Translation: Original published in Finnish on 9/18/2026 at 8:17 am EEST.

Puuilo, a Finnish discount DIY retailer, has delivered strong earnings growth, and we see a good outlook for continued growth supported by the expansion and maturation of its domestic store network. The company is seeking further growth by piloting its concept in Sweden. The starting points for internationalization are at least reasonable, but initial success will require investments in raising brand awareness. The stock looks expensive based on trailing earnings, but earnings growth and dividend yield offset the high multiples, which is why we consider the risk/reward ratio to be sufficient. We reiterate our Accumulate recommendation and EUR 18.00 target price.

A prize specimen in discount retail

Puuilo is a discount retail company operating in Finland and soon in Sweden. Its concept focuses on DIY needs, although the company also sells other, often rather defensive product categories. The company has grown strongly throughout its history (2010–25 CAGR of 20%) and has done so with exceptional profitability. Efficient operations in both stores and administration have secured the company clearly higher profitability than its competitors. Rapid growth has also been reflected in market shares, as over the past five years the company has doubled its share of the Finnish discount trade market (12% in 2023). Although the company has grown strongly historically, we still see significant growth potential in the company, supported by the maturing store network and new store openings.

Sweden is opening up a new path for growth, but there is no guarantee of success

The company is piloting its current concept in Sweden with a network of around 10 stores. Initially, Puuilo's growth is driven by store openings, and later by the maturation of the young network and the growing awareness of the concept. If successful, the pilot will extend the growth path far into the future and open doors to the rest of Northern Europe as well. However, Puuilo starts from an underdog position. The number of competitors and their store networks are larger in Sweden than in Finland, so we estimate that finding good retail locations will be challenging, and sales will initially have to be taken from neighbors through promotional campaigns. This erodes margins, and in our view, major profits should not be expected from Sweden during this strategy period (2025–2030). Expansion will increase the Group's cost structure, add to forecasting uncertainty, and, in a worst-case scenario, weaken the Group's excellent returns on capital. However, the risk is limited by the asset-light pilot model, which we believe can be adapted to fit the market with minimal effort. However, in our view, the starting points for success are at least reasonable, driven by a concept that has performed exceptionally well in Finland. In the domestic market, the company has outperformed all known Swedish players measured by market share growth. However, for our forecasts in Sweden, we are proceeding for now with a clear safety margin.

Expected return is sufficient

In terms of realized earnings multiples (P/E 23x and IFRS 16 adj. EV/EBIT 19x), the company is priced above our comfort zone. However, this is justified as we expect the company to be able to achieve strong earnings growth in the coming years, when multiples fall to an attractive level for a high-quality growth company (2027-28e P/E 19x and 17x and IFRS16 adj. EV/EBIT 15x and 13x). Taking into account our earnings growth forecasts, valuation multiples that are slightly elevated on actual earnings, and a 5% dividend yield, the expected total return on the stock is around 10%. We consider this level sufficient, as it just barely exceeds our required return, meaning that the stock's risk/reward ratio remains adequate. The value per share of just above EUR 18 implied by our cash flow model also suggests upside and justifies a positive view on the stock. We see Puuilo as one of the highest quality companies in the sector, with a concept that has proven its competitiveness in both favorable and challenging markets.