Vaisala - Decent quarter expected in a soft market

W&E driving growth and profitability, for now

Vaisala’s net sales missed our estimates slightly for Q3 while the margins were stronger than we anticipated. The margins were supported by the company’s OPEX discipline and reduced spot component purchases. The market situation has stayed relatively unchanged from Q3 as IM faces subdued demand driven by weak industrial activity globally in Q4. With slight negative adjustment to our net sales estimate for IM, we estimate revenue of EUR 58.4m for Q4/23, down 3% y/y. For W&E, we keep our net sales estimate for Q4/23 at EUR 85.2m resulting in group wide net sales of EUR 143.6m for Q4 (prev. EUR 145.1m) and for FY 2023 EUR 536.6m (prev. EUR 538.1m). We estimate EBIT of EUR 17.5m with a margin of 12.2% for Q4 and EUR 67.9m for FY 2023. The margin improvement is mainly driven by improved gross margin.

Market remains challenging for IM

In addition to Q4 figures, our interest lies in the comments and outlook for 2024. In the Q3 report, the company commented that markets for high-end industrial instruments and life science have somewhat declined and Vaisala doesn’t expect recovery in Q4. The Eurozone industrial confidence has not improved during Q4/23 or start of 2024, on the other hand, the Chinese industrial production showed some signs of improvement during Q4. For 2024E, we make slight changes to our estimates as we expect continued growth, albeit at a slower pace driven by W&E as we expect softness in IM volumes to continue during H1. The FX headwind is estimated to decrease as the year progresses. Profitability wise, we estimate slight improvement driven by cost discipline and no further negative effects from spot purchases expected in 2024.

BUY with a TP of EUR 41