Translation: Original published in Finnish on 9/30/2026 at 8:05 am EEST.

Scanfil announced on Tuesday that it is raising its long-term financial targets, particularly those related to revenue growth and indebtedness. In our view, the target update reflects the company’s strong confidence following successful acquisitions and positive developments in new sales over the past few years. In principle, we are positive about the company's elevated growth ambitions because Scanfil has a good track record of creating value through consolidation in the fragmented contract manufacturing market, and its performance in organic growth has also been trending upward recently. We will be attending Scanfil's Capital Markets Day (CMD) in Italy this week and will provide a broader overview of the CMD later in the week.

Boosting growth targets relies on both organic and inorganic factors

Scanfil’s new target is to achieve a 15% average annual revenue growth over the business cycle, compared to its previous target of 10%. In practice, the company would double its revenue in five years if this target is met. The company estimates that the contract manufacturing market will grow nominally by 5–6% annually until 2030, and our own estimates for organic growth are also at this level. Nevertheless, Scanfil believed it could grow faster than the market organically, supported by faster-growing defense, energy, and health sectors (which account for about 60% of Scanfil's revenue), in addition to which the growth outlook is supported by the continuation of the long-term upward trend in the outsourcing rate, among other things. To achieve the new growth target, significant and systematic inorganic growth is required, and we estimate that roughly half of the growth should come inorganically. Scanfil’s management indeed confirmed that its goal is to act as an active consolidator in the market. In practice, achieving the target would require one larger acquisition in the 100 MEUR range annually, whereas the company is primarily looking for targets with revenues between 50 and 150 MEUR. We consider this strategy warranted because the industry's fragmented structure offers many opportunities, and Scanfil has demonstrated its capability on the inorganic front. However, acquisitions must always be assessed case by case. Against this background, as well as recent organic wins of new projects and rising inflationary pressures, raising the growth target was not surprising to us.

The company maintained its profitability target at a comparable EBITA margin level of 7–8%. We did not find this particularly surprising, as the company has mostly operated around the lower end of the target level or slightly below it over the past 10 years. We have estimated previously as well that it is difficult to permanently raise margins above this level in the highly competitive field of contract manufacturing. This is particularly true in Scanfil's case, as its customer structure leans toward established companies, resulting in a quite low risk profile. We believe that long-term value creation at Scanfil relies primarily on growth and a healthy return on capital rather than continuously stretching margins, although in principle, organic revenue growth at existing factories in particular should support profitability in the contract manufacturing industry to some extent. In the medium term, we estimate that the company's share price will follow revenue growth particularly closely, as profitability and valuation multiples are already at roughly the company's normalized levels.

Raising debt ceiling provides much-needed leeway for the balance sheet

Logically, as the growth target was raised, Scanfil also raised its balance sheet leverage target. The new target for the net debt-to-EBITDA ratio is 1–2x, compared to the previous target of below 1.5x. At the end of Q2, the company's net debt/EBITDA ratio was 1.6x, slightly exceeding the previous target level following the latest acquisitions (ADCO and MB). We have deemed the company’s balance sheet to be entirely sound, even despite the previous breach of the limit, as significant downward fluctuations in the company’s EBITDA have been rare and the covenants set by lenders are likely well above the upper limit of the new target range. Thus, we believe the company can withstand slightly higher leverage than the previous target, especially at times, and the new target range gives the company more flexibility to execute acquisitions within its strategy without the immediate need for equity financing (as opposed to organic growth, which typically creates pressures for working capital growth in the industry, including for Scanfil). As we expected, the dividend policy remained unchanged at around one-third of EPS. Furthermore, we estimate that Scanfil intends to maintain slow growth in its dividends, though the company has not set this as an official target.

As expected, this year's guidance remained unchanged

At the same time, the company reiterated its guidance for the current year 2026, expecting revenue of 940–1,060 MEUR and comparable EBITA of 64–78 MEUR. In our view, reiterating the guidance in this context was entirely expected, and our own estimates are firmly in the middle of the guidance ranges (revenue 1,000 MEUR, adjusted EBITA 73 MEUR).