Quickly about Harvia and my views on the company:
In this stock analysis, I have taken a look at the sauna specialist Harvia.
A publicly traded company on Nasdaq Helsinki, which was listed in 2018. They supply saunas, maintenance, and hot tub products.
My thoughts on Harvia:
Why I do not want to buy Harvia
They sell products that I personally do not want/understand.
It's difficult to price the company, and they are often highly valued.
It’s a considerable luxury item sold to ordinary people, and it’s difficult for me to understand that this is something people afford.
Why I do not own Harvia as of today
I saw Harvia for the first time a few years ago.
I felt the company was a bit overvalued, even though they had good growth.
When I was closer to making a decision, the economic climate became quite difficult, and I believed Harvia would perform weakly in a challenging economic climate.
Why I want to buy Harvia
They have shown resilience in a difficult market and convinced me that they have something to offer regardless of the climate.
Repair, maintenance, and upgrade revenue will increase with each sale and seem to be a good primary source of constant cash flow.
People who own hot tub products end up needing maintenance, and for expensive items, it's often safer to have this done by the brand they bought from. (This somewhat locks customers to Harvia).
They simply deserve to be part of my portfolio.
Strategy:
Harvia focuses on quality equipment and ensuring the customer comes to them for durable products that offer good value.
They focus on having customers return for repair, maintenance, and improvements with the same supplier.
They work on capturing markets within the various geographical areas they are already in, focusing more on market share in diverse countries rather than entering an entirely new country.
Building a health and wellness culture linked to saunas.
Creating diversified product portfolios that fit into other areas.
In short - Harvia aims to be the best supplier of sauna and hot tub products.
They will focus on winning the battle for market share and concentrate more on creating the best possible experience with their products.
Economic Stock Analysis:
They have had good economic growth since they were listed on the stock exchange in 2018. The company is stable, maintains growth, has fared well during periods of poor interest rates, and has a decent margin.
They have good control over debt and a great cash flow. Overall, I am very positive about their finances, and it appears that 2024 will be a stronger year than 2023, suggesting they might be past the worst turbulence.
Statement
With good growth since 2017, Harvia has hit a bit of a wall in a challenging economic landscape. They have more or less doubled their revenue but have experienced a considerable decline since the peak year of 2021. They have good margins and are strong in terms of revenue, but moving forward, I would keep an eye on whether they can maintain growth.
This will be especially important now that the company has increased in value again and is no longer a "bargain buy."
NET INCOME | EBIT | RESULT | EBIT MARGIN | MARGIN | |
2017 | 60107 | 9263 | 2914 | 15.41% | 4.85% |
2018 | 61942 | 9376 | 6780 | 15.14% | 10.95% |
2019 | 74095 | 13324 | 9597 | 17.98% | 12.95% |
2020 | 109115 | 22376 | 15951 | 20.51% | 14.62% |
2021 | 179123 | 46644 | 34789 | 26.04% | 19.42% |
2022 | 172408 | 34678 | 28068 | 20.11% | 16.28% |
2023 | 150547 | 33044 | 23280 | 21.95% | 15.46% |
Balance
They have quite good control over debt and leasing, so there's nothing particularly concerning for me here.
A fair amount has been taken on since 2019, but with current income and cash balance, it’s not too alarming.
Overall, the balance looks fine.
INTERESTBEARING DEBT AND LEASING | DEBT | Equity | Total Assets | Debt-to-EBIT Ratio | Cash | |
2017 | 81713 | 94717 | 19276 | 113993 | 8.82 | 8345 |
2018 | 38895 | 51118 | 65821 | 116939 | 4.15 | 8268 |
2019 | 39276 | 52987 | 68838 | 121825 | 2.95 | 10879 |
2020 | 59212 | 96765 | 68860 | 165625 | 2.65 | 27321 |
2021 | 59305 | 117343 | 84149 | 201492 | 1.27 | 15488 |
2022 | 79839 | 110454 | 98345 | 208799 | 2.30 | 25310 |
2023 | 78151 | 105607 | 108657 | 214264 | 2.37 | 40581 |
Cash flow
I really have nothing to say about the cash flow other than that the company has experienced good growth and can distribute more dividends if they choose to.
It is simply a great cash flow.
OPERATIONS | INVESTMENTS | FINANCE | DIVIDEND | |
2017 | 8029 | -1166 | -4882 | 0 |
2018 | 8820 | -1603 | -7297 | -3365 |
2019 | 15072 | -1773 | -10781 | -6917 |
2020 | 28080 | -20602 | 8914 | -7104 |
2021 | 21816 | -19223 | -14711 | -14711 |
2022 | 24335 | -3435 | -11297 | -11327 |
2023 | 39139 | -5835 | -17585 | -11956 |
Quickly about Q1-Q2 2024
2024 shows signs of improvement, and although the margin is not quite there yet, there is a considerable increase in the top line. They continue with good debt control and further improve cash flow.
Q1-Q2 2024 gets a thumbs up from me. Harvia itself states in CMD that they believe the sales pressure is slightly increasing, and the weak period is beginning to pass.
Advantages and Risks
Strengths and Competitive Advantages
Good reputation and focus on high quality.
Presumed to be beneficial for you, attracting health giants to step in.
There is a lot of upselling, maintenance, and repair associated with these types of products.
Harvia is in a good financial position and originates from a country with an extremely strong culture connected to its products.
Challenges and Risk Factors:
Expensive products that require good economy and mainly favorable economic conditions.
Investments and ownership of land/house are required to invest in a sauna or hot tub (not city-friendly).
Countries with a strong culture for these products are locked out of sales.
Energy consumption increases considerably, and rising electricity prices will push away more investment opportunities.
Conclusion
Future Prospects:
The company aims to continue its growth forward, and as the strategy states, they focus on gaining market shares and building their product in key and relevant markets.
Capacity suggests that dividends will increase in the future.
Improved margin and good economics will continue as long as inflation picks up again.
Summary:
Harvia is a Finnish company that stands firmly with both feet on the ground. They have shown good growth, demonstrated resilience, and seem to have a business model that works well.
In my review of the company, I am entirely sure that I will buy in, even though I feel they may not be cheap at this moment.
They are currently at about 32 P/E, although with the current situation, one could argue that this will look better in a few months.
I am very interested in the business model and believe Harvia is a good company to diversify into if one desires entry into the luxury and health segment that maintains growth and maintenance services.
The question is whether Saunas are a fad or if those who start with them become hooked.
For me, I believe the company is worth buying, but one should watch inflation, interest rates, and the demand for the goods sold.
From my side, I want to buy Harvia when I have the opportunity, but I'm not hurrying with any purchase based on the current valuation.
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