Translation: Original published in Finnish on 11/7/2026 at 11:00 am EET.

We reiterate our Accumulate recommendation for Teleste but revise our target price to EUR 3.9 (was EUR 4.2). Revenue in Q3 clearly fell short of our expectations, as deliveries were deferred to Q4, but strong profitability pushed earnings to the level we anticipated. We slightly decreased our forecasts due to ongoing uncertainty surrounding the investments of Networks' two largest customers in North America. Offsetting this to some extent is the strong performance of Public Safety and Mobility. Based on our estimates for next year, Teleste's share valuation is very low (2027e EV/EBIT 7.4x) if the earnings growth materializes. However, the uncertainties surrounding this are still causing us to exercise some caution at this stage. 

Profitability was strong despite the shift in deliveries

Teleste's Q3 revenue fell by 18% to 28.4 MEUR, which clearly missed our 35.9 MEUR forecast. Revenue in the Networks segment decreased by 26%, as deliveries in North America fell short of the comparison period due to the main customer's merger. However, growth in Europe continued. The segment's order intake grew by 4% to 14.7 MEUR. Public Safety and Mobility's revenue decreased by 5% due to project timing. Orders received reached a record high of 69.7 MEUR, supported by a Siemens agreement worth approximately 40 MEUR. The group’s order book increased to 156.5 MEUR. Adjusted EBIT was 2.1 MEUR, in line with our forecast. The adjusted EBIT margin (7.4%) clearly exceeded our estimate, thanks to a favorable product and customer mix that supported the gross margin. The company emphasized that the margin was exceptionally strong during the quarter. Public Safety and Mobility posted its strongest quarterly results ever, and Teleste's measures in recent years are paying off here. Cash flow has remained close to zero thus far this year because the company has increased its inventory levels amid a tight supply of components.

Short-term visibility in North America is weak

Teleste revised its guidance, lowering the upper end of its revenue (140-145 MEUR) and adjusted EBIT (7-9 MEUR) ranges. Q4 revenue is expected to be the highest of the year, which necessitates successful major deliveries in both segments. In North America, Cox and Charter's combined company is reorganizing, and Teleste does not yet have visibility into its investments for next year. Rogers has also reduced its investments and is absorbing its previous acquisitions. Teleste has expanded its customer base among local operators and expects North American revenue to start growing in 2027. However, we believe that short-term uncertainty is slightly higher than before. In Europe, Teleste expects Networks growth to continue next year. The outlook for Public Safety and Mobility is also positive. We lowered our earnings estimates for the coming years by around 3-4%. We forecast revenue growth of 7.5% and an adjusted EBIT of 10.0 MEUR for next year (2026e: 8.7 MEUR).

Valuation is low, but uncertainty fosters patience

With our 2026 estimates, Teleste's adjusted P/E ratio is 9.3x and its EV/EBIT ratio is 9.2x. If the earnings growth we forecast continues, the multiples (P/E 8.3x and EV/EBIT 7.4x) will become very low in 2027. Teleste's medium-term earnings potential is still even higher than this. In light of our DCF model (EUR 4.3) and sum-of-the-parts calculation (EUR 4.5), the share also has upside as earnings growth continues. A dividend yield of around 3-4% in the next few years will partially support the expected return. However, realizing next year's forecasts partly relies on a recovery in North American demand, the timing of which remains unclear. Our target price corresponds to a P/E ratio of around 10x and an EV/EBIT ratio of just under 9x based on our estimates for next year. This is at the lower end of our acceptable ranges, which we consider justified given the uncertainty in North America. If earnings growth materializes, we believe the share has even more potential than this.