Vaisala - W&E remains in the driver’s seat

Price competition and lower volumes led to GM pressure

Vaisala’s net sales increased by 4% in Q4 to EUR 147.4m, slightly above our estimates (143.6/142.7m Evli/cons.). W&E’s growth was strong as the net sales grew 10% y/y (14% excl. FX). IM’s sales decline was slightly steeper than expected. On the flip side, the company’s profitability missed our estimates as EBIT amounted to EUR 16.3m (17.5/17.7m Evli/cons.), reflecting a margin of 11.0%. While the negative effect from spot purchases was practically non-existent for both segments as expected, price competition and lower volumes affected the gross margin more than we estimated, especially for IM.

W&E’s outlook brighter, while IM navigates tough market

W&E’s orders received grew 35% y/y to EUR 87.7m aided by the EUR 20m airport surface observation system order in Kuwait. IM’s orders declined 8% y/y to EUR 59.4m as the important life science market segment’s orders declined especially strongly. Vaisala estimates that its FY24 net sales will be EUR 530-570m and EBIT 63-78m. We have revised our estimate for FY24 net sales to EUR 553.7m (prev. EUR 551.8m) while for EBIT, we decreased our estimate some 6% to EUR 71.7m (prev. EUR 76.1m). The Q1 is now expected to be soft driven by continued weak IM demand, impact from implementation of ERP system and industrial actions in Finland. Revenue growth is expected to be led by W&E backed by the solid order backlog. On the other hand, we estimate that there will be some softness in the margins due to the expected sales mix for W&E. For IM, we estimate growth to pick up slightly in H2 as the comparison periods get softer, the visibility to turn around in demand remains low.

BUY with a TP of EUR 41

Based on our updated estimates for 2024-2025, Vaisala trades at roughly 17-15x adj. EV/EBIT, this represents a discount of 11-15% when compared to the peer group. With slightly higher peer group multiples and long-term case intact, we retain our TP at EUR 41.0 and rating at BUY.