Componenta Q2'25: A step forward on the path to turnaround

Translation: Original published in Finnish on 7/24/2025 at 8:02 am EEST.

Componenta's half-year report was slightly better than we expected, with the key items slightly exceeding our forecasts. Although we kept our estimates for the next few years the same, we increased our medium-term estimates slightly, as the continued earnings turnaround has made us more confident about long-term profitability. In our view, the sharp rise in the share price reflects expectations of top-notch performance in the coming years, making the risk/reward ratio modest. We raise our target price to EUR 4.3 (was EUR 3.8) and reiterate our Reduce recommendation.

Report fulfilled our preliminary expectations

Componenta slightly exceeded our expectations in Q2, with revenue of 30.9 MEUR and EBITDA of 2.6 MEUR (8.5% EBITDA-%) The growth in revenue was practically entirely due to the impact of the business acquisition, so organic growth remained sluggish. Improved profitability was driven by higher volumes than in the comparison period and price increases that offset low utilization rates. The order book developed more dynamically than expected (14.2 MEUR, +31% y/y) and, according to our estimates, achieved organic growth of approximately 10%. This mitigates the risks to our growth forecasts for the rest of the year.

We expect earnings growth to continue in the coming years

Componenta reiterated its broad guidance, which we expect the company to easily achieve. We expect the company's revenue to grow by 17% to 114 MEUR in the current financial year. Most of the growth will come from business acquisitions made in H2’24, while we expect organic growth to remain below 5%. We forecast that the EBITDA for the full financial year will be 8.5 MEUR, corresponding to an EBITDA margin of 7.5%. Compared to the actual figures for the first half of the year (H1’25 EBITDA-% 8.4%), full-year profitability will be weighed down by a seasonally weak Q3, while we expect performance to improve slightly in Q4 compared to the first half of the year as demand picks up slightly. Over the next few years, deliveries of a large order from the Finnish Defence Forces, the recovery of the agricultural machinery market and the moderate growth outlook for other customer segments will support our revenue growth expectations for Componenta. We project organic revenue growth of 16% and 8% in 2026–2027. We expect improved utilization rates in the foundry business and the Defence Industry's share of revenue to support profitability. Conversely, we expect the price increases justified by low production volumes that have supported profitability in the current financial year to be temporary in nature, which will slow down the scale of the profitability improvement in our forecast. High financing costs can be reduced as earnings levels improve either through repayment or refinancing of expensive debt financing. According to our estimates, the company will not pay taxes for several years as previous tax-deductible losses will not expire until after the turn of the decade.

Share fully priced following share price rise

The long-term DCF model gives Componenta a share value of EUR 4.3 (previously EUR 4.0). Due to the use of factoring financing, EV-based multiples are not very comparable, and the cost of debt in the DCF model is high. Assuming that factoring financing remains at the level at the end of the 2024 financial year (13 MEUR), the EV/EBIT multiples adjusted for this debt amount for 2025 and 2026 would be 19x and 10x, respectively, and the EV/EBITDA multiples would be 7x and 5x, respectively. Burdened by high financing costs, the P/E ratios are 39x and 12x for the same years. The expected return relies heavily on earnings growth in the coming years, and the valuation does not appear attractive until 2027 in our forecasts. Based on the valuation methods we use, the share is currently tightly priced.