Finland drove a clear top-line beat

Revenue grew 27% year-on-year to 190 MEUR, clearly beating our 176 MEUR estimate. As in Q2, the Civil Engineering segment drove the growth, with revenue up 39% to 169 MEUR, as the record backlog continued to move through execution during the seasonally strong second half. Swedish revenue rose 12% to 124 MEUR (Inderes estimate: 118 MEUR), supported by, among others, the continuation of new railway infrastructure projects with high production concentrated in a short period. Finland, however, was the main source of the beat, as revenue increased 126% to 47 MEUR (Inderes: 33 MEUR), driven by the ramp-up of construction at the Mikkeli data center project. On the earnings call, management indicated that around 15-20% of the Mikkeli contract value is currently in the order backlog, up from roughly 10% at the end of Q2, which in our view implies a materially longer call-off runway than we had assumed. In contrast, Consulting revenue declined 25% to 21 MEUR (Inderes: 25 MEUR), as the average number of FTEs fell to 570 (Q3'25: 719) amid continued weak demand for project personnel services in the Norwegian offshore market and more selective order intake. Management noted that the entire decline came from the lower-margin project personnel business.

Group order intake reached a record 555 MEUR (Q3'25: 118 MEUR), of which Civil Engineering accounted for 542 MEUR. Intake included NYAB's ~294 MEUR share of Phase 2 of the Uppsala tramway (total value 6.5 BSEK, 50/50 joint venture with AZVI) as well as the ~1.6 BSEK (~140 MEUR) Phase 2 contract for Svenska kraftnät's Letsi-Svartbyn power line. Excluding Uppsala, group order intake was ~261 MEUR, above our 241 MEUR estimate. Beneath that, Swedish intake excluding Uppsala of ~160 MEUR fell short of our ~192 MEUR estimate and was itself dominated by Letsi-Svartbyn, while Finnish intake of 89 MEUR came in well above our 33 MEUR estimate. Excluding Uppsala, the Civil Engineering order backlog reached a new record of ~580 MEUR, up ~16% from the previous quarter, while the reported figure including the joint venture more than doubled year-on-year to 874 MEUR (Q3'25: 404 MEUR). As the joint venture is equity-accounted and contributes only through the share of results of associates and joint ventures, we would caution against reading the headline backlog figure at face value. Nevertheless, we view the underlying backlog as providing strong visibility into 2027.

Management reiterated that long-term investment programs in energy, infrastructure and industry continue to support demand, highlighting heavy investment needs from defense, data centers and infrastructure. Management also noted that competition remains clearly lower in the early-phase and collaborative work that now represents a growing share of volume, while competitive intensity in traditional general contracting is broadly unchanged, and that it has not seen any margin pressure from material or labor costs. The Norwegian offshore market remained soft, and the appetite for new renewable energy investments stayed weak.

With Uppsala and Letsi-Svartbyn now in execution, the estimated value of potential execution contracts from ongoing early-phase assignments fell to ~200 MEUR, from ~600 MEUR at the end of Q2. The change reflects these projects moving into the order book, as well as new assignments and revised estimates. According to management, the remaining pipeline relates to a high extent to industrial clients, including the early works agreement with SSAB for a steel coil logistics facility linked to its planned mini-mill in Luleå, where negotiations on subsequent phases are ongoing. Management did not disclose any indication of the potential execution value of the Utajärvi data center project. These potential contracts are not included in order intake or the backlog.

In our view, the quarter once again demonstrated the value of NYAB's early-phase positioning, as the two largest contracts in the company's history were both converted from Phase 1 positions. We continue to see the main uncertainty in the remaining pipeline as one of timing rather than outcome. Importantly, unlike Uppsala’s joint venture structure, the remaining contracts would be NYAB’s own and would therefore flow through revenue in full.

Headline EBIT beat, but the underlying quality was weaker

Operating profit (EBIT) increased 33% to 15.0 MEUR (Q3'25: 11.3 MEUR), translating to a 7.9% margin (7.5%) and beating our 14.0 MEUR (7.9%) estimate. With the margin in line with our expectations, the beat was driven by volume. The Civil Engineering segment's EBIT rose 33% to 13.7 MEUR, but its margin declined slightly to 8.1% (8.4%). In Sweden, the margin improved to 8.4% (7.8%) on efficient project execution, but this was clearly below our 9.7% estimate, and EBIT of 10.4 MEUR fell short of our 11.4 MEUR estimate. Management described itself as satisfied with the level, while noting there is still room for improvement and that ramp-up costs persist as long as the current growth rate continues. Finland was the positive surprise, with EBIT of 3.3 MEUR (Inderes estimate: 1.9 MEUR) and a margin of 7.0% (8.3%) against our 5.7% estimate. Management attributed the year-on-year decline to ramp-up costs associated with the growth rate and a small number of legacy renewable energy projects with tighter margins, which will be essentially completed after Q4. Consulting profitability weakened further, with the margin falling to 0.6% (4.5%) against our 2.8% estimate, as the cost-efficiency measures in Norway have yet to take full effect.

