Translation: Original published in Finnish on 4/22/2025 at 7:00 am EEST.

Kreate will publish its Q1 report on Thursday, April 24. We expect the revenue decline to have continued in the first quarter, driven by a weaker order book, but we estimate that profitability improved as project margins recovered and pricing pressure eased. We expect market activity to remain sluggish in the first half of the year, with a gradual recovery towards the end of the year. However, the recent escalation of the trade war adds uncertainty to the outlook, which may also slow the recovery in infrastructure construction, even if the situation does not directly affect Kreate. We do not change our forecasts or our view ahead of the Q1 results and therefore reiterate our Accumulate recommendation and our target price of EUR 8.00.

Revenue will continue to decline moderately

We expect Kreate's Q1 revenue to decrease by 3.1% year-on-year to 52.7 MEUR. The decline in revenue has been driven by the still decreasing order book (Q4’24: -10%) and especially the Finnish operations (Q1’25e -9%). In the much smaller Swedish business, we expect revenue to continue to grow (Q1'25e: +40%). Kreate has completed several larger projects, and new larger projects are still awaiting final decisions or the completion of the development phase. The early part of the year is typically quiet for the industry, but projects start to pick up again in the spring. However, railway projects in particular have boosted the company's development, and during the review period Kreate announced the Tampere passenger yard project (value around 40 MEUR). However, larger projects start with the development phase, but these should move to the construction phase during the spring and fall of this year.

Improvement in result expected

We expect Kreate's adjusted EBITA to have increased to 0.3 MEUR in Q1 (Q4'24: 0.3 MEUR) despite lower revenue, and the margin to have improved to 0.6% in our forecasts (Q4'24: 0.5%). Based on last year's development, we estimate that Kreate's performance has improved as old low-margin projects no longer affect profitability. In addition, growth investments in railway projects and the Swedish business are starting to bear fruit. However, profitability is still hampered by fierce competition and low volumes. While it would be desirable for the market challenges to ease over the next few years, the most important thing for Kreate is that the projects progress successfully.

Outlook under the magnifying glass in an uncertain market

In its guidance, Kreate expects its revenue to grow in 2025 to 290-310 MEUR (2024: 275.5 MEUR). EBITA is expected to grow to 9-11 MEUR (2024: 8.8 MEUR). The Swedish market is currently favorable for Kreate, and the company announced during the quarter that it is targeting growth in Sweden under the leadership of a new CEO. Kreate also announced that it would expand its operations in Sweden to land construction and geographically to the Gothenburg region on the west coast. In Finland, the market situation is more neutral but strengthening towards the end of the year.

We expect the construction market to remain challenging and competition in infrastructure construction to remain fierce. The short-term outlook is watchful and overshadowed by increased uncertainty as a result of the recently escalated trade war. In our view, trade policy tensions may increase caution in developers' investment decisions and disrupt supply chains. However, the extent of the impacts is very difficult to assess at this stage, but in our view, the risks of a delay in the recovery of construction have increased. For Kreate, projects in the development phase are expected to increase the order book during the spring, which offers the company good potential for growth despite the uncertain market situation. However, the focus of Kreate's investment story is on profitability, the potential and progress of which we expect the report to shed further light on.