainty around the improvement slope, however valuation appears neutral relative to peers.
Inflation and certain low project volumes hurt Q2 results
Enersense’s Q2 top line declined 3% y/y to EUR 59.8m. The softness was mostly due to Smart Industry, where e.g. lower Olkiluoto project volumes explained the fall. The war also led to project delays, and the ICT strike hurt volumes within Connectivity (it also suffered from inflation particularly due to fuel). Inflation, which in the case of Enersense mostly means higher metal and fuel prices, is especially a problem in the Baltics, where long contracts also add to the pain. International Operations thus saw a marked decline in profitability even when revenue grew by 14% y/y. Existing framework agreements suffer from inflation, although Enersense has been able to make some progress in adjusting their rates for higher costs. Power fared relatively well due to its more dynamic nature of business.
Enersense continues to work towards its targets
Inflation was a major issue as adj. EBITDA fell to EUR -0.4m from EUR 4.8m a year ago. Enersense sees Q3 as the most profitable quarter also this year even though inflation continues to hurt results in H2. Investments in offshore wind capabilities will still be a burden in H2, in addition to which ERP investments are set to continue for a few years. H2 profitability will remain far below potential, but volumes continue to grow as recent orders announced over the summer indicate. There are also no major issues with e.g. labor availability. Enersense recently announced the acquisition of Voimatel to add to Connectivity and Power, but the deal still waits for competition authority approvals.
Valuation appears broadly in line with peers
We cut our FY ’23 adj. EBITDA estimate to EUR 16.7m from EUR 22.2m due to the current challenges. Enersense is valued some 5.5x EV/EBITDA and 12x EV/EBIT on our FY ’23 estimates. The earnings multiples are broadly in line with those of peers; there remains much uncertainty around next year’s margins, but our estimated 2.9% EBIT is still not that high a level. Enersense’s multiples are close to Eltel’s, and the two are also similar in the sense that FY ’22 results are set to be modest for both. Our new TP is EUR 6 (8); we retain our HOLD rating.
Scanfil’s Q2 report didn’t serve any major surprises. Top line was largely according to expectations, although Q2 profitability came in a little soft but only implies stronger EBIT in H2.
Enersense’s Q2 results were known before the official release as the company disclosed preliminary figures in connection with a negative earnings guidance revision.
Dovre revised its guidance up earlier than we expected. We make some estimate updates, but we don’t see major news.
We don’t see any big news behind the guidance revision
Dovre specified its guidance somewhat earlier than we would have expected. The old guidance suggested revenue above EUR 165m and EBIT of more than EUR 6.1m, whereas the new guidance is for revenue above EUR 185m and EBIT in the range of EUR 6.5-7.5m. Our previous estimates were respectively for EUR 200.9m and EUR 8.4m. Dovre sees no negative changes in demand, which we do not consider especially surprising considering the three segments’ favorable positioning within energy markets as well as the Norwegian civil and infrastructure sectors. Our updated FY ‘22 revenue and EBIT estimates stand at EUR 199.1m and EUR 7.4m respectively.
Renewable Energy is operating in a busy environment
We leave our FY ’22 estimates for Consulting intact ahead of the report. We make minor downward revisions for Project Personnel; the segment had a very strong Q1 thanks to its favorable positioning within the Norwegian oil & gas sector. We previously estimated 4.2% EBIT margin for FY ’22, but we revise the estimate slightly down to 4.0%. We continue to expect similar levels for the coming years, although we don’t consider 5% EBIT that challenging as a long-term target. Our downward revisions concern mostly Renewable Energy. We would expect the specialty construction business to proceed mostly according to plan as Suvic is set to deliver some EUR 90m in Finnish wind farm projects this year. Materials challenges, including steel availability and prices, have not come as a surprise, but there’s still some uncertainty around execution and supplier networks given the current high demand. We thus revise our EBIT estimate for Renewable Energy down to EUR 2.8m from EUR 3.6m.
