Estimates. We have increased our 2021-22 EBIT estimates by 5% due to our more positive view on 2021. We estimate 2021 EBIT to decline by 2% y/y but EPS to grow.
Valuation. Tikkurila’s shares have underperformed peers and the local market YTD. Tikkurila trades at 49%/40% discounts to global paint peers on 2020-21E EV/EBIT and at a 21% discount to its own historical NTM multiple. We estimate 8.2-8.5% FCF yields in 2021-22. We set our 12M fair value range at EUR17-19 per share (previously EUR16-18), which implies 2021E EV/EBIT of 11.5-12.8x. The mid-point of our valuation range implies 25% upside potential for the shares, while still valuing the stock at a 25% discount to peers (10Y average discount: -1%).
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