Translation: Original published in Finnish on 1/9/2026 at 6:30 am EET.

Kreate's growth will accelerate significantly this year as the company grows organically in both Finland and Sweden, supported by a strengthening order backlog. In addition, growth is boosted by the completed SRV Infra acquisition. We expect that through growth, the company's profitability will return relatively closer to the level seen in previous years. Due to the recent positive order flow, we have also raised our growth estimates from 2026 onwards. However, the earnings-based valuation multiples for 2026-2027 have risen to a neutral level relative to our accepted valuation level. Thus, the risk/reward ratio is not attractive at this stage, considering the uncertainties related to earnings growth. Due to changes in our estimates, we raise our target price to EUR 12.5 (was EUR 11.0) but reiterate our Reduce recommendation. 

A Finnish constructor specializing in demanding infrastructure

Kreate is a company specializing in demanding infrastructure construction, operating in Finland and Sweden. Kreate's businesses are divided into Transport infrastructure construction and Structural engineering. Transport infrastructure construction includes the construction of railways, roads and streets. Structural engineering includes the company's bridge construction and repair, foundation and civil engineering, special foundation construction (KFS Finland), and the Swedish operations. Following the acquisition of SRV Infra Oy, the company also has an underground rock construction business in Finland. Kreate has grown strongly in the recent past relative to the infrastructure construction market (2017-2024 CAGR ~10%), while profitability has been at a good level compared to the industry average (on average EBITA-% 3.9%). With a business model that ties up limited capital, returns on capital have also been strong.

Components for profitable growth in place for coming years

In its current strategy, Kreate aims for more moderate growth than before to support profitability development. Regarding growth, the company's focus remains on the railway business and the Swedish business. In our view, in addition to focusing on profitability, the company is still well-positioned for strong growth, especially in the coming years. In addition to the acquisition, growth is supported by significant projects in the development phase, which we expect to move into the execution phase and thus be recorded in the company's order book in the first half of 2026. In addition, we expect Kreate's Swedish business to continue its profitable growth as the company expands into new types of construction and into the role of main contractor in the market. Kreate is targeting 5-10% growth during its current strategy period of 2024-2027. We expect the company to grow faster than its target, at an average annual rate of some 12%. Our profitability forecast remains below the company's target level (target: EBITA-% >5%, 2027 forecast 4.2%). In our view, achieving the target level is possible in a single year, but the company's efficiency would need to improve significantly to reach the target sustainably.

Valuation neutral compared to our updated forecasts

In our view, Kreate's investment story in the coming years will primarily revolve around earnings improvement. In 2025, the company's front-loaded personnel investments will continue to depress profitability. Due to the completed acquisition, it is justified to primarily examine the 2026 multiples, which fully account for the acquisition's impact. Based on our estimates, Kreate's share is valued at 11x EV/EBIT and 13x P/E multiples for 2026. Relative to our acceptable valuation (EV/EBIT 10-12x & P/E 10-13x), the pricing appears neutral. In addition, the valuation is broadly in line with peer companies (peer group median 2026e EV/EBIT 11x, P/E 14x). Looking to 2027, the multiples fall to a more attractive level (EV/EBIT 9x, P/E 10x). However, there is uncertainty regarding the realization of earnings growth due to factors such as the completed acquisition and the expansion of operations in Sweden. The DCF model value is roughly in line with our target price, supporting the recommendation.