YIT - Market outlook facing challenges
YIT reports its Q1 results on April 28th. We anticipate growth on group level, and continued softness in Residential Finland. Having lowered our estimates for Residential Finland, and seeing risks to the overall market outlook ahead, we adjust our TP to EUR 2.7 (2.9), REDUCE-rating intact.
Expecting growth but weakness in Residential Finland
YIT reports its Q1 results on April 28th. YIT recently updated its segment reporting, with revenue recognition from self-developed projects now reported as percentage of completion instead of upon project completion, primarily affecting the Residential Finland and Residential CEE segments. After revisions to the new reporting structure, we estimate a revenue of EUR 410m (Q1/26: EUR 386m) and adj. operating profit of EUR 14m (Q1/26: EUR 13m). We anticipate Residential Finland to in relative terms remain the weakest performing segment driven by the challenging demand situation.
Housing construction in Finland expected to decline in 2026
We have lowered our expectations for residential Finland ahead of the Q1 results and anticipate a slightly larger decline in 2026e revenue. In its most recent economic outlook, the Confederation of Finnish Construction Industries RT lowered its estimate for start-ups of block-of-flats production, now estimating a decline of 16% y/y. The expectations for 2027 are also cautious, with volumes not expected to improve. Based on our discussions with construction companies, we consider RT’s expectations in line with our own revised market assumptions. The weakness is mainly driven by reduced construction of government subsidized housing, which for YIT has been limited, and we for now expect growth in 2027 through consumer apartments. The interest rate environment due to the situation in Iran however poses further risks, with rate hikes being floated, which we see would be detrimental for the already struggling residential construction in Finland.
REDUCE-rating with a TP or EUR 2.7 (2.9)
Based on our estimate revisions and potential increased weakness in the market outlook, we adjust our target price to EUR 2.7 (2.9) and retain our REDUCE-rating. As of now all YIT’s segments, except Residential Finland, are performing well, but a more unfavourable interest rate environment could limit growth.