Financial overview


Scanfil - Stable margins, growth to resume

24.04.2024 | Company update

Scanfil’s Q1 revenue fell more than estimated, which also caused EBIT to drop below estimates, however operating margin remained quite high while demand outlook is already showing signs of stabilization.

EBIT margin remained high despite the decline in revenue

Scanfil’s Q1 revenue fell 11.5% y/y to EUR 198.9m, vs the EUR 212.5m/210.2m Evli/cons. estimates, since Industrial and Medtech & Life Science both fell by some 15% y/y due to destocking as well as account demand changes. Energy & Cleantech decreased 3.3% because of lower demand for energy savings solutions, where there was too optimistic demand last year, but the segment still grew by 11.3% excluding such products; we estimate it to be the only segment to add top line this year as comparison figures remain high especially in Q2. Scanfil’s EUR 12.7m EBIT was a bit soft relative to the EUR 13.9m/14.0m Evli/cons. estimates as revenue fell more than estimated, however the margin remained strong at 6.8% excluding layoff costs and FX changes.

Margins stable, volumes to grow again towards next year

Scanfil improves operational efficiency to safeguard profitability even in a more challenging market. We estimate Scanfil H2 revenue to grow 1.5% y/y since the comparison period is no more that challenging, while we expect FY ’25 to see 5% growth as Energy & Cleantech and Medtech & Life Science have many large and favorably positioned accounts driving higher volumes (we expect prices to remain quite stable). In our view there aren’t many significant differences in growth outlook across geographies, although Asia is slightly more dynamic than Western markets (especially in Medtech & Life Science). We estimate EBIT to decline by EUR 1.5m this year but expect it to gain some EUR 3m next year as EBIT margin has basically stabilized around 7%.

Valuation not demanding in the light of margins and mix

Scanfil is valued below 9x EV/EBIT, a discount of some 15% relative to peers, which we consider a low level given that Scanfil has demonstrated how it can achieve relatively high margins also in more challenging environments. In our view the company’s consistently high margins and attractive account mix would justify higher multiples even if earnings growth outlook is currently a bit muted. We retain our EUR 9.0 TP and BUY rating.

Scanfil - Results were somewhat soft

24.04.2024 | Earnings Flash

Scanfil’s Q1 results were expected to be soft relative to the comparison period but still came in somewhat lower than estimated. Scanfil retains its outlook according to which market demand picks up again in H2. Meanwhile the company has focused on some efficiency measures.

  • Scanfil’s Q1 revenue declined by 11.5% y/y to EUR 198.9m vs the EUR 212.5m/210.2m Evli/consensus estimates. Top line decreased by 8.6% when excluding spot market purchases. Energy & Cleantch decreased 3.3% y/y but was up 11.3% excluding energy saving solutions. Industrial as well as Medtech & Life Science fell by similar 15% y/y rates due to destocking and demand changes. Market demand was lower relative to the comparison period and Scanfil focused on improving operational efficiency and inventories were reduced by EUR 10m.
  • EBIT landed at EUR 12.7m, compared to the EUR 13.9m/14.0m Evli/consensus estimates. Operating margin was 6.4% (6.8% excluding layoff costs and FX changes).
  • Scanfil guides FY ’24 revenue in the range of EUR 820-900m and adjusted EBIT of EUR 57-65m (unchanged). H1 market outlook remains sluggish, however activity is expected to pick up again in H2.

Scanfil - CMD notes

06.03.2024 | Company update

Scanfil’s organic growth has been impressive in the recent past, and although a breather is likely in the short-term its long-term potential remains solid due to the account base.

From five segments to three in order to better drive sales

Scanfil made small updates to its financial targets, but in our view the formation of the new Industrial segment (by combining three existing ones) was the biggest news from an operational POV as it clarifies sales focus. The segment still has a relatively attractive organic CAGR potential of 6%, although not quite as high as the 7-8% CAGRs seen for Energy & Cleantech and Medtech & Life Science. Many Scanfil accounts are favorably positioned for growth thanks to various demand drivers, in addition to which trends like supply chain regionalization continue to drive growth.

Main markets to grow at around 6-8% CAGR in FY ’23-28

The new EBIT target of 7-8% was much expected, however we view the 10% long-term CAGR target ambitious (at least on an organic basis) since the EMS business is characterized by account stickiness; it’s not easy to win additional market share, so organic growth mostly stems from the existing accounts’ volumes. Scanfil previously targeted 5-7% organic CAGR, which we viewed to be well in line with many of its accounts’ profiles and growth targets. A CAGR of 10% is likely to require at least some M&A, and while Scanfil’s balance sheet is strong enough to facilitate deals many peers are also performing well. Valuations may not thus in general be very low, however the market is fragmented and so there are bound to be some opportunities where the targets would fit Scanfil’s portfolio and could also be developed further.

We make no estimate changes at this point

Scanfil remains more profitable than a typical peer, however the margin gap has narrowed in recent years as the sector’s performance has improved. Even though Scanfil’s EBIT margin hasn’t increased that much its EBIT has risen to above EUR 60m from around EUR 35-40m a few years ago. EBIT may not rise much above EUR 60m in the short-term but continued growth could still add another EUR 20-30m to it in the next five years or so even with rather modest margin gains. Meanwhile Scanfil remains valued below 9x EV/EBIT, compared to the levels of around 10x for many peers. We retain our EUR 9.0 TP and BUY rating.

Scanfil - Growth to add earnings in H2

26.02.2024 | Company update

Scanfil’s performance remained strong in Q4 and was largely as expected. H1’24 sees quite high comparison figures, but in our view H2 should again have scope for improvement as Scanfil’s key accounts remain well positioned for growth.

Q4 EBIT slightly soft, FY ’24 guidance basically as expected

Scanfil Q4 revenue declined 0.7% y/y to EUR 221m vs the EUR 220m/220m Evli/cons. estimates, while it grew by 4.9% when adjusting for spot purchases. The EUR 13.4m EBIT was a bit soft vs the EUR 15.7m/14.9m Evli/cons. estimates as there were one-offs due to efficiency measures, however Scanfil’s FY ’24 guidance wasn’t a surprise since basically flat top line and EBIT development was expected after an extended period of double-digit growth and earnings gains to around the targeted 7% EBIT margin.

H1 faces stiff comparison figures, but H2 has more potential

Our estimate changes remain small as the report and comments were mostly as expected. We believe H1 top line will not grow, and estimate EBIT to soften slightly, as the comparison figures are high, yet H2 should see demand pick up; we estimate H1 EBIT to decline by ca. EUR 3m and that of H2 to improve by roughly similar amount so that FY ’24 EBIT would stay flat. Scanfil’s efficiency measures are to yield annual cost savings of EUR 1.7m, and Scanfil’s accounts’ long-term growth outlook remains favorable enough so that the company is comfortable with its recent capacity expansions. Energy & Cleantech especially continues to grow, although clearly not as fast as in the recent past, while Medtech & Life Science is another group with attractive long-term outlook; some destocking can now be seen in Medtech but also in certain other niches case by case, but we expect H2 revenue to grow again as the comparison figures are no more that high.

Earnings remain high and multiples are relatively low

We estimate Scanfil’s FY ’24 top line to decline by 2% as we see volumes remaining flat when excluding spot market purchases. 5% CAGR should still be a very relevant long-term target, but it will probably take at least until H2 to again attain such a level. H2 growth would position Scanfil for further marginal earnings gains; we estimate FY ’25 EBIT to gain by EUR 3m. Scanfil is valued a bit above 8x EV/EBIT on our FY ’24 estimates, which is still relatively low compared to peers. We retain our EUR 9.0 TP and BUY rating.

Scanfil - EBIT slightly missed estimates

23.02.2024 | Earnings Flash

Scanfil’s Q4 top line developed flat as expected, while the EUR 13.4m EBIT missed estimates as there were more than EUR 1m in one-off costs. Scanfil’s FY ’24 guidance stands quite well in line with estimates, so estimate changes are likely to be small.

