Investment case Investment case Lorem ipsum dolor sit amet, consectetur adipiscing elit. Vivamus volutpat, nibh ac porttitor condimentum, purus nulla placerat massa, in eleifend nisi tellus nec lorem. Vivamus posuere hendrerit est ac dapibus. Interdum et malesuada fames ac ante ipsum primis in faucibus. Morbi posuere posuere bibendum. Cras ullamcorper mi et aliquam scelerisque. Proin nec ligula maximus, consectetur odio id, elementum neque. Aliquam lacinia dui in velit semper, sit amet rutrum justo euismod.

re hendrerit est ac dapibus. Interdum et malesuada fames ac ante ipsum primis in faucibus. Morbi posuere posuere bibendum. Cras ullamcorper mi et aliquam scelerisque. Proin nec ligula maximus, consectetur odio id, elementum neque. Aliquam lacinia dui in velit semper, sit amet rutrum justo euismod.

Financial overview

Header201720182019202020212022
Header201720182019202020212022
Header201720182019202020212022
Header2019/12019/22019/32019/420192020/12020/22020/32020/42020
Header201720182019202020212022
Header201720182019202020212022
Header201720182019202020212022

Scanfil - Not quite as high as we expected

19.02.2020 | Earnings Flash

Scanfil’s Q4 didn’t reach our expectations as top line missed our estimate by a few percentage points while operating margin was some 60bps lower than we expected.

• Scanfil Q4 revenue amounted to EUR 155m vs EUR 159m/157m Evli/consensus estimates.

• Communication top line was EUR 21m, while we estimated EUR 23m.

• Consumer Applications’ revenue was EUR 28m, compared to our EUR 27m estimate.

• Energy & Automation recorded EUR 29m Q4 revenue vs our EUR 29m estimate.

• Industrial top line amounted to EUR 47m vs our EUR 51m expectation.

• Medtec & Life Science Q4 revenue was EUR 29m, compared to our EUR 29m estimate.

• Scanfil’s Q4 EBIT stood at EUR 10.0m vs EUR 11.3m/11.0m Evli/consensus estimates. Operating margin thus amounted to 6.5%, whereas we estimated 7.1%.

• The BoD proposes EUR 0.15 (0.13) dividend per share to be distributed, which we had estimated at EUR 0.16.

• Scanfil guides ’20 revenue in the EUR 590-640m range and expects adjusted operating profit to amount to EUR 39-43m. We find this guidance range unsurprising as FY ’19 revenue stood at EUR 579.4m while adjusted operating profit was EUR 39.4m. Scanfil says the guidance is subject to exceptional uncertainty due to the coronavirus situation.

• Scanfil updates its long-term financial target, according to which Scanfil aims to reach EUR 700m revenue organically in ’23 (previously EUR 600m in ’20) with a 7% operating margin.

Scanfil - We see extended solid performance

28.10.2019 | Company update

Scanfil’s 7.9% EBIT margin topped our estimate, and while the result was partly due to a favorable product mix, we now see the company in shape to post 7% EBIT margins on a regular basis. Our new TP is EUR 5.00 (4.75), rating BUY.

HASEC contributed, yet organic growth was also decent

Scanfil’s sales have developed in a stable fashion during the last few years. The Communication segment was the only one of the five where revenue declined y/y. The segment supplies telecommunications companies with products such as base stations, is arguably the most cyclical and challenging of Scanfil segments, and with LTM revenue of EUR 86m the smallest. Nevertheless, even Communication sales have been improving since Q2. Consumer Applications and Energy & Automation grew slightly, and Medtec improved by 14% relative to the soft comparison period. Most noteworthy was the Industrial segment, which contributed ca. 80% of the revenue increase, and as such the most significant segment generates almost a third of Scanfil revenue. Although HASEC added revenue meaningfully, more than half of the Industrial segment’s growth was organic.

We see Scanfil able to routinely post 7% EBIT margins

Scanfil says the integration of HASEC is proceeding according to plan. Revenues attributable to HASEC will be mostly reported under the Industrial and Medtec segments. Scanfil says the strong 7.9% operating margin was partly due to favorable product mix, and so we wouldn’t extrapolate this profitability level too far. However, Scanfil posted an above 7% operating margin also in Q2 with what the company says was a normal product mix. It’s early to assess prospects for next year, but in the light of such performance Scanfil’s 7% operating margin target for ’20 might start to look a tad conservative.

