Translation: Original published in Finnish on 08/19/2026 at 08:42 am EEST

Source: Inderes

Orthex's Q2 figures were operationally slightly stronger than our expectations, although one-off costs related to strategic projects weighed on the reported result, bringing it below our estimate. During the review period, the revitalized sales in the Nordics and resilient gross margins demonstrated the company's ability to pass on increased production costs to its prices. Due to strong development in the Nordics, we have slightly raised our estimates for the next few years and updated our target price to EUR 4.8 (was EUR 4.4). We raise our recommendation to Accumulate (was Reduce).

Nordic countries supported 

Orthex’s Q2 revenue grew by 5% to 21.6 MEUR exceedeing our 21.2 MEUR estimate. The structure of growth changed from the beginning of the year, as invoiced sales in the Nordic countries grew by a strong 12%, while sales in the rest of Europe, important for the growth story, decreased by 11%. Growth in Europe was slowed by the temporary suspension of growth initiatives due to price increase negotiations. The higher prices of plastic raw materials due to the Middle East conflict weighed on the gross margin, and adjusted EBIT decreased to 1.4 MEUR, but slightly exceeded our forecast of 1.2 MEUR. The company has been among the first in its industry to raise prices, but we understand that competitors have broadly followed suit. However, price increases particularly affected growth prospects in the European export markets, causing delays in potential new campaigns and distribution agreements. Reported EBIT remained at 0.8 MEUR due to 0.6 MEUR in non-recurring items from strategic development projects. Orthex's balance sheet remained strong, with the net debt to adjusted EBITDA ratio at 1.1x, against a target of below 2.5x. This leaves the company with plenty of leeway for growth investments and M&A.

Nordic strength drove the estimate changes, but significant growth requires pull from the rest of Europe

In connection with the report, we have raised our EBIT estimates for the next few years by 3-6%, driven by recovering demand in the Nordics. Based on the interim report, the demand outlook in the Nordic countries appears better than before, and based on management's comments, Orthex is now seeing signs of recovery in Finland, in addition to Sweden and Norway. However, price increases are weighing on the development of European growth markets more than we expected. Due to Orthex's strong market share in the Nordic countries, it is critical from a long-term value creation perspective that the company can achieve sustainable growth in the European export markets. We expect Orthex's profitability to remain under pressure for the rest of the year, but from next year onwards, the company should achieve earnings growth supported by revenue growth and strengthening relative profitability due to declining raw material costs.

Valuation is cheap with normalized earnings

Orthex's earnings-based valuation appears neutral with this year's weak earnings and becomes favorable with our estimates for next year (P/E: 11x, EV/EBIT 9x). Due to the Middle East conflict and Orthex's sensitivity to oil-based raw materials, there is more uncertainty than usual in the short-term earnings estimates. However, the company's ability to defend its margin in Q2 and the strong balance sheet providing resilience increases confidence to look beyond short-term challenges With a normalized EBIT margin of 11% in 2020-Q2'26, the company's EV/EBIT multiple would be 9x based on our current year revenue estimate of 90 MEUR, which, together with a dividend yield of ~6%, supports the stock's current valuation level.