UBS has moved Neste Oyj up to a 'buy' recommendation from 'neutral' and increased its price target to €31 from €29, pointing to firmer diesel pricing and stronger-than-anticipated regulatory support for biofuels that it believes the market has not fully priced in following a pullback in the shares.
The bank noted that Neste's shares climbed to nearly €30 in March but have since declined to about €25, despite ongoing outperformance in the company's Renewable Products business. The shares were trading at €25.92 on April 23, according to the figures cited by UBS.
UBS underlined what it sees as a valuation disconnect: the brokerage's forecasts sit materially above consensus earnings projections, with UBS saying its estimates are 48% higher than Visible Alpha consensus earnings for 2026 and 43% above consensus for 2027. On a valuation multiple basis, the stock is trading on 5.7x 2027E EV/EBITDA compared with a three-year average of 8.3x.
Central to UBS's upgrade is its view on Renewable Products margins. The broker estimated the market-implied near-term Renewable Products margin at roughly $650 per tonne, significantly below UBS's own forecasts of $874/t for 2026 and $734/t for 2027.
Regulatory developments in both the United States and Europe feature prominently in UBS's thesis. The U.S. Environmental Protection Agency confirmed an approximately 60% increase in the biodiesel mandate for 2026, which UBS said will drive roughly a 20% increase in renewable diesel volumes. UBS models a sharp jump in U.S. margins - from below $100/t to above $900/t within three months - and noted that the United States represents more than 20% of Neste's volumes.
In Europe, UBS pointed to the planned abolition of double-counting rules in Germany this year and said European margins have already improved substantially. The brokerage added that it sees a lower risk of a reversal in biofuel targets compared with the disruption witnessed in 2022-23.
On near-term operational performance, UBS expects first-quarter 2026 results to come in close to consensus, forecasting a Renewable Products margin of $770/t versus consensus of $745/t. For the second quarter, UBS's estimate is about $1,073/t compared with consensus of $781/t; the broker also said margins are running at about $1,100/t quarter-to-date against roughly $780/t expected by the market.
The report described a rapid recent rise in margins, which reached highs near $1,300/t in recent weeks, with UBS estimating about $1,200/t quarter-to-date. Both term and spot sales are reported to be benefiting, and UBS noted that term contracts linked to diesel prices account for about 60% of Neste's volumes in 2026.
For full-year 2026, UBS expects comparable Renewable Products margins of $874/t versus consensus of $694/t - a difference the bank quantified as 26%. On profitability, UBS projects EBITDA 19% above consensus for 2026 and 21% higher for 2027.
UBS identified two upcoming potential catalysts: first-quarter results due on April 29 and a German regulatory vote scheduled for May 8, following approval of changes by the Bundestag Environment Committee earlier in the week.
Key developments and context are summarized below.
- UBS upgrade - Rating raised to 'buy' from 'neutral' and price target increased to €31 from €29.
- Valuation gap - UBS forecasts well above consensus and the stock trading below its three-year average EV/EBITDA multiple.
- Margin outlook - UBS projects materially higher Renewable Products margins than the market, supported by U.S. and European regulatory changes.