Translation: Original published in Finnish on 2/6/2026 at 9:00 am EET.

Neste's Q4 earnings beat expectations by a wide margin while the sales volume guidance for Renewable Products in 2026 was weak compared to expectations. Reflecting this, we have made minor negative adjustments to our current-year estimates. Therefore, we reiterate our EUR 22.0 target price and Reduce recommendation.

Margins exceeded expectations in Q4

Neste achieved a comparable EBITDA of 601 MEUR in Q4, which clearly beat both our and consensus estimates. Earnings growth, relative to the weak level of the comparison period, was particularly driven by Renewable Products. Despite maintenance turnarounds, the segment achieved a higher-than-expected sales volume of 1.1 Mt. In line with this, and a higher-than-anticipated sales margin, Renewable Products' earnings significantly exceeded expectations. This was further supported by Oil Products, where the refining margin rose to a rather high level due to very high product margins at the end of the year. Thanks to good earnings development and, above all, working capital management, Q4 cash flow rose to a strong level. This increased full-year cash flow to over 1.7 BEUR, also allowing full-year free cash flow to climb significantly into positive territory (550 MEUR) after a challenging 2024. This is of paramount importance, as the company's debt is elevated, and the Rotterdam investment project continues to consume significant capital. Neste will pay an expected dividend of EUR 0.20 per share.

Sales volumes of Renewable Products are tight

Neste 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. The latter guidance was expected, as the maintenance turnaround in Porvoo, likely scheduled for the end of the year, will reduce the segment's volumes. At the same time, guidance for Renewable Products fell short of expectations as maintenance activities are also eroding this segment's volume development. Regarding the margin outlook, the company remained tight-lipped, as expected, but we understand that strong market conditions at the end of 2025 helped increase the pricing of annual contracts (~60% of Renewables sales volumes) for this year.

Forecasts declined in line with outlook for Renewable Products

We have lowered our forecast for this year's operating result by 4% following the guidance on sales volumes for Renewable Products. While our updated forecast projects a sales volume growth of just over 1% for the segment to 4.2 Mt, the segment's earnings growth will be supported by the higher sales margin we are forecasting (USD 570/ton vs. USD 479/ton in 2025). Our projections for the coming years remain largely unchanged, and we expect Renewable Products to drive earnings growth over the next few years, with the completion of the Rotterdam expansion keeping the segment's sales volumes on an upward trajectory in 2027–2028.

Earnings growth expectations reflected in the price

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 around 10x relative to our estimated 2028 earnings level. This earnings potential is based on the assumption of a healthy market situation and a higher gross margin than in the recent past. Thus, we believe the current valuation contains expectations of a sustainably better supply and demand balance in the renewable products market than in the recent past. We believe this is warranted, but at the same time, an attractive expected return from the current level would necessitate stretching margin expectations to a level that we consider too high, resulting in a weak risk-reward ratio.