Still more earnings potential over the following years
We estimate Dovre’s FY ’22 EBIT margin at 3.7%, down from our previous estimate of 4.2%; in our view all three segments have further potential to improve beyond this year. Earnings growth outlook remains solid as before, while there have been no major changes in peer multiples. Dovre is valued around 9x EV/EBIT on our FY ’22 estimates, and SOTP valuation still implies upside. We retain our EUR 0.70 TP and BUY rating.
Suominen reports Q2 results on Tue, Aug 9. We continue to expect q/q improvement over the weak Q1 results.
Some improvement should already be visible
Suominen’s Q1 figures were very soft, largely as expected although the EUR 3.3m EBITDA was somewhat below estimates. Q2 profitability is to remain at a modest level due to the spike in European energy costs, which in the case of Suominen amounts to mostly electricity. We believe the energy surcharge Suominen announced in Q1 will help Q2 profitability to improve q/q, however we estimate EBITDA to have declined more than 50% y/y to EUR 7.0m. We note raw materials prices surged at double-digit rates in H1’21, and even though there were some signs of stabilization before the war price levels have continued to advance over the spring and summer months. Suominen’s nonwovens pricing therefore continues to catch up with higher raw materials costs at least over this summer.
H2’22 EBITDA should be clearly better than the recent lows
We make only marginal estimate revisions ahead of the report. US demand may still fluctuate on a quarterly level due to the supply chain issues, but we expect Americas revenue to be up by 4% this year relative to last, when especially Q3 figures received a hit. Strong dollar will help top line and we estimate 6% growth for this year. The estimated EUR 469m revenue would be above the previous record of EUR 459m seen in FY ’20, however weak H1’22 profitability means FY ’22 EBITDA will stay far below the previous record. Suominen’s EBITDA amounted to only EUR 13m in H2’21 and we estimate the figure to have declined even lower, to EUR 10m, in H1’22. It remains unclear how much the figure will improve in H2’22 as cost inflation has not abated from the agenda; we estimate the figure at EUR 23m.
Valuation multiples are low on modest earnings levels
Suominen’s earnings can deviate a lot from those of its peers, but valuation is by no means challenging considering the low level from which profitability is likely to bottom out this year. Suominen trades around 4x EV/EBITDA and 6.5x EV/EBIT on our FY ’23 estimates. The level implies a discount of 50% relative to peers while we don’t consider our margin estimates for FY ’23 very challenging. We retain our EUR 3.5 TP and BUY rating.
DT’s Q2 EBIT faced a significant decline due to low sales and increased costs. The outlook for H2 and 2023 seems bright and we expect the company to see a clear profitability improvement in 2023.
CapMan's net sales in Q2 amounted to EUR 17.7m, slightly above our estimates and in line with consensus (EUR 16.5m/17.8m Evli/cons.). EBIT amounted to EUR 14.1m, above our and consensus estimates (EUR 11.5m/11.9m Evli/cons.).
Detection Technology’s Q2 net sales came down less than we expected. Net sales decreased by 3.3% due to soft sales development in medical markets while SBU and IBU saw strong double-digit growth during Q2.
DT releases its Q2 result on Wednesday, 3rd of Aug. With supply chain issues prolonging DT’s lead times and delaying customer demand, we expect Q2 net sales to decrease y/y and thus EBIT to experience a significant decline.
We see Eltel’s earnings are to decline this year as H1 cost challenges will continue to burden H2 results as well.
Nordics are coping with inflation, but H2 will still be soft
The EUR 208.6m Q2 revenue was soft vs the EUR 216.5m/215.2m Evli/cons. estimates. Finnish ICT strike hit top line in addition to a late spring, while Denmark suffered from low volumes as Eltel expected but more than we estimated. The other units’ top lines were above our estimates, but inflation was a lot bigger burden than we estimated: EBIT fell to EUR 0.4m vs the EUR 3.6m/3.2m Evli/cons. estimates. Finland performed better than we estimated despite inflation, which affected through its large Power business. Sweden improved the most in Q2, but the results beyond Finland and Sweden were clearly below our estimates. Inflation cover within frame agreements isn’t a major issue in Finland, Sweden and Denmark, whereas in Norway higher costs are yet to be addressed to a similar extent. Fuel and materials had ca. EUR 4m H1 impact and the level should be similar in H2.
