Pihlajalinna is a Finnish private healthcare-services provider — primary/specialist clinics, occupational health, diagnostics, and a shrinking legacy public-outsourcing/residential-care book it is deliberately exiting. The FY2025 story is a real operating turnaround: adjusted EBITA reached an all-time-high EUR 65.3M (a 10.0% margin, up from 7.8%) and EPS rose to EUR 1.58 (from 1.13), even as revenue fell −7.4% to EUR 652.3M. The improvement is genuine operating leverage on a leaner cost base (efficiency + labour-cost management) rather than a one-off — the EUR 8.5M divestment gain was more than offset by ~EUR 14M of restructuring/impairment costs.
Our adjustments normalise the EBITDA-level comparability items (net −EUR 0.6M LTM) and add back EUR 5.3M post-tax of restructuring-linked asset write-downs on premises/PP&E; PPA amortization (EUR 1.7M of acquisition intangibles) is kept in opex as a real recurring cost of the clinic roll-up. The result: adjusted ROIC ~9.35% on IC EUR 466M only just clears the 8% WACC, leaving a thin EP of +EUR 6.3M — the spread is the weak point. A positive housekeeping signal: the EUR 20M 12%-coupon hybrid was repaid in Q1 2026, simplifying the capital structure. The valuation is the attraction: at PEBV ~1.0 the market prices continued revenue erosion (implied growth ~−6.6%), so margin durability and revenue stabilization are asymmetric upside.
On adjusted NOPAT (EUR 43.6M) the reverse-DCF is ~+8.5% to the EUR 10.86 price even at zero growth and ~+14% at 5% (PEBV ~1.0, implied growth ~−6.6%) — genuinely cheap if the FY2025 margin gains hold and revenue stabilises after the contract exits.
Base EUR 12.5 (revenue stabilises and margins hold — modest re-rating from a cheap base); bull EUR 14.5 if the margin gains stick and the top line returns to growth post-restructuring; bear EUR 9.5 if revenue erosion continues and the thin EP turns negative under healthcare-reform pressure.
The market pays today’s enterprise value for roughly -6.6% NOPAT growth over 5 years. The business earns 9% on capital against a 8% cost of capital (spread +1.3 pp); the no-growth value is €13/share (119% of price), so the rest is priced-in growth.
| Scenario | 24m target | Impl. g | Upside | Prob. | Driver |
|---|---|---|---|---|---|
| Bull | €14 | +6% | +34% | 30% | Margin gains stick + revenue returns to growth |
| Base | €12 | -1% | +15% | 45% | Revenue stabilises, margins hold; cheap base re-rates |
| Bear | €10 | -11% | -13% | 25% | Revenue erosion continues; thin EP turns negative |
| Prob-weighted | €12 | — | +14% | 100% | Scenario-weighted expected value |
| WACC \ g | 0% | 3% | 5% | 8% | 10% | 15% |
|---|---|---|---|---|---|---|
| 6.50% | 22 | 24 | 25 | 28 | 29 | 33 |
| 7.25% | 17 | 18 | 19 | 20 | 21 | 23 |
| 8.00% (base) | 13 | 14 | 14 | 15 | 15 | 16 |
| 8.75% | 10 | 10 | 11 | 11 | 11 | 11 |
| 9.50% | 8 | 8 | 8 | 8 | 8 | 7 |
Green = fair value above the current price of €10.86. The reverse-DCF conclusion is dominated by WACC and growth — see the whole surface, not a single fair value.
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Adjusted EBITA 7.8%→10.0% on a leaner cost base — the core re-rating driver.
PEBV ~1.0, rDCF ~+8.5% at zero growth — the market prices a continued decline.
EUR 20M 12% hybrid repaid Q1 2026; portfolio shift out of low-margin contracts.
Exiting low-margin public/care work lowers revenue but raises mix quality.
Pihlajalinna is a cheap (PEBV ~1.0) Finnish healthcare-services turnaround with a genuine margin step-up (adjusted EBITA to 10.0%) but a thin economic-profit spread (ROIC ~9.35% vs 8% WACC). The market prices continued decline, so stabilization is the upside. HOLD with a value lean; base EUR 12.5.
BUY-worthy on evidence that the FY2025 margins are durable and revenue is troughing; the thin spread and reform uncertainty cap conviction until then.
