Translation: Original published in Finnish on 5/4/2026 at 6:20 am EEST.

Incap's Q1 figures we weak and clearly worse than expected, especially due to lower-than-anticipated revenue. However, the company reiterated its guidance, and comments on order book development were exceptionally positive. However, we slightly lowered our near-term volume forecasts and, consequently, our earnings expectations. Reflecting these changes, we revise our target price for Incap to EUR 12.00 (was EUR 13.00) and downgrade our recommendation to Accumulate (was Buy). We still expect the company to achieve earnings growth already in Q2, which, combined with a reasonable earnings valuation, still creates an attractive expected return for the year despite increased short-term risks. 

The year started clearly weaker than the company's baseline

Incap's revenue grew by 7% to 56 MEUR in Q1, and adjusted EBIT decreased by 13% to 5.2 MEUR. The figures include less than half a quarter from the Lacon acquisition. The revenue level was significantly weaker than we expected. The biggest surprise for us was the deliveries that were postponed due to component availability challenges, but revenue was also burdened by somewhat sluggish demand and currencies. The company did not properly break down the structure of its growth, but we estimate that organic volume development was approximately stable, and Lacon's contribution was slightly larger than the currency headwind. Incap's adjusted EBITA (same as adj. EBIT) decreased by 20% to 5.2 MEUR in Q1, whereas our forecasts had anticipated a clear organic and inorganic earnings improvement already at the beginning of the year. The main reason for the decline in operating profit was the low revenue level, but personnel expenses also clearly exceeded our forecasts. On the lower lines, financial costs were positive, contrary to our expectations, and the tax rate was normal. Thus, Q1's reported EPS of EUR 0.13 reached the comparison figure and fell slightly less short of our expectations than the operating result. In terms of cash flow, the report was also weak, as delayed deliveries and normal seasonal factors significantly increased working capital, pushing cash flow substantially into negative territory in Q1.

Achieving the guidance requires a new gear already from Q2

Incap reiterated its guidance for the current year that its revenue and adjusted EBITA will be clearly higher than last year. Last year, Incap recorded an adjusted EBITA of 26 MEUR on revenue of 215 MEUR. In our view, the guidance practically implies 20-40% growth for both revenue and operating profit. Incap was about 2 MEUR behind in terms of profit in Q1, but the company commented on the development of its order books in an uncommonly positive light, and the revenue that was missing from Q1 will be delivered in Q2. The Lacon acquisition will also support the company more in the latter part of the year than in Q1. Against this backdrop, we believe achieving the guidance is still realistic, although the back-loaded nature of the outlook inevitably carries some risk given the prevailing macroeconomic and geopolitical situation. However, we lowered our estimates for Incap for this year (including the Q1 miss) and the coming years by only 2-7%, and we expect the company to be able to catch up for this year due to the Lacon acquisition and a pick-up in organic growth. We now expect Incap's revenue to grow by 33% to 286 MEUR this year and adjusted EBITA by 22% to 31.9 MEUR.  In the coming years, we expect the company to significantly improve its earnings as volume growth accelerates due to a gradual recovery in the economic situation and certain customer wins at the Indian factory.

Valuation is attractive, even if the risk/reward suffered from Q1

Incap’s adjusted P/E ratios for 2026 and 2027 based on our estimates are 13x and 11x, and the corresponding EV/EBIT ratios are 9x and 7x. Especially on an EV basis, the multiples for this year are at the lower end of our acceptable ranges for the company. In our view, the expected return, mainly consisting of earnings growth, is higher than the required return in the short and medium term, even though the disappointing Q1 report slightly hurt the share's short-term risk-reward ratio. A significant relative discount and a DCF value around our target price support a positive view on the stock.