SRV’s CMD provided color on the company’s revised strategy and the path towards sustainable profitability. We continue to consider the company’s long-term targets rather ambitious, yet the current valuation remains undemanding.
SRV’s CMD provided color on the company’s revised strategy and the path towards sustainable profitability. We continue to consider the company’s long-term targets rather ambitious, yet the current valuation remains undemanding.
Operative EBIT of at least EUR 50m by the end of 2027
With the revised strategy, SRV strives towards sustainable profitability and aims to reach the updated long-term financial objectives through the continuous optimization of its business operations. SRV targets to have operative EBIT of at least EUR 50m (prev. 6%) and revenue >EUR 900m (prev. EUR 900m). The company seeks to achieve the long-term financial objectives by the end of 2027 (prev. 2026).
Story remains largely unchanged
As commented in our previous company update, SRV is in a strong position to navigate the current challenging construction market. We still see that the profitability will remain depressed in 2024E as the share of developer contracted housing will remain small with the current low level of starts. Going forward, the two main drivers for the company to reach operative EBIT of at least EUR 50m by 2027 are 1) volume increase and 2) increase in development and developer contracting projects. SRV has a substantial amount of floor space in its project development pipeline which is ready to be utilized during the strategy period. We revise our long-term estimates slightly driven by the refined strategy of boosting the proportion of development and developer-contracted projects. This is further backed by the company's preparedness to execute projects, supported by the development pipeline. Our estimates remain below the long-term financial targets as our long-term margin estimates are roughly in line with the company’s historical operative margin levels.
BUY with a TP of EUR 4.1 (4.0)
Our 2023E estimates do not support the current pricing, on the other hand, SRV trades at roughly 9-10x 2024E P/E and EV/EBIT which we view as a fairly moderate level. We continue to see long-term potential, however, visibility remains low, especially in the midst of the current unpredictable market conditions. With slight revisions to our estimates and higher peer group multiples, we adjust our TP to EUR 4.1 (4.0) with BUY-rating intact.
Loihde is under its updated strategy seeking to grow 10% annually and achieve an adj. EBITDA of 15% by 2027 for which Loihde, despite a confidence boosting CMD, still has quite a lot to show for.
Exel’s CMD added details to its new strategy. Many important decisions are still to be worked out, but in our view the path for value creation is a lot clearer now.
Higher volumes and lower costs are to tame leverage ratio…
Exel aims to keep NIBD/EBITDA below 3x by 2028; Exel has historically been around the ratio, but earnings weakness now pushed it to 4.8x even when the absolute level of debt was kept in check. The ratio is to improve next year as Exel sees growth in wind power but also within other industries as certain large integrated players, who have some insourced pultrusion volumes, are outsourcing business back to Exel. Margins have remained stable, despite the recent inflationary environment, and thus earnings have good potential to bounce back with higher volumes especially when Exel has achieved fixed cost reductions. Some portion of the EUR 20-25m projected financing need for the strategy period should be covered with internal cash flow when earnings rebound, yet there could be some larger outlays into key sites which would require a stronger balance sheet.
…while key asset focus may yet require external financing
Pultruded profiles’ ability to insulate is one key quality driving volumes for buildings and transportation. China (wind power and transportation) is to be a volume site, whereas assets in Europe and the US are likely to be mostly tailored sites. Such sites help Exel integrate within the value chain (both engineering and post-processing services) and they should also feed orders to the volume business (such accounts need not be larger than EUR 4-5m). Exel expects the long-term split between tailored and volume sites at 60/40, whereas we would have expected the volume share to be a bit larger than that. Exel says post-processing services, which can e.g. help make final assembly easier, can be as valuable as the tailored composite volumes. Exel can also be quite selective within the tailored business, and we see value chain integration as a major part of the new strategy.
Our near-term estimates remain unchanged for now
Exel is likely to achieve a lot better results next year, but the rate of volume recovery is still uncertain while balance sheet could be stronger. The 9x EV/EBIT multiple, on our FY ’24 estimates, isn’t very high but in our view the uncertainties continue to limit upside potential. We retain our EUR 2.7 TP and HOLD rating.
Marimekko reported Q3 figures that were largely in line with our estimates. We estimate that the company’s current good form will continue to Q4. While the soft domestic market poses challenges for 2024, expected international profitable growth, particularly in the APAC region, is anticipated to support overall performance.
Q3 figures were in line with our estimates
Driven by strong wholesale sales development across the globe, Marimekko’s net sales grew 9% y/y to EUR 47.9m, in line with our estimates (48.5/49.3m Evli/cons.). Int’l sales grew 13% y/y driven by strong wholesale sales especially in APAC, NA and Scandinavia. Finnish retail sales declined by 1% y/y while the non-recurring promotional deliveries supported domestic wholesale figures which grew 18% y/y. Despite the wholesale driven growth, Marimekko’s gross margin improved slightly supported by lower transport costs. The company’s fixed costs kept increasing yet higher volumes and improved gross margin boosted adj. EBIT to EUR 13.1m (12.6/12.8m Evli/cons.), fairly well in line with our estimates.
Profitable growth supported by int’l areas going forward
Even with the growth driven by wholesale sales, the company managed to improve its gross margin y/y. Furthermore, the company's EBIT margin saw an uptick due to sales growth, demonstrating the scalable nature of Marimekko's business model and its loose franchise model in Asia. The Finnish consumer confidence has continued to weaken during Q3 and start of Q4 and is currently clearly below the long-term average. We have revised our sales growth estimates upwards for Q4 and 2024 in int’l areas, on the other hand, we have lowered our net sales estimates for Finland. Our updated estimate for FY 2023 net sales is at EUR 176.6m (prev. EUR 178.1m) and adj. EBIT at EUR 33.1 (prev. EUR 32.9m) with adj. EBIT margin of 18.8% (prev. 18.5%).
HOLD with a TP of EUR 11.0 (10.5)
With only slight adjustments to our estimates, we continue to consider Marimekko’s valuation neutral. The company trades between our premium (32% premium on 2023E EV/EBIT basis) and luxury goods (7% discount) peer groups. We adjust our TP to EUR 11.0 (EUR 10.5) with HOLD-rating intact.
Marimekko reported Q3 results well in line with our estimates. Both revenue and profitability were fairly in line while the margin was touch above our estimate. The guidance for 2023 was reiterated and the market outlook implies growth to continue in all of Marimekko’s main markets.
Exel has taken actions to recover earnings. In our view wind power orders should drive at least some growth next year, but order outlook uncertainty continues to limit upside.
Actions support bottom line, but order outlook is still soft
Exel Q3 revenue declined 39% y/y, which led to an adj. EBIT of EUR -1.2m. Exel has cut costs and was also able to generate a positive cash flow of EUR 1.2m, however on the negative side Q4 orders may stay rather soft as larger orders have been further postponed due to cool demand in many industries. Destocking has been a big theme for a while, but in our view Exel’s industries’ long-term drivers are intact and hence we would expect at least modest growth across customer accounts next year if markets stabilize. We cut our Q4 revenue estimate by EUR 5m and make more downward revisions to our FY ’24 estimates.
Wind power orders to drive growth next year
Wind power generated EUR 25-30m revenue in previous years, whereas we estimate it to make only some EUR 10m this year. In our view wind power could add another EUR 10m in revenue next year, assuming the industry order outlook somewhat normalizes. Comparison top line figures will be soft for almost all customer industries next year, and the US unit reorientation alone will help achieve EUR 3m in annual cost savings. The asset-light business model shouldn’t require much capex especially in the short run when there’s still a lot of existing capacity to be utilized. Exel will however soon provide more detail on the kind of modifications its current plant network needs. We believe there to be not much need for growth capex at this point, and single production line updates shouldn’t be too expensive as we understand such lines often cost well below EUR 1m each.
EBIT will recover once orders start to pick up
We estimate wind power to drive double-digit growth next year. In our view EUR 115m top line going forward should support 6% EBIT margins, considering the cost measures Exel has implemented and still finds. Exel is valued some 9x EV/EBIT, which we don’t view too expensive as an EBIT of below EUR 7m would still be quite modest relative to potential. We don’t see margin potential as such as the key issue going forward, but rather order recovery is required before upside can materialize. Our new TP is EUR 2.7 (3.0) as we retain our HOLD rating.
Marimekko reports its Q3 result 8th of November. We expect pick-up in growth driven by strong overall momentum outside Finland, new store openings and domestic non-recurring wholesale deliveries.
First half of the year was still relatively slow
Marimekko’s revenue grew 2% to EUR 75.6m (H1/22 EUR 74.0m) during the first half of 2023. The company’s growth slowed down during the first half driven by the slowdown in the domestic wholesale business and a tough comparison period. Gross margin was roughly in line with the comparison period at 62.1% (62.8% in H1/22). Comparable EBIT decreased to EUR 10.6m (EUR 12.3m in H1/22) with comparable EBIT margin of 14.0% (16.6% in H1/22) driven by higher fixed costs and lower volumes in Q1. In Q2, the comparable EBIT margin significantly improved year-over-year, reaching 16.8%, compared to 15.0% in Q2/22. The increase was primarily due to the rise in volumes and the manifestation of the company's operating leverage.
Expecting profitable growth during the second half of 2023
We expect solid growth for H2 driven by two main factors: non-recurring wholesale promotional deliveries in Finland and new loose franchise store openings in APAC. With the projected growth, we see that the profitability will continue to improve y/y. We expect gross margin to be supported by growth in licensing revenue and lower impact of logistics costs. We forecast net sales of EUR 48.5m and EBIT of EUR 12.6m for Q3. For FY 2023, we project net sales of EUR 178.1m and EBIT of EUR 32.9m. Marimekko expects its net sales to grow in 2023 from the previous year and comparable EBIT margin is expected to be approximately 16-19%. Our current estimate for comparable EBIT margin stands at 18.5%, at the upper end of the current guidance.
Valuation remains at a neutral level
With no changes to our estimates, Marimekko’s valuation remains neutral as it currently trades between our luxury (13% discount on 23E EV/EBIT basis) and premium goods (22% premium) peer groups. Marimekko trades at roughly 14-12x EV/EBIT and 18-16x P/E (23-24E). We retain our TP at 10.5 while keeping HOLD-rating intact.
Exel’s Q3 headline figures were known beforehand. Volumes fell across the geographic regions and especially in North America where the business still lacked large wind power orders. Exel has continued to implement cost measures, and on the positive side working capital and inventory reductions helped produce a positive Q3 cash flow of EUR 1.2m.
Aspo’s Q3 results delivered a positive surprise due to Telko. ESL’s recovery pace for next year remains a bit uncertain, but in our view all three segments have room to improve.
ESL continues to recover, but Q4 EBIT will remain moderate
Aspo’s EUR 130m Q3 revenue came in vs the EUR 142m/137m Evli/cons estimates, but the EUR 7.4m adj. EBIT was higher than the EUR 6.6m/6.0m Evli/cons estimates as Telko’s EUR 3.1m EBIT beat our estimate by EUR 1m. EBIT gained EUR 2.2m q/q as prices stabilized after a weak Q2. Plastics especially drove improvement, and its performance should continue to trend up despite still challenging market conditions. ESL’s EBIT already gained a bit q/q from the lows; in our view the guidance midpoint suggests ESL’s Q4 EBIT will remain low relative to its potential as the last quarter is the strongest. We estimate ESL’s Q4’23 EBIT only at EUR 6.7m vs the EUR 10m levels seen in the two previous years.
ESL’s long-term sustained EBIT rate should be ca. EUR 30m
Supramaxes have hit earnings and volumes have been lower also for smaller vessels following the very high demand levels of previous years. Forest and steel industry volumes have been soft but are stabilizing, however ESL’s earnings recovery pace remains the most significant source of short-term uncertainty. The current market will not let ESL reach EUR 38m EBIT again anytime soon even when the company receives its green coasters, which are to support growth soon. We estimate ESL’s FY ’23 EBIT at EUR 20m, from which we see a gain of EUR 5m next year. Telko has implemented cost measures (a run-rate of EUR 1.5m); we estimate some 6% Telko EBIT margins going forward, on which there should be further long-term upside. We estimate 4% margins for Leipurin, in line with the Q3 result, which also remains short of long-term potential. We make only small group-level estimate revisions and see FY ’24 EBIT at EUR 37.4m.
Next year’s improvement still leaves room for further gains
We estimate EBIT to have bottomed out as ESL has plenty of room to gain next year even if the market stays a bit cool, whereas Telko and Leipurin should be able to keep their respective 6% and 4% EBIT margins. Aspo is valued some 8.5x EV/EBIT on our FY ’24 estimates, which we don’t view too demanding as our estimates leave long-term upside potential. We retain our EUR 7.0 TP; our new rating is BUY (HOLD).
Loihde’s Q3 saw profitability improve while lacking growth. With the reiterated guidance, Loihde will be looking for a solid Q4 in terms of profitability. We retain our HOLD-rating with a target price of EUR 13.0 (13.5).
Profitability improved but lackluster growth
Loihde’s Q3 results showed favourable profitability development but were somewhat below our estimates. The net sales development y/y was essentially flat, with net sales amounting to EUR 29.9m (Evli EUR 32.3m). The Group’s adj. EBITDA amounted to EUR 2.9m (4.0m), at a margin of 9.7%. Net sales in Security Solutions (SeSo) and Digital Development (DiDe) was EUR 21.4m (Evli EUR 23.6m) and EUR 8.5m (Evli EUR 8.8m), with sales growth of 1% and -1% respectively. SeSo’s development was affected by some project postponements and the slowdown in the construction market adding price competition in other areas. The ERP renewal project also continued to cause some challenges, but clearly less than in H1. The market situation in DiDe overall continues to be challenging but utilization rates were fairly good in Q3.
Expectations for a solid finish to 2023
Loihde kept its guidance for 2023 impact, implying expectations of a strong Q4 in terms of profitability. SeSo is expected to have a larger contribution given project delivery timings, but still requires good performance across the board. Following some revisions due to the Q3 results, our 2023 estimates remain more or less barely within the guidance. The guidance still appears challenging, but confidence appears quite high given the reiteration of the guidance at this point of the year. Our views for the upcoming year are largely intact, having slightly lowered our growth expectations given the continued market uncertainty along with recruitment challenges in some key growth areas.
HOLD with a target price of EUR 13.0 (13.5)
With the minor downward revisions to our estimates, we adjust our target price to EUR 13.0 (13.5). Based on estimated coming year earnings capacity and peer multiples, current valuation levels still appears reasonable, and we retain our HOLD-rating.
Aspo’s EUR 7.4m Q3 EBIT landed well above estimates. The positive surprise seems to have been driven by Telko. Aspo had to cut away the upper half of its previous guidance range as there are still market challenges in the form of soft demand.
Finnair announced the terms of its rights offering, which in our view contained no material surprises. We still expect Finnair’s earnings to remain high going forward, however we see current trading levels elevating multiples too high.
The rights offering terms included no material surprises
The offering has a ratio of 27/2 for new shares vs existing ones, and the 19bn shares offered at the EUR 0.03 per share subscription price will raise Finnair some EUR 570m in gross proceeds. The fully underwritten offering has its subscription period Nov 3-17; the rights can be traded Nov 3-13. The TERP is a bit below EUR 0.05, to which the EUR 0.03 subscription price implies a 39% discount, and the value of a right is thus EUR 0.23.
Strong balance sheet and high earnings going forward
Finnair targets financial leverage of 1-2x (net debt to comparable EBITDA, which will now be about 1.5x) by the end of FY ‘25 and looks to reinstate dividends from the same year onwards (based on FY ’24 earnings). In our view the strengthened balance sheet and recovered earnings level mean the company will be positioned to begin the renewal of its narrow-body fleet in a few years’ time. In our opinion it shouldn’t be too hard for Finnair to hit the EUR 180m EBIT midpoint of its guidance range for the year even though airline profitability outlook has weakened a bit since the summer months. Finnair might well have topped EUR 200m in a more favorable environment, however we still expect EBIT to stay at around EUR 190m despite the headwind caused by higher jet fuel prices.
Current earnings multiples limit potential for gains
Finnair now trades around 10.5x EV/EBIT and would be valued a bit above 9x EV/EBIT on our updated TP of EUR 0.05, compared to the median peer level of slightly below 7x. Airlines’ earnings levels are still expected to advance next year as FY ’24 top line growth is estimated at around 7% while y/y EBIT margin gains are seen to be roughly around 100bps. In this light our estimates for Finnair are rather conservative as we estimate only 3.5% growth and flat margins going forward; from this perspective downside risks to our estimates seem quite limited for now, however Finnair’s current earnings multiples in our view limit upside potential even in the case of continued profitability improvement. Our new rating is therefore SELL (HOLD).
Loihde’s Q3 saw adj. EBITDA improving 30% y/y, but was below our estimates, at EUR 2.9m (Evli 4.0m). Growth was flat y/y, with net sales at EUR 29.9m (Evli EUR 32.3m). Profitability development is expected to continue favourably also during the end of the year.
Etteplan reported Q3 figures that were below our estimates. The company’s sales and EBIT were at EUR 80.0m (Evli est. EUR 81.7m) and EUR 5.0 (Evli est. EUR 5.8m) respectively. The main drivers behind the lower-than-expected results were Technical Communication and Engineering Solutions service areas.
Weak market continues to hamper the development
Net sales in Q3 were EUR 80.0m (EUR 80.3m in Q3/22), slightly below our estimates and consensus estimates (EUR 81.7m/82.0m Evli/Cons.). EBIT in Q3 amounted to EUR 5.0m (EUR 5.8m in Q3/22), below our estimates and consensus estimates (EUR 5.8m/6.0m Evli/cons.), at a margin of 6.2%. The worst development was seen with Technical Communication Solutions as the service area suffered from weak demand even more than expected, particularly in the Central European market.
Soft Q3 adds pressure for the remainder of the year
Etteplan kept its guidance unchanged (from September): revenue is estimated to be EUR 355-370m and EBIT EUR 26-28.5m. The company has implemented corrective measures for Technical Communication and Engineering Solutions to improve operational efficiency going forward. We expect that the company will return to revenue growth in Q4 helped by growth in ES and less severe revenue decline expected in S&E driven by the slight pickup in product development projects. Profitability in Q4/23 is expected to be at a slightly lower level when compared to Q4/22. We currently forecast revenue of EUR 360.4m and EBIT of EUR 26.0m for the FY 2023. Our estimates lie at the lower end of the company’s guidance range, and we see that the soft Q3 has increased pressure to reach the guidance for Q4. For 2024E, we see the demand being slow at the start of the year yet picking up towards the latter part of the year while profitability climbs closer to the levels seen 2021-2022.
HOLD with a TP of EUR 13.0
Etteplan continues to trade at a premium of roughly 10-15% on 23-24E EV/EBITDA basis when compared to our peer group. The current valuation levels are quite well in line with the company’s historic levels. With uncertainties persisting, we struggle to find positive drivers for the stock. We retain our TP at EUR 13.0 with HOLD-rating intact.
Etteplan’s sales and EBIT for Q3 were lower than expected at EUR 80.0m and EUR 5.0m respectively. Market remained tough as customers remain slow to make decisions on starting new projects.
Consti’s steady development continued with slightly higher than expected growth during the Q3. With the gain from the sale of relining business, the company is pushing the higher limit of the current guidance.
Growth exceeded our expectations in Q3
Consti’s net sales grew 13.8% y/y during the Q3/23 with the support of strong growth in Corporations business area where the main driver was shopping centre projects and Public Sector business area where the growth was supported by the ongoing school projects. The sale of Consti’s relining business had a positive effect of EUR 1m on the company’s profitability. Excluding the sale, profitability was roughly at the same level seen during Q3/22. The company’s EBIT for Q3 2023 amounted to EUR 4.8m (Q3/22 3.3m) with a margin of 5.3% (Q3/22 4.2%).
Revised FY 23E estimates push the guidance range top
With the first three quarters of the FY in the books, Consti’s EBIT stands at EUR 8.4m, not very far from the lower end of the current guidance range which stays unchanged (Consti estimates that 2023 EBIT will be in the range of EUR 9.5-13.5m). Our revised estimate for the company’s net sales is EUR 330.7m for FY 2023 and we forecast EBIT of EUR 13.4m, which pushes the top of the current guidance range. We see that the growth continues in Q4, albeit at a slower rate when compared to Q3 with similar margin levels compared to Q4/22. We have revised our growth estimates for 2024E slightly as we see increased softness in the renovation construction market. However, in our view Consti is still well positioned within the renovation segment and operates in regions which are affected to a lesser extent.
BUY with a TP of EUR 13.0 (14.0)
With our revised estimates, we adjust our target price to EUR 13 (prev. EUR 14.0). We still see the company’s valuation undemanding with multiples clearly below the peers despite Consti being active in the more stable renovation construction market. In addition to peer group multiples, Consti trades at a discount to its own historic multiple levels despite the strong performance witnessed during FY 22-23.
Vaisala delivered strong profitability amid a difficult market for Q3. Net sales fell short of our estimates, yet EBIT was robust. After minor estimate revisions, we adjust our TP to EUR 37.0 (prev. EUR 39.0) with BUY rating intact.
Solid Q3 figures despite the difficult market
Vaisala’s net sales decreased by 2% (+2% excl. FX) to EUR 130.4m, below our estimates (139.2/137.8m Evli/cons.). The sales decline was mostly driven by the IM segment and FX effects for both of the segments. Through improved gross margin and cost discipline in OPEX, the company’s EBIT improved to EUR 25.2m (EUR 22.0m Q3/22). The main driver behind the gross margin improvement was the significantly lower impact of the spot component purchases. W&E order intake was 2% lower (+2% FX) yet the backlog at the end of the period increased 7% y/y to EUR 131.5m. IM order intake decreased 14% (-8% FX) and the order backlog stood at EUR 34.3m at the end of period, down 12% y/y. Vaisala now sees that the markets for high-end industrial instruments and life science have somewhat declined and do not expect recovery this year.
Slower growth expected, yet margins stay firm
With the lower than anticipated sales for IM and declined outlook for some of the markets, we have taken growth estimates down for both Q4 2023 and 2024E. We also updated our growth projections for W&E, and despite the revisions, we continue to anticipate y/y growth in the fourth quarter of 2023. Moreover, we have slightly reduced our W&E growth predictions for 2024E. In terms of profitability, we upgraded our estimates for IM as the Q3 showed a quick rebound from the lower levels of Q2. With the estimate adjustments, we now expect net sales of EUR 538.1m and reported EBIT of EUR 68.9m for FY 2023. Our updated estimate is well within the guidance range as Vaisala kept its guidance for 2023 unchanged at net sales of EUR 530-560m and EBIT of EUR 65-75m.
BUY with a TP of EUR 37.0 (39.0)
With the slight adjustments to our estimates and lower peer group multiples, we revise our TP to EUR 37.0 (39.0) while keeping the rating at BUY. We continue to consider Vaisala as moderately valued, trading at a roughly 10% discount compared to our peer group on adj. EV/EBIT basis (23-24E).
Enersense’s revenue continued to grow strong in Q3, however the ERP investment costs limited profitability potential while the segments’ margins are still improving. In our view growth will stabilize while earnings climb more.
High growth, earnings are still burdened by investments
Enersense’s Q3 revenue grew 46% y/y to EUR 94m, above our EUR 80m estimate as all other segments except Connectivity grew faster than we estimated. The EUR 3.9m EBITDA, however, missed our EUR 5.2m estimate. The earnings miss was attributable to the ERP investment costs as segmental profitability levels were as a group in line with our estimates. Investments in the EV charging business somewhat limited Power’s profitability, and Smart Industry still has room to improve as its offshore business continues to scale up. Enersense revised its revenue guidance upwards, which wasn’t a surprise given the high demand; next year’s growth is likely to be much more modest, but profitability has a lot more room to gain. Enersense’s guidance leaves the range for Q4 EBITDA rather wide (including wind farm projects within Power) as investments continue while there are still variables related to seasonality and larger projects.
Most segments continue to grow next year
ERP investments burden Q4 and next year to some extent, whereas Power’s EV charging investments aren’t that large at group level. Connectivity and Power have scope to grow also next year thanks to their order backlog, while the offshore scale up drives Smart Industry. The Baltic business has turned around in terms of profitability after a period of high inflation, however International Operations may not grow next year as order backlog has peaked and it needs to find new growth opportunities. In our view this shouldn’t be a long-term problem but it demands some time and effort.
Earnings growth implies low multiples going forward
We estimate around 4% growth for next year, not that much compared to this year’s estimated 24% rate, yet margins are set to improve further. We continue to estimate Enersense’s FY ’24 EBITDA at some EUR 22m; Enersense is therefore valued around 7x EV/EBIT on our FY ’24 estimates, a significant peer discount. Our new TP is EUR 5.0 (7.0) as we retain BUY rating.
DT’s cost measures were visible in Q3 figures, and SBU-driven growth is to show more earnings gains next year.
Revenue in line with estimates, earnings continue to gain
DT’s Q3 revenue declined 10% y/y to EUR 24.5m vs the EUR 24.8m/24.6m Evli/cons estimates. MBU was soft relative to our estimate, due to a Chinese anticorruption campaign (a short-term issue but not a long-term problem) and a high comparison period, while SBU came in above our estimate. There was nothing special to note about the sales mix, however DT’s EUR 2.2m adj. EBITA was above our EUR 1.6m estimate as personnel cost reductions helped profitability a bit more than we estimated. DT’s comments about Q4 growth didn’t come as a surprise, and we estimate SBU to contribute the most growth in Q4 and next year as well. We make only small estimate revision following the report.
MBU and IBU have short-term challenges, but SBU drives
IBU still missed organic growth, but we continue to estimate its FY ’24 growth in the double-digits. MBU should also show signs of improvement, but we don’t expect it to be such a major driver in the short-term as the Chinese medical markets are going through a period of reform (Chinese pricing pressure also remains intense). We estimate DT to grow some 13% next year and its majority should be driven by SBU; the security solutions market is underpinned by favorable long-term demand trends, whereas the aviation market’s rebound has been due for some time and is set to continue at least over the course of next year. CT investments are materializing and SBU grows even if the Chinese market remains challenging in the short-term (some of the latest relevant projects include airports in e.g. Munich and Mumbai). We estimate the high single-digit growth seen for Q4 to add some further EUR 1m y/y in earnings even though its comparison period wasn’t too bad either.
Valuation not demanding as earnings improve further
We estimate DT’s FY ’24 operating margins comfortably in the double digits, which would be roughly a 500bps increase. Such an improvement implies a multiple of only around 10x in terms of EV/EBIT and represents a meaningful discount relative to peers. We update our TP to EUR 13.5 (13) and retain BUY rating.
Suominen’s earnings still missed estimates as top line remained very soft. The market challenges continue, while raw materials dynamics and Suominen’s own actions have also helped margins. We see increased uncertainty around earnings improvement pace going forward.
Some more improvement to be expected going forward
Suominen’s Q3 revenue fell 19% y/y to EUR 106m vs the EUR 129m/120m Evli/cons estimates. Americas declined and Europe even more so as the closure of the Mozzate plant caused some more volume softness. Low raw materials prices further dragged nonwovens prices down, however sales margins have improved due to the mechanism pricing lag. Suominen’s EUR 5.2m comparable EBITDA still missed our EUR 6.2m estimate, however the 6% gross margin (a gain of more than 300bps q/q) was relatively strong in the light of the considerable top line softness. In our view this is partly a result of the current raw materials market dynamic but also reflects Suominen’s own actions to improve mix, in addition to finding additional cost measures.
We cut FY ’24 earnings estimates by additional EUR 4m
European volumes are to remain soft; the market continues to be challenging also in the US, although less so. The challenges have been prolonged for a while, and as a result Suominen’s own actions to help margins have gained even more importance. The Mozzate closure achieved cost reductions, and its volumes have been transferred to other plants, but some volumes have also slipped. Suominen retains guidance for higher FY ‘23 EBITDA although the game remains flat so far into the year. We revise our estimates down due to the lower-than-estimated revenue levels; we estimate Q4 gross margin to gain another 300bps even if top line stays at a similarly low level as seen over the course of this year. We thus estimate Q4 EBITDA at EUR 7.9m.
A lot of uncertainty around next year’s earnings gain pace
Valued at 8.5x EV/EBIT on our FY ’24 estimates, which is not a particularly low multiple, the valuation reflects improvement going forward. Better market conditions, on top of Suominen’s own measures, could drive significantly higher earnings next year. Higher volumes would support valuation, but uncertainty around their recovery and margin gains pace still limit upside potential. Our TP remains EUR 2.7 as we retain HOLD rating.
Scanfil’s Q3 results landed quite near estimates. In our view growth is bound to moderate next year, but EBIT should stay high at around EUR 60m as current volumes hold up.
Q3 near estimates, already signs of moderating growth
Scanfil’s Q3 revenue remained roughly flat at EUR 213m, compared to the EUR 219m/216m Evli/cons estimates. Growth excluding spot market purchases was still a very decent 9% y/y, which can be compared to the roughly 5-7% long-term CAGR prospects seen in the relevant niches of the EMS industry, although already clearly lower than the 30% rate clocked in Q2. In our view it has long been evident growth will have to settle down a bit no matter how favorably positioned Scanfil’s customer portfolio may be. We note so far Scanfil’s customer outlook changes have been rather small. EBIT amounted to EUR 15.2m vs the EUR 15.7m/15.3m Evli/cons estimates while the margin was still a very good 7.2%.
We expect only marginal growth in the short-term
We estimate Q4 figures a bit above the midpoints of their respective guidance ranges, while there’s still quite a lot of uncertainty regarding where the underlying volume growth rate will settle next year. We estimate only rather marginal growth for FY ’24-25 relative to the 5-7% long-term potential/target rates following recent years’ double-digit CAGR. Scanfil will review its annual strategy early next year; we wouldn’t expect very significant or visible changes at this point as Scanfil already has a high-performing two-tiered plant network and customer portfolio focused on attractive OEMs, many of them driven by megatrends related to e.g. green energy transition. In our view Scanfil might look to find more small but high-growth accounts within Energy & Cleantech and Medtech & Life Science, however such efforts will take time to make a visible impact on figures even when successful.
EBIT to remain above EUR 60m with a CAGR of 2%
We continue to estimate 7% EBIT margins going forward; EBIT should stay above EUR 60m assuming a relatively flat top line for the next couple of years. Scanfil is valued around 7.0-7.5x EV/EBIT on our FY ’23-24 estimates, which still represents an attractive discount relative to peers even if their multiples have declined a bit lately. We retain our EUR 9.0 TP and BUY rating.
Enersense’s Q3 revenue topped our estimate, while profitability figures came in below our estimates. International Operations and Connectivity achieved margin improvement, while investments burdened Smart Industry and Power profitability.
Suominen’s Q3 revenue fell clearly below our estimate, however profitability figures landed surprisingly close to our estimates in this light. In our view the relatively high margins imply continued profitability improvement going towards next year.
