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Deep dive on Harvia Oyj results, stock up 104% in six months


It’s first €100 million+ turnover and Harvia is 70 years old! With €109 million in sales during this year’s pandemic Harvia stock achieved €33.6 on Friday, an all time high (52w 7.08 – 33.6). We expect 2021 to be great too – driven by Harvia’s US business.

Helsinki-based Inderes analyst, Petri Kajaani, as predicted – has now increased his target to €33 – but after the fact as usual and in conservative Finnish style. Even Kajaani was disappointed by the lack of guidance the firm operates with – only long term, but when you seriously over deliver not under promise, it is annoying to the analysts following the stock.

Conservative analysts do not understand growth companies in Finland

With greater equity coverage this hidden gem could well exceed the conservative Finnish analysts’ previous targets, first €13, then €16 and then €22; and now the €33 price target – now Harvia hass second tier USA equity analyst house Raymond James following them. including a few very conservative Finnish analysts – especially with their long term objectives for the stock of: 5% per annum sales growth (now 70%), 20% adjusted operating profits (now 25%), and over 60% dividend (achieved) payout ratio.

KLAFS was sold January 6 – Harvia was involved, but declined

Maybe this deal will change the whole industry, since there are not many public listed “pure play” sauna & spa companies listed in the world. Harvia is the only one that is publicly listed. Maybe it was too soon for Harvia after its EOS (private company) purchase that closed in 2020. Or maybe the price asked was too expensive – we will never know.

Both companies are clear leaders of the sauna & spa market with both having about 15% of the global sauna heater market. The deal would have really established Harvia as the clear leader of the industry. Klafs was also a private company like EOS Group and operates very much in the same region: Germany, Austria and Switzerland.

The dangers INVESTING in medium/small companies who are public listed BUT family owned

There is increasing danger or even fear that Harvia itself might be bought out from the Finnish stock exchange. Especially from the US where it is growing like “tumble weed” with over 70% growth per year from Almost Heaven Saunas (doubling production sites) and with great partners like Home Depot and COSTCO. CEO Tapio Pajuharju used the term “Paradise in the back yard” and this trend will continued in the USA and UK with the wellness trend.

Harvia prides itself with large individual ownership (breakdown at December 31st, 2020):

  • Shareholders: 13,551 (up +550% from 2,071 in 2018 and 5,249 in 2019). The increase is explained because individual stockholders have found the stock!
  • Still 44.8% are nominee registered and outside Finland (down -8,3% since 2019)
  • 20.3% Finnish individual investors (up +4.8% since 2019)
  • 12.3% Onvest Oyj (anchor Finnish investor – unchanged)
  • 11.2% Finnish private corporations (up +3.4% since 2019)
  • 11.1% Finnish banks and insurance companies (down -0.2% from 2019)
  • 0.3% Harvia’s own shares (unchanged)
  • 6.1% Harvia’s Board of Directors, management and personnel (down -3,0% from 2019)

My view: the German shareholders decreased their holdings after the EOS Group sale, Finnish individual stockholders really found the stock – over 8,000 new investors were registered. The Finnish banks and insurance companies did some  small profit taking. Some Finnish private investment companies increased their stakes. There were a few very famous local players like Kyosti Kakkonen with his Joensuun Kauppa & Kone Oy.

Egeria will not buy Harvia – but a US or UK fund might

In September, 3i invested £60m for a majority stake in GartenHaus GmbH to build the leading European-DACH online leader in garden homes, sheds, saunas, and related products. Egeria is an independent pan-European investment company founded in 1997, which focuses on medium-sized companies. Egeria invests in healthy companies with an enterprise value between €50 million and €350 million. Egeria is not a problem and it is possible Harvia will buy parts of Klafs in the coming years.

Harvia’s market cap is now close to €600 million and tthe business is going gangbusters. The premium would be sizeable (70-100%?) if somebody would like to buy it off the Nasdaq Helsinki stock exchange. A UK player like 3i Group’s private equity arm might be one. My money is on US private equity in three to five years. I hope that Harvia stays public and the market cap will double over 1 billion euros+.

The Armchair Trader watched the Q4 results and webcast call live on February 11th here in Finland. We have followed Harvia since November 2019 at €11 and €180 million market cap (now €31.7 and €594 million market cap) and it was one of our top 34 pandemic recovery stocks. The stock has now been officially moved to midcap level as of January 2021 on Nasdaq Helsinki. Once Harvia has executed their three to five year plan with organic growth and M&A activity in this fragmented industry, they will be in large cap section in the Finnish stock market.

The future for Harvia

CEO Pajuharju is promising strong performance (“paradise in the backyard”) if you listen to him between the official lines. The next three to five years will likely see further strong organic growth and M&A. Markets going to be volatile in the next months/years – I would personally always add to my position below €30 until €25. If the price dropped below €25 I would close my long position, but I strongly believe that the next target is €40 with this kind of performance. The dividend payments twice a year make this a good time to hold/add/buy this stock for the short/medium/long term.

Harvia market facts

Strong M&A results: The company has a very experienced management team (CEO Tapio Pajuharju and CFO Ari Vesterinen), which knows its way around international distribution and sales channels. The company does not rely on organic growth alone, which is the hardest part to grow. The M&A activity of the company has been excellent in the last two years.

Long-term growth: We believe that these results will keep on coming – Almost Heaven Saunas in the USA opened up strategic sales channels in Home Depot and COSTCO. The health trend is growing and people are spending on their main and holiday homes. The hotels and spas sector will come back as well – healthy balance sheet companies are using this time to upgrade their facilities.

The market is around 17 million saunas globally (around 3 million in Finland): the sauna & spa market is popular and growing worldwide and Harvia is the global leader with 70 years of experience, +14% market share and growing very strong sales in over 80 countries. The most recognized international sauna brand among Finnish, Swedish, German, Russian and American consumers is getting overdue share price recognition. Now targets are lifted to €33 levels, which we think is still too low with this kind of execution. Our previous target was €20 per share in 2020 and we are now raising it to €30 in 2021, but after the results last week I am raising my target to €40 in 2021.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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