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Koskisen is active in the forest industry. The company specializes in the manufacture and distribution of industrial wood products. The company's product portfolio is broad and mainly includes wood products such as sawn wood, plywood, chipboard, and veneer. The business is run via various business segments and the customers can be found in a number of industries around the global market. The largest presence is found in Finland. The company was founded in 1909 and has its headquarters in Järvelä, Finland.
We reiterate our Reduce recommendation for Koskisen and lower our target price for the company to EUR 7.50 (was EUR 8.50). We lowered our near-term forecasts for Koskisen significantly following the largely negative news flow in Q3. The cyclical recovery in the construction sector has continuously receded, and we consider the stock to be expensive relative to its weak short-term earnings performance. Consequently, we believe the expected return on Koskisen shares will be modest over our target price horizon, despite our belief that the company has good earnings growth potential once the construction sector eventually turns around.
The operating environment has been very difficult in both business areas, and the rise in market interest rates is already challenging expectations set for next year regarding the recovery of (residential) construction, which is important for the company.
We reiterate our EUR 8.50 target price and Reduce recommendation for Koskisen. Although the company's Q2 earnings were weaker than we expected, we did not make significant changes to our near-term estimates. However, the cyclical recovery has continuously receded, and the stock is expensive relative to its weak short-term earnings performance. Thus, we believe the expected return on Koskisen's share remains modest over our target price horizon.
Demand for birch plywood exceeded expectations in Q2, but the high price of logs and weak construction demand are still holding back margins in both units.
