Harvia Q2'25: Growth slowed in the US

Translation: Original published in Finnish on 8/8/2025 at 8:41 am EEST.

Harvia's Q2 figures fell short of expectations, and its result also declined year-on-year, as strong growth in the US slowed down, at least temporarily. We lowered our forecasts, and consequently, our target price to EUR 41 (was EUR 43). In our view, the share valuation (e.g., 2025 P/E over 30x) remains high. We reiterate our Reduce recommendation. 

Q2 result fell short of expectations due to slower growth in the US

Harvia's Q2 revenue increased 9% (Inderes: 13%), or approximately 5% organically (the ThermaSol acquisition supported the reported figure, but the weakening of the USD had a negative impact). Geographically, development in Europe was practically flat year-on-year, as expected. According to the company, North America grew organically in local currencies, but we estimate that growth was very modest, meaning that North America was also close to the level of the comparison period in organic terms. This was clearly weaker growth than we had expected. Thus, organic growth largely came from the APAC & MEA region, which grew significantly faster than expected, i.e. by more than 50%.

Harvia's adj. EBIT deteriorated to 8.2 MEUR, whereas we expected it to be as high as 11 MEUR. However, the actual figure includes an inventory adjustment of 0.8 MEUR, so operationally, it would be 9 MEUR. Still, this figure is slightly below that of the comparison period and well below expectations. Harvia's material margin was strong at around 66%, or over 67% excluding the aforementioned inventory adjustment, which is a very good level. Nevertheless, employee and other expenses grew faster than expected, which, together with lower-than-expected revenue growth, pushed the adj. EBIT margin for the quarter to 17%, slightly below the company's target of over 20%. The company, however, seemed satisfied with its margin for the entire H1, which was just over 20%. It appears that growth investments will therefore continue, despite the temporary weakness in margins.

Threats and opportunities in the US – we lowered our estimates

Harvia generally does not provide guidance and did not comment in detail on developments in the US market following Q2 this time either. In our view, the direct impact of tariffs is limited and manageable, but weaker demand may also be reflected in Harvia's figures during H2. On the other hand, many competitors import their products from China, which could strengthen Harvia's competitive position in the US and/or permit higher prices when competitors are forced to raise theirs. However, the company reiterated that it sees the long-term potential in the US as strong, which we agree with. For Q4, Harvia's comparison figures are strong in both the US and the APAC&MEA region, which may limit revenue growth.

We lowered our estimates for this year's EBIT by about 10% and by 5-8% for 2026-27. We continue to expect good revenue growth in the coming years and a gradual improvement in margins, which the company has not achieved in recent years due to rising costs.

High valuation is deserved, but also exposes to risks

We believe that Harvia's valuation level (e.g. EV/EBIT 2025 over 20x, P/E over 30x) is high, although the company's excellent return on capital employed and allocation, as well as its cash flow profile, will lower the multiples, making them more moderate in the coming years. However, we believe that continued strong growth in the US, the company's largest market and growth driver, is now more uncertain than before, which could slow earnings growth as seen in Q2. We believe that Harvia's capital allocation will continue to create value, i.e., the company will be able to make successful acquisitions, or, in the absence of such, return money to its owners. We also see Harvia as a potential acquisition target, but with the current valuation, we find it quite expensive for the buyer.