Result good if not excellent, revenue at the lower end of guidance. A cautious start to the year and growth are forecast, but this subordinate clause particularly pleases me as an owner: “and the company has a clear plan for potential acquisition targets”
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Incap is starting to have a pretty good amount of cash in hand for acquisitions:
At the end of Q3: 42,166,000€ —> After Q4: 72,172,000€! 
EDIT: For the first time, Incap’s financial income is now also greater than its expenses.
2024
Financial income 3,717,000€
Financial expenses -2,825,000€
As an owner, it’s nice to see that a huge cash pile has been put to work while acquisition targets are being sought.
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I wonder if these estimates/guidance figures already take into account future acquisitions, because it is stated as follows:
Or will future acquisitions be added on top of that, and new guidance will then be given once the deals have closed due to their effects.
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“Revenue for the fourth quarter of 2024 was EUR 59.3 million (10–12/2023: EUR 42.4 million). This was an increase of 39.7% from the comparison period. Excluding the impact of the company’s largest customer, revenue decreased by 7.0% due to seasonal variation.”
“We achieved approximately 40% higher revenue and 132% better profitability compared to the corresponding period of the previous year, mainly due to higher production volumes at Incap India.”
Victron’s momentum accelerating? Explains the higher profitability.
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Have future acquisitions already been taken into account in these estimate/guidance figures, since it is stated as follows:
I interpret this to mean that potential acquisitions have not been taken into account in the guidance. I would expect that their effects will be reported separately once the deals are completed.
It is possible that more will be heard about this at 11 AM.
Incap will organize an English-language webcast event on Friday, February 28, 2025, starting at 11:00 AM. The results will be presented by Incap Plc’s CEO Otto Pukk and CFO Antti Pynnönen.
The live webcast can be followed at Microsoft Virtual Events Powered by Teams
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Without knowing the production processes in more detail, is it possible that Victron, as an older and largest customer, would have been prioritized over others? And by this, I don’t necessarily mean direct favoritism towards a larger customer, but rather that capacity immediately suitable for other customers has flowed back to Victron’s use?
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Quote me here: Incap will be the best performing stock on OMXH in 2025.
Pukk also said in the call that their existing defence customers are ramping up orders and that they are in active negotiations with NEW defence customers.
Going to drop a bag today.
Edit: Thought.
Incap really is a Buffet stock. The stock market can go offline for 10 years and I wouldn’t mind. Incap will keep on performing.
Insane Q4.
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Isa Huddin interviewing Mr. Pukk.
- H1 expected to be slightly slower and weaker. Awaiting atmosphere, as we see how tariffs affect. Widely spread production brings security.
- In Q4, production volumes in India returned to relatively normal levels, and additional capacity is still available if needed.
- Business with the largest customer has returned to normalized operations and its normal growth.
- In acquisitions, the same “It takes two to tango” was repeated as used in the conference call (referring to the valuation of the acquisition target), which one might imagine hints that we are close to the finish line once an agreement is reached on the last “small” detail (my own speculation!).
Outlook and Guidance
The company uses verbal guidance for growth.
Higher 0-20%
Clearly higher 20-40%
Significantly higher 40%+
The given guidance “Higher” does not include potential acquisitions, but solely the current organization. After M&A activities, the guidance will be updated if necessary.
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Let’s assume that the profit scales in the same way as revenue. If nothing to buy is found, the cash will be 100 - 110 million in a year. The current market cap is indeed 320 million. Debt is now 30 million. Interest from cash significantly exceeds interest expenses, so at the end of the year, cash minus debt is approx. 80 million. Earlier in the buy and sell thread, I omitted the debts 
. New customers are coming from the defense sector, so this still looks good. I will buy more if the drop continues. Pukki seemed satisfied, even though he is cautious as always.
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It was indeed a peculiar market reaction to today’s report and news. The cash flow is overflowing, and soon we will grow inorganically again, it couldn’t be expressed much clearer than what was written in the report. New customers are being acquired for the Defence sector, and there will certainly be an increasing number of these in the current situation.
I took the opportunity to make a slight addition; incap continues to be by far the largest in the portfolio.