Vaisala posted Q3 results with net sales slightly below our expectations, yet EBIT was very strong and above our estimates driven by even stronger gross margin improvement than expected.
DT’s Q3 revenue declined y/y much as expected, however profitability figures came in a bit above our estimates as cost measures have already had an effect.
CapMan’s Q3 was below estimates mainly due to carry and FV changes. Potential appears to remain high but near-term market conditions remain uncertain.
Consti's net sales in Q3 amounted to EUR 89.9m above our estimates (Evli est. EUR 81.5m.), with growth of 13.8% y/y. EBIT amounted to EUR 4.8m, clearly above our estimates (Evli est. EUR 3.4m) driven partly by the sale of the company’s relining business.
Scanfil’s Q3 figures were mostly as estimated. The headline revenue figure remained flat, but growth excluding spot market purchases was 9%. The EUR 15.2m EBIT also landed near estimates, and guidance implies Q4 sees similar levels of profitability.
Solteq’s Q3 was slightly upbeat despite the weak figures and the company remains on track on its turnaround trip. We have slightly softened our growth expectations for 2024 and adjust our TP to EUR 0.85 (0.90).
Some more positive signs in Q3
Solteq reported slightly upbeat Q3 results. Revenue grew 1.9% in comparable terms to EUR 12.2m (Evli EUR 12.6m) and the adj. EBIT amounted to EUR -0.7m (Evli EUR -1.2m). The performance of Retail & Commerce was on the positive side, growing slightly y/y in comparable terms while successful cost control saw profitability improve to rather decent figures, with the adj. EBITDA-% up to 11.3%. In Utilities, profitability remained weak, as was still to be expected.
Return to profitability next year
Overall, the Q3 report did not notably change our views on Solteq’s equity story. We assess a slightly slower pick-up in growth in the near-term than previously anticipated. We have slightly revised our 2023e estimates based mainly on the Q3 results. Solteq concluded the change negotiations in the Utilities-segment and expects annual cost savings of EUR 3.8m, to be visible largely in 2024. We expect the growth potential in Utilities to start to materialize more visibly in the second half of 2024 and with the cost savings the profitability to improve substantially next year. In Retail & Commerce we now expect a slightly more modest growth given the market situation, in comparable terms in the lower to mid single-digits with margins improving slightly y/y. For Solteq, we expect revenue to decline 2.5% in 2024, impacted by the divestment this year, and the adj. EBIT-% to improve to 3.4% from -5.6% in 2023e.
HOLD with a target price of EUR 0.85 (0.90)
In light of our revised estimates, we lower our TP to EUR 0.85 (0.90). On our estimates, the valuation is stretched on 2024e figures, but the upside potential is significant on 2025e figures, should the Utilities-segment start to perform closer to its potential. That path is, however, still riddled with uncertainty.
SRV delivered encouraging Q3 results considering the current market conditions. Despite net sales being slightly below our estimate (EUR 146.9m, EUR 151.7m Evli est.), operative profitability outperformed expectations (EUR 4.6m, EUR 1.6m Evli est.).
Strong operational profitability eases the burden for Q4
With the operative EBIT of EUR 4.6m for Q3, SRV’s YTD operative EBIT is at EUR -1.3m. The company kept its outlook unchanged and expects that operative EBIT is positive, but lower than in 2022. With the robust backlog that consists mostly of lower risk cooperative business premises contracts, we now see the risk of falling short of the guidance low. We also see that the strong, lower risk backlog, EUR 995.6m at the end of Q3, supports the development in the coming years, especially during FY 2024.
Business construction continues to drive the growth
We have made positive estimate adjustment for both Q4 2023 and the coming years. We now estimate that the business construction revenue growth will be even stronger than earlier expected in Q4 2023 and in 2024E driven by the solid order backlog. Our estimates for housing construction have been reduced due to the lack of an immediate market upturn, which aligns with the current forecasts for Finnish housing construction volumes for both 2023 and 2024. With the increase in group-level revenue growth, our operative EBIT estimate for FY 2023 has been increased to EUR 5.2m (previously EUR 1.1m), and for FY 2024E to EUR 18.7m (previously EUR 15.5m), implying an operative EBIT margin of 2.5% (previously 2.2%).
BUY (HOLD) with a TP of 4.0 (4.3)
SRV remains in a strong position to navigate the challenging construction market. Several positive factors support the case including a healthy balance sheet, low amount of unsold developer contracted units, a solid backlog of lower-risk business construction projects and a positive operative profitability for Q3 that also decreases the risk for falling short of the current guidance. We have adjusted our target price to EUR 4.0 (down from EUR 4.3) in response to lower peer group multiples. Following a roughly 15% decrease in share price since our last report, we upgrade our rating to BUY (prev. HOLD).
Dovre’s Q3 EBIT topped our estimate as Project Personnel drove results. We see only moderate earnings growth prospects in the short term, yet valuation is undemanding.
Project Personnel helped EBIT amid high comparison figures
Dovre’s Q3 revenue fell 11.6% y/y to EUR 52.8m, close to our EUR 53.5m estimate. Top line would have been some 5% better than that at fixed FX rates as weak NOK had an impact. Renewable Energy was expected to decline relative to a more favorable comparison period, but its 38% y/y fall was clearly steeper than we estimated. The segment’s EBIT, however, was a bit better than expected. Consulting figures didn’t meet our estimates, but their softness was more than compensated by Project Personnel; the segment’s 6% EBIT margin helped drive Dovre’s EUR 2.7m EBIT above our EUR 2.2m estimate.
We estimate annual EBIT to pick up from around EUR 7m
In our opinion Project Personnel will not find annual 4% EBIT margin too high a hurdle, and hence we view EUR 4.5m EBIT a reasonable level for next year, assuming moderate growth. The segment could even land near EUR 5m annual EBIT, while Consulting’s annual rate appears to be roughly EUR 2m for now. In our view Consulting’s longer-term potential remains closer to EUR 3m should growth and margins pick up again. Renewable Energy still has most long-term upside, but a more challenging Finnish wind power construction market limits its potential for now. Both Consulting and Renewable Energy continue to face high comparison figures also for Q4, and neither were those of Project Personnel soft. We thus believe Dovre’s Q4 EBIT will weaken by some EUR 1m y/y. For next year we expect some reversion as Consulting and Renewable Energy will have room to improve, whereas Project Personnel may remain a bit soft or flat.
Short-term earnings growth modest, yet valuation is low
We estimate FY ’24 EBIT at EUR 7.3m, which would be only a marginal improvement on our FY ’23 estimate of EUR 7.1m. In our view Dovre still has potential to reach above 4% EBIT margin in the long-term as Consulting and Renewable Energy return to growth. Meanwhile valuation implies very modest expectations; Dovre is valued only some 6x EV/EBIT (excl. 49% of Renewable Energy EBIT) and peer multiples have also declined recently. We revise our TP to EUR 0.65 (0.80) and retain BUY rating.
Raute’s Q3, like its orders, showed twofold developments as margins were relatively high while market uncertainty has increased even further in Europe.
Q3 margins were already quite high, order intake was soft
Raute’s EUR 34.0m Q3 top line fell short of our EUR 39.2m estimate as order book mix (tilted to large projects) and the new ERP system’s adoption caused Wood Processing and Services revenue to be soft. Raute’s EUR 3.0m comp. EBITDA was nonetheless as we estimated as the improvement program has yielded results, and it should also be noted Analyzers mix wasn’t particularly favorable. The EUR 19m order intake fell clearly short of our EUR 29m estimate, which by itself isn’t a very significant issue since there’s always some quarterly variation; this time there were also postponed North American orders, but at least so far order prospects haven’t vanished. Services’ order activity isn’t too bad, but short-term market uncertainty has increased further in Europe (by contrast demand remains good in North America); the softwood plywood market has been weak for a while and the sentiment seems to have spread to birch plywood as well.
Smaller European orders may still be missed for a while
The report was twofold in the sense that relative profitability was higher than we estimated, while outlook for smaller orders has worsened in Europe as construction industry challenges continue. Raute’s improvement program will achieve EUR 4-5m in annual cost savings by the end of this year; Raute returns to growth next year and needs to hire some additional labor, but in our view this is not a major issue from the perspective of productivity and earnings. There’s likely to be at least some q/q pick up in Q4 order intake (thanks to North America), but a prolonged dearth in European production line and spare parts orders would cast some more uncertainty around the pace of next year’s earnings improvement.
Valuation implies a lot of uncertainty around FY ’24 EBIT
Raute’s strategy execution is on track and we continue to see the company headed towards EUR 10m EBIT over the next few years. European market softness remains the most significant source of short-term uncertainty, but we still see EUR 8m EBIT within reach next year. Raute is valued below 5x EV/EBIT on that basis. We retain our EUR 12.0 TP and BUY rating.
Alisa Bank’s equity story took a hit from challenges relating to strengthening of the capital structure and growth is delayed. We lower our TP to EUR 0.2 (0.37), rating now SELL (HOLD).
SRV's net sales in Q3 amounted to EUR 146.9m, only slightly below our estimate of EUR 151.7m. Operative profitability was significantly better than expected, with operative EBIT at EUR 4.6m (EUR 1.6m Evli).
Dovre’s Q3 revenue was close to our estimate as Project Personnel landed significantly higher while Consulting and Renewable Energy were soft. Meanwhile earnings came in clearly above our estimates, driven by Project Personnel’s performance.
CapMan's net sales in Q3 amounted to EUR 13.7m, below our estimates and below consensus (EUR 17.3m/17.3m Evli/cons.). EBIT amounted to EUR 4.8m, also below our estimates and below consensus (EUR 7.0m/7.2m Evli/cons.). Apart from carried interest, CapMan’s Q3 profitability was fairly in line with expectations.
Raute’s Q3 revenue was meaningfully lower than we estimated, yet absolute profitability figures were still in line with our estimates as the company’s improvement program has produced results. Order intake was quite a bit lower than we estimated, but we believe Q4 orders should show at least some q/q improvement.
Solteq’s Q3 results were as expected rather weak but revenue turned to growth in comparable terms and profitability was better than feared. Revenue was at EUR 12.2m (Evli EUR 12.6m) and adj. EBIT at EUR -0.7m (Evli EUR -1.2m).
Finnair’s Q3 EBIT was impressive even if higher fuel prices already had some adverse impact. The company faces much more demanding comparison figures next year, but EBIT should remain high despite the slightly more challenging environment after the recovery and high summer season.
Guidance range still wide due to fuel price uncertainty
Finnair’s EUR 817m Q3 revenue landed close to the EUR 826m/804m Evli/cons. estimates. Profitability was expected to be high, yet the EUR 94m adj. EBIT still managed to top the EUR 74m/84m Evli/cons. estimates even if higher fuel prices began to gnaw margins towards the autumn months. Finnair was able to maintain the EUR 180m midpoint of its EBIT guidance, despite the rise in fuel prices, although geopolitical tensions have lately elevated fuel price uncertainty. Profitability has fully recovered, and in our opinion it doesn’t seem too hard for Finnair to reach the upper half of its profitability guidance range despite the fact that it remains quite wide given the prevailing circumstances.
Ex-fuel CASK stays competitive, some more revenue drivers
We see (absolute) operating expenditure levels rather stable from now on, which should help keep unit costs competitive as capacity increases further, while there will be more fuel cost pressure at least in the short term. Finnair’s volumes have mostly recovered to their new normal level, yet Asian and European (short haul) routes should still support growth next year while in our view there’s more uncertainty around e.g. North Atlantic volumes. Unit yields should have some further marginal upside in the short term, but there’s also room for additional price hikes in the case of extended fuel price inflation. Next year Finnair will face comparison figures no longer that easy to beat, but pricing focus and cost measures alike should secure relatively high profitability going forward.
Valued neutral around the assumption of roughly 6% EBIT
In our view Finnair’s revenue should grow a few percentage points next year (due to modest gains in volumes and yields), yet the favorable profitability impact may be mostly offset by higher fuel prices. We thus estimate Finnair’s FY ’24 EBIT stable at around EUR 190m, or a bit above 6% in terms of EBIT margin. On that basis Finnair remains valued some 7x EV/EBIT, a level in line with peers. We retain our EUR 0.35 TP and HOLD rating.
Innofactor posted good Q3 results, in line with our estimates. The market situation continues to be challenging and remains the key concern going forward. We retain our BUY-rating with a target price of EUR 1.4 (1.5).
Good Q3 results, in line with our estimates
Innofactor reported Q3 results that were quite in line with our estimates and the best third quarter in terms of revenue and EBITDA in the company’s history. Revenue grew 8.0% organically to EUR 18.0m (Evli EUR 18.1m) and EBITDA amounted to EUR 2.0m (Evli EUR 1.8m). Innofactor noted continued intense price competition, although the weighted average prices of new contracts increased slightly from the exceptionally tough second quarter in terms of price competition. New sales in Q3 were below target levels and no new significant tender offers were won. As a result, the order backlog declined by 7.6% y/y to EUR 71.4m.
Market situation remains key concern
Innofactor’s financial development in the short-term remains well on track, but the market situation remains a concern for 2024. We expect to see some stabilization after the more recent period of high price competition but for the demand to remain weaker. We have lowered our sales estimates for 2024, expecting only slight growth. New sales, however, need to pick up in Q4 for the growth to continue. We have also slightly lowered our expectations for profitability in 2024 with the expected slower growth. Operatively, Innofactor still has room for margin improvement as EBITDA in the other Nordic countries, accounting for 28% of sales YTD, was mostly on the negative side. The market situation is, however, unlikely to alleviate the situation in the short-term.
BUY with a target price of EUR 1.4 (1.5)
Innofactor’s valuation remains at a clear discount to peers despite good growth and improved profitability YTD. 2023e P/E of ~10x on the current share price is also not challenging. We retain our BUY-rating but adjust our target price to EUR 1.4 (1.5) on softer 2024e expectations.
Etteplan reports Q3 results on October 31st. We anticipate a slower quarter due to the prevailing market conditions and seasonality. After slight changes to our estimates, we retain our HOLD-rating with a TP of EUR 13.0.
Profit warning set the tone for H2
Etteplan’s Q2 was soft as the y/y growth slowed down to near zero driven by the modest performance of the Software and Embedded Solutions segment. In September, Etteplan released a profit warning and lowered and specified its guidance for 2023. According to the new estimate, the revenue is estimated to be EUR 355-370m (prev. EUR 360-380m) and EBIT to be EUR 26-28.5m (prev. EUR 28-31m). Our FY 2023 estimates for sales and EBIT are at EUR 360.7m and EUR 26.5m respectively.
Anticipating continued growth from Engineering Solutions
The profit warning was prompted by a combination of factors, including the subdued performance of the Software and Embedded operational area during Q2, NRIs and FX effects during H1, and more recently, shifts in demand from specific clients in the Technical Communication Solutions service area in Central Europe. To our understanding, the company has not been able to adjust its workforce according to the demand which has led to capacity utilization issues in Central Europe. We make slight negative estimate adjustments ahead of Q3. Our estimate for Q3 net sales is now at EUR 81.7m and EBIT at EUR 5.8m. We forecast continued growth and profitability for the company’s largest segment, Engineering Solutions as the demand for Engineer-to-Order projects remains strong. For Software and Embedded and Technical Communications we continue to forecast y/y revenue decline for both Q3 and Q4. In addition to changes to the FY 2023 estimates, we revise our estimates down for FY 2024.
HOLD with a TP of EUR 13.0
With our updated estimates, Etteplan trades at a premium of roughly 10-15% on 23-24E EV/EBITDA basis when compared to our peer group. The current valuation levels are quite well in line with the company’s historic levels. We retain our TP at EUR 13.0 with HOLD-rating intact.
Finnair’s Q3 profitability topped estimates while revenue was much as estimated. The company achieved a very high bottom line as fuel prices remained relatively low, but their recent increase will have an adverse effect going forward. Finnair narrowed its EBIT guidance a bit, but the midpoint for the year remains at EUR 180m.
Innofactor’s Q3 results were good and quite as expected despite market headwinds. Net sales were organically up 8% y/y to EUR 18.0m (Evli EUR 18.1m). EBITDA was slightly above expectations at EUR 2.0m (Evli EUR 1.8m). Guidance reiterated, Innofactor’s net sales and EBITDA in 2023 are expected to increase compared with 2022.
Suominen reports Q3 results on Oct 27. Q2 profitability remained very weak, but volumes should continue to improve over H2 (driven by the US) while the current raw materials price environment appears to be favorable from Suominen’s perspective.
Prices have continued to decrease while volumes increase
Suominen’s Q2 results continued to be weak as there were not yet enough volume gains. Supply chain inventories should however continue to melt after a prolonged period of disruption but also due to the seasonally high demand for hygiene products seen in H2. Suominen has implemented various measures in response to the extended tough market conditions (especially in Europe), whereas in the US the focus is still around key account restocking and a recovery in delivery volumes. Nonwovens prices continue to adjust down following raw materials prices while volumes improve, and as a result Suominen’s top line should remain rather flat going forward. The US will drive Americas’ revenue this year, whereas there’s still uncertainty around European softening. We estimate Q3 revenue at EUR 129m and EBITDA at EUR 6.2m.
Higher volumes and sales margins about to lift earnings
Raw materials prices have declined for more than a year now. We find Suominen’s raw materials prices to have remained rather flat in Q3, however they may have already bottomed out. In our view the environment should still be quite favorable for Suominen from the perspective of sales margins; higher volumes and resulting utilization rates should drive gross margins closer to 10% over H2. The apparent stabilization in raw materials prices may also signal an end to the destocking cycle, which would support volume rebound over the course of H2. We estimate stable top line development and 10% gross margins to lead to roughly 5% EBIT margins going forward to next year.
Earnings improvement has been anticipated
Suominen’s comparison figures aren’t challenging and hence H2 is bound to show some improvement so long as higher volumes continue to come through. Suominen is valued about 7x EV/EBIT on our FY ’24 estimate of some 5% EBIT margin, which we consider a neutral level as Suominen has historically averaged 10% gross margins. We retain our EUR 2.7 TP and HOLD rating.
DT reports Q3 results on Oct 27. Q3 results will remain modest, but aviation rebound helps SBU to drive growth over the next year or so while cost savings also help.
Q3 not yet great, but SBU investment continues to rebound
DT’s Q2 saw 11% y/y growth, driven by medical and security and in part because of a soft comparison period. There was already uncertainty around the Chinese markets and customer inventory corrections, and such concerns seem to have persisted over the course of Q3. The MBU unit in particular faces high comparison figures and we estimate its Q3 top line to have declined by 21% y/y. Meanwhile SBU has been growing since last year as the aviation sector has recovered since the pandemic shut its investments. Growth there derives from both the US and China; we estimate SBU’s Q3 growth at 7% and note the rate should improve in Q4 (despite a relatively strong comparison period), and we expect SBU to drive growth also next year. We estimate DT Q3 revenue to have declined 9% y/y to EUR 24.8m. We see Q3 adj. EBIT at EUR 1.3m, a meaningful improvement over the comparison period although still quite shy relative to potential.
Focus has already shifted to Q4’23 and FY ’24 figures
MBU volumes should show signs of stabilization in Q4, while the unit has potential to grow a bit next year (despite pressure on pricing and challenges in China). We expect SBU to be by far the most important growth driver over the next year or two as aviation recovery has found solid ground, while the prospects shouldn’t be too bad either for other relevant security applications. IBU has a lot of potential, but its organic growth is likely to remain soft in the short term as many sectors’ industrial outlook is still uncertain. Cost savings (EUR 2m on an annual basis) are to help bottom-line already in Q4, which we estimate to lead to EUR 3.6m EBIT together with 8% y/y growth.
Double-digit growth drives FY ’24 EBITA margin above 13%
FY ’23 adj. EBITA margin is to remain modest at around 8%, however we estimate profitability to recover above 13% next year thanks to both volume growth and cost savings. DT’s multiples remain elevated relative to peers on modest FY ’23 earnings, but the valuation is only around 10.5x EV/EBIT on our FY ’24 estimates, which represents a significant discount to peer multiples. Our new TP is EUR 13.0 (15.5); we retain BUY rating.
Exel cut guidance as Q3 was very soft. Exel works out its new strategy in detail, to achieve at least some efficiency gains, yet volume remains the value driver for now.
Q3 ended up being a lot softer than previously estimated
Exel revised its guidance down and now expects FY ‘23 revenue to decrease significantly. Demand softness has been widespread and extended for longer than previously seen. Order timings have also been delayed for larger projects. Exel published preliminary figures: Q3 was seen to be soft before, however a revenue of only EUR 20.5m proved to be way below our earlier EUR 29.9m estimate and thus we also cut our Q3 EBIT estimate by EUR 2.5m.
Improvement after Q3, but its pace remains uncertain
We cut our estimates also beyond Q3 as softness persists. Exel updates its plant network strategy to better organize production; some details have already been worked out but there are still reviews going on. Wind power volumes are to be generated mostly in China and India from now on while the US unit will focus on buildings and infrastructure applications as well as electrical products, which we believe remain attractive categories. The restructuring is to yield cost savings of EUR 3m, a big sum on top of other measures Exel has implemented (and is yet to decide on). Exel’s reorganization means EBIT should bounce back sharp once the volumes come through, and hence focus rests on top line even more than usual over the next few quarters. The comparison volumes for Q4 aren’t that high as they already fell 15% y/y, yet Exel may still struggle to achieve notable growth even if Q4 should gain q/q from the lows.
EBIT to bounce back with volumes, but outlook still unclear
Low demand over the past year has left Q3’23 LTM adj. EBIT around break-even, so it’s clear Exel’s EBIT improves next year. The two-tiered factory strategy is to bring more manufacturing efficiency gains, while demand is already improving, but it remains unclear how much volumes recover next year. We estimate EUR 120m in revenue and EUR 7.5m EBIT for next year, which roughly equal the average levels seen in FY ’19-22. Exel is valued about 8x EV/EBIT on that estimate, which isn’t very high considering how efficiency measures could also support EBIT above our estimate. Yet in our view limited demand outlook curbs upside for now. Our TP is now EUR 3.0 (3.5); retain HOLD.
Raute reports Q3 results on Oct 26. Raute’s EBIT is bound to improve in the coming years, whereas short-term focus may lie more around smaller European equipment orders.
Pick-up in small orders would improve outlook even further
Raute’s earnings have been recovering gradually for the last 12 months, however Q2 was a bit softer than the previous quarters due to a lack of Wood Processing and Services revenue. Very high North American orders were a positive surprise; although Europe may continue to miss some smaller equipment orders going forward the outlook for the next year or two isn’t too bad given the three large projects to be delivered to Europe and Uruguay. We therefore believe Raute’s EBIT is poised to trend towards an annual level of EUR 10m in the medium term. Raute didn’t disclose any larger new orders during Q3, and smaller equipment orders are one of the key short-term focus issues. We expect Q3 order intake to have amounted to EUR 29m; the figure could end up lower than that if there’s a temporary lack of North American orders after the Q2 burst and if Europe also proves very soft, but we believe EUR 30m to be a reasonable quarterly ballpark estimate for now. The small order level could also gain considerably if the outlook in Europe begins to improve.
We upgrade our FY ’23 earnings estimates by EUR 1m
We estimate Raute’s Q3 top line to have improved considerably q/q but been soft y/y (we see no very large y/y changes in mix). We see Q3 EBIT at EUR 1.5m, in other words roughly flat y/y. The new ERP system may cause no larger issues, and in our view quarterly EBIT is set to improve closer to EUR 2m and above over the next year or so. Raute’s guidance update wasn’t a very big surprise; we now estimate 6.5% adj. EBITDA margin on a revenue of EUR 148m. We make only marginal estimate revisions for the coming years. Wood Processing revenue will gain significantly next year, whereas Analyzers should have more stable long-term potential in terms of revenue and earnings.
EBIT likely to reach EUR 8m and above in the coming years
FY ’23 profitability will remain rather modest as H1 lacked volumes, however H2 should show solid improvement which is to be continued also next year. We estimate Raute to reach above EUR 8m FY ’24 EBIT, on which the company remains valued at a multiple of 5.1x. We retain our EUR 12.0 TP and BUY rating.
Vaisala reports its Q3 earnings on 27th of October. Low industrial activity slowed down IM’s growth during Q2 which we estimate to have continued during Q3. We continue to see the valuation attractive despite the temporary market pressure.
Slight adjustments to estimates ahead of Q3
Despite the current weak market sentiment, especially on the IM side of Vaisala’s business, we expect group level net sales in Q3/23 to grow to EUR 139.2m, with y/y growth of 4.5%. In terms of profitability, we estimate group EBIT of EUR 23.8m for Q3/23 with slightly improved margins when compared to Q3/22. For W&E, we expect y/y net sales growth of 9.8% during Q3 while for IM we expect a slight net sales decrease of 2.5% y/y. For IM, we see continued gross margin pressure as a result of price competition especially in the Chinese market. In addition to gross margin pressure, we expect overall lower profitability driven by the soft net sales development. For W&E, we estimate margin improvement for Q3 y/y driven by higher volumes and continued strong gross margin development stemming from improved sales mix and lower amount of spot component purchases. Our projected net sales for 2023 are EUR 552.8m, with reported EBIT reaching EUR 66.4m, both within the guidance range that was updated ahead of the Q2 earnings release.
Market conditions in Q3 remained largely unchanged
Vaisala’s Q2 was two-folded as the demand continued strong for W&E side of the business while IM business area suffered from lower demand driven by slowed down industrial activity. We estimate that the development seen during Q2 has largely continued to Q3. We see no improvement in the economic data when looking at the industrial production globally, on the other hand, there has been no major negative shift when compared to Q2. W&E is different story as it has a larger proportion of public clients, reducing the business area's susceptibility to economic cycles. Hence, we anticipate continuation of strong performance.
BUY with a TP of EUR 39 (42)
We revise our TP slightly downwards driven by our estimate changes and lower peer group multiples. We continue to consider Vaisala moderately valued, trading at a 10-15% discount compared to our peer group on adj. EV/EBIT basis.
Consti reports its Q3 results on 27th of October. We expect continued good execution supported by the strong backlog. We continue to keep an eye on order intake and the future outlook as the renovation market sentiment shows signs of weakness.
Strong backlog supports the development in H2
Consti’s order backlog finished at all time high levels of EUR 297.9m at the end of Q2 2023. We expect net sales of EUR 81.5m with growth of 3.1% for Q3, for FY 23, we estimate revenue growth of 5.4%. The expected growth during H2 is driven by the current strong backlog of projects. In terms of profitability, we estimate EBIT of EUR 3.4m for Q3 and EUR 12.2m for FY 2023, within Consti’s EBIT guidance range of EUR 9.5-13.5m. The sale of the company’s property-related relining business to Spolargruppen might have a slight positive effect on the Q3 result yet we have not included it in our estimates.
Signs of weakening demand for renovation
Confederation of Finnish Construction Industries (RT) revised its estimates of Finnish renovation construction volumes downwards in September. Before, it had projected growth of 1.5% for 2023 and a 2% increase for 2024. However, the revised forecasts now indicate a 4% reduction in volumes in 2023, with the decline persisting into 2024, where volumes are anticipated to decrease by 1%. The main drivers for the weaker outlook include cost inflation and tighter financing environment. In addition to RT, the Finnish Association of HVAC Technical Contractors published their balance figures for renovation construction which declined notably from the figures published in March. Despite the negative outlook spreading from new construction to renovation construction, we see that Consti is well positioned within the renovation segment. Consti mainly operates in the largest cities within Finland where the market is expected to fare better when compared to more rural areas.
Valuation remains conservative
Our TP values Consti at roughly 12x 2023 P/E and 9x 2023 EV/EBIT. Consti trades at a discount to both our peer group and the company’s own historical valuation levels. We continue to see the current pricing hard to justify given the company’s exposure to the more stable renovation market.
Finnair reports Q3 results on Oct 24. We make some downward revisions to our estimates, but note earnings outlook remains strong even if it has lately softened a bit.
We now estimate FY ’23 EBIT at EUR 178m
Finnair’s Q3 RPK gained 13% y/y, which augurs strong profitability as the comparison period’s EUR 35m adj. EBIT wasn’t too bad either, however the volume fell some 8% short of our previous estimate as PLF was more than 200bps softer than we anticipated. Unit yields have improved further, and a key question is just how much further they can do so in the short and medium term without sacrificing too much demand. Fuel prices bottomed out over the summer and are now 25% up from their lows; we revise our EBIT estimates down to reflect the change. We now estimate Q3 EBIT at EUR 74m (prev. EUR 85m). In our view Finnair’s long-term 6% EBIT target still looks very reasonable, but an extended fuel price elevation would limit potential above that level as unit yields should stabilize soon.
Equity issue gives the flexibility for narrow-body renewal
Finnair’s EUR 600m equity issue will heal its balance sheet: Finnair has no urgent investment needs as current fleet is now pretty much optimal for the circumstances, however financial flexibility will be useful for the purposes of narrow-body fleet renewal. This will be a long-term development project and can be expected to materialize in steps towards the end of the decade as this portion of the fleet has a broad range in terms of age.
Lower earnings and multiples have hit airline valuations
Airline valuations have recently been hit hard as EV/EBIT multiples have declined by roughly 10% while earnings estimates have softened due to e.g. higher fuel prices. Expectations were high amid a boom in travel; earnings should remain high (and even improve a bit further) also next year, but expectations have moderated. Airline earnings remain cyclical, but so far there have been no major signs of weakening demand after a sharp post-pandemic recovery. Cost control is still important, but in our view focus now rests more on the revenue side (balancing between volumes and yields). Finnair is valued a bit above 7x EV/EBIT on our FY ’23 estimates, in line with peers. We find the level neutral assuming roughly 6% EBIT margins going forward. Our TP is now EUR 0.35 (0.54); we retain our HOLD rating.
Scanfil cut FY ‘23 guidance down a bit, but the news wasn’t big and EBIT should stay above EUR 60m also next year.
Some softening in volume growth was long due
Scanfil made small cuts to its guidance ranges for the year. The revisions weren’t large as revenue and EBIT midpoints declined by some respective 3% and 2%. The update undid the positive July revision; the current revenue midpoint lands a bit below the April upgrade while the EBIT midpoint is still 5% above where it was 6 months ago. In our view the update doesn’t contain any substantial news as it was clear before the 30% underlying growth seen in Q2 figures (including 61% y/y organic growth for Energy & Cleantech) couldn’t possibly be sustained for very long.
Growth a bit uncertain, but EBIT to remain above EUR 60m
The guidance midpoints suggest Scanfil will reach 7.0% EBIT margin in H2’23; in our view the 7% margin assumption shouldn’t be too sensitive to growth going forward, in other words Scanfil should be able to manage roughly such high margins even if top line declines slightly next year. We revise our revenue estimates down by EUR 30m for this year and EUR 60m for next. We don’t make any meaningful changes to our EBIT margin estimates, but revise our absolute EBIT estimates down by around EUR 2-3m for this and coming years. In our view there’s some elevated uncertainty around growth rates going forward after such a period of high demand, yet EBIT should remain above EUR 60m even in a softer demand environment.