  • Scanfil Q4 revenue declined by 0.7% y/y to EUR 220.8m, compared to the EUR 219.8m/220.4m Evli/consensus estimates. Growth excluding spot-market purchases was 4.9%.
  • Advanced Consumer Applications landed at EUR 52.5m vs our EUR 44.5m estimate, while Energy & Cleantech was EUR 74.7m vs our EUR 65.6m estimate. Automation & Safety was EUR 44.5m, compared to our EUR 52.9m estimate.
  • EBIT came in at EUR 13.4m vs the EUR 15.7m/14.9m Evli/consensus estimates. Operating margin was 6.1%. Scanfil implemented efficiency improvements, which will generate EUR 1.7m in annual savings; excluding one-off costs for efficiency improvement, customer settlement, spot-market purchases and other material invoicing EBIT margin was 6.7%.
  • Scanfil guides FY ’24 revenue in the range of EUR 820-900m and adjusted EBIT of EUR 57-65m, compared to the respective EUR 909.5m/890.8m and EUR 63.7m/60.6m Evli/consensus estimates.
  • The BoD proposes a dividend per share of EUR 0.23 to be distributed for FY ’23, compared to the EUR 0.23/0.23 Evli/consensus estimates.

Scanfil - High margins to be maintained

29.10.2023 | Company update

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.

Scanfil - Q3 was largely as expected

27.10.2023 | Earnings Flash

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.

  • Scanfil Q3 revenue grew by 0.4% y/y to EUR 212.8m vs the EUR 218.9m/215.9m Evli/consensus estimates. Growth excluding spot market purchases was 9%.
  • Advanced Consumer Applications was EUR 49.8m, compared to our EUR 59.0m estimate, while Energy & Cleantech amounted to EUR 73.5m vs our EUR 63.2m estimate. Automation & Safety landed at EUR 42.2m, compared to our EUR 45.5m estimate. Energy & Cleantech continued to grow at a 38% y/y rate.
  • EBIT amounted to EUR 15.2m, compared to the EUR 15.7m/15.3m Evli/consensus estimates, and hence operating margin was 7.2%. Good customer demand continued and supply chain challenges further eased. Scanfil has also focused on automation and digitalization to improve operational efficiency.
  • Scanfil guides FY ’23 revenue to be in the range of EUR 880-920m and adjusted EBIT of EUR 60-66m (updated on Oct 10), which implies respective Q4 revenue and EBIT guidance midpoints of EUR 219m and EUR 15.1m.

Scanfil - Margins set to stay high

12.10.2023 | Company update

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).

Scanfil - To be continued on a strong note

07.08.2023 | Company update

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.

Scanfil - Results stronger than estimated

04.08.2023 | Earnings Flash

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.

  • Scanfil Q2 revenue grew by 14.3% y/y to EUR 243.3m, compared to the EUR 239.9m/237.1m Evli/consensus estimates. Growth was largely driven by the Energy & Cleantech segment (recycling, green energy and energy efficiency solutions). Strong demand, better electronic components availability and investments in production capacity enabled higher production volumes.
  • Advanced Consumer Applications amounted to EUR 57.9m vs our EUR 68.0m estimate, while Energy & Cleantech was EUR 86.0m vs our EUR 65.3m estimate. Automation & Safety was EUR 47.5m, compared to our EUR 55.6m estimate.
  • EBIT came in at EUR 17.5m vs the EUR 16.2m/16.6m Evli/consensus estimates, meaning operating margin was 7.2%. High production volumes and capacity utilization rates, increased operational efficiency and successful cost inflation management supported profitability.
  • Scanfil guides FY ’23 revenue in the range of EUR 900-950m and adjusted EBIT of EUR 61-68m (updated on Jul 10).
  • Scanfil has also decided to invest EUR 20m in a new factory building in Sieradz, Poland. The new building will increase its Sieradz plant factory floor area by over 70%. The project starts this month and the new building is estimated to be ready for production in Q2’25. Additional expansion investments will be done gradually in line with production volume growth.

Scanfil - Realizing earnings potential

12.07.2023 | Company update

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.

Scanfil - Some more profitable growth ahead

27.04.2023 | Company update

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).

Scanfil - Figures stand high

26.04.2023 | Earnings Flash

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.

  • Scanfil Q1 revenue grew by 14.2% y/y to EUR 224.6m vs the EUR 205.9m/216.1m Evli/consensus estimates. The figure includes EUR 7.9m of spot market component purchases.
  • Advanced Consumer Applications was EUR 51.3m vs our EUR 53.9m estimate, whereas Energy & Cleantech amounted to EUR 67.5m, compared to our EUR 56.2m estimate. Automation & Safety was EUR 52.5m, compared to our EUR 48.1m estimate.
  • EBIT amounted to EUR 15.1m, compared to the EUR 13.7m/13.8m Evli/consensus estimates. EBIT margin was thus 6.7%, matching our estimate. High capacity utilization rate, increased efficiency due to improving component availability and successful cost inflation management helped produce the highest quarterly margin in two years.
  • Scanfil guides revenue for FY ’23 to amount to EUR 880-940m and EBIT of EUR 56-64m (outlook revised on Apr 12).

Scanfil - High growth and profitability

14.04.2023 | Company update

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.

Scanfil - Ready to meet high demand

22.02.2023 | Company update

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 - No major surprises, strong report

21.02.2023 | Earnings Flash

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.

  • Scanfil Q4 revenue increased by 15.9% y/y to EUR 222.3m, compared to the EUR 215.6m/218.3m Evli/consensus estimates. The figure includes EUR 14.6m in invoicing of spot market purchases.
  • Advanced Consumer Applications amounted to EUR 56.3m vs our EUR 59.8m estimate, while Energy & Cleantech was EUR 61.3m, compared to our EUR 60.3m estimate. Automation & Safety was EUR 51.4m vs our EUR 46.0m estimate.
  • EBIT landed at EUR 13.4m vs the EUR 12.8m/12.5m Evli/consensus estimates and hence EBIT margin amounted to 6%. FX rate changes had a positive impact of EUR 0.3m. Continued good customer demand and improved manufacturing performance (due to better component availability) supported profitability to a high absolute level, whereas spot market purchases with negligible margin limited operating margin.
  • The BoD proposes EUR 0.21 per share dividend to be distributed for the year, compared to the EUR 0.20/0.20 Evli/consensus estimates.
  • Scanfil guides FY ’23 revenue to be in the range of EUR 820-890m and EBIT of EUR 49-55m. The number of spot market purchases is likely to decrease significantly compared to previous year.

Scanfil - Profitability continues to improve

27.10.2022 | Company update

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.

Scanfil - Decent results, better to come in Q4

26.10.2022 | Earnings Flash

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.

  • Q3 revenue grew by 26.3% y/y to EUR 211.9m, compared to the EUR 210.3m/208.6m Evli/consensus estimates. Transitory component invoicing amounted to some EUR 20m as the component availability challenges eased a bit. Customer demand remained strong in all customer segments.
  • Advanced Consumer Applications amounted to EUR 67.8m vs our EUR 70.4m estimate, while Energy & Cleantech was EUR 53.1m vs our EUR 52.6m estimate. Automation & Safety amounted to EUR 44.2m, compared to our EUR 41.0m estimate.
  • Adjusted EBIT landed at EUR 11.5m vs the EUR 12.3m/11.5m Evli/consensus estimates. Higher delivery volumes and lower FX losses had a positive effect. The pandemic did not have any significant effect and Scanfil expects further positive development for Q4.
  • Scanfil guides revenue of EUR 800-880m and adjusted EBIT of EUR 43-48m for FY ’22 (unchanged). The guidance’s midpoints now suggest EUR 219m revenue and EUR 13.5m EBIT for Q4.

Scanfil - High demand and better productivity

08.08.2022 | Company update

Scanfil’s Q2 report didn’t reveal big surprises, although there were a couple of profitability headwinds which should not limit performance that much going forward.

Q2 profitability faced a couple of headwinds

Scanfil Q2 top line grew 23% y/y to EUR 213m vs the EUR 202m/213m Evli/cons. estimates. Growth was 11% when excluding the spot component purchases; 3% was due to inflation and thus underlying comparable growth was ca. 8%, neatly above the 5-7% long-term organic target. Advanced Consumer Applications didn’t achieve much growth without the transitory invoicing items, but other than that demand remained favorable for all segments. EBIT landed at EUR 10.1m vs the EUR 11.3m/11.2m Evli/cons. estimates. The miss can be attributed to the FX loss which was mainly due to strong USD; Scanfil has since put hedges into place, although it’s still not entirely immune to FX moves. Lockdowns in China also hit profitability in Suzhou during the spring, but the situation has since normalized.

