YIT - Slower quarter on residential side

Slower quarter due to few housing unit completions 
YIT reports its Q3 results on October 30th. During H1, YIT’s net sales has declined with mid-single digit percentage figures, and we expect a similar trend to continue during Q3. The decrease has been driven by lower volumes in residential and non-residential construction in Finland. The decline in net sales slowed down, however, aided by continued growth in Residential CEE and by Infrastructure posting good growth after a weaker 2024. Q3 is expected to be a slow quarter, with expected developer contracted housing unit completions heavily skewed to Q4. As a result, we expect fairly modest profitability, with our adj. operating profit estimate at EUR 10.3m (2.5% of net sales).

Positive but modest residential construction development
In its autumn economic review, The Confederation of Finnish Construction Industries RT lowered its expectations for housing unit starts, with the 2026 estimate down nearly 20% to 20,000 units. Apartment units starts are expected to increase some 4% p.a. during 2024-2026. RT continues to expect the share of government subsidized housing to decline clearly, which in our view remains a favourable driver through potential for accelerated net sales and margin growth through an increased share of developer contracted housing units. Recent market development in Finland, although showing positive signs, in our view supports RT’s lowered expectations. Non-residential construction expectations remain modest. We have lowered our expectations for investor apartment construction in Residential Finland, otherwise our estimates remain intact.

ACCUMULATE (REDUCE) with a TP of EUR 2.9 (3.0)
Following the slightly lowered expectations to our estimates for housing construction in Finland, we lower our TP to EUR 2.9 (3.0). With the share price down over 10% since our previous update, we upgrade our rating to ACCUMULATE (REDUCE).