Translation: Original published in Finnish on 10/29/2025 at 07:30 am EET

Kreate announced on Monday that it is acquiring all shares in SRV's subsidiary SRV Infra Oy. The enterprise value of the transaction is approximately 30 MEUR, and the purchase price will be paid in cash. This acquisition will expand Kreate's offering in Finland into an entirely new business area, underground rock construction. The business to be acquired is remarkably profitable and supports Kreate's improving profitability in our estimates. With SRV Infra's actualized earnings, the transaction price can be considered neutral (EV/EBIT 11.5x). On the other hand, we believe that the business has continued to develop favorably this year and that the earnings level will be at least absolutely higher than last year. We feel the transaction strengthens Kreate’s outlook for profitable growth in the coming years. We raise Kreate's target price to EUR 11.0 (was EUR 10.5), but reiterate our Reduce recommendation.

Kreate expands into a new business with the acquisition

On October 27, Kreate announced that it is acquiring all shares in SRV's subsidiary SRV Infra Oy. With the acquisition, Kreate expands its offering in Finland into an entirely new business area for the company, underground rock construction. In addition, the acquisition strengthens Kreate's existing foundation and special foundation construction business, in which the company already operates. The long-term framework agreement with SRV, concluded in connection with the transaction, also provides stability and visibility for the coming years, reducing the risks of the acquisition. Cooperation is also possible in the future on the back of the framework agreement, e.g., in challenging business premises projects where both infrastructure construction and building construction play a role. The deal has no impact on Kreate’s guidance for 2025.

Acquisition target supports profitable growth in coming years

SRV Infra’s revenue in the financial year 2024 was 52 MEUR, or approximately 19% of 2024 Kreate’s revenue. SRV Infra’s  EBIT was 2.6 MEUR and the margin was 5.0%. Thus, the profitability of the acquisition target is clearly higher than Kreate's current profitability level. In its financial reports for the current year, SRV has emphasized stronger margin generation in infrastructure construction than in the comparison period. Considering this, it is likely that SRV Infra's EBIT has improved at least somewhat during the current year compared to 2024 levels. Relative to the target's 2024 EBIT (2.6 MEUR), the enterprise value-based valuation multiple (EV/EBIT) is approximately 11.5x. We find the purchase price neutral overall with realized earnings and in line with the valuation we accept for the sector (EV/EBIT 10-12x). On the other hand, we believe the multiple will fall for the current year due to SRV Infra's improved margin accumulation. In our view, SRV Infra has good growth prospects also under Kreate, considering, e.g., the security investments in the coming years. On the other hand, visibility into the project pipeline and thus the sustainability of the revenue level is still limited at this stage, particularly considering SRV Infra's large share of revenue from internal customers. Thus, we keep our growth estimates for the acquired business at a moderate level for the coming years.

Valuation remains neutral, considering the transaction

The transaction marginally decreases Kreate’s earnings-based multiples based on our estimates for the coming years. Although there is still uncertainty regarding the realization of our estimated earnings growth, we believe the acquisition clearly strengthens Kreate’s story of profitable growth. Kreate's share is valued at 10x EV/EBIT and 11x P/E multiples based on our 2026 estimates. The multiples are in line with the valuation range we accept for the company (EV/EBIT & P/E: 10-12x). The company's valuation is moderate compared to its peers. However, the earnings-based multiples of the peers are still at a high level next year due to the weak earnings performance of several companies, which reflects the weak building construction market. For this reason, we do not give significant weight to relative valuation in our valuation.