Scanfil: Proven resilient results - Evli Research
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.
https://pankki.evli.com/hubfs/ERP/Raportit/Scanfil/Scanfil%20200810%20Company%20update.pdf
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