Translation: Original published in Finnish on 5/8/2025 at 8:48 am EEST.

Harvia's Q1 results were in line with our expectations, and the company did not comment on post-quarter developments or the outlook. As a result, our forecasts for the coming years remain unchanged, but we have slightly raised our longer-term growth forecast, which supports the increase in the target price to EUR 42 (was EUR 40). We reiterate our Reduce recommendation. 

North America drove growth and profitability recovered as expected in Q1

Harvia's revenue grew by 23% in Q1, of which 14% was organic growth and the rest driven by the ThermaSol acquisition. Organic growth was a couple of percentage points below our forecast. In familiar fashion, the growth driver was the company's largest market area, North America, mainly the US, which grew by almost 60%, or even organically by about 30%.

Harvia's profitability was weaker than normal in Q4, as the lower price of campaign deliveries and increased raw material costs weakened the material margin. In Q1, the material margin rose again to over 66% (Q4’24: just under 60%, Q1’24: 64.6%) and was clearly better than our forecast (62.5%). In addition to the clear decrease in campaign deliveries, the margin was supported by, e.g., price increases. However, Harvia's fixed costs grew somewhat faster than we expected, and the adjusted EBIT was exactly in line with our forecast (11.9 MEUR), and the margin was also very close to our expectation of around 23%. However, the margin decreased slightly from the comparison period due to the company's significant investments in fixed costs, which aim to build future growth.

No comments on post-Q1 developments

Harvia does not provide guidance, nor did it comment on developments after Q1. With the US tariff situation escalating in early April, we believe that any potential impact on consumers, and thus on Harvia's demand, will not be visible until Q2. In this regard, we will have to wait at least for the release of Harvia's Q2 figures.

However, the company reiterated that it sees the long-term potential in the USS as strong in any case, which we agree with. In addition, the company emphasized that the sauna market is still relatively small in the US, and there are enough consumers with purchasing power in the country. This is also true, and in recent years the company has been able to grow strongly in the US, regardless of the economic situation. Nevertheless, we believe that weakened consumer confidence in the US and tariff-induced inflation pose a negative risk to Harvia's short-term demand prospects. With Harvia's Q1 figures meeting our expectations and the company refraining from commenting on subsequent events, the report as a whole contained very little new information compared to our previous expectations. Thus, our forecasts remained largely unchanged. Thus, in our view, yesterday's fairly strong share price increase was not justified, at least based on the Q1 figures and forecast changes.

High valuation is deserved, but also exposes to risks

We believe that Harvia's valuation level (e.g. EV/EBIT 2025 20x, P/E 28x) is highish, although we consider the company's return on capital employed and its ability to allocate and generate cash flow excellent and that multiples will, therefore, moderate in the coming years. However, we note that there are currently more downside risks to the forecasts, especially given the risks to US consumer demand. We believe that Harvia’s capital allocation will continue to be value-creating, and thus channeling cash either to acquisitions and/or larger dividends would support the investor's expected return. We also see Harvia as a potential acquisition target, but with the current valuation, we find it quite expensive for the buyer. On the other hand, we believe that the high valuation of the stock exposes it to downside risk in the event of a possible slowdown in US growth.