Component shortages seem to be easing already

The component availability situation has been a nuisance for well over a year, but there are now signs of improvement. Scanfil sees Q3 spot market purchases already lower than in Q2 yet still somewhat high. The stabilizing component situation will help productivity and profitability going forward, and Scanfil looks to manage its elevated inventory levels down. This easing should be a major factor in helping H2 EBIT higher; Scanfil’s guidance implies meaningful EBIT margin improvement for H2 without any significant changes in product mix. Late increases in production space mean Scanfil can meet high customer demand at least in the short-term, while M&A remains a likely tool for potential larger increases in manufacturing footprint.

Profitability has room to improve quite a bit more

Scanfil may not achieve significant top line growth next year as the spot market purchases fade away, however that should not limit absolute profitability potential. Scanfil’s 7% long-term EBIT margin target remains a relevant benchmark, but it is likely to take at least a few more years to reach that level. Scanfil is valued 7.5x EV/EBITDA and 10x EV/EBIT on our FY ’22 estimates. The multiples are in line with peers’ while Scanfil’s margins top those of the typical peer. We retain our EUR 8 TP and BUY rating.

Scanfil - Strong H2 profitability in the cards

05.08.2022 | Earnings Flash

Scanfil’s Q2 report didn’t serve any major surprises. Top line was largely according to expectations, although Q2 profitability came in a little soft but only implies stronger EBIT in H2.

  • Scanfil Q2 revenue grew by 23% y/y to EUR 212.9m, compared to the EUR 201.7m/212.5m Evli/consensus estimates. Transitory component invoicing amounted to EUR 29.5m during the quarter. Customer demand was generally strong in all customer segments, however poor availability of electronic components remained a challenge. Spot market component purchases will remain high at least in Q3.
  • Advanced Consumer Applications amounted to EUR 68.7m vs our EUR 64.6m estimate, while Energy & Cleantech was EUR 53.5m vs our EUR 54.2m estimate. Automation & Safety landed at EUR 45.6m, compared to our EUR 41.6m estimate.
  • Q2 adjusted EBIT came in at EUR 10.1m vs the EUR 11.3m/11.2m Evli/consensus estimates. There was an FX loss of EUR 1.4m, mainly due to the strengthening of the US dollar. China’s lockdown measures affected the Suzhou factory’s profitability especially in April, but the level returned to normal in May and June. Scanfil’s guidance also implies strong H2 profitability.
  • Scanfil guides EUR 800-880m in revenue and EUR 43-48m in adjusted EBIT for FY ’22.

Scanfil - Earnings are to improve

25.04.2022 | Company update

Scanfil’s profitability is set to improve over the course of the year despite the still tight component market situation.

Profitability should improve throughout this year

Scanfil’s Q1 revenue grew by 20% y/y to EUR 197m, compared to the EUR 170/179m Evli/cons. estimates, and was up by 10% y/y excluding the EUR 17m in transitory spot purchases; inflation added around 2-3% to top line, hence volume growth amounted to about 7%. Growth stemmed widely from all the five segments, including also new customer accounts within Advanced Consumer Applications (kitchen machines for professional as well as consumer use). The EUR 10.3m EBIT was a bit above the EUR 9.2m/9.7m Evli/cons. estimates and the 5.3% margin wasn’t a surprise. The margin would have been 5.7% without the spot purchases, a decent figure but still well short of the 7% long-term potential as component availability issues persisted.

M&A unlikely short-term as organic execution claims focus

Components will remain scarce at least until Q4, however Scanfil’s guidance and comments imply there will be meaningful profitability improvement throughout this year. Inflation isn’t a major issue for Scanfil, and neither is the war likely to have any direct impact. The Chinese virus situation is probably the most significant short-term risk as it could lead to local production halts, but so far this hasn’t happened for Scanfil. Chinese demand also remains strong. Scanfil’s inventory levels are still elevated as the company tries to manage high customer demand and limited component availability. We estimate Scanfil to touch EUR 800m top line already this year. Inorganic growth doesn’t now seem to be that high on the agenda, but M&A could happen in North America or Asia within the next 3-5 years.

Earnings growth is likely to continue next year as well

Scanfil’s valuation, 7.5x EV/EBITDA and 10x EV/EBIT on our FY ’22 estimates, isn’t too demanding. We expect EBIT margin to remain a bit modest 5.8% this year as component issues persist, however we see the margin improving to above 6% in H2’22. We estimate 6.4% margin for FY ’23, and hence we expect Scanfil to reach an above EUR 50m EBIT next year as we see growth continuing at an above 5% annual rate from late ’22 onwards. FY ’23 multiples are therefore only around 6.5x EV/EBITDA and 8x EV/EBIT on our estimates. We retain our EUR 8 TP and BUY rating.

Scanfil - Q1 figures topped estimates

22.04.2022 | Earnings Flash

Scanfil’s Q1 top line continued to grow at a 20% annual rate while operating margin remained decent at 5.3%. Relative profitability was therefore close to estimates while the high revenue figure helped deliver a small earnings beat.

  • Scanfil Q1 revenue grew by 20.4% y/y and was EUR 196.6m vs the EUR 170.0m/179.4m Evli/consensus estimates. Transient spot market component purchases amounted to about EUR 17m and excluding them revenue would have been EUR 179m.
  • Advanced Consumer Applications landed at EUR 55.0m, compared to our EUR 45.9m estimate, while Energy & Cleantech amounted to EUR 54.6m vs our EUR 45.5m estimate. Automation & Safety was EUR 42.6m vs our EUR 36.9m estimate.
  • Adjusted EBIT was EUR 10.3m, compared to the EUR 9.2m/9.7m Evli/consensus estimates. Component availability issues limited Q1 profitability. Profitability should improve throughout the year while spot market component purchases are to remain high at least in Q2 and Q3.
  • Scanfil guides FY ’22 revenue to be EUR 750-820m and adjusted EBIT EUR 43-48m. The war hasn’t had any significant financial impact on Scanfil, likewise with the Chinese virus situation so far.

Scanfil - Steeper earnings accretion ahead

23.02.2022 | Company update

Scanfil’s Q4 report didn’t provide any big surprises as figures were slightly above estimates, while the guidance and long-term targets were pretty much as expected.

High growth due to volumes and component inflation

The EUR 192m Q4 revenue, up 24.5% y/y, topped the EUR 183m/185m Evli/cons. estimates by a fair margin. The EUR 14.4m in spot purchases were spread even between the five segments, relative to their sizes. Energy & Cleantech grew the most also in Q4. It was known before that Q4 would fall short of Scanfil’s EBIT potential as component issues and infections limited productivity, but the EUR 10.2m adj. EBIT was a bit above the EUR 9.7m/9.6m Evli/cons. estimates. The Q4 issues are by their nature temporary; in our view Scanfil’s guidance and comments suggest the situation is improving, or at least has stabilized.

Performance is set to improve this year and beyond

All the segments grew last year. We expect Energy & Cleantech to contribute most growth this year as the segment benefits from many megatrends and includes customers such as TOMRA. Inventories grew EUR 90m last year due to high demand but also in response to the component challenges. Scanfil suggests spot purchases may be lower again in H2’22; we estimate margin improvement throughout the year. Scanfil mentioned possible expansion in Asia beyond China, and this would be likely in countries such as India, Vietnam, and Malaysia. In our view such an expansion would be more likely through M&A than greenfield. Scanfil has recently announced expansions to its plants in the US and Germany, and hence capex will be a bit above 2% of revenue this year. An expansion to the Suzhou plant might also follow.

