Translation: Original published in Finnish on 8/21/2026 at 8:30 am EEST.

The H1 report provided further evidence of the ongoing profitability turnaround, with the material margin significantly surpassing our estimate. A robust order book sets the stage for favorable earnings growth for the remainder of the year and also bolsters the outlook for 2027. The difficulty of predicting a young industry and the valuation based on future earnings growth maintain the stock's relatively high risk level. Conversely, the company has recently been able to demonstrate its competitiveness through new technologies, a profitability turnaround, and international expansion. We reiterate our Accumulate recommendation and raise the target price to EUR 5.5 (was EUR 4.7) supported by forecast changes.

H1 continued to tell the story of rising profitability

The H1 report largely met our expectations regarding revenue and orders but exceeded our expectations for profitability. H1 order intake was very strong at 53 MEUR, doubling from the comparison period. Although revenue remained at the level of the comparison period in H1, the company still managed to improve its EBITDA to 0.5 MEUR (we estimated 0.1 MEUR, H1'25: 0.3 MEUR). The material margin improved by nearly 6 percentage points year-on-year, more than offsetting the increase in fixed costs. According to the company, improved productivity resulting from organizational learning, standardization, and more efficient procurement supported profitability. Net cash also increased to 1.0 MEUR (H1'25: 0.6 MEUR), although the company's net working capital commitment is highly volatile.

Order book enables strong growth

The company reiterated its guidance, which states that revenue will grow from the previous year in 2026 and that EBITDA will be 2-4 MEUR. We estimate that the company has a good chance of achieving this guidance because the order book at the end of H1 (50 MEUR, up 70% y/y) allows for significant revenue growth for the rest of the year (H2 estimate: 17%, 2026: 8%). Our EBITDA estimate increased by 9% to 3.1 MEUR, surpassing the midpoint of the guidance. EBITDA forecasts for 2027–28 increased by 4% based on favorable profitability trends.

Strategically important goals demonstrate progress

We have considered Merus Power a high-risk growth company because forecasting the profitability of the young energy storage industry and the continuity of investment-driven demand is challenging – particularly since operations have been concentrated solely in Finland. In our view, the recent favorable trend in profitability, paired with the expansion of energy storage sales into new markets in Poland and the Baltics, has strengthened the perception of the company's competitiveness. More information on the impact of expansion on profitability is expected as international projects move into the delivery phase within the next 12 months.

Progress in the earnings turnaround supports the valuation

With our current estimates, the company's EV/EBIT multiple would be 30x on current-year estimates (high), but it would quickly decrease to moderate levels of 16x and 12x in 2027-28e. We consider this valuation attractive for a company based on its own technology in a rapidly growing industry. The company will present its new strategy at the end of September. We estimate that revenue will grow by an average of 15% during the new strategic period of 2027–30 (2022–26: 35%), which, combined with economies of scale in profitability, could enable strong value creation. Regarding the EBIT margin, we forecast that it will end up close to the 5% level, similar to what, for example, Wärtsilä achieved at its peak before divesting its energy storage business. The stock's risk level remains high, and competition in the industry is fierce, even as the EU seeks to phase out Chinese technology in critical infrastructure. In particular, fluctuations in investment-driven demand could cause a decline in the share price in a negative scenario, although we find the stock's risk-reward ratio attractive overall.