Vaisala - Looking to improve despite headwinds
Vaisala reports its Q2/24 results on Thursday 25th of July. We expect net sales growth and margin improvement y/y after a sluggish start to the year.
Slow start requires acceleration towards the year end
Due to industrial actions in Finland and simultaneous ramp-up of the new ERP system, Vaisala’s start to the year was slow in Q1. While net sales declined strongly, the company was able to successfully scale its OPEX in accordance with the lower volumes. Driven by this, Vaisala’s EBIT came in slightly better than we had estimated. While the first quarter can be described as a defensive victory, it leaves room for improvement and some acceleration is needed to meet the FY guidance. We have made slight adjustments to our estimates for Q2 and FY 2024E. We estimate net sales of EUR 545.8m and reported EBIT of EUR 70.4m for 2024E, both only slightly below the guidance middle-point. Vaisala’s 2024 guidance stands unchanged ahead of the Q2/24 report at net sales of EUR 530-570m and EBIT of EUR 63-78m.
IM market conditions have remained largely unchanged
The ECB delivered its first 25 bps rate cut in June as was expected and the current consensus predicts two more rate cuts of 25 bps during the remainder of the year. The FED is yet to cut rates, while the consensus expects first rate cut during the remainder of the year. Global PMI data shows an improving trend from the lows seen during 2023. Despite a slight improvement in general economic conditions, we expect that the market conditions for Vaisala’s Industrial Measurements segment have remained relatively unchanged during Q2/24. For the Weather and Environment segment, we estimate that the strong orderbook development during the last two quarters has translated into sales growth in the second quarter.
HOLD (BUY) with a TP of EUR 42.0 (EUR 40.0)
Vaisala’s valuation has normalized since our latest update, and it trades roughly at par to our peer group. With our estimates for 2024-2025E, Vaisala is priced at 18-16x adj. EV/EBIT and 24-21x adj. P/E. Our DCF yields a fair value of EUR 42. We downgrade our rating to HOLD while we adjust TP to EUR 42.