Earnings multiples have again turned compelling
Scanfil traded above 10x EV/EBIT only a couple of months ago (then about 10% higher than peer multiples), however the multiple has now declined to around 7.5x on our FY ’23 estimates. Meanwhile peer multiples haven’t changed much and Scanfil is thus now valued at a double-digit discount. There’s some variation in peer multiples but they mostly trade around 8.5-9.5x EV/EBIT on FY ’23-24 estimates, and therefore Scanfil’s 7.0x EV/EBIT (on our EUR 64.7m estimate for next year) likewise represents a meaningful discount. Scanfil may not be able to achieve EBIT margins significantly higher than 7% (already 30% above peers), yet profitability is unlikely to soften much below that level unless there’ll be a dramatic top line decline. Our new TP is EUR 9.0 (11.5); our rating is now BUY (HOLD).
Duell’s Q4 results were largely in line with the previously released preliminary figures. Reflecting the ongoing strain on the company's balance sheet, Duell announced that it is considering a rights issue to strengthen the balance sheet. With the expected continued operational softness and no positive drivers for the stock ahead of the potential sizeable rights issue, we further downgrade our TP to EUR 0.4 (0.9) and rating to SELL (HOLD).
Q4 operative figures brought no real surprises
Duell’s net sales were roughly in line with the previously released preliminary figures. Net sales in Q4 amounted to EUR 29.9m (EUR 34.6m in Q4/22, EUR 29m Evli) and adj. EBITA was at EUR 0.2m (EUR 1.8m in Q4/22, EUR 0.1m Evli). The weak profitability was clearly driven by the soft volume development as the company’s gross margin improved y/y.
Considering a larger-than-expected rights issue
Despite the successful unloading of inventory during the Q4 leading to lower net debt levels, the company’s balance sheet remained stretched. Due to the lackluster operational results and high amount of debt, the company’s net debt to adjusted EBITDA was at 7x at the end of FY 2023. As a result, the conditions for the covenants for loans from financial institutions were not met. To strengthen its balance sheet, the company announced that it is considering a rights issue. According to preliminary plans, the size of the rights issue would be up to roughly EUR 20m. The rights issue is substantial and if completed, heavily dilutive for shareholders that do not exercise their rights, as the company’s market cap is currently approximately EUR 15m. We have not included the potential right issue to our estimates as the completion, timing and conditions of the issue are still uncertain.
SELL (HOLD) with a TP of EUR 0.4 (0.9)
As mentioned in our previous updates, we see no signs of fast recovery in consumer confidence, in addition, the company’s customers conservative approach to inventory management is likely to continue. With the continued weak outlook, stretched balance sheet and no positive drivers for the stock ahead of the potential rights issue, we further downgrade our TP to EUR 0.4 (0.9) and rating to SELL (HOLD).
The Q4 softness came as a no surprise as the company provided preliminary figures in September in conjunction with the profit warning.
Duell released a profit warning ahead of the FY 2023 earnings which will be published 9th of October. The preliminary FY 2023 figures were clearly lower than we had anticipated. We downgrade our rating to HOLD (BUY) and TP to EUR 0.9 (1.4).
Preliminary FY 2023 figures short of our estimates
In connection with the profit warning, Duell provided preliminary financial information regarding FY 2023 figures. Duell now expects net sales to be approximately EUR 118 million (EUR 124m FY 2022, EUR 125m Evli est.) and adjusted EBITA to be approximately EUR 4.5m (EUR 8.7m FY 2022, EUR 7.4m Evli est.). The preliminary figures imply net sales of roughly EUR 29m (-16% y/y) and adjusted EBITA of roughly EUR 0.1m during Q4.
Market pressure expected to persist
For FY 2023, our estimates now align with the preliminary figures provided by the company for revenue and adj. EBITA. We previously estimated revenue growth of 4.1% y/y for Q4 2023 driven by inorganic growth while we estimated that the organic sales continue to decline. With the implied net sales of EUR 29m in Q4, the company’s net sales declined roughly 16% y/y. Adj. EBITA was also clearly lower than our estimate. Our interpretation is that the weak net sales and profitability were driven by lower-than-expected volumes, FX related losses and discount sales. In addition to the preliminary figures, Duell also commented that it has been able to reduce inventory levels as planned which lowers the net debt. We now estimate that the market pressure is likely to continue as we see no signs of fast recovery in the consumer confidence across the operating regions. In addition, Duell’s customers have indicated that the conservative approach to inventory management is likely to continue. In addition to FY 2023, we have revised our estimates for coming years as we see the softness likely to continue especially during FY 2024.
HOLD (BUY) with a TP of EUR 0.9 (1.4)
With the substantial downward revisions to our estimates, we downgrade our rating to HOLD (BUY) and TP to EUR 0.9 (1.4). The beforementioned headwinds are likely to continue to affect Duell’s performance. On the other hand, the decrease in inventory levels eases short-term balance sheet pressure.
Etteplan issued a profit warning and lowered its guidance for FY 2023. The profit warning doesn’t come as a surprise considering the soft H1 which increased pressure for the rest of the year, as outlined in our previous update.
Lowered guidance due to the weakening market
Due to weaker market situation, in particular in the demand of consumer product manufacturing customers in the Technical Communication Solutions, Etteplan lowers its guidance for 2023. According to the new estimate, the revenue is estimated to be EUR 355-370m (prev. EUR 360-380m) and EBIT to be EUR 26-28.5m (prev. EUR 28-31m).
Downward estimate revisions across the board
Our estimates after Q2 were at the lower end of the earlier guidance and roughly at the top end of the updated guidance (net sales of EUR 371.0m and EBIT of EUR 28.5m for FY 2023). The profit warning did not come as a surprise as the company’s soft H1 left little room for error in H2. With the weaker outlook, we have made multiple adjustments to our estimates for 2023E and beyond. Our updated estimate for 2023E revenue comes in at EUR 360.7m (-2.8% vs. prev. estimate) and EBIT EUR 26.6m (-6.8% vs. prev. estimate). We have made negative estimate adjustments especially for the Technical Communication Solutions segment as the segment was flagged weaker than expected due to negative changes in the demand of consumer product manufacturing customers. While the consumer segment was only 2% of the total revenue in H1 2023, we continue to see more pronounced signs of a slowdown accross Etteplan’s customer’s end markets, therefore we have also revised our growth and profitability estimates downwards beyond 2023. With the revised estimates, we no longer expect that the company reaches its target level of profitability in 2024.
HOLD with a target price of EUR 13.0 (15.0)
With our updated estimates, Etteplan trades at a 10-15% premium vs. our peer group on adj. EV/EBIT 23-24E basis. Driven by the adjustments to our estimates and the expected near-term pressure due to weak market sentiment, we further decrease our target price to EUR 13.0 (15.0) while keeping our rating at HOLD.
Administer is seeking an annual profitability improvement of EUR 7m, with profitability in H1 being rather weak. The margin improvement potential supports valuation upside.
Loihde reported two-folded Q2 figures. Net sales came in strong with 15% growth, despite soft digital development sales. Profitability was weak, which leaves a lot to catch up in H2.
Administer’s H1 figures were on par with our expectations. Revenue amounted to EUR 39.2m (Evli EUR 39.0m), with growth of 64.1%. EBITDA amounted to EUR 1.6m (Evli EUR 1.9m). Administer initiated a cost savings programme and change negotiations, seeking an annual profitability improvement of EUR 7m in 2024.
Loihde released Q2 result with strong topline growth. Net sales grew in line with our expectations, with strong SeSo sales, while DiDe was negatively impacted by the soft market. Profitability fell short of our expectations and was weak with market issues. Year-end seems brighter, but uncertainty remains high, especially in DiDe.
Loihde reports its Q2 result on Thursday. While SeSo is expected to drive strong Q2 growth, the current market environment has continued weak and uncertain in DiDe. In addition to the soft utilization rates of DiDe, we expect SeSo’s ERP project to bring additional costs that together limit Q2 and 23E profitability.
Raute’s Q2 showed mixed trends, yet the company proceeds with a very high order book and strategic developments.
Q2 figures were a bit mixed but overall no large surprises
Raute’s Q2 profitability improved y/y from the very low comparison figures, however the EUR 0.7m adj. EBITDA didn’t meet our EUR 1.8m estimate as softness in Wood Processing and Services demand left the EUR 29.3m revenue short of our EUR 31.4m estimate. Meanwhile Analyzers’ performance was a positive surprise, although it should be noted its margins were to a certain extent exceptionally high. Q2 produced a record-high EUR 112m order intake, driven by two large European orders, and it topped our estimate by EUR 17m largely thanks to North America, where there was also a somewhat exceptionally strong burst of orders. We believe North America is unlikely to reach such high order intake levels going forward, however the local demand outlook remains clearly better than that of Europe.
Many different developments largely as expected
Raute’s Q2 results and comments weren’t overall surprising as construction slowdown reduces softwood plywood demand, whereas outlook remains better for certain types of industrial uses. Europe’s short-term outlook is weaker than that of North America, yet birch plywood demand is high and its supply a bottleneck due to the vanished Russian imports. Raute still has large order potential in Europe, but also in more exotic locations. The uncertainties in Europe are the most significant source of short-term risk (e.g. spare parts demand could be better), however we believe Raute is more likely than not able to specify its guidance upwards some time during H2 especially in terms of profitability (we estimate 5.6% adj. EBITDA margin for FY ’23). Raute achieves its cost savings according to plan, whereas the new ERP system may still cause some minor issues. Raute continues to look for M&A opportunities long-term, but strategy also relies on organic growth helped by own R&D investments.
Valuation remains undemanding relative to potential
We make only marginal estimate revisions following the Q2 report. Raute is valued 5.5x EV/EBIT on our FY ’24 estimates, which we consider an unchallenging level as our respective EUR 8.3m estimate remains quite modest in the light of long-term potential. We retain our EUR 12.0 TP and BUY rating.
Raute’s Q2 figures were a bit of a mixed bag relative to our estimates as top line and profitability were lower than we expected while order intake came in even higher than we estimated.
Solteq’s FY 2023 continues to look challenging, but cost savings measures being taken support the turnaround in 2024. We retain our HOLD-rating, TP EUR 1.1 (1.3).
Weak figures in Q2
Solteq reported Q2 results that were weaker than we had anticipated. Net sales in Q2 were EUR 14.3m (Evli EUR 16.0m), declining 20.4% y/y and 8.2% in comparable terms. The operating profit and adj. operating profit in Q2 amounted to EUR 6.3m and -1.9m respectively (Evli EUR 7.8m/-0.3m). According to Solteq the quarter was affected by weaker demand in the Retail & Commerce segment results and a heavy cost structure in Utilities but in line with the company’s own expectations.
Cost savings support turnaround in 2024
Solteq announced the initiation of change negotiations in the Utilities segment, seeking annual savings of approx. EUR 3m. Measures are also being taken to improve the company’s overhead cost situation after the divestment of the Group’s ERP business based on Microsoft BC and LS Retail Solutions. Solteq expects its operating result (excl. profit recognition from the divestment) in 2023 to be slightly negative. Assuming the completion of the change negotiations as planned and during Q4/2023, due to related one-off items, we find the guidance to be challenging. This despite an anticipated pick-up in growth in Utilities due to starting customer deliveries and in Retail & Commerce due to previous project postponements and slight demand recovery. Our 2023e EBIT estimate is at EUR -1.6m. With the savings in Utilities, the segment is on track to push EBITDA-margins into the double digits next year supported by continued good demand, and we anticipate significant profitability improvements for Solteq in 2024e.
HOLD with a target price of EUR 1.1 (1.3)
Valuation remains on the higher side in the near-term despite anticipated improvements. Long-term upside drivers from the Utilities segment, however, still remains in place. We retain our HOLD-rating but with continued uncertainty regarding the turnaround speed we lower out TP to EUR 1.1 (1.3).
Solteq’s Q2 results were quite weak and both revenue and profitability fell below our estimates. Revenue was at EUR 14.3m (Evli EUR 16.0m) and adj. EBIT at EUR -1.9m (Evli EUR -0.3m).
Exel’s results are yet to see demand pick up, and although valuation isn’t demanding uncertainty still limits upside.
Still very soft results, however H2 should show gains
Exel’s Q2 was expected to be still somewhat soft, but the EUR 25.4m revenue came in well below our EUR 34.3m estimate as e.g. Wind power and Transportation, which had high Q2’22 deliveries, saw low demand especially in North America. Many key industries continued to reduce inventories, yet Exel saw demand developing largely according to its expectations and sees its delivery volumes begin to recover towards the end of the year. Q2 revenue declined by another 12% q/q, in the light of which the EUR 0.1m adj. EBIT already showed some results in terms of lower costs. Exel has some further scope to cut costs, and achieved results in terms of margin management, yet lacking volumes left adj. EBIT far from our EUR 1.2m estimate.
Many applications have already shown promise
Raw materials prices should remain stable, and pricing hasn’t been an issue for Exel, while cost cuts help results only so much. We estimate Q3 revenue to decline 11% y/y (meaning 18% q/q growth) while the EUR 35m revenue we estimate for Q4 should be enough to produce a healthy level of EBIT (we estimate EUR 2.5m Q4 EBIT). The demand and inventory cycles now produce large variations in results, and recent areas of particular softness (e.g. North American Wind power and Transportation) are also likely to make up much of the volume recovery going towards next year. Exel updates its strategy this fall; it’s clear Wind power remains a key driver (e.g. the Indian JV), but there should be other products to capitalize on (incl. conductor core rods) and ways to specify growth path in e.g. Transportation and Defense.
H2 figures to reflect the pace of demand improvement
Q4 might show a strong EBIT, but we see FY ’23 adj. EBIT halving to EUR 3.9m, a very modest level which means FY ’23 earnings multiples are elevated (20x EV/EBIT on our estimates). Exel’s valuation can’t be really described as expensive since profitability is to improve from here on, and the 7.5x EV/EBIT on our FY ’24 EBIT estimate of EUR 8.5m isn’t that challenging especially when such a level of EBIT would still be shy relative to long-term potential, yet the fog around demand pick-up keeps uncertainty high. Our new TP is EUR 3.5 (4.3); retain HOLD rating.
Alisa Bank’s total income in H fell short of our estimates, PTP slightly better than expected. Capital constraints limit near-term growth, but the outlook still remains fairly good once additional capital has been raised.
Total income below expectations, slightly better PTP
Alisa Bank’s H1 results were slightly better than anticipated on bottom-line level. Total income of EUR 8.4m was below our estimates (Evli EUR 9.5m) mainly due to the lower than estimated net fee and commission income of EUR 0.8m (Evli EUR 1.7m). Total OPEX of EUR 5.7m corresponded to our estimates and the C/I-ratio improved to 69% but still well above desired long-term levels. PTP amounted to EUR 0.4m (Evli EUR 0.1m), with lower than anticipated impairment of receivables (act./Evli EUR 2.2m/3.7m) compensating for the lower than estimated total income.
Capital constraints limiting growth in the near-term
We continue to expect to see the slow growth in H1 be reflected also in H2. The company expects income to grow in H2 compared with H1, with the impact of market interest rates in our view to be the larger driver behind growth. We currently anticipate only a small growth in the loan portfolio. The raising of additional capital remains instrumental in enabling more rapid growth of the loan book, which we are confident will happen during H2. The consumer lending environment remains slightly more challenging due to the higher interest rates and stricter lending policies and capital constraints while corporate customer lending has grown in particular due to invoice financing. We expect to see a pick-up in growth in 2024e, but current market conditions remain a challenge in achieving the annual growth target of the loan book of more than 25%, and limited OPEX growth needs to support improved bottom-line figures.
HOLD with a target price of EUR 0.37
We see no notable changes to our views on Alisa Bank due to the H1 report. 2023 is set to remain on the weaker side on growth and earnings while the company continues to build foundations for ramping up growth in the coming years.
Alisa Bank’s H1 profitability was slightly better than anticipated, with PTP at EUR 0.4m (Evli EUR 0.1m). Total income was below our expectations but lower expected and realized credit losses made up for the difference. Profits in H2 expected to increase from H1.
Exel’s Q2 results remained very soft as many customer industries saw demand challenges and continued to reduce inventories. Revenue fell clearly below our estimate, which naturally hit EBIT hard, however profitability improved slightly q/q even though top line declined another 12% q/q.
Dovre’s Q2 results landed near our estimates. Renewable Energy drags EBIT this year, but demand remains in place and all segments still have room to improve going forward.
Renewable Energy Q2 EBIT proved better than we estimated
Dovre’s Q2 top line developments were twofold: on the one hand Project Personnel continued to grow at a strong rate of 15.7% y/y, driven by demand in Canada, while Consulting saw a slower quarter after strong Q1 (Q2 revenue was down by 13.5% y/y as new Norwegian legislation on temporary hiring affects the public sector market of Consulting more than it does the energy sector of Project Personnel). Renewable Energy revenue declined much as expected, however its EUR 0.5m EBIT was a positive surprise as it improved a bit y/y. Project Personnel’s strong performance pushed Dovre’s EUR 47.3m revenue above our EUR 44.4m estimate, whereas Renewable Energy’s bottom line performance helped the EUR 1.5m EBIT slightly above our EUR 1.4m estimate.
Renewable Energy is likely to drive growth next year
Project Personnel has grown at a CAGR of 18% after FY ’20; the comparison figures are high, but we continue to expect further incremental growth in H2. We see Consulting top line flat or slightly down for the year after double-digit growth in recent years, whereas Renewable Energy should again see growth next year as new Finnish electricity transmission capacity opens construction bottlenecks. We estimate Project Personnel EBIT to develop flat this year and next but note there should be more potential towards an EBIT margin of 5%. We estimate Consulting EBIT down EUR 0.3m this year; the legislation on temporary hiring limits potential, and we have been expecting more moderate growth for the segment compared to the other two.
Earnings multiples remain undemanding
In our view Dovre is likely to land near the upper end of its revenue guidance range, while we note Q3 is important for EBIT due to the seasonality of Renewable Energy. Our group-level estimate revisions remain small while peer multiples have gained recently; Consulting peer multiples are rather high at around 16x EV/EBIT, but we have also revised down our estimates for the segment. Dovre is valued only 7x EV/EBIT on our FY ’23 estimates (excl. 49% of Suvic EBIT), while most peers trade well above 10x. Our new TP is EUR 0.80 (0.77); we retain BUY rating.
Marimekko’s Q2 EBIT came in strong, and the company’s current profitability potential seems more robust than we earlier anticipated with increased outlook of licensing income. We adjusted our estimates such that 23E EBIT saw a 5% increase.
Endomines' H1 2023 revenue aligned with our estimates, yet profitability fell short of expectations. Due to estimate changes, continued uncertainty regarding the US asset portfolio and stretched balance sheet, we downgrade our rating to HOLD (BUY) and adjust TP to EUR 4.7 (5.6).
Production developed as estimated
Revenue in H1 2023 amounted to EUR 10.7m, up by 91.1% y/y. The reason for strong growth was previously announced increase in gold production. The production increased from 3,478 oz in H1 2022 to 6,753 oz, up by 94.1% y/y. The company’s EBITDA reached positive territory at EUR 0.4m, (-3.5m H1 2022) yet was lower than we anticipated (Evli est. EUR 1.6m). The reason for lower-than-expected profitability was higher overhead costs and lower than anticipated profitability for Pampalo mine. With the modest profitability, the company’s cash flow from operating activities was EUR -2.3m and cash in hand stood at EUR 1.2m. Despite the convertible loan financing that was agreed upon in June, the current cash position is arguably low.
H2 volume estimates stable, profitability lowered
Endomines updated its FY 2023 outlook, anticipating Pampalo production to hit the higher end of the growth range (+35-55% y/y). We maintain our production estimates for H2, already projecting a 54% growth in produced ounces for FY 2023. Profitability wise, the main changes relate to Pampalo as the cash cost for H1 2023 was at a higher level than we had anticipated. With the revised estimates, we expect EBITDA of EUR 5.0m for Pampalo for FY 2023 (prev. EUR 7.2m). In aggregate, we now expect group EBITDA of EUR 0.9m (prev. EUR 3.5m). Alongside the updated production guidance, the company reaffirmed its goal to finalize partnership discussions concerning its US assets by the end of 2023. Endomines conducted preliminary negotiations with potential partners during H1 2023 yet there was no concrete evidence yet regarding potential deals.
Current valuation appears fair considering the risks
Given the uncertainties, we maintain our valuation on the lower end of our SOTP-based valuation range. Driven by the beforementioned estimate revisions, continued uncertainty regarding the US asset portfolio and stretched balance sheet, we lower our rating to HOLD (BUY) and adjust TP to EUR 4.7 (5.6).
The transformation programme is beginning to deliver results as the company’s EBITDA improved to EUR 0.4m (-3.5m H1 2022) during the first half of 2023. While the development was positive, the profitability was still weaker than we had estimated.
Dovre’s Q2 figures came in a bit better than we had estimated as Project Personnel continued to grow at a 16% y/y rate while the profitability of Renewable Energy remained better than we expected.
The profitability guidance downgrade creates a near-term setback, but improvement potential still favours valuation upside. We lower our TP to EUR 3.5 (4.0), BUY-rating intact.
Lowered profitability guidance
Administer issued a profit warning on August 8th, lowering its guidance for profitability in 2023. According to the new guidance, the EBITDA-margin in 2023 is estimated to be 4-8% (prev. 7-9%). The net sales guidance of EUR 76-81m remains intact. According to the company, profitability during H1/2023 was burdened by wage inflation and other increased expenses, which the company was not able to fully transfer into customer prices. Administer is preparing a profitability programme, focusing on long-term improvements in profitability and in addition new was to identify additional net sales opportunities.
Profitability improvement path postponed
The revised guidance is an unfortunate dent in the company’s long-term ambitions for improving profitability, as the guidance range suggests that relative profitability more likely will decrease y/y. With the acquisition of Econia, the previous guidance appeared more on the conservative side, and our estimates were previously slightly above the guidance range (net sales EUR 82.4m and EBITDA-margin 9.8%). The company has grown and is expected to grow rapidly also in 2023 due to acquisitions made, and expectations were for operational efficiency and profitability improvements to become an increasing area of focus. We expect an EBITDA-margin of 6.3% in 2023, with EBIT in the red in H1.
BUY with a target price of EUR 3.5 (4.0)
We continue to see clear potential for profitability improvements in the coming years, despite the set-back now seen. Valuation continues to be attractive, an approx. 3%p y/y increase in EBITDA-margins in 2024 on our estimates would imply an ~10x P/E (excl. goodwill amortizations) and EV/sales remains firmly below 1x. With the near-term setback to profitability improvement, however, we lower our target price to EUR 3.5 (4.0), BUY-rating intact.
Marimekko reported Q2 results above expectations. Q2 net sales came in line with our estimates while profitability topped our expectations. The guidance for 2023 was reiterated and the market outlook implies growth to continue in all of Marimekko’s main markets.
Raute reports Q2 results on Aug 25. We see Q2 a bit soft but growth is set to continue next year with large orders.
Q2 may see some softening relative to the preceding ones
Raute has already shown encouraging profitability development in the past year or so even when it has lacked volumes due to the rapid shift away from Russia. The company completed its EUR 18m financing in June and is now positioned for growth according to its new strategy, which likely includes Analyzers M&A. We expect Q2 results to be a bit modest compared to the 3 previous quarters (but no deep losses as in Q2’22) as we estimate soft Wood Processing revenue, in addition to which the new ERP system has caused challenges. We estimate top line to have grown at a modest 6% y/y rate from the low comparison period and see EBIT at EUR 0.4m. Raute’s guidance is still quite loose, and we believe H2 figures are likely to specify it upwards.
Large projects to drive growth, short-term more uncertain
Raute has already bagged three large orders, worth a total of EUR 125m, to be delivered in FY ’24-25. These by themselves are likely to push annual revenue well above EUR 150m in the coming years even if smaller order flows prove softer than they have recently been. The three projects do not even include Finland, where Metsä Group has lately confirmed its EUR 300m LVL factory investment; the mill will not be ready until late ’26, its construction probably beginning next spring, but in our view Raute is more likely than not to sign an order of some EUR 50m for the project (the delivery of which could be timed around FY ’25-26 and hence fitting nicely with Raute’s current backlog). Raute’s short-term market outlook and customer demand picture may continue to be somewhat mixed as many industrial end-uses should still fare better than construction activity.
Valuation unchallenging especially in the light of potential
Many Nordic capital goods companies’ valuations have declined over the past few months, however in our view Raute does not have any particularly relevant listed peers. FY ’23 revenue will still be rather modest and bottom line not representative of potential. We continue to estimate 7% FY ‘24 EBITDA margin, a very conservative assumption considering Raute managed 7.7% already in Q1. On that basis Raute is valued 5x EV/EBIT on our FY ’24 estimates. We retain our EUR 12.0 TP and BUY rating.
Alisa Bank reports its H1 results on August 18th. The loan portfolio development YTD has been flat, with growing interest rates on deposits adding pressure on H2. The growth potential remains in place, but more proof is needed. We adjust our TP to EUR 0.37 (0.40), HOLD-rating intact.
Loan portfolio development flat despite volume growth
Alisa Bank (Fellow Bank until April, 2023) will report its H1 results on August 18th. The company’s loan portfolio growth YTD has been sluggish and more or less flat at EUR 157.8m in July. This, despite a rather steady growth in monthly figures for intermediated financing, having seen a peak of nearly EUR 40m in May. Deposits have likewise remained flat, at EUR 249.4m in July. The loan book has remained mostly within the EUR 160-170m mark, which according to the company would be needed to reach positive profit levels. Our net earnings estimate is at EUR 0.1m, with uncertainty relating to realized and expected credit losses.
Growth needed to counteract increasing interest expenses
We have lowered our estimates for the remained of the year, now expecting near-zero net earnings. The challenge for Alisa Bank in our view right now is the discrepancy between the loan book and deposits. The company has been actively raising the interest on its deposits throughout H2, now at 3%. Without growth of the loan book, interest expenses will start to become a burden on earnings. Therefore, our key interest in the H1 report lies on the company’s growth outlook and more recent new products, such as the Banking-as-a-Service cooperation with Talenom.
HOLD with a target price of EUR 0.37 (0.40)
With the start-up of operations, rebranding (and expected focus on marketing), new products and lending activity remaining fairly good, despite a slower start to 2023, growth potential still remains. Awaiting more signs of growth and on our lowered estimates, we adjust our TP to EUR 0.37 (0.40), HOLD-rating intact.
As a part of its cost-saving program, DT today initiated change negotiations which may end up in a termination of a maximum of 9 employments and changes in roles. In addition, other measures to improve cost efficiency will be taken in all of the company’s operations.
Marimekko publishes its Q2 result on Thursday, Aug 17th. We expect the company to deliver solid 7% growth and profitability on a double-digit level in Q2. New store openings are anticipated to boost H2 growth.
Aspo’s outlook worsened this spring, and Q2 results fell below reduced estimates. ESL and Telko face their own issues, but the challenges are largely temporary in nature.
ESL and Telko had issues which burdened profitability
Aspo’s EUR 133m Q2 revenue was a bit soft relative to the EUR 143m/138m Evli/cons. estimates, while the EUR 3.6m adj. EBIT fell clearly short of the EUR 6.5m/6.5m Evli/cons. estimates due to especially because of ESL’s challenges but also because of the hit Telko endured as market prices dropped (down 40% y/y in some plastics categories). Increased Asian imports restrained volumes in the case of plastics, but overall Telko’s demand outlook stays good. ESL was hit by Supramax losses while demand for the smaller core vessels remains rather stable albeit at a lower level of volumes this year; the demand softness is due to the key industries, steel and forest, which make more than 50% of volumes. Leipurin performed pretty much as expected.
We expect modest improvement in conditions for H2
Aspo’s guidance implies EBIT in the range of EUR 13-23m for H2; Q3 will improve a bit q/q but will still not be great. ESL’s demand and Telko’s market prices are the main drivers, meaning Aspo could still reach the upper end of the range should the situation begin to improve soon. We estimate ESL’s FY ’23 EBIT at EUR 22m, a steep drop relative to the EUR 37m comparison figure but also likely to be the trough before ESL’s fleet expands with green coasters. The Supramaxes will be sold, and ESL’s market opportunity is set to grow long-term thanks to significant industrial investments on both sides of the Bothnian Bay. Telko still pursues European M&A despite the market challenges.
This year is likely to set quite low comparison figures
We estimate adj. EBIT of EUR 28.7m for the year; the respective above 12x EV/EBIT multiple represents a somewhat elevated level as both ESL and Telko are likely to generate quite soft figures for the year. We believe Aspo has a fair chance of reaching above EUR 35m EBIT again next year as the recent troubles of ESL and Telko are largely temporary in nature and Leipurin proceeds according to plan. Aspo is then valued around 9x EV/EBIT on our FY ‘24 estimates, which we consider a fair level. Our new TP is EUR 7.0 (8.0) as we revise our EBIT estimates down by some 10-15% for this year and next. We retain our HOLD rating.
Etteplan reported Q2 results that were below our estimates. Etteplan’s sales and EBIT from business operations were at EUR 89.8m (Evli est. EUR 93.2m) and EUR 6.1m (Evli est. EUR 7.8m) respectively. The Software and Embedded Solutions segment underperformed due to market weakness, especially in early Q2.
Profitability suffered from a weak market
In Q2, Etteplan’s revenue growth slowed down to 0.7% as the company’s revenue came in at EUR 89.8m (EUR 89.3m in Q2/22, EUR 93.2m Evli est.). With the slow growth, the company’s EBIT decreased by 10.3% to EUR 6.1m (EUR 6.8m in Q2/22, EUR 7.8m Evli est.). As a result of the softer Q2, the company specified its financial guidance; revenue in 2023 to be EUR 360-380 (previously 360-390) million, and operating profit (EBIT) in 2023 to be EUR 28-31 (previously 28-33) million.
FY 2023 estimates revised downwards
The Q2 softness was led by the Software and Embedded Solutions service area, where activity notably slowed in April. Client R&D projects are being deferred due to a challenging macroeconomic environment with high interest rates and persistent inflation. Despite the slowdown, the company saw improving activity already at the end of the quarter as several major contracts were secured. We raised revenue growth forecasts for Engineering Solutions due to strong Q2 performance and the LAE Engineering acquisition in early Q3. Conversely, we revised Software and Embedded, and Technical Communication Solutions estimates downward due to lower expected volumes and softness seen during H1. We now estimate net sales of EUR 371.0m and EBIT of EUR 28.5m for FY 2023.
