Translation: Original published in Finnish on 6/5/2025 at 8:29 am EEST.

Digia has continued its systematic and successful strategy execution for the last ten years. Currently, the focus is on internationalization, which was further strengthened by an interesting Polish acquisition. We expect the company to continue its systematic strategy implementation, moderate organic growth in the coming years and accelerate growth through acquisitions. We forecast profitability to increase slightly and to be clearly above the sector and slightly below its own potential. The share's valuation is attractive from several perspectives (2026e P/E 10x and EV/EBIT 8x). We reiterate our target price of EUR 8.3 but, driven by the share price appreciation, downgrade our recommendation to Accumulate (was Buy).

Digia's offering covers the entire IT life cycle, which responds well to market trends

Digia is an IT service company operating mainly in the Finnish market, but it has also expanded more strongly into the Swedish and Polish markets through acquisitions. The company's offering covers the IT lifecycle from the development of digital services to their maintenance, which is a clear competitive advantage in the current market situation. The company's traditional spearheads are integration expertise and ERP systems, as well as now also secure software development, which are strong individual competencies in the current market situation. Demand has continued to shift from dot-like purchasing towards a comprehensive need for solutions, where Digia's competitive edge is at its strongest. Demand has continued to shift from dot-like purchasing towards a comprehensive need for solutions, where Digia's competitive edge is at its strongest. Digia also has its own well-established software products that bring stability, but whose potential is still unexploited. With its latest and interesting acquisition, the company expanded into the Polish market, strengthening its price competitiveness and integration expertise.

Strategy execution has been continuous and effective; now the focus is on internationalization

Digia has executed its strategy well and systematically over the past ten years. The strategy periods have been a natural continuation of the previous ones. The current strategy period is coming to an end, and the company has achieved or is very close to achieving its key financial targets for growth (>10%), profitability (EBITA: 12%) and internationalization (>15% of revenue). We also estimate that the next strategy period will be a natural continuation of previous ones, and we expect internationalization to remain a clear focus. With the latest acquisition, the company's vision for internationalization is to "be a Northern European Integration Powerhouse". In addition, we estimate that Digia will focus on a few good growth areas for it, where the company has already demonstrated a competitive advantage (security and defense sector, integration and data expertise, and its own product areas). We also estimate that the company will repeat its financial targets for the next period.

We forecast stable earnings growth of around 10% in the coming years

We estimate that Digia's revenue will grow organically by 2-5% in 2025-2028. In addition, we expect the company to continue to strengthen its service offering and grow through acquisitions, which is made possible by its cash and strong cash flow. We expect the EBITA margin to increase to 11% by 2028, supported by better operational efficiency and scalable solutions, although there is also potential for over 12%. Digia's risk profile is among the lowest in the sector, and the company's key risks relate to customer demand (market reversal and its timing), project management, return on investments and acquisitions.

Valuation picture is attractive

Digia has strengthened its profile as an earnings growth company and has risen to become one of the sector's top performers, which supports the share valuation. Based on the valuation methods we use, the stock is attractively (2026e P/E 10x and EV/EBIT 8x) or even very attractively priced from almost all perspectives. When examining our cash flow calculation and relative valuation level, the stock is very attractively priced. In addition, the company's risk profile is among the lowest in the sector. In summary, we see the fair value of the share in the range of EUR 8-9 per share.