Pihlajalinna reports Q2 results on Fri, Aug 13. Our FY ’21 estimates remain intact, but we note the latest announced acquisition which is set to be closed by the end of this year.
Q1 top line grew 5% y/y, driven by public sector and corporate customers. COVID-19 testing contributed a major share of the revenue increase within the two groups. Meanwhile private customer revenue fell by 10% y/y, although COVID-19 testing had a small positive contribution there as well. COVID-19 testing added a total of EUR 8.2m in revenue, while overall net revenue growth was EUR 6.9m. We expect the tests to have played a similar important role in Q2 as the acute situation restrains other volumes. Finnish vaccination coverage was negligible in Q1 but improved a lot in Q2; testing levels might otherwise begin to fade in Q3 were it not for the fact that the virus situation has once again turned for the worse over the summer. We believe the testing business does not in any case reach abnormal margins and thus the back and forth with other services should have a neutral effect on Pihlajalinna’s profitability going forward.
Pihlajalinna is again active in M&A since the bid by Mehiläinen was curbed. The latest target is Pohjola Sairaala, for which Pihlajalinna pays EUR 32m in cash. The acquisition will add some EUR 60m in revenue next year and so the 0.5x EV/S valuation looks modest relative to Pihlajalinna’s 0.9x multiple. The target has been lately generating negative EBITDA and Pihlajalinna will provide more color on its development in the coming months. Pihlajalinna is valued 8x EV/EBITDA and 17x EV/EBIT on our FY ’21 estimates. The company has plenty more profitability potential and thus the multiples should decrease to 6.5x and 13x already next year. Both earnings multiples and margin levels are clearly below those of peers. We retain our EUR 13.2 TP and BUY rating.
Source: Finwire News.