While the combined segment EBIT of 13.8 MEUR was slightly below our 14.0 MEUR estimate, the headline beat was explained by unallocated group items of +1.2 MEUR (Q3'25: -0.3 MEUR), supported by a revaluation gain of ~1.7 MEUR on the total return swap used to secure share deliveries under the long-term incentive plans. As we consider this non-operational, adjusted EBIT was 13.3 MEUR, corresponding to a 7.0% margin, against 7.5% a year earlier and our 7.9% estimate. On the path toward the long-term EBIT margin target of >7.5% (LTM: 6.2%), management reiterated that the target is not expected to be reached in 2025-2026 due to the dilution from the project personnel business, and that it aims to be more transparent about the 2027 outlook at the turn of the year. More encouragingly, management highlighted that Finland's historically weak first halves, caused by too low volumes relative to its fixed cost base, should look clearly better in 2027 given the much stronger backlog, which in our view supports a structural improvement in the Finnish full-year margin.

Further down the income statement, positive net financial items (0.3 MEUR vs. -0.6 MEUR) and a lower-than-expected tax rate lifted net income by 49% to 12.6 MEUR (Q3'25: 8.5 MEUR), above our 11.4 MEUR estimate, and EPS increased to EUR 0.018 (EUR 0.012).

Free cash flow dipped on the timing of a large customer payment

Free cash flow was -7 MEUR (Q3'25: 9 MEUR), as ~20 MEUR was tied up in working capital, mainly in contract assets. According to management, a customer payment of 31 MEUR was received a few days after the end of the quarter, and had it arrived within the quarter, free cash flow would have been around 24 MEUR. In addition, working capital has been tied up during Q2 and Q3 in a single strategic project with extended payment terms, for which the company receives compensating revenue adjustments, and management expects a significant reduction in working capital in Q4 in line with the agreed invoicing and payment plan. As such, the normalization of cash conversion we expected after Q2 has been pushed into Q4, but we continue to view it as timing-related rather than a deterioration of the underlying model, which management confirmed, noting that underlying cash conversion has historically been around 90%. Net cash declined to 5.2 MEUR (Q2'26: 12.0 MEUR), corresponding to a net debt/EBITDA of -0.12x, and the equity ratio stood at 64.8%. While the balance sheet remains strong, contract assets will be the item we follow most closely in the Q4 report.

• We raise our revenue estimates by 2-3% across the forecast period and leave our earnings estimates broadly unchanged. In our view, the composition of the revisions matters more than the level. Finland moves up sharply on both volume and profitability, Sweden comes down on margin, and Consulting comes down on both lines. At group level, these largely cancel out, and our adjusted operating margin falls slightly in all three years despite the higher revenue.

• Finland is the main change, and we see it as a step change rather than a phasing effect. Following the Q3 beat in both revenue and order intake (89 MEUR vs. our 33 MEUR estimate), and management's indication that only 15-20% of the Mikkeli contract value is currently in the backlog, we raise our Finnish revenue estimates by 22% for 2026 to 151 MEUR and by 19% for both 2027 and 2028. We also raise the Finnish operating margin to 4.8%, 5.9% and 4.8% for 2026-2028 (was 3.6%, 3.8% and 4.1%). More importantly, Finland has historically been loss-making or barely profitable in the first half, as volumes were too low to carry its fixed cost base, and the order book of 137 MEUR at the end of Q3 (Q3'25: 97 MEUR) removes much of that problem heading into 2027. As a result, Finland now accounts for around 20% of our 2027 segment operating profit forecast, against roughly 10% previously.

• While Swedish revenue came in ahead of our estimate, the operating margin of 8.4% fell well short of our 9.7% estimate, and management stated that ramp-up costs persist as long as the current growth rate in Civil Engineering continues. We therefore cut the Swedish operating margin to 8.4%, 8.2% and 8.6% for 2026-2028 (was 9.1%, 8.9% and 8.9%). Our Swedish revenue estimates are essentially unchanged, since the backlog continues to support the current production rate.

• Consulting comes down on both revenue and profitability. With the number of consultants on assignment falling further and the rolling 12-month book-to-bill of 0.7x giving no support for a near-term recovery, we lower Consulting revenue by 7% for 2026 and by around 10% for 2027-2028, and lower the operating margin to 1.1%, 1.9% and 2.7% (prev. 2.1%, 2.5% and 3.0%). We note, however, that the entire revenue decline came from the lower-margin project personnel business in the Norwegian offshore market, so the mix effect is less damaging than the revenue figures alone suggest. This is why we keep a gradual margin recovery through 2028 even as we lower the revenue base.

• As the Q3 EBIT beat sat entirely outside the operating segments and was supported by the ~1.7 MEUR revaluation gain on the total return swap, we carry the gain in our reported EBIT for 2026 but exclude it from our adjusted EBIT, and we assume no further swap gains in our forecasts, since the instrument is marked to the share price and is not forecastable. This is why our 2026 adjusted EBIT estimate falls by 3% while our reported EBIT estimate rises by 1%.

