Translation: Original published in Finnish on 10/12/2026 at 8:00 am EEST.

Preliminary data from KH Group indicates that the group's strong performance from Q2 has continued. While Q3 revenue was in line with our estimates, profitability was stronger than expected. Despite the stronger-than-expected performance in Q3, our forecasts were already at the upper end of the now-refined full-year guidance range. In light of this, we consider the updated guidance to be conservative, and our estimate adjustments were weighted toward the next few years. We raise our target price to EUR 0.90 (was EUR 0.70) but because of the rise in the share price, we revise our recommendation to Reduce (was Accumulate).

Strong Q2 momentum continued into Q3

On Friday, KH Group revised its guidance for the current year upward. According to initial data, the group's revenue in Q1–Q4 was 157 MEUR, with comparable EBIT of 5.9 MEUR. This means that Q3 revenue came in at approximately 50 MEUR, representing growth of about 10%, which is roughly in line with our previous forecasts. Meanwhile, comparable EBIT was approximately 2.7 MEUR (Q3'25: 1.2 MEUR), exceeding our expectation of 2.0 MEUR clearly. Based on management's comments, this development is driven by the continued strong performance of both subsidiaries. KH-Koneet's systematic efforts to grow in the machine sales business and improve profitability in the rental business have paid off. We are particularly optimistic about the news that the Swedish operations, which have previously struggled with profitability challenges, have turned to the positive during the current year despite unfavorable exchange rates. The Nordic Rescue Group has also shown favorable development, and according to management, the fire and rescue vehicle business is progressing toward its best result ever.

Preliminary information reinforced our confidence in the company's outlook

Even before the guidance update, our estimates for the current year were in line with the upper end of the updated range. Considering that Q3 profitability was stronger than we expected, the updated guidance seems conservative and leaves room for a positive surprise in Q4, assuming the group's strong momentum continues. The company's management indeed stated that the outlook for the fourth quarter has improved. To achieve the updated guidance range, the company needs an EBIT of 3.1–4.1 MEUR in Q4, which is below the 4.2 MEUR in the comparison period. Our estimates for the current year remained unchanged on an annual basis, though our earnings estimate shifted partially from Q4 to Q3 following the preliminary information. In any case, the preliminary information from KH Group confirmed our assumption of positive business development, which, together with the recent positive signals from the construction sector, gave us the confidence to raise our EBIT estimates for the coming years by 5-9%.

Valuation assumes continued clear improvement in performance

Based on our current-year estimates, KH Group's valuation is high (P/E 20x, EV/EBIT 13x), but with our estimates anticipating clear earnings improvement next year, the valuation becomes neutral (P/E 10x, EV/EBIT 10x). Our estimates require a clear improvement in KH-Koneet's earnings, the conditions for which appear better than before, based on the promising profitability development of the Swedish business. However, due to KH Group's low relative profitability and significant financial leverage, earnings-based valuation is sensitive to even small forecast changes. Our DCF model, which indicates longer-term potential, implies a value of EUR 0.94 per share for the group, although the model relies on a sustainable improvement in profitability. Although a P/B ratio of 1.0x 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.