We raise our TP due to continued good performance

We’ve made upward revisions to our EBIT estimates, now expecting Scanfil to reach 7.0% margin already in ’19 (we previously expected 6.6%). We base our TP on Scanfil’s historical multiples, which have valued the company at some 7x EV/EBITDA and 9x EV/EBIT, and thus our updated TP stands at EUR 5.00 (4.75). Our rating remains BUY. We also note Scanfil’s peer group multiples have gained sharply during the last couple of months.

Scanfil - Strong operating margin for Q3

25.10.2019 | Earnings Flash

Scanfil’s Q3 revenue, at EUR 152m, missed our EUR 163m estimate by 7%, however the company still managed to beat our EUR 11.4m operating profit expectation by posting a figure of EUR 12.1m.

  • The EUR 152.3m in Q3 revenue represents 16% y/y increase. The 7% q/q growth nevertheless didn’t meet our estimate.
  • Operating profit came in strong, the EUR 12.1m figure translating to an operating margin of 7.9% (vs 6.7% margin a year ago). Our expectation was for a 7.0% margin.
  • Scanfil says roughly half of the EUR 21m y/y increase in revenue was due to organic growth, the remainder being attributable to the HASEC acquisition closed at the end of Q2.
  • Industrial and Medtec segments performed well, and the strong operating profit was partly attributable to favorable product mix but also thanks to high utilization rate.
  • Scanfil expects the fourth quarter of 2019 to be the best in terms of sales, sees good activity also for the first quarter of next year.
  • Scanfil updates its FY ’19 guidance. The new guidance is EUR 570-590m in revenue and EUR 39-41m in operating profit (previously EUR 580-610m and EUR 39-42m).

Scanfil - Expecting further pickup in H2’19

12.08.2019 | Company update

Scanfil didn’t meet our revenue estimate but nevertheless managed to beat in terms of EBIT. Overall Q2 was rather undramatic, yet we note that volumes need to continue to improve during H2’19 if the company is to deliver on FY guidance. We retain our EUR 4.75 TP and our BUY rating.

Scanfil expects improved customer demand during H2’19

Scanfil posted EUR 143m in Q2 revenue (vs our EUR 158m estimate), thus adding 10% q/q but losing 6% y/y. Revenues were quite evenly spread between the five segments. The y/y revenue decline was mostly attributable to the Consumer Applications segment, which decreased by 29% (a major product will fold due to low demand), however the Communication segment (e.g. base stations) was also soft, declining by 18%. Despite soft Q2 revenue Scanfil managed to top our EUR 10.0m EBIT estimate. The reported EUR 10.3m figure (7.2% EBIT margin vs our 6.3% estimate) testifies to plant network efficiency (strong EBIT margin with a normal product mix). Scanfil notably has a strong record in cost control.

Scanfil writes down Hamburg, closes the HASEC acquisition

Scanfil’s Hamburg unit has underperformed and so the company impaired the plant’s goodwill. The line is now fully impaired (the write-off was EUR 3.6m), but the company still works to expand the unit’s customer base and volumes. Scanfil also closed the HASEC deal near the end of Q2 (the German unit contributed EUR 1.5m to Q2 revenue). Scanfil expects HASEC to contribute EUR 20m in revenue and EUR 1m in EBIT during H2’19. We now expect EUR 321m in H2’19 revenue (EUR 301m) and EUR 22m in H2’19 EBIT (EUR 20m). Scanfil’s updated guidance for FY 2019 is EUR 580-610m in revenue and EUR 39-42m in EBIT (previously EUR 560-610m and EUR 36-41m).

Minor estimate changes as the thesis remains unchanged

Scanfil’s H1’19 was on the slow side (largely due to Q1) in revenue terms, meaning volumes need to improve further in H2’19 if the FY ’19 guidance is to be met. The main risk is on the volume side; in our view Scanfil will have no problem reaching the EBIT target if the revenue goal is met. Scanfil still trades ca. 15-20% below its historical averages. We value Scanfil according to these multiples and thus hold our EUR 4.75 TP and BUY rating.

Scanfil - Strong EBIT despite soft revenue

09.08.2019 | Earnings Flash

Scanfil reported Q2 revenue clearly below our expectations yet managed to beat our operating profit estimate. Operating margin remained strong despite 6% decline in revenue compared to previous year.