Multiples have declined, favorable outlook is much intact

We make only marginal estimate revisions. Scanfil is valued 6.0-7.5x EV/EBITDA and 8.0-9.5x EV/EBIT on our FY ’22-23 estimates. In our view the medium to long-term demand and earnings outlook hasn’t changed much in the past 3-6 months, while valuation has declined by 15-20% (peer valuations have declined by roughly similar percentages). Scanfil’s multiples are now well in line with peers, but in our view a premium can be justified by the fact that Scanfil’s EBIT outlook remains somewhat higher than that of a typical peer. We revise our TP to EUR 8 (9) as the sector’s valuations have declined, but our rating remains BUY.

Scanfil - A bit above the estimates

22.02.2022 | Earnings Flash

Scanfil’s Q4 top line grew by 24.5% y/y and was well above the estimates. We find the beat stemmed from many customer segments. The EUR 10.2m adjusted EBIT also topped estimates, while the guidance for this year should not prompt any major estimate changes. In our view the 5-7% organic CAGR target is also in line with expectations.

  • Scanfil Q4 revenue grew by 24.5% y/y to EUR 191.7m, compared to the EUR 182.5m/184.8m Evli/consensus estimates.
  • Advanced Consumer Applications was EUR 52.9m vs our EUR 54.6m estimate, while Energy & Cleantech amounted to EUR 53.4m vs our EUR 47.1m estimate. Automation & Safety landed at EUR 41.1m, compared to our EUR 39.4m estimate.
  • Adjusted EBIT landed at EUR 10.2m vs the EUR 9.7m/9.6m Evli/consensus estimates. Adjusted EBIT margin was 5.3% vs our 5.3% estimate.
  • Scanfil guides FY ’22 revenue to be EUR 710-760m and adjusted EBIT of EUR 43-48m. The respective consensus estimates for the year stand at EUR 718.6m and EUR 45.3m. Semiconductor availability, pricing, and supply chain functioning, as well as the pandemic, continue to pose uncertainty.
  • Scanfil’s (updated) long-term target is to grow at a 5-7% organic CAGR and to reach 7% EBIT margin, in addition to paying a growing amount of dividend to the tune of a third of EPS.
  • The BoD proposes EUR 0.19 per share dividend to be distributed, compared to the EUR 0.18/0.19 Evli/consensus estimates.

Scanfil - Q4 EBIT will remain a bit modest

13.12.2021 | Company update

Scanfil’s earlier guidance suggested Q4 to be highly profitable, and we had estimated 6.9% EBIT margin, but well-known challenges have proved persistent for now.

The fresh guidance implies some 5.1% Q4 EBIT margin

Scanfil issued a negative profit warning. Plants’ productivity has suffered due to continued component availability challenges, and the worsened Covid-19 situation has also bothered production. Q4 EBIT is further hit by the FX exposure due to the relatively high inventories, which the company build up earlier this year to be better able to meet demand by anticipating needs early on. Scanfil’s previous guidance suggested EUR 166-206m in Q4 revenue and EUR 11-14m EBIT. The new range implies EUR 176-196m top line and EUR 8-11m EBIT. We don’t view the news as a major issue in the long-term context because the challenges are to a large extent transitory in nature, although the pandemic and component shortage situations will persist at least during the early part of next year. Scanfil however doesn’t have to struggle with cost inflation since the contracting logic covers component purchases. Customer demand has also remained strong in Q4.

We continue to expect strong performance for next year

We make only small revisions to our top line estimates, but we revise our Q4 EBIT estimate down to EUR 9.7m from EUR 12.5m. We revise our FY ’22 EBIT estimate down to EUR 46.3m (prev. EUR 48.5m). The Hamburg restructuring measure by itself should help some EUR 2.5m in terms of cost savings; we hence expect 17% EBIT improvement for next year as the component and Covid-19 issues will begin to ease. Scanfil is set to achieve a robust double-digit top line growth this year, and we continue to estimate 7% growth for FY ’22. In our opinion 7% EBIT margin remains very much an appropriate long-term profitability target for Scanfil, and the company is unlikely to make any changes around that specific figure.

Earnings multiples are not expensive relative to peers

Scanfil is valued 9.5x EV/EBITDA and 13x EV/EBIT on our FY ’21 estimates. The levels aren’t particularly low, but in our view both demand and earnings growth outlook remain robust enough to warrant a longer perspective. The multiples are 8.5x and 11x on our FY ’22 estimates. We retain our EUR 9 TP and BUY rating.

Scanfil - Performance is unlikely to falter

27.10.2021 | Company update

Scanfil’s Q3 EBIT faced some headwinds, but Q4 EBIT is set to improve and outlook for FY ‘22 doesn’t seem bad either.

We expect the Q3 margin softness will prove temporary

Scanfil’s Q3 revenue grew by 18.5% y/y and amounted to EUR 167.8m vs the EUR 165.5m/171.2m Evli/cons. estimates. The growth was for the most part attributable to Advanced Consumer Applications and Energy & Cleantech segments, while Medtech & Life Science continued to grow at a 12% y/y pace. Advanced Consumer Applications had to make many spot components purchases and excluding all such transitory items top line grew by 10.2% y/y. Component availability issues limited Scanfil’s ability to meet customer demand and the challenges also hurt relative profitability. We understand the component scarcity situation limited profitability to the tune of EUR 1.0-1.5m. Q3 EBIT amounted to EUR 9.5m (5.7% margin), compared to the EUR 10.8m/10.9m Evli/cons. estimates. The challenging component situation will not fade away for quite some time, however Scanfil’s comments indicate there should be no major earnings drag going forward.

Spot purchases’ margin dilution is likely to be transient

Inventories increased by 63% y/y and 24% q/q as Scanfil wanted to secure necessary components to meet strong customer demand. This had a negative impact on cash flow, but Scanfil sees the situation is under control and inventories should not grow much more from here on. The new normal, in terms of component availability challenges, might mean revenue streams related to component spot sourcing will begin to generate adequate margins already during the next few quarters.

In our view earnings growth is set to continue next year

We expect Scanfil’s Q4 EBIT to improve q/q and y/y; our EUR 12.5m estimate translates to a very good 6.9% margin. The company’s comments on customer demand and component pricing dynamics suggest favorable outlook for next year’s earnings. We expect organic growth to continue in FY ’22 at a 7% pace; we see Scanfil reaching a 6.6% EBIT margin then, which would translate to EUR 48.5m in EBIT. The Hamburg restructuring also supports earnings growth going forward. Scanfil is valued 7.8-8.6x EV/EBITDA and 10.1-11.7x EV/EBIT on our FY ’21-22 estimates. We retain our EUR 9 TP and BUY rating.

Scanfil - Guidance implies strong Q4 EBIT

26.10.2021 | Earnings Flash

Scanfil’s Q3 revenue landed close to expectations, but the EUR 9.5m EBIT fell a bit short of estimates. Scanfil’s FY ’21 guidance, however, implies Q4 EBIT will be considerably higher.

• Q3 revenue grew by 18.5% y/y to EUR 167.8m, compared to the EUR 165.5m/171.2m Evli/consensus estimates. EUR 11.7m of revenue amounted to transitory separately agreed low-margin customer invoicing due to component availability issues. Most of this transitory revenue was located within Advanced Consumer Applications. Revenue growth excluding the transitory items was 10.2% y/y.
• Advanced Consumer Applications’ top line was EUR 55.4m, while we expected EUR 46.7m. Energy & Cleantech amounted to EUR 43.5m vs our EUR 41.7m estimate. Automation & Safety was EUR 32.5m, compared to our EUR 38.1m.
• Scanfil Q3 adjusted EBIT amounted to EUR 9.5m vs the EUR 10.8m/10.9m Evli/consensus estimates. EBIT margin was 5.7% vs our 6.5% estimate. According to Scanfil material constraints and the Hamburg factory closure caused about a EUR 2m negative EBIT impact for the quarter. Scanfil’s guidance midpoint also suggests Q4 EBIT will be some EUR 3m higher q/q.
• Scanfil guides FY ’21 revenue at EUR 670-710m and adjusted EBIT at EUR 41-44m (unchanged).
• Scanfil retains its long-term financial targets for now (EUR 700m revenue on an organic basis in FY ’23 with a 7% EBIT margin).

Scanfil - Further acceleration in H2 growth

14.10.2021 | Company update

Scanfil made a minor guidance update and by implication organic growth rate will reach well into the double digits this year. We upgrade our FY ’21 growth estimate by 4% and expect the positive momentum to spill over to next year as well. We retain our EUR 9 TP; our new rating is BUY (HOLD).

