Kreate Q3'25 preview: Share price rally turned the expected return insufficient

Translation: Original published in Finnish on 10/6/2025 at 11:00 pm EET.

Kreate will report its Q3 results on Wednesday, October 22, at approximately 8:30 am EET. We expect revenue to have continued its steady growth in Q3, supported by a strong order book, and earnings to have improved moderately with rising volumes. Kreate's share has risen by some 15% since the Q2 earnings, as a result of which the valuation of the share has become neutral. Thus, a small breather is justified in the short term, even though the share still has potential in the longer term as earnings growth continues. We revise Kreate's target price to EUR 9.40 (was EUR 9.20), but due to the share price increase, we lower our recommendation to Reduce (was Accumulate).

We expect revenue growth to have continued in Q3 and profitability to have improved moderately

We expect Kreate's revenue to have grown by around 9% in Q3 to 84.7 MEUR, supported by a strengthened order book (Q2'25: +40% y/y). In our estimation, the Finnish business has continued to perform well, and we forecast revenue to have increased by approximately 9% to 73.6 MEUR, driven particularly by railway construction projects. We estimate the significantly smaller Swedish business to have grown by approximately 10% to 11.1 MEUR, driven by previous growth investments and market growth. Our Q3 forecast for adjusted EBITA is around 3.6 MEUR (Q3’24: 3.1 MEUR), corresponding to a margin of 4.3%. We estimate that the moderate improvement in profitability was supported by volume growth and the progress of projects in Sweden and on the rail side.

Guidance anticipates growth weighted towards the end of the year

Kreate estimates in its guidance that its 2025 revenue will be 290-310 MEUR (2024: 275.5 MEUR). The company estimates EBITA to be 9-11 MEUR (2024: 8.8 MEUR). Earnings and revenue accumulation will again be heavily weighted towards the second half of the year, but achieving the guidance still requires a stronger H2 from the company compared to the previous year. Our current and near-term forecasts remain unchanged, and we expect Kreate's 2025 revenue to increase by approximately 9% to 300 MEUR and adjusted EBITA to 9.7 MEUR (EBITA%: 3.2%). Revenue growth is driven by projects materializing from the order backlog, and railway projects in the development phase that are not yet booked in the order backlog. In addition, the company estimates that approximately 169 MEUR of the order book will be realized during the current year, which we believe supports reaching the revenue guidance. Profitability, in turn, is supported by growing sales volumes and an increase in the relative share of the more profitable Swedish business.

We also see this year's strengthening order backlog, the progress of large won projects, and the gradually recovering market driving Kreate's earnings growth in the coming years (2024-2027 EPS CAGR: ~25%). On the other hand, the risks include prolonged project development phases, project postponements, and other project-related risks.

Valuation picture has turned neutral with the share price increase

With our current year estimates, Kreate's share is valued at an EV/EBIT multiple of 12x, and the corresponding P/E multiple is 15x. Relative to its short-term development, the stock is already priced quite fully compared to our acceptable valuation (EV/EBIT: 10-12x, P/E: 10-12x). If the market starts to pick up and the earnings growth that we forecast materializes, the valuation already looks reasonable for the coming years (2026-2027e avg.: EV/EBIT 9x, P/E 11x). However, in our view, this does not offer sufficient upside to make the expected return attractive even in the longer term, as some of the potential has already materialized with the share price increase. Thus, the expected return, which is based on a dividend yield of around 5%, no longer appears sufficiently attractive. The DCF model value, which is around our target price, also supports moving to the sidelines for now.