Translation: Original published in Finnish on 04/20/2026 at 08:20 am EEST

Koskisen is transitioning from a period of very active investment in recent years towards a slightly calmer phase of profitable growth. In addition, Koskisen's performance should gain traction when global construction eventually recovers from the weak cycle that has prevailed for years. However, we believe that this is appropriately priced into the share, as most valuation methods indicate that the share's valuation is quite neutral. We reiterate our EUR 9.00 target price and Reduce recommendation for Koskisen.

Koskisen is a wood products company

Koskisen is divided into the Sawmill Industry and Panel Industry, where the company’s main products are softwood sawn timber, processed timber, birch plywood and chipboard. The company’s entire production is in Finland. About 70% of the Group's revenue comes from Europe and both businesses (and especially the Sawmill Industry) are cyclical and volume-driven by nature. Koskisen's market is international and grows slowly organically but is large relative to the size of the company. With its quality strategy, Koskisen aims to find pockets on the market where customers value highly customized, high-quality products and accept a price premium on them. We believe the competitive dynamics of the sawmill sector are largely brutal and the margins are thin, whereas in the Panel Industry, with the products’ higher value-added, we believe the average profitability potential of the segment is better. Koskisen's main risks include demand sensitive to the general economy, price fluctuations, tightening competition, and the structurally tight timber market in Finland.

Koskisen’s target is to be able to generate 500 MEUR in revenue in 2027 and an average EBITDA of 15%. The over the cycle growth target would require M&A transactions in the fragmented sawn timber sector, even after last year's acquisition of Iisveden Metsä. We consider the margin target challenging, considering the structural profitability levels of the company’s businesses.

There is clear room for improvement in earnings

Koskisen’s demand outlook is supported by several drivers, like the growing popularity of ecological wood construction. Cyclically, the construction market has been in a slump in recent years. The next cyclical turnaround will likely be positive, but the outbreak of the war in Iran and the at least temporary rise in market interest rates it caused are new risks to the recovery timeline. A significant supply disruption still prevails in the Panel Industry in Europe, the root cause of which is Russia's war of aggression in Ukraine. In addition, the company's recent investments in the Sawn Timber Industry, the synergies from the acquisition of Iisveden Metsä, and the ongoing investment program in the Panel Industry have only partially delivered the targeted benefits from these investments. Therefore, we expect Koskisen’s earnings trend, which made an upturn last year, to remain on the same path in the next few years. However, we have slightly lowered our estimates due to the volume and cost pressures likely to result from the war in Iran this year. In our forecasts, the company's revenue grows on a volume-driven basis by approximately 8% per year until 2028, and the adjusted EBITDA % gradually increases from 8% in the last 12 months to around 11%. In both units, margins are limited by Finland’s tight timber market and, consequently, high log prices.

We feel the price tag is on the right level

Koskisen’s 2026 and 2027 EV/EBITDA ratios are around 7x and 6x, and the P/B ratio (2026e) is around 1.3x. The multiples are within our acceptable ranges, taking into account the company's estimated return on capital and risk profile. The DCF is also close to the current share price. Thus, Koskisen's expected return based on earnings growth, falling multiples (2025 ACT P/E > 20x), and a dividend of around 2% is, in our view, below the required return. Thus, we maintain our cautious stance on the stock, although there could be leverage in the medium term if the European construction and economic recovery surprised positively during 2026-2027.