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Recommendation
Buy
Target Price
13.00 EUR
Updated
02.03.2025
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Updated report:
“We reiterate our Buy recommendation for Incap and our target price of EUR 13.00. Incap’s Q4 report, despite certain softness related to the quality of year-end revenue and earnings and a subdued start to 2025, met expectations overall, as the company guided for earnings growth this year in line with our expectations. The stock’s return potential is still good, driven by earnings growth (2025e: EV/EBIT 9x). A positive option is further strengthening growth through acquisitions.”
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Hello Everyone here at Incap forum!
First of all, thank you for the interest in Incap, good questions during the Webcast and the activity here! It is my pleasure to post summary of Incap related Q4 Webcast Q&A here:
In 2024 revenue grew by 4%, in Q4 by 40%, what kind of growth can we expect from 2025? Do you still expect quarter on quarter growth?
We expect a somewhat cautious start for the year 2025, as the market is anticipating the impact of the changes related to tariffs, taxes and geopolitical challenges, mostly linked to the new US administration. We will see how the different supply chain channels work to tackle different tariffs and other obstacles in the market. But overall, I think the market is picking up.
When Incap gives guidance and outlook, it’s always based on the current organizational structure we have in place and no acquisitions are added or simulated on top of it assumed . If we acquire new businesses, we look at whether the guidance remains unchanged, or if we need to adjust the outlook.
Your EBIT has bounced back in 2024 and in Q4 it was 14,7%. Is this the new normal level?
The EBIT always varies depending on our product mix. The higher utilization at our factories, the lower the share of fixed costs is and the higher is the EBIT. The normal is in between the different numbers that, for example, we have seen here in the past year, and it will vary a little bit quarter on quarter.
Incap’s strength is the extremely lean and efficient organization, not only in headquarter level, but also at all sites. That gives us the possibility to manage overheads optimally to achieve this kind of levels. When we had all-time-low point in Q4 2023, Q4, and we had low levels in some of the units, we still made very close to double-digit, 8.7%. And that’s just the background of Incap’s model and strength, which allows us to do the great profitability. The business model and the product mix define whether our profitability is 13%, 14% or 15%.
You highlight new customer acquisition in your report. What sectors/countries did you get them from?
If you look at our units, we had growth in almost all of them, growth in many different sectors, but perhaps we could mention one: the defence industry. It does not represent a big share, but it has been growing. We also see cross-selling opportunities, for example, in our Indian unit and in US, also, there has been good development in US market, in many sectors, including industrial, utilities and other sectors. In general, there has been good development in many areas.
Incap has three factories in India. How would you describe the capacity utilization in those factories in Q4?
All of our three factories are in use in India and the utilization has increased. We still have capacity for filling up our third factory and we are working with our customers on that. We always try to have some kind of overcapacity, so we have possibility to grow. But it doesn’t mean that we have an empty factory - if you walk around there, it is quite busy, but there’s still plenty of room.
How did the seasonal variations affect Q4? Could you explain a little bit, what has been the driver for the strong Q4, including the strong cashflow?
In Q4 the holidays have an impact, depending if they are on weekends or mid-week. We also had a quite long Christmas break, and we have had several of the units resting a week or even two weeks.
Strong cashflow was driven by very good profitability in the fourth quarter, and the change in some of the net working capital items and for example the inventory levels went down and had a positive impact on the cash flow. We have continued to grow and grow profitably and also to collect receivables. We have had no credit losses or long-term customers who have deferred their payments.
How about the largest customer and how much was its share in Q4 of the revenue?
We didn’t disclose it as a part of the Q4, but it’s around 40%. More customer-related information will be announced within our annual report in the financial notes.
Could you elaborate on the type or size of acquisitions that you are looking at and how do you think about valuation, including potential synergies?
We may look at smaller acquisitions, which are close to our existing unit size, ie. so-called bolt-on acquisitions. On a more strategic level, we want to be able to operate our decentralized model. Then the unit needs to be around 20-25 million in revenue at the minimum, to be able to handle the accounting, engineering, human resources and other various support structures it needs to operate independently.
The work our team does with due diligence is the same for a unit around 25 million in revenue or a bigger factory of 50-100 million. So, of course we prefer bigger targets but there are not so many out there. EMS industry in general has lots of small companies and not so many large companies. But when we are hunting, we are hunting big targets. What is equal to all targets, is that we don’t want any turnaround cases. We want profitable business and business that will bring value to our shareholders. As we do not calculate in synergy effects, the standalone unit also should be able to contribute and create value. We have had so far successful acquisitions, and we want to keep it in that way.