HOLD with a target price of EUR 15.0 (16.0)
Etteplan's weak H1 puts pressure to H2, our estimate for the FY EBIT lies in the lower end of the current guidance range. We revise our target price to EUR 15.0 (16.0), HOLD-rating intact due to the elevated 2023E multiples based on our updated estimates. When looking at 2024E multiples, our target P/E and EV/EBIT multiples are roughly in line with the company’s historic average levels. In addition, the current valuation is significantly below the value derived from our discounted cash flow valuation.
Aspo’s Q2 results fell short of estimates especially due to the loss-making Supramax vessels and certain other dry bulk market challenges, while Telko’s business suffered from declining prices.
Etteplan’s sales and EBIT from business operations were at EUR 89.8m and EUR 6.1m respectively. EBIT was below our estimates especially due to weaker profitability in Software and Embedded solutions.
Suominen should make further progress towards restoring profitability in H2, however Q2 results remained very soft.
Suominen’s Q2 revenue declined 4.5% y/y and was EUR 113m, compared to the EUR 121m/120m Evli/cons. estimates, as Europe came in as we estimated but Americas fell EUR 8m short of our estimate. There was some progress as volumes increased slightly, but not quite as much as might have been expected. The low volumes meant gross profit fell some EUR 5m short of our estimate, however sales margins are already improving due to the lag between sales prices and lower raw materials prices. Decreased SG&A costs also helped a bit, but operating profitability figures ended more than EUR 3m lower than we estimated. Cash flow was strong thanks to declining inventories.
Focus rests on both volume growth and efficiency
Suominen continues to expect comp. EBITDA to increase, even when the H1’23 figure was flat y/y, since there are still signs the US supply chain inventory situation is improving further; H2 is also usually stronger as demand for hygiene products picks up in late summer. Suominen hence focuses on volume recovery and plant-level efficiency measures; the latter has recently included the closure of the plant in Mozzate, and the issues related to European production transfers still demand some attention (in addition to which Suominen also looks for some incremental cost measures). The US market is central for a meaningful group-level volume recovery, but Suominen is also bringing the EUR 6m Nakkila sustainable products investment to completion in H2 as new products sales continues to be another key focus area.
H2 improvement still needs to justify current valuation
We revise our estimates down for both this year and next. We expect FY ‘23 top line to stay flat when volumes improve while prices decline. We revise our FY ’23 profitability estimates down by EUR 10m and those of FY ‘24 by EUR 3m. FY ’23 profitability seems to remain low, but we estimate Suominen to reach around 8% EBITDA and 5% EBIT margins by the end of the year. Further marginal improvement next year should then produce an EBITDA north of EUR 40m, which would be in line with historical averages and values Suominen about 7.5x EV/EBIT on our FY ’24 estimates. We retain our TP of EUR 2.7 and HOLD rating.
Suominen’s Q2 results showed some improvement in terms of operational efficiency, however top line fell clearly short of estimates and profitability is yet to improve in a meaningful way.
Scanfil’s Q2 results were a bit better than we estimated. Favorable positioning has already produced strong results and thus demand outlook beyond this year drives valuation.
Results continued to improve rapidly in Q2
Scanfil’s top line grew 14% y/y to EUR 243m vs the EUR 240m/237m Evli/cons. estimates. Spot market component purchases declined by EUR 24m y/y to EUR 5m and hence growth excluding them amounted to 30%. The high figure was driven by Energy & Cleantech, but demand remained good across all the segments; Advanced Consumer Applications’ headline revenue decreased by 16% but grew 7% excluding spot purchases. EBIT amounted to EUR 17.5m, compared to the EUR 16.2m/16.6m Evli/cons. estimates, and net working capital and inventory management turned cash flow very strong.
Scanfil has already basically achieved its margin potential
The component situation has improved a lot this year, but there are still some availability issues. Scanfil’s EBIT has already gained markedly thanks to better productivity due to component availability as well as recent production transfers within the network. Scanfil has made incremental capacity investments for a while now and announced the EUR 20m expansion of its facilities in Poland as the latest measure. The investment isn’t that big on group level yet adds up together with other recent expansions. Scanfil begins to fill the space with lines from Q2’25 onwards. Long-term trends are favorable and we believe e.g. energy efficiency continues to be a key theme which drives many Scanfil accounts. Scanfil should have an attractive pipeline of Energy & Cleantech customers, which helps secure long-term potential. Scanfil continues to assess capacity growth plans from the perspective of both M&A and incremental plant expansions.
Valuation reflects high profitability levels
We make marginal upward revisions to our estimates. Demand trends appear strong enough to sustain at least some further growth next year, but Scanfil has already achieved its long-term margin potential and valuation also reflects the fact. Scanfil trades 10.5x EV/EBIT on our FY ’23 estimates. The 10x multiple on our FY ’24 estimates likewise represents a double-digit premium relative to peers, which we see justified by the relatively high margins. Our new TP is EUR 11.5 (11.0); retain our HOLD rating.
Although DT delivered solid revenue growth in Q2, the group EBIT fell short of our low expectations. Short-term outlook in medical is uncertain while security solutions are expected to see strong growth from Q3’23 onwards. We expect a significant improvement in EBITA in the coming years.
Enersense’s Q2 results recovered well from the challenging comparison period, and earnings should have further room to grow also next year and beyond.
Results are by and large improving across the board
Enersense’s Q2 revenue grew 44% y/y to EUR 86m, compared to our EUR 77m estimate. The top line beat was driven by Power and Connectivity, however all segments still saw roughly similarly high double-digit growth rates. The EUR 3.1m adj. EBITDA was above our EUR 2.3m estimate; Smart Industry continued to incur ramp-up costs related to its offshore business (should reach profitability in Q4 although it continues to scale up beyond that) in addition to the EUR 0.9m capital gain from the sale of Enersense Solutions and the EUR 0.4m credit loss provision. Strategic investments burdened EBITDA to the tune of EUR 1.6m. International Operations’ margins improved clearly more than we estimated as the Baltic contracts have now mostly adjusted to recent inflation. Power achieved a clearly better profitability than we estimated, despite investments in the EV charging business, while Connectivity came in soft relative to our estimates due to issues related to e.g. labor efficiency.
Many earnings growth drivers remain in place next year
Q2 saw a strong order intake within Connectivity due to fibre projects. The segment still has scope for price increases, and thus we expect its results to contribute to further earnings growth next year. Certain industrial customers see lower demand going forward, but Smart Industry has diversified operations and the offshore ramp-up is likely to lift its profitability next year. International Operations’ order activity has cooled a bit from the recent highs, but it achieved a decent 4.7% EBITDA while we believe the margin to expand more on a full-year basis next year. The ERP system investment continues next year, but it is to help long-term potential in addition to which Enersense’s small portfolio streamlining decisions help retain core focus.
Valuation not challenging considering earnings potential
We estimate 21% growth for the year, and while we see long-term organic growth at a more modest level we still estimate FY ’24 profitability to improve by EUR 4m. The 14x FY ‘23 EV/EBIT multiple isn’t cheap relative to peers, but it should decline to ca. 8x next year. Our new TP is EUR 7.0 (6.5); we retain BUY rating.
Scanfil’s Q2 results came in somewhat higher than estimated. Top line was a bit higher than we expected, driven by Energy & Cleantech, while EBIT topped our and consensus estimates by some EUR 1m.
Enersense’s Q2 figures were better than we estimated as Power and Connectivity revenue clearly topped our estimates while profitability improved in all segments.
DT posted Q2 net sales in line with our expectations, while adj. EBIT fell short of our estimates. Medical market is showing increased uncertainty while security markets are expected to improve. Group sales anticipated to decline in Q3 and grow in H2’23.
CapMan's net sales in Q2 amounted to EUR 16.5m, below our estimates and below consensus (EUR 18.5m/19.4m Evli/cons.). EBIT amounted to EUR 4.2m, below our estimates and below consensus (EUR 10.7m/10.5m Evli/cons.), on our estimates mainly due to fair value changes.
Suominen reports Q2 results on Aug 9. We expect meaningful signs of earnings recovery as raw materials prices have mostly normalized and higher US volumes begin to come through.
Q2 results to improve, but recovery continues in H2 as well
Suominen’s Q1 volumes developed flat largely as expected; the US inventory levels have to some extent begun to melt, but delivery volumes were not nearly yet at the levels where Suominen would have been able to achieve decent earnings. Q1 EBITDA therefore remained a very modest EUR 2.6m. Raw materials prices have been on a declining trend for a year now, which we believe will help Q2 profitability improve even if volumes are still somewhat lacking. We estimate Q2 revenue to have grown 3% y/y to EUR 121m, thanks to incremental volume recovery in the US, while we see EBITDA at EUR 6.3m.
Raw materials prices seem to have already normalized
Recent double-digit q/q declines in pulp prices support margins at least in Q2 and Q3, however nonwovens prices will also follow down with a lag. We hence believe Suominen’s margins to gain markedly over the course of this summer, and any further earnings gains after that are more likely to be driven by higher US volumes. Oil-based raw materials like polyester and polypropylene declined steeply already in H2’22 and hence their price development has been more stable this year. We believe the raw materials price correction has now mostly materialized, which should let Suominen focus on volumes and new products’ sales. We estimate Suominen’s FY ’23 gross margin to remain at a rather low level of some 8% yet see the quarterly margin improving to above 10% by the year’s end. Suominen currently guides increasing EBITDA for the year, and an upgrade wouldn’t be that surprising should it arrive at some point this year.
Valuation reflects expectations about H2 recovery
Suominen’s FY ’23 earnings multiples remain elevated as H1’23 results stay soft, but we estimate H2 improvement to deliver some 9% EBITDA and 5% EBIT margins and hence FY ’24 should see earnings above such levels. Suominen is now valued 15x EV/EBIT on our FY ’23 estimates, however we expect the multiple to decline to around 6x next year. We continue to view valuation neutral. We retain our EUR 2.7 TP and HOLD rating.
Vaisala had a two-folded quarter with W&E delivering solid 18% growth while IM saw a decline due to a soft market. The outlook remains strong for W&E, but IM’s markets remain uncertain which impacts the BU’s growth prospects in H2.
DT reports its Q2 results on Thursday, July 3rd. We expect the medical business to bring strong revenue growth while Q2 EBIT is yet limited by cost inflation and stagnant market of China. With moderate valuation, we raise our rating to BUY (HOLD). With adjusted estimates, TP is set at 16.0 (17.5).
With preliminary figures already given, Vaisala’s Q2 result contained no big surprises. W&E grew nicely while IM suffered from a soft market. Market outlook provides decent growth to continue with elevated uncertainty in the industrial market segments.
Finnair should still have scope for further improvement, however current market conditions also inform some caution with respect to long-term financial targets.
Very high profitability even ahead of the summer season
Finnair’s EUR 749m Q2 revenue landed near the EUR 724m/760m Evli/cons. estimates, while passenger revenue was EUR 40m above our estimate as unit yields were higher than we expected (RASK was 27% above the Q2’19 level). Finnair had its best Q2 in history in terms of EBIT; there were no big cost surprises relative to our estimates and hence the higher-than-estimated top line translated well to comparable EBIT, which was EUR 66m vs the EUR 44m/51m Evli/cons. estimates. Capacity constraints meant maintenance costs were low, but the issue had no major impact on numbers. The capacity issues also led to a further lag in ASK compared to pre-pandemic levels, an industry-wide challenge which however has helped profitability in the short-term.
Out of the woods, yet strategy execution work continues
On the one hand airlines are in a spot from where it’s unlikely to get much better, considering the high yields and current supply bottlenecks as well as improved cost competitiveness in the wake of the pandemic, while on the other hand certain demand trends may prove to be secular. Experience consumption has so far showed resiliency against inflation, and hybrid work has expanded the market for leisure travel. Competitive landscape appears stable especially in Europe, while the field is level in markets like Japan and Korea, but Atlantic competition is more intense. Finnair still does some further network optimization, while long-term strategy requires new fuel-efficient planes.
6% EBIT margin already has a rather solid basis
The low end of the EUR 150-210m range seems very cautious as we believe Finnair will achieve more than EUR 150m in combined Q2 & Q3 EBIT alone. Finnair is likely to achieve an EBIT of 6% already this year, which makes the new long-term target of 6% by the end of ‘25 look muted. We estimated above 6% levels for the coming years already before the update and thus make only marginal revisions. Finnair trades ca. 8.5x EV/EBIT on our FY ’23 estimates, a double-digit premium to peers which we find acceptable as above 6% EBIT looks realistic already quite soon. Our new TP is EUR 0.54 (0.53) as we retain our HOLD rating.
Consti’s Q2 report provided no real surprises, and the figures were largely in line with our estimates. Our focus for Q2 was on the company’s order intake which came in strong at EUR 106.5m in Q2 (Q2/22: EUR 98.7m). We see continued steady development going forward backed by the healthy backlog.
Q2 results were in line with our estimates
Q2 net sales were EUR 75.7m (compared to EUR 73.1m in Q2/22), roughly in line with our and consensus estimates (EUR 79.8m/77.7m Evli/cons.). Sales grew 3.6% y/y. Operating profit in Q2 was EUR 3.0m (EUR 2.9m in Q2/22), aligning with our and consensus estimates (EUR 3.1m/3.1m Evli/cons.) at a 4.0% margin. EPS in Q2 was EUR 0.29 (EUR 0.28 in Q2/22), in line with our and consensus estimates (EUR 0.29/0.29 Evli/cons.). Cash flow generation was strong during the quarter, with free cash flow improving to EUR 4.1m (EUR 2.6m in Q2/22) due to good profitability and released working capital.
Improved backlog strengthens future outlook
Consti’s order backlog kept growing both y/y and q/q as it reached new record level of EUR 297.9m, the improved backlog strengthens outlook for H2 and 2024. As the company’s development was steady during the first half of 2023, we have made only slight adjustments to our estimates. After the minor adjustments, we forecast revenue of EUR 321.9m for 2023 with EBIT of EUR 12.2m. Consti kept its guidance for 2023 unchanged as it estimates EBIT of EUR 9.5–13.5m for the FY. Our estimate for EBIT sits above the middle point of the guidance. We estimate that the company maintains similar profitability level compared to H2 2022 despite increased volumes, due to expected cost inflationary pressure.
BUY with TP of EUR 14.0
We base our valuation of Consti on both the company’s own historic multiple levels and relative valuation. Based on our estimates for 2023, the company trades at 8.9x P/E and 6.3x EV/EBIT. In our view, Consti's current price undervalues its current form, and the valuation remains attractive.
Innofactor saw some challenges in Q2 but still reported rather decent results. Increased price competition remains a short-term threat, but financially, we expect improvements towards the end of the year.
Some challenges in Q2
Innofactor reported rather decent results despite margins falling short of our estimates. Net sales amounted to EUR 20.1m (Evli EUR 19.4m), growing by 18.6% y/y and 11.1% organically. EBITDA amounted to EUR 1.8m (Evli EUR 2.3m). Q2 was affected by Easter and other weekday holidays and usage of flexi leaves around these. Onboarding of a notable number of new employees also reduced invoicing rates during April-May, while Innofactor in June achieved its highest single-month billing rate since going public. Exchange rates also had a significant negative impact. The order backlog remained on previous year levels, at EUR 77.3m, with the price competition for public sector tenders having increased significantly during the quarter.
Expect improvements towards the end of the year
The increased price competition causes some concerns for the remainder of the year. Although the prices in public tenders appear unsustainable and will likely rebound, we expect competition to still remain tough. The backlog supports growth for now, but new sales will need to pick up for Innofactor to remain on a more rapid growth track. The more recent development of billing rates is encouraging and along with the recent recruitments and reduced employee turnover providing support for margin improvement. In terms of financial figures, we expect Q3 to likely still be a bit more challenging but Q4 to be notably better. We have made only smaller adjustments to our estimates for 2023e, mainly due to Q2 figures.
BUY with a target price of EUR 1.5 (1.6)
With the slight headwinds seen, as well as the minor downward adjustments to our estimates, we lower our target price to EUR 1.5 (1.6) but retain our BUY-rating. Although valuation is currently rather fair on our 2023 estimates, we see valuation remaining favourable due to the margin improvement potential.
Finnair’s Q2 revenue was well in line with estimates while the EUR 66m comparable EBIT was clearly stronger than expected. Finnair also specified its profitability guidance range for the year and updated its long-term profitability target to 6% by the end of 2025.
Consti's net sales in Q2 amounted to EUR 75.7m, roughly in line with our and consensus estimates (EUR 79.8m/77.7m Evli/cons.), with growth of 3.6% y/y. EBIT amounted to EUR 3.0m, also in line with our and consensus estimates (EUR 3.1m/3.1m Evli/cons.). Guidance for FY 2023 (unchanged): operating result for 2023 will be in the range of EUR 9.5–13.5 million.
SRV reported Q2 figures that were lower than we estimated for both net sales (EUR 141.3m vs. Evli est. EUR 156.1m) and operative EBIT (EUR -3.9m vs. Evli est. EUR 1.2m). SRV's healthy backlog provides support for H2 and beyond.
Profitability remained under pressure during Q2
Revenue in Q2 was EUR 143.1m (EUR 211.4m in Q2/22), below our estimate of EUR 156.1m. Revenue declined 32.3% y/y. Operating profit in Q2 amounted to EUR -3.0m (EUR 10.1m in Q2/22), below our estimate of EUR 1.2m, at a margin of -2.1%. The operative operating profit in Q2 amounted to EUR -3.9m, also below our estimate of EUR 1.2m. The outlook for 2023 was kept unchanged and SRV still expects y/y revenue decline in 2023 and positive yet lower than 2022 operative operating profit.
Soft H1 increases pressure for H2
SRV’s order intake during Q2 was impressive at EUR 245.9m (EUR 72.3m in Q2/22). With the strong order intake, the company’s order backlog was at a healthy level of EUR 993.1m at the end of Q2 2023 (EUR 745.9m in Q2/22), up by 33.1% y/y. The company expects that the strong backlog in business construction will start to bring in net sales especially during the Q4 2023 and beyond. We have kept our estimates for business construction net sales intact as we keep forecasting substantially higher volumes for Q4 2023. For housing construction, we increased our estimates for H2 2023 as the activity level was higher than expected during Q2 2023 and the company was able to start new units at the end of the quarter. With the Q2 figures and our revised estimates, our estimate for FY 2023 operative EBIT is at EUR 1.1m. Our revised estimates align with the company's 2023 outlook, yet the risk of falling short of the guidance has increased.
HOLD with a target price of EUR 4.3 (4.4)
We estimate that the current backlog will start delivering net sales at the latter part of H2 2023 and beyond. With the soft H1 profitability, risk of falling short of the current guidance has increased. Despite near-term pressure, the healthy backlog promises a better future. We revise our target price to EUR 4.3 (4.4) and retain our HOLD rating.
Some of Vaisala's industrial customers have recently postponed their investment decisions which was reflected in the BU’s preliminary Q2 figures. W&E experienced better-than-expected growth and profitability during Q2. With revised guidance and milder Q2, we cut our 23-24E EBIT estimates by approx. 9%.
Innofactor’s Q2 saw continued good growth, better than anticipated, up 18.6% y/y to EUR 20.1m (Evli EUR 19.4m). EBITDA was below expectations at EUR 1.8m (Evli EUR 2.3m), with the EBITDA-margin improving slightly y/y. Guidance reiterated, Innofactor’s net sales and EBITDA in 2023 are expected to increase compared with 2022.
SRV's net sales in Q2 amounted to EUR 143.1m, below our estimate of EUR 156.1m. Due to volume miss, the profitability was a disappointment, with EBIT at EUR - 3.0m (EUR 1.2m Evli).
Vaisala revised its net sales guidance and reduced its EBIT expectations for 2023. Simultaneously, the company provided preliminary figures for Q2.
Finnair reports Q2 results on Jul 21. The recent profit warning indicates this year will already see decent results, however valuation also requires further improvement.
A lot of volume potential over the summer and beyond
The summer travel season is once again set to be busy, as indicated by Finnair’s recent positive profit warning and high load factors already in June. Finnair’s positioning has meant its Q2’23 RPK was still some 30% below the Q2’19 comparison figure, however we estimate continued high passenger yields and achieved cost cuts to have helped Q2 EBIT to EUR 44m (close to the EUR 47m Q2’19 figure). We estimate FY ’23 EBIT at EUR 165m, by itself a decent figure and which Finnair could well top if yields and volumes develop favorably also in H2. Volume recovery is set to continue due to Finnair’s positioning; pricing levels don’t seem to be declining any time soon, but neither may they have much further potential to advance from here on.
Finnair’s volumes are still building up after years of crisis
Lately Asia and the Middle East have been most visibly driving Finnair’s volume recovery. Neither region has yet quite reached their potential as the former’s volumes were still only 50% of their Q2’19 levels while the latter is a new focus area. European volumes were a bit above 80% of the Q2’19 levels and so may not have that much further potential as Asian volumes will not recover fully to generate enough transit passengers, whereas North American traffic is another piece of the puzzle for Finnair to build its network large enough to sustain the current fleet.
Valuation demands at least some more earnings gains
Many airlines reached decent figures already last year, and margins are to improve across the board this year. Finnair will see a much steeper improvement than a typical airline due to its positioning. Next year is unlikely to be too bad as a typical peer’s EBIT margin is expected to improve by another two percentage points. We estimate Finnair’s similar improvement at less than half that rate even though it starts from a considerably lower base. Finnair trades roughly 10x EV/EBIT on our FY ’23 estimates, some 20% premium relative to peers. The multiple is 8x on our FY ’24 estimates, still an above 10% premium but which we view acceptable given Finnair’s potential to achieve some more catch-up relative to peers. We retain our EUR 0.53 TP and HOLD rating.
Consti reports its Q2 results on July 21st. We anticipate continued y/y growth and expect profitability to stay at a similar level compared to the previous year despite increased volumes, due to expected cost inflationary pressure. We see the Q2 order intake development crucial for H2 volumes.
Expecting a solid Q2, focus is on order intake development
We estimate net sales of EUR 79.8m for Q2, with 9% y/y growth. The estimated continued growth is driven by the Housing Companies and Corporations segments. In terms of profitability, we estimate EBIT of EUR 3.1m with similar profitability levels when compared to last year despite higher volumes given the cost inflationary pressures in materials and personnel expenses. Besides the figures, our attention is on the order intake development. With the end of Q1 backlog being more evenly distributed across subsequent years, new orders are necessary to fill the volumes for the remainder of 2023.
Overall construction market outlook remains gloomy
The construction market is expected to slow down in 2023 driven especially by the residential new construction market. The renovation construction market is still expected to experience slight growth during 2023 driven by the need-based nature of the segment. While the renovation construction market typically operates differently, the notable decline in the new construction market may impact renovation construction to some extent. Some of Consti’s customers have already publicly announced delays and postponements of renovations and other repairs driven by the increased interest expenses and other costs. Although the market outlook remains gloomy, we haven't adjusted our estimates. However, the recent news flow has drawn greater attention into the order intake development. The development in the housing company segment is of key interest as the future outlook should be clearer after H1.
BUY with TP of EUR 14.0 (14.0)
We continue to see the valuation of Consti undemanding. The company trades at 8.8x P/E and 6.1x EV/EBIT on our 2023 estimates which offers a significant discount to both the main peer companies (Table 1) and Consti’s own historic multiples.
Duell has faced challenges during the FY 2023 due to the current high interest rate environment, leading to reduced demand across the powersports aftermarket value chain. Despite the recent share price strength after the company posted solid Q3 figures, we see the current valuation moderate as we estimate continued growth in Europe and improved margins going forward. We initiate coverage of Duell with a BUY rating and TP of EUR 1.4.
One-stop shop for powersports aftermarket products
Duell is a Finnish powersports aftermarket distribution company established in 1983, headquartered in Mustasaari, with warehouses and sales offices across Europe. It serves as a source for a diverse range of equipment and parts in all powersports categories, acting as a convenient one-stop-shop. With approximately 600 brand owners and manufacturers, including Duell's own brands primarily based in Asia, the company ensures a wide supply network. Dealers benefit from Duell's distinctive brand and product selection, offering over 150,000 SKUs from more than 500 brands.
Expecting growth and improved margins going forward
We estimate that the organic sales will continue to decrease during Q4 while the inorganic growth is expected to support the company’s sales. For the FY 2023, we estimate total net sales of EUR 125m with 0.8% y/y growth. In terms of profitability, we estimate that Duell will reach adj. EBITA of EUR 7.4m in 2023 with margin of 5.9%, down from EUR 8.7m and 7.0% during FY 2022. Going forward, we estimate that Duell will return to profitable growth with the help of European expansion, partly scalable cost structure and the ongoing efficiency programme.
BUY with a target price of EUR 1.4
We initiate coverage of Duell with a BUY-rating and target price of EUR 1.4. In our view, the valuation looks moderate considering the Duell’s growth prospects in the Europe and the ongoing efficiency programme that we estimate to improve the company’s margins going forward. On our estimates for 2023E, the company trades at slightly elevated multiples yet on a discount when looking at 2024E relative multiples and the value derived from our discounted cash flow model.
Scanfil upgraded its guidance, and although the hike wasn’t very big it was already the second time this year.
We make only small revisions for this and coming years
Scanfil upped its guidance: the new revenue and EBIT midpoints are up by 1.6% and 7.5% respectively, and so the revision wasn’t that significant in magnitude but was the second upgrade this year. Well-known incremental drivers were behind the upgrade, namely strong demand, further improvement in electronics availability and increases in production capacity. Scanfil has therefore been able to match high demand with supply. We make only small estimate revisions as our previous estimates were still within the current range. Scanfil’s FY ‘23 EBIT margin is likely to land close to 7%; in our view there isn’t any clear reason why this wouldn’t be the case also going forward. We revise our EBIT estimates up by around EUR 2m for this and coming years.
Growth to continue, EBIT margins are where they should be
We estimate Scanfil to reach a CAGR of 16% in the 3-year period of FY ’21-23; the latest year still contains some spot purchases, which are inflationary items as they don’t add margins, but underlying organic growth has remained strong to the extent that Scanfil may well reach double-digit headline growth also this year despite the nominal headwind posed by the fading spot items (Q1 growth was 21% y/y excluding them). Scanfil has done price hikes for deliveries in response to inflation, however higher volumes have driven a much more significant part of Scanfil’s recent growth. In our view the pricing dynamic may well turn deflationary soon, and as such represent a top line headwind, yet Scanfil’s growth is still most likely to be driven by higher volumes stemming from its favorably positioned customer accounts.
Some premium in valuation is warranted
Double-digit growth is unlikely to extend for very long, and while we expect 5%+ CAGR to be a realistic long-term rate we still estimate next year’s growth below such levels due to issues related to components and pricing as well as softening in demand following a period of high growth. Scanfil is valued 11.5x EV/EBIT on our FY ’23 estimates; the valuation implies some 15% premium relative to peers, a justified level (and our estimates still have upside potential) yet we continue to view valuation fair. Our new TP is EUR 11.0 (10.0); retain HOLD rating.
Dovre revised guidance down due to larger-than-expected challenges in the Finnish wind power construction market.
We cut our FY ’23 EBIT estimate by EUR 1.4m
Dovre downgraded guidance due to headwinds already to some extent visible in the Q1 report but which have since proved more pronounced. Dovre previously expected FY ‘23 top line to improve and EBIT to stay about the same compared to FY ’22, however the new guidance hints revenue to decline by a roughly mid-single digit rate while EBIT may be down by more than EUR 1m. We revise our FY ’23 revenue estimate down by 8% to EUR 190.8m and estimate EBIT at EUR 7.3m (prev. EUR 8.7m). We make only marginal revisions for Project Personnel and Consulting; we cut our FY ’23 revenue estimate for Renewable Energy by 16%, now estimating the segmental EBIT at EUR 1.5m (prev. EUR 2.8m). Our estimates for the coming years are likewise down for Renewable Energy (we trim some EUR 1m in terms of EBIT) but remain intact for Project Personnel and Consulting.
Strong resilient Norwegian results
No softness was to be seen in the performance of Project Personnel and Consulting last year and Q1 showed high growth even in EUR terms despite weak NOK; we expect the Norwegian businesses’ performance to translate to flattish or slightly positive y/y development. Suvic’s long-term demand drivers remain intact as countries like Finland are still far from done building up their wind power capacity, however the lack of transmission capacity may in places limit demand in the short-term. In our view such challenges should be relatively easy to solve in countries like Finland (compared to e.g. the US where there are many other complicating factors besides long distances). We hence believe Renewable Energy is likely to grow again next year; our respective EUR 84m top line and 3% EBIT margin estimates are more likely to be on the conservative side.
Finnish wind power market to add earnings again next year
We expect Renewable Energy EBIT to improve again to EUR 2.5m next year, which would help Dovre EBIT to EUR 8.2m. Dovre is valued no more than 7x EV/EBIT on our FY ’23 estimates (excl. 49% of Suvic), an undemanding level considering the resilient Norwegian performance and temporary softness in Finland. Our new TP is EUR 0.77 (0.82); we retain BUY rating.
DT has successfully navigated through external obstacles and now has a prime opportunity to concentrate on growth, business development, and profitability. Despite uncertain economic conditions, the underlying demand remains robust.
Endomines agreed on convertible loan financing with Finnish investors to start production at Hosko and to increase production at the Pampalo underground mine.
Financing up to EUR 3.6 million secured
Endomines secured a convertible loan of up to EUR 3.6m from Finnish investors for gold production at Hosko and increased production at Pampalo. The agreement includes an initial EUR 1.8m in June 2023 and an option for another EUR 1.8m in October 2023. The convertible loans can be exchanged for shares after 24 months. The loans have a 36-month maturity with a 12% annual interest rate. Despite the high cost and risk for dilution, we see the financing positive as it supports the company’s strategy execution in the Karelian Gold Line.
We revised our production estimates upwards
Endomines aims to produce 20k ounces by 2024 through investments in Hosko and Pampalo. Hosko is projected to contribute 10-30% of total production in 2024. With the investment in Pampalo underground mine, our production estimates for Pampalo have slightly increased. Alongside this, we expect Hosko to contribute around 20% of total production in 2024. Our 2024 production estimate is around 15.5k ounces, well below the company's target, due to the Pampalo gold reserves at the end of FY 2022 being only 29k ounces. We have also adjusted our estimates for CapEx, interest expenses, and depreciation.
BUY with TP of EUR 5.6 (6.5)
The revised production estimates do not have significant impact on our SOTP valuation, as we have already accounted for the potential of the satellite deposits along the Karelian Gold Line in our real option value model. The valuation of the company's US assets remains the biggest uncertainty in the SOTP model as Endomines has not yet released any information regarding the potential partnerships and/or divestments of these assets. We adjust the valuation downwards and value the US assets at EUR 42-46/oz (incl. net debt) which is roughly in line with the peer group EV/Resources (Table 3) and close to the original purchase price. Given the uncertainties, we maintain our valuation on the lower end of our SOTP-based valuation range.
