Translation: Original published in Finnish on 10/28/2026 at 0:35 am EET.

The Q3 report was strong, but we estimate the market had expected even more aggressive profitability targets from the company. We consider the new targets realistic and see the share’s valuation as attractive relative to the earnings growth outlook, underpinned by a strong order book and the company’s position as a global technology leader. We raise our recommendation to Buy (was Accumulate) and keep our target price unchanged at EUR 33 ahead of next week’s Capital Markets Day.

Stronger-than-expected orders and good profitability in Q3

The Q3 report delivered an order intake stronger than both our and consensus expectations (combined growth of 47% y/y in Marine and Energy). Profitability development was also slightly better than our estimates, as the M&E adj. operating result grew by 25% y/y (margin +0.7 percentage points) and was 5% above our estimate. Cash flow also developed strongly as order intake inflated advance payments, as a result of which the company's net cash at the end of Q3 was already 2.2 BEUR (Q3'25: 1.4 BEUR).

Company sees no cooling in the order pipeline

The company continues to expect demand in both Marine and Energy to remain at the comparison period’s level over the next 12 months. The outlook was better than we had expected, as we had anticipated some cooling given the extremely strong comparison period and the lengthening delivery times, which are likely to start limiting new orders at some point. We understood management to expect strong demand in Energy to continue, driven by data centers and balancing power, among other things. The company also noted that its data center customers are financially strong hyperscalers rather than higher-risk neocloud-type customers. We slightly raise our 2029–2030 revenue estimates on the strong order trend and outlook. We lower our EBIT estimates, as hedging costs will be included in operating profit from 2027 following the adoption of IFRS 18. Net financial items improve correspondingly, leaving our EPS forecasts unchanged.

The market may have expected even higher earnings targets

The company announced new financial targets alongside its Q3 print. The targets are largely in line with our expectations, but we interpret the significant share price drop on results day as reflecting market expectations of an even larger increase in the EBIT margin target (raised from 14% to 16%), given strong demand in Energy. We believe the target reflects the technical effect of IFRS 18 and possibly the difficulty of predicting the long-term supply-demand balance in new equipment sales (2030 onward). On revenue growth, a low double-digit target was, in our view, to be expected. We consider the new targets realistic, and we forecast average annual revenue growth of 10% in 2027–30, with the EBIT margin rising to 15.9–16.0% in 2029–30 (LTM: 14.2% before the accounting change).

Multiples turn attractive as production capacity expands

Wärtsilä is a global leader in medium-speed engines, and the quality of its business is underpinned by the high share of predictable service earnings (2025: ~77%). The long order backlog provides good visibility into the income statement for the coming years, on the basis of which we expect EV/EBIT to fall to 11x in 2028 and 8x in 2030. Applying a fair EV/EBIT of 15x to our end-of-decade forecasts and discounting back to today implies upside of as much as 26% for the share (15% annually). Our forecasts assume that data center-driven orders will halve by 2029, while balancing power orders increase. If data center-driven demand were to disappear and new equipment margins were to return to 2025 levels, the current share price would be close to fair value. In our view, the high share of services in earnings and the growth potential in the 2030s from the expanding installed base limit the downside risk and support the risk/reward, even though new equipment margins may fluctuate as the supply-demand balance shifts.