Scanfil Q2'25: Acquisitions quickly tightened the valuation

Translation: Original published in Finnish on 07/17/2025 at 11:02 pm EEST

We found the overall picture of Scanfil's Q2 report released yesterday to be fairly neutral. We added the ADCO and MB acquisitions, announced by the company in the summer, to our forecasts. Promising deals and putting the balance sheet to work raised our EPS estimates for the coming years by just over 10%. We nevertheless reiterate our Reduce recommendation for Scanfil, as the MB acquisition, in particular, boosted the share price this week and already pushed the valuation to fully priced (2026e: adj. EV/EBIT 11x). However, reflecting positive estimate revisions, we raise our target price to EUR 10.50 (was EUR 9.00).

There was no fuel for earnings growth yet in Q2

In Q2, Scanfil's revenue increased by 3% to 202 MEUR. Organically, we suspect revenue declined by some 1%, as the SRX acquisition supported revenue by some 4%, or 8.8 MEUR.  In Q2, the adjusted EBITA decreased marginally to 14.2 MEUR. Profitability (adj. EBITA-% ) was at Scanfil's baseline level of recent years, 7.0%. The improved earnings development from Q1 was slightly weaker than our somewhat overly optimistic expectations, but there was no major drama in the Q2 figures. The company managed to sell 42 MEUR of new projects in Q1, which was about 3% higher than in the comparison period. We commented on Scanfil’s Q2 figures yesterday in more detail here.

Acquisitions raised our estimates

Scanfil reiterated its guidance of 2025 of 780-920 MEUR revenue and 55-68 MEUR adjusted EBIT. The guidance was in line with our expectations. Despite macroeconomic uncertainties, the company commented positively on the H2 outlook (as did Kitron and Note in their reports earlier in July). This was at least partly due to the improved outlook of project-driven customers. The guidance does not yet include the ADCO and MB acquisitions announced in the summer, but due to the development in H1, the positive H2 outlook despite the uncertainties, and the acquisitions only materializing in H2, we expect the company to maintain its guidance range throughout the year. 

We added the ADCO and MB acquisitions to Scanfil's forecasts starting from Q3 and Q4, but organically, we made no significant changes to the company's growth and profitability forecasts after a fairly neutral Q2 report. The promising acquisitions and putting the strong balance sheet to work increased our adjusted EPS estimates for Scanfil in the coming years by over 10%. We expect that Scanfil's adjusted EPS will grow at a rate of some 15% by 2028, driven by acquisitions and organic growth enabled by a gradually recovering economic situation. The main risks for our forecasts are related to external demand factors such as the global economy. Internally, we believe the company is in fairly good shape, although we suspect the integration of two nearly simultaneous acquisitions will slightly increase the risk level associated with the company's operations in the coming quarters.  

Valuation has tightened clearly since the MB acquisition

Scanfil’s share price has risen by over 20% since the MB acquisition published last Sunday. We believe the share price rally was driven by the increased weight of the defense sector, which has strong prospects and has grown due to acquisitions, and positive comments on the outlook from Nordic peers. Although the outlook for the defense sector is strong and its opening to Scanfil is positive, we do not yet see a need to drastically change the stock's valuation multiples. The defense sector will be Scanfil’s smallest customer segment in the near term with a revenue share of just under 10%. Based on our estimates for 2025 and 2026, Scanfil's adjusted P/E ratios are 16x and 13x, and the corresponding EV/EBITA ratios are 14x and 11x. In our opinion, the multiples for next year, which depend on the market situation picking up, are also neutral, considering the acquisitions, so in the short term, we believe the valuation of the stock has tightened. Correspondingly, the expected annual return, consisting of earnings growth, the downside in the multiples, and a 2-3% dividend yield, remains modest. Also, when viewed against the DCF value, the upside in the share has been exhausted.