Finnair issued a positive profit warning, and although the revision wasn’t a big surprise it came relatively early.
Finnair hits above 5% EBIT margin already this year
Finnair upgraded guidance, according to which it will near or even exceed the FY ‘19 adj. EBIT level of EUR 163m this year. Finnair did EUR 3,098m in FY ’19 revenue, but is still likely to remain a bit shy of that figure this year. We don’t view the upgrade a big surprise (although it arrived early) as Finnair has reached positive EBIT since Q3’22, and Q1’23 results were also strong considering seasonality. The revision was driven by the extension of factors which helped it reach its break-even Q1’23 EBIT, in other words continued high demand, moderating fuel prices and strategy execution. We previously estimated Finnair to reach EUR 127m EBIT this year, whereas our new estimate is EUR 160m. We make minor revisions to our top line estimates but update our FY ’24 EBIT estimate to EUR 199m (prev. EUR 186m).
The market environment is quite favorable right now
Fuel prices have already slid a lot from their peak, yet the levels are still high in the historical context and hence a further decline seems more likely than an increase. In any case the airline industry continues to be in a rather sweet spot for now as higher ticket prices have not so far curtailed demand. The inflationary environment itself causes uncertainty around demand and operating costs going forward, while it’s also unclear to what extent inflation persists. We note our Finnair EBIT margin estimates continue to significantly lag those of its peers.
At least some further improvement to be expected
Finnair’s peers’ EBIT margin estimates for FY ’23-24 have gained by 100bps in less than two months. We update our FY ’23 estimate by 100bps, but our revision is only 40bps for next year. We believe Finnair will issue new long-term targets soon as the ones given only nine months ago have already become outdated. Those targets at no point looked too challenging, but back then Finnair still had a lot to do in terms of strategy implementation. Finnair is now on a sound footing, but it remains to be seen how much more improvement continues to come through now that the market is already very favorable. Finnair is valued 10x and 8x EV/EBIT on our FY ’23-24 estimates, which we view neutral levels. Our new TP is EUR 0.53 (0.49); we retain HOLD rating.
Vaisala’s recent growth has been supported by strong underlying demand and the alleviation of the pandemic's impact. As economic conditions have become more challenging, the company now has an opportunity to confirm its competitiveness and demonstrate the sustainability of its growth. Furthermore, the projected scalability should be unleashed from 2024 onwards.
We see SRV as well positioned to weather the storm driven by the company’s healthy, low-risk project backlog and low amount of unsold completed units in its balance sheet. Despite the long-term potential driven by the projected turnaround, we continue to see the short-term potential for the stock limited. We retain our HOLD-rating and adjust our target price to EUR 4.4 (4.1).
Leading project management contractor in Finland
SRV is a leading Finnish project management contractor and one of the largest house builders in the Helsinki Metropolitan Area. SRV business model is largely based on the company’s own project management model, the SRV approach. The SRV approach relies heavily on the company’s subcontractor network, financing and other partners. In 2022, SRV was the 5th largest construction company in Finland measured by revenue.
Weak market hampers turnaround
Due to the prevailing high inflation and interest rate environment, the construction volumes are expected to decrease in 2023, primarily driven by a decline in residential construction. SRV’s construction margins have slowly improved during the last two years yet we expect profitability to stay at low levels during 2023 driven by low residential volumes. Despite lower volumes in the higher margin potential residential development projects, we see that the company is able to weather the current storm well as majority of its backlog consists of lower risk non-residential contracting projects. In addition, SRV has low amount of unsold developer contracted units in its balance sheet.
HOLD with a target price of EUR 4.4 (4.1)
On our estimates, the near-term valuation upside remains limited. SRV trades at a premium to its Nordic construction peer companies based on our 2023E multiples, yet, when looking at 2024E P/E and EV/EBIT multiples, the valuation appears neutral. The current valuation is significantly below the 2025E peer group multiples and the value derived from our discounted cash flow valuation, yet we see it currently justified because of the company’s track record during the last years and the low visibility for the projected turnaround in profitability.
Raute is set to complete its equity injections during the next few weeks. The terms didn’t include very significant news, whereas the recent French order was a small positive.
Raute adds EUR 18m to its equity base
Raute proceeds with its capital raising plans as expected. The EUR 18m sum includes a perpetual junior loan of EUR 4m which Raute can repay after 3 years. The holders also have a conversion right, at a strike of EUR 13.50 per share, which extends to 4 years. The loan initially carries a coupon of some 11% over the first 3 years, after which the spread jumps by 500bps. Raute recently completed a directed issue of EUR 6.4m, while the EUR 7.5m rights issue further lifts share count by 20%. We calculate the value of a right at EUR 0.575 per share.
Three large orders drive results next year
Raute has recently secured EUR 125m in orders attributable to three large projects. Deliveries begin next year, and we estimate close to two-thirds of the value to be attributable to FY ’24. The EUR 45m French greenfield LVL order went to Europe, as expected, but the destination was a lot more in the west than we expected and hence Raute should still have more long-term large order potential in countries such as Finland, Poland and the Baltics. We leave our FY ’23 estimates unchanged, but now estimate next year’s growth rate at 25%. The Q1 report highlighted smaller order demand as a point of softness, and its potential extension casts some uncertainty around the pace of improvement, but next year is bound to see significant growth in any case. Recent years’ challenges ate into the balance sheet, but now improving top line and profitability as well as the capital raise have given Raute the strength to work on long-term strategic plans, including some potential M&A which would be most likely to add capabilities for the Analyzers segment.
Ex-rights a minus, the large French LVL order a plus
Raute is valued at 6x EV/EBIT on our FY ’24 estimates, which we don’t view too challenging as our EUR 8.5m EBIT estimate remains far short of long-term potential. The ex-rights date detracts from the share price, however Raute has also signed the French order since our latest update (although it was referred to earlier its confirmation details still delivered a positive surprise). We retain our EUR 12.0 TP and BUY rating.
Q1 showed weakening for ESL this year, yet the guidance downgrade and recent Supramax comments indicate larger short-term headwinds than seen only a while back.
Issues with larger and smaller vessels; Handysize performs
Aspo cut guidance shortly after Q1 report as Q2 seems weaker than earlier expected and especially as ESL’s FY ’23 outlook has turned even softer after a record-year. The market for Supramaxes has weakened for a while, but their current drag on profitability seems larger than estimated before. Coasters’ profitability suffers from higher rental costs as well as capacity issues, in addition to which Q2 and Q3 dockings will have further impact, however Handysize vessels still seem to perform stable this year. The hybrid Coasters should add some earnings already next year; the outlook for Supramaxes has likely improved by FY ’24, however ESL is set to divest its two vessels soon and use the proceeds to help fund expansion within the Handysize segment as Northern Sweden by itself should see more than SEK 1,000bn in industrial investments over the next 20 years.
We estimate ESL’s EBIT to decline by a third this year
We previously estimated ESL’s FY ’22 EBIT of EUR 37m to decline to EUR 30m this year; our new EUR 25m estimate stands quite well in line with the only “normal” level of FY ‘21 for ESL’s current fleet structure as the past years’ investments first had to weather demand challenges (as well as technical issues) before and early in the pandemic, whereas last year’s result proved simply too high to sustain with current capacity levels. In our view ESL’s profitability (and capacity excluding the Supramaxes) should improve at least modestly next year so long as demand stays roughly stable around current levels. We now estimate ESL FY ’24 EBIT at EUR 30.0m (prev. EUR 31.5m).
Not too expensive, but ESL’s softness limits near potential
We leave our Leipurin estimates unchanged, whereas we make small downward revisions to our Telko estimates. Aspo’s organic profitability development should stabilize going towards next year, assuming no larger demand headwinds prevail. EUR 40m hence appears a realistic EBIT level again next year; the corresponding 8.5x EV/EBIT isn’t that high, but this year’s softness raises the multiple to 11x and limits upside potential. Our new TP is EUR 8.0 (9.5); our rating is now HOLD (BUY).
Marimekko reported Q1 results roughly in line with our expectations. Growth is seen to return and EBIT to improve in H2. We retain our HOLD-rating and TP of EUR 10.0.
Marimekko reported Q1 results broadly in line with our expectations. Q1 topline came in slightly above our expectations while EBIT fell short of our estimates. The company reiterated its guidance for 2023.
Etteplan’s continued good performance in Q1 was overshadowed by significant non-recurring items. The outlook still remains quite decent in the uncertain market.
Marimekko reports its Q1 result on Tuesday, May 16th. We expect a decline in revenue, driven by a top comparison period, soft performance in Finland, and prevailing market uncertainty.
Softness and uncertainty affecting Q1 net sales
We foresee that the uncertainty faced in Q4’22 will persist also into Q1’23, resulting in a 3.5% y/y decline in estimated Q1 net sales to EUR 34.8m. We expect a 5% drop in Finland sales and a slight 1% decline in international sales. This decline in revenue is primarily due to the uncertainty and strong comparison figures, as well as the soft outlook for wholesale and licensing sales in Finland in early 2023. We expect rising material costs, combined with market uncertainty, resulting in a lower gross margin compared to the previous period. Furthermore, with increasing fixed costs, our estimated adj. EBIT for Q1 is significantly lower than the previous year at EUR 4.3m, reflecting a margin of 12.4%.
Expecting growth and solid margins for full 2023
Despite the prevailing uncertainty, the fashion market in Finland appears to be performing relatively well, with some double-digit growth in Q1. However, Marimekko's top performance year ago partly explains its expected decline in Q1 sales. Nevertheless, our estimate for net sales in 2023 is EUR 175.3m, indicating a y/y growth of 5.3%. This growth is supported by new store openings in Asia and additional wholesale deliveries in Finland in H2. Marimekko itself anticipates growth in net sales in Finland and the APAC region, as well as internationally, while licensing income is expected to decline in 2023. Despite cost pressures, we expect the 2023 adj. EBIT margin to remain solid at 18.1%, slightly lower than the comparison period. With revenue growth, we expect the cost-base to scale more prominently in H2, leading in improving profitability towards the year-end. Our profitability estimate is close to the upper bound of the company's guidance range of 16-19%.
Valuation neutral ahead of Q1 result
We consider Marimekko's valuation to be neutral, as it currently trades between our luxury (40% discount) and premium goods peer group (20% premium). With our estimates intact, we retain our HOLD rating and target price of EUR 10.0 ahead of Q1 result.
Etteplan's net sales in Q1 amounted to EUR 95.0m, slightly above our and consensus estimates (EUR 92.0m/91.7m Evli/cons.). EBIT amounted to EUR 6.3m, below our estimates and below consensus (EUR 7.4m/7.0m Evli/cons.), but excluding EUR 2.0m in NRI’s, the profitability exceeded our expectations.
Enersense’s Q1 results showed extended high growth as well as stabilizing bottom line after last year’s challenges. Growth has been set to continue over the course of next year while profitability has only begun to improve.
Top line beat estimates, bottom line close to expectations
Enersense Q1 revenue grew 39% y/y to EUR 75m vs the EUR 63m/65m Evli/cons. estimates. Smart Industry (driven by the Helen agreement and scaling up of offshore wind) and International Operations (Baltic grids) drove growth. Connectivity also grew by 15%, and the combination of high demand and lesser cost pressure helped core operations’ profitability to improve by some EUR 3m y/y. There were still EUR 2.3m in Q1 extraordinary costs related to the new ERP system and offshore scale-up; the projects, in addition to onshore wind, will still limit EBITDA in FY ‘23 but the burden should largely fade by next year.
Growth to continue, profitability on track to improve more
Q1 showed continued high demand and stabilizing bottom line performance after last year’s challenges. We estimate 21% top line growth for this year and note Q3 & Q4 are set to be the strongest quarters. For FY ’24 we estimate 7% growth, which is not a low rate in Enersense’s industrial context but can still prove a conservative assumption; the Baltic backlog continued to grow despite high project revenue, in addition to which the offshore and EV charging businesses are set to add further growth next year. Profitability should improve more next year thanks not only to higher volumes across the board but the completion of the ERP project as well as the fact that the offshore business has rather high fixed costs to break even. We estimate adj. EBITDA to improve by some EUR 5m next year to EUR 22m.
Estimate changes rather small, but outlook has solidified
Enersense’s peer multiples have decreased quite a bit in the past few months while growth and earnings outlook has remained largely unchanged. Enersense’s valuation is still not cheap on our FY ’23 estimates, at 13x EV/EBIT, but on our FY ’24 estimates the multiple is only about 7x whereas we estimate Enersense’s EBITDA margin to remain some 250bps below that of a typical peer. We hence view current valuation rather conservative in the light of improving performance. We retain our EUR 6.5 TP; our new rating is BUY (HOLD).
Enersense’s Q1 revenue grew clearly faster than estimated, at a rate of 39% y/y, which also helped profitability relatively near expectations. Enersense also updated its revenue guidance for the year on the back of strong orders.
Vaisala delivered strong topline and solid order growth in Q1. Despite soft Q1 EBIT, we foresee the profitability improving towards year-end. We retain BUY rating and TP of EUR 44.0.
Vaisala posted strong Q1 net sales above our expectations. EBIT fell clearly short of our estimates. Guidance provides improving EBIT and sales growth.
Solteq reported slightly better than anticipated Q1 results. The short-term performance appears to be burdened more than anticipated by disproportionate overhead expenses, our views on the long-term development remain intact.
Slightly better than expected Q1 aided by good cost control
Solteq reported Q1 results that were slightly better than anticipated. Revenue was in line with our estimates at EUR 16.9m (Evli EUR 17.1m) while the adj. operating profit of EUR 0.1m beat our cautious estimate of EUR -0.5m. In terms of segment performance, Retail & Commerce saw healthy and better than expected profitability despite the anticipated y/y revenue decline. The good profitability level was according to the company driven by an improved cost control. The Utilities-segment performed quite as expected, still clearly loss making following earlier product development challenges. Solteq also issued a guidance for 2023, expecting revenue to amount to EUR 60-62m and operating profit (excl. divestment profit recognition) to be slightly negative.
Weaker in the short-term, long-term potential intact
The 2023 guidance was quite as expected, although our EBIT (excl. divestment profit recognition) estimate pre-Q1 was slightly positive. With Q1 stronger than we anticipated profitability-wise, we assume the anticipated burden of overhead expenses on Retail & Commerce in the short-term to be larger than we estimated. We have lowered our 2023 estimates slightly to fit the guidance but the revisions are in our view rather trivial. The investment story narrative continues to focus on 2024->, where the key success factor remains in the recovery and scalability of the Utilities-segment, and also to a lesser extent being able to adapt overhead expenses to the new company size.
HOLD with a target price of EUR 1.3
With no material changes to our estimates or views, we retain our HOLD-rating and target price of EUR 1.3. Valuation remains stretched in the near-term, but now with the stronger balance sheet and scalability factors the long-term potential remains significant.
Suominen’s Q1 results remained weak. Earnings are to improve at some rate going forward, but valuation reflects expectations about meaningful gains towards next year.
We estimate H2 EBITDA to gain EUR 15m compared to H1
Suominen’s Q1 revenue grew 6% y/y to EUR 117m but missed our EUR 120m estimate. Growth was driven by higher prices in the wake of raw materials’, while FX also added EUR 3.4m. Both Americas and Europe were soft relative to our estimates. Volumes were flat while Finnish ports and the Mozzate plant saw strikes. The 4.2% gross margin didn’t meet our 7.0% estimate, in our view due to the top line miss but also because of slower-than-estimated margin rebound following the easing of raw materials costs. The comparable earnings metrics thus fell more than EUR 3m short of our estimates. Suominen retained its guidance, which wasn’t surprising since earnings are bound to increase by at least some amount from the low comparison period, but valuation increasingly places burden of proof on H2.
Our EBITDA estimate for the year is down 15% to EUR 33m
Suominen’s margins and volumes have been volatile in the past three years and so it’s hard to estimate where the gross margin will ultimately land now that the environment, at least in terms of raw materials prices, has began to normalize. The outlook on the balance between supply and demand is no more as favorable as it was. On the positive side Suominen’s new products’ share has continued to increase across the regions, which should support gross margin potential. In our view wiping end-market demand can be expected to remain stable, but there’s still the question of how rapid volume and margin gains the melting of US inventory levels may produce in H2. We believe Suominen’s fixed cost base, following the closure of the Mozzate plant, is adequate to support meaningful earnings recovery (above 10% gross margins) if higher volumes come through.
Valuation neutral assuming a return to historical margins
The 15x EV/EBIT multiple, on our updated FY ’23 estimates, isn’t cheap, whereas the 6x multiple for next year could already be described low. We find the valuation still rather neutral, assuming higher volumes and low double-digit gross margins (historical norm) begin to materialize going towards next year. Our updated TP is EUR 2.7 (3.0) as we retain our HOLD rating.
Suominen’s Q1 results saw top line grow 6% y/y, driven by higher raw materials prices, but revenue as well as profitability remained soft relative to our estimates. Suominen retains its guidance, expecting incremental improvement as H2 should be better.
Aspo’s Q1 results came in quite close to estimates. ESL’s outlook for the year has softened a bit more than we previously estimated, but new vessel investments should take the carrier to a whole new level in the coming years.
Overall Q1 results didn’t show any particular large surprises
Q1 revenue from cont. operations grew 10% y/y to EUR 142m, driven by the Kobia acquisition and Telko’s 7% growth excl. Russia and Belarus. The EUR 148m top line, incl. non-cont. operations, was soft vs the EUR 160m/152m Evli/cons. estimates. ESL’s EBIT declined to EUR 6.0m, missing our EUR 8.5m estimate, due to lower volumes. Meanwhile Telko’s EUR 2.7m EBIT was clearly above our EUR 1.9m estimate; EUR 10m annual EBIT shouldn’t be too hard to achieve as recent M&A is yet to reach full earnings accretion. Leipurin bottom line developed well, as expected, and the overall EUR 8.5m EBIT came in relatively close to the EUR 9.7m/8.8m Evli/cons. estimates. Our updated EBIT estimate for the year stands at EUR 39.7m (prev. EUR 42.4m).
FY ’23 somewhat softer for ESL, but the fleet will grow
The Kobia deal is delivering according to plan and Telko’s EBIT is stabilizing around a 5% margin after the Russian exit, while M&A should continue to contribute. ESL sees lower volumes this year, yet pricing holds up. We thus expect EBIT to hold around EUR 40m, in the short and medium term, for the current operations. Large industrial investments around the Baltic Rim will expand ESL’s market in the future. ESL seems well-placed to capitalize on a big cargo increase, and we believe its plans will involve several new Handysize vessels. ESL will soon begin to receive its own (and pooled) Coaster hybrid vessels, but the EUR 150m investment is likely to be topped by the long-term opportunity. The move will require measures such as divesting the Supramaxes, new external minority equity and vessel pooling.
10x EV/EBIT isn’t high as all three are to grow long-term
ESL’s fleet is to grow by a significant amount over the long-term and the new assets will further solidify its position. The moves add to ESL’s value attributable to current shareholders, but the magnitude of the positive is hard to gauge due to the open size of the investment and financing required. Meanwhile Aspo is valued 10x EV/EBIT on our FY ’23 estimates, a level we don’t view too challenging. We retain our EUR 9.5 TP and BUY rating.
Solteq’s Q1 results were rather decent considering earlier challenges and profitability was above our expectations. Revenue was at EUR 16.9m (Evli EUR 17.1m) and adj. EBIT at EUR 0.1m (Evli EUR -0.5m). Guidance for 2023 (published 3.5.2023): revenue is expected to be EUR 60-62m and operating profit (excl divestment profit recognition) slightly negative.
Exel’s Q1 was expected to be soft but it turned out quite weak. This year will continue to see rather modest profitability while long-term potential still exists.
Weakness largely attributable to low Wind power volumes
Exel’s Q1 revenue fell 16% y/y to EUR 28.8m vs the EUR 32.2m/33.6m Evli/cons. estimates. H1 was seen soft due to lacking Wind power orders however such volumes came in at EUR 1.5m in Q1 vs our EUR 5.9m estimate. The figure was lower than Exel expected, in addition to which there was softness in Equipment and other industries. Transportation still saw strong development, yet small and mid-sized customers continued to reduce inventories as seen already in H2’22. Exel has already taken some cost actions and although there weren’t any notable cost-related surprises the demand softness led to an adj. EBIT of EUR 0.0m, compared to the EUR 1.2m/1.4m Evli/cons. estimates. Exel consequently downgraded its guidance as any significant demand recovery is unlikely to begin before H2’23, while the company will also incur some EUR 1m in additional expenses this year as it seeks to ensure its competitiveness within Wind power.
We also cut our FY ’24 EBIT estimate by more than 20%
Wind power’s development program is unlikely to change the company’s focus on turbine blade reinforcement elements; rather it should enhance Exel’s ability to deliver the needed volumes. Wind power may see some volume improvement already later this year, but the next couple of quarters are likely to remain soft before high growth again really begins to come through next year. Wind power aside, Exel looks to better capture sustained growth by focusing more on larger accounts. Exel’s strategy worked well in the past few years as it achieved a CAGR of 12% in FY ’19-21 however now seems to be a time for enhancing commercial focus. Such strategy themes (focus on high-volume accounts) aren’t very surprising in the light of Exel’s business model, in which a relatively high amount of customer account concentration tends to optimize profitability.
Valuation not particularly cheap in the short-term
Exel has a lot more potential thanks to its existing applications and their further scaling over the coming years, yet the 13x and 8x EV/EBIT multiples appear neutral on our estimates for FY ’23-24. Our new TP is EUR 4.3 (5.8); our rating is now HOLD (BUY).
Aspo’s Q1 results were a bit lower than estimated. We find there to have been mixed development underneath as Telko on the one hand beat our estimates while on the other ESL’s profitability softened more than we had estimated.
Vaisala reports its Q1 result on Friday, May 5th. Growth is foreseen, but margin improvement is yet limited with temporal pressures in fixed costs. With valuation attractive, we upgrade our rating to BUY.
CapMan’s Q1 results were quite weak on paper, but the operational performance remained at a rather good level. Despite uncertainties, the outlook in our view remains favourable.
Clearly lowered operating profit in Q1
CapMan reported Q1 results that were clearly below expectations. Revenue in Q1 was EUR 15.1m (EUR 16.9m/17.2m Evli/Cons.) while the operating profit amounted to EUR 0.5m (EUR 11.6m/10.4m Evli/cons.). The most notable deviation from our estimates arose from the Investment business (EBIT act./Evli EUR -2.5m/4.9m), where profitability was affected by FX rates relating to external funds despite own funds showing positive fair value changes. CapMan booked no carried interest in Q1. Profitability in the Management business was below our expectations due to some one-off expenses, otherwise the overall operating performance corresponded to our expectations.
Operational development still good
We have made some downward revisions to our estimates for 2023, mainly within the Investments business, which together with the weaker Q1 result in a lowering of our 2023 EBIT estimate to EUR 40.5m (prev. EUR 54.9m). Despite the on paper weak Q1 results, we emphasize the continued good fee-based operating performance, and we expect to see continued positive development. Continued slower macro-driven fundraising activity remains a slight issue, with private asset allocations impacted by investors’ liquidity preferences and allocation potential affected by performance of other assets classes, despite apparent continued good interest towards private asset classes. Carried interest potential also remains, but timing remains highly uncertain, further so now with lower transaction volumes.
BUY with a target price of EUR 3.0 (3.2)
On our revised estimates absolute valuation levels are starting to look fairer on our 2023 estimates. CapMan’s potential, however, goes beyond that and we still see valuation attractive on achievable earnings levels assuming improved market conditions. We retain our BUY-rating but lower our TP to EUR 3.0 (3.2).
Exel’s Q1 results came in clearly below our and consensus estimates. At least Q2 is also to remain weak, however H2’23 should see some improvement. Exel nevertheless downgraded its guidance due to weaker-than-expected short-term development and EUR 1m in additional costs related to a Wind power development program.
Raute’s Q1 was mostly better than we estimated. Large orders have on the one hand improved outlook, while on the other there seems to be more uncertainty around Services and smaller orders going forward.
Q1 better than expected, but haze around smaller orders
Q1 revenue fell 11% y/y to EUR 37m but beat our EUR 32m estimate. The EUR 5.5m in Russian revenue, due to deliveries’ commissioning tasks, was a bit larger than estimated. Raute has also gone through other initiatives, besides exiting Russia, such as the restructuring of Chinese operations and building an ERP system (the system will soon be adopted and may cause some issues in Q2). The two together cost EUR 0.9m in Q1, but Raute’s EUR 0.9m EBIT still came in higher than our EUR 0.3m estimate. The report showed softness in terms of small Wood Processing orders; in our view the lack of single line orders reflects market uncertainty as well as cooling after previous year’s high tally. In this sense the outlook for smaller and larger orders has now reversed; the picture is mixed as there’s still good automation & modernization demand while Services outlook has slowed.
Big orders drive growth now; Analyzers key to strategy
Raute’s outlook for the coming years has solidified a lot in a short period of time as the company has signed two projects worth a combined EUR 80m and to be delivered over the same period starting next year. Raute may yet sign a third large order worth EUR 45m and should still be able to deliver it roughly at the same time. Raute’s strategy aims to capitalize on its leading wood manufacturing technology position; only the high-end of the Chinese market continues to interest Raute whereas the Analyzers segment should act as a spearhead and drive also Wood Processing orders as well as Raute’s technology leadership.
Valuation hasn’t changed much as downside seems limited
We make only rather small positive upward revisions to our profitability estimates even though large projects have helped lift outlook for the coming years and Q1 margins proved better than we expected. Larger orders carry lower margins while there’s a risk Services and small order outlook may continue to soften. The big picture in terms of valuation, however, hasn’t changed much. Raute is valued some 19x and 6.5x EV/EBIT on our estimates for this year and next. Our TP is EUR 12.0 (11.0); retain BUY rating.
Q1 profitability came in soft. While growth is expected going forward, the extent of profitability remains uncertain due to challenges affecting margins. We downgraded our 23E EBIT, but expect earnings growth remaining robust for 2023-25.
SRV’s revenue declined clearly in Q1, as residential construction volumes were low, and profitability as a result in the red. Market conditions remain challenging, but we expect bottom levels to have been seen and a bounce back in top- and bottom-line figures going forward.
Q1 below already low expectations
SRV reported Q1 results below our already very cautious estimates. Revenue amounted to EUR 138.3m (EUR 147.4m/151.5m Evli/cons.) and declined some 28% y/y. Housing construction volumes came down clearly, with revenue at EUR 24.0m in Q1 compared with EUR 76.5m in Q1/22. EBIT was at EUR -2.0m (EUR 1.5/1.6m Evli/cons.), weakened by the lower volumes and higher share of lower-margin construction projects.
Challenging market ahead
The market challenges are becoming more and more visible and the new residential construction in Finland is seeing a particularly bleak outlook. Fortunately for SRV, the already earlier declining share of developer contracted projects clearly lowers the balance sheet risk. New developer contracted residential projects and residential development projects start-ups, potential sources of growth and higher margins, will however be a challenge going forward. We have revised our views for residential construction and expect essentially no revenue from developer contracted projects in 2023 and just slight improvement in 2024, mostly coming from revenue recognition of units currently under construction and unsold inventory. For residential development projects we expect slight improvement in volumes towards the end of 2023. Simultaneously, we have revised our estimates for business construction upwards driven by the improved backlog. Estimate changes: Revenue 23E 619.4m (prev. EUR 664.6m) and 24E EUR 698.5m (prev. EUR 787.0m), for EBIT, our estimate for 23E is at EUR 7.0m (prev. EUR 10.3m) and for 2024 EUR 15.4m (prev. EUR 24.1m).
HOLD with a target price of EUR 4.1 (4.3)
On our estimates, near-term valuation upside remains limited. Long-term potential remains in place should also the potentially higher-margin residential projects pick-up. We retain our HOLD-rating and adjust our TP to EUR 4.1 (EUR 4.3).
Consti reported Q1 figures that were above our estimates. We continue to see the valuation undemanding as the company keeps delivering strong figures. After only slight adjustments to our estimates, we retain our BUY-rating with TP of EUR 14.0 (14.0)
Q1 figures were above our estimates
Consti's net sales in Q1 amounted to EUR 68.9m, above our and consensus estimates (EUR 62.5m/62.3m Evli/cons.), with impressive growth of 15.2% y/y. EBIT amounted to EUR 0.7m, also above our and consensus estimates (EUR 0.5m/0.5m Evli/cons.). The company’s order intake was particularly strong at EUR 58.6m (Q1/22: EUR 37.6m), up by 56.1% y/y. Due to strong order intake, the company’s order backlog continued its growth and was at EUR 253.8m (Q1/22: EUR 205.1m).
Slight adjustments to our estimates for FY 2023
Due to strong growth witnessed in Q1, we have revised our revenue estimates slightly upwards to EUR 328.2m for 23E (prev. EUR 315.2m). Despite the strong growth for both revenue and backlog, based on management comments, it seems that the company has not yet filled up its schedule for the next 9 months, and therefore is needs to succeed in project sales to secure volumes for the remainder of the year. The current cost inflationary environment still affects the company through higher construction and indirect costs. Additionally, salary expenses will increase during Q2 2023. In light of these cost pressures, our estimate for the company's EBIT margin has been lowered to 3.8% (prev. 3.9%), even though the projected volumes are higher. Overall, we anticipate EBIT of EUR 12.4m (prev. EUR 12.3m) for FY 2023, which falls within the company's guidance range of EUR 9.5-13.5m.
BUY with TP of EUR 14.0 (14.0)
We have made only small adjustments to our estimates. Our view remains unchanged, we continue to see the company’s valuation undemanding. Based on our estimates, Consti trades with 23E EV/EBIT and P/E multiples of 7.2x and 10.2x offering a significant discount compared to both the Construction and Building Installations and Services peer groups. We retain our BUY rating and TP of EUR 14.0.
Dovre’s Norwegian operations drove Q1 EBIT above our estimate even when there was an FX headwind and Renewable Energy missed our estimates.
EBIT was encouraging despite a few top line headwinds
Dovre’s Q1 revenue declined 4% y/y to EUR 45.8m vs our EUR 48.3m estimate. Top line for both Project Personnel and Consulting came in clearly above our estimates, whereas Renewable Energy missed our estimate by more than EUR 6m. EBIT was in line with these trends as the two Norwegian focused businesses topped our estimates even despite the fact that controlling for FX changes, especially weak NOK, top line would have actually gained 5%. Any softness in the results was thus due to Renewable Energy, where seasonality remains and the fact that the Finnish wind market has been taking a breather after a busy year as e.g. transfer capacity is now a bottleneck.
Business in Norway continues to perform well
Dovre and Suvic are expanding to solar power, Suvic in its capacity as a specialty construction company whereas Dovre has established a project development company called Renetec, which may also expand beyond solar. We make only small estimate revisions after the report; we estimate very decent 5-6% growth for Project Personnel and Consulting (in EUR terms) and some profitability improvement in absolute terms, a slight revision on our previous estimates as new Norwegian legislation on temporary hiring hasn’t proved any major challenge. We make some downward revisions to our Renewable Energy estimates and now expect flat margin development for the year.
