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Talenom reported Q1 results close to our expectations. We expect organic growth to accelerate in coming quarters and the many acquisitions to drive reported sales to the fastest-ever growth in 2021E (24% y/y). The growth case appears well on track but much is already priced in and the high valuation (42x 2021E EBIT) limits upside potential in our view.

The shares have been strong (+32% in a month), probably driven by the recent guidance upgrade related to acquisitions in our view. Talenom now trades in line with Admicom on 2021E EV/EBIT and at a 3% premium on 2022E (Admicom based on FactSet consensus). Given lower scalability and lower EBIT margins (Admicom 2021E: 45%; Talenom: 20%), Talenom’s valuation looks high to us. Even though bolt-on M&A at low multiples could provide upside to our current estimates, we struggle to see meaningful upside potential for the shares in the next 12 months. We raise our 12M fair value range to EUR12-14 (from EUR10-12).

Source: Finwire News.