A Finnish CEO who learned from Nokia's collapse. A gross margin that keeps climbing. And a contrarian thesis: the more chaotic the world gets, the more people retreat into a wooden box at 80 degrees.

When the world locked down in 2020, sauna sales exploded. Management did not see it coming. Now, with Middle East tensions grounding flights and inflation curbing travel plans, the same tailwind is building again.. and this time, Harvia's CEO is paying attention.

Last week, at Harvia's Annual General Meeting in Helsinki, a small group of shareholders sat down with CEO Matias Järnefelt. What came out of that room tells you everything about where this company is heading.

The Nokia scar.

Järnefelt spent years at Nokia. He watched the most profitable mobile company on earth lose everything because it stopped investing. Product leadership. Brand leadership. Gone.

That corporate PTSD drives Harvia's current strategy. While near-term EBIT margins sit at a trough of roughly twenty-one percent, the company is deliberately spending on brand equity, US distribution, digital tools, and new product lines. Without those growth investments, EBIT would already exceed twenty-six percent. Management is choosing to reinvest the margin rather than report it.

The CEO told shareholders that three to four years of elevated growth spending is required to build the platform for one billion euros in sales. They started in early 2024. Translation: we are roughly halfway through the investment cycle before margins really scale.

Gross margin is the fuel.

Harvia's gross margin used to sit around sixty percent. In fiscal 2025 it reached sixty-four point six percent, a new high, even after absorbing tariff and currency headwinds. Strip those out and the underlying margin was closer to sixty-five percent.

Two forces are driving this. First, wood costs have normalized since the pandemic spike, making sauna rooms more profitable. Second, international sales carry better economics. The more Harvia grows outside Finland, particularly in heating equipment, the higher the mix shifts toward premium gross margin.

How far can it go? The Compounding Tortoise — a concentrated-value Substack that flew from Belgium to Helsinki just to attend this AGM — estimates sixty-eight percent or more as the COVID-era comps finally lap. Wood gets cheaper.. Harvia keeps its prices. That is a margin ratchet, and it only turns one way.

The staycation thesis, round two.

Here is the contrarian angle that even the CEO had not fully considered until a shareholder raised it at the AGM.

In 2020, revenge travel was impossible. Consumers bought saunas, hot tubs, home gyms. Harvia boomed. Then in 2022, the world reopened and consumers shifted spending back to travel. Harvia's top line softened.

Now the pendulum may be swinging back. Rising jet fuel costs, Middle East disruptions, and general travel anxiety are pushing consumers toward staycations. The CEO admitted he had not viewed the current geopolitical situation through this lens but said it makes total sense as a catalyst.

The early signals are there. Almost Heaven Saunas' Instagram following jumped twenty percent in three months. US Google searches for "sauna heater" remain elevated. The replacement cycle for COVID-era saunas starts within the next few years, creating a predictable demand wave that does not depend on macro optimism.

The US is a multi-decade runway.

Picture a suburb in Tennessee. A family installs a barrel sauna in their backyard for four thousand dollars. Fifteen years later, it needs replacing. Multiply that by ten million households — the number needed to match Germany's sauna density — and you are looking at roughly fifty billion dollars in total addressable value. For Harvia at thirty percent market share, that is close to a billion in recurring revenue.

Management is building for exactly this. New production site in Lewisburg. The Blackwater Cube series under Almost Heaven. High-end saunas under ThermaSol. A strengthened DIY strategy aimed at the homeowner who watches one YouTube video and orders a kit.

The internet compresses the adoption curve. Management expects the US to move faster than any prior international market because the path from "I saw a sauna on Instagram" to "I bought one" is now three clicks.

AI makes the case stronger, not weaker.

When asked whether the AI chip boom was creating component shortages for Harvia's control units, the CEO had a simple answer: no disruptions, no price pressure.

But his bigger point was philosophical. As the world becomes more digitized and hectic, people will flee into offline experiences. Sauna is the place where you are human again. The younger generation's obsession with wellness, the decline in alcohol consumption, the growing cultural appetite for recovery and presence.. all of it feeds Harvia's secular tailwind.

Nobody brings their phone into a 90-degree sauna. That is the product.

The valuation.

Shares trade at fifteen point seven times fiscal 2026 NOPAT and thirteen point two times fiscal 2027 NOPAT. For a business with expanding gross margins, high returns on incremental invested capital, a multi-decade US runway, and cumulative free cash flows approaching today's market cap.. this is not demanding.

Even if margin expansion stalls entirely through 2030, the impact on the long-term return CAGR is only ten basis points. What matters is top-line growth and the terminal EBIT margin, both of which remain firmly intact.

Management is buying. The Compounding Tortoise is adding two percent to their position and reinvesting the dividend that goes ex this Friday. When operators and concentrated investors are both reaching for their wallets at the same time, pay attention.

The scorecard

Overall Score: 66/100. A quality compounder in mid-investment-cycle at an undemanding valuation. The US opportunity is enormous and barely started. Buy the margin trough, not the margin peak.

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