Solwers: Acquisitions factored into forecasts

Translation: Original published in Finnish on 1/7/2026 at 8:34 am EET.

Before Christmas, Solwers announced acquisitions in Poland and Sweden, and we have now incorporated them into our forecasts. Based on current information, we view the acquisitions neutrally, as the highly profitable targets raised our earnings estimates, but at the same time, they further increased the company's high financial leverage, which also keeps the risk profile elevated. We reiterate our target price of EUR 2.5 and our Accumulate recommendation.

Acquisitions in Poland and Sweden after a long break

In December, Solwers acquired its first operational company in Poland, the accounting firm Szwak & Spółka. The acquired company's revenue in 2024 was 1.9 MEUR, and its adjusted EBIT was 0.46 MEUR. Solwers' subsidiary WiseGate AB, in turn, acquired the Swedish company Odigo Consulting AB. Odigo specializes in technical services for the manufacturing and process industries. Its revenue for the financial year ending in June 2025 was 2.1 MEUR and EBIT was 0.26 MEUR. The transaction prices were not disclosed in the acquisition announcements, but Solwers has historically paid moderate EBIT multiples of around 5-6.5x for its acquisitions. We have estimated these transactions to be at the upper end of that range due to their strong profitability profile. Both companies will be reported as part of the Group from December 1, 2025.

The acquisitions supported our earnings estimates but increased the already high debt level relative to the Group's earnings at the bottom of the cycle. If the earnings improvement we forecast for the company has started to materialize, there are good grounds for increased M&A activity, but better visibility on this and the acquisition prices will only be available in the Q4 report. The company's net debt/EBITDA ratio was high at around 5x in the H1'25 report. The company aims to reach normal covenant levels (below 3.5x) by the end of June. With the current net debt of ~29 MEUR, this would imply an annual EBITDA of around 8 MEUR. Our own estimates are in line with this.

We expect clear earnings growth from the bottom of the cycle

Solwers' earnings trend stabilized in Q3, and its average number of employees decreased to 687 (Q3'24: 717 employees). The company also commented that the order book has increased, and it appears that going forward, the workload relative to personnel is in a better balance than before. We expect organic revenue to continue growing during Q4'25. The company's earnings should also recover as utilization rates improve and savings are realized.  From 2026 onwards, we also expect market price levels to recover as investment activity picks up, which will more clearly support the company's margins. Currently, the key question remains what the company's normal profitability level will be once the market finally improves. In our view, it is clear that it will be better than the 2024-25 level, which was burdened by a weak cycle and one-off costs, but a return to the 2019-2023 average (EBIT 7.9%) seems unlikely. Our profitability forecasts are clearly below 2019-23 levels, but we still expect a significant improvement in profitability in the coming years.

Achieving earnings growth is critical

Solwers' risk profile is dependent on its normal profitability level, as the company's debt servicing capacity and the associated debt risk level depend on the earnings level. Cutting a few corners, if the profitability level were to remain close to the levels seen during 2024-2025, the share would be expensive, the M&A strategy would have failed, and the debt burden would be a challenge. Similarly, if profitability recovers to the level predicted by our forecasts, the stock valuation will be quite favorable, and the level of debt will be under control. If profitability were to recover even close to the average levels of 2019-2023, the stock would be strikingly cheap (P/E 5-6x). In our view, the stock's risk/reward ratio is attractive at the current price. However, the slope of earnings growth is still unclear, which keeps financial risks elevated.