Every adjustment traces to the cited note/page in the source filing — click to open it there. Annual report / 10-K: 📄 open · Latest interim: 📄 open
| Adjustment / figure | Value | Source | Why mttssn treats it this way |
|---|---|---|---|
| Revenue (FY2025) | 652 | Consolidated income statement (Note 2) 📄 p.102 | Audited consolidated income statement, EUR 652,300 thousand. Cross-checked to FS-release income statement and key-figures table. LTM revenue 613.0 = 652.3 + Q1'26 142.1 - Q1'25 181.4. |
| Revenue (Q1 2026 vs Q1 2025) | 142 | Consolidated income statement 📄 p.14 | Q1 2026 revenue EUR 142.1m vs Q1 2025 EUR 181.4m; used to roll FY anchor to LTM. -21.7% YoY is structural (outsourcing-contract expiry), not demand. |
| Operating profit / EBIT (FY2025) | 52.7 | Consolidated income statement 📄 p.102 | Audited EBIT EUR 52,720 thousand (= EBITDA 109.3 - D&A 56.6). LTM EBIT 48.5 = 52.7 + 12.2 - 16.4. |
| Adjusting items affecting comparability to EBIT (FY2025) | 5.9 | Description of adjustment items (Board report) 📄 p.23 | Audited bridge: EBITDA-level adjustments net -0.7 (restructuring +5.3, dismissal +0.7, IFRS-3 +1.0, property provisions +1.5, IAS-37 reclass -1.5, divestment gain -8.5, other +0.1/-0.1) PLUS D&A-level write-downs +6.6 (ROU premises 1.8 + property/land 2.2 + PP&E 2.5) = +5.9 total. Reconciles reported EBIT 52.7 to adjusted EBIT 58.6. |
| Gain on sale of business units (in Other operating income) | 8.5 | Note 3 Other operating income 📄 p.112 | Divestments of business units = EUR 8,452 thousand within total other operating income EUR 12,224 thousand (vs 3,800 prior). One-off disposal gain from selling special-housing/residential-care units to Esperi Care, Mehilainen and Attendo; stripped from NOPAT as non-operating. |
| Asset write-downs (impairment) treated as comparability items | 6.6 | Adjustments to depreciation, amortisation and impairment 📄 p.23 | Right-of-use premises write-downs 1.8 + property/land-area write-downs 2.2 + PP&E write-downs 2.5 = 6.6 pretax. Reclassified by mttssn to a post-tax add-back (6.6 x 0.80 = 5.28). |
| Goodwill | 254 | Note 14 Intangible assets and goodwill 📄 p.120 | Carrying amount 31 Dec 2025 EUR 253,830 thousand (Private Healthcare Services 247.8 / Public 6.0; AR p121). Roll-forward: -1.163 from sold operations, +0.118 from acquisitions. 31 Mar 2026 EUR 253.6m (Q1 p15). |
| Goodwill impairment (FY2025) | 0 | Note 14 Impairment testing 📄 p.121 | Annual value-in-use test at 30 Nov 2025 (PHS pre-tax WACC 10.1%, terminal growth 2.0%; Public WACC 13.7%). Result: NO impairment recognised for either CGU. None in Q1 2026 either. |
| PPA amortisation (FY2025) | 1.7 | Bridge to adjusted EBITA 📄 p.23 | PPA amortisation EUR 1.7m (acquisition-related intangibles: trademarks, customer-relationship value, non-competition, patient database; Note 14 roll-forward AR p120). mttssn KEEPS this in opex (not added back). |
| Lease liabilities | 192 | Statement of financial position (Note 13) 📄 p.15 | 31 Mar 2026: non-current 162.3 + current 29.8 = 192.1 (FY2025: 167.0 + 30.5 = 197.5; AR Note 24 p132). ROU assets 169.7 (98% clinic/hospital/medical-centre premises) — primary operating asset base, so leases are included in invested capital. |
| Interest-bearing debt (ex-leases) | 107 | Statement of financial position (Note 16) 📄 p.15 | Loans from financial institutions 31 Mar 2026: non-current 103.6 + current 3.5 = 107.1 (FY2025: 102.6 + 1.8 + other 0.5 = 104.8; AR Note 24 p132). Excludes the EUR 20.0m hybrid bond, which was REPAID in Q1 2026. |
| Cash and cash equivalents | 11.9 | Statement of financial position 📄 p.15 | 31 Mar 2026 cash EUR 11.9m, down from EUR 30.7m at YE2025 (Q1 cash flow p17): hybrid-bond repayment -20.0 and dividend -1.3 drained the buffer. Cash < 2% of LTM revenue (12.3), so excess cash = 0 in the IC build. |
| Total equity | 168 | Statement of financial position 📄 p.15 | 31 Mar 2026 total equity EUR 167.8m (to parent 165.5, NCI 2.3). The EUR 20.0m hybrid bond previously inside equity was repaid in Q1 2026, lowering equity vs YE2025 (192.6). Fair-value reserve (OCI) 0.7 stripped for equity_ex_oci 167.1. |
| Income tax / effective rate (FY2025) | -7.166 | Note 11 Income taxes 📄 p.116 | FY2025 tax EUR -7,166 thousand on PBT 45,754 = 15.7% effective (Finnish statutory 20%, reduced by EUR +2,773 thousand of utilised prior losses with previously unrecognised tax benefit — a non-recurring benefit). We use a normalized 20% statutory rate for NOPAT so the one-off loss-utilisation does not overstate durable after-tax returns. |
How the mttssn view has evolved — each prior dated note is preserved.