Exel Composites Q2'25: Market seems to be holding on

Translation: Original published in Finnish on 8/15/2025 at 9:20 am EEST.

Exel's Q2 operational development was unsurprising given the preliminary information provided. However, the company's market comments leaned cautiously positive in our view, which led us to make small positive forecast revisions. Similarly, with the strengthened order book, nascent market recovery and progressing earnings turnaround, we are already shifting our focus more strongly to next year and see sufficient upside in the stock's valuation. Thus, we raise our recommendation to Accumulate (was Reduce) and our target price to EUR 0.43 (was EUR 0.40)

With the preliminary information, the key lines were already known

Exel's revenue decreased by 7% year-on-year and settled at 24.8 MEUR. The development was mainly due to the timing of deliveries related to the closure of the Belgian factory and the transfer of production to other factories. Correspondingly, Exel's adjusted EBIT settled at 1.1 MEUR, supported by a high material margin. We assume this was partly influenced by the company's comments on the favorable development of raw materials, and possibly certain factors behind the revenue structure. However, reported earnings were weighed down by small one-off items, while on the bottom lines, net financing expenses were significantly higher than our expectations, which was due to non-cash flow related FX changes on intra-group loans.

However, reflecting the continued positive order intake (28 MEUR) and the relatively low level of deliveries, the company's order book grew to 44 MEUR, which provides support for the short term, even though we estimate the order book to be structurally longer than typical.

Guidance unchanged and minor estimate changes

As expected, Exel reiterated its guidance and expects its revenue to increase (2024: 100 MEUR) and its adjusted EBIT to increase significantly compared to last year (2024: 1.7 MEUR). The company commented that the year had remained positive and reported it had successfully navigated the current uncertain business environment. Furthermore, based on the comments, it appears to be a relative winner in tariff policy through its global structure, and it also stated that it had already secured supply agreements thanks to the tariffs. In other respects, market comments were at least cautiously positive, considering the uncertainty of the operating environment and Exel's pro-cyclical business nature. However, due to increased uncertainty, we see a certain risk in the development of the situation, considering the demand situation that has fluctuated frequently in recent years.

Reflecting an unsurprising report, our forecasts for the current year's revenue (108 MEUR) and adjusted EBIT (5.8 MEUR) remain unchanged. Instead, for the coming years, we made minor upside revisions (+2%) to our revenue forecasts, supported by a strong order book and market comments. However, the overall forecast revisions were minor. We also made minor revisions to our cost estimates (mainly depreciation), which led to a slight increase in our earnings estimates for the coming years (adj. EBIT 2026e-27e: +3-4%).

Eyes again on the longer game

The stock's valuation picture is elevated for this year (2025e: P/E > 100x, EV/EBIT 11x, EV/EBITDA 6x) relative to our accepted valuation (P/E 10x-14x, EV/EBIT 8x-12x, EV/EBITDA 5x-8x). In contrast, looking at next year, the multiples (P/E 10x, EV/EBIT 8x) are at the lower end of the ranges. However, with a strengthened order book, cautiously positive market comments, and an ongoing earnings turnaround, we see sufficient upside potential in next year's multiples. Due to the aforementioned factors, we are also prepared to take a slightly longer-term view. Our view on the stock's upside potential and its long-term potential is also supported by our DCF calculation (EUR 0.45/share), which is above the share price.