Translation: Original published in Finnish on 10/9/2026 at 8:00 am EEST.

We reiterate Exel Composites' Accumulate recommendation but raise our target price to EUR 18.0 (from EUR 17.5), reflecting the estimate revisions we have made. The implementation of the growth phase of the company's strategy has kicked off at a fast pace, and the measures taken in recent years are bearing fruit. A strong order book, new multi-year framework agreements, and a generally favorable market environment provide, in our view, a solid foundation for the continuation of rapid earnings growth. We believe that the expected return of the share, driven by earnings growth in the coming years, remains attractive.

Shift to growth phase in strategy execution

Exel is a specialist in the design and manufacture of composite products suitable for various demanding industrial applications. The company successfully completed the stabilization and profitability phase of its two-phase strategy as planned by the end of 2025. In 2026, the company has transitioned to a growth phase, within which it aims to achieve its ambitious financial targets set for the end of 2028 (revenue of 200 MEUR, adj. EBIT margin > 10%). During the stabilization phase, the company cut fixed costs and optimized its factory network, among other things. These measures, together with increased factory utilization rates, have already significantly improved profitability (H1'26: adj. EBIT-% 6.2% vs. 2025: 3.5%). In addition to the streamlining of the factory network, the increased capacity utilization rates were driven by commercial successes. By far the largest of the recent contracts is the historically large delivery contract for carbon fiber planks concluded by Exel’s joint venture in India in Q3'26 with the wind power customer Suzlon Energy. Additionally, significant wins include the two framework agreements for composite conductor cores announced at the end of 2025. Following the recent Suzlon contract, we believe attention will shift particularly to monitoring the delivery capability and profitability of the Indian plant as production volumes increase significantly in the near future.

We expect rapid growth in the coming years

The company's target market growth picture is forecast to be on a healthy footing, with the market growing by an average of 5–7% per year in the coming years, depending on the source. In our view, the brightest outlook is in the Energy customer industry, which is Exel's most important growth driver, as well as in defense applications. The sectors are supported by both the energy transition and the growth of defense investments. Reflecting recent significant contracts, we expect the company's revenue to grow by as much as 30% this year. We forecast the strong growth to continue in the coming years as well (2027e–2028e: 12–23% per year), but we still do not expect the company to fully reach its target (revenue 2028e: 184 MEUR). We also expect the company's margins to rise alongside revenue, but to remain below the target level (2027e–2028e adj. EBIT-%: 6.4–8.7%), as we estimate that the margin profile of volume applications at the India plant is lower than that of Engineered Solutions. In our view, the most significant forecast risks relate, in addition to investment-driven demand, to the growth rate and profitability of volume growth at Exel's Indian plant, as well as the delivery timing of larger framework agreements.

Earnings growth makes the expected return attractive

In our view, the stock's valuation is high for this year based on EV multiples (EV/EBIT 16x) despite significant earnings growth. However, with the recent order announcement, strong order book, and favorable market environment, we believe it is justified to already shift our focus to next year. With our robust earnings growth forecasts, the EV/EBIT multiple for 2027 (just under 10x) drops slightly below the range we currently consider justified (EV/EBIT 10x–12x). Reflecting the current outlook, however, we believe the stock can be valued closer to the upper end of the range, and we continue to see the risk-adjusted expected return as attractive. Our positive investment view is also supported by our DCF model, which is at the level of our target price.