Translation: Original published in Finnish on 7/27/2026 at 8:18 am EEST.

Due to a reversed market situation from the comparison period, Neste reported a record-high Q2 result, which was well in line with expectations. The exceptional market situation in both main segments currently provides a tailwind, though its duration is uncertain due to the geopolitical situation. We have made quite minor forecast revisions and are therefore increasing our target price to EUR 35.0 (previously EUR 34) and reiterating our Accumulate recommendation.

Party of the margins led to a record-breaking result

In Q2, Neste achieved a record comparable EBITDA of 1.2 BEUR, which was fairly in line with our upward revision to the forecast in the earnings preview. Earnings multiplied from the comparison period, as margins for both Renewable Products and Oil Products rose to exceptionally high levels. The record-high quarterly result for Renewable Products was supported by strong demand and an increase in end-product prices caused by the geopolitical situation, which boosted its sales margin to a historically high level. The total refining margin for Oil Products, boosted by the wars in the Middle East and Ukraine, was also exceptionally strong.

Volumes are tight, but margins are strengthening the result

Neste reiterated its guidance for the current year, estimating that sales volumes for Renewable Products would remain at approximately the same level as in 2025, while sales volumes for Oil Products would decrease. Verbal guidance is not very helpful when the threshold values are unknown, especially those for the Renewable Energy guidance. There is some concern that production of Renewable Products is 14% behind the comparison period at the end of H1. However, we estimate that inventories will support sales volumes in H2'26, while several maintenance shutdowns, especially the major turnaround at the Porvoo refinery, will reduce production volumes. Despite weak volumes, earnings will be significantly supported by the margin outlooks of both segments because margins for Renewable Products and Oil Products have remained high at the beginning of Q3. However, they are susceptible to rapid changes in current market conditions, so forecast risks remain high in both directions.

We made no large estimate revisions

We increased our sales margin forecast for Renewable Products, in particular, for H2 and next year, but the impact of these increases was reduced by a slightly lower sales volume forecast. Overall, the comparable EBITDA forecast for the current year increased by 2%, and by 4% for next year. We expect the Rotterdam expansion to increase sales volumes of Renewable Products next year, but our forecasts assume a significantly lower sales margin due to the calming geopolitical situation. At the same time, however, our margin estimate reflects the favorable supply and demand outlook for Renewable Products for both next year and the medium term.

Attractive valuation picture remained unchanged

The valuation of the share for the coming years is moderate (P/E ratio 12-16x and adj. EV/EBIT ratio 10x-14x), considering the medium-term earnings growth driven by the increase in Renewable Products capacity. We estimate the valuation level of Neste's largest value driver, the Renewable Products segment, in a sum-of-the-parts calculation, according to which Renewable Products trades at an EV/EBIT multiple of around 10x relative to our estimated 2028 earnings level. In our view, this is a quite reasonable level, and we believe the segment’s long-term upside potential offers an attractive expected return.