We expect key markets to drive growth again next year
The inflation challenge is not that bad in the Nordics but remains a major issue in Poland, where it’s unclear how long beneficial outcomes might take to materialize. The possible divestiture of Poland has been on the agenda since last autumn, and a decision could be reached by the end of this year. Eltel’s long-term improvement path can still be seen as Finland and Sweden appear to continue firm on their own tracks. Meanwhile further progress should be expected from Norway and Denmark since both have recently signed large Communication agreements. We estimate Eltel to return to earnings growth again next year, however the weak H1 as well as the continued cost pressure over H2 imply FY ’22 will be a gap year in profitability terms.
Valuation appears fair in the light of margin potential
We shave our H2’22 EBITA estimates by EUR 5.3m, whereas our updated estimate for FY ’23 amounts to EUR 17.3m (prev. EUR 26.3m). Eltel is valued 5x EV/EBITDA and 14x EV/EBIT on our FY ’23 estimates, the former implying a discount to peers while the latter is a premium. We don’t consider valuation too challenging in the light of Eltel’s margin upside potential, however there’s still way to go before Eltel will be near its peers’ profitability. Our TP is now SEK 9 (10); we retain our HOLD rating.
Eltel’s Q2 top line was soft relative to estimates and profitability fell clearly below expectations as inflation hit results more than was expected.
Raute has now largely cleaned its Russian exposure and Western orders are materializing at a good pace, however H2’22 profitability will still be far from satisfactory.
New Western orders will henceforth help profitability
Q2 top line fell 16.5% y/y to EUR 29.6m vs our EUR 38.0m estimate. The shortfall was due to projects, in particular Russian orders, whereas services figured above our estimate. The war led Raute to temporarily pause operations and assess the Russian order book, while the Chinese lockdowns induced production transfers. One-off issues led to EUR 11m in items, but cost inflation also affected the results more than we had estimated and thus Q2 EBIT was EUR -15.1m vs our EUR -10.7m estimate. Bottom line will now improve but we expect at least Q3 EBIT to stay negative due to inflation. Meanwhile services profitability is not suffering that much, in addition to which Q2 order intake amounted to EUR 40m vs our EUR 30m estimate. Demand has held up and there were again no large orders.
We would expect positive EBIT early next year at the latest
Order intake in Europe and Asia, excl. China where the situation is yet to normalize, drove the figure above our estimate. North American orders were soft relative to our estimate after high Q1, but demand there is strong. There’s more uncertainty around European demand, but the Baltics and Eastern European countries are bright spots. The overall outlook and the EUR 104m order book is not bad considering it has now been mostly cleaned of Russia while Raute has been able to book EUR 40m in new quarterly orders even without any large ones. Smaller order demand related to modernization and automation remains high on customers’ agenda. Raute’s outlook for the coming years could improve with larger orders, however EBIT will stay at a modest level for several quarters to come. Investments in R&D remain high, while Raute has a program to improve profitability.
High uncertainty but long-term multiples are undemanding
We make minor revisions and still expect positive EBIT for FY ’23, although it looks set to be a modest one. Raute trades 9x EV/EBIT on our FY ’23 estimates; next year’s EBIT is likely to stay far below potential, and valuation isn’t challenging in the long-term context. There’s however still much uncertainty and hence we view valuation fair. We retain our EUR 11 TP and HOLD rating.
Consti reported Q2 results that corresponded quite well with expectations. Prevailing market conditions still create some uncertainties for the end of the year but overall, the outlook is still quite positive. We retain our target price of EUR 12.0 per share and BUY-rating.