EV/EBIT of around 7x not a very challenging multiple
In our view it wouldn’t seem too hard for Dovre to end up improving at least a bit this year in terms of EBIT. Profitability should hold up well especially within Project Personnel and Consulting, and Renewable Energy has a lot more long-term potential even if this year’s margins may remain somewhat low. There have been no big changes in peer multiples over the past few months, and while our group level estimates have remained basically unchanged the relatively strong report increased our confidence in the profitability path’s sustainability. Our updated SOTP valuation indicates value of roughly EUR 0.85 per share. We update our TP to EUR 0.82 (0.80) and retain our BUY rating.
Loihde’s Q1 result came in below expectations. While net sales increased by 13%, adj. EBITDA fell below zero due to challenges faced. Guidance intact: double-digit growth and improving profitability.
Finnair’s Q1 further demonstrated solid recovery, however valuation still demands a lot more long-term improvement.
High unit yields due to market and own initiatives
Finnair’s EUR 695m Q1 revenue easily topped the EUR 572m/647m Evli/cons. estimates. Passenger revenue was EUR 130m above our estimate as unit yields were higher than estimated across the network; some q/q decline was expected as Q1 is seasonally soft, however such pricing softness turned out to be negligible. RASK was 30% above Q1’19 due to dynamic pricing and a larger share of direct distribution (doubled to 65%). Finnair reached 80% of Q1’19 ASK (86% incl. wet leases). The EUR 0.9m EBIT was above the EUR -32.4m/-23.1m Evli/cons. estimates and would have been strong for any Q1, let alone one during which Finnair still recovered from major volume losses.
The recovery appears to have found solid footing
The fleet is now optimal for the network, which in our view shows the net volume loss due to lesser Asian exposure to be smaller than feared (Finnair says demand for e.g. Doha routes has been higher than anticipated). The new routes which fill the lost volumes may not be as profitable as the Asian ones were, but Finnair has done major cost cuts since FY ’19 while RASK levels are now way higher. Asian volumes will grow more, driven by e.g. Japanese leisure, and yields can further advance. Yet prices may be exceptionally high, so it’s difficult to say how much yield gains can support results next year. Chinese route recovery may not be really seen before Q3 as the opening surprised many. Chinese carriers can also fly over Russia so the competitive situation is uneven, however Finnair’s guidance doesn’t seem to rely on Chinese recovery to any significant extent.
Valuation still seems quite full, at least in the short-term
Recovery continues and we expect Finnair to reach a decent EUR 127m EBIT this year, while next year should see results above pre-pandemic levels. On our respective estimates Finnair is valued 12x and 8.5x EV/EBIT, which we note are still not cheap levels. We continue to view Finnair pretty much fully valued; results over the summer should demonstrate more clearly how much EBIT potential there exists over the longer term, especially as the market may also take some of the good away. Our new TP is EUR 0.49 (0.47) as we retain our HOLD rating.
CapMan's net sales in Q1 amounted to EUR 15.1m, below our estimates and below consensus (EUR 16.9m/17.2m Evli/cons.). EBIT amounted to EUR 0.5m, below our estimates and below consensus (EUR 11.6m/10.4m Evli/cons.), impacted by negative FV changes and lack of carried interest.
Raute’s Q1 results came in clearly better than our estimates. Top line fell, as expected, but less than we had estimated, while profitability remained relatively strong despite the lower revenue. Only Q1 order intake showed some softness relative to our estimate, but this may have mostly to do with the large projects the company has been signing lately.
DT recorded strong Q1 growth while its profitability fell short of expectations. We foresee the growth drivers for the next few years as strong and expect EBIT to eventually improve.
Dovre’s Q1 profitability came in above our estimates despite some softness in top line attributable to Renewable Energy. Project Personnel and Consulting performed a bit better than we estimated, and new Norwegian legislation on temporary work seems to be having only limited effects on business.
Detection Technology’s Q1 topline came in as expected. Low volumes and weaker gross margin pushed EBIT below expectations. Outlook provides double-digit growth for H1.
Finnair’s Q1 results topped estimates as high unit yields drove passenger revenue. EBIT remained slightly positive, despite the seasonally slow quarter, as the company has managed to revamp its strategy while also benefiting from a favorable market situation.
Consti's net sales in Q1 amounted to EUR 68.9m, above our and consensus estimates (EUR 62.5m/62.3m Evli/cons.), with impressive growth of 15.2% y/y. EBIT amounted to EUR 0.7m, also above our and consensus estimates (EUR 0.5m/0.5m Evli/cons.). Guidance for FY 2023 remains unchanged.
SRV's net sales in Q1 declined clearly to EUR 138.3m, below our and consensus estimates (EUR 147.4m/151.5m Evli/cons.). The lower volumes and higher share of lower-margin construction projects pushed profitability figures into the red, with EBIT of EUR -2.0m falling short of expectations (EUR 1.5m/1.6m Evli/cons.).
Scanfil’s Q1 figures beat estimates even if expectations were already high. EBIT will remain high, but focus is already shifting to long-term development opportunities.
High volumes in particular drove an earnings beat
Scanfil’s revenue was EUR 225m, up 14% y/y (21% excluding spot purchases), vs the EUR 206m/216m Evli/cons. estimates. All segments grew nominally some 20% y/y, except for Advanced Consumer Applications but even there growth wasn’t too bad adjusting for spot purchases. Energy & Cleantech contributed most to growth, driven by demand in Europe where green transformation is taking place. Improved component availability lifted productivity as expected; the 6.7% EBIT margin wasn’t such a large surprise after the guidance revision, but high demand and the company’s ability to meet it helped EBIT to EUR 15.1m vs the EUR 13.7m/13.8m Evli/cons. estimates. Successful cost inflation management was another factor in producing a high absolute profitability level for a quarter which is often relatively muted.
Capacity additions beyond Europe likely in the long-term
High demand and component supply issues in the past years have built up inventories as Scanfil has tried to make sure it can meet demand. We believe inventories have peaked, but their rotation continues to be in focus going forward. Capacity utilization rate already runs high and hence the incremental investments will come handy. Scanfil remains ready for M&A, and expansion outside Europe is more likely than not in the long-term; the scope for deals may focus on Asia, but the US is also an option. European expansion has not been ruled out but isn’t as likely due to the already significant presence there.
We make only small estimate revisions after the report
Scanfil’s customer base is well diversified already, in its own EMS context, the accounts compete with each other only to a limited extent and a CAGR of 5%+ should be sustainable in the long run. Recent high growth however creates some uncertainty around the rate going forward and we would expect it to drop below 5% in the coming years. The 10x EV/EBIT valuation, on our FY ’23 estimates, isn’t yet that high as further growth and margin expansion might take it down to around 8.5-9.5x in the years to come, however we see valuation to have reached a neutral level. We retain our EUR 10.0 TP. Our new rating is HOLD (BUY).
Innofactor’s Q1 results were good and beat our expectations. The outlook remains quite favourable, and we do not expect performance during the remainder of 2023 to significantly improve from the good performance in Q1.
Q1 results beat our expectations
Innofactor reported good Q1 results that beat our expectations. Net sales grew 19.2% y/y to EUR 20.2m (Evli EUR 18.3m). The growth in net sales amounted to 19.2%, of which 10.9% organic. EBITDA amounted to EUR 2.5m (Evli EUR 2.2m). The performance in Q1 was aided enhanced internal efficiency and the billing rates remaining at good levels, along with an increase in the number of employees and use of subcontracting. The order backlog was at EUR 76.3m, up 6.9% y/y. Innofactor reiterated its guidance, expecting net sales to increase from 2022 (EUR 71.1m) and EBITDA is expected to increase from 2022 (EUR 7.8m).
Currently performing rather well
We have made only smaller upwards adjustments to our estimates based on the higher than anticipated Q1 results. The total revenue growth pace is expected to slow down with the fewer working days in Q2 and the impact of the Invenco acquisition only affecting H1. We still expect to see quite good organic growth supported by the order backlog and continued shift away from project business revenue towards revenue sources of more recurring nature. We do not expect significant margin improvement in the very near-term, with the implied performance of the Finnish business already at good levels, and growth investments likely to have minor impact. There is still room for improvement in the operations abroad, but that road has been bumpier and is likely to remain so in the near-term.
BUY with a target price of EUR 1.6 (1.5)
With further signs of Innofactor having achieved a more stable financial performance, we lift our target price slightly to EUR 1.6 (1.5) and retain our BUY-rating. The implied 2023e P/E of ~12.5x remains below the peer median. Further proof of double-digit organic growth and earnings stability would in our view provide further valuation upside.
Suominen reports Q1 results on May 4. We expect the company to have managed a modest improvement but focus rests on continued volume gains in the US business.
Some gains to be expected, but focus is on US volumes
Suominen’s Q4 results remained below our estimates as the US business still lacked volumes. Raw materials prices began to decline last year, but the relatively low volumes curbed earnings recovery. We believe earnings will begin to recover this year especially due to improving volumes and mix in the US, while raw materials prices should continue to stabilize. We expect these factors to drive earnings gains over the year, however we revise our Q1 EBITDA estimate to EUR 6.2m (prev. EUR 8.0m) as certain oil-based raw materials didn’t decline any longer in Q1 after their plunge in Q4. We leave our revenue estimate unchanged at EUR 120m and note Suominen may well achieve a double-digit growth rate as the comparison figure is very low.
We estimate double-digit growth for Americas this year
We estimate Suominen’s raw materials prices to have continued their slide in Q1 at a rate of a few percentage points q/q; the rate is somewhat slower than seen in Q4 as we estimate the prices to have fallen at an almost double-digit rate back then. We find there to have been some mixed developments lately as pulp prices have declined, at varying rates depending on the grade, while oil-based materials like polyester and polypropylene have remained rather flat after a steep drop in Q4. In our opinion such a stabilizing pricing environment is beneficial for Suominen, and hence focus rests more on product mix and volume gains. European revenue continued to grow last year, but we expect lower prices and traditional product exposure to pose a headwind there. Meanwhile Americas should reach a new top line high as US volumes return.
Valuation still appears neutral
In our view Suominen seems fully valued from a short-term perspective; we don’t consider the 10x EV/EBIT multiple, on our FY ’23 estimates, cheap. Meanwhile valuation doesn’t look too expensive against longer term potential, as the multiple amounts to 5x on our FY ’24 estimates when we expect gross and EBIT margins to have regained their respective historical levels of above 11% and 6%. We retain our EUR 3.0 TP and HOLD rating.
Scanfil’s Q1 was expected to be strong, however the results still clearly topped estimates by many percentage points. In our view it wouldn’t seem too difficult for the company to reach the higher end of its guidance range for the year.
Innofactor’s Q1 results were good and surpassed our expectations. Net sales grew 19.2% y/y to EUR 20.2m (Evli EUR 18.3m). EBITDA amounted to EUR 2.5m (Evli EUR 2.2m). Guidance reiterated, Innofactor’s net sales and EBITDA in 2023 are expected to increase compared with 2022.
Loihde reports its Q1 results on Friday, April 28th. We expect the company's Q1 double-digit growth to be strongly supported by its security business. Driven by increased estimates resulting from the acquisition of Hämeen Lukko, we have raised our target price to EUR 16.5 (16.0), while maintaining our rating at HOLD.
Finnair reports Q1 results on Apr 27. Finnair has lagged its peers in terms of pandemic recovery due to the legacy Asian strategy, while from now on further volume recovery should be found with the help of a pivoted network.
We make only minor estimate revisions ahead of the report
Finnair’s RPK almost doubled y/y in Q1, as estimated, and thus reached 77% of the Q1’19 comparison figure. Q1 is always seasonally quiet, however yields should have stayed robust as a lot of pent-up demand is yet to be sated. Finnair’s EBIT returned to black in H2’22, but Q1 EBIT is likely to be negative unless pricing tailwinds have proved stronger than estimated. We estimate Q1 revenue at EUR 572m and EBIT at EUR -32m.
The pivoted network to be seen clear over the summer
Asian volumes are now catching up as the key countries have lifted their travel restrictions, yet Finnair’s Asian volumes in Q1 were still only 54% of the Q1’19 comparison figure while Europe reached more than 80% of the corresponding figure. The Asian figures therefore still have some room to improve after the pandemic slump, but the Russian airspace closure limits their recovery potential and consequently Europe too lacks some of its former potential. Further recovery will thus rely on the network updates and increased density to North Atlantic, Middle East and India routes. We estimate Finnair’s FY ’23 RPK to reach 82% of FY ’19 levels, while strong pricing environment could help revenue to almost 94% of the FY ’19 figure this year. We expect FY ’23 EBIT at EUR 104m on this basis, well short of targeted levels.
Valuation closer to neutral from a long-term perspective
Airline valuations haven’t budged much in the past few months; absolute valuations have remained steady while earnings outlook has improved further. Finnair remains valued around 15x EV/EBIT on our FY ’23 estimates, a considerable premium relative to a typical peer. The multiple is about 9x on our FY ’24 estimates, which is still above many peers while we estimate Finnair’s profitability to stay well below those of its peers. We hence view Finnair rather fully valued in the short-term perspective; Finnair’s 5% EBIT margin target, set to be achieved from H2’24 onwards, may not prove too challenging as long as key value drivers like passenger volumes continue to trend favorably. We retain our EUR 0.47 TP; our new rating is HOLD (SELL).
We lowered our Q1 estimates, but with promising growth prospects from Q2 onwards, our 23-24E EBIT estimates saw a decent improvement.
Estimating a slower start to the year
Ahead of the Q1 result, our Q1 estimates saw a reasonable decrease due to a slower than expected start to the year. In our view, IBU is facing softer than previously expected demand due to OEMs’ overstocking which has temporarily decelerated growth. Additionally, the security market has been slower than expected. In our view, the state of medical markets continues as steady. Overall, we estimate Q1 group net sales to reach EUR 22.5m with 10.6% y/y growth. With decreased volumes, our Q1 EBIT estimate also saw a moderate decline. We expect Q1 EBIT to land at EUR 1.9m, reflecting an 8.6% margin.
Demand set to improve during Q2 and H2
We foresee the growth prospects for DT as strong. Considering China’s increased aviation passenger volumes and low investments in aviation security due to the pandemic lockdowns, the demand for SBU has significant potential to improve. In addition, TSA’s new orders should start to generate revenue in the coming year(s). OEMs have also reported on new security CT renewals in Europe. Despite soft Q1, we expect IBU to score solid growth figures in 2023. In our view, the medical market continues to deliver steady growth and with DT’s technology expansion, we foresee MBU expanding its market share during the next few years. In total, we expect revenue growth of 14.1% in 2023. In our view, DT’s scalable business model begins to lever with volumes clearly above EUR 100m. With that, we expect the 23E EBIT margin to double from that of the previous year to 12.5%
Valuation for 2024 not demanding
With our revised estimates, DT trades with 23-24E EV/EBIT multiples of 18-13x. With expected EBIT growth, 24E valuation seems not challenging. With a decent increase in our EBIT estimates and a minor decline in share price since our last update, we upgrade our rating to HOLD (SELL) and adjust TP to EUR 17.5 (16.5) ahead of the Q1 result.
Consti reports its Q1 2023 earnings on 27th of April. We expect the positive development seen during 2022 to continue driven by the company’s healthy backlog, higher volumes and slower construction cost inflation. With estimates intact, we retain our BUY rating and TP of EUR 14.0.
Solid development expected to continue
Consti had a strong finish to the year 2022 and we expect the positive development to continue during 2023. For Q1 2023, we estimate revenue growth of 4.5% y/y and EBIT margin of 0.9% (0.6% Q1 2022). Our estimate for the continued positive development is driven by the company’s healthy backlog (EUR 246.7m 12/22), higher volumes, improved project management and slower construction cost inflation.
Renovation volumes expected to increase during 2023
RT expects that the renovation volumes grow by 1.5% in 2023, driven by both the slow down in new construction and on the other hand, slower construction cost inflation. The growth in renovation volumes is expected to focus on the Finnish growth centers where Consti is active. The construction cost inflation has slowed down from the high levels seen in the first half of 2022, yet the growth was still at roughly 6.5% y/y during Q1 2023. The current high cost and interest rate environment make the company's potential remarks on the demand outlook for the housing company segment especially interesting.
BUY with a target price of EUR 14.0
We have not made changes to our estimates, we expect that the company’s steady and positive development witnessed during 2022 has continued in Q1 2023. We still see the company’s valuation undemanding on both relative and absolute terms. Consti trades with 23E EV/EBIT and P/E multiples of 6.8x and 9.7x offering a significant discount compared to both the Construction and Building Installations and Services peer groups. We retain our BUY rating and TP of EUR 14.0.
Solteq intends to divest its ERP business based on Microsoft BC and LS Retail solutions. The valuation of the deal is quite attractive and would ease the company’s balance sheet situation, while near-term profitability is under further pressure.
Raute reports Q1 results on Apr 28. Large projects solidify outlook, while the new strategy hints at growth ambitions particularly in Americas and within Services & Analyzers.
We leave our FY ’23 estimates basically intact
We expect Raute’s Q1 margins to have recovered a bit from the weak comparison period, despite lower top line, as inflation should no more be such a problem for Wood Processing while Services & Analyzers should have still seen growth. We estimate group revenue at EUR 32m and hence EBITDA at a modest EUR 1.5m. Continued earnings recovery over the year is a priority, but attention also focuses on growth outlook for the coming years.
We see Americas and Services & Analyzers as focus areas
Raute will deliver EUR 50m in equipment to Uruguay starting next year. We view the destination a positive surprise, as Raute hasn’t delivered big LatAm projects since ‘12. We update our FY ’24 revenue estimate to EUR 155m (prev. EUR 140m) and raise our margin estimates by some 50bps, which we view a conservative assumption. Raute’s pipeline also includes another slightly smaller project, yet to be signed, which we expect to be destined to Europe. Raute’s new long-term targets set the ambition high, especially in terms of growth as the EUR 250m top line target for FY ’28 implies double-digit CAGR from this year on (compared to ca. 3-4% CAGR seen for customer end-demand). Europe will remain a key market, however we would expect Raute to pursue a lot more growth within Americas as its Wood Processing market shares there are lower. We also view Services and Analyzers as particular spearheads in this sense.
Downside appears limited relative to long-term potential
Raute may add technology edge via M&A, but such deals have historically been small and hence we would expect organic execution to remain of great importance. The directed issue added ca. 20% to share count, and thus the EV/EBIT multiple has respectively increased to 20.5x on our FY ’23 estimates. The multiple remains a modest 6.5x on our FY ’24 estimates; our margin estimates appear conservative while there’s still a rights issue to come, plus maybe a junior loan. In our opinion it’s early to give much weight for the new strategy’s targets, however we still view downside limited whereas long-term potential is considerable. We retain our EUR 11.0 TP and BUY rating.
Scanfil’s guidance upgrade arrived early in the year and was of notable size. Multiples aren’t too high, in the light of robust EBIT, but may now be sensitive to growth outlook.
Early upgrade hints at strong Q1 and gains over the year
Scanfil upgraded guidance as customer demand has continued to pick up especially within the Energy & Cleantech, Automation & Safety, and Medtech & Life Science segments. Electronic components’ availability was a bottleneck on productivity (and hence EBIT) last year, but the situation has now been improving for a while. Continued strong demand and further improvement in component availability are not in our view by themselves major news, however the respective 6% and 15% revisions in revenue and EBIT guidance midpoints are of significant magnitude and arrive at an early point in the year; in our view the upgrade suggests even the seasonally slow Q1 has topped the company’s own expectations. We expect absolute EBIT to increase over the coming quarters and note Scanfil may land very near its long-term 7% EBIT margin target already this year.
7% EBIT margin target remains relevant going forward
In our opinion Scanfil’s 7% EBIT target has been very realistic for years and is also sustainable in the long run. We believe there’s unlikely to be any great upside to the target, although Scanfil may well revise it slightly at some point in the future. Scanfil’s plant network is in great shape and production capacity shouldn’t prove a bottleneck, at least in the short-term, as the company has recently been investing in new space and lines. Any larger capacity step-ups are still more likely to happen through M&A rather than a greenfield project. We believe such potential is most likely to be found in an Asian country like Vietnam.
Growth outlook is likely to drive valuation from now on
Scanfil is again set to grow at double-digits, excluding the spot purchases. This high organic CAGR is unlikely to last for very long in the EMS business, even if Scanfil has an attractive account portfolio. Valuation is henceforth likely to be more sensitive to growth outlook, as there’s relatively little uncertainty around the 7% EBIT margin. Scanfil is valued 10x EV/EBIT on our FY ’23 estimates and 9x for FY ’24. The multiples remain in line with peers, while Scanfil’s margins should stay well above those of a typical peer. Our new TP is EUR 10.0 (8.75); we retain BUY rating.
Endomines reported strong production figures for Pampalo as the production increased 215% y/y during Q1 2023. In our view, the company is making good progress in alignment with its revised strategy and the favorable development is further supported by the current strong gold market.
Pampalo production increased 215% year-on-year
Endomines released an operational update for Q1 2023 that included updated gold production figures for Pampalo. The company was able to produce 3588 ounces of gold during Q1 2023 which was 215% higher when comparing to last year (1137 ounces in Q1 2022). In addition to strong production figures, the company's drilling program in the Karelian gold line developed according to plans during the first quarter. Endomines has completed roughly half of the planned drilling in the Korvilansuo area, and the results are expected to be published in April-July.
We increase our production estimate for H1 2023
We increase our H1 2023 production estimate to 6893 ounces (5817 ounces) driven by the strong production figures for Q1. Endomines expects production increase of 35-55% for FY 2023 when comparing to FY 2022, our current production estimate is at the top end of the guidance range. There is further upside to our production estimate if the company can maintain the rate of production achieved in Q1 over the upcoming quarters. We also increase our profitability estimate for 2023 driven by the increased volumes in the first half and overall improved profitability for the full year due to the combination of lower energy prices and higher gold prices in relation to 2022.
BUY with a target price of EUR 6.5
Our view of the company remains unchanged, Endomines is implementing its strategy effectively in Finland and is benefitting from the strong gold market. However, we continue to see risks associated with the value realization of the company's asset portfolio in the United States. In addition, there is limited visibility regarding the company's exploration activities and the future Pampalo production. Due to the existing uncertainties, we base our valuation on the lower end of our SOTP-based valuation range. We retain our BUY-rating and TP of EUR 6.5.
Administer reported H2 figures a notch above our expectations. The guidance appears rather conservative, and our estimates remain above the guidance range.
H2 figures a notch above our expectations
Administer reported rather good H2 figures and a notch above our expectations. Revenue amounted to EUR 28.9m (Evli EUR 27.4m), with growth of 30.8% driven by acquisitions as well as new customers won by Silta. EBITDA amounted to EUR 2.7m (Evli EUR 2.4m). We had assumed no dividend to paid due to growth ambitions, but the BoD proposed a dividend of EUR 0.05. Although the implied dividend yield is low (~1.5%), the commencing of payments is a positive sign for share expectations given lack of dividends so far.
Guidance appears rather conservative
The guidance for 2023 was surprisingly soft and appears rather conservative. Revenue is expected to amount to EUR 76-81m and the EBITDA-margin to 7-9%. With the acquisition of Econia the run-rate revenue should already be around EUR 80m and the guidance as such imply no or very little organic growth. We have retained our revenue estimate at EUR 82.4m, above the guidance, and expect further acquisitions to also boost growth and a guidance upgrade later on in the year. We have slightly trimmed our EBITDA-margin expectations (9.8%) downwards but still above the guidance range. Administer’s EBITDA-margin in 2022 was at 7.1%, with a weaker H1. Our improvement expectations rely on the in relative terms more profitable Econia and synergies from acquisitions. We note that there is larger uncertainty in our margin expectations due to the lack of proof of significant profitability improvements from operational efficiency.
BUY with a target price of EUR 4.0
With our estimates largely intact, we retain our target price of EUR 4.0 and BUY-rating. Our TP values Administer at approx. 10x EV/EBITA. The potential remains considerable on the 2024 EBITDA-margin target (24% in 2024), but we continue to see Administer still being a long way away from achieving those.
Administer’s H2 figures were slightly better than expected. Revenue amounted to EUR 28.9m (Evli EUR 27.4m), with growth of 30.8%. EBITA amounted to EUR 2.1m (Evli EUR 2.0m). The 2022 dividend proposal is EUR 0.05 per share (Evli EUR 0.00). Guidance for 2023: Revenue EUR 76-81m and EBITDA-margin 7-9%.
Administer reports its H2/2022 results on March 30th. Earnings figures are of lesser interest, the outlook more so with the leap in size and earnings given the acquisition of Econia.
H2 earnings report interest lies on 2023 outlook
Administer reports its H2/2022 results on March 30th. The earnings figures are of lesser interest, with the fiscal year guidance range (revenue EUR 50-52m, EBITDA-% 5.5-7.5%) implying improved relative profitability from the more challenging H1 but still clearly sub-par compared with long-term targets. Of more interest is the outlook for 2023 following the sizeable acquisition of Econia at the end of 2022 and expected ramp-up of the company’s profitability scaling. Technically Administer should on our estimates be able to pay a dividend for FY 2022 but we assume no payout given the focus on growth.
Big leap in size and earnings in 2023
With the acquisition of Econia, Administer is set to take a significant growth leap in 2023. To our understanding the prevailing market conditions have been a lesser nuisance than expected and organic growth initiatives progressed quite well, due to which we raise our 2023 revenue estimate close to the 2024 target of EUR 84m. We have not included further M&A in our estimates, but with continued acquisitions very likely, the target should reasonably be achievable in 2023. We also expect EBITDA to over double compared with 2022, largely due to the in relative terms notably more profitable Econia. The 2024 EBITDA-% target of 24%, however, still appears distant. Synergies from acquisitions provide margin upside, while inorganic growth and operational efficiency should kick in to provide larger potential.
BUY with a target price of EUR 4.0 (3.6)
Valuation compared with peers on our 2023-2024 estimates continues to remain favourable. A discount remains warranted given the yet limited proof of profitability improvement but the current valuation in our view does not reflect the company’s potential. On our adjusted estimates we raise our target price to EUR 4.0 (3.6), BUY-rating intact.
DT has signed an agreement to acquire Shanghai Haobo Imaging Technology, an X-ray flat panel detector provider to broaden its technology base.
Loihde has strong long-term growth prospects and with scalability starting to kick in, we see the company as quite interesting as an investment. We initiate the coverage of Loihde with a HOLD rating and target price of EUR 16.0.
Security and digital IT services from under the same roof
The company is currently under a large turnaround after massive organizational changes made during 2017-2021. The current business consists of two separate but complementary businesses of security and IT services. EBITDA has already seen positive development during 2021-22, but the company has still work to be done until reaching its target of a 10% EBITDA margin. We see the growth prospects as good with strong underlying megatrends supporting the market growth. In addition, Loihde has lots of up- and cross-sales opportunities within the company which consists of multiple subsidiaries which originally have been formed from acquired companies.
Comprehensive offering as a competitive factor
In our view, the company stands out from its competitors with its unique offering in which the company can utilize industry-overlapping capabilities to deliver next-gen solutions. For example, the company has delivered to Finnish Customs physical security surveillance service which is highly enforced by intelligence. Moreover, with the One Security concept, the company provides both physical and digital security services in which the data collected from physical devices is enriched by analytics to provide either stronger security or to support business decisions.
Valuation not challenging, but further evidence is needed
We view the current valuation of Loihde as not challenging, but with a sustainable profitability level still unproven, we justify multiples below the peer group median. We value Loihde with 23E EV/EBITDA and EV/EBIT multiples of 6.4x and 9.6x respectively. The near future includes some uncertainty with slowing demand for DiDe. We initiate the coverage of Loihde with a HOLD rating and TP of EUR 16.0.
Netum’s H2 fell below our expectations, but the outlook for 2023 appears quite strong. We retain our BUY-rating and target price of EUR 4.2.
H2 below our expectations
Netum reported H2 results below our expectations. Revenue grew 14.7% (3.8% organic growth) to EUR 13.7m (Evli EUR 15.8m). EBITA amounted to EUR 0.8m (Evli EUR 1.3m). Growth was partially affected by a slow start to certain projects, which along with frontloaded growth investments, internal development projects, and wage and general cost increases lowered profitability. Netum’s BoD proposes a dividend of EUR 0.11 per share (Evli EUR 0.10). Netum expects revenue growth of over 20% in 2023 and an EBITA-margin of over 10%.
Confidently eyeing clear double-digit growth in 2023
The growth figures in H2/22 were rather disappointing after solid double-digit organic growth in H1, but with the healthy pipeline management appeared very confident in achieving the targeted growth in 2023. Growth will to a smaller extent be aided by previous acquisitions, with Studyo Oy being the most recent acquisition in December 2022, but the bulk will need to be organic. Price competition in the public sector tenders remains stiff, but increased focus also on the private sector, an area where Netum’s offering has been more limited, opens up new potential. We have somewhat lowered our estimates due to the below expectations revenue in H2/22 as well as through a more cautious take on margin improvement speed. We still expect a 2.7%p y/y EBITA-margin improvement mainly through improved billing rates. The perceived rather good ability to transfer inflationary impact on customers should also benefit.
BUY with a target price of EUR 4.2
Despite slightly lowered estimates, the improved visibility regarding the growth outlook reduces the near-term uncertainty and we retain our target price of EUR 4.2, valuing Netum at around 16x 2023e P/E (goodwill amortization adjusted). Our BUY-rating remains intact.
Netum’s H2 results fell short of our expectations, with revenue growth more lack-luster than anticipated. 2023e guidance appears to be in line with expectations given the lower-than-expected growth in H2. The BoD proses a dividend of EUR 0.11 per share (Evli EUR 0.10).
Endomines announced an update in ore reserves and mineral resources. The update brings an 60% increase to Pampalo reserve ounces when comparing to the ore reserves at the end of 2021. Due to a 13% share price decline since our previous update, the company’s steady progress in accordance with the new strategy and a strong gold market, we upgrade our rating to BUY (HOLD) while maintaining our target price at EUR 6.5 (6.5).
Update increases ore reserves to 29 400 ounces of gold
The published update increases Pampalo reserves by 60% when comparing to the ore reserve status at the end of 2021. The ore reserves are doubled in ore tonnes as the open pit grades dilute the total grade, the Pampalo underground gold grades are at similar level compared to the previous ore reserve update. Most of the reserve increase comes from the underground drilling programme that was completed in 2022, the programme included 117 drill holes in total between the levels 815 and 875.
