Translation: Original published in Finnish on 5/12/2025 at 7:45 am EEST.

We raise our recommendation for Koskisen to Accumulate (was Reduce) and our target price to EUR 8.25 (was EUR 7.50), reflecting a moderate increase in estimates and a slight decrease in the required return. Koskisen's Q1 report was significantly better than we expected, especially thanks to excellent volume growth in the Sawn Timber Industry. We didn't make any big changes to our near-term forecasts for the lower lines of the income statement, but the strong performance at this stage of the construction cycle already has lowered the risk level of the stock in our book. As a result, we believe that the expected return on the stock has turned positive, as the valuation of the stock is also moderate.

Powerful start to the year

In Q1, Koskisen's revenue increased by 35% to 86 MEUR and adj. EBITDA by more than 70% to 9.5 MEUR. Operating result rose driven by very strong volume growth in the Sawn Timber Industry, beating all consensus forecasts, although the company's market situation remained sluggish due to continued low activity in the construction sector. The company was able to achieve very good sales in the market at a reasonable price, and deliveries in the Sawn Timber Industry probably hit the target almost perfectly. Although the Panel Industry's results were down, particularly due to the rise in birch log prices, the Panel Industry still exceeded our forecasts. We commented on the result here on Friday.

Estimate changes were moderately positive

Koskisen reiterated its guidance for 2025 according to which revenue will grow from last year (2024: 282 MEUR revenue) and the adjusted EBITDA margin will be 7-11%. This in itself was to be expected, as the company is not in the habit of qualifying its guidance with adjectives, and the acquisition of Iisveden Metsä, which will dilute the company's margins in the short term, will be completed in early June. The market situation is also uncertain, and construction has not recovered, although the underlying sentiment, at least in the Panel Industry market, seems to be cautiously positive based on the comments. 

We included the acquisition of Iisveden Metsä in our estimates from the beginning of June, as approvals for the deal have been received from key stakeholders. The arrangement has been particularly supportive of our revenue and also our EBITDA forecasts, but the impact on the lower lines has been smaller, especially for the next few years. Given the partly unclear drivers of volume growth in the Sawn Timber Industry and the risks associated with a tightening of trade policies, we have so far refrained from significantly raising our estimates for the company for the remaining quarters of the year and for the coming years, but the Q1 estimate beat clearly raised our forecasts for this year. In the Sawn Timber industry, developments were promising at this stage of the cycle, which reduced the risks to the earnings improvement already included in our forecasts. We expect Koskisen's revenue and EBITDA to continue to grow, driven by the gradual recovery of the construction cycle, investment efficiency gains and the acquisition of Iisveden Metsä. However, high raw material prices will limit the profitability improvement, even though revenue is increasing.

Expected return already starting to look attractive

Koskisen’s 2025 and 2026 EV/EBITDA ratios that consider the strong balance sheet are around 6x and 5x and the P/B ratio (Q1’25 ACT) is around 1.1x. The multiples are weighted within our approved ranges for this year, factoring in Koskisen's estimated return on capital and risk profile, which we consider cautiously attractive given the upward earnings trajectory and slightly lower risk profile of the stock. The stock's DCF is also higher than the share price, thanks to increased estimates and a slight decline in the required return. Thus, Koskisen's expected return based on earnings growth, falling multiples (Q1'25 LTM P/E 17x) and around 2% dividend is, in our view, already slightly above the required return on a one-year horizon. As the European economy and construction recover, the company could also have the potential for a longer earnings growth streak from current levels, which would be a strong driver for the stock even in the medium term.