UBS has cut its recommendation on Finnish engine and power systems group Wärtsilä from "buy" to "neutral," while keeping a €40 price target. The move reflects UBS's view that the share price, which was trading at €36.53 as of May 27, has already priced in much of the potential upside after doubling over the past 12 months.
"2026 could be peak order momentum and we do not see the November CMD as a major positive catalyst," UBS analysts wrote, pointing to a combination of rising rivalry in datacentre contracts, peak cruise shipyard orders, uneven conditions across other marine segments and an unresolved picture for energy storage demand.
UBS noted Wärtsilä has secured 2.4 gigawatts of datacentre-specific orders so far and expects datacentre orders to represent 27% of total order intake in 2026. At the same time, the bank projects Energy original equipment (OE) order flows will peak at 4.5 gigawatts this year before easing, and forecasts datacentre-tailored orders to decline from 1.8 gigawatts in 2027 to 1.2 gigawatts by 2030.
Competitive dynamics are central to UBS's cautious stance. The bank highlighted competitors Caterpillar and Cummins increasing capacity by three times and one time respectively versus Wärtsilä’s one time expansion, and flagged that players including Hyundai, Weichai and fuel cell manufacturers are making inroads.
On modelling, UBS lifted its 2026 Energy OE order intake estimate by 41% to €3.11 billion, while trimming its 2027 and 2028 Energy OE forecasts by 9% and 11% to €2.00 billion and €1.95 billion respectively. Group revenue projections were modestly reduced by 1% to 2% across 2026-2028, to €6.76 billion, €7.38 billion and €8.25 billion in those years.
The bank expects group EBIT to climb to €910 million in 2026, €1.06 billion in 2027 and €1.22 billion in 2028, with margins rising from 13.5% to 14.3% and then to 14.7% over the same period. UBS's 2027 and 2028 EBIT estimates sit about 5% above consensus; the bank says this divergence stems mainly from the lower-multiple marine unit rather than the higher-multiple energy division.
UBS's sum-of-the-parts valuation that underpins the €40 target applies a 15 times 2027 EBIT multiple to the core business, producing €29 per share. The bank assigns an additional €8 per share to datacentres, €2 to navy exposure and €1 to energy storage.
Scenario analysis in UBS's note sets an upside case at €56 per share, which assumes a sustainable datacentre order run-rate of 2.4 gigawatts and a 17.5 times multiple. The downside case is €26 per share, based on 0.8 gigawatts of datacentre orders and a 10.5 times multiple, and would imply a roughly 29% fall from current levels.
UBS reports the stock was trading at 31.7 times estimated 2026 earnings and 19.2 times EV/EBITDA. The bank's forecasts include diluted EPS of €1.15 in 2026, €1.33 in 2027 and €1.54 in 2028. Dividend expectations are €0.60 per share in 2026, rising to €0.70 in 2027, implying a yield of about 1.6%.
Net cash stood at €2.01 billion at the end of 2025 and UBS projects net cash of €1.51 billion in 2026. Wärtsilä is scheduled to present updated mid-term targets at its capital markets day in November. The company currently targets a combined marine and energy EBIT margin of 14%, whereas UBS models 17% for energy and 15% for marine. UBS summarises the stock's upside-to-downside ratio at about 1.8 to 1.
Context for markets
- Sector impacts are concentrated in energy equipment suppliers and marine engine manufacturers, with implications for companies competing in datacentre power solutions.
- Capital allocation, capacity expansion and the pace of datacentre demand will influence revenue and margin trajectories across the peer group.