Translation: Original published in Finnish on 4/30/2026 at 8:00 am EEST.

Neste's Q1 earnings easily surpassed expectations as margins for both Renewable Products and Oil Products reached a robust level. In light of the encouraging margin development of Renewable Products in particular, we have made significant upward revisions to our short- and long-term estimates. Despite the recent increase in the share price, we believe that the long-term earnings growth of Renewable Products still offers an attractive expected return. Following the estimate changes, we raise our target price to EUR 33.0 (was EUR 26.5) and reiterate our Accumulate recommendation.

Margins at a strong level in Q1

Neste achieved a comparable EBITDA of 861 MEUR in Q1, which beat both our and consensus estimates. Earnings improved significantly from the comparison period, as margins for both Renewable Products and Oil Products strengthened considerably. The sales margin for Renewable Products (Q1'26 USD 856/ton vs. USD 310/ton in Q1'25) was clearly boosted by higher margin levels from annual contracts made in a better market environment than the previous year, but the ripple effects of the war in Iran also increased the margin. Thus, it appears that the sales margin was boosted more than we expected by annual contracts signed during a more favorable market environment, although the company did not specify the exact extent of this impact. The effects of the war in Iran, especially the rise in diesel prices, were reflected in the high refining margin of Oil Products (Q1’26 USD 23/bbl vs. USD 9.9/bbl in Q1’25), along with the impact of the cold winter. These factors raised the segment's earnings to a strong level.

Volume growth is limited

Neste has provided guidance for the current year, estimating that sales volumes for Renewable Products would remain at the same level as in 2025, while sales volumes for Oil Products would decrease. In the first quarter, sales volumes of Renewable Products were sluggish due to maintenance turnarounds and certain operational challenges. Although we expect production to be running normally in Q2, maintenance turnarounds in the second half of the year will hinder volume growth this year. Correspondingly, the decrease in Oil Products' sales volumes is clear, as the segment will undergo a significant maintenance turnaround in Porvoo at the end of the year.

We increased our estimates

Reflecting the sales margin for renewable products, which exceeded our expectations, as well as the impact of annual contracts, we have made positive adjustments to both our short-term and long-term sales margin forecasts. In our view, the current margin more accurately reflects long-term margin potential because the outlook for the European renewable diesel market, in particular, is favorable. At the same time, we estimate that positive developments in US regulations will balance margin levels in the local market. Due to the increase in short- and long-term sales margins for Renewable Products, our 2026-2028 EBITDA estimates increased by 9-16%.

Price reasonably reflects expected earnings growth

With the upward revision of our estimates, the valuation for the coming years remains moderate (P/E ratio 14x-17x and EV/EBIT ratio 12x-15x), considering the medium-term earnings growth driven by the increased capacity of Renewable Products. We estimate the valuation level of Neste's largest value driver, the Renewable Products segment, in a sum-of-the-parts calculation, according to which Renewable Products trades at an EV/EBIT multiple of just under 10x relative to our estimated 2028 earnings level. In our view, this is quite a reasonable level, and we believe the segment’s long-term upside potential still offers an attractive expected return, even though the volatility of its earnings has increased the required return.