UBS lowered its recommendation on Neste (HE:NESTE) to Neutral from Buy on Wednesday, attributing the move to a near 30% jump in the company's share price during the last two months that, the bank says, largely incorporates an improved regulatory environment. Shares fell about 2% on the downgrade.
Although UBS nudged its price target higher to c23 from c20.50, that valuation leaves little room for further gains versus Monday's close of c21.68. The brokerage pointed out that Neste is now trading at an enterprise value-to-EBITDA multiple of 8.3x, which it identified as the stock's three-year average.
"We downgrade Neste to Neutral as we see the improved outlook largely priced in," UBS analysts wrote, framing the move around the balance between recent share-price appreciation and the company's forward outlook.
UBS quantified the market's expectations by estimating that the share price implies a Renewable Products (RP) margin of roughly $580 per tonne. That implied margin sits close to UBS's own forecasts of $586 per tonne for 2026 and $602 per tonne for 2027.
Looking to the near term, UBS expects a mixed fourth-quarter report from Neste, ahead of results scheduled for Feb. 5. The bank forecasts an RP margin of $408 per tonne for the quarter, below consensus of $457 per tonne, and attributes the shortfall primarily to extensive maintenance activity.
UBS highlighted that RP margins weakened toward the end of the year, a trend it associated mainly with lower diesel prices. The brokerage said this trend increases downside risk in the near term. Operationally, Neste's Rotterdam plant was offline for about half of the fourth quarter, and the Singapore facility also entered a turnaround period. Company management had previously warned that such turnarounds could shave as much as $100 per tonne from margins.
Reflecting the pressure on margins and fuel prices, UBS trimmed its 2025 earnings-per-share estimate by 18% to c0.53, noting that lower diesel prices are affecting both Renewable Products and Oil Products divisions. At the same time, UBS raised its 2027 EPS forecast by 21% to c1.96, driven by expectations for stronger RP margins further out.
For 2026, UBS projects RP margins of $586 per tonne, above consensus of $546 per tonne, but cautioned that unusually high uncertainty remains because of the split between spot and term sales. UBS estimated year-to-date spot margins at about $900 per tonne versus roughly $550 per tonne for term contracts. In its modelling, the brokerage increased its assumed renewable diesel premium and raised the share of spot sales to 45%.
UBS also updated its outlook for renewable diesel and sustainable aviation fuel, anticipating stronger demand in 2026 and a more stable supply environment after a period of delays and cancellations in 2025. While regulatory changes in some European markets, notably Germany, have reduced downside risk for 2026-27, UBS judged that the overall risk-reward profile for Neste has moved toward a more balanced position compared with before the recent share-price run-up.
On a comparable basis, UBS forecasted EBITDA of c1.61 billion in 2025 and c2.36 billion in 2026, figures that the broker said are above consensus estimates.
Operational context included Neste's global footprint and capacity: renewable diesel plants across Europe, Asia and the U.S. with combined capacity of 5.5 million tonnes per year, alongside a 210,000 barrels-per-day refinery in Finland. The Finnish government is noted as holding about 44% of the company.
Summary takeaways
- Nesta was downgraded to Neutral after a 30% rally that UBS says already prices in regulatory improvements.
- UBS raised its price target to c23 but sees limited upside from recent levels and expects mixed near-term performance due to maintenance and weaker diesel prices.
- UBS adjusted EPS forecasts downward for 2025 and upward for 2027, and projected higher EBITDA in 2025-26 versus consensus.
Key points
- Market pricing appears to reflect a Renewable Products margin of about $580 per tonne, near UBS's 2026-27 forecasts.
- Maintenance-driven plant outages in Rotterdam and Singapore are expected to pressure Q4 margins, with management flagging potential impacts up to $100 per tonne.
- The balance between spot and term sales creates significant uncertainty in margin forecasts, affecting the energy and commodities-linked segments of the market.
Risks and uncertainties
- Downside risk from weakening diesel prices could depress Renewable Products and Oil Products results, impacting company earnings - relevant to energy and refining sectors.
- Operational disruptions from turnarounds, as seen in Rotterdam and Singapore, can materially reduce margins in the short term - relevant to production and logistics operations.
- High uncertainty around the mix of spot versus term sales - this affects forecast accuracy for margins and revenues, with implications for commodity traders and fuel customers.