  • Q2 revenue, at EUR 143m, missed our EUR 158m estimate by 10% and declined by 6% compared to previous year (but increased by 10% compared to previous quarter). Scanfil says revenue developed favorably in all segments except Medtec & Life Science.
  • Q2 adjusted operating profit amounted to EUR 10.3m vs our EUR 10.0m estimate. Adjusted operating margin was thus 7.2% vs our 6.3% expectation.
  • The adjustment items include expenses related to the acquisition of HASEC-Elektronik GmbH (EUR 0.4m) and the impairment of Scanfil GmbH’s goodwill (EUR 3.6m).
  • Scanfil adjusts 2019 outlook to reflect the HASEC acquisition it completed at the end of Q2. Scanfil says HASEC will contribute ca. EUR 20m in revenue and EUR 1m in operating profit during 2019 and hence the new FY 2019 guidance is EUR 580-610m in revenue and EUR 39-42m in adjusted operating profit (previously EUR 560-610m and EUR 36-41m).
  • Scanfil also said it will initiate a share repurchase program. The authorization is to purchase a maximum of 300,000 shares, or approximately 0.46% of the total number of shares (the maximum amount to be used is EUR 1.35m). The repurchasing will start on Aug 12, 2019 at the earliest.

Scanfil - Expect further robust results

18.06.2019 | Company report

We expect Scanfil to remain one of the contract electronics manufacturers with better positioning amid a perennially competitive market for outsourced industrial electronics production. We view Scanfil’s strength premised on quality control, competitive pricing and good relationships with its key customers. In our view Scanfil’s valuation is at an attractive level as the current multiples represent a discount of some 20% compared to its own historical averages. We rate the shares BUY, TP at EUR 4.75 per share.

Scanfil remains well-positioned strategy-wise

While Scanfil’s short-term success is dependent on its most important customers’ products (the ten largest accounts generate ca. 60% of revenues), and these large industrial OEMs often face cyclical demand, Scanfil’s plant network can serve accounts both in the early stages of a product cycle and industrial electronics that are already being manufactured at high volumes, meaning Scanfil is able to nurture initially small customers and in the longer perspective graduate them to more significant revenues. However, such development demands patience as it will take a few years to reach a couple of million in annual sales (and this is only a fraction of the tens of millions required to be recognized as a major Scanfil customer).

Scanfil set to grow both organically and inorganically

Scanfil targets organic growth of ca. 3% in 2019-20 and a slight improvement in operating margin (7% in 2020). In our view these remain realistic targets, although success could be hampered by the softening of demand for a major customer product. Scanfil is still committed to screening the German market for acquisition targets (after announcing a deal in May).

Both Scanfil and its peers valued at undemanding multiples

Scanfil has historically traded at EV/EBITDA and EV/EBIT multiples above 7x and 9x, while the company is currently valued at 5.7x and 7.4x (based on our 2019 estimates). This 20% discount is in line with the recent peer group development. We rate Scanfil BUY, our target price being EUR 4.75 per share.

Scanfil - Slow start for the year

26.04.2019 | Company update

Scanfil’s Q1 EBIT, at EUR 6.8m, came in below our EUR 8.0m estimate, while the EUR 130m sales topped our EUR 125m estimate. Scanfil did warn Q1 would be slow due to a few major customers and still expects clear pick-up in activity in Q2. We leave our growth and margin estimates unchanged, retaining our TP of EUR 4.75 and BUY rating.

The 7% y/y revenue decline was due to two segments

Scanfil reorganized its segments in the beginning of 2019. The new structure includes Communication (previously Networks & Communications; 14% of Q1 sales), Consumer Applications (parts of Urban Applications and Other Industries; 18% of Q1 sales), Energy & Automation (some contracts added from other segments; 20% of Q1 sales), Industrial (parts of Urban Applications and Other Industries; 28% of Q1 sales), and Medtec & Life Science (21% of Q1 sales) segments. The Q1 revenue decline was attributable to the Consumer Applications (35% y/y decrease) and Communication (20% y/y decrease) segments. The other three segments’ revenues were either flat or increasing. Scanfil also expects Consumer Applications’ top line to grow in 2019 despite the plan to halt the production of a single major product where demand has been low since Q3’18.

Q1 EBIT margin low due to volumes and product mix

Scanfil managed a meagre 5.3% operating margin in Q1 (7.4% a year ago) owing to both low sales volumes and a suboptimal product mix. Although Scanfil has now posted substandard margins for two consecutive quarters (Q4 EBIT was similarly low due to product mix), we continue to expect 6-7% operating margins going forward. Scanfil targets 7% operating margin.

