Translation: Original published in Finnish on 05/06/2026 at 07:55 am EEST

GRK's seasonally slow first quarter performed significantly stronger than we anticipated in terms of profitability. With a high order book, Stegra's successful funding round, and a healthy project portfolio, we believe the outlook for the rest of the year is strong. We also identify several growing segments in private demand, such as green transition projects and data centers, which are likely to bring the company additional orders in the coming quarters. We raise our target price to EUR 15.0 (was 14.5) and recommendation to Buy (was Accumulate).

Profitability surprised positively in the first quarter

GRK's revenue decreased by 36% y-o-y in Q1 to 111.9 MEUR. This was slightly below our 120.0 MEUR estimate. As expected, revenue was weighed down by more challenging weather conditions than in the comparison period and significantly lower volumes for the Stegra project. Despite lower revenue, GRK's profitability remained at what we consider an excellent level in Q1. Adjusted EBIT settled at 5.9 MEUR, which clearly exceeded our 1.1 MEUR estimate. The adjusted EBIT margin was even higher than the strong comparison period (5.3% vs. 5.0%), and clearly stronger than our 0.9% expectation. We believe the company's exceptionally strong margin reflects strong project management and good margins, which compensate for the negative effects of lower volume on fixed cost coverage. In addition, the company has presumably made positive updates to its project estimates regarding margins, which has supported profitability in terms of volume during the slowest quarter.

The order book strengthened clearly from the year-end figures and was roughly on par with the comparison period. The order backlog strengthened from the turn of the year, particularly in Sweden, where it was supported, e.g., by a second contract won from the North Bothnia Line railway project (valued at 55 MEUR).

We now expect GRK to return to a growth path in 2027

As expected, GRK reiterated its guidance for 2026, according to which revenue is 720-870 MEUR and adjusted EBIT is 45-60 MEUR. Q1 earnings were clearly stronger than we expected, and we have also made moderate adjustments to our forecasts for the coming quarters. Although Q1 revenue was slightly lower than we anticipated, the company's strong order book supports full-year revenue. On the back of this, we have slightly raised our revenue estimate. Overall, we believe the company has excellent preconditions to reach its guidance range.

In addition to the current year, we have raised our expectations for the coming years. We now expect revenue to turn to moderate growth next year, considering the company's current strong order book, projects in the development phase, and the predominantly positive outlook for its market areas. Both Finnish and Swedish infrastructure construction volumes are estimated to continue growing next year (1% and 4%). In addition to public demand, we believe the market is supported by private sector projects such as data center projects and green transition industrial projects. Regarding green transition projects, GRK announced it had signed a contract for the SSAB steel mill project in Sweden. We suspect the project does not reach the scale of the Stegra project, but it is still significant for the company as a whole. We also believe the positive market trend in data center construction will bring orders to GRK during the year, as we suspect several projects are currently in the bidding phase.

Expected return is attractive

GRK's EV/EBIT multiple, accounting for its substantial net cash position, is around 7x based on our 2026–2027 estimates. The share trades at a clear discount relative to our estimated fair value range (EV/EBIT 9-12x). In addition to a moderate valuation, the share offers a dividend yield of around 4-5% for the coming years, which, in our view, raises the total expected return to a very attractive level. The fair value derived from the DCF model (EUR 15.9) also warrants a positive recommendation.