Translation: Original published in Finnish on 10/22/2025 at 8:45 am EEST.

Reflecting mildly positive estimate revisions, we raise our target price for GRK to EUR 14.50 (was EUR 14.00) and reiterate our Accumulate recommendation. We still consider the expected return, consisting of upside in the share valuation and the dividend, attractive. GRK will publish its Q3 report on Thursday, October 30. 

We slightly increased our estimates after profit warning

GRK issued a positive profit warning last week regarding its current year's revenue and adjusted EBIT. GRK now estimates that its revenue will be 820–870 MEUR (previously 730–800 MEUR) and its adjusted EBIT will be 57–64 MEUR (previously 45–55 MEUR) in 2025. While the profit warning was not a surprise to us, it was slightly steeper than expected. Our previous comment on the profit warning can be found here.

We have slightly raised our estimates for GRK for the current year, as the profit warning was stronger than we expected. We expect GRK's revenue to grow by 17% to 853 MEUR and by 33% to 60.5 MEUR this year, around the midpoints of the guidance ranges for the current year. GRK's growth and earnings growth are underpinned by H1 figures and effective sales and project implementation. Conversely, we have only made minor positive adjustments to our estimates for the coming years following the profit warning. In terms of revenue, we expect 2025 to remain GRK's peak level, at least without new acquisitions, as it will likely be challenging to quickly compensate for the dip in Swedish revenue caused by the large Stegra project that will slow down and eventually end next year. In Finland, we expect GRK to grow at least at the market's slow pace, whereas in Estonia, significant railway projects are driving more rapid growth than this. Overall, the demand outlook for infrastructure construction seems fairly positive in all of GRK's operating countries. In our forecasts, the group's earnings will also decline in 2026-2027, after which the company should return to a growth path. The decline in earnings in our estimates is also influenced by the profitability margin normalizing slightly from the excellent levels of 2025 due to the decline in revenue. In 2028, however, we expect the company to exceed its revenue target of 750 MEUR and achieve the targeted adjusted EBIT margin of over 6%. The main risks to our forecasts are project risks, individual large projects, intensifying competition, the additional financing needs of the largest customer Stegra, and the possible consequences of the Finnish competition investigation.

We expect company's earnings growth to have continued in Q3

We expect GRK's revenue to have grown by 3% to 232 MEUR and its adjusted EBIT to have declined by approximately 15% to 19.2 MEUR in Q3, despite the exceptionally high growth of the comparison figure and the successful execution of projects. We estimate that new orders amounted to approximately 175 MEUR. Consequently, we anticipate a double-digit percentage decline in the company's order book, particularly in relation to its Swedish operations (Stegra project), bringing it to approximately 730 MEUR. In addition to the earnings and order developments, we will monitor management's comments on the Stegra project situation, which requires additional funding. While we do not believe GRK faces credit loss risks in connection with the project, we estimate the customer's financial situation may affect schedules for remaining work and margin potential, particularly next year.  

Expected return remains sufficiently good

Based on our GRK estimates, the P/E ratio for 2025 is 12x, while the EV/EBIT multiple, accounting for the oversized cash position, is approximately 7x. We expect dividend yields for the next few years to be just under 5%. In our 2026–2027 projections, the share price is already at the lower end of our approved ranges (2026–2027e EV/EBIT 8x–9x and approved range 9–12x). Consequently, we see slight upside in the valuation, which, together with the dividend yield (4–5%), brings the expected return above the required return. Our view of a moderate upside for the stock is also supported by the DCF value (EUR 14.6).