Translation: Original published in Finnish on 3/26/2026 at 7:10 am EET.

Puuilo's Q4 report painted an overall positive picture, driven by earnings growth. The company is progressing with its internationalization efforts, but we do not expect to see returns from abroad until 2027 at the earliest. Regardless of the uncertainties, we consider the outlook for the Finnish business to be positive. While the stock’s most pronounced undervaluation has been resolved as the share price has risen, the risk/reward ratio remains attractive. We lower our recommendation to Accumulate (was Buy), while maintaining a target price of EUR 14.0.

Strong development throughout the group

Puuilo’s strong revenue growth was driven by both new stores and increased growth in comparable stores. The older stores experienced growth in both customer numbers and revenue, which is important for scaling growth. Product margins continued to rise, driven by the success of private label sales. The share of private-label products has risen significantly, from approximately 18% in 2021 to approximately 24% in 2025. A positive aspect of this development is that the gross margin has increased simultaneously, suggesting that investments in proprietary procurement have paid off and that margins have not been eroded by private-label production costs or passed on directly to customer prices. The latter also reflects the company’s strong competitive position. The only negative finding in the report, though an expected one, was the rapid increase in fixed costs. This is largely due to the record pace of store openings, which we believe will pay off over time. Q4 EBITA rose to 16.5 MEUR (16.3% margin), surpassing both our expectations and those of the consensus. Based on the strong balance sheet, the board of directors is proposing a basic dividend of EUR 0.54, plus a special dividend of EUR 0.12, for a total dividend yield of just over 5%.

Internationalization is progressing

Preparations for internationalization, which is key to Puuilo’s long-term growth, continued in Q4 as the company hired a country manager for Sweden. At the same time, the mapping of the first retail locations began, and the company intends to open its first store within the next 18 months. Although preparations will increase the company's costs, we expect the group's earnings development to remain positive due to strong earnings performance in Finland and a cost-controlled approach.

Our estimates remained unchanged in connection with the update, except for minor technical adjustments. Based on its guidance for fiscal year 2026, the company expects earnings growth, with the midpoints of the guidance ranges corresponding to 12% revenue growth and an EBITA margin of 17.2%. Our forecasts project revenue growth driven by an expanding network of seven stores and comparable growth remaining at a moderate level. We expect margins in 2026 (and in subsequent years) to remain largely unchanged, primarily weighed down by additional costs associated with international expansion, inflationary pressures, and the rapid pace of store expansion in Finland. However, as cost pressures ease, we believe the company’s profitability has a good chance of improving thanks to its scalable business model. For now, our forecasts are based on a more pessimistic outlook for the overall economy. Nevertheless, we believe Puuilo will continue to gain market share and therefore expect its earnings per share to grow by approximately 13% annually over the medium term.

We believe the risk/reward ratio is attractive

The stock's short-term valuation is elevated, which slightly limits the expected return on the stock. However, we believe this is justified due to the company's strong earnings growth outlook, which lowers the valuation multiples to very attractive levels (2027e P/E 15x and IFRS 16 adj. EV/EBIT 12x) for a company generating a strong return on invested capital (ROIC ~30%). The expected return is supported by a solid dividend yield of 5-6%. We therefore believe that the stock’s expected return is already attractive, supporting a positive view. The DCF model (EUR 15) also indicates significant upside in the share.