Q2 results quite as expected
Consti reported Q2 results which overall corresponded well with expectations. The prolonged winter had a small impact on net sales growth, with growth nonetheless at 3.1% y/y to EUR 73.1m (EUR 74.6m/74.7m Evli/Cons.). The operating profit amounted to EUR 2.9m (EUR 3.0m/2.9m Evli/cons.), at a margin of 4.0%. The increase in construction materials prices had a greater impact than in the comparison period in certain on-going projects and inflation increased indirect costs. The order backlog was at a quite good level of EUR 240.8m, up 1.9% y/y, with a Q2 order intake of EUR 98.7m (98.5m). The 2022 operating profit guidance of EUR 9-13m was kept intact.
Near-term uncertainty still present
We have made only smaller adjustment to our estimates, till expecting relative growth to pick up slightly during the end of the year for an overall modest full-year growth. Our 2022e operating profit estimate is slightly below the guidance mid-point, at EUR 10.4m. The near-term demand situation remains affected by current uncertainties, especially within corporate customers. The situation with construction material prices and availability still has an impact, although smaller within renovation projects. Some indications of price peaks have been seen, but the uncertainty should still most likely be present at least throughout the year.
BUY with a target price of EUR 12.0
Despite the prevailing market situation and uncertainties Consti has in our view performed well and we remain rather optimistic also for the coming quarters. Long-term drivers still remain. Compared with peers the current valuation remains quite cheap. We keep our target price of EUR 12.0 intact, rating still BUY.
Despite robust growth shown in Q2, Vaisala’s EBIT was a bit softer driven by increased cost pressures. We expect the demand for Vaisala’s products to continue strong while we foresee some short-term pressures on margins. We retain our HOLD-rating and adjust TP to EUR 43.0 (45.0).
SRV reported surprisingly good Q2 profitability, but headwinds still remain. With the recently completed transactions the company is now financially in good shape.
Q2 profitability exceptionally good
SRV reported good Q2 results in term of P&L figures. Revenue was on par with comparison period figures at EUR 211.4m (EUR 191.7m/219.0m Evli/cons.), while profitability was above expectations, with an operating profit of EUR 10.1m (EUR 4.1m/5.5m Evli/cons.). The relative profitability was exceptionally good and not expected to be as high during H2. The order backlog development remained unfavourable, at EUR 745.9m at the end of Q2. H1 contained new agreements of EUR 202.4m. SRV specified its guidance, now expecting revenue of EUR 800-860m (prev. 800-950m) and an operative operating profit of EUR 15-25m (prev, >5.3m), which compared with our pre-Q2 estimates is slightly on the weaker side but understandable given the current market situation.
Current uncertainty threatening growth outlook
We have lowered our 2022 revenue estimate by 5% while our operative operating profit estimate is essentially intact nearer the upper end of the new guidance. We have lowered our estimates somewhat for 2023. Although SRV currently has EUR 1.3bn in won projects that are not yet entered into the order backlog, with the current uncertainty, order backlog development and lack of developer contracting housing unit start-ups we currently see limited signs of growth. Cost pressure is also still clearly present, but at least in some areas peak increases appear to be behind and the sector in general appears to have coped quite well with the pressure so far. With the completed financing arrangements SRV is now virtually net debt-free (excl. IFRS 16), thus clearly improving the risk profile.
HOLD with a TP of EUR 5.0 (prev. 0.18 pre-reverse split)
Following revisions to our estimates and with the reverse split completed in July we adjust our target price to EUR 5.0 (prev. 0.18) and retain our HOLD-rating. Our target price values SRV at around 6x EV/EBIT.
Vaisala’s Q2 EBIT fell short of our and consensus expectations. Q2 received orders came in with y/y growth of 10% and the order book was on a record-high level. Group revenue grew by 10% y/y.
Raute’s Q2 revenue and EBIT were clearly worse than we expected, however order intake was well above our estimate. It is always unclear how well single quarter order intake extrapolates, but if new orders remain near the EUR 40m level seen in Q2 Raute will be able to fill the gap left by Russian business relatively quickly.
