Translation: Original published in Finnish on 7/24/2026 at 8:41 am EEST.

Componenta published a significantly stronger half-year report than we expected, with profitability continuing its excellent development. The stronger-than-expected earnings turnaround in the first half of the year appears sustainable for the current decade, as we anticipate demand in the defense and energy sectors, which enabled the turnaround, to continue on a strong trajectory. Reflecting this, we made significant forecast upgrades. Forecast risks are, in turn, related to the sustainability of the prevailing earnings level. Despite the share price increase, we believe the neutral valuation and favorable earnings growth outlook keep the risk/reward ratio attractive. We raise our target price to EUR 6.9 (was EUR 5.5) and reiterate our Accumulate recommendation.

Earnings improvement clearly exceeded our expectations

Componenta's revenue grew by 20% to 37.2 MEUR in Q2 but was about 7% below our estimate. The industry breakdown published in the half-year figures confirmed that growth was driven by the defense (16% of revenue) and energy industries (25%), while demand in the agricultural machinery sector remained low. EBITDA increased to 4.8 MEUR (Q2'26e: 4.0 MEUR), or 12.9% of revenue (Q2'25: 8.5%), clearly exceeding our estimate. Demand in the foundry business remained soft based on comments, so the improvement in profitability was, in our assessment, driven by the excellent performance of the machining business. The two-month firm order book rose to 17.4 MEUR (+22.5% y/y) and exceeded our estimate, providing a good starting point for the seasonally quiet Q3. The balance sheet strengthened to virtually net debt-free based on the reported figures.

Earnings turnaround reached a new level; drivers have long-term momentum

Componenta reiterated its 2026 guidance, according to which revenue and adjusted EBIT are expected to improve from the previous year, and with our forecasts (revenue 136 MEUR and adjusted EBIT 8.9 MEUR), the guidance is met with a clear margin. Componenta has achieved a significantly faster and stronger profitability turnaround than we expected in recent quarters. We believe the earnings turnaround is based not only on the company's own successes but also on demand drivers in the energy and defense industries, which are likely to remain unchanged throughout this decade. After the report, we made significant upward revisions to our earnings forecasts (adjusted EBIT 2026–2028e +19–31%) while revenue forecasts remained almost unchanged, which was also slightly reflected in our dividend forecasts. We believe that short-term forecast risks are still skewed positively, as we expect a stable adjusted EBITDA margin in the coming years. Revenue growth has the potential to improve profitability. In addition, foundries operating at low utilization rates could support earnings more strongly than we expect if the agricultural machinery market recovers. The downside risks are primarily related to a potential slowdown in data center investments, which would impact the energy industry's revenue outlook. In the next decade, we expect the profitability level to decline, reflecting our assessment of the business's super-cyclical return on capital profile.

Valuation relies on earnings growth

Our forecast factoring-adjusted EV/EBITDA multiples for 2026 and 2027 are around 5.3x and 4.8x. Based on the realized figures, we do not see significant downside in the multiples, so we expect continued strong earnings growth to support the expected return. The value of our DCF model increased to EUR 6.9 due to forecast changes and a slightly lower required return. Componenta is valued more favorably than its peer group for the coming years, although we view the peer indication with reservations. Supported by a moderate dividend yield (2.5–3.5% in 2026–2028e), the stock's risk/reward ratio remains attractive in our view, despite the sharp share price increase in recent months.