Our target price remains unchanged at EUR 4.75 per share

Scanfil’s peer group valuation multiples have stayed largely flat since the previous earnings report. Scanfil currently trades at 6.1x EV/EBITDA ‘19e and 7.8x EV/EBIT ‘19e, a valuation level in line with the peer group. Moreover, as we see no changes to Scanfil’s longer term outlook, we retain our target price of EUR 4.75 per share and leave our rating BUY.

Scanfil - Sales beat, EBIT subdued

25.04.2019 | Earnings Flash

Scanfil missed our Q1 EBIT estimate of EUR 8.0m, the figure coming in at EUR 6.8m. The company said earlier Q1 will be relatively slow, citing low demand among a few significant customers. Scanfil continues to expect customer demand to pick up during Q2, holding on to its earlier guidance for the year.

  • Q1 revenue amounted to EUR 130m vs. our expectation of EUR 125m. Revenue declined by 7% y/y due to customer-specific considerations.
  • The sales decrease was attributable to the Consumer Applications and Communication segments. Other customer segments’ revenues were stable or developed positively.
  • Q1 EBIT stood at EUR 6.8m (5.3% margin) vs. our estimate of EUR 8.0m (6.4% margin). The operating profit declined by a third on an annual basis due to lower turnover and unfavorable product mix.
  • Scanfil retains 2019 guidance for EUR 560-610m in revenue and EUR 36-41m in EBIT. The company expects Q2 to be much stronger in terms of revenue and EBIT.

Scanfil - Q4 softness unlikely to persist

18.02.2019 | Company update

Scanfil’s Q4 EBIT didn’t meet our expectations. However, the weakened operating margin was attributable to Scanfil’s account idiosyncrasies. Certain contracts with above average profitability lacked volumes in Q4. Overall, the company sees business continuing as before, and we expect organic revenue growth to add around EUR 20m in 2019. 2020 sales target stands at EUR 600m. We update our target price to EUR 4.75 (4.60); our rating stays BUY.

Individual contracts determine quarterly segment results

Although Other Industries segment grew 18% in 2018, the segment’s Q4 results were weak due to a significant decrease in demand from a certain notable customer. Urban Applications Q4 top line declined by 12% y/y due to one or two accounts’ seasonal variation. In other words, the Q4 EBIT margin weakness was entirely attributable to a couple of accounts that are above average in terms of profitability. Broadly speaking, demand continued to develop positively and the company’s guidance for 2019 is in line with our earlier expectations. While individual accounts may have large impact on specific segment results, we expect MedTech, Life Science and Environmental Measurement to be the most stable performer. Conversely, within a segment such as Networks and Communication, it is hard to say when larger order volumes may materialize (i.e. when a standard such as 5G starts to have an impact).

Scanfil expects Q1 to be slower, demand to pick up in Q2

Scanfil says the year will have a sluggish start; the company expects clear demand pick up during the second quarter. The company is adding new customers particularly in Sweden. In addition to organic growth, initiatives such as a EUR 50m acquisition in e.g. Germany are not off the table.

Our rating is BUY, update target to EUR 4.75 (4.60)

Our long-term expectations for Scanfil are intact. Increased peer multiples provide lift for valuation, and thus we update our target price to EUR 4.75 (4.60) per share.

Scanfil - EBIT below our expectations

15.02.2019 | Earnings Flash

Scanfil’s Q4 results didn’t reach our estimates. We expected an EBIT margin of 6.0%, while the company delivered 5.4%. Nevertheless, the full year saw robust growth and operating profit development. The BoD proposes a dividend of EUR 0.13 per share for 2018 (vs our expectation of EUR 0.14).

  • Q4 sales increased by 6.3% compared to Q3, supported by almost all customer segments. Energy and Automation, Medtec and Life Science and Other Industries segments achieved over 10% growth.
  • The quarterly decrease in operating margin was mainly due to significantly decreased demand from a few notable customers, and partly due to seasonal variation.
  • The demand decline was restricted to a few customers. Overall, demand has remained steady. Customers’ forecasts are looking strong.
  • Guidance: Scanfil estimates 2019 revenue will be EUR 560-610m, expects operating profit will amount to EUR 36-41m. These figures are in line with our estimates.
  • Scanfil’s target is to reach EUR 600m sales in 2020 and an EBIT margin of 7%.

Scanfil company presentation 28052019

Scanfil - Company presentation

28.05.2019
ShareholdersDate% of shares% of votes
Currency: EUR
Price change in selected period:

These research reports have been prepared by Evli Research Partners Plc (“ERP” or “Evli Research”). ERP is a subsidiary of Evli Bank Plc.

