Vaisala - Growth ingredients in place for 2025
Vaisala’s Q3 fell short of our estimates for both net sales and profitability. Despite the miss, we see the company’s prospects for 2025E bright with higher project driven backlog for W&E and some early signs of demand pick up in IM. Vaisala will hold its CMD on 11th of November.
Q3 fell short of our expectations yet contained also positives
Group net sales increased by 5% to EUR 136.6m, falling short of our estimate of EUR 142.3m. Gross margin fell slightly y/y to 57.3% (58.0% Q3/23). EBIT amounted to EUR 24.1m (EUR 28.0/27.8m Evli/cons.), reflecting a margin of 17.7% (19.3%). Despite falling short of our expectations for both net sales and EBIT, backlog grew for both IM and W&E. IM backlog ended at EUR 36.8m at the end of the quarter, up 7% y/y while W&E backlog was at EUR 183.5m, growing 40% y/y. The main driver behind W&E backlog growth was the large project order in Spain as expected. Market commentary remained relatively unchanged from the previous quarter, as the company still sees early signs of a pick-up in IM demand in North America. Looking at the end-market outlook for 2024, Vaisala shifted its outlook for renewable energy to stable from growth. According to the management, the underlying long-term growth remains intact despite short-term challenges in wind energy investments.
Growth should pick up in 2025E
Vaisala kept its guidance unchanged for 2024 at net sales of EUR 540-570m and EBIT at EUR 68-78m. After adjusting for the Q3 figures and small estimate changes, we model net sales of EUR 554m and EBIT of EUR 72m for 2024E. The growth prospects for 2025E remain positive with large projects driving W&E growth and some early positive signs for IM demand from North America. We now estimate net sales of EUR 612m with growth of 10% for 2025E. For 2025E EBIT, we estimate EUR 83m with a margin of 13.6%. While the company’s margins typically scale well with volumes, we estimate that for example the increased portion of project sales for W&E will affect the segments gross margin negatively.
HOLD with a TP of EUR 47.0
Based on our updated estimates for 2024-2025E, Vaisala is priced at 20-18x adj. EV/EBIT. While high on absolute level, we consider the pricing still neutral given the projected profitable growth for the coming years. The company’s pricing is also in line with our peer group consisting of R&D-focused electrical equipment and measurement solutions providers.