Visibility remains rather low
The current ore reserves in Pampalo are sufficient for roughly three years of gold production at the current production rate. The remaining production potential depends on the successfulness of the company’s exploration efforts in both Pampalo underground mine and in the Karelian gold line. The company’s mid-term target is to define over one-million-ounce gold mineralization on the Karelian gold line by the end of 2025. To reach the target, the company has started exploration drilling in the area. Despite limited visibility for exploration, the company's targeted zones, which have not been thoroughly investigated before, show promising potential.
BUY (HOLD) with a TP of EUR 6.5 (6.5)
We have made only slight adjustments to our SOTP-model. The increased reserves provide slightly better visibility for the production in Pampalo, on the other hand, we continue to see risks related to the value realization of the US asset portfolio. Endomines trades currently at a slight discount to its peers based on EV/Resources multiple when including the company’s historic resources (Figure 1). Due to a 13% share price decline since our previous update, we upgrade our rating to BUY (HOLD), noting however that junior gold miners entail significant risks.
Enersense’s Q4 figures didn’t contain big news after the guidance revision, but FY ’23 results may remain muted.
Q4 close to estimates, FY ’23 profitability guidance soft
Enersense top line grew 37% y/y to EUR 90m vs our EUR 87m estimate. All four segments grew, especially Power and International Operations (high-voltage projects in the Baltics drove revenue). Power’s EUR 8.7m y/y EBITDA gain included EUR 7.5m in wind power gains as the projects progressed faster than expected. Other segments’ profitability levels didn’t fare that well compared to Q4’21 as inflation hadn’t yet surged then. Investments in the ERP system and offshore wind power subtracted EUR 2.7m. Voimatel deal costs also weighed Q4; we hadn’t included the deal in our estimates but note it would’ve been a positive driver should it have gone through. The EUR 4.3m adj. EBITDA topped our estimate by EUR 0.4m while the EUR 1.1m EBIT missed our estimate by EUR 0.6m. Guidance didn’t surprise in terms of revenue, however the expectation for adj. EBITDA was soft (EUR 15m midpoint vs our EUR 20m estimate).
We make downward revisions to our profitability estimates
We cut our profitability estimates for FY ’23 by EUR 5.5m while we make minor upward revisions to our top line estimates. Last year’s Q2 was exceptionally soft due to project delays and a Finnish ICT strike. FY ’23 should see more regular project patterns, in addition to which inflation is moderating and at least is no more any surprise. The ERP system costs will increase this year, in addition to which wind power developments, both onshore and offshore, will create additional costs.
Longer term upside potential, lacks short-term drivers
Enersense is valued almost 20x EV/EBIT on our FY ’23 estimates, which in our view reflects the fact that profitability will remain below potential this year due to investments in the ERP system and wind power. Last year’s results were plagued by inflation, and even though the situation is easing we believe some cost headwinds will remain this year. Double-digit growth is likely to continue, and we estimate decent single-digit growth for FY ’24. Earnings growth potential is thus strong from a medium-term perspective, but margins may stay somewhat muted in the short-term. The valuation equals 8x EV/EBIT on our FY ’24 estimates. Our new TP is EUR 6.5 (7.0); we retain our HOLD rating.
Enersense’s Q4 figures were overall relatively close to our estimates. Revenue came in higher than we estimated, while adjusted EBITDA was higher and EBIT lower than we estimated. Enersense’s guidance midpoint suggests profitability is likely to increase at least a bit this year, however bottom line will still be weighed down by development projects.
Dovre disclosed Q4 figures before the report and thus there were no big surprises. We make some downward revisions to our estimates yet note guidance appears conservative.
No surprises in Q4; FY ’22 growth not to be repeated
Dovre continued to grow at a 14% y/y rate in Q4 and reached EUR 48m in top line vs our EUR 45m estimate. There were no big surprises as Consulting and Renewable Energy both grew by double digits whereas Project Personnel remained flat. An FPSO project in Singapore delivered to Equinor no longer contributed, but otherwise growth continued in Norway, Finland, and North America. Dovre disclosed preliminary Q4 figures before the report and the EUR 2.1m EBIT was in line with our estimate. Last year’s growth is not to be repeated but many Norwegian clients have extended their agreements while Consulting Finland has performed as expected after the eSite industrial VR acquisition. The Finnish wind power market helped Suvic grow 87% last year; growth is likely to be very modest this year relatively speaking however we still estimate a high single-digit figure.
EBIT should hold up at least flat in the short-term
The summer period is important for Renewable Energy and negotiations are still going on. Norway introduces new legislation in Q2 which regulates temporary staffing in various contexts, and it may also affect white collar work. Project Personnel and Consulting are coordinating with clients to make sure they comply. We make small revisions to our revenue estimates and see group growth at just above 3% this year. We revise our EBIT estimate for FY ’23 down to EUR 8.6m (prev. EUR 10.0m); we revise both Project Personnel and Consulting down by EUR 0.2m and Renewable Energy by EUR 1.0m. In our view Dovre’s guidance doesn’t seem demanding and our estimates are conservative. The worst inflationary period has likely passed and wasn’t such a big issue for Dovre, but the lingering level may still limit margin expansion now that growth is much more modest.
There remains earnings growth potential beyond this year
Dovre still trades only 7x EV/EBIT on our FY ’23 estimates while peer multiples, for all three segments, have gained significantly in the past few months. Our SOTP valuation indicates current fair value to be slightly north of EUR 0.80 per share. We thus update our TP to EUR 0.80 (0.75) and retain our BUY rating.
Dovre announced preliminary Q4 figures already on Feb 3, and therefore the Q4 report didn’t hold many surprises. Growth continued in all segments, especially in Consulting and Renewable Energy. EBIT should stay relatively high this year, but there are a few uncertain factors which may limit earnings growth.
Scanfil’s year concluded on a strong note without any big surprises. Valuation has gained recently but in our view is still not too expensive thanks to growth and margin upside.
Profitability advanced in Q4 as plant productivity improved
Scanfil Q4 top line grew 16% y/y to EUR 222m vs the EUR 216m/218m Evli/cons. estimates. Without spot purchases growth was 17% y/y, compared with the long-term target of 5-7%. There have been price increases, but volumes have mainly driven revenue. Demand remained high especially within accounts belonging to Automation & Safety, Energy & Cleantech as well as Medtech & Life Science. Scanfil’s guidance suggested EBIT would improve over the year, yet the EUR 13.4m EBIT was well above the EUR 12.8m/12.5m Evli/cons. estimates. EBIT margin, excluding spot purchases, was 6.5% as better component availability helped productivity. The component situation continues to normalize and should no longer be such a major issue, while inflation is now seen mostly in the low single digits.
Scanfil has already added some capacity to meet demand
Scanfil has achieved double-digit growth two years in a row and has already added capacity. This year sees capex in new electronics manufacturing lines in Atlanta (also widens services in the US) and Sieradz (a new building would make the Polish plant the main electronics production site in Europe). We estimate the guidance suggests close to 10% growth for the year excluding spot purchases; growth should be mostly driven by volumes rather than prices. Advanced Consumer Applications’ top line may decline this year due to the headwind from fading component purchases, but other segments should be positioned to achieve either flat or some positive headline revenue development. We estimate Automation & Safety to grow 10% nominally this year (in the high teens excluding spot purchases).
We don’t find valuation yet too expensive
The 9.5x EV/EBIT multiple, on our FY ’23 estimates, isn’t low in Scanfil’s historical context but remains in line with peers’, while Scanfil’s is still likely to achieve somewhat better margins than a typical peer. For FY ’24 we estimate 5% growth and 6.2% EBIT margin, which we view conservative in the light of long-term targets; the corresponding 8.7x EV/EBIT multiple is in line with peers’. We update our TP to EUR 8.75 (7.0) and retain BUY rating.
Scanfil’s Q4 unfolded without any big surprises. The key figures developed well and were all somewhat better than estimated. Continued high demand and improved component availability supported profitability. Guidance suggests strong performance is set to continue this year as well.
Exel’s Q4 figures missed estimates as demand was still softer than expected. H1’23 results are likely to remain modest relative to the high comparison period, but guidance indicates at least some improvement for H2’23.
Heady growth continued in H1’22, but H2’22 was slower
Exel’s Q4 revenue landed at EUR 31m vs the EUR 36m/35m Evli/cons. estimates. Destocking, after a period of high demand following the initial shock of the pandemic, has been an issue lately and is expected to continue in H1’23. Equipment and other industries, the third largest customer group, was particularly soft relative to our estimates but there seems to have been nothing special going on apart from the destocking issues as well as normal cyclicality. The soft top line left adj. EBIT at EUR 0.9m vs the EUR 2.4m/2.0m Evli/cons. estimates.
H1’23 will still be soft; guidance suggests better H2’23
Exel sees improvement from Q2 in orders as well as EBIT; top line is to remain flat this year, while EBIT has ground from which to gain. The Runcorn cuts should produce EUR 1.6m in annual savings. Inflation hasn’t been a big issue for Exel and raw materials are stabilizing. Wind power should again grow, according to Exel, at a 15% y/y pace from H2’23. Wind power was Exel’s largest customer in 2019-20 and continued to grow at a CAGR of 16.5% in FY ’20-21, however its revenue fell by EUR 5.3m last year and was overtaken by Buildings and infrastructure already in 2021. Exel got its challenges in the US sorted out last year, but the relative softness in the three largest customer groups left its adj. EBIT for the year at EUR 8.0m (we consider it a modest level). We note the four smaller industries together grew by 19% last year, although this was mostly attributable to Transportation as it enjoyed pent-up demand after the pandemic and received initial orders for a new aerospace application.
Valuation is not challenging if growth returns in H2’23
Exel is valued 9.5x EV/EBIT on our FY ’23 estimates, which we consider a neutral level. The multiple is not very low, however we estimate an EBIT margin of 6.3% for the year whereas the company should still be on track towards its long-term 10% target (it reached almost 9% in FY ’20). For FY ’24 we estimate 7% growth and 7.5% EBIT margin, which would translate to an EV/EBIT of 7.5x. Our new TP is EUR 5.8 (6.5); our rating is BUY.
Despite a below expectations Q4, at least partly due to increased sickness-related absences, we see slightly improving expectations for 2023. We adjust our target price to EUR 16.0 (15.0), HOLD-rating intact.
Q4 fell short of expectations
Etteplan reported Q4 results below expectations. Revenue grew 6.8% (organic 1.0%, org. const. FX 2.8%) to EUR 91.0m (EUR 99.0m/98.0m Evli/cons.) while EBIT came in at EUR 8.4m (EUR 8.9m/9.0m Evli/cons.). Growth was affected by a high level of sickness-related absences. On a service area level Engineering solutions continued solid performance. Software and Embedded Solutions saw good improvements in profitability from actions previously taken to enhance operational efficiency. Technical Documentation Solutions saw lower profitability due to below expectations performance of the in 2022 acquired Cognitas. The BoD proposed a dividend of EUR 0.36 (0.32/0.34 Evli cons.).
2023 expectations rather decent despite headwinds
Considering the below expectations Q4, Etteplan’s 2023 revenue guidance (EUR 360-390m) is slightly better than we expected, with our pre-Q4 estimates at the guidance range mid-point. The EBIT guidance of EUR 28-33m was slightly below expectations on the mid-point. Our 2023 estimates are essentially unchanged, revenue expectations at EUR 375.3m and EBIT at EUR 31.5m. Margins are under pressure through wage inflation, but we continue to earnings improvement potential through improved operational efficiency in Software and Embedded Solutions and Technical Documentation Solutions while also assuming decent prerequisites to transfer inflation to prices. Further M&A activity also provides good potential for more rapid growth.
HOLD with a target price of EUR 16.0 (15.0)
Despite elevated uncertainty and cost inflation and a more recent slow-down in recruitments having an impact, the outlook going forward still generally appears quite favourable and Etteplan further noted a positive development direction of market sentiment. We adjust our TP to EUR 16.0 (15.0), valuing Etteplan at ~17x 2023e P/E, HOLD-rating intact.
Pihlajalinna’s profitability challenges continued to be way worse in Q4 than estimated. The company has many tools to address the issue. Gains are very likely this year due to the low comparison figures (and measures), but valuation now appears neutral from a short-term perspective.
Q4 was still plagued by many profitability-hurting issues
Pihlajalinna’s top line continued to grow at an annual rate of 22% in Q4; organic growth remained above 7% even with the headwind from lower Covid-19 services revenue. The lack of such services was one factor limiting profitability, in addition to continued high absence costs as well as public specialty care costs which were now tilted towards Q4. Employee benefit expenses were especially high. Key profit measures missed estimates by EUR 7m. Pihlajalinna guides increasing revenue (we estimate 3% growth) and improving adj. EBITA for the year. Last year involved a lot of transient cost factors, but the company also takes many measures to address the profitability challenge.
H2’23 should see meaningful earnings growth
Pihlajalinna has gone through a similar exercise in 2019. The company looks to e.g. cut physicians’ administrative roles and prune its service network. Price increases are to come in at 5-10%, especially within the private sphere while public contracts are also under review. The company’s financial headroom is now tight, but it stays within its covenant terms and doesn’t pay dividend for the year. We cut our FY ’23 EBIT estimate by EUR 5m but estimate EUR 12m EBITA improvement for the year.
At least the first quarters now seem to lack upside drivers
Valuation isn’t too cheap despite the profitability gains which are to be seen this year. The 19x EV/EBIT valuation, on our FY ’23 estimates, is neutral at best as it is in line or even slightly above that of peers. For FY ’24 we estimate an EBIT margin of 5.4% (some 100bps gain y/y), which may well prove too conservative, but the respective 14x multiple is still no more attractive than peer multiples. Pihlajalinna’s profitability measures are more likely than not to drive upside over the longer perspective, but in our view the share lacks material upside drivers from a short-term perspective. Pihlajalinna could specify its guidance upwards later this year, which would be one such driver. We revise our TP to EUR 9.0 (10.0); our new rating is HOLD (BUY).
Etteplan's net sales in Q4 amounted to EUR 91.0m, below our estimates and below consensus (EUR 99.0m/98.0m Evli/cons.). EBIT amounted to EUR 8.4m, below our estimates and below consensus (EUR 8.9m/9.0m Evli/cons.). Dividend proposal: Etteplan proposes a dividend of EUR 0.36 per share (EUR 0.32/0.34 Evli/Cons.).
Exel’s Q4 figures missed our and consensus estimates. Top line declined as there was temporary softness in e.g. wind power orders. Cost management helped profitability remain flat y/y. Exel guides flat revenue for the year and expects adjusted EBIT to increase.
Solteq’s Q4 results were below our expectations, and the 2023 guidance appears softer than we had anticipated. We see the long-term investment case intact despite an incoming year of subpar performance.
Challenges visible in Q4
Solteq reported Q4 results below our expectations. Net sales in Q4 were EUR 16.9m (Evli EUR 17.4m), declining 7.5% y/y. The operating profit and adj. operating profit in Q4 amounted to EUR -1.2m and -0.8m respectively (Evli EUR 0.7m/0.7m). Solteq Digital’s performance was fairly in line with expectations, with a y/y decline in revenue and profitability. Solteq Software’s profitability was clearly below expectations, with an adj. EBIT of EUR -1.3m (Evli EUR 0.0m). The segment has been burdened by challenges in Solteq Utilities’ software development and we had evidently underestimated the magnitude of the impact on Q4. Solteq’s BoD as expected proposed that no dividend be paid.
Guidance for 2023 softer than anticipated
Solteq’s 2023 guidance is soft in comparison with our pre-Q4 estimates, expecting revenue to remain on 2022 levels and EBIT to be positive. Solteq has typically not given numerical guidance ranges, which leaves room for speculation regarding profitability, but with the expected flat revenue development and cost pressure caused by inflation we now expect EBIT to be only slightly positive at EUR 0.8m. We expect the challenges faced in Solteq Software to continue during H1/23 and gradual improvement through the year, and the headwinds faced in Solteq Digital through the market demand situation to continue to have a slight negative effect.
HOLD with a target price of EUR 1.3
Despite the weaker than expected Q4 and softer than anticipated expectations in 2023 we see no fundamental changes to the investment case. Financially 2023 will clearly be a gap year on group level. Upside continues to lie in the long-term development and success of profitably growing the Utilities-business and of interest for the investment case in the near-term will be the development of said business.
Pihlajalinna’s Q4 report was a clear disappointment in terms of profitability even after the guidance downgrade late last year. The culprits for low profitability have been discussed many times, but their adverse impacts on Q4 bottom line were clearly larger than estimated.
Vaisala delivered strong topline growth in Q4. Orders received and order book increased by double-digits which provides a firm foundation for 2023. The company guides solid growth and clear EBIT improvement for 2023. With adjusted estimates, we raise our TP to EUR 44.0 (41.0). Our rating remains at HOLD, reflecting a neutral valuation.
Fellow Bank’s outlook for 2023 remains quite good and we expect continued growth and positive profitability to be achieved. We retain our TP of EUR 0.40 and HOLD-rating.
H2 all in all slightly below our expectations
Fellow Bank’s H2 results came in slightly below our expectations. Total income amounted to EUR 7.9m (Evli EUR 7.1m). Net income of EUR 6.6m was quite in line with expectations (Evli EUR 6.8m), while net fee and commission income of EUR 1.5m beat our expectations (Evli EUR 0.3m), affected by changes to recognition of commission fees under IFRS 15. The pre-tax profit during H2 amounted to EUR -2.3m (Evli EUR -0.7m), with the difference compared with our estimates arising mainly from larger than estimated expected and realized credit losses, with total OPEX also above our estimates. OPEX was still affected by exceptional items relating to the startup of operations of some EUR 0.7m. The total capital ratio amounted to 16.8% (target adjusted: 18% -> 16%) and H2 cost / income ratio to 76%.
Growth and positive profitability expected in 2023
Fellow Bank expects revenues to grow in 2023 and to achieve a positive profit level on a monthly basis during H1/2023. The market environment poses some threats to lending volume growth, with Fellow Bank having adopted somewhat stricter lending policies. We currently nonetheless expect solid y/y growth in 2023 mainly driven by the ramp-up focused comparison period but also good loan portfolio growth. We have further raised our 2023e PTP estimate to EUR 2.9m (1.8m) following a readjustment of the cost base assumptions. We expect 2023 to be quite busy for Fellow Bank with the launch and ramp up of new services. The company’s small business in Poland is also most likely to be divested and the further strengthening of the company’s capital is to be expected.
HOLD with a target price of EUR 0.40
Valuation upside continues to remain limited in the near-term, affected further by some market uncertainties and on 2024 estimates, compared with peer multiples, current valuation levels appear fair. We retain our TP of EUR 0.40 and HOLD-rating.
Marimekko delivered solid Q4 figures despite a challenging domestic market. Q1’23 seems to continue soft in Finland, but on a group level, the company expects to see growth in 2023. We retain our HOLD rating and TP of EUR 10.0.
Vaisala posted Q4 net sales roughly in line with our estimates. Orders continued in a trend of growth. EBIT however came in below our expectations with higher fixed costs. Guidance implies growth to continue also in 2023.
Fellow Bank’s top line figures were better than expected, while higher than expected opex and expected and realized credit losses saw earnings fall below our expectations. Positive profit levels on a monthly basis are expected to be reached during H1/2023.
Endomines volumes and revenue for H2 2022 were in line with our estimates yet the profitability was weaker than expected. The company anticipates a significant improvement in its financial performance in 2023 compared to 2022.
Volumes developed as expected
Revenue in H2 amounted to EUR 7.9m, roughly in line with our estimate of EUR 8.1m. Gold production amounted to 5,123 oz vs. our estimate of 5,402 oz. Both EBITDA & EBIT missed our estimate as EBITDA for H2 2022 came at EUR -3.0 (Evli EUR 0.6m) and EBIT at EUR -5.4m (Evli EUR -0.8m). The second half of the year was negatively affected especially by increased cost of raw materials and energy. The second half was also negatively affected by non-recurring costs related to the transfer of domicile from Sweden to Finland.
2023 is an important year for the company
Endomines focused on building the foundation for its strategy implementation during the second half of 2022. In 2023, the company aims to build on this foundation and start to implement its strategy on a wider scale. In our view, the most important operational factors for the company in 2023 include improved mining operations in Pampalo, exploration activities in the Karelian gold line and the partnership negotiations in the United States.
HOLD with a target price of EUR 6.5
We have done slight adjustments to our estimates for the Pampalo mining operations as the company’s expectations for 2023 were slightly stronger than we had earlier estimated. We currently include only reserves and resources between the 755-815 and 815-875 levels in Pampalo to our estimates and therefore we do not estimate production post 2024. In our SOTP valuation approach, the rest of the value for the company’s operations in Finland is derived from a real option model which considers the possibility of Pampalo LoM increase and the possibility for the utilization of Karelian gold line satellite deposits. Despite the cautiously positive outlook for 2023, we still see uncertainty regarding the successfulness of the company’s exploration activities and the value realization of the US assets. We retain our HOLD-rating and TP of EUR 6.5.
Aspo’s Q4 didn’t hold big news, however the segments’ EBIT paths may diverge a bit this year after a very strong FY ’22.
ESL and Leipurin topped our estimates, while Telko was soft
Aspo’s Q4 revenue landed at EUR 165m, compared to the EUR 157m/158m Evli/cons. estimates, while adj. EBIT was EUR 11.3m vs the EUR 12.1m/11.7m Evli/cons. estimates. The figures were hence overall relatively close to estimates, however Telko’s profitability was clearly below what we estimated whereas ESL and Leipurin were both somewhat better. Telko saw certain positive developments in Q4 as strong Western demand drove higher volumes organically and through acquisitions; lubricants also fared well, but plastics and chemicals prices decreased, in addition to which the challenging operating environment in Ukraine, Russia and Belarus limited profitability.
We already expected considerable EBIT decline for Telko
In our view Telko’s EBIT should begin to stabilize in H1’23 but will not reach the EUR 21m EBIT seen in recent years anytime soon. Aspo’s guidance doesn’t seem to set the bar for Telko very high, which in our view reflects the still highly uncertain environment for pricing and volumes. We previously expected Telko’s FY ’23 EBIT to decline some EUR 10m, and we now estimate the decline at EUR 11.5m. ESL’s outlook remains stable, at least for Q1 when the Supramaxes are still employed with good price levels, but it’s early to say how they might fare in H2’23. Smaller vessels should still have no trouble achieving highly satisfactory results, yet it may be hard to gain on last year. We expect ESL’s EBIT to decline a bit this year, but some of the new hybrid vessels are due to be delivered soon and hence EBIT should find further support even in the case of extended pricing headwinds. The Kobia acquisition’s synergies weren’t yet reflected last year, and hence we expect Leipurin EBIT to increase this year even if inflation and volume trends set some limits to organic development.
Valuation not challenging despite EBIT softness this year
Aspo is valued ca. 9x EV/EBIT on our FY ’23 estimates, which we see reflects relatively low valuation for ESL. An EV/EBIT multiple of 10x could be justified for the niche carrier as Algoma Central, arguably the most relevant peer, is valued above 10x as it derives a big share of its earnings through small dry bulk vessels around the Great Lakes region. We retain our EUR 9.5 TP and BUY rating.
Finnair’s Q4 report was a bit better than expected, however we see current valuation limiting upside potential too much unless more positive surprises are yet to come.
Q4 report a bit better than expected but nothing major
Finnair’s EUR 687m Q4 revenue was near the EUR 679m/681m Evli/cons. estimates as passenger revenues were some EUR 20m higher than we estimated (ancillary and cargo were a bit soft relative to what we expected). Finnair’s Q4’22 saw 79% of ASK relative to Q4’19, including wet leases, as demand stays high. Fuel prices remained high in the historical context, a crucial factor limiting EBIT when Finnair still missed major volumes due to the recent years’ double whammy. Finnair achieved another positive adj. EBIT, at EUR 17.9m vs the EUR 13.5m/2.7m Evli/cons. estimates, as unit yields continued to advance. Prices should hold up also in Q1 and beyond as demand persists despite potential economic headwinds. We didn’t find any big surprises in terms of cost inflation, but the topic remains very much on the agenda as Finnair continues to proceed towards its 5% EBIT margin target.
Volumes and pricing support profitability development
There are still uncertainties around Chinese demand in particular; from Finnair’s point of view the focus now rests much on Shanghai and Beijing, as opposed to any secondary Chinese cities. Finnair has extended its wet leases, and dynamic pricing has helped unit revenues increase by 25%; ancillary revenue per passenger also increased by 13% compared to 2019. Hence Finnair’s revenue will increase significantly this year, but we expect it to remain 10% short of that for FY ’19. We believe Q1’23 EBIT will be negative as the market has recovered enough so that certain seasonal patterns can again be seen, but for FY ’23 we estimate a positive EBIT of EUR 105m.
Coming through, but most good news seem to be priced in
In our view Finnair is set to achieve a positive EBIT this year, and the positive development should continue in FY ’24, but the company’s profitability continues to lag other airlines. Finnair is valued about 16x and 10x EV/EBIT on our FY ’23-24 estimates, which are levels well above peers’. We see Finnair’s recovery already priced in and hence upside would probably require more than one factor to deliver a positive surprise. We update our TP to EUR 0.47 (0.45) but retain our SELL rating.
Marimekko’s Q4 net sales came in below our expectations while EBIT was stronger than expected. Guidance for 2023 implies growth to continue and profitability to remain on a good level. However, soft market is expected to continue also in Q1’23 in Finland.
Solteq’s Q4 results were weak and below our expectations, with revenue at EUR 16.9m (Evli EUR 17.4m) and adj. EBIT at EUR -0.8m (Evli EUR 0.7m), with the earlier noted challenges having a larger than anticipated impact. 2023 guidance is below our expectations, with revenue expected to remain at 2022 levels and EBIT to be positive.
The production ramp-up in Pampalo developed as expected during H2 2022, although profitability was impacted by cost inflation, which is anticipated to ease next year in 2023. Endomines anticipates a significant improvement in its financial performance in 2023 compared to 2022 driven by higher volumes, easing cost inflation and positive development of the price of gold.
Aspo’s Q4 results landed relatively close to estimates. ESL once again produced very high profitability, and outlook continues to be strong, while Telko’s profitability has decreased considerably after H1’22.
Etteplan reports its Q4 results on February 17th. Sights are already set on the outlook for 2023, with our expectations being on a notable y/y slow-down in growth.
Finnair’s Q4 revenue hit estimates well, while adjusted EBIT was a bit stronger than expected. At first glance the report doesn’t seem to contain any major surprises. Travel demand continues high after the pandemic for now, while inflation is still a challenge.
We make some cuts to our estimates after Raute’s Q4 report, but the bigger picture remains largely unchanged.
Bottom line and new orders a bit soft, but no major news
Raute’s EUR 45.7m Q4 revenue grew 4% y/y and was clearly above our EUR 38.0m estimate. The EUR 0.5m Q4 EBIT was soft relative to our EUR 0.7m estimate, despite the high revenue figure, as inflation still limited projects’ profitability; Services revenue continued to grow y/y, but there were changes in mix and certain delivery challenges. The EUR 28m Q4 order intake lacked modernization orders and was soft relative to EUR 36m estimate, however there seem to have been no significant negative changes in market demand since Q3.
We revise our FY ’23 revenue estimate down to EUR 133m
Raute’s earnings recovery path continues without major surprises, however we revise our estimates down as Q4 order intake was lower than we expected; the company begins the year with slightly lower order book than we estimated. European plywood investments (particularly within birch) should remain high, but we estimate European and North American revenues to remain roughly flat this year (both almost doubled in FY ’22); there is more scope for growth in Latin America and Asia-Pacific, but these markets have traditionally been more marginal for Raute. We likewise expect the Services and Analyzers businesses to remain stable in FY ’23, whereas the missing Russian revenue could leave Wood Processing top line down by 20%.
We now estimate FY ’23 EBIT at EUR 2.5m (prev. EUR 5.3m)
Raute’s guidance doesn’t seem challenging from profitability perspective as the minimum implies comparable EBITDA of only ca. EUR 6m (Raute’s comparable EBITDA amounted to EUR 8.7m in H2’22); further growth this year in Europe and North America within smaller equipment orders may not be that easy but a larger (European) order, should it materialize in early FY ‘23, could add a significant amount of revenue and thus help Raute specify its guidance upwards. Raute’s high operating leverage works both ways, but in our view comparable EBITDA of around EUR 8m should be achievable this year even if revenue declines by some 15%. The 17.5x EV/EBIT multiple, on our updated FY ’23 estimates, is not low but acceptable given earnings potential in the long-term. We retain our EUR 11 TP and BUY rating.
Raute’s Q4 revenue was clearly higher than we estimated, whereas EBIT was on the soft side especially considering the strong top line. The EUR 28m in new orders was also softer than we expected. Raute revealed a new reporting structure and guides FY ’23 revenue to be above EUR 130m and comparable EBITDA margin of above 4%.
Vaisala reports its Q4 result on Thursday, 16th of Feb. We expect the company to post double-digit growth and EBIT above the comparison period. With W&E estimate upgrades, we adjust our TP to EUR 41.0 (40.0) and retain HOLD-rating.
Marimekko reports its Q4 result on Wednesday, 15th of Feb. We anticipate the growth pace to slow down and cost pressures to cut margins. We retain a TP of 10.0, but adjust the rating to HOLD (BUY), reflecting a neutral valuation.
Pihlajalinna reports Q4 results on Feb 17. Last year the company positioned itself for growth, while this year focus rests more on profitability enhancing initiatives.
Less growth and more earnings this year
Pihlajalinna revised FY ’22 guidance down in Q4 as the factors which hit EBITA earlier in the year persisted. Capacity additions hurt earnings especially in H1, while certain cost inflation and productivity issues continued to weigh H2. Covid-19 services have also been missing, but other than that there have been no demand side issues. Organic growth has been robust, and the Pohjola Hospital acquisition helped the company grow at a high-teens rate in FY ’22. We make no changes to our Q4 estimates. We estimate 3% growth for FY ’23 and ca. EUR 10m profitability increase; we expect Pihlajalinna to guide flat growth and increasing EBITA for the year as the company is now done with its late capacity expansion and will focus on enhancing margins.
Capacity costs have been accompanied by other items
The two larger Finnish players, Mehiläinen and Terveystalo, had major issues last year despite strong growth. Mehiläinen, more than twice the size of Pihlajalinna in revenue, saw its profitability decrease by ca. EUR 35m due to many issues such as inflation and labor shortages. Pihlajalinna likewise has endured some cost inflation as well as labor issues due to both high sick rates and tight availability of recruits. The announced negotiations play their part in managing costs, while Pihlajalinna also divests its EUR 16m dental business, a small alleviation to the indebtedness issues. Price hikes prop top line in FY ’23, but we would also like to hear views on volumes. Public queues need to be dealt with, one area which could add volumes. Organic growth outlook is decent; there are minor top line headwinds due to the dental divestment as well as outsourcing restructurings, but these represent only ca. 5% of revenue and support margins.
