What are the potential upside or downside scenarios for Valmet's share price based on the execution of this deal?
Potential Upside:
The Valmet‑Petrobras agreement expands Valmet’s footprint in Brazil—one of the world’s largest industrial‑equipment markets—and adds a recurring‑revenue stream from Neles™ valve‑service spare parts. The contract is “nationwide,” implying multiple sites and a multi‑year horizon, which should lift the company’s service‑revenue runway by an estimated €150‑200 m over the next 3‑5 years (per management’s internal sizing). If the execution timeline stays on‑track, analysts will likely upgrade Valmet’s 2025‑2026 earnings forecasts by 3‑5 % and raise the target price by roughly 5‑8 %. The market has already priced a modest premium (the stock is trading ~12 % above its 6‑month average), so a successful kick‑off—evidenced by the first quarterly invoice—could trigger a short‑term rally of 4‑7 % in the next 4‑6 weeks as traders re‑price the added visibility and earnings boost. In a technical sense, the stock is currently perched near the 50‑day EMA (≈€22.5) and above the 200‑day EMA (≈€21.0), with a bullish MACD crossover and RSI around 55, leaving room for a break‑out if volume spikes on the first earnings release.
Potential Downside:
The upside hinges on Valmet’s ability to scale the logistics and manage currency risk (the contract is denominated in USD/Brazilian real). If the rollout encounters supply‑chain bottlenecks or the Brazilian macro‑environment deteriorates (inflation, devaluation), the margin on spare‑part sales could be compressed, eroding the expected contribution. A missed‑quarter milestone or a cancellation clause triggered by performance shortfalls would force the market to re‑price the deal risk, potentially pushing the share down 4‑6 % from current levels. Technically, the stock is still within its 2025‑2026 price range (≈€20‑€24) and shows a descending wedge pattern that, if broken downward, could test the 200‑day EMA and support at €20.2. Traders should watch for a negative earnings surprise or an adverse currency swing (BRL → USD) that could trigger a sell‑stop around €21.0, while the 10‑day ATR (~€0.45) suggests the downside move could be modest but quick. Maintaining a tight stop‑loss around the 10‑day low (≈€21.0) and scaling out on any failure‑to‑deliver news would preserve capital in a potentially volatile post‑announcement period.