None of the analysts contributing to this report, persons under their guardianship or corporations under their control have a position in the shares of the company or related securities. The date and time for any price of financial instruments mentioned in the recommendation refer to the previous trading day’s closing price(s) unless otherwise stated in the report. Each analyst responsible for the content of this report assures that the expressed views accurately reflect the personal views of each analyst on the covered companies and securities. Each analyst assures that (s)he has not been, nor are or will be, receiving direct or indirect compensation related to the specific recommendations or views contained in this report.

Companies in the Evli Group, affiliates or staff of companies in the Evli Group, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives) of any company mentioned in the publication or report. Neither ERP nor any company within the Evli Group have managed or co-managed a public offering of the company’s securities during the last 12 months prior to, received compensation for investment banking services from the company during the last 12 months prior to the publication of the research report.

ERP has signed an agreement with the issuer of the financial instruments mentioned in the recommendation, which includes production of research reports. This assignment has a limited economic and financial impact on ERP and/or Evli. Under the assignment ERP performs services including, but not limited to, arranging investor meetings or –events, investor relations communication advisory and production of research material. ERP or another company within the Evli Group does not have an agreement with the company to perform market making or liquidity providing services. For the prevention and avoidance of conflicts of interests with respect to this report, there is an information barrier (Chinese wall) between Investment Research and Corporate Finance units concerning unpublished investment banking services to the company. The remuneration of the analyst(s) is not tied directly or indirectly to investment banking transactions or other services performed by Evli Bank Plc or any company within Evli Group.

This report is provided and intended for informational purposes only and may not be used or considered under any circumstances as an offer to sell or buy any securities or as advice to trade any securities.

This report is based on sources ERP considers to be correct and reliable. The sources include information providers Reuters and Bloomberg, stock-exchange releases from the companies and other company news, Statistics Finland and articles in newspapers and magazines. However, ERP does not guarantee the materialization, correctness, accuracy or completeness of the information, opinions, estimates or forecasts expressed or implied in the report. In addition, circumstantial changes may have an influence on opinions and estimates presented in this report. The opinions and estimates presented are valid at the moment of their publication and they can be changed without a separate announcement. Neither ERP nor any company within the Evli Group are responsible for amending, correcting or updating any information, opinions or estimates contained in this report. Neither ERP nor any company within the Evli Group will compensate any direct or consequential loss caused by or derived from the use of the information represented in this publication.

All information published in this report is for the original recipient’s private and internal use only. ERP reserves all rights to the report. No part of this publication may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in any retrieval system of any nature, without the written permission of ERP.

This report or its copy may not be published or distributed in Australia, Canada, Hong Kong, Japan, New Zealand, Singapore or South Africa. The publication or distribution of this report in certain other jurisdictions may also be restricted by law. Persons into whose possession this report comes are required to inform themselves about and to observe any such restrictions.

Evli Bank Plc is not registered as a broker-dealer with the U. S. Securities and Exchange Commission (“SEC”), and it and its analysts are not subject to SEC rules on securities analysts’ certification as to the currency of their views reflected in the research report. Evli Bank is not a member of the Financial Industry Regulatory Authority (“FINRA”). It and its securities analysts are not subject to FINRA’s rules on Communications with the Public and Research Analysts and Research Reports and the attendant requirements for fairness, balance and disclosure of potential conflicts of interest. This research report is only being offered in U.S. by Auerbach Grayson & Company, LLC (Auerbach Grayson) to Major U.S. Institutional Investors and is not available to, and should not be used by, any U.S. person or entity that is not a Major U.S. Institutional Investor. Auerbach Grayson is a broker-dealer registered with the U.S. Securities and Exchange Commission and is a member of the FINRA. U.S. entities seeking more information about any of the issuers or securities discussed in this report should contact Auerbach Grayson. The securities of non-U.S. issuers may not be registered with or subject to SEC reporting and other requirements.

ERP is not a supervised entity but its parent company Evli Bank Plc is supervised by the Finnish Financial Supervision Authority.

Scanfil company presentation 28052019

Video presentation

Company Facts

Guidance

Scanfil expects to generate EUR 590-640m in revenue and EUR 39-43m in adjusted operating profit for 2020

Financial targets

Scanfil aims to reach EUR 700m in revenue and 7% operating margin thru organic growth in 2023

Share price (EUR)


Schedule analyst call

For professional investors wishing to discuss the case, please book a complimentary analyst call

Book call