Scanfil

Scanfil’s share price has fallen by 20% since the earnings release at the beginning of August without any major company-specific news. However, industrial data from Europe and globally has been subdued. Thus, the downward risks have also increased slightly for Scanfil, but with the drop in valuation due to the clear share price decline, we feel the expected return has improved and risen above the required return.

We have examined longer-term ROIC, components of return levels and underlying explanatory factors of Incap, Scanfil and four other Nordic electronics industry contract manufacturers. Overall, the companies’ return on capital has been at an excellent level and strengthened during our review period.

We examined the revenue growth and acquisitions of six Nordic contract manufacturers over the past 4.5 years. Since 2018, the companies’ revenue growth has been at a fierce level (combined revenue grew by some 19% p.a.). Part of the growth is explained by the numerous acquisitions made by the companies, but organic revenue growth has also been strong (total organic revenue has increased by over 10% p.a.).

Scanfil generated a record result in line with our expectations in Q2 and reiterated its outlook. We only made marginal but positive estimate changes for the coming years after the report. We feel the short-term valuation of the share is neutral, although in the longer term, Scanfil still offers a strong, profitable growth investment story.

The overall picture of Scanfil’s Q2 report published on Friday was somewhat neutral relative to the increased expectations, as the company generated a record result in line with our expectations in Q2 and reiterated its outlook. We only made marginal but positive estimate changes for the coming years after the report.