• Below the operating line, the revisions are modestly positive. Net financial items turned positive in Q3, the share of results of associates and joint ventures contributed 0.8 MEUR over the first nine months, and the effective tax rate of 19.3% ran below our 21% assumption. Together with the swap gain in reported EBIT, this lifts our reported net profit estimates by ~4% for 2026 and by ~1% for 2027-2028. Our dividend estimates are unchanged.

• We leave our cash flow estimates broadly unchanged. Given management's explanation of the delayed 31 MEUR customer payment and the expected release of working capital tied to the strategic project, we continue to model a strong Q4 cash flow, with NYAB remaining in a net cash position throughout the forecast period.

CEO Interview - NYAB Q3'26

NYAB, Audiocast, Q3'26

Operational earnings drivers

• NYAB's Civil Engineering order book (excl. the Uppsala JV) stood at a record ~580 MEUR at the end of Q3 (Q2'26: 502 MEUR), and 874 MEUR including NYAB's ~294 MEUR share of the Uppsala tramway. Excluding Uppsala, group order intake of ~261 MEUR in Q3, driven by the ~140 MEUR Letsi-Svartbyn power line, keeps the strong visibility into 2027.
• Following the conversion of Uppsala and Letsi-Svartbyn, the estimated value of potential execution contracts from early-phase assignments stands at ~200 MEUR, mainly relating to industrial clients, including the SSAB early works agreement in Luleå. Management reiterated that NYAB has never won a Phase 1 or early works agreement without subsequently receiving the execution order.
• The ramp-up of the Mikkeli data center project, with only 15 to 20% of the contract value in the backlog so far, supports Finnish volumes and means Finland enters 2027 with a materially higher opening backlog than a year earlier.
• Several large multi-year contracts signed during the past 12 months continue to give the company visibility for the coming quarters and improve the predictability of the business while reducing seasonality.
• Revenue growth slightly scales fixed costs, although ramp-up costs persist as long as the high growth rate continues
• Sustainable profitability improvement in Finnish businesses closer to the level of the Swedish business
• Successful execution in enhancing the profitability of acquired Dovre businesses
• Skarta Energy project development progress (including any development fees) or sale of ownership

We also think it is worth noting that we believe the company has the potential to accelerate its growth through acquisitions over time due to the strong balance sheet. However, in the short term, we believe larger M&A is unlikely as we expect the company to focus on the integration of Dovre's businesses.

With a record underlying order book, reduced seasonality, a positive demand outlook in Sweden, and a structurally improving picture in Finland, we continue to view the risk level related to earnings growth as decreasing. We nonetheless do not think NYAB is yet justified in trading at the upper end of our acceptable ranges. Q3 showed that the drop-through from strong volume growth is not automatic, as some ramp-up costs held back the Swedish margin, Consulting continues to dilute Group profitability amid soft market activity, and the >7.5% EBIT margin target has been deferred across two financial years. Balancing these, we believe NYAB is presently justified in trading at the middle of our ranges, around 11-12x EV/EBIT and 13-14x P/E, which the share has largely reached on our 2026 estimates. At our target price, the 2027 EV/EBIT and P/E multiples would be ~10.4x and ~14.6x, respectively. In our view, a move up the range would require sustained margin progression in Consulting, evidence that the improvement in Finnish profitability holds over a full year, and smooth conversion of the record backlog without the execution problems that have historically punished this sector.

SOTP and DCF indicate a more moderate upside

Expected return for the coming years

We have also looked at an investor's expected return over the next few years by simplifying the acceptable valuation and our 2028 earnings estimates. In our view, NYAB's business could be valued at 11x-12x EV/EBIT and around 13x-14x P/E at the end of 2028 based on our current estimates. However, this requires that the company maintains profitability above the industry average and that there are no major changes in the company's growth outlook.

Based on this and our current estimates, we believe that NYAB could be valued at roughly SEK 10.2-11.2 per share at the end of 2028 (with the current EUR/SEK exchange rate). At the current share price of SEK 8.19, the expected average annual return would be around 13%, and we expect the investor to receive an annual dividend yield of around 2-3%. The average annual expected total return of around 15-16% therefore remains above the cost of equity we use (9.6%), but the margin has narrowed clearly following the share price development. However, the calculation does not take NYAB's share in Skarta Energy or the Uppsala joint venture into account, which is why it only serves as a supporting element for the valuation.

In conclusion, we feel the expected return on the stock remains attractive, but less so than at the time of our extensive report.

Reflecting this overall picture, we see the risk-adjusted expected return on the share to be above the cost of equity we use over the next 12 months, but no longer at a level that warrants a Buy recommendation, as the share price has risen more than our estimates since our extensive report. As such, we lower our recommendation to Accumulate, while raising our target price to SEK 9.5 (was SEK 9.2), reflecting our higher revenue estimates and the improved Finnish earnings profile.