Sitowise Q1'26: Faint indications of improvement

Translation: Original published in Finnish on 5/7/2026 at 7:26 am EEST.

Sitowise's Q1 performance was generally in line with our expectations, though write-downs on Buildings projects slightly weakened the figures. We made no major changes to our estimates. We reiterate our Accumulate recommendation and our target price.

Sales slightly exceeded our expectations and the result was as expected

Sitowise's Q1 revenue increased by 2% to 49.0 MEUR (Q1'25: 48.1 MEUR), while we expected a 0.4% growth to 48.3 MEUR. Infra grew again by a robust 6% to 18.8 MEUR, surpassing our expectations. Digital Solutions' sales remained unchanged year-on-year (9.3 MEUR) as project work shifted toward lower-priced customer segments, but the segment's strategically important recurring revenue continued to grow by 6%. Sales in the Buildings segment decreased by 7% to 13.2 MEUR, but this was due to write-downs on projects. Revenue in Sweden increased by 3% organically, while we had anticipated zero growth. This brought an end to the segment's downward trend that had lasted 10 quarters.

The company's adjusted EBITA settled at 1.9 MEUR (Q1'25: 2.4 MEUR) while our forecast was 2.3 MEUR. However, the company stated that the group's adjusted EBITA margin would have risen year-on-year without the project write-downs. Verbal descriptions of the segments revealed that Infra continued to show strong profitability (over 12%). Digital Solutions also maintained healthy profitability (5-10%). The Swedish and Buildings businesses were loss-making. The net debt/EBITDA ratio decreased to 4.5x (Q4’25: 4.9x), though it remains high. If the result improves in line with our forecasts, the target level of 3x will be reached in 2027. The company still has plenty of time to deliver an improvement in earnings, as the financing package is not due until summer 2028.

No major surprises in the guidance

The company's order book continued to increase slightly when adjusted for the impact of project write-downs. Meanwhile, the number of full-time employees decreased by 2% year-on-year. The number of employees in relation to the workload appears to be more balanced, which forms a basis for our earnings growth expectations. We also consider it a positive sign that employee satisfaction improved in the early part of the year, as it is critical for expert companies. However, the company still expects the construction market recovery to be slow and materialize on a larger scale only in 2027.

Our big-picture forecasts unchanged

We forecast that Sitowise's revenue will increase by 2.5% in 2026 and that its adjusted EBITA margin will end up at 5.9% (2025: 4.7%). We expect a clearer recovery to occur only in the latter half of 2026 and in 2027, when growth will accelerate to 6-8%, thanks to increased construction and investment activity and reduced price competition. In the longer term, we expect the operational leverage to support margin improvement towards an EBITA margin of 9%, though we do not predict the group will return to the company's targeted EBITA margin of 10%.

Realizing earnings growth is crucial

According to our forecasts, the EV/EBITDA ratio will remain high at 8x in 2026. High financial expenses will also significantly erode net earnings, leading to an even higher P/E ratio of >100x. However, it is clear that the company's earnings potential is significantly higher than the current level because the company is now operating at the bottom of the residential construction cycle. Therefore, we believe that the 2027 valuation (EV/EBITDA: 6x, P/E: 14x), as well as the one for 2028 (EV/EBITDA: 5x, P/E: 9x), better reflect Sitowise's valuation in relation to the company's normalized earnings performance. In recent quarters, earnings have stabilized, and as a result, we are prepared to examine the stock's potential and our earnings growth estimates more closely. However, we also remind investors that there are high financial risks if our estimated earnings growth fails to materialize.