Scanfil Q1'25: Share price has reached neutral zone

Translation: Original published in Finnish on 4/25/2025 at 7:25 am EEST.

In our view, the overall picture of Scanfil's Q1 report published yesterday was rather neutral, and we did not make any changes to our forecasts following the report. In our view, the stock is reasonably valued (2025e: P/E 13x, EV/EBIT 10x), but the expected return no longer exceeds the sustainable required return on a 12-month horizon due to elevated macro risks. Hence, we reiterate our target price of EUR 9.00 on Scanfil and lower our recommendation to Reduce (previously Accumulate) as the stock's upside narrows. Our recent extensive report on Scanfil is available here.

Q1 impacted by ramp-up of new projects as expected

In Q1, Scanfil's revenue decreased by 3% to 193 MEUR from a reasonable comparison level. Organically, we estimate that revenue declined by about 7%, as the SRX acquisition supported revenue by around 4%, or 7.6 MEUR. The negative top-line development was mainly caused by sluggish demand, while the ramp-up of several new projects at various factories limited sales in the first months of the year, as previously communicated by the company. In Q1, Scanfil's adjusted EBITA decreased by around 4% to 12.6 MEUR. Profitability (adj. EBITA-%) remained at a satisfactory level for Scanfil at 6.5%, as the ramp-up of projects won last year also weakened the production efficiency of the factories in Q1. The company managed to sell 47 MEUR of new projects in Q1, which was about 5% higher than in the comparison period. We commented on Scanfil's Q1 figures in more detail on Thursday here. 

Guidance remained virtually unchanged

Scanfil updated its approach to guidance for the current year. The company now expects a revenue of 780-920 MEUR in 2025 (unchanged), and an adjusted EBITA of 55-68 MEUR (previously adj. EBIT 53-66 MEUR). In practice, however, the guidance remained unchanged, which was also in line with our expectations.

Due to a revision of the company's reporting and a change in the guidance, we moved the non-cash-flow-related PPA depreciation related to the acquisitions within non-recurring items as an adjustment item, but apart from this technical change, we did not make any changes to our estimates after the Q1 report. Our projections for the current year are in the lower half of the company's guidance ranges, as we expect the company's revenue to grow by 7% to 831 MEUR and adjusted EBITA by 9% to 60 MEUR this year. Over the next few years, we predict that Scanfil's adjusted EBIT will grow at a revenue-driven annual rate of around 5-10%. The main risks to our forecasts relate to external demand factors such as the global economy, while internally we believe the company is in relatively good shape. Given the company's reliance on local production, we do not expect Scanfil to be significantly impacted directly by tariffs, but due to the difficult-to-predict indirect effects, we also see a tightening of the trade political situation as a negative risk for Scanfil as well.

Pricing is starting to look pretty balanced on a one-year horizon

Based on our estimates for 2025 and 2026, Scanfil's adjusted P/E ratios are 13x and 12x, while the corresponding EV/EBITA ratios are 10x and 9x. We expect the dividend yields for the next few years to be around 3%. This year's multiples are in line with the company's moderate 5-year medians, and next year's multiples are below them. In relative terms, while Scanfil is atypically and uncharacteristically discount-priced, peer forecasts may not yet fully reflect the recent deterioration in the economic outlook and increase in risks. In our view, the stock as a whole is already quite correctly priced. Thus, the expected return is clearly positive, but it no longer exceeds the required return. Moreover, the stock's upside is already beginning to be limited when viewed against the DCF at our target price level.