FY ’21 revenue guidance midpoint increases by 5%

Scanfil issued a small guidance update. The new range is EUR 670-710m in FY ’21 revenue and EUR 41-44m in adj. EBIT, while the previous guidance was respectively EUR 630-680m and EUR 41-46m. Most important recent trends, namely strong customer demand and climbing component prices, have persisted. Scanfil continues to flag the supply chain risk related to semiconductor availability and the guidance update is not in our view that big news. Our previous estimates for this year were EUR 658m in revenue and EUR 43m in adj. EBIT. Our updated revenue estimate stands at EUR 681m; we make no changes to our absolute FY ‘21 adj. EBIT estimates.

Strong growth supports absolute profitability estimates

Scanfil H1’21 growth amounted to 12% y/y; we previously estimated H2’21 y/y growth at above 8% and now expect more than 16%. We reckon the positive surprise extends beyond this year and we have updated our FY ’22 growth estimate to 7.0% (prev. 5.8%). The improved growth outlook supports our absolute profitability estimates for the coming years to the tune of EUR 1-2m. The updated outlook also means the EUR 700m organic revenue target for FY ’23 is now pretty much irrelevant as the company might well break through that threshold already this year. We expect Scanfil to communicate a new long-term target at some near future date, however we don’t expect the company to make any revisions to its long-term 7% EBIT margin target.

In our view valuation has now turned more attractive

Scanfil’s share price has slipped a bit since the previous update while growth outlook has improved an additional notch. On our updated estimates for FY ’21-22 Scanfil is now valued 8.0-8.6x EV/EBITDA and 10.3-11.8x EV/EBIT. The multiples remain slightly above those of a typical peer, but we continue to view the premium warranted. We retain our EUR 9 TP; our rating is now BUY (HOLD).

Scanfil - CMD notes

15.09.2021 | Company update

Scanfil hosted its first-ever CMD yesterday, during which the company elaborated on customer service and internal processes. Long-term financial targets were left unchanged.

The focus was on Scanfil’s positioning and latest trends

The CMD added color on Scanfil’s comprehensive manufacturing service model and value chain positioning. Scanfil’s service has over the years evolved to cover the entire life cycle for many high-mix low-volume industrial electronics products. Scanfil’s own processes now appear well harmonized across the factory network. Scanfil can take care of the final product’s delivery to end-use location, as highlighted in the case of TOMRA’s reverse vending machines and grocery stores. Established OEM customers amount to 85% of accounts (95% of revenue) while start-ups make up the rest. Each factory has its own P&L and Scanfil monitors their strategic position as well as financial performance. The divested plant in Hangzhou was performing well in financial terms but no more seemed a great fit strategy-wise, whereas in the Hamburg closure case the reverse was true. According to Scanfil the Connectivity segment should have the highest relative growth potential, not a big surprise considering it is still by far the smallest of the five. Semiconductor sourcing challenges seem set to last at least until 2022 and affect accounts across all the segments. Scanfil doesn’t see any internal bottlenecks an issue; business has mostly managed to stay on course thanks to extended planning and demand forecasts.

Organic growth potential is strong for the coming years

Scanfil recently announced the EUR 6m planned investment in Suzhou to double the current plant’s production capacity. We consider this an efficient way to address organic growth opportunities driven by Chinese demand. Scanfil has also added new staff in China and the US to help capitalize on local sales potential. We continue to expect ca. 7% organic CAGR going forward, a strong figure in the EMS context.

The overall valuation context has not changed

Scanfil left its long-term financial targets intact for now and we make no changes to our estimates. Valuation hasn’t changed much since the last update; Scanfil trades around 8.5-9.0x EV/EBITDA and 11-12x EV/EBIT on our FY ’21-22 estimates. We retain our EUR 9.0 TP and HOLD rating.

Scanfil - Outlook is valued well enough

09.08.2021 | Company update

Scanfil’s Q2 top line was close to estimates while EBIT didn’t quite reach expected levels. We make only minor estimate revisions. Our rating is now HOLD (BUY).

Some softness in Q2 EBIT margin, but nothing major to flag

Q2 revenue, incl. transitory invoicing, grew 11% y/y to EUR 173m. The figure was EUR 166m excl. the component-related items and can be compared to the EUR 165m/169m Evli/cons. estimates. Automation & Safety top line remained flat while both Advanced Consumer Applications and Energy & Cleantech grew by more than 30%. Advanced Consumer Applications had account ramp-ups and high demand persisted for familiar favorably positioned customers. Energy & Cleantech performed strong even without big ramp-ups as the customers’ markets expand, and we believe Scanfil has gained share within attractive accounts like TOMRA. Component availability challenges remain, but the shortage situation didn’t have any big negative effect on Q2 performance; the situation may now be improving or at least isn’t worsening. The EUR 10.6m Q2 EBIT was a tad soft compared to the EUR 10.9m/11.1m Evli/cons. estimates. In our view the Hamburg plant closure costs explain a large part of the shortfall.

Our FY ’21 estimates remain close to the guidance midpoint

We make only very small revisions to our estimates. In our view cost inflation is not an issue for Scanfil, while component availability is for now a challenge for pretty much all EMS companies. Scanfil will host its first ever CMD in September and we wouldn’t be surprised to see an upgrade to the current organic growth target. We now see Scanfil is headed for the EUR 700m figure a year in advance. Scanfil can top the 7% EBIT margin target at least on a quarterly level, but we would view any upgrade to this target ambitious because growth in the EMS business often doesn’t scale that much in terms of relative profitability. This is one of the major factors that limit valuation.

We view current valuation picture neutral

Scanfil is now valued ca. 9x EV/EBITDA and 12x EV/EBIT on our FY ’21 estimates. We believe growth continues to drive absolute earnings up in the coming years and so the multiples should be down to around 8x and 11x already next year. The valuation represents a premium relative to peers, but in our opinion is warranted. We retain our EUR 9.0 TP; rating now HOLD (BUY).

Scanfil - EBIT margin a bit below estimates

06.08.2021 | Earnings Flash

Scanfil’s Q2 didn’t offer many surprises. Top line was close to expectations while there was a small shortfall in operating margin relative to estimates.

Scanfil Q2 revenue was EUR 172.9m, compared to the EUR 165.3m/168.6m Evli/consensus estimates. Top line grew by 11% y/y and included EUR 7.4m of transitory separately agreed, low margin customer invoicing. This was related to the ongoing component shortage situation and excluding these items revenue grew by 6.4% y/y to EUR 165.5m.

Advanced Consumer Applications’ revenue amounted to EUR 53.4m vs our EUR 47.7m estimate. Meanwhile Energy & Cleantech was EUR 44.8m, compared to our EUR 40.9m estimate. Automation & Safety top line stood at EUR 36.8m vs our EUR 39.5m estimate.

Q2 EBIT stood at EUR 10.6m vs the EUR 10.9m/11.1m Evli/consensus estimates. EBIT margin was 6.1% vs our 6.6% estimate. According to Scanfil the production transfer and planned closure of the Hamburg factory, which will happen by the end of September, generated additional costs.

Scanfil guides EUR 630-680m revenue and EUR 41-46m adjusted operating profit for FY ’21 (issued on Jun 11). Especially semiconductor availability continues to create uncertainty around the outlook.

Scanfil - Organic growth justifies multiples

14.06.2021 | Company update

Scanfil upped guidance as demand remains strong and component supply risks haven’t materialized. The upgrade isn’t a big surprise, but in our view supports the long-term story. Our new TP is EUR 9.0 (8.5), rating now BUY (HOLD).

Not a big surprise, but hints at extended strong demand

Scanfil upgraded its FY ’21 guidance. The revision wasn’t a big surprise since in our view Scanfil already seemed, following the Q1 report, bound towards the upper end of its then current guidance range. The revenue midpoint increases by 5.6% with the upgrade. Our old EUR 630m revenue estimate lands at the lower bound of the new EUR 630-680m range. We revise our estimate up by 2.5% to EUR 646m. Our old EUR 41.7m adj. EBIT estimate can be seen in the context of the new EUR 41-46m range. Our new estimate is EUR 43.2m. In our opinion the new outlook’s key meaning is in the fact that it lends long-term estimates even more relevance. Our absolute EBIT estimates for FY ’22-23 increase by only ca. EUR 1m, but in our view Scanfil’s outlook now warrants some additional expansion in multiples.

