Translation: Original published in Finnish on 10/31/2025 at 8:34 am EET.

GRK’s Q3 result was better than expected, largely due to the order book being executed faster than anticipated. We did not see the need for any significant changes to our estimates. GRK's earnings growth will be limited in the near term, but the expected return from the valuation upside of the share and the dividend is still attractive. Therefore, we reiterate our Accumulate recommendation for GRK with a target price of EUR 14.50.

Order book translated into revenue more rapidly than expected

GRK's revenue grew stronger than we expected, reaching
257 MEUR (+15% y/y). This was due to the completion of several significant projects ahead of their original schedule. Consequently, the order book decreased more than estimated, despite the fact that new orders were fairly good. The 9.1% adjusted EBIT margin achieved in Q3 was also excellent, and the decrease from the strong level of over 10% in the comparison period is not a cause for concern. Thus, the projects have proceeded without major problems, and their rapid progress with a strong margin level underscores the success of GRK's project management. Q3 operating cash flow was significantly higher than the result, which was due to favorable working capital development. However, we estimate that the share of advance payments in the Stegra project, which ends next year, is significant, so we do not foresee similarly strong cash flow development in the coming years.

No material estimate changes emerged from the report

GRK naturally reiterated its recent guidance, according to which its revenue in 2025 will be 820-870 MEUR and adjusted EBIT will be 57-64 MEUR. We made no material changes to our estimates based on the Q3 report. Our 2025 estimate only increased slightly because, according to the company, several significant projects were completed ahead of schedule during Q3. Thus, to counterbalance the Q3 earnings beat, we lowered our expectations for Q4 accumulated earnings. Our estimates for 2026–2027 remained virtually unchanged because, although the order book decreased slightly due to projects progressing faster than expected, the project pipeline is strong. Additionally, management's comments about the demand situation were quite positive, though increased competition may put pressure on GRK's excellent margins, in our view.

In terms of revenue, we expect 2025 to remain GRK's peak level, at least without new acquisitions, as it will be challenging to quickly compensate for the dip in Swedish revenue caused by the large Stegra project that will end next year. In Finland, we expect GRK to grow at the market's slow pace, whereas in Estonia, significant railway projects are driving more rapid growth than this. 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 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.

Moderate valuation offers a good expected return

Based on our forecasts, the P/E ratio for 2025 is around 11x, while the EV/EBIT multiple, considering the oversized cash position, is around 6x. At the company's normal earnings level, which our estimates for 2026–2027 better reflect, the share also trades at a moderate level, below the lower end of the range we consider justified (2026–2027e EV/EBIT around 8x vs. accepted level of 9–11x). Therefore, we see slight upside in the valuation, which, together with a 5% dividend yield, raises the expected return to an attractive level. Our view of a moderate upside for the stock is also supported by the DCF model (approximately EUR 15.0).