Commissioned Research: Scanfil

The core strengths we see in Scanfil are its elastic business model and extensive experience in the electronics manufacturing services sector.

Scanfil has commissioned Nordea Markets to produce a research report with the aim of providing investors with quality research on the company.

A good start for the year – Updated 2 May 2018

Q1 figures were slightly better than market consensus

The company reported 14% revenue growth from Q1. In the previous quarter (Q4 2017) sales growth was 18%. If it maintains this speed, the company will outpace all estimates for full year 2018. Regardless of the company keeping the full-year guidance unchanged on results day, we upgrade our 2018 EPS estimate by 5%.

Operating profit margin was 7.4% in Q1

EBIT was EUR 10m (consensus EUR 9m) in Q1. Costs did not grow in line with revenue growth, which is why Scanfil was able to improve profitability y/y. However, the comparison period was also easy because of overheads from the restructuring done a year ago. Productivity has finally improved at the Myslowice plant, which is also one of the reasons for the better EBIT margin than seen in the last three years. The company’s long-term financial target has been a 7% EBIT margin.

The range in our valuation approach is EUR 5.0-6.1

We base our fair value on a combination of peer group and DCF analysis. The equally weighted range from our four different valuation approach drivers (DCF, P/B, EV/EBITDA and P/E) is EUR 5.2-6.3 (previously EUR 5.0-6.1).

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Improving demand supports full-year earnings – Updated 17 April 2018

Scanfil’s time to shine

Scanfil has witnessed an improvement in customer demand since the beginning of the year and upgraded its full-year 2018 EBIT guidance from EUR 33-37m to EUR 36-40m. We also upgrade our EBIT estimate by some 5%. Our new revenue growth forecast is 7%, while our new EBIT margin estimate for 2018E is 6.7% (previously 6.4%).

Volumes have been good in Q1

One of the main reasons for Scanfil’s recent improvement is its broader customer portfolio. Scanfil is not more dependent on the telecom sector and we argue that increased volumes have been the main driver behind the strong Q1 rather than product mix or pricing. There has not been one individual customer making the difference and the improving demand is instead coming from several sectors. Raw materials represent some 70% of revenue and cost inflation could very well be a threat for the company. However, the time lag for a raw material cost recovery is good as Scanfil acquires components based on the customer order.

The range in our valuation approach is EUR 5.0-6.1

We base our fair value on a combination of peer group and DCF analysis. The equally weighted range from our four different valuation approach drivers (DCF, P/B, EV/EBITDA and P/E) is EUR 5.0-6.1 (previously EUR 4.8-5.9).

Read the full report.

Scanfil’s time to shine – Updated 6 April 2018

An unnoticed jewel

Electronics manufacturing services (EMS) player Scanfil is active in the electronic device subcontractor market, which is set to grow by over 6% globally per year, according to IDC. The company has what we consider to be the right strengths in

the very competitive EMS sector, allowing it to protect its market position. We also believe that the operating margin improvement seen last year will continue this year.

A survivor in a competitive industry

Scanfil has faced several difficult years, but has emerged a survivor. The core strengths we see in the company are its elastic business model and extensive experience in the EMS sector.

Valuation is slightly below the sector median

We expect market demand for EMS subcontractors to remain strong for the next ten years at least. Small subcontractors typically trade at a small discount compared to larger

competitors. We do not expect Scanfil to grow faster than the industry and therefore do not find a clear premium compared to peers warranted.

We base our fair value on a combination of peer group and DCF analysis. The equally weighted range from our four different valuation approach drivers (DCF, P/B, EV/EBITDA and P/E) is EUR 4.8-5.9.

Read the full report.

Nordea Markets is the commercial name for Nordea’s international capital markets operation. The information provided herein is intended for background information only and for the sole use of the intended recipient. The views and other information provided herein are the current views of Nordea Markets as of the date of this document and are subject to change without notice. This notice is not an exhaustive description of the described product or the risks related to it, and it should not be relied on as such, nor is it a substitute for the judgement of the recipient. The information provided herein is not intended to constitute and does not constitute investment advice nor is the information intended as an offer or solicitation for the purchase or sale of any financial instrument. The information contained herein has no regard to the specific investment objectives, the financial situation or particular needs of any particular recipient. Relevant and specific professional advice should always be obtained before making any investment or credit decision. The document has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination.
Nordea Bank AB (publ), Company registration number/VAT number 516406-0120/SE663000019501. The board is domiciled in Stockholm, Sweden.

Conflict of interest

Readers of this document should note that Nordea Markets has received remuneration from the company mentioned in this document for the production of the marketing material. The remuneration is predetermined and is not dependent on the content. It is important to note that past performance is not indicative of future results. Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction. This document may not be reproduced, distributed or published for any purpose without the prior written consent from Nordea Markets.

Issuer review

This report has been reviewed, for the purpose of verification of fact or sequence of facts, by the issuer of the relevant financial instruments mentioned in the report prior to publication. The review has led to changes of facts in the report. Completion date: 17 April 2018, 06:43 CET

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