Automatic translation: Originally published in Finnish 30/10/2026, 06:23 GMT. Give feedback here.

Source: Inderes

Boreo's Q3 results were very strong, with as much as 25% organic growth flowing efficiently down to the bottom lines of the income statement. On the flip side, growth tied up working capital and weighed on cash flow, turning it negative – a development we will monitor going forward. The demand picture remains positive, even though companies tied to construction will not provide support for a while. Following the report, we made small positive estimate changes to our forecasts, part of which stemmed from the TEXpro acquisition. The valuation remains moderate relative to the improved earnings performance and does not price in value creation from M&A, even though the improved earnings performance once again opens the path for acquisitions. We raise our target price to EUR 32.0 (prev. EUR 29.0) and reiterate our Accumulate recommendation.

An extremely strong quarter for Technical Trade

Boreo's revenue grew by 26% in Q3 to EUR 41.5 million (Q3'25: EUR 32.8 million), clearly exceeding our EUR 36.3 million estimate. Growth was practically entirely organic (25%) and continued for the eighth consecutive quarter, although the comparison period was weak. The beat relative to our estimates came particularly from Technical Trade, which grew by 36% to EUR 25.0 million, driven especially by welding industry companies. Electronics grew by 14% to EUR 16.5 million, supported by Milcon and SSN. Operational gearing worked excellently, as revenue grew without a significant increase in operational expenses. Adjusted EBIT rose to EUR 3.5 million (Q3'25: EUR 1.7 million), also clearly beating our estimate (EUR 2.8 million). The earnings beat also came from Technical Trade (EUR 2.5 million, Q3'25: EUR 1.2 million), while Electronics (EUR 1.6 million, Q3'25: EUR 1.1 million) was in line with our estimates.

Cash flow spilled into inventories

The flip side of the otherwise strong report was the operating cash flow, which remained negative at -1.1 MEUR, as inventory building for year-end deliveries tied up working capital. We expect some working capital to be released as early as late this year, but working capital management will likely remain something to monitor going forward, as the steady cash flow generated by the business plays a critical role in the serial acquirer model.

Net debt increased to 41.8 MEUR (Q2'26: 29.1 MEUR) as expected and mainly due to the partial conversion of the hybrid loan into a bank loan. Net debt/EBITDA was 2.6x (Q2'26: 2.1x), which is still within the target range. ROCE rose to 11.6% (Q2'26: 9.6%), increasing at a good pace closer to the company's target level (15%).

Order books still at a strong level

Boreo does not provide short-term guidance, making the order book the most important leading indicator. According to the company, order books at the end of Q3 were at the same level as at the end of June and clearly higher than in the comparison period. The outlook for industrial customers remains positive, supported by demand in the defense industry and backup power business, whereas the outlook for construction-linked companies remains sluggish. The outlook was thus as expectedly positive. In Q4, however, a clearly stronger comparison period and a product mix slightly weaker than in Q3 warrant moderate expectations for the rest of the year, and similar growth figures are unlikely to be seen then. Following the Q3 report, we made upward revisions of ~4–5% to our estimates for 2027–2028.

Valuation is low as earnings growth continues

Boreo's adjusted P/E multiple on our 2026 estimates is 13x, and the EV/EBIT multiple is 12x. The corresponding multiples for 2027 fall to the 10x level, which we already consider low. However, the realization of the estimates requires the positive economic momentum to continue. As organic earnings growth continues, the balance sheet position will improve and capital available for investment will accumulate at an accelerating pace (provided that cash flow improves), allowing the serial acquirer model to function once again. The value of our cash flow model reflecting the current business is EUR 31.5, and in our view, the current valuation does not price in value creation from future acquisitions. Considering the favorable business trend and moderate valuation, we consider the stock's risk/reward ratio attractive.