Translation: Original published in Finnish on 6/22/2026 at 8:30 pm EEST.

Burdened by cost pressures and Foodhills' losses, we expect Apetit's earnings to be clearly below the comparison period this year. However, with the share price decline, the stock's valuation has moderated, and with our estimates for the coming years, the multiples have fallen closer to our accepted level. A dividend yield of around 6% supports the expected return, but the uncertainty related to the earnings turnaround keeps the risk-adjusted expected return weak. After the price drop, we raise our recommendation to Reduce (from Sell) but reiterate our EUR 12.5 target price.

Cost pressures limit the visibility of an earnings turnaround

Apetit has guided that the current year's EBIT will decrease significantly year-on-year (2025: 5.9 MEUR, excluding the one-off impact of the Foodhills acquisition). The guidance also includes ~2.3 MEUR in one-off costs and write-downs related to the closure of the Pudasjärvi frozen pizza factory. In our 2026 forecasts, the adjusted EBIT of the old businesses (i.e. excluding non-recurring items related to the closure of the frozen pizza factory) is 4.0 MEUR, but Foodhills' operating loss of 2.4 MEUR weighs down the adjusted total EBIT to 1.6 MEUR.

In the food sector, geopolitical uncertainty can be reflected in both consumer confidence and cost pressures throughout the food chain. In our view, key cost items for Apetit include raw materials, energy, logistics, and packaging costs, the increases of which can typically only be passed on to prices with a delay. In addition, the pricing rhythm of the retail trade limits rapid reaction to cost changes. Although the fall in oil prices has eased short-term inflationary pressures, we believe there is still uncertainty regarding the normalization of cost levels and the compensation for cost increases.

We kept our 2026 earnings forecast practically unchanged and only marginally lowered our forecasts for the coming years. In our view, the timeline for the normalization of cost levels, pricing delays, and the progress of Foodhills' turnaround still limit visibility into earnings improvement in the coming years. In our forecasts, the improvement in earnings is based on the reduction of Foodhills' losses, successful pricing, and the stabilization of cost pressures.

Prerequisites for earnings improvement are in place, but evidence is needed

Apetit's legacy businesses have demonstrated reasonable earning power in recent years. The company has also streamlined its production structure, with a recent example being the closure of the frozen pizza factory in Pudasjärvi and the transfer of production to contract manufacturing. The arrangement reduces investment needs in the coming years and supports earnings from 2027 onwards. The acquisition of Foodhills from Sweden strengthens Apetit's position in frozen vegetables and offers longer-term growth opportunities. However, the business is still loss-making, and cost pressures and weak volume development in the early part of the year limit the visibility of earnings growth. We believe the company will be able to improve its results in the coming years, but the pace of the turnaround is more moderate than our previous expectations.

Valuation has moderated but is not yet attractive

The valuation of the share has moderated due to the share price decline, but on an earnings basis, we do not yet consider it attractive. The 2026 multiples are high due to a weak earnings level, whereas with our 2027–2028 estimates, the EV/EBIT multiples are around 12x and 10x, respectively. These are already closer to what we consider an acceptable level (~10x), but they require the company's earnings turnaround to be successful. On a balance sheet basis, the stock's P/B ratio is low, but the return on capital in the coming years remains modest in our forecasts, and thus, in our view, the balance sheet valuation does not provide sufficient support for the stock. A dividend yield of around 6% supports the expected return, but the uncertainty related to the earnings turnaround keeps the risk-adjusted expected return weak.