Translation: Original published in Finnish on 10/22/2026 at 07:56 am EEST

Q3 reinforced our stance on the favorable profitability trend of conventional cylinders as volumes at the highly automated factory increase. Guidance for this year appears uncertain in terms of revenue, but when it comes to profitability is likely to be met by a clear margin. The share is valued very cheaply relative to the earnings of the conventional cylinder business, which compensates for the risks related to NorrDigiand the balance sheet position. The balance sheet has also strengthened recently with the earnings turnaround. We reiterate our Accumulate recommendation and raise the target price to EUR 1.6 (was EUR 1.4).

Strong earnings trend, balance sheet has strengthened

The Q3 report delivered good revenue growth in line with estimates (8% y-o-y) and significantly stronger profitability than expected. EBITDA (1.05 MEUR) was double compared to our estimate and the comparison period. Profitability was supported by favorable sales development, sales mix, and the company's continuous improvements related to production efficiency. The company's debt has decreased rapidly due to good earnings development, and low investments. Net debt decreased by 1.8 MEUR y-o-y, and the net debt/EBITDA ratio at the end of Q3 was only 2.4x (2025: 3.4x). However, working capital commitment has kept liquidity tight, to which inventory reduction during the rest of the year may bring a positive revision.

Automated factory runs increasingly well as volumes grow

We raised our earnings estimates for the coming years on the back of the strong profitability development in Q3 (2026 and 2027 adj. EBIT up 24% and 12%). The material margin has been on an upward trend since 2025, which, we believe, is the result of improved operational efficiency at the company's plant completed in 2022 and rising capacity utilization rates as demand has recovered closer to normal levels. We estimate that high quality and efficiency also support revenue growth, as the company stated in the Q3 report that it had gained market share. We expect the company to be able to continue its good revenue growth of around 10% in the remainder of the year, but for 2027, we estimate more moderate growth of 5% (4% in conventional cylinders, and the rest from NorrDigi). Demand in the important forest industry remains weak and, if it were to turn, could offer potential for stronger growth. NorrDigi's revenue is low in our estimates for the coming years (2027-28e: 0.9-2.1 MEUR), because despite the active sales pipeline for EMA, visibility into the progress of commercialization is uncertain.

Minor significance of revenue guidance risk

The company reiterated its guidance and still expects revenue of 30-32 MEUR and EBITDA of 3-4 MEUR for 2026. Our revenue estimate is at the lower end of the guidance range (29.9 MEUR), and our EBITDA estimate is solidly in the middle (3.53 MEUR). Even if revenue were to fall slightly short of guidance, we do not see this having a significant impact on future cash flow prospects and thereby the fair value of the stock.

Valuation of conventional cylinders business is favorable

Following the earnings turnaround, the share valuation has become favorable (EV/EBIT 2026e: 9x, 2027e: 8x), even though NorrDigi, in its early development stage, continues to weigh on the company's earnings (adjusted for this, the 2026e EV/EBIT would be ~7x). The risks on the balance sheet are also gradually easing, and over the past year, the company has demonstrated its ability to repay debt at a rapid pace. We believe the conventional cylinder business alone is enough to warrant sufficient upside for the share (fair EV/EBIT for the business of around 10x), and we still see potential to continue profitable growth through the modern factory. NorrDigitechnologies could, if commercialization succeeds, offer more capital-light and pricing-power-driven growth and thus stronger upside, but due to growth-related uncertainty, we do not rely on NorrDigi's potential in our recommendation.