Vaisala - CMD notes
In its CMD, Vaisala outlined its strategy and updated long-term financial targets. With slight positive estimate adjustments and higher peer multiples, we increase TP to EUR 49.0 (prev. EUR 47.0), recommendation remains at HOLD.
Well positioned in many ways
Vaisala’s CMD provided more insights into updated financial targets and the current strategy which focuses on driving sustainable growth and global leadership in its two main segments. The strategy builds on the success elements of the previous strategy. We find that the company continues to be exceptionally well positioned to drive profitable growth aided by several trends. While R&D continues to be a key enabler for the company’s competitive advantage, the focus has shifted towards new opportunities, with approximately half of the R&D investments in 2024 allocated to new products, technology, and research. The other half is dedicated to the maintenance and modernization of existing products, which was the primary focus of R&D still in 2019. See the following pages for our comments on the strategy and updated financial targets.
Ready, set, growth
The growth target remains unchanged from the last strategy period and is well in line with the company’s historic growth rate. In W&E, Vaisala’s legacy business should continue its low single digit growth while the subscription and especially the renewable business drive faster growth. Coupled with this, the strong project backlog boosts volumes for the coming years. For IM, the market outlook remains uncertain, yet we expect that the segment will return to growth in 2025E after two slower years. Vaisala updated its profitability target parameter from EBIT margin to EBITA margin. This change is logical, as the amortization of intangible assets related to the acquired businesses impacts EBIT. Vaisala also made its margin target descriptive (improving vs. prev. 15% EBIT margin), at least partly due to market uncertainty. We are now confident in the sustained margin improvement of W&E, as the company has boosted profitability in its legacy and project businesses, while its more profitable renewable segment has grown significantly.
HOLD with a TP of EUR 49.0 (prev. EUR 47.0)
Vaisala is priced at 27-24x adj. P/E and 21-18x EV/EBITA based on our estimates for 2024-2025E. While high on absolute level, the pricing represents a slight discount to our peer group and the company’s own historical valuation multiples. With slight positive estimate adjustments and higher peer group multiples, we increase our TP to EUR 49.0 (prev. EUR 47.0).