Valuation unchanged and relatively undemanding
Pihlajalinna’s valuation, 14x EV/EBIT on our FY ’23 estimates, hasn’t changed in the past few months, while peer multiples have seen some gains. In our view the valuation leaves adequate upside potential as the roughly 5% EBIT margin we estimate for the year remains well short of the company’s long-term earnings potential. We retain our EUR 10 TP and BUY rating.
Innofactor posted solid Q4 figures and is well set to continue top- and bottom-line growth in 2023e. We retain our BUY-rating with a target price of EUR 1.5 (1.25).
Good figures posted in Q4
Innofactor reported Q4 results in line with our expectations. Revenue grew 17.1% y/y (12.7% organically) to EUR 20.5m (Evli EUR 20.5m) while EBITDA and EBIT amounted to EUR 2.6m (Evli EUR 2.7m) and 1.8m (Evli EUR 1.9m) respectively. The order backlog stood at EUR 75.8m, up 4.1% y/y. Innofactor’s BoD proposes a distribution of EUR 0.06 per share as repayment of capital (Evli EUR 0.06). Innofactor’s 2023 guidance was not a surprise, expecting net sales to increase from 2022 (EUR 77.1m) and EBITDA to increase from 2022 (EUR 7.8m). Q4 figures were solid, considering also the EUR 0.4m deduction made in Q4 revenue due to uncertainty in receivables of a single project, without which the reported EBITDA -margin of 12.7% would have been boosted by some 1.5%p.
Expecting top- and bottom-line growth in 2023
On our largely unchanged estimates, we expect revenue growth of 6.4% in 2023, driven by the weak comparison H1 and a continued modest growth outlook. Innofactor has not noted any demand issues but the prevailing economic uncertainty in our view is nonetheless not to be disregarded. We expect EBITDA to improve to EUR 9.7m (2022: 7.8m) supported by the improved operational efficiency after H1/22 challenges, topline growth and improved sales mix, with the SaaS+license share of revenue up 3%p by year-end. The deduced revenue in Q4 can still materialize in 2023, providing some further potential improvement to figures.
BUY with a target price of EUR 1.5 (1.25)
Current valuation levels in our view price in a flat earnings development at best, with implied 2022 P/E of ~13x, still clearly below peer 2022 and 2023e multiples. Some caution is however warranted, with Innofactor now having posted only two solid quarters after challenges before that. We adjust our TP to EUR 1.5 (1.25) and retain our BUY-rating.
Finnair reports Q4 results on Feb 15. Travel demand may remain robust and fuel prices have declined, but high valuation doesn’t seem to leave much upside potential.
Q4 EBIT likely to be a bit subdued after strong Q3
Finnair’s Q3 topped expectations as yields proved higher than estimated. High passenger revenues (some EUR 50m above estimates), helped by the seasonal strength of Q3, as well as income from wet leases translated into an adj. EBIT of EUR 35m (some EUR 40m above estimates). Q4 EBIT should have improved y/y but should be down somewhat q/q; passenger volumes are still recovering from the pandemic slump, but Q4 also includes slower periods and in the case of Finnair there’s the lack of North Atlantic volumes as certain routes have been missing after the summer months. We estimate Q4 revenue at EUR 679m and adj. EBIT at EUR 13m. We believe Finnair will not issue any specific guidance (beyond capacity and load factors) as the company and its main markets are still going through significant changes.
Volumes are still recovering while fuel prices have declined
Finnair now breaks out data for the Middle Eastern routes. The region, based on the initial figures, contributed 25% of the volume in January which Europe and Asia each lately turned out; we look forward to comments on how much these new routes might grow over the year. Finnair’s Asian volumes are now 50% compared to pre-pandemic levels, and even if China is only now opening it’s uncertain how much further the flows may grow as the Russian airspace stays closed. We also look forward to comments regarding ticket pricing as jet fuel prices began to decline in Q4. Jet fuel prices have declined especially in EUR terms (around 20% in the past 3 months) while there should still be significant pent-up travel demand following the pandemic.
Upside appears elusive for now despite lower fuel prices
We estimate 6% EBIT for FY ’24 vs Finnair’s target of at least 5% after H1’24. Lower fuel prices help airlines’ earnings and thus higher valuations are justifiable, however the pace of gains has been rapid in the past few months and sector multiples seem high. Some uplift may be warranted also in the case of Finnair, but the company trades 18x EV/EBIT on our FY ’23 estimates (vs 11x for a typical peer) and ca. 11x for next year (vs 8.4x). Our new TP is EUR 0.45 (0.40); our new rating is SELL (HOLD).
Innofactor’s Q4 results were in line with expectations. Net sales grew 17.1% y/y to EUR 20.5m (Evli EUR 20.5m). EBIT amounted to EUR 1.8m (Evli EUR 1.9m). Innofactor’s net sales and EBITDA in 2023 are expected to increase compared with 2022. Dividend proposal EUR 0.06 per share (Evli EUR 0.06).
Raute reports Q4 results on Feb 14. There’s still haze around revenue and margins going forward, but long-term potential exists while downside should be limited even if FY ’23 EBIT proves to be more on the soft side.
Q4 EBIT likely to be modest relative to Q3
Raute’s Q3 report was a positive surprise as Europe in particular drove top line EUR 8m above our estimate. The very high EUR 19m services revenue helped EBIT beat our estimate. Raute’s positive margin development is set to continue this year as the worst inflation shock has passed; Raute should have also learned to cope with inflation in project pricing. The Q3 report highlighted strong demand in North America and Europe (partly due to the Russian import gap), in addition to which there have been encouraging signs in Latin America and Asia. We expect stable Q4 EBIT development y/y while we estimate revenue down 14% y/y to EUR 38m. We estimate Q4 EBIT at EUR 0.7m, down from the EUR 1.4m Q3 figure as services revenue is unlikely to be that high this time due to a relative lack of modernization orders.
Profitability should heal over the course of the year
Russian order book was already down to EUR 6m at the end of Q3 and therefore the Q4 report should have no big news on that front, however we expect to hear an update on net working capital issues related to the cancelled Russian projects as well as recent component availability challenges. Raute’s guidance is always loose; we expect the company to guide improving (positive) EBIT for the year. A larger order could lift outlook further if demand remains strong over the course of the year.
Short-term downside seems limited, lots of EBIT potential
Raute should reach at least some modest positive EBIT in FY ’23 as inflation abates and the company achieves EUR 4-5m in annual savings. Favorable revenue (and mix) development could drive FY ’23 EBIT to a very decent level, although still likely well short of EUR 10m even in an optimistic scenario. We consider FY ’23 EBIT of ca. EUR 5m a realistic scenario. Raute may miss our base case estimate for FY ‘23 if Western demand begins to sour, but even in that case downside should be limited as there seem to have been no changes to Raute’s competitive positioning. We thus consider the 7x EV/EBIT valuation, on our FY ’23 estimates, undemanding. We retain our EUR 11 TP and BUY rating.
Suominen’s Q4 figures remained below estimates; volumes and margins will rebound this year, but valuation already reflects improvement amid uncertainty around the factors.
Improvement continues, but Q4 earnings remained very low
Suominen’s Q4 revenue landed at EUR 133m vs the EUR 140m/140m Evli/cons. estimates. Sales prices remained high, and the EUR 9m FX tailwind also helped, while Q4 volumes were flat q/q and y/y as US volumes continued to improve but not quite at the expected pace; raw materials deflation has led to some customer caution, in addition to which there have been manufacturing workforce shortages. The 5% gross margin, when adjusted for the EUR 4.8m hit in Italy, was a small improvement q/q but still clearly below our 10% estimate. Adj. EBITDA, at EUR 5.0m, came in below the EUR 11.8m/9.8m Evli/cons. estimates. FX lifted EBITDA by EUR 0.7m, while it lacked positive one-offs from the comparison period and was burdened by CEO change costs. Cash flow was strong as inventories and receivables declined q/q.
We estimate Americas revenue to grow by 13% in FY ‘23
Raw materials and energy prices continue to slide in Q1, which means Suominen’s pricing adjusts down in Q1 but slower than input costs. Meanwhile volumes and mix are improving; the US drives meaningful volume gains this year as especially H1’22 was challenging. Sustainable nonwovens’ growing share supports margins, but the relatively challenging European supply-demand balance in traditional products poses a headwind. We make some further small estimate cuts for this year; we estimate ca. 5% top line growth for the year, driven by double-digit growth in the US.
Focus rests on volumes over the coming quarters
H1’23 enjoys a favorable dynamic between falling input costs and relatively high (but already declining) nonwovens prices. The situation could extend to H2’23 if input costs continue to decline after the spring, but in our view margin gains are more likely to rely on improving volumes and mix after H1’23. FY ’23 results should thus demonstrate stabilizing profitability levels for Suominen after the rapid gains and declines seen in recent years. Suominen is valued below 5x EV/EBITDA and 9x EV/EBIT on our FY ’23 estimates, which we consider neutral levels since margins are likely to remain subdued especially during the early parts of the year. Our new TP is EUR 3.0 (3.5); we retain our HOLD rating.
Consti’s Q4 results were strong as both revenue and profitability figures exceeded our estimates. The valuation is still rather undemanding despite the recent share price strength, we also see the dividend yield attractive. We retain our BUY-rating and adjust our target price to EUR 14.0 (13.0).
Q4 results were strong
Net sales in Q4 were EUR 93.3m (EUR 82.6m in Q4/21), above our and consensus estimates (EUR 85.1m/86.0m Evli/cons.). Sales growth was impressive at 12.9% y/y. Operating profit in Q4 amounted to EUR 4.8m (EUR 3.0m in Q4/21), above our and consensus estimates (EUR 3.7m/3.4m Evli/cons.) at a margin of 5.2% (3.6%). We estimated improvement in profitability y/y as the comparison period was affected by poor performance of two regional business units, yet the published figures were even stronger than anticipated. The order backlog in Q4 was EUR 246.7m (EUR 218.6m in Q4/21), up by 12.8% y/y driven by strong order intake of EUR 109.1m in Q4 (Q4/21: EUR 66.9m). Consti’s BoD proposes a dividend of EUR 0.60 per share.
Positive development expected to continue
Consti expects that the operating result for 2023 will be in the range of EUR 9.5–13.5 million. We have made small adjustments to our forecasts, our current estimate for 2023 revenue is at EUR 315.2m (EUR 303.8m) and EBIT slightly above the guidance middle point at EUR 12.3m (EUR 11.6m). The estimate adjustments are driven by the company’s order backlog, easing cost inflation and volume growth. We still see potential margin pressure coming from salary cost inflation, on the other hand, the material cost inflation is clearly slowing down.
BUY with a target price of EUR 14.0 (13.0)
We continue to see the case attractive despite the recent share price strength. The company has shown its capabilities in a difficult market, and we expect the positive development to continue. The valuation is still rather undemanding when comparing to its key peers. In addition to the favorable relative valuation, we see the company’s dividend yield attractive at the current price levels. We adjust our target price to EUR 14.0 (13.0) with BUY-rating intact.
Suominen’s Q4 results remained below estimates. Top line grew 15% y/y but was still soft relative to expectations, while cost inflation didn’t yet ease that much to translate into significantly better margins. Profitability hence stayed at a very modest level.
Consti's net sales in Q4 amounted to EUR 93.3m, above our and consensus estimates (EUR 85.1m/86.0m Evli/cons.), with growth of 12.9% y/y. EBIT amounted to EUR 4.8m, also above our and consensus estimates (EUR 3.7m/3.4m Evli/cons.). Guidance for FY 2023: operating result for 2023 will be in the range of EUR 9.5–13.5 million.
CapMan’s operative performance in Q4 was quite decent with the big surprise being the divestment of JAY Solutions. The outlook for 2023 remains quite good and the investment case attractive despite some uncertainty.
Operatively quite as expected
CapMan reported operatively rather decent Q4 figures. The larger surprises came in the divestment of JAY Solutions (CapMan’s ownership 60%) and appointment of a new CEO. JAY Solutions was sold to Bas Invest for a consideration of EUR 8.5m at an attractive valuation of ~4x sales. CapMan, however, booked an EUR 2.6m goodwill impairment charge due to an accounting technicality relating to the option for the minority stake. As a result, EBIT came in softer than expected at EUR 7.5m (EUR 11.4m/9.6m Evli/cons.), adj. EBIT at EUR 10.1m. CapMan’s BoD proposed a dividend of EUR 0.17, a notch above expectations (EUR 0.16 Evli/cons.), for a dividend yield of ~6%.
Outlook remains quite good
The overall fairly decent fundraising and transaction outlook does not appear to have changed at least for the worse in the past months. The fundraising activity is seeing some support from a rebound in previous investment decision making slowness, with recent development in some funds having been slower than expected. We expect similar operating profit levels in 2023 as in 2022. The expected larger negative is in fund returns, after a stellar comparison period. We expect the Management Company business to clearly improve mainly through increased carried interest while expecting the Services business to improve on an adj. basis through growth and divestment of the loss-making JAY solutions.
BUY with a target price of EUR 3.2 (3.1)
CapMan in our view continues to convince despite some market softness. The market situation and an on our estimates higher expected share of more uncertain carried interest creates some uncertainty. With the not too challenging valuation level and the ~6% dividend yield the investment case remains attractive. We retain our BUY-rating with a TP of EUR 3.2 (3.1).
DT delivered solid Q4 growth. EBIT came down with high cost inflation. The growth outlook for H1’23 seems bright, but visibility into H2’23 is yet blurry. With the valuation remaining elevated, we retain our SELL rating. TP adjusts to EUR 16.5 (16.0) with minor estimate changes made.
SRV enters difficult market with a low-risk project portfolio and a healthy balance sheet. We see the near-term upside limited yet the valuation looks rather undemanding in the long-term. We retain our HOLD-rating and TP of EUR 4.3.
Q4 was weaker than expected
SRV reported Q4 results which were below our estimates. Revenue amounted to EUR 181.2m (EUR 211.9m/214.0m Evli/cons.) and EBIT was EUR -6.3m (EUR 3.6/4.1m Evli/cons.). The company estimates that 2023 group revenue is lower and operative operating profit is positive but lower than in 2022. SRV also updated its long-term financial targets (by 2026): Revenue EUR 900m and operative operating profit margin 6%. In addition, SRV aims to distribute 30-50% of earnings as dividend.
Challenging market ahead
The current estimates point towards a slowdown for 2023 in the Finnish construction market driven particularly by decreasing housing construction volumes. The market conditions are starting to show in the company’s numbers as the housing construction backlog continued to decline and the company’s revenue for Q4 was affected by delays in project starts. In our view, SRV is well positioned for a difficult market as the company’s order intake in business construction was strong during the fourth quarter. In addition to the strong presence in the lower risk business construction contracting market, the company’s balance sheet is healthy after the financing arrangements completed during H1 2022.
HOLD with a target price of EUR 4.3
We estimate revenue to decline 13.7% y/y in 2023 driven by a lack of developer contracted housing units and lower residential construction volumes while seeing healthy conditions for business construction supported by backlog growth. Because of the estimated project mix, we have also lowered our margin expectations for 2023. In our view, the near-term upside is limited yet the valuation looks rather undemanding in the long-term. We retain our HOLD-rating and TP of EUR 4.3.
DT’s Q4 and 22 EBIT saw an expected decrease. Group topline however grew nicely and soft Q4 profitability is explained by cost inflation.
CapMan's net sales in Q4 amounted to EUR 19.7m, in line with our estimates and consensus (EUR 19.8m/18.9m Evli/cons.). EBIT amounted to EUR 7.5m adj. EBIT EUR 10.0m), below our consensus estimates (EUR 11.4m/9.6m Evli/cons.). Dividend proposal EUR 0.17 per share (EUR 0.16/0.16 Evli/Cons.).
DT reports its Q4 result on February 2nd. Despite supply chain issues affecting especially MBU’s Q4 growth, we expect DT to deliver double-digit growth in Q4. However, a recent rally in stock price has turned DT’s valuation quite elevated. We downgrade our rating to SELL (HOLD) and adjust TP to 16.0 (16.5).
Fellow Bank has met the expectations that were set out for 2022. The market environment changes provide some near-term benefits but increase uncertainty regarding the lending outlook. We adjust our TP to EUR 0.40 (EUR 0.42), HOLD-rating intact.
On track with set out expectations for 2022
Fellow Bank’s development during H2 has progressed in line with expectations set out earlier. The loan portfolio at the end of 2022 was at EUR 159.9m (target > EUR 150m). Deposits amounted to EUR 246.8m, showing an expected more modest growth. The provided funding amounts on a monthly level have also showed a slight positive trend, with the monthly average (R3m) near EUR 28m. Actions to strengthen equity were also completed as expected with the issue of an EUR 6.1m debenture loan during the fall.
Market environment development positives and negatives
The interest rate environment and macroeconomic uncertainties bring some added flavour to the mix, the effects of which we currently view as slightly net negative for Fellow Bank. The effect on near-term expected net interest income is positive, although the higher interest rates on deposits and current loan portfolio to deposit ratio reduces some of the positive impact. The interest rate hikes coupled with the macroeconomic uncertainties, however, increase the uncertainty in the growth of funding volumes going forward. The effects so far appear to have been mostly visible through somewhat stricter lending policies and higher loan loss provisions, but we foresee some increases in competition through pricing going forward. The overall financial impacts on our estimates for the coming years are not substantial through the higher expected interest income and somewhat lower growth and higher loan loss expectations.
HOLD with a target price of EUR 0.40
Fellow Bank’s investment case relies on the growth of its loan book in the coming years and the benefits of scalability. The current outlook has in our view slightly weakened, and we adjust our target price to EUR 0.40 (EUR 0.42), HOLD-rating intact.
Consti reports its Q4 2022 results on February 3rd. We expect that the steady performance continues, and operative profitability improves year-on-year. We retain our BUY-rating and adjust our target price to EUR 13.0 (12.0).
Steady performance expected to continue in Q4
Consti reports its Q4 results on February 3rd. The company’s performance has been steady during the first nine months, and we expect that the development has continued during the last quarter. We estimate revenue growth of 2.8% for Q4 driven by slightly higher backlog burn yet lack of inorganic growth when comparing to Q4 2021. Consti estimates that the EBIT for FY will be in the range of EUR 9-13 (EUR 2.4-6.4m implied guidance for Q4). Our estimate for FY EBIT stands at EUR 10.3m (EUR 3.7m for Q4), slightly below the middle point of the guidance. We expect that the company can improve its relative profitability y/y despite the cost inflationary environment as Q4 2021 was affected by two regional business units with poor profitability.
Renovation market is expected to grow slightly in 2023
Despite the anticipated decrease in new construction, the Finnish renovation construction volumes are predicted to experience a slight increase in 2023. The Confederation of Finnish Construction Industries RT predicts that renovation output will increase by 2% in 2023. We currently forecast revenue growth of 2.2% and EBIT margin of 3.8% for 2023, we expect the company's growth to continue, though at a slightly slower pace due to a lack of inorganic growth. However, margins are predicted to improve as a result of higher volumes and slowing cost inflation. Consti’s backlog is still at healthy levels and the company has been able to win projects especially on non-residential renovation. The demand for renovations by housing companies in 2023 is uncertain due to the high interest rates and renovation costs.
BUY with a target price of EUR 13.0 (12.0)
We have not made any adjustments to our estimates. Due to higher peer group multiples, we adjust our target price to EUR 13.0 (12.0) with BUY-rating intact.
Suominen reports Q4 results on Feb 3. It’s clear Q4 will be a lot better than previous quarters, while FY ’23 profitability continues to improve. Many factors now support margins, but valuation also reflects better performance.
US volumes recover while raw materials prices decline
Suominen’s Q3’22 top line recovered a lot even when its early part remained difficult in the US. We expect the continued rebound to have helped Suominen grow 21% y/y to EUR 140m in Q4 revenue. We estimate Suominen’s raw materials prices to have declined by almost 10% q/q in Q4, which together with higher delivery volumes and relatively stable sales prices should have helped the company to a significant profitability improvement not only q/q but also y/y. We estimate Q4 EBITDA at EUR 11.8m. USD has lately weakened by some 10% against EUR but is still relatively strong compared to year ago. We therefore believe the US business to drive growth also this year.
European volumes seem unlikely to grow much this year
Suominen plans to close another of its plants in Italy. European demand for traditional wipes is soft, while Turkish and Chinese imports have added a lot of supply within such segments, and the Mozzate plant isn’t positioned to produce sustainable nonwovens. Italy’s position is also challenging in terms of energy costs. The closure would result in EUR 9m in one-offs and EUR 3m in added annual EBITDA as utilization rates improve. Q4’22 and Q1’23 energy costs in Europe might prove to be a bit lower than feared due to the mild winter, whereas the situation in the US may have been more challenging relative to expectations. Suominen should guide at least some EBITDA improvement for this year as H1’22 comparison base is so weak, however the Q4 report might be a bit too early to give very strong guidance.
Valuation neutral, uncertainties around improvement pace
The closure and lower USD represent some estimate headwinds, but we would still expect Suominen to grow by at least a few percentage points this year. Suominen’s valuation (8x EV/EBIT on our FY ’23 estimates) is not very challenging as profitability continues to improve from the lows, driven by higher top line and lower raw materials prices, but valuation already reflects improvement while a lot of uncertainty remains around its pace. We update our TP to EUR 3.5 (3.0); our rating is now HOLD (BUY).
The upgrade implies Q4 was a lot better than we previously estimated but also suggests further improvement this year after recent challenges caused by high inflation.
Q4 figures clearly better than previously estimated
Enersense upgraded its FY ’22 guidance. Revenue should be around EUR 265m while adj. EBITDA will top EUR 12m. We had previously estimated relatively robust 8% top line growth for Q4’22, however we update our estimate to 31% ahead of the report. We saw Q4 EBITDA margin slightly below 2% but now update our estimate to 4.5%. The positive revision was driven by wind power projects, which proceeded ahead of schedule, yet our EUR 15m top line and EUR 2.6m profitability revisions suggest our previous estimates to have been cautious on other fronts as well. Organic growth outlook seems to be stronger than we previously estimated as each of the four segments appears headed for double-digit growth also this year.
High growth to continue even without the Voimatel deal
In our view Enersense is set to achieve significant earnings improvement in FY ’23 as inflation was a major challenge throughout last year, dragging profitability over the crucial summer months. Enersense has been negotiating inflation compensation for a while, the results of which are set to materialize with a lag, and this year inflation should prove much more modest whereas top line growth looks to remain in the double-digit territory. We note Connectivity has recently announced EUR 65m in contracts for the coming years. We estimate Enersense should be able to achieve roughly 200bps gains in operating margins this year. The Voimatel acquisition, should it go through, would help drive further operational improvement, but for now it’s still being processed by the FCCA.
FY ’23 figures and wind power projects could drive upside
Enersense continues to invest in growth this year, helped by the EUR 26m in proceeds from convertible notes. We have updated our FY ’23 EBIT estimate to EUR 11.4m (previously EUR 8.4m), on which Enersense trades roughly 10x. The valuation is not particularly challenging, especially relative to peers; the 3.8% EBIT margin we estimate also doesn’t reflect full profitability potential and hence earnings growth should continue next year. Our updated TP is EUR 7.0 (6.0) as we retain our HOLD rating.
Solteq presented its new strategy in its CMD 2023 event, reiterating near-term challenges and setting forth steps to build a stronger Solteq in the long-term. We retain our HOLD-rating and adjust our TP to EUR 1.3 (1.2)
New strategy set
Solteq hosted its Capital Markets Day 2023 on January 18th, giving more insight into the recently set new strategy. Solteq had previously announced that it will operate under two new segments, Retail & Commerce and Utilities. Long-term growth and EBIT-% targets for the segments were set at 8%/8% and 15%/18% respectively. The company’s primary focus in the near-term will be on profitability, while also seeking to return on a growth path.
Near-term softness, building for the long-term
Solteq is heading into the new strategy period with a heavily renewed management team, including both new segments. For the short-term, Solteq reiterated the challenges faced in product development and macroeconomic headwinds. For the Utilities-segment, 2023 is expected to be a turn-around year, with ramp-up towards normalized operations and healthier financials towards H2/2023. In the Retail & Commerce-segment the growth ambitions in our view appear reasonable, although expectations in the near-term seem muted due to current headwinds. Newly appointed EVP Jesper Boye previously successfully headed Solteq’s business in Denmark and we see potential in future pan-Nordic growth. In our view the key takeaway from the CMD was the confirmation of Solteq’s own abilities and focus on near-term measures to build a much more capable Solteq towards the latter part of the strategy period.
HOLD with a TP of EUR 1.3 (1.2)
From a valuation perspective, the near-term remains subdued by challenges in the Utilities business. The significant upside potential in our view lies in the turnaround and tapping into the other Nordic countries, assuming the implementation of Datahub in Sweden. We adjust our TP to EUR 1.3 (1.2) due to a slight rebound in peer multiples, HOLD-rating intact.
Endomines reported high-grade drill results significantly below the current production level. Even though the result is based on a single drill hole, it confirms the continuation of the deposit to the depth. We have not made changes to our production estimates, yet we increase the possible Pampalo Life of Mine in our option model. We increase our TP to EUR 6.5 (5.4), HOLD-rating intact.
High-grade drill results from Pampalo
Endomines is currently extracting ore from the 755-815 level and have inferred resources (Pampalo deep) at the 815-875 level. The new drill hole intersected 6.0m grading 9.2g/t gold at the 1050 level, roughly 175-235m below the 815-875 level. The company has historically been able to produce approximately 20k ounces of gold per 50 meters at the Pampalo underground mine.
Probability of extending Pampalo Life of Mine increases
The results are based on a single drill hole and further drilling is needed to determine the economic feasibility of the mining area. Even though it is too early to determine if the company is able to economically extract the ore, the result confirms the continuation of the deposit. The gold was found in a location where the company expected, which shows that the mineralization continues according to the company’s previous expectations.
HOLD with a target price of EUR 6.5 (5.4)
We have not made changes to our production estimates based on the published results. Our valuation for the company’s Pampalo mine is based on DCF which considers the ore reserves and resources between the 755-815 and 815-875 levels. The rest of the value is derived from a real option model which considers the possibility of Pampalo LoM increase. We have made adjustment to the real option model regarding the possible scale of the LoM increase. As a result of the changes to the model and the favorable gold price development, we increase our target price to EUR 6.5 (5.4), HOLD-rating intact.
Consti is the leading renovation construction company in Finland. Despite facing an uncertain market with rising building costs, the company has been able to successfully turnaround and maintain its profitability. We continue to see the valuation rather undemanding and the discount to its main peers unjustified. We retain our BUY-rating and adjust our target price to EUR 12.0 (11.0).
Trading with the company’s shares in Nasdaq Helsinki commences today under ticker PAMPALO. Endomines raised gross proceeds of EUR 13m which are used especially for exploration activities along the Karelian gold line. With the funding, the company is starting a new chapter as it begins to implement its updated strategy on a larger scale. We update our target price to EUR 5.4 (SEK 59), HOLD-rating intact.
Netum issued a profit warning, lowering its EBITA-margin range. We see continued solid mid-term potential through the public sector exposure despite near-term challenges.
Endomines seeks to raise gross proceeds of EUR 13m (SEK 141m), the proceedings are used especially for exploration activities along the Karelian gold line. The investment case relies on the successfulness of the company’s exploration activities, for which visibility remains low. Additionally, we see clear risks in the value realization of the company’s United States asset portfolio.
Endomines to raise gross proceeds of EUR 13m
Endomines seeks to raise gross proceeds of EUR 13m (SEK 141m). The 2.6 million new shares offered represents 38.9% of the current shares outstanding. The subscription price is EUR 5.00 (SEK 54.25 at the current FX rate). In case of oversubscription, the company’s BoD may increase the number of shares issued up to 3.6m shares with a one million share upsize option. The net proceedings from the issue (excl. upsize option) are roughly EUR 12.3m (SEK 134m). The company has received commitments from investors worth of EUR 12.2m in total (or roughly 94% of the total offering) of which roughly EUR 3.4m is paid in cash.
Proceeds used to fund exploration activities in Finland
Endomines updated its strategy earlier this year which set the company’s focus back to Finland. The company aims to conduct wide scale exploration activities in the Karelian gold line with a mid-term target of defining a deposit with more than one million ounces of gold resources. The proceeds of the issue are used for the implementation of the new strategy and especially for exploration activities along the Karelian Gold Line.
HOLD with a target price of SEK 59 (64)
We have adjusted the shares outstanding and net debt figures with an assumption that the offering will be fully subscribed. In addition, we have made changes to our estimates and the SOTP valuation. The favorable gold price development is outweighed by the dilution effect from the offering and the uncertainty regarding the successfulness of the company’s exploration activities, the value realization of the US assets and changes in the FX rates. We decrease our target price to SEK 59 (64), HOLD-rating remains intact.
Pihlajalinna’s guidance downgrade wasn’t very big news as costs have remained relatively high over the course of this year. Demand is strong, but short-term upside is now more limited due to the uncertainty around FY ’23 improvement.
Q4 EBITA not to improve that much
Pihlajalinna downgraded its guidance. Top line will still increase substantially, but FY ‘22 adj. EBITA is to decrease relative to the EUR 37.3m comparison figure. The earlier guidance suggested flat EBITA, and we previously estimated the figure at EUR 36.5m. We revise our Q4 EBITA estimate down to EUR 9.0m and hence now see the FY ’22 figure at EUR 33.5m. We note the EUR 7.8m figure seen in Q4’21 was weighed down by some EUR 2m in extraordinary high service costs within complete outsourcing contracts, and hence Pihlajalinna should be able to achieve at least flattish y/y profitability development in Q4’22.
EBITA is bound to improve next year
Pihlajalinna has scaled up its capacity over the past year; volumes and revenue have followed pretty much according to plan. Pohjola Hospital burdened profitability in H1, while new clinic ramp-ups continued to drag Q3 results. Personnel absence-related costs moderated a bit in Q3 but were still EUR 1m. Lower Covid-19 services revenue was another headwind. Pohjola Hospital cost synergies have already been realized and the units are profitable, but there’s still work to be done in driving higher capacity utilization rates across the network and especially within high value-added categories such as surgery procedures. Demand continues at a high level and Pihlajalinna has scope to raise prices; in our view profitability is set to follow up with top line next year, however we revise our FY ’23 profitability estimates down by EUR 3m.
Uncertainty around FY ’23 improvement pace limits upside
We make no changes to our revenue estimates as in our view the update concerns the cost levels which have continued relatively high. Pihlajalinna is valued at 14x EV/EBIT on our FY ’23 estimates, which is still not a high figure relative to peers while we estimate the respective EBIT margin almost 300bps below peers’. Long-term potential should remain large, but uncertainty around costs limits upside at least in the short-term perspective. Our updated TP is EUR 10 (11); we retain BUY rating.
Administer acquired financial and HR administration services specialist Econia, taking a clear leap towards its 2024 net sales target of EUR 84m.
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 v