Consti's net sales in Q2 amounted to EUR 73.1m, in line with our and consensus estimates (EUR 74.6m/74.7m Evli/cons.), with growth of 3.1% y/y. EBIT amounted to EUR 2.9m, in line with our and consensus estimates (EUR 3.0m/2.9m Evli/cons.). Guidance reiterated: operating result in 2022 is expected to be EUR 9-13m.
Innofactor’s Q2 results were weaker than anticipated to a weakened billing rate and individual project delivery challenges. Improvement is needed during H2 to achieve the FY ‘22 guidance. Near-term operational capabilities are still of some concern, but the potential is still quite solid. We adjust our TP to EUR 1.25 (1.6), BUY-rating intact.
Top-line and bottom-line figures short of our estimates
Innofactor’s Q2 results fell short of our expectations. A weakened billing rate and challenges relating to individual project deliveries resulted in a slight y/y decline in revenue to EUR 16.9m (Evli EUR 17.7m). As a result, the operating profit also fell to EUR 0.7m (Evli EUR 1.4m) for a rather meager operating profit margin of 3.9%. The order backlog remained at a good level of EUR 77.2m, up 6.1% y/y. During the quarter, Innofactor acquired Invenco Ltd, a company specializing in data and analytics, with some 50 employees and EUR 6m in annual revenue.
Improvement needed during H2
Following the weaker first half of the year, on our revised estimates, we expect Innofactor to be able to beat its guidance with a slim margin essentially thanks to the acquisition of Invenco. EBITDA-margins should return to ~12% during H2, a level that under current circumstances could be seen as a normal level for Innofactor. Despite the implied one-off nature of the project delivery challenges we are slightly concerned for the operational delivery capabilities and the revenue trend in relation to the order backlog growth. Still, the potential is still quite solid and with the acquisition of Invenco and a normal profitability EPS would on our estimates grow 30% y/y in 2023.
BUY with a target price of EUR 1.25 (1.60)
With our revised estimates and continued operational uncertainty, as well as declines in peer multiples, we adjust our target to EUR 1.25 (EUR 1.60). Our TP values Innofactor at a slight discount to peers. Upside potential is provided by the profitability improvement potential. We retain our BUY-rating.
Exel’s Q2 results topped estimates and confirmed the company is advancing again after the recent profitability issues in the US.
Absolute profitability topped the previous record
Exel’s top line grew 13.5% y/y to EUR 38.1m vs the EUR 36.8m/35.7m Evli/cons. estimates. Wind power customers developed soft relative to our estimate due to China and the local policies, but the shortfall was more than made up by Transportation where revenue grew by EUR 4.4m y/y to EUR 7.2m thanks to released pent up demand after the pandemic. The orders were attributable to old applications like train panels as well as a new aerospace application in North America, on the details of which Exel will elaborate later this year. Exel can already produce the application profitably even though it is only in the initial phases of its lifecycle. Q2 adj. EBIT reached EUR 3.1m, compared to the EUR 2.4m/2.2m Evli/cons. estimates. The 8.2% adj. EBIT margin was not bad, but Exel is still able to do better than that in the long-term assuming growth continues and the US unit keeps improving.
Progress is set to continue
The US unit has already improved a lot in recent quarters yet still has EBIT upside potential. This is also reflected by the EUR 37.0m order intake, which developed flat q/q but declined by 15% y/y as there were certain US Wind power orders last year which were later cancelled due to production challenges. The Q2 report confirmed Exel’s continued progress on its long-term track especially in that the company can find suitable high-volume customers and is not overly reliant on any one industry or application. The inflationary environment is not a major challenge given Exel’s niche position in the value chain. Exel left its guidance unchanged for now due to the well-known global uncertainties, however an upgrade seems likely in the months ahead.
Valuation is unchallenging as potential materializes
We make only very marginal updates to our estimates. We expect 10% growth for this year while we estimate a 7.4% adj. EBIT margin. The EUR 11m adj. EBIT translates to a valuation multiple of 10x, which would continue to decrease to 8x EV/EBIT on our FY ’23 estimates. We retain our EUR 8.5 TP and BUY rating.