We see organic CAGR outlook has moved to 7% from 5%

Scanfil’s long-term organic growth target, which implies ca. 5% CAGR by the end of FY ’23, has gained relevance ever since last fall. Scanfil has an unblemished operational track record, its segments’ outlooks are either good or great, and macro tailwinds continue to push many industrial sectors. From this perspective Scanfil should have no trouble reaching EUR 700m top line in FY ’23. The updated FY ’21 guidance range’s midpoint implies 10% growth for this year. We consider this a bumper year for Scanfil and the situation is not unlike that for many other companies operating within the industrial manufacturing value chain. We would not extrapolate such growth rates very long into the future, but nonetheless the general outlook suggests Scanfil is positioned for around 7% CAGR in the years to come.

In our view some further multiple expansion is justified

Scanfil’s 8.5x EV/EBITDA and 11.5x EV/EBIT multiples, on our FY ’21 estimates, are high in the historical context, but growth outlook warrants looking further into the future. The multiples decrease to ca. 8x and 10.5x already next year. In our view Scanfil’s performance and positioning also warrant a peer premium. Our new TP is EUR 9.0 (8.5), rating now BUY (HOLD).

Scanfil - Sound demand outlook fully valued

26.04.2021 | Company update

Scanfil’s Q1 featured very few surprises. The company remains well-positioned and many customer megatrends continue to drive demand in the short as well as long term perspective. Our TP is now EUR 8.5 (8), rating HOLD (BUY).

All five segments have developed positive since Q3’20

Scanfil’s EUR 163m Q1 revenue was above the EUR 152m/151m Evli/cons. estimates even when excluding the discontinued trade in Hangzhou. Organic growth was 7% y/y when excluding the discontinued business. Scanfil renewed its segment structure as the previous Industrial segment had become too diverse. Advanced Consumer Applications and Energy & Cleantech, the two largest segments, both grew rapid. The former’s demand stemmed e.g. from elevators (as well as new customers) while the latter was driven by e.g. reverse vending machines. The other three segments have also continued to develop well since Q3’20, demand overall improved throughout Q1 and March was especially strong and profitable. Scanfil posted EUR 10.0m in Q1 EBIT, in line with the EUR 10.5m/10.0m Evli/cons. estimates.

Strategy and day-to-day execution continue to work

In our view Scanfil is headed for the upper end of its FY ’21 revenue guidance range. Demand outlook supports Scanfil’s long-term organic growth target and implies 5-6% CAGR in the years ahead. The accounts are unlikely to build up inventories, rather there seems to be solid demand that stems from many megatrends. Component bottlenecks are possible but so far these haven’t had a negative impact on Scanfil. The company takes proactive measures to better anticipate demand and so secure relevant components early on. Scanfil also reports no gross margin pressure and remains able to pass price inflation forward to customers. M&A options remain relevant in the long-term.

In our view further upside is not found in the short-term

Scanfil is valued ca. 9x EV/EBITDA and 12x EV/EBIT on our FY ‘21 estimates. In terms of EBITDA the share trades at a peer premium while the EBIT multiples are in line. Scanfil is thus valued at a small premium and we see this well justified. Scanfil’s and peers’ multiples have alike rerated recently. EMS companies used to be valued very low, and in our view the current higher multiples are warranted at least in Scanfil’s case. We view Scanfil’s valuation now neutral. Our new TP is EUR 8.5 (8) and rating HOLD (BUY).

Scanfil - Clear top line beat

23.04.2021 | Earnings Flash

Scanfil’s Q1 was a clear positive surprise in terms of revenue. Profitability was more in line with expectations. Scanfil did not revise its guidance but updated the segment structure.

  • Scanfil Q1 revenue was EUR 163m vs the EUR 152m/151m Evli/consensus estimates. Top line grew by 13% y/y.
  • Scanfil updated its segment structure. The new five segments are called Advanced Consumer Applications, Automation & Safety, Connectivity, Energy & Cleantech, and Medtech & Life Science. Q1 growth was strongest in Advanced Consumer Applications, the largest segment that also includes elevators business. Energy & Cleantech, the second largest (includes e.g. reverse vending machines), also developed well.
  • Scanfil Q1 EBIT amounted to EUR 10.0m, compared to the EUR 10.5m/10.0m Evli/consensus estimates. Operating margin was therefore 6.1% (6.0% a year ago).
  • Scanfil guides EUR 600-640m in revenue and EUR 40-44m in adjusted EBIT for FY ’21 (unchanged). Uncertainty continues with respect to the availability of certain materials, especially semiconductors. The pandemic may also have a negative impact on customer demand and supply chain delivery capability.
  • Scanfil says there was scarcity in certain materials, however this did not have any major impact.

Scanfil - Outlook remains robust

19.02.2021 | Company update

Scanfil’s Q4 didn’t serve any major surprises, but the overall picture turned even more encouraging. Our new TP is EUR 8.0 (6.5). Our rating is now BUY (HOLD).

Q4 figures as well as FY ’21 guidance in line with estimates

Scanfil Q4 revenue, flat y/y at EUR 154m, met the estimates. The Communication segment’s top line remained a bit soft. This wasn’t big news as the Hangzhou divestment and low base station product sales were known. The pick-up in Consumer Applications’ demand was a positive surprise given that the segment had been underperforming already before the pandemic. Energy & Automation posted a respectable 18% organic growth. Industrial and Medtec & Life Science performed close to estimates. We view these two the most stable segments and positioned for ca. 5% growth in the coming years (it should be noted Medtec & Life Science hasn’t gained any meaningful demand due to the pandemic). Scanfil thus posted EUR 10.4m Q4 EBIT, compared to the EUR 10.0m/9.9m Evli/cons. estimates.

Both guidance and comments are encouraging

We revise our estimates up a bit as the guidance implies demand holds even in an environment best described as extraordinary. Our previous EUR 617m FY ’21 revenue estimate was close to the EUR 620m midpoint; we revise the figure up to EUR 625m. We continue to expect the same EBIT margin as before and so our EBIT estimate only increases from EUR 41.6m to EUR 42.2m. This is not a big quantitative difference, but the report adds confidence. Scanfil says outlook is perhaps a bit better now than a few months ago, in addition to which gross margin improved slightly in Q4. It thus seems unlikely the guidance will fail, particularly considering Scanfil’s history. The company’s balance sheet is ready for M&A, although any deal is not imminent. Relatively low capex needs also help the overall valuation picture, even if the share price has gained a lot in recent months.

Performance and outlook warrant higher valuation

In our opinion Scanfil’s extended track record and robust outlook justify higher multiples. Our updated EUR 8.0 (6.5) TP values Scanfil at about 8.5x EV/EBITDA and 12x EV/EBIT on our estimates for this year. Earnings growth would help to decrease the multiples to respective 8x and 10.5x levels next year. Our TP is now EUR 8.0 (6.5). Our new rating is BUY (HOLD).

Scanfil - No negative surprises

18.02.2021 | Earnings Flash

Scanfil capped 2020 strong and we didn’t find notable negatives from the Q4 report. Scanfil enters this year with confidence and the guidance is in line with the long-term organic growth targets.

  • Scanfil Q4 revenue amounted to EUR 154.1m, compared to the EUR 153.7m/152.1m Evli/consensus estimates. The y/y top line change was -0.4%.
  • Communication top line amounted to EUR 19.5m vs our EUR 22.8m estimate.
  • Consumer Applications was EUR 27.5m vs our EUR 22.6m expectation. The positive surprise is encouraging given that the segment has been a soft performer recently. Scanfil says a new customer also contributed to the result.
  • Energy & Automation revenue stood at EUR 34.6m, compared to our EUR 30.3m estimate. According to Scanfil the 18% y/y growth stemmed broadly from the segment’s customer base.
  • Industrial was EUR 43.2m while we expected EUR 48.2m.
  • Medtec & Life Science revenue was EUR 29.3m, compared to our EUR 29.7m estimate.
  • Scanfil Q4 EBIT was EUR 10.4m vs the EUR 10.0m/9.9m Evli/consensus estimates.
  • Scanfil guides FY ’21 revenue to be EUR 600-640m, adjusted EBIT EUR 40-44m. The guidance is in line with our estimates and thus backs the long-term organic EUR 700m revenue and 7% operating margin targets for FY ’23.
  • The Board of Directors proposes EUR 0.17 per share dividend distribution, compared to our EUR 0.15 estimate.

