Translation: Original published in Finnish on 06/16/2025 at 08:00 am EEST

We reiterate Nurminen Logistics’ Accumulate recommendation and our EUR 1.2 target price. Nurminen has made a remarkable turnaround in its business in the 2020s. With the latest acquisitions, its earnings level has also risen to completely new levels, and at the same time, its business has expanded more strongly outside Finland. The company also has the potential to accelerate its international growth through acquisitions in the short term. Considering this big picture, we believe the stock's valuation is moderate, and we see the risk-adjusted expected return as attractive.

Internationally expanding service company focused on rail logistics

Nurminen is a company providing diverse international logistics services, focusing especially on rail logistics. For the time being, the company's earnings drivers are North Rail, which is in very strong shape, and the Baltic business. However, the company took a significant step towards internationalization through the acquisition of the Swedish company Essinge Rail at the end of last year, whose business focuses on traffic between Central Europe and the Nordic countries. We estimate that Nurminen will also seek to expand and strengthen its market position in railway operations in Central Europe through future acquisitions. It also has good prerequisites for these already in the short term, thanks to its strengthened financial position and strong income financing. Based on the evidence so far, we also consider these to be moves with a positive expected value.

The earnings level has been set high

In our view, the demand outlook for the businesses (North Rail, Baltic) that are key to the company's earnings is fairly stable and possibly even slightly growing, although visibility into volumes coming from outside is quite limited. We have only made minor positive revisions to our near-term forecasts following the release of the separate financial statements. We expect the company's revenue to continue to grow to 126 MEUR this year, supported by inorganic growth, and the adjusted EBITA to be 23.1 MEUR (was 22.8 MEUR). Thus, we also expect the company to meet its fairly wide guidance. However, we estimate that the prevailing geo- and trade-political uncertainty will limit organic growth this year. We expect the economic situation in Europe to gradually improve, which will allow the company to achieve 4-6% growth in 2026-2027, driven in particular by the international railway business. Correspondingly, we expect Nurminen's earnings level to remain high, although we expect relative profitability to be under slight pressure due to changes in revenue distribution and a slight normalization of North Rail's very high margins. The most significant risk for the company in the short term is the (geo)political risks related to Russia. The greatest risk would be the expansion of possible sanctions to cover goods transported by North Rail or the Baltic business.

There is upside in the current valuation

With our updated estimates, the P/E ratios for Nurminen, adjusted for estimated PPA amortizations, are approximately 9x and 7x for 2025 and 2026. Relative to our accepted multiple range (P/E 9x-12x), we believe there is upside in the earnings-based valuation, especially when looking at next year. In the short term, however, we do not think it is justified to value the stock at the very top of the range, considering the distribution of earnings (large shares of North Rail and the Baltic business), despite the addition of Essinge Rail. We estimate that the expected return will also be supported in the coming years by strong earnings performance and dividend distribution enabled by cash flow (dividend yield of ~6%). In addition, we see this enabling the company to make inorganic moves in the fairly near term.