Translation: Original published in Finnish on 3/9/2026 at 7:10 am EET.

Tokmanni's Q4 report was somewhat subdued overall, even though the company managed to improve its earnings. The turnaround of Dollarstore, key expected return driver for Tokmanni, is taking longer than anticipated. Considering the stock's neutral valuation and the uncertainty related to the earnings turnaround, we believe Tokmanni's risk/reward ratio is weak. Thus, we lower our recommendation to Reduce (previously Accumulate). At the same time, the target price falls to EUR 7.5 (was EUR 9.0) in line with the lowered forecasts.

The Group’s result improved slightly

Tokmanni's revenue grew by 3% due to the expansion of Dollarstore's store network. Customer traffic across the Group was sluggish in comparable stores, which also negatively impacted their sales. In our view, this was a negative driver for the Group's profitability, especially for the Dollarstore segment. The company managed to turn the profitability of the Tokmanni segment upwards due to strict cost control. Overall, the Group's adjusted EBIT increased by 2% to 48 MEUR, which was slower than revenue growth. The company proposed a dividend of EUR 0.34 per share, in line with the comparison period, with the distribution of the second half conditional on a separate board decision. Overall, the size of the profit distribution indicates uncertainty related to the 2026 earnings development.

Guidance implies earnings growth

Tokmanni expects its revenue to be 1,780-1,860 MEUR (2025: 1,728 MEUR) and adjusted EBIT to be 85-105 MEUR (2025: 85 MEUR) in 2026. According to the company, the key drivers for earnings growth are Dollarstore's turnaround, the Tokmanni segment's strong H1 performance (easy comparables), and the assumption of improving domestic consumption. We made negative forecast revisions based on the Q4 report, as our previous interpretation of Dollarstore's Q4 turnaround proved incorrect. Currently, we expect Dollarstore's earnings to increase slightly in 2026 (easier comparables) and improve significantly in 2027 (turnaround). Therefore, our adjusted EBIT estimate (91 MEUR excluding PPA amortizations) is below the midpoint of the guidance. We emphasize that the uncertainty related to the earnings turnaround is high, which is also a significant risk factor for our earnings growth forecast.

We consider valuation to be neutral; limits expected return

From a P/E ratio perspective (2026e 11x), the stock appears cheap, but the EV/EBIT multiple (2026e 14x and 12x when adjusted for IFRS 16 items), which accounts for the balance sheet, is at best neutral or slightly elevated. The discrepancy in the multiples is explained by Tokmanni's elevated net debt and, in particular, large lease liabilities. We do not expect a significant change in net debt, as the free cash flow generated by the company is partly used to finance growth, i.e., working capital, and also for dividend distribution. For this reason, we believe the P/E ratio should be low in absolute terms. We believe Tokmanni's valuation multiples are neutral compared to its key Finnish peers, which limits the stock's return potential. The limited upside of the DCF value of EUR 7.7 also reflects a neutral valuation and that Dollarstore's medium-term earnings turnaround is already priced into the current share price. For an investor who believes in a rapid turnaround for Dollarstore, the share price decline could offer a good buying opportunity, but we see the associated risks as elevated, which limits the stock's short-term positive price drivers. This is highlighted by the fact that Dollarstore's turnaround is still ongoing (management would have mentioned this in connection with the Q4 results, and the 2025 dividend proposal would likely have been higher), meaning that a continued decline in comparable store customer numbers in H1 cannot be ruled out. Without the stabilization of customer numbers in mature stores, it is likely that Dollarstore's profitability will continue to decline, even though the comparable figures for 2026 are "easier." So far, the evidence suggests a slower turnaround for Dollarstore, which is why we believe that investors can join the story later with a more attractive risk/reward ratio.