Taaleri Q1'25: High expectations for the fall strategy update

Translation: Original published in Finnish on 04/29/2025 at 11:38 pm EEST

We reiterate our EUR 9.0 target price and Buy recommendation for Taaleri. The Q1 report was subdued, but its significance is limited as the focus is on the strategy update. The stock continues to trade at a hefty discount relative to its sum of the parts, and it is also very cheap in absolute terms. The key question is how to highlight the undeniable value of the parts. We hope to get a clear answer to this question at the fall's CMD, because without a clear roadmap for unlocking value, a price below the sum of the parts is justified.

One-off items depressed Q1 earnings

Taaleri’s Q1 report was clearly more modest than expected. The earnings shortfall was, however, almost entirely attributable to investments and one-off items, and, therefore, its significance is limited. Operationally, the figures were largely in line with our expectations, and Garantia’s performance was once again very good. The sales of the SolarWind3 fund seem to be falling short of targets, which cannot be considered surprising in the current market. We commented on Taaleri’s result in more detail here.

There was no concrete information regarding the strategy yet, and the company will arrange a CMD in the fall. Our view remains that the value of the company’s parts is not reflected in the current group structure. However, the comments made by the company's management in our interview give us reason to believe that the value in parts could finally be revealed.

Estimates revised slightly down, capital allocation is the biggest question mark

We have revised our estimates somewhat downwards, in particular becauseSolarWind3 is below expectations. We predict that Taaleri’s operating result will be 30 MEUR on average in the coming years. Earnings fluctuate significantly on an annual level due to the significant weight of investment operations in the group's earnings. We expect the profitability of private equity funds to gradually improve along with the growth in AUM, but the timing and amount of non-recurring fees will sway annual earnings somewhat. We expect Garantia to return to stable growth as the housing market slowly picks up. Bioindustry investments are a significant variable in the company's investment case, but the schedule and magnitude of these are still question marks. The dividend stream is reasonable, with the main focus of capital allocation on own balance sheet investments.

There is value in parts, but the route to materialize it is unclear

In this analysis, we focus on the sum of the parts, as it is the best way to consider the value of different parts of Taaleri and the different profiles of the businesses. The value based on our conservative sum of the parts is around EUR 10 per share, which is clearly above the current share price level. The majority of the value is still generated by the insurance company Garantia, while the remainder is effectively split between the energy fund business and balance sheet investments. The stock is also cheap in absolute terms (P/E 10x, EV/EBIT 6x). We think it is clear that there is significant value in the parts, but the route to materialize it and the timetable are question marks. We hope to get clear answers to this in the CMD this fall. If the company continues with its current structure and own-balance-sheet bioindustry investments are at the core of the strategy, we find it justified that the stock is priced below the sum of the parts. This is because the schedule for bioindustry investments is really long (the potential would be realized at the end of the decade at the earliest), and we also do not see the value of the different parts being fully realized in the current conglomerate-like structure.