Innofactor’s Q2 results were weaker than expected. Net sales declined 2% y/y to EUR 16.9m (Evli EUR 17.7m) due to a weakened invoicing ratio and individual project delivery challenges. Q2 EBIT of EUR 0.7m was also clearly weaker than in the comparison period and our estimates (Evli EUR 1.4m).
SRV's net sales in Q2 amounted to EUR 211.4m, above our estimates and in line with consensus (EUR 191.7m/219.0m Evli/cons.). EBIT amounted to EUR 10.1m, above our estimates and above consensus estimates (EUR 4.1m/5.5m Evli/cons.). SRV now expects a revenue of EUR 800-860m (800-950m) and an operative operating profit of EUR 15-25m (>5.3m) in 2022.
Exel’s Q2 report didn’t disappoint as both revenue and profitability clearly topped estimates. Growth was driven by a new aerospace application within the Transportation customer industry. Exel leaves guidance unchanged, which now appears cautious, but the company seems set to advance on its improving track.
Finnair continues to address its challenges, and EBIT will improve, but a lot of uncertainty lingers around outlook while valuation multiples remain high relative to peers.
We make downward revisions to our estimates
Finnair’s EUR 550m Q2 revenue matched the EUR 549m/542m Evli/cons. estimates. Top line continued to rebound with higher passenger loads while cargo revenue was down q/q. Wet leases amounted to 6% of ASK and the figure continues to increase to above 10% as strong demand will extend over the winter and probably even up to next summer. The EUR -84.2m adj. EBIT missed the EUR -41.3m/-56.5m Evli/cons. estimates as jet fuel prices spiked during Q2. Ticket prices are to catch up with the resulting higher unit costs, but the big gap may not close for a while; yields picked up in June as demand matched capacity sufficiently to help revenue management efforts, but the pricing environment is to remain somewhat volatile. Finnair’s guidance for H2’22 implies further top line recovery, but we make some downward revisions to our ASK estimates. We expect Q3 EBIT to remain negative (EUR -9m vs our previous estimate of EUR 18m).
Roughly 10-15% of ASK could still be rerouted or sold
The EUR 60m in cuts should come in as planned and the new strategy, to be ready during the autumn, is to deliver more savings. Partnerships play an important role in the network strategy and the weight of previously marginal destinations, such as the US and India, will increase. Yet the new strategy also likely implies some aircraft sales. Leases can be included in the strategy, but we believe they are unlikely to amount to more than 10% of ASK. Hence some 10-15% of ASK needs to find new routes or be sold. Finnair has a strong record when it comes to flight and crew performance, and we expect the strategy will be able to secure profitability. FY ’23 is likely to see a meaningful positive EBIT, but there remains much uncertainty around the level. We now estimate the figure at EUR 77m (prev. EUR 116m).
Valuation appears tight relative to peer multiples
The competitive landscape remains stable; we see valuation tight against this backdrop when Finnair’s outlook is still subject to elevated uncertainty. Finnair trades around 26x and 12x EV/EBIT on our FY ’23-24 estimates; we find the levels high relative to peers. Our new TP is EUR 0.36 (0.43); our rating is SELL (HOLD).
Vaisala reports its Q2’22 result on Friday, 22nd of July. With its record high order book and solid outlook, we expect Vaisala to continue its robust revenue growth in Q2.
Expecting solid growth to continue
Vaisala’s Q1’22 included some positive seasonality and revenue was on a great level although Q1 has been historically the quietest quarter. We expect Q2’22 to contain less seasonality and revenue amount to EUR 118.1m, reflecting y/y growth of 7.9%. Revenue growth is driven by solid order book of W&E and strong sales development of IM as well as Vaisala’s delivery reliability during uncertain times. Our IM’s Q2 revenue estimate amounts to EUR 49.8m (+12.9% y/y) while W&E’s revenue estimate lands at EUR 68.3m (+4.4% y/y). So far, the company has been able to deliver all its orders without delays despite issues in its supply chain. We remain to wait for the news of the company’s order book development and management’s comments on the market environment as there have been some signs of slowdowns in the global industrial activity.
