Componenta Q1'25: Successful adaptation to the market situation

Translation: Original published in Finnish on 5/12/2025 at 9:06 am EEST.

Componenta's Q1 report was better than expected as the company managed to strengthen its profitability despite sluggish production volumes. We have raised our EBITDA forecasts for the current year, but our projections for the coming years are largely unchanged. Our confidence in the company's ability to maintain satisfactory profitability in modest market conditions has strengthened, which we see as a factor slightly reducing the level of risk. In the longer term, the stock’s valuation is balanced, but in the short term, we believe the risk/reward ratio is inadequate. We raise our target price to EUR 3.8 and reiterate our Reduce recommendation. 

Profitability pushed above forecasts

In Q1, Componenta's revenue grew by 22% to 28.8 MEUR, which was in line with our expectations. The main driver of revenue growth was the machining and service businesses acquired in Q4’24. Q1 EBITDA amounted to 2.4 MEUR (8.3% margin), beating our forecast of 1.9 MEUR. In our view, the development of profitability is encouraging, as the company has now reached a moderate level of profitability for four consecutive quarters despite weak production volumes, but there is still a way to go to achieve a satisfactory return on capital (Q2’24-Q1’25 adjusted ROIC of just under 5%). In addition to the adaptation measures, profitability was strengthened by pricing actions implemented to compensate for the low volumes.

Growth outlook for the agricultural machinery market is brightening

Componenta guides for an improvement in revenue and EBITDA from the previous financial year. We estimate that the business acquisition completed in 2024 will support revenue by more than 10 MEUR, and about half of the EBITDA for the comparison period has been accumulated after Q1'25, which means that the bar set by the guidance for the end of the year is quite low, and we expect the company to easily reach its guidance.

The order book at the end of Q1 was 17.4 MEUR. Including acquisitions, we expect organic order book growth to remain slightly negative, which supports keeping near-term organic growth expectations moderate. The company commented that order activity has remained at a good level after the end of Q1 and that the impact of US tariffs is likely to remain minor, which is nevertheless a positive signal for short-term development.

We expect revenue to grow by 17% to 113 MEUR this year (organically 3%). We expect the recovery of the agricultural machinery market to support growth from Q4'25 onwards, and more clearly in 2026. In addition to the agricultural machinery market, growth in 2026 will be supported by the peak of the large delivery to the Finnish Defense Forces. Supported by these, we expect organic revenue growth to accelerate to 17% in 2026. Based on the strong Q1 and the positive demand outlook, we increased our EBITDA forecast for the current year by 8% and expect EBITDA to increase to 8.5 MEUR this year (2024 EBITDA 4.9 MEUR).

Expected return relies on earnings growth

Based on our 2025 and 2026 estimates, EV/EBIT multiples are 15x and 8x, and the corresponding EV/EBITDA multiples are 5x and 4x. Taking into account our estimate of the impact of factoring on net debt, the 2026 EV/EBIT and EV/EBITDA multiples would be 10x and 5x, respectively. The multiples are high for this year, while neutral for next year. The P/E ratios (39x and 11x) based on our 2025 and 2026 estimates tell the same story. Our DCF model yields a value of EUR 4.0. Looking at 2027, the expected return rises to our required return level, so with a two-year horizon, the stock is fairly priced.