Scanfil - A most resilient performer

08.01.2021 | Company report

We remain confident towards Scanfil’s long-term value chain positioning, however in our opinion recent share price gains have largely neutralized valuation. Our new TP is EUR 6.5 (6.25) and our rating is now HOLD (BUY).

The performance amid the pandemic testifies to strengths

Scanfil’s business has remained robust to macroeconomic shocks throughout its 40+ year history. ‘20 is another testament to this resilience as the pandemic hasn’t considerably affected Scanfil’s performance. The company has had to make only very small revisions to FY ’20 guidance; the latest revenue and EBIT outlook figures are down by respective 2% and 5% compared to the initial figures issued before the pandemic broke out. We now expect Scanfil to achieve some 3% top line growth for FY ’20; the increase is due to the 2019 HASEC acquisition. Profitability has remained strong. The Energy & Automation, Industrial and Medtec & Life Science segments have extended their good figures, while Communication and Consumer Applications have been softer. Consumer Applications’ revenue is down by ca. EUR 40m since FY ’18, however we view the segment still has good long-term outlook. We aren’t estimating rapid rebound for the segment yet see Scanfil should be able to post a 4% organic CAGR in the coming years thanks to its three largest ones.

We expect stellar performance to continue

We see Scanfil remains in top shape overall and is probably one of the best performing decent-sized contract electronics manufacturers globally. In our opinion Scanfil is unlikely to encounter profitability issues going forward and long-term organic growth outlook still appears good despite the pandemic. The company is also in a strong position to do more M&A and we are confident any potential deal, small or large, is likely to further improve Scanfil’s competitiveness.

Multiple expansion was overdue, yet visibility is limited

Scanfil’s share has appreciated significantly, and in our view some multiple expansion was long overdue given the company’s strong track record. Scanfil now trades in the range of 7-8x EV/EBITDA on our estimates for ’20-21, a level we don’t consider that challenging, but also view to be enough to curb meaningful additional gains for now since revenue visibility is limited even in the best of times. Our TP is EUR 6.5 (6.25), rating HOLD (BUY).

Scanfil - Well-positioned for the weather

28.10.2020 | Company update

Scanfil’s top line didn’t meet our estimate but profitability remained strong. We retain our EUR 6.25 TP, rating BUY.

Some top line softness but in our view nothing dramatic

Scanfil posted EUR 141.6m in Q3 revenue, down 7% y/y. The figure didn’t meet our EUR 156.2m estimate largely due to the Communication and Industrial segments. Communication revenue fell by 28% q/q mostly as a result of low demand for network elements. The segment also supplies other types of products and we expect revenues to stabilize in Q4. Consumer Applications’ top line remained low as expected, slightly up by q/q but down by 23% y/y. There are signs the segment’s demand is bottoming out and we expect more improvement for Q4. Energy & Automation and Medtec & Life Science performed close to expectations, but Industrial managed only EUR 44.7m (vs our EUR 50.5m estimate) and was down by 9% y/y. Industrial softness wasn’t attributable to any single customer and was pronounced in July and August. Demand nevertheless improved in September. In absolute profitability terms Scanfil’s EUR 9.9m Q3 adj. EBIT didn’t quite reach our EUR 10.5m estimate, however the quarter still delivered a strong 7% operating margin.

Guidance implies meaningful q/q improvement for Q4

The low-end of the updated FY ’20 guidance implies 5% q/q Q4 revenue increase, while the high-end implies 19% growth. We make only small updates to our Q4 estimates, and now expect EUR 154m in Q4 revenue (prev. EUR 158m), down by 1% y/y and up by 8% q/q. We now expect Q4 EBIT at EUR 10.0m (prev. EUR 11.1m). Scanfil’s overall positioning within the value chain and relative to competition remains unchanged. The company has a balance sheet ready to facilitate acquisitions should a fitting opportunity arise. There’s a lot of uncertainty but we note Scanfil’s customers tend to be well-positioned OEMs who compete against each other directly only to a very limited extent.

Valuation is still very reasonable

Scanfil is valued at about 6.3x EV/EBITDA on our FY ’20 estimates. Scanfil’s organic strategic growth target for ’23 implies some 5% CAGR for the coming years. Although the target was decided on before the pandemic, we still view it quite relevant considering the customer portfolio and performance so far this year despite the uncertainty. Our TP remains EUR 6.25 and our rating BUY.

Scanfil - Sound figures

27.10.2020 | Earnings Flash

Scanfil reported Q3 revenue slightly on the soft side, however the overall picture seems to remain pretty much unchanged with demand and profitability as previously expected.

  • Scanfil Q3 revenue was EUR 141.6m vs the EUR 156.2m/147.6m Evli/consensus estimates. In our view the slight softness was due to Communication and Industrial segments.
  • Communication posted EUR 20.7m in revenue, compared to our EUR 27.8m estimate. The softness was due to lower demand for network elements.
  • Consumer Applications’ revenue was EUR 21.3m vs our EUR 20.9m estimate. Scanfil reports encouraging signs of demand picking up for the segment.
  • Energy & Automation revenue was EUR 28.9m while we expected EUR 30.4m. There was a lot of customer-specific sales variation.
  • Industrial recorded EUR 44.7m vs our EUR 50.5m expectation. July and August were slow, but demand improved in September.
  • Medtec & Life Science revenue amounted to EUR 26.1m, compared to our EUR 26.6m estimate.
  • Scanfil Q3 EBIT stood at EUR 9.9m, compared to the EUR 10.5m/10.3m Evli/consensus estimates. Operating margin was thus 7.0% vs our 6.8% expectation.
  • Scanfil guides FY ’20 revenue to land in the EUR 590 – 610m range and EBIT EUR 38 – 40m. The estimate ranges were previously EUR 580 – 620m and EUR 38 – 42m.

Scanfil - Proven resilient results

10.08.2020 | Company update

Scanfil’s Q2 clearly beat our estimates. The company’s active plant network management should help secure good profitability in the coming years even if the pandemic will eventually begin to hurt business more. Our TP is now EUR 6.25 (5.25); we reiterate our BUY rating.

Communication and Energy & Automation up organically

Scanfil Q2 revenue was EUR 156m (up 9% y/y and of which two-thirds due to HASEC i.e. mostly Industrial). Communication posted a 49% revenue surge. Business jumped due to 5G networks but also e.g. camera surveillance systems. Energy & Automation grew by 15% as many accounts drove growth. Industrial top line grew by 17% mainly due to HASEC, yet also organically with e.g. KONE elevators. Medtec & Life Science was flat. Consumer Applications demand fell as the pandemic altered consumer behavior. The segment supplies e.g. TOMRA reverse vending machines and Scanfil says many accounts cut business sharply in Q2, leading to 26% y/y drop in revenue. Scanfil is however seeing signs of stabilizing demand for the segment. The EUR 10.2m in Q2 EBIT (vs our EUR 8.7m estimate) was more than satisfactory as Scanfil estimates the pandemic’s effects’ net cost was EUR 0.8m in H1. The pandemic notably elevated freight and safety costs. On the other hand, Scanfil also received state subsidies in compensation for shortened working hours.

Fundamentally strong thanks to active plant management

We make minor estimate changes, mostly reflecting latest segment updates. We see FY ’20 EBIT at EUR 40.4m. While FY guidance is likely to hold it’s early to say much about next year. However, Scanfil’s Hamburg plant closure will further help profitability going forward. Scanfil expects the decision to yield EUR 2.5m in annual cost savings since two other nearby plants are in a better position to serve the current Hamburg accounts. Scanfil also prunes its Chinese operations, having sold the Hangzhou plant (sheet metal mechanics) and thus focusing on Suzhou (electronics manufacturing and demanding integration).

