Translation: Original published in Finnish on 4/19/2026 at 9:00 pm EEST.

Neste will publish its Q1’26 earnings on Wednesday of next week at around 9.00 am EEST. Due to the ripple effects of the conflict in the Middle East, we estimate that the earnings for this quarter will be quite good. We have therefore made substantial upward revisions to our estimates for the current year. Thanks to the upward revisions to forecasts and strengthened cash flow, we find the stock's risk/reward ratio attractive. We raise our target price to EUR 26.5 (was EUR 22.0) and our recommendation to Accumulate (was Reduce).

Margins on the rise at beginning of year

As a result of the escalating conflict in the Middle East, the price of diesel has risen significantly, substantially strengthening the short-term earnings outlook for Oil Products and Renewable Products. This is due to the supply-constrained Oil Products market, which has led to very high diesel product margins. The increase in the price of fossil diesel also strengthens the sales margin for Renewable Products because it is a pricing component for renewable diesel.

Earnings up significantly year-on-year in Q1

We have increased our short-term estimates and anticipate that Neste will achieve a comparable EBITDA of 787 MEUR in Q1 (was 602 MEUR). Thanks to the high diesel product margin, we estimate that the refining margin for Oil Products will more than double from the comparison period. Our sales margin estimate for Renewable Products is also more than double that of the comparison period (Q1'26e USD 745/ton vs. Q1'25 USD 310/ton). This reflects the increase in end-product prices seen in March but also the annual contracts made in a significantly healthier market environment where, in our estimation, margin levels are considerably higher than last year's.

Neste has provided guidance indicating that it expects Renewable Products sales volumes in 2026 to be approximately at the same level and Oil Products sales volumes to be lower than in 2025. We believe this guidance will remain unchanged as it is difficult to increase Renewable Products' sales volumes further, and the major turnaround in Porvoo at the end of the year will particularly reduce Oil Products' sales volumes. However, when the earnings are announced, attention will focus on the margin impacts of the conflict's spillover effects and the margin uplift provided by Renewable Products' annual contracts.

We made positive estimate changes for the short term

We have increased our earnings estimates for the current year more broadly because the margin outlook for both main segments has remained favorable, even at the beginning of Q2. However, recent developments have shown that the conflict has at least paused. Consequently, the price of diesel has trended downward, bending also the margin outlook for both businesses into a downward trend. We have raised our earnings estimates for H1'26 in particular, reflecting a 28% increase in our comparable EBITDA estimate for 2026, while our forecasts for the coming years have remained unchanged.

Risk/reward has improved

Following the increase in estimates and a strengthened financial position, the valuation for the coming years has decreased to a moderate level (2026-2027 P/E 15-16x and EV/EBIT 13-14x). With Renewable Products' earnings growth, the segment trades at an EV/EBIT multiple of less than 10x for 2028 based on our sum-of-the-parts calculation. Due to the strengthened cash flow and slightly decreased risk level, we find this attractive despite the elevated estimate risks caused by strongly volatile margins. Overall, however, we consider the stock's risk/reward ratio to be on the attractive side.