We have a clear plan and a robust M&A pipeline. We are constantly working on acquisitions, and we have a good network with different stakeholders like advisors and analysts that support us in different M&A phases. We have targets in our pipeline in different phases. We will naturally inform the market as soon as something gets completed.
Regarding geography - we don’t exclude anything. Of course, in Europe, Germany and Central Europe are areas where we are not so well represented today. And of course the US market, where we now also operate – a market with excellent potential and growth opportunities . South-East Asia is also something we are all looking into. We are quite confident in the work we are doing and sooner or later something will work out. Of course it takes both sides to negotiate and agree on our evaluation and if we do not want to overpay then that is also a negotiation point. But I am optimist.
At the moment we have seen that the activity on the M&A market is quite busy. We have a lot of things going on at our end as there are targets available.
Is it easier to agree on the valuations as most of the EMS companies have weaker figures in the books now?
We look at a lot of different multiples when we do the valuation. If the owner has a privately owned business, they don’t care so much about market evaluations. It is never easy to agree upon a price that makes sense to both parties. Incap in general is considered a good buyer, because we run a decentralized model and, we do not want to come in and kill the existing business. We want to keep the management, keep the business and that is less frightening compared to other companies that have other intentions.
When it comes to structuring mergers and acquisitions - when we have a different view of the near future compared to the other side and there is a gap, we often want to establish some kind of earn-out structure. We try to bridge both parties and mitigate the risk this way. Two cases from the past both have had an earn-out structure and that is a good way to get a common understanding and get the deal done.
A topical question about possibilities in defence industry and space technology. Do you see possibilities for new customer acquisitions or orders in these sectors?
We have seen growth in our existing defence customers, and also there are possibilities with the new ones we are working on with our teams. We are exploring those new opportunities.
What’s the rationale behind not paying dividend?
The Board decides on the proposal of dividend to the Annual General Meeting. We still see ourselves as a growth company and we have active pipeline with M&As, so from a management point of view it’s positive that we have money to operate with. We will create value with those funds as well.
You mentioned that you have little exposure to the Nordic EMS market.
What are the benefits of that and what do you mean by that?
Compared to our Nordic listed peers, Incap has only one factory operating in the Nordic market, and that is the Estonian factory. We have a turnover of about EUR 30 million in the Nordic market and the rest comes elsewhere around the world. It is not always fair to look at Incap and compare it with the market development in Scandinavia. We are only slightly affected by the slow economy in Scandinavia. So, even if we are a Finnish listed company, our business is mainly located in the other parts of the world.
Are there geographical differences in demand outlook for 2025.
We stated in our outlook that the market is hesitant, and I think that’s the case all over the world at the moment. We don’t know how the tariffs and the different trade relations will develop. We and many of our customers have alternatives to selling to different markets from different channels, and we are well positioned. We have units within the US and outside the US, within EU and outside EU and we have some playing room there. I’m not worried, but the market is a little bit hesitant and that is like that all over the world. There are positive signals on the market and as our outlook states as well, we believe in growth this year, but a slow start until the shakedown has settled.
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Has anyone else been bothered by Antti and Otto’s repeated mantra “early year quiet, picks up by year-end, early year quiet, picks up by year-end”? This seemed to be the point that caused the stock to change hands rapidly for three (grueling) days.
I should have read, listened, internalized, and reacted better at this point in connection with the Q4 earnings release, then I might have been able to keep my hand off the buy button for a while and saved a few thousand euros. Now it feels like as a loyal owner of the company, you’re paying a penalty for holding, while smart money waits for a 10-20% lower entry price for those good news. Not good. Not fair.
So, at the same time, management has immense faith in the year-end, which is, of course, a good thing. At the same time, questions also arise as to where this certainty stems from. Are there so-called good deals on the table that are only now starting to materialize, and we will reap the fruits in the Q3&Q4 results?
If this is the case, then Otto and Antti’s “warned” early year would fit in between, and we investors, unfortunately, have to content ourselves with uncertainly holding shares and watching their value quietly wither, as we don’t dare jump off the ride for fear of acquisitions or a surprising positive profit warning.
