Translation: Original published in Finnish on 2/24/2025 at 8:24 am EET.

The overall picture of Scanfil's Q4 report released on Friday was, in our view, cautiously positive, with the company's performance showing signs of a turnaround. After the report, we did not make any changes to our earnings forecasts, but we did revise our required return slightly downwards, as we believe the risk level of the stock has decreased somewhat following the guidance that was in line with expectations. Thus, we revise our target price for Scanfil to EUR 9.40 (was EUR 8.70) and reiterate our Accumulate recommendation. In our view, the stock is moderately valued (2025e: P/E 13x, EV/EBIT 10x). As a result, the company's attractive long-term investment story can still be accessed at what we believe is a sufficient near-term expected return at current price levels. However, the expected return hinges on the realization of our earnings growth forecasts. 

Performance turned slightly upward in Q4

In Q4, Scanfil's revenue decreased by 4% to 212 MEUR from a good comparison level, which was slightly above our forecast. In organic terms, the decline in revenue was still around 9% due to the weak market situation, as the SRX acquisition supported the profitability inorganically. In Q4, revenue also included low- or zero-cost consignment sales of around 15 MEUR, so the overshoot was not purely demand-driven. Scanfil's adjusted EBIT turned upward and increased by about 4% to 14.0 MEUR from the satisfactory comparison period. The operating result was practically in line with our forecast. In Q4, the company's performance was supported in particular by savings and efficiency measures, as the contribution from the SRX acquisition to the result in Q4 was still limited and the decline in revenue naturally also put pressure on the result. We commented on Scanfil’s Q4 numbers in more detail on Friday here.

No changes to estimates after Q4 report

Scanfil gave guidance for the current year, according to which the company's 2025 revenue will be 780-920 MEUR and adjusted EBIT 53-66 MEUR. Prior to the report, we expected Scanfil's revenue to grow by 9% to 844 MEUR and adjusted EBIT to grow by 11% to 59 MEUR. We also suspect that consensus forecasts were roughly similar. Thus, we believe the current-year outlook was sufficient to meet expectations, although the relatively wide ranges reflect, in our view, the uncertainty still related to the near-term outlook, especially regarding external factors (e.g., geopolitics, global economy and trade policy). Fundamentally, however, Scanfil's demand outlook should be improving as a modest economic recovery and a decline in interest rates will support the company's investment-driven demand from H2 onwards. In addition, the rather encouraging new sales successes in 2024 should support growth and earnings growth from Q2 onwards.

We did not make any forecast changes to our earnings estimates for Scanfil after the report. Our forecasts for the current year are around the mid-points of the company's guidance ranges. We predict that Scanfil's adjusted EBIT will grow at a revenue-driven annual rate of around 10% over the next few years. The main risks to our forecasts relate to external factors such as the global economy, while internally we believe the company is in relatively good shape.

If earnings growth is realized, stock’s expected return is still good

Based on our estimates for 2025 and 2026, Scanfil's adjusted P/E ratios are 13x and 11x, while the corresponding EV/EBIT ratios are 10x and 9x. This year's multiples are in line with or slightly below the company's moderate 5-year medians, and next year's multiples are below them. In relative terms, Scanfil is atypically and unjustifiably discounted. As such, we believe the valuation of the stock is still attractive. Therefore, we still consider Scanfil's expected return based on earnings growth and a dividend yield of around 3% to be above the required return. The DCF also indicates that the stock is still cheaply priced.