Translation: Original published in Finnish on 10/8/2025 at 7:30 am EEST.

Harvia is a leading company in its field, boasting clear competitive advantages and strong growth potential. All of this enables good earnings growth and ROIC, as well as value creation, in addition to which the company's capital allocation to acquisitions has been successful. After the share price declined following the Q2 report, we believe that the valuation is at an acceptable level and that the share therefore offers attractive expected returns through earnings growth. We raise our recommendation to Accumulate (previously Reduce) but revise our target price to EUR 40 (previously EUR 41) due to slightly lower estimates.

Leading company on the growing sauna and spa industry

Harvia is the world's largest sauna and spa company. The company itself estimates its market share to be around 5%, which means that its share of the relevant product market for Harvia would be around 10%. Harvia has significantly increased its market share over the past seven years (both through acquisitions and organically). Growth has largely come from North America, which now accounts for 39% of Harvia's revenue (H1'25). After major fluctuations in 2020-2023, the global market is returning to growth, which Harvia expects to exceed 5% p.a. in the coming years.

Harvia has clear competitive advantages and low capital requirements that support strong value creation

In our opinion, Harvia has several clear competitive advantages that support the profitable growth and value creation of the company. They relate in particular to the market for traditional sauna heaters and their components, which account for just over 50% of Harvia's revenue. We believe Harvia's competitive advantages are: 1) vertical integration and own design, 2) economies of scale (in production), 3) strong brand(s), 4) broad and long-term distribution relationships. We feel that the company has been very successful since 2014 in driving the international growth of Harvia and strengthening its competitive advantages. In our opinion, the company has also expanded its competitive advantages to the ready-made sauna product group (~25% of revenue). We believe the company has been successful in creating value by allocating capital to acquisitions, and the ThermaSol deal made in 2024 looks promising as well. The competitive advantages and low capital requirements enable the company an ROIC of above 20% in the coming years.

We believe Harvia will continue to gain market share and achieve its targets

Harvia updated its targets in 2024, which include annual sales growth of 10% (including acquisitions) and an operating profit margin of over 20%. We believe that Harvia will achieve these targets, as the ThermaSol acquisition led to growth of around 15% p.a. in 2024-25, and we estimate the organic growth rate alone will be close to 10% in the coming years. As in recent years, growth will be driven by non-European regions, with growth in the US, in particular, supported by increased expansion in steam and infrared products. We believe this will allow Harvia to gain further market share in the US. We also expect Harvia to maintain profitability at the target level of 20-23%. However, growth investments are reflected in the margin, which is not scaled up significantly in our forecasts despite the growth. In this report, we have lowered our margin growth expectations slightly for the coming years, reducing our earnings estimates by 2-5% for 2026-27.  

Earnings growth supports good expected return

Harvia’s valuation level is still somewhat high for this year, but we believe it is an acceptable level for next year (EV/EBIT 15x, P/E 20x). We consider the company's return on capital employed and its ability to allocate and generate cash flow excellent and that multiples will, therefore, moderate in the coming years. We believe that Harvia’s capital allocation will continue to be value-creating, and thus channeling cash either to acquisitions and/or larger dividends would support the investor's expected return. We also see Harvia as a potential acquisition target, but with the current valuation, we find it quite expensive for the buyer. Overall, we think the expected return is good.