This was just my own train of thought that I had to vent somewhere. I do trust the company in the long run. In my opinion, due to the uncertainty caused by China’s and Trump’s antics, the outlook for a company like Incap is better than ever. Provided, of course, that the EU finally wakes up and starts investing in its own industry, defense industry, green energy (electric vehicles/solar energy = Victron etc.). Incap’s production is geographically excellently diversified, as management also mentioned in the interim report, and it’s also excellent that a foothold was established in the US before this farce.
Now just close those good acquisitions and deals, and this will still turn out well. 
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In my opinion, Otto and Antti communicate Incap’s outlook very clearly and openly. Even though we are currently talking about a weaker start to the year, it indicates that the company’s management has a realistic understanding of the situation, which will hopefully continue to lead to good and rational decisions. Operations have been kept more profitable than competitors in both good and weaker markets.
If the share price drop feels like a “penalty,” it’s worth clarifying your own investment horizon: are you trading according to quarterly economic fluctuations, or is your long-term goal further away?
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I just became an owner of Incap with a small stake, and in its honor, below are a few excerpts from Nordea’s latest view (date: 3.3.2025). 
Fair value range: 12,10-14,80 €
“We believe that the company’s revenue growth of 40% y/y and record-high EBIT margin of 15% in Q4 2024 were not enough for investors. Incap expects a slow start to 2025, prompting the share price to fall by 9% on 28 February. The main reason for its cautious view is geopolitical uncertainty, which could impact supply chain logistics, inventory levels and end demand in the short term. We trim our revenue estimates, but continue to believe that the company is aiming for more than 10% revenue growth in 2025. Our fair value range remains at EUR 12.1-14.8, based on our DCF analysis and backed by a peer group comparison. Incap’s 2025E EV/EBIT is currently 31% below the peer group median.”
“We expect more than 10% revenue growth in 2025. The company guides for 0-20% revenue growth for this year. The EMS market could be in waiting mode, due to the possible imposition of tariffs and geopolitical concerns in the short term. Uncertainty could even prompt some companies to reduce inventory levels in H1 2025. We raise our margin forecast, but lower our sales growth expectations for the coming quarters. Our net sales forecast is EUR 261m for 2025, while our EBIT projection is EUR 35m (6% above consensus).”
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How much could Incap potentially benefit from the EU defense package? The company mentioned in the Q4 call that their defense customers are doing well, but I don’t have a clear understanding of how big a part this is of their total business.
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As is well known, Incap has openly expressed its interest in new acquisitions/arrangements. And there is no doubt about the location of potential acquisition targets: Central Europe (Germany), the United States, and Southeast Asia have been mentioned. On inderesTV, we generally went through the growth logic of contract manufacturers through acquisitions, as well as Incap’s situation in more detail. Finally, a short set on growth opportunities in the defense industry.
Topics:
00:00 Introduction
00:20 Incap: “It takes two to tango”
03:30 Organic versus inorganic growth
07:21 “Rather big than small”
11:03 The necessity of acquisition for Incap
14:30 Scanfil’s factory network
16:08 Scanfil, SRX and M&A track
19:16 The necessity of acquisition for Scanfil
22:30 Growth opportunities for contract manufacturers in the defense industry
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It’s quiet here, so here are 3 fresh videos for Incap investors.
Not much new emerges from them, but a general positivity towards the business emanates from all three videos.
Oto’s interview discusses, among other things, the advantage of Incap having production facilities in different parts of the world in the current situation, as well as Incap’s agility.
Additionally, a decentralized and lean, low-cost management model. The decentralized model gives responsibility to the management in different countries.
Inventory reduction with the largest customer is over. There might be uncertainty in H1 of this year due to the geopolitical situation, but overall it looks very positive.
Antti Pynnönen’s interview from the same event. It discusses the same topics as Oto’s interview, namely a decentralized organization that fosters an entrepreneurial spirit and is low-cost.
In the second half of the year, markets will pick up, and Antti believes in growth and states that they are focusing on one cornerstone of Incap’s growth strategy, namely an acquisition, for which the financial situation is good.
Acquisition targets could be in North America, Europe such as Germany, and Southeast Asia.
Clearly, an acquisition is close, but Incap is particular about the suitability of the company to be acquired.
Defense is not yet a large part of Incap’s business but is growing. Other customer areas are briefly touched upon.
In the interview with Dave Spehar, Incap USA’s leader, Dave generally states that joining Incap has gone smoothly in terms of business and corporate culture compatibility, and the larger group offers many opportunities for Incap USA.
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Norway has started funding Incap with its oil money
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