Translation: Original published in Finnish on 04/28/2026 at 08:00 pm EEST

Source: Inderes

HKFoods publishes its Q1 report on Wednesday, May 6. We expect revenue to have returned to growth and adjusted EBIT to have improved from the comparison period, supported by operational efficiency and a better sales mix. However, we have slightly lowered our earnings estimates for the current year due to cost pressures and typical pricing delays. With our estimates assuming moderate earnings growth, the share's valuation (2026e adj. EV/EBIT: 9x) is neutral, and the expected return remains modest in our view over a one-year horizon. We lower our recommendation to Reduce (was Accumulate) and revise our target price to EUR 1.70 (was EUR 2.00), reflecting the minor estimate changes.

We expect moderate revenue growth and improved earnings

We estimate HKFood's revenue to increase by 3% to 239.5 MEUR in Q1. In our view, growth is supported particularly by moderate demand in the retail and foodservice channels, and a sales mix weighted towards higher-margin products. We estimate that demand for poultry and ready meals, in particular, remained strong, and the timing of Easter may also have provided a small boost to sales volumes. We expect the adjusted EBITA to have improved to 5.1 MEUR (Q1'25: 4.6 MEUR). Although we believe the company's operational efficiency has improved with the efficiency program, we estimate that earnings are being weighed down by factors such as the higher electricity prices due to the cold winter earlier in the year and general inflationary pressure. Reflecting this, we have slightly decreased our Q1 earnings estimate. Our earnings per share forecast is EUR 0.00.

We expect the company to reiterate its upward guidance

HKFoods has guided for comparable EBIT to increase from 2025 (34.1 MEUR) in 2026, which we expect the company to reiterate in the report. We estimate that HKFoods continues to have good prerequisites for growing its earnings due to ongoing efficiency measures and a more favorable demand environment than last year. On the other hand, due to the tightened geopolitical situation and the conflict in the Middle East, we estimate that the company will face cost pressures this year. As pricing periods for retail are rigid, it is difficult to pass on increased costs to prices before next fall. As a result, we cut the company's adjusted EBIT estimate for 2026 by around 5% overall. We have also slightly lowered our estimates for the coming years, as cost inflation is expected to continue next year.

In the report, we pay particular attention to management's comments on the development of the cost environment and the company's ability to pass on increased costs to sales prices. Our attention is also focused on the strengthening of the balance sheet and the development of financing costs, as the company aims to reduce its high interest expenses as its balance sheet position improves and to prepare for the refinancing of the 2027 bond. The traction of poultry exports and the sustainability of domestic consumer demand are also key issues to monitor.

Expected return remains weak for the time being

We see potential for HKFoods to be a defensive dividend company, but value creation is limited by the industry's moderate growth prospects and capital-intensiveness. With our estimates assuming moderate earnings growth, the share's earnings-based valuation (2026-2027e adj. EV/EBIT: ~9x and P/E: 9-13x) is somewhat neutral and therefore not attractive to us.  Thus, the expected return currently relies mainly on a dividend yield of around 5%. In our view, the uncertainty associated with accelerating inflation increases the risk to earnings estimates in the 1–2 year horizon. In a positive scenario, a rapid de-escalation of the Middle East conflict and normalization of raw material flows could support stronger earnings development than we estimate, which would also turn the stock's expected return moderate again.