Some supply chain disruptions might affect margins
With the lack of crucial components, the company has sourced components from spot markets which have increased material costs during recent quarters. So far, robust topline growth and sales mix have offset the spot component impact on profitability and Q1 EBIT was surprisingly high. However, the company’s management pointed out that it’s increasingly difficult to purchase spot components. With the revenue growth, we expect Q2 EBIT to also improve y/y to EUR 12.5m but the weaker gross margin to restrict the EBIT margin development to 10.6%. We foresee some increases in the OPEX development y/y. The uncertainty lies in the gross margin development that in turn is associated with the level of spot component purchases and sales mix, and therefore our EBIT estimate include some uncertainty.
Estimates intact, valuation elevated ahead of Q2
We have made no changes to our estimates ahead of Q2. Like before, the company’s valuation remains quite elevated which is in our view justified, given Vaisala’s technology leadership and delivery reliability, but not providing a reason for a rating upgrade. We retain our HOLD-rating and TP of EUR 45.0.
Finnair’s Q2 top line was as expected, but EBIT came in below estimates as costs were high especially because of fuel. We also find Finnair’s guidance leaves some downward pressure on H2’22 estimates. Finnair is preparing a new strategy and looks to complete the work on it this autumn.
Raute reports Q2 results on Jul 22. We make downward revisions to our estimates due to the latest update as well as the deterioration in wider economic conditions.
Profitability is set to improve in H2
Raute’s Q2 bottom line will be burdened by big one-offs, including EUR 8-9m in write-downs related to Russian projects and receivables as well as some EUR 1m in restructuring costs such as severance. We thus revise our Q2 EBIT estimate down to EUR -10.7m (prev. EUR -1.4m). H1 results would have been poor even without such items due to the inflation which affects already signed orders. Raute expects profitability to improve in H2, which we do not find a big surprise. Raute is also finding ways to improve margins and lower costs; results should already materialize this year and be even better visible in 2023 especially if Western demand continues to develop favorably.
Western orders continue to pick up after slow years
Raute’s focus tilts to West, especially after the Russian orders have been delivered. North American orders came in at a high level of EUR 15m in Q1, but the level may not extrapolate that well even in a more favorable economic backdrop let alone in a souring one. We still expect the American business continues to pick up as the market was cool even before the pandemic, however we trim our estimates for new orders. Similar logic applies to Europe as the local market softened considerably towards 2019 but showed marked increases in orders last year, including a large Baltic project. Additional large European orders could improve outlook, but it’s difficult to estimate the materialization and timing of such projects especially now that uncertainty tends to undermine plans for larger investments. Our FY ’22 revenue estimate is intact at EUR 146m, but we cut our FY ’23 estimate to EUR 141m (prev. EUR 152m). We cut our FY ’23 EBIT estimate to EUR 4.8m (prev. EUR 6.2m).
Valuation not very challenging, but outlook a bit unclear
In our view Raute retains its position as the global leader within the niche of plywood and LVL machinery, particularly at the upper end of the market. The current valuation of 8x EV/EBIT, on our FY ’23 estimates, is not all too challenging, however there’s still a lot of uncertainty around the next few years’ profitability levels. We revise our TP to EUR 11 (14); our rating is HOLD.
Finnair reports Q2 results on Jul 19. We revise our estimates up a bit due to busy early summer, but valuation continues to reflect the on-going improvement well.
We believe EBIT could turn positive already in Q3’22
Q2 RPK topped our estimate by 12% thanks to high passenger loads, especially in June, as Europe was in line while Asian and North Atlantic flows were above our estimates. The overall Q2 RPK figure was roughly half of the level seen in 2019; Finnair’s European Q2 flows were already 70% of the corresponding 2019 figures, which reflects the fact that short-haul routes have rebounded faster than long-haul ones. Many airports have been strained under the traffic and Finnair cannot have dodged the challenge although the impact may have been less pronounced in its case. Finnair expected Q2 EBIT to land around the same level seen in Q4’21 (EUR -65m); we previously estimated the figure at EUR -80m but revise our estimate to EUR -41m due to the busier-than-expected early summer season. Finnair appears poised to reach profitability in the coming quarters, despite the Russian airspace closure, as Western routes continue to rebound and high travel demand helps secure good prices for wet leases.
