Digital Healthcare And Senior Services Will Reshape This Undervalued Nordic Provider

Catalysts

About Terveystalo Oyj

Terveystalo Oyj is a Finnish private healthcare company that provides occupational health, primary care, specialist care, diagnostics and dental services in Finland and Sweden.

What are the underlying business or industry changes driving this perspective?

• Rollout of the new occupational healthcare digital platform, built with MedHelp and already in use with paying clients, can deepen employer relationships, support higher pricing on renewals and new contracts, and over time lift revenue and earnings quality in Healthcare Services.
• Scaling AI assisted appointments, digital 10X and the Ella interface for physicians, which management reports already improves physician efficiency by about 30%, can allow more visits per professional and lower unit costs, supporting higher EBIT margins and operating leverage as demand recovers.
• Expansion of services for seniors, including Kela 65 where Terveystalo reports positive development, together with wider reimbursement coverage in Finland, can support steady volume growth in an ageing population and underpin group revenue and EBITDA over the long term.
• Strengthening position in dental through organic progress and the planned Hohde acquisition, subject to closing, can increase scale in a consumer segment that has held up relatively well, supporting more resilient revenue and potentially higher net margins through integration efficiencies.
• Early investments in prevention at scale, using data driven and digital tools to engage customers through their health journey, can create new service lines and recurring revenue opportunities while leveraging existing platforms, which can support long term revenue growth and earnings.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on Terveystalo Oyj compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Terveystalo Oyj's revenue will grow by 12.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.2% today to 8.4% in 3 years time.
• The bullish analysts expect earnings to reach €146.9 million (and earnings per share of €0.95) by about July 2029, up from €76.4 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as €107.8 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 11.0x on those 2029 earnings, down from 12.7x today. This future PE is greater than the current PE for the FI Healthcare industry at 10.0x.
• The bullish analysts expect the number of shares outstanding to grow by 0.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.48%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The recent period of exceptionally weak healthcare demand, with many service segments reported at roughly 5% to 10% below prior levels and visit growth in Healthcare Services down 9.6%, could prove more persistent than management expects. This would pressure revenue and limit operating leverage.
• Management is investing heavily in digital platforms, AI assisted appointments and prevention at scale while the market is soft. These projects are already flowing through as strategic project costs and higher capex, so if customer adoption or pricing power disappoints, the returns on these investments may be lower than planned and weigh on earnings and net margins.
• Occupational healthcare is described as the main business, but connected employees are still about 5% below prior levels after a period of price increases and negative media coverage around billing. If contract renewals, new wins or front book pricing do not recover as expected, this could hold back revenue growth and keep EBIT margins under pressure.
• The outsourcing portfolio in Portfolio Businesses is shrinking by about €20 million in 2026 from a €55 million revenue base in 2025, and management expects the remaining roughly €30 million of legacy contracts to continue to decline year on year. If new public sector partnership models and county purchases do not scale, this structural headwind could drag on group revenue and dilute margins.
• Sweden is described as a continued weak market, and Sweden is also exposed to export driven macro conditions. If employer behavior there stays cautious and connected employees do not translate into higher visit volumes, the Swedish unit may remain subscale and limit the group’s ability to improve earnings and overall EBIT margin.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Terveystalo Oyj is €10.5, which represents up to two standard deviations above the consensus price target of €9.2. This valuation is based on what can be assumed as the expectations of Terveystalo Oyj's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €10.5, and the most bearish reporting a price target of just €7.9.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be €1.7 billion, earnings will come to €146.9 million, and it would be trading on a PE ratio of 11.0x, assuming you use a discount rate of 6.5%.
• Given the current share price of €7.63, the analyst price target of €10.5 is 27.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.