EcoUp extensive report: Insulation demand prospects are on an upward trajectory

Automatic translation: Originally published in Finnish on 14.5.25 at 9:14 AM EEST. Please note that the automatic translation of the content currently only covers the text visible here and may contain errors. You can provide feedback on the quality of  the translations and possible errors here.

We reiterate our Accumulate recommendation for EcoUp and our target price of EUR 2.5. EcoUp consists of Insulation and Technology businesses that operate in the construction value chain. In the short term, the market turnaround in detached house construction will accelerate the growth of the Insulation business, and in the long term, both businesses will be supported by the trends of circular economy and sustainable construction. The improved margin in the coming years makes the risk-return ratio attractive for the next year, even though the share is neutrally valued in the short term.

Insulation business in the main role

In both of its business operations, EcoUp manufactures new, higher value added products from recycled or waste materials. EcoUp's backbone is the Insulation business, in which it sells insulation materials made from waste paper, among other things, as well as related installation services to construction companies, house factories, hardware stores and consumers. In addition, EcoUp has an early-stage Technology business in the development phase, which can be used to process recycled products from waste demolition wool, for example, to replace concrete products. With its strategy targeting 2026, EcoUp is seeking growth in both business segments. EcoUp's recent years have included several market turns, including a sudden acceleration of cost inflation in both businesses, an insulation demand peak created by the energy crisis, and a collapse in detached house construction activity due to rising interest rates. However, the short-term outlook for the Insulation business is now brighter, as falling interest rates support detached house construction activity, which is important for EcoUp, and the company has achieved brisk growth with its insulation renovation concept. In addition, the insulation sales and installation company in Sweden acquired by EcoUp at the beginning of fiscal year 2025 will strengthen export capabilities, although the positive earnings impact of the arrangement requires a profitability turnaround to be achieved in the acquired entity. In the long term, EcoUp is excellently positioned in the green trend of construction. In our view, the company’s main risks relate to detached house construction activity affecting the development of the Insulation business and the success of the profitability turnaround in Sweden, as we believe that the Technology business currently has a limited impact on the group’s value creation.

Margin leap expected next year

Reflecting the turnaround in detached house construction and the impact of the acquisition, we forecast Insulation business revenue to grow by 23% and 7% in 2025–2026. Thus, we expect the Insulation business' revenue to fall at the lower end of the company's 2026 target range of 40–45 MEUR. We expect technology sales to amount to 4 MEUR next year in the form of equipment and product sales. In 2026, our estimates indicate that the company will reach its Insulation business EBITDA target of 6–8 MEUR, while we expect the Technology business EBITDA to remain at zero. Achieving our 2026 estimates requires a continuation of the recovery in detached house construction and one equipment delivery in the Technology business.

Earnings growth makes the risk-return ratio attractive

We value EcoUp using a sum-of-the-parts (SOTP) model and also a DCF model. With our sum-of-the-parts model, which emphasizes the short term, we arrive at a value of approximately EUR 2.0–3.2 per share. Based on our estimates for the current year, the share is not cheap, but due to the approaching earnings growth, the sum-of-the-parts valuation turns attractive. Earnings growth and the expected return in the coming years are supported by the recovery in detached house construction, although there is uncertainty regarding the pace of market growth. In our calculation, the mature Insulation business accounts for approximately 90% of the group's value. Also, the DCF (close to EUR 3 per share) gives a positive view of the valuation.