Translation: Original published in Finnish on 10/14/2026 at 8:00 am EEST.

We reiterate our Accumulate recommendation and EUR 16.00 target price for Raute. Raute has delivered a strong earnings turnaround in recent years, though the protracted construction slump has clearly weighed on investment-driven demand. We expect the next turn in demand to be positive, despite still-elevated uncertainty. On that basis, we see the expected return as attractive given the prevailing low valuation, even as the required return remains elevated on the structurally high risk level. 

Raute has sustainable competitive advantages and a growth-oriented strategy

Raute is an engineering company serving primarily the plywood and LVL industries. Drivers such as rising living standards and environmental concerns support wood construction, which in turn increases demand for Raute. We believe that Raute has a sustainable competitive advantage based on technology and a global sales and service network, as well as a solid market position, especially in the demanding high end of the segment and in Europe. Around 70% of the company's revenue has been generated from cyclical equipment project deliveries, just over 20% from more stable Services and the remaining 10% from Analyzers.

Raute has pursued a growth-oriented strategy since 2023, and driven in particular by several large projects, achieved the highest revenue and earnings in its history in 2024–2025. The company is targeting growth from Western markets and the high-margin Services and Analyzers businesses, and partly from expanding into wood products segments beyond plywood and LVL, such as solid wood.  Given Raute’s strengths and the already high market shares of its European businesses, strategic success depends heavily on the phase of the investment cycle – and in 2025–2026 the cycle has shown its downside as the global construction slump has dragged on. The roadmap to the 250 MEUR revenue target for 2028 also remains unclear, as the company has yet to establish cycle-independent growth in practically any business area. That said, we like the level of ambition in the strategy. The earnings improvement in 2024–2026 is an encouraging signal that Raute’s competitive advantages remain intact and that the changes made by current management are working, particularly on profitability.

We expect Raute’s earnings to turn next year

Raute’s order book slipped to a relatively low 66 MEUR at the end of Q2, but with the 31 MEUR order secured from Estonia in September, the company should enter next year from at least a tolerable starting position. In our base case, an eventual upturn in construction will lift demand for Raute’s products and services, though recent inflation acceleration, rising interest rates, and geopolitics continue to create significant uncertainty around the timing. We expect adjusted EBITDA to return to growth next year, as growth in Services and Analyzers, efficiency measures, and progress in strategy execution offset earnings pressure in Wood Processing as major projects wind down. We make no changes to our operational estimates in this update. Our forecasts sit well below Raute’s aggressive growth targets, though the 12% adjusted EBITDA margin target (through the cycle) looks realistic on the track record of recent years. The main risks to our forecasts are demand volatility, project risks, and the success of growth investments. 

The stock still looks cheap

On our estimates, Raute trades at a P/E of 12x and 10x for this year and next, with corresponding EV/EBIT multiples of 7x and 5x. The EV-based valuation in particular is very modest, with multiples falling clearly below the ranges we consider acceptable for the company. Our view is further supported by a significant relative discount to peers and a DCF value above our target price. The 12-month expected return, comprising valuation upside and dividends, therefore exceeds our required return.