Translation: Original published in Finnish on 07/31/2026 at 07:42 am EEST

Incap's Q2 was operationally in line with the estimates that had been lowered after last week's profit warning. The report also did not indicate that the margin pressure mentioned in the company's profit warning would be a temporary factor, as its root cause is likely increased competition in India. Following the Q2 report, we did not make changes to the company's operational estimates, which we lowered across the entire forecast horizon after the profit warning. We reiterate our EUR 9.00 target price and Accumulate recommendation for Incap, as the stock's valuation has been trampled down to a low level (EUR 2026: EV/S 0.7x, EV/EBIT 8x).

There were no longer any surprises in the Q2 figures

Incap’s revenue grew by 34% in Q2 to 74 MEUR, which was well in line with our estimates. Most of the growth came inorganically through the Lacon acquisition, but organic growth also likely turned to 4% after several weak quarters, even though delivery delays due to material availability challenges continued in Q2. Incapadjusted EBITA (same as adj. EBIT) increased by 4% to 6.5 MEUR in Q2. The operating result was almost in line with our estimates, which decreased significantly after last week's profit warning. The modest profitability (Q2: adj. EBITA-% 8.8%) compared to Incap's accustomed baseline was explained by Lacon's lower profitability than Incap's and delays caused by component availability challenges. In addition, the company commented that competition in the Indian market has intensified, which revealed the source of the "margin pressure" mentioned in the profit warning. However, it was difficult to verify the margin pressure from the Q2 cost structure. In the lower lines, the tax rate rose to a high level, as the repatriation of the Indian company's profits to the parent company resulted in an additional 1 MEUR tax in Q2. In the comparison period, the corresponding tax entry was even larger, so Incap's EPS grew clearly to EUR 0.10 in Q2, but remained below our estimate, mainly due to taxes.

Margin pressure may not ease quickly

Incap naturally reiterated the guidance it downgraded last week, based on which its 2026 revenue is 270-290 MEUR (previously: clearly growing) and adjusted EBITA is 26-29 MEUR. Based on the comments on the earnings day, the margin pressure in India is not easing quickly, so we consider the structural cut in margin estimates we made in connection with our preview to be in the right direction, given the current information. Thus, we made no changes to our operational estimates in connection with this update, but we raised our tax estimates after Indian withholding taxes surprised negatively for the second year in a row.

We now expect Incap's revenue to grow by 31% this year to 280 MEUR and adjusted EBIT by 2% to 26.7 MEUR. Revenue growth is driven especially by the Lacon acquisition and organic growth turning slightly positive in H2. We estimate, however, that margin pressures and raw material availability will keep Incap'searnings in organic decline for the fourth consecutive year, as we believe Lacon's inorganic contribution to the operating result is somewhat positive. In the coming years, we estimate the company will be able to grow organically at a rate of around 6-10% due to a gradual economic recovery and certain customer wins. However, we now expect the company's adjusted EBITA margin to remain at around 10%, which is clearly a lower estimate than the company's profitability in previous years.

Valuation keeps the stock on the buy side

Incap’s 2026-2027 adjusted P/E ratios based on our estimates are 12x and 10x, and the corresponding EV/EBIT ratios are 8x and 6x. We consider the multiples cheap, although the EV/EBIT ratio is doomed to remain in single digits until the organic earnings growth trend of recent years reverses and prevailing uncertainties ease. The relative markdown of the share is significant, and the volume-based premium that traditionally guaranteed high margins for Incap has also melted away (2026e: EV/S 0.7x). The DCF value also supports a positive view on the stock.