Translation: Original published in Finnish on 1"/12/2025 at 7:22 am EET

We reiterate our EUR 10.50 target price for Scanfil and raise our recommendation to Accumulate (was Reduce). We have not made any material revisions to our estimates for Scanfil, although the delay in acquisitions slightly decreased our Q4 estimates. However, with the valuation decrease due to the recent price drop (2026e: P/E 12x), we feel the expected return has improved and risen slightly above the required return. In our view, Scanfil also offers an attractive investment story of profitable growth in the longer term.

Completion of the acquisitions has been delayed

In our view, the news flow from the contract manufacturing sector has been fairly neutral overall during Q4. Industrial-related macro data from Europe, the company's main market, has remained subdued, even though consensus still expects the economic situation to develop positively next year, driven by, e.g., German stimulus and defense investments. In North America, the economy appears to have adapted to tariffs surprisingly well, while Asia is characterized by China's subdued but somewhat stable macroeconomic situation. At the company level, Scanfil completed the ADCO transaction this week, and the larger MB transaction was announced to be postponed until January. We do not believe that the delays have a material impact on the fair value of the share.

We updated the acquisition delays in our estimates

Scanfil's guidance is that its 2025 is 780-920 MEUR and adjusted EBITA 55-68 MEUR We shifted the completion schedules of the ADCO and MB acquisitions forward by a few weeks, which negatively impacted our Q4 estimates. Otherwise, the estimate revisions remained very small, as the news flow in Q4 largely met our expectations. We forecast Scanfil's adjusted EPS to grow by around 15% by 2028, driven by acquisitions, a gradually recovering economic situation, and organic growth enabled by project wins. The main risks to our forecasts relate to external demand factors such as the global economy. Internally, we believe the company is in pretty good shape, although the integration of two almost simultaneous acquisitions adds a notch to the risk level associated with the company's own operations during 2026. We also note that from the perspective of the value creation potential of acquisitions, profitably growing MB and ADCO as part of Scanfil plays a key role, as at least the larger MB acquisition, including additional purchase prices, was not particularly cheap in our view.   

We find the stock attractively priced

Based on our estimates for 2025 and 2026, Scanfil's adjusted P/E ratios are 15x and 12x, while the corresponding EV/EBITA ratios are 10x. We believe that the multiples for next year, which include the acquisitions and are partly dependent on a recovery in market conditions, have fallen to the lower end of our acceptable ranges for the company due to the share price decline of over 10% in recent weeks. Thus, we again consider the valuation cautiously attractive. Correspondingly, we believe that the expected annual return, consisting of earnings growth, a slight downside in multiples (Q3’25 LTM P/E 16x), and a dividend yield of nearly 3%, slightly exceeds our required return. The share also has a slight upside relative to our DCF value. Relatively, Scanfil is undervalued by approximately 10-30% compared to both global contract manufacturers and Nordic core peers. However, the global peer group and many Nordic peers are already priced at quite high levels and clearly above their medium-term averages. Thus, the relative valuation is also attractive, although we do not expect the valuation gap to close solely through a Scanfil stock rally.