Expect to hear more on shoring up long-term potential
The Russian closure is likely to limit Finnair’s long-term potential to some extent, however Finnair is yet to announce any sales of aircraft in response. It would therefore be interesting to get some further color on where Finnair sees itself standing now with respect to the already announced leases and potential additional capacity reduction measures. Finnair was quick to identify further EUR 60m in permanent cost savings, and there were hints the target could still be upped a bit. The company has also recently expanded its Stockholm Arlanda presence and may be able to pursue more growth from there.
Valuation reflects the improving environment
Jet fuel prices peaked in June and are already down by some 20% from those highs but the current levels remain elevated by historical standards. We have revised our EBIT estimates slightly upwards, but airline valuations have developed soft over the summer weeks and are now trading about 12x FY ’23 EV/EBIT. We don’t thus see upside on the 13-18x EV/EBIT multiples (on our FY ’23-24 estimates). We retain our EUR 0.43 TP and HOLD rating.
With lower volumes, increased fixed costs, and higher price competition, Verkkokauppa.com’s profitability faced a notable headwind in Q2. The development of consumer demand contains a large amount of uncertainty and the H2 result is likely below what we earlier expected.
Market continued challenging
Verkkokauppa.com’s topline faced an expected decline y/y, and with lower volumes, increased costs, and softer gross margin EBIT fell negative. Group revenue decreased by 3.7% y/y to EUR 125.7m driven by soft development of the consumer segment with the record low consumer trust and reduced consumer purchasing power. B2B segment and evolving product categories brought light with their y/y sales growth of 12.6% and 4.8% respectively. Q2 inventory was significantly above the level that of the comparison period and hence logistics costs faced a notable increase y/y which with a help of a softer gross margin resulted in an EBIT of EUR -0.9m (adj. EUR -0.2m), implying an EBIT margin of -0.7% (adj. -0.2%). Q2 EPS amounted to EUR -0.02.
Guidance was revised downwards
The company lowered its guidance for FY’22, now expecting revenue between EUR 530-570m (prev. 530-590m) and an EBIT of EUR 8-14m (prev. 12-19m). The downgrade of the upper bound of the sales guidance was a result of weaker outlook for the consumer segment while EBIT guidance was decreased due to lower expected sales volumes and increased price pressures. In addition to rising price competition, a high level of inventory forces the company to either lower product margins to increase the inventory turnover or store products over a season both potentially resulting in weaker profitability.
HOLD with a target price of EUR 3.7 (4.3)
In the light of guidance revision and Q2 result, we adjusted our estimates downwards. We now expect 2022 revenue to amount to EUR 556.0m and adjusted EBIT to land at EUR 7.9m (1.4% margin). 2022 result will be record soft; hence, we value the company with 23E multiples. With the company trading above its peers, we retain our HOLD-rating and adjust the TP to EUR 3.7 (4.3).
Verkkokauppa.com’s Q2 EBIT fell short of our expectations. Simultaneously, the company lowered its FY’22 guidance, which was driven by weak consumer trust, impaired consumer purchasing power, and increased operative costs.
The consumer demand for durable goods in the Nordic markets has continued softly in Q2 and hence we have made no changes to our estimates. We expect Q2 revenue to decline and profitability to weaken. We retain our HOLD-rating and TP of EUR 4.3 ahead of Q2’22.
Underlying demand in the imaging markets remains strong but issues in the supply chain have restricted DT’s growth. We expect revenue and profitability to see solid development in 2023 with the completion of the R&D program. We retain our HOLD-rating and TP of EUR 20.0.
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).