Vaisala - Some catching up to do

Q1 was negatively affected by one-time events

Vaisala published preliminary net sales of Q1/24 yesterday, missing our estimate by a substantial margin. The company’s preliminary net sales were EUR 112m (Evli est. EUR 128m), down roughly 15% y/y from EUR 132m Q1/23. Due to lower sales, EBIT is expected to be significantly lower when compared to Q1/23. The reasons for the decline were already known and communicated by the management in connection with the Q4/23 report and pre-silent comments. The industrial actions in Finland and implementation of the new ERP were the main drivers behind the declined sales. While we expected a soft first quarter due to the beforementioned reasons, with a net sales decline of roughly 3%, the negative effects from these one-time events were more substantial than estimated.

Guidance demands growth for the remainder of the FY

While the Q1 preliminary net sales indicate a decline of roughly 15%, Vaisala reiterated its FY24 outlook where it estimates that net sales will be in the range of EUR 530–570m and EBIT in the range of EUR 63–78m. With the preliminary net sales for Q1, the outlook range implies y/y revenue growth of roughly 2-12% for the remaining nine months of FY. With the preliminary net sales updated to our model in addition to other estimate changes, we now estimate net sales of EUR 542m and EBIT of EUR 68m for FY 2024. Our estimates imply roughly 5% growth for the remaining nine months supported by W&E’s backlog and softer comparison for IM during H2. Q1 is now estimated to be exceptionally weak also in terms of profitability driven by the net sales miss and further OPEX investments.

BUY with a TP of EUR 40 (prev. EUR 41)

Based on our updated estimates for 2024-2025, Vaisala trades at roughly 17-14x adj. EV/EBIT, this represents a discount of approximately 12% when compared to the peer group. Supporting this, our DCF indicates an upside of roughly 10%.