Translation: Original published in Finnish on 2/3/2026 at 8:30 am EET.

Neste will publish its financial statements on Thursday at around 09.00 am EET. We have raised our short-term estimates, reflecting high fossil product margins, while the increase in Renewable Products sales margin estimates raised our longer-term estimates. Considering this overall picture, we raise our target price to EUR 22.0 (was EUR 18.0), but in light of a balanced valuation picture, we reiterate our Reduce recommendation.

Oil Products margins at a high level in Q4

In our updated estimate, we expect Neste to have reached a comparable EBITDA of 504 MEUR in Q4’25 (was 417 MEUR), which is a huge improvement compared to the weak comparison period and is in line with the scattered consensus estimate. In our estimates, the earnings improvement is driven by both Renewable Products and Oil Products. We estimate sales volumes for Renewable Products to have increased by 8% to just over 1 Mt, but a more significant earnings driver is the substantial rise in the sales margin from a weak comparison period (Q4’25e USD 440/ton vs. USD 242/ton). However, in absolute terms, the sales margin for Renewable Products is not particularly good compared to historical levels, and we estimate that Neste has not been able to significantly benefit from the attractive market situation in Q4, partly due to maintenance shutdowns. The overall picture for Oil Products is similar, and we estimate its total refining margin to have increased significantly from a moderate comparison period, driven by strong product margins. Neste's financial position remains tight (Q3'25 NIBD/EBITDA 4.4x), but we estimate the company will pay a dividend of EUR 0.20 for last year, in line with the previous year.

Discord in the 2026 outlook

Last year, Neste guided sales volumes, but not the highly volatile margins of its main segments. More concrete guidance would be desirable compared to the previous vague guidance, but providing this is challenging in a variable market situation. Due to the Porvoo maintenance shutdown, Oil Products' sales volumes are expected to decrease this year. This, together with other routine maintenance shutdowns, will find the sales growth of Renewable Products to be moderate (2026e Inderes +8%), even though market growth supports demand. The key variable is the sales margin for Renewable Products, and the market outlook for renewable diesel is currently strong. This is supported by supply constraints in Europe, which caused market prices to rise in H2'25 and remain high. This should be reflected in the margins of annual contracts, which is why strong earnings growth is expected from Renewable Products in 2026. In line with this market development, we have raised our segment estimates, and our EBITDA estimates for 2026-2027 increased by 4-8%. The improvement in the earnings outlook for Renewable Products is of paramount importance given the company's indebtedness and investment levels in the coming years (i.e., the development of free cash flow).

Balanced valuation picture

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. This earnings potential is based on the assumption of a healthy market situation and a higher gross margin than in the recent past. Thus, we believe the current valuation contains expectations of a sustainably better supply and demand balance in the renewable products market than in the recent past. We believe this is warranted, but at the same time, an attractive expected return from the current level would necessitate stretching margin expectations too high for our taste.