Translation: Original published in Finnish on 04/24/2026 at 09:00 pm EEST

We initiate coverage of Posti with an Accumulate recommendation and a target price of EUR 10.0. The company's earnings have been growing due to efficiency improvements in Postal Services, but increasing support is needed from growing businesses as digitalization reshapes sales distribution. Supported by slight earnings growth and a high dividend yield, the stock's total expected return exceeds the required return, which is why we consider the stock's risk/reward ratio attractive.

Posti's portfolio focuses on comprehensive logistics

Posti is a company focused on transport and logistics, operating in Finland, Sweden, and the Baltic countries. Posti's portfolio consists of growing parcel delivery (eCommerce and Delivery Services) and warehousing services (Warehousing and Logistics Services) businesses, as well as traditional postal delivery (Postal Services). A significant portion of Postal Services' revenue is structurally declining, which the company aims to offset with new digital initiatives and growth in other businesses. Posti's sales have decreased by around 2% annually (2013-2025) due to declining postal delivery volumes and divestments. However, earnings development in recent years has been very positive, particularly due to efficiency improvements in Postal Services, which has enabled good returns on capital (2022-25 ROCE ~13%).

The investor story relies on earnings improvement and a high dividend

Central to the investor story is protecting the strong earnings of Postal Services amidst a market disruption where letter volumes decrease due to digitalization and changing customer behavior. Posti has a strong track record of adjusting its cost structure, but in our view, for risk management reasons, earnings support is also needed from other growing businesses in the future. A significant portion of the Group's earnings currently comes from Postal Services, and with digitalization shaping the industry, we consider it possible that the segment's earnings will be smaller in 5-10 years than they are today. If the company fails to capitalize on the commercialization of digital mail, we estimate that the segment's earnings will decline sharply in the long run. We identify significant earnings growth potential in eCommerce and Delivery Services, and particularly in Warehousing and Logistics Services, arising from a combination of trend-supported revenue growth and operational efficiency/integration. Our starting point is that the earnings of Postal Services will gradually decrease, while the earnings growth of other businesses will increasingly compensate for the digital transition of Postal Services. Overall, we expect the EBIT to increase by 4% annually in the medium term (the company's target is 5% annually). Another important element in Posti's investor story is the company's generous dividend policy (>60% of net profit). Historically, profit distribution (excl. the additional dividend raised by the State, which was debt-financed before the IPO) has been funded by increasing earnings and sales of balance sheet assets (securities). This will also continue, as the liquidation of the 100 MEUR real estate portfolio will significantly support the growth of Posti's profit distribution over the next few years. We also consider it possible that the divested funds will be used to pay off debts and/or for acquisitions, which we view positively.

In our view, the stock's risk/reward ratio is attractive

In our view, Posti trades at a neutral valuation based on its past earnings. We feel the valuation multiples for the coming years (2027e P/E 8x and IFRS 16 adj. EV/EBIT 9x) will decrease to attractive levels for a company that generates a good return on capital. The moderate valuation picture is supported by Posti's significant discount relative to its key peers. In our view, the expected return on the share consists of approximately 5% earnings growth and a 10% dividend yield. Thus, the total expected return (~15% p.a.) exceeds our required return, which means we consider the share's risk/reward ratio attractive. Our sum-of-the-parts and DCF calculations show that the stock’s fair value (EUR 10-11) is above the current share price, which suggests upside and warrants our positive view.