Translation: Original published in Finnish on 7/22/2026 at 8:54 am EEST.

The fill rate of Wärtsilä’s order books is quite high for the next 2–3 years, and the growing volumes will help the company further strengthen its profitability. We see strong demand drivers for the company in the medium term, even if data center-driven demand were to slow somewhat. We are changing our recommendation to Accumulate (was Reduce) as the valuation has become moderately attractive due to the decline in the share price and order growth. Our target price is EUR 33 (was EUR 32.5).

Equipment orders exceeded already high expectations

The Q2 report was strong overall, as Marine and Energy orders exceeded consensus estimates by a total of 14%. Marine and Energy orders grew by 33% combined, driven purely by new equipment sales. Profitability also showed a positive underlying trend, with adjusted EBIT exceeding estimates by 3%, despite the revenue mix being more skewed towards new equipment sales and less towards services than expected. Marine and Energy's adj. EBIT strengthened to 214 MEUR (Q2’25: 190 MEUR), with adj. EBIT margin strengthening by 1 pp. Cash flow from operating activities strengthened year-on-year in Q2 and has been in line with the strong comparison period for H1 as a whole.

Difficulties in increasing Energy orders have been acknowledged by the company

Energy's massive orders in Q2, along with an otherwise very strong order intake over the past 12 months combined with capacity bottlenecks, led to guidance that was nominally more cautious than before. The company expects the demand environment for Energy to remain at the level of the comparison period, whereas in Q1, an improvement in the demand environment was expected. The company commented that the revision reflects high comparison period figures and that the demand environment for Energy continues to appear very strong, driven by data centers and the need for balancing power in renewable energy. Marine demand is also expected to remain similar to the comparison period, which is unchanged from the Q1 guidance.

Energy's profitability is improving, but part of the market expected something even better

In its Q2 report, Wärtsilä provided details on the margin profile of Energy's order book. The gross margin of Energy's new equipment order book was over 5 pp higher at the end of June than at the beginning of 2025, which will result in significantly stronger profitability for new equipment sales going forward. On the other hand, based on the share price reaction and the investor call, the market seemed disappointed with the pricing of Energy's new equipment sales (MEUR/MW), which decreased year-on-year in Q2. Thus, the foreseeable improvement in profitability appears to be due primarily to economies of scale and increased production efficiency rather than price increases. We made minor cuts to our short-term estimates due to long delivery times, but our medium-term earnings estimates remained unchanged.

Valuation multiples decrease in the medium term

The strengthened order book improves visibility into Wärtsilä's earnings growth in the coming years, while the share price has decreased slightly. We view the company as a global technology leader in low-emission shipping and engine power plants, which enables a strong return on invested capital (ROI: 2026-28e: 26-31%). Valuation multiples will decrease to attractive levels as earnings grow in the coming years (2027-29: 16x, 13x and 11x), and by applying a 15x EV/EBIT multiple to our 2029 estimates, the expected return, together with the dividend, would rise to just over 10% per year. Our estimates assume that order intake driven by data centers will decrease by around 40% by 2029, so continuation of the growth trend can be viewed as a positive option. The company has significantly streamlined its structure in recent years, and the outlook for the profitability of its remaining Marine and Energy divisions has strengthened at the same time. In light of this, we would not be surprised if the company were to set new, higher profitability targets in the coming years.