In our opinion higher multiples are justified

The pandemic could begin to hurt volumes even if so far Scanfil’s overall levels have not been impacted. Scanfil however remains valued at attractive levels, ca. 6.5x EV/EBITDA and 9.0x EV/EBIT on our FY ’20 estimates. Our new TP is EUR 6.25 (5.25), rating BUY.

Scanfil - Clearly topped expectations

07.08.2020 | Earnings Flash

Scanfil’s Q2 clearly exceeded expectations. Revenue grew by 9% y/y and slightly more than a third of the increase was organic, the rest being attributable to the HASEC acquisition (mainly recognized in the Industrial segment).

  • Scanfil Q2 revenue was EUR 155.6m compared to the EUR 145.4m/147.0m Evli/consensus estimates. Scanfil says organic demand growth was especially strong in Communication and Energy & Automation.
  • Communication revenue amounted to EUR 28.9m vs our EUR 20.4m estimate.
  • Consumer Applications top line was EUR 20.3m compared to our EUR 26.2m expectation. Scanfil comments the pandemic has had an adverse effect on the segment’s demand.
  • Energy & Automation revenue was EUR 32.6m while we expected EUR 29.1m.
  • Industrial posted EUR 48.5m vs our EUR 43.2m estimate.
  • Medtec & Life Science revenue was EUR 25.3m compared to EUR 26.5m estimate.
  • Scanfil Q2 EBIT amounted to EUR 10.2m vs the EUR 8.7m/9.3m Evli/consensus estimates. Operating margin was therefore 6.5% while we had expected 6.0%.
  • Scanfil guides FY ’20 revenue in the EUR 580 – 620m range and sees adjusted EBIT at EUR 38 – 42m.

Scanfil - Outlook basically unchanged

27.04.2020 | Company update

Scanfil operations continue to develop on a positive note as industrial OEM customer demand seems remarkably strong in the face of the pandemic. We have made rather small downward revisions to our estimates due to increasing uncertainty. Our TP is EUR 5.25 (5.75), rating BUY.

No dramatic effects to segment performances so far
Q1 revenue grew by 11% y/y (two-thirds due to the HASEC acquisition) to EUR 144m and thus beat estimates by ca. EUR 10m. ROI, at 17.8% in Q1, continued to develop strong. February saw the Chinese plants stall due to the coronavirus situation that hadn’t back then escalated into a pandemic. There has been only one production plant closure so far since (in Poland). In fact, March was the strongest month in terms of (organic) growth and helped to compensate for slow February. According to Scanfil supply chains have continued to work well and only a few customer accounts have seen demand forecasts drop for Q2 and Q3. Naturally uncertainty is growing but for now Scanfil can reiterate its previous strong outlook for this year.

Scanfil continues to perform and is ready for acquisitions
We have slightly revised our estimates down due to increased uncertainty. The adjustments are remarkably small, amounting to an average of EUR 6m in quarterly revenue, or 4%. We have also done a small downward adjustment to operating margin, now expecting 6.5% instead of the previous 6.75%. We thus see EBIT at the low bound of the guidance range i.e. at EUR 39.0m; we previously expected EUR 41.4m. Scanfil says it has a liquidity position of some EUR 60m ready to be deployed for e.g. M&A.

A valuation above peer multiples is well justified
The pandemic seems to pose no cracks to Scanfil’s fundamentals. According to one narrative the pandemic will reverse globalization and thus supply chains and actors such as contract manufacturers are hit particularly hard. In our opinion such stories fly a bit too high and are based on unsound reasoning. Scanfil’s comments readily confirm industrial OEMs still want to outsource significant amounts of production. We update our TP to EUR 5.25 (5.75) due to increased macroeconomic uncertainty but note how few facts seem to impair Scanfil’s long-term story. We see good upside to Scanfil’s 5.5x EV/EBITDA and 7.5x EV/EBIT ‘20e valuation multiples.

Scanfil - Good results amid the pandemic

24.04.2020 | Earnings Flash

Scanfil’s Q1 revenue clearly exceeded our and consensus estimates. Communication, Energy & Automation as well as Industrial segments were stronger than we expected. Scanfil says profitability developed as expected and reaffirms FY ’20 outlook.

  • Q1 top line stood at EUR 144.1m, compared to EUR 133.7m/135.2m Evli/consensus estimates.
  • Communication revenue was EUR 22.4m while we expected EUR 16.1m. Scanfil says 5G network elements were the most important demand driver.
  • Consumer Applications revenue amounted to EUR 18.7m vs our EUR 24.7m estimate. Scanfil says the softness was due to a certain account whose demand begins in Q2 this year. The coronavirus also had an impact on a couple of accounts.
  • Energy & Automation recorded EUR 30.7m compared to our EUR 25.4m estimate. Demand was broad and strengthened during the quarter.
  • Industrial top line was EUR 45.6m vs our EUR 38.6m expectation.
  • Medtec & Life Science revenue amounted to EUR 26.7m, in comparison to our EUR 28.9m estimate.
  • Scanfil’s Q1 EBIT was EUR 8.6m vs EUR 8.7m/8.3m Evli/consensus estimates. The 6.0% operating margin was thus slightly lower than our 6.5% estimate.
  • Scanfil issued annual guidance on Feb 19, 2020 according to which the company saw FY ’20 revenue in the EUR 590-640m range and EBIT at EUR 39-43m. Scanfil said the guidance was subject to exceptional uncertainty due to the coronavirus situation that was evolving in China back then. The company made a certain allowance accordingly. Scanfil now reaffirms the outlook but updates the definition of uncertainties with a reference to potential negative effects of the pandemic.

Scanfil - Higher multiples are warranted

20.02.2020 | Company update

Scanfil’s Q4 results fell slightly short of our expectations, yet overall there were no significant changes in the wider picture. The HASEC acquisition helped Industrial as well as Medtec & Life Science top line, however both segments extended strong organic growth. Scanfil aims to grow at a 5% organic CAGR according to its updated long-term target; in our view there’s still good upside to current multiples. Our TP is now EUR 5.75 (5.25), remain BUY.

All segments continued to grow except Communication

Scanfil’s EUR 155m Q4 revenue didn’t quite meet our EUR 159m estimate yet grew by 10% y/y. The Industrial segment (key accounts include Kone) jumped by a third in Q4 (Q3 y/y growth was 52%), and so the EUR 47m revenue almost met our EUR 51m estimate. Scanfil says the performance has been due to organic growth but the HASEC acquisition also helped. Medtec & Life Science (potential customers include Thermo Fisher Scientific and Vaisala) top line grew by 17% y/y and so was in line with our EUR 29m estimate. Scanfil says the segment grew mostly in an organic fashion, receiving only slight lift from the German acquisition. Energy & Automation (e.g. Valmet) continued to grow at a stable organic 6% annual rate. Consumer Applications has stabilized for two quarters now, but the business is rather seasonal. Communication (e.g. Nokia) fell by 24%, yet Scanfil says the segment could well stabilize this year. Scanfil’s Q4 operating margin, at 6.5%, was 60bps below our estimate; we still think the company will easily reach its 7% long-run target.

Scanfil targets 5% organic CAGR during the next four years

We estimate Scanfil has grown at a 6% organic rate during the last two quarters. Considering Scanfil’s strong cost, quality and delivery record we view the company’s 5% CAGR target as highly feasible, especially given a good positioning in Industrial and Medtec & Life Science, which we estimate to contribute some two-thirds of all the organic growth going forward.

In our view Scanfil can be valued above peer multiples

Although lowish valuation multiples are in general well-advised for contract electronics manufacturers, in our view Scanfil’s strong profitability track record as well as organic growth outlook justify higher than the current 6x EV/EBITDA and 8x EV/EBIT ‘20e multiples. Our new TP is EUR 5.75 (5.25), retain BUY.

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

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Company Facts


Scanfil expects to generate EUR 820-900m in revenue and EUR 57-65m in operating profit for 2024

Financial targets

Scanfil targets 10% revenue CAGR over the business cycle and 7-8% operating margin

Share price (EUR)

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