Translation: Original published in Finnish on 10/30/2026 at 08:30 am EET

Source: Inderes & Modular Finance, 7 analysts (consensus)

Harvia's Q3 revenue grew as expected, but profitability clearly fell short of our expectations due to rising costs. We lowered our margin estimates for 2026-27, but we believe the company's long-term growth prospects remain unchanged. We lower our target price to EUR 46 (was EUR 47), but raise our recommendation to Buy (was Accumulate), as the upside of ~20% to the target price and strong earnings growth make the expected return attractive.

Revenue grew as expected, profitability clearly fell short

Harvia's revenue grew by 17% in Q3 to 53.9 MEUR, which was close to our estimate of 55.1 MEUR, taking into account an accounting adjustment that weighed on revenue by 0.7 MEUR. The growth was broad-based and entirely organic, supported as expected by the shift of around 4 MEUR in deliveries from Q2. Adjusted EBIT was 9.5 MEUR, which was clearly below our estimate of 11.8 MEUR and the consensus estimate of 12.1 MEUR. Even adjusted for the one-off adjustment (0.8 MEUR), EBIT would have been just over 10 MEUR. Earnings were depressed by a lower-than-expected material margin and the growth of personnel and other costs, reflecting the company's investments in growth. We consider the investments to be the right decision for Harvia's value creation, and we see no structural pressure on margins.

Net debt stood at just over 60 MEUR, and the ratio of net debt to adjusted EBITDA was 1.2x, while the company's target is below 2.5x. In our estimates, the gearing ratio will fall below 0.5x by 2028, which provides room for acquisitions or higher profit-sharing.

We lowered our margin estimates for 2026-27

The company's outlook remained positive, although it does not provide detailed comments on the future. We lowered our EBIT estimate for this year by 8% and for next year by 6%, driven by the weak Q3 outcome and a reduction in our gross margin estimates to around 63-63.5% (was 64.5%). We expect the adjusted EBIT margin to be 18.7% this year and 20% next year.

In coming years, we expect progress to be in line with targets

Harvia's targets include annual sales growth of 10% (incl. acquisitions) and an EBIT margin of over 20%. We believe Harvia will reach these targets in the coming years through organic growth alone. In our estimates, growth is driven by non-European regions, particularly the US. We also believe that the growth of the APAC & MEA region will increasingly support the Group's overall growth as the region's share of revenue increases (11% in 2025). We expect Harvia's profitability to rise to the target level of 20-21% in 2027-2029. However, we estimate that continuous growth investments will be reflected in the margin, which, despite strong growth, will not scale up significantly in our forecasts.

Earnings growth offers a good expected return

The 2026 multiples (P/E 24x and EV/EBIT 18.5x) are high in absolute terms, but earnings growth is quickly pushing them lower. With our 2026 estimates, the P/E ratio is 19x and the EV/EBIT ratio is 15x. We estimate that adjusted EPS will grow by an average of around 15% per year in 2025-30, which, together with the dividend, offers an annual expected return of over 15%. We consider Harvia's return on capital and cash flow generation capacity excellent, and our DCF value (~EUR 46) supports the target price. Harvia’s competitors Sauna 360 and Klafs have been bought by US companies in recent years, and we also believe that Harvia is a potential acquisition target for viable players of this type.