Translation: Original published in Finnish on 11/2/2026 at 8:10 am EET.

KH Group's Q3 figures relied more heavily than we expected on the strong performance of the Nordic Rescue Group (NRG), while timing factors and the weak krona weighed on the earnings of the Swedish operations of both subsidiaries. However, the Finnish operations made up for the slump in Sweden. We increased NRG's estimates for the next few years, but we lowered KH-Koneet's estimates for next year due to concerns about the sustainability of the turnaround in Sweden. Based on current-year estimates, the stock valuation looks tight, but with estimates pointing to a clear earnings improvement next year, the valuation becomes clearly attractive. We reiterate our EUR 0.90 target price but, following the decline in the share price, raise our recommendation to Accumulate (was Reduce).

Finland made up for Sweden's slump

KH Group's Q3 revenue increased significantly, and the comparable EBIT of 2.7 MEUR was consistent with our estimate, as indicated by preliminary data. Below the surface, however, the quarter was mixed. KH-Koneet's EBIT in Finland more than doubled, and the improvement was driven by the sales and customer mix, commercial measures, cash discounts on procurement, and rental efficiency, while fixed costs remained unchanged. We view these factors as recurring, supported by strong growth in high-margin aftermarket services. In Sweden, on the other hand, KH-Koneet's EBIT dipped slightly into negative territory as deliveries shifted to Q4 and the krona weakened. In our view, the dip was not caused by the demand environment. NRG's earnings were exceptionally strong for what is typically a slow summer quarter, driven by a long series of orders from the Finnish Defence Forces. The balance sheet continued to shrink as KH-Koneet's inventory decreased and bank loans were repaid.

Guidance leaves room for a positive surprise

KH Group reiterated its guidance, revised in October, indicating weaker Q4 results than the comparison period. We consider this guidance to be cautious given the group's improved earnings performance, the postponement of deliveries to Q4, and the enhanced outlook for KH-Koneet. Our earnings estimate for the current year is slightly above the guidance range. Next year, we expect clear earnings improvement from the group, driven by KH-Koneet's strengthened performance. While NRG's robust order book will carry the company through next year, we expect a slight weakening of earnings performance due to a less favorable sales mix. The downturn in Sweden raised questions about the sustainability of KH-Koneet’s profitability turnaround, which is why we lowered our forecasts for KH-Koneet next year. We do not expect CEO Carl Haglund's departure to cause any disruption since each subsidiary has its own CEO.

Risk/reward ratio attractive again

Since our previous update, KH Group's share price has clearly fallen, which has improved the risk/reward ratio. Based on our current-year forecasts, the valuation is still high, but based on our forecasts predicting an improvement in earnings next year, the valuation becomes attractive (P/E 9x, EV/EBIT 10x). Our DCF model, which reflects longer-term potential, suggests a fair value of EUR 0.91 per share. For the investment story to progress, KH-Koneet's Swedish business must return to a path of earnings turnaround, and the unwinding of debt leverage must continue. With postponed deliveries, Q4 is indeed the next checkpoint regarding the continuation of the earnings turnaround in KH-Koneet's Swedish business. Although KH-Koneet’s P/B ratio of 0.9x is not particularly high, according to our estimates, raising the return on equity of KH Group to a normalized level, in line with its required return on capital, would require sustained improvement in the profitability of KH-Koneet’s Swedish operations or the growth of other businesses to a larger scale.