Translation: Original published in Finnish on 7/31/2025 at 9:32 am EEST.

GRK's Q2 EBIT, published this morning, almost quadrupled year-on-year and significantly exceeded our estimates. GRK reiterated its raised guidance in its Q2 report, as fully expected, following the positive profit warning in June. However, with strong H1 performance and a still reasonable order backlog, even the new guidance does not appear particularly demanding, at least at the lower end of the ranges. We expect a positive share price reaction for GRK today due to strong Q2 numbers.

Source: Inderes

Revenue and EBIT smashed our estimates

GRK's revenue grew by 27% to 232 MEUR, as the company continued the swift execution of its strong order book during Q2. Revenue strongly beat our estimates, as growth vastly exceeded our expectations in all of the company's operating countries (Finland, Sweden, Estonia). GRK's adjusted EBIT improved by 250% in Q2 to 16.5 MEUR, which corresponds to a good 7.1% adjusted EBIT margin for the company. Earnings and profitability were especially supported by the high revenue level, but based on the margin, projects proceeded during Q2 without major problems (cf. profitability was burdened by margin deteriorations in certain projects in Q2'24). In our view, profitability development, driven by revenue growth, has been favorable in all the company's operating countries, even though the report does not disclose country-specific profitability levels.

On the lower lines, the company recorded listing expenses as an adjustment item to EBIT (cf. in forecasts as financing costs), but the recorded amount was clearly smaller than our expectations. Conversely, financing expenses were positive, thanks to, among other things, interest income from a strong cash position and other financial income, while the tax rate was in line with the company's usual level. Thus, GRK's Q2 EPS of EUR 0.32 comfortably exceeded our forecast, especially reflecting the operating result. In contrast to the result, the company's cash flow was clearly negative in Q2, but considering the seasonal nature of the business, high levels of advances on the balance sheet, and the otherwise favorable working capital situation at the end of Q1, this was not a significant surprise for us. Due to the nature of GRK's project business, the development of earnings and cash flow can be significantly divergent on a quarterly basis.

Business was generated moderately from small streams and the market situation is good

According to our calculations, GRK received new orders of around 147 MEUR in Q3, corresponding to an order-to-billing ratio of around 0.6x. GRK's order book stood at 789 MEUR at the end of Q2, which was 8% below the comparison period. The decline in orders was, in our view, expected, as GRK presumably received significant additional orders from the Stegra project in Sweden during the comparison period. Overall, we believe the order flow gathered in Q2 was moderate, consisting mainly of small contributions, and it roughly met our expectations. In turn, the order book was slightly lower than our expectations due to higher Q2 revenue than we had estimated. However, the company commented positively on the demand situation in all regions, and in addition to ongoing tenders, it has over 400 MEUR of projects already won but still in the development phase outside its order book. Therefore, the company's order outlook appears healthy in our view, even though growth will already slow down in H2 due to the decline and lengthening of the order backlog.

Following H1, especially the lower ends of the new guidance ranges appear cautious

GRK reiterated the guidance it updated in its positive profit warning in June, according to which its revenue is 730-800 MEUR and adjusted EBIT is 45-55 MEUR in 2025. The reiteration of the guidance was exactly in line with expectations. In our view, given the Q2 beat, especially the lower end of the guidance appears at least initially rather conservative, even though growth will naturally slow down in H2 and based on comments, business development this year is more stable than last year (compared to a very strong Q3 2024). At this point in the year, the company should already have reasonable visibility into the full-year volume, and there don't seem to be any issues with the order book margins either.