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We hosted an investor call with Vestas'' HIR Daniel Patterson and Senior IR Specialist Frederik Jacobsen. Our key findings are: 1) boundary conditions in ONshore have clearly improved over the last 6-12 months; 2) the OFFshore outlook is less certain as project economics still put a question mark behind an otherwise strong auction pipeline of 40GW in Europe alone; 3) faith in the ≥10% mid-term EBIT margin target is high, but getting there will require higher volumes on top of a better mix in ON, more scale in OF and not least a normalization in warranty provisions. Net net, while we appreciate the progress underway, we struggle with valuation vis-a-vis operating risks. ON - improved conditions in all key markets, pricing expected to remain stable for now IR highlighted good momentum in the U.S. but emphasized that any volume recovery (2020/23: 6.8GW/2.1GW) will be gradual, with staff levels at c. 3k in FY23 vs. c. 6k at peak and the company hiring 20-25 people per week at this juncture. In Europe, better auction prices and permitting have started to unlock the potential in the region. With demand remaining apparently healthy, VWS reiterated its constructive view on pricing in the foreseeable future as flagged on the Q4 call. OF - homework remains to be done to deliver on political targets, confidence in V236 ramp IR pointed to greater project selectiveness and focus on industrialising the existing OF technology among the OEMs. History shows that reality tends to fall short of the potential, calling into question the 40GW auction pipeline in Europe and the rate of conversion of VWS''s own 10GW PSA pipeline into firm orders. For the ramp-up of its V236 turbine, IR said that that all 3 existing projects are located in Europe, while - being based on the EnVentus platform in ON - this should reduce related risks. Financials - ≥10% EBIT margin confirmed, VA consensus for Q1 rather ambitious in our view Despite U.S. momentum in ON, the ramp-up in OF...
Vestas Wind Systems Vestas Wind Systems A/S
Q1e: we expect adj. EBIT of EUR 3m, -93% vs. cons. EUR 40m. We cut '25e and '26e adj. EBIT ests by 9-11% on lower orders. '24e P/E 41.2x vs. historical 12m fwd range of 15-20x – HOLD.
Underlying GM almost back up to ~2018 levels, supporting recovery, but orders must go ATH in '24e to see ~20% volume growth in '25e. Stock not cheap: '24e P/E ~41x, dropping to ~20x in '25e: HOLD.
Vestas reported better than expected Q4 results and FY24 EBIT guidance only 8% below consensus at the mid-point. Our model update yields an unchanged TP of DKK160, as does our updated DCF model despite assuming 4% terminal growth and a 10% EBIT margin (WACC: 9.1%), so we struggle to see the upside case from here, and with no upside to consensus either, we remain U/P. Q4 review - better for core KPIs, FY24 guidance closer to Street vs past, but likely soft FCF Vestas delivered a straight beat for all core KPIs (PS orders / adj. EBIT: 19% / 30% ahead), yet FCF at EUR1.6bn was the real surprise (FY23: EUR0.2bn). However, the question is how sustainable orders of EUR18.5bn as received in FY23 (Q423: EUR8.2bn) might be from here, i.e. by how much Q423 NWC tailwinds of EUR1.7bn might snap back in FY24. With capex guided EUR0.4bn higher y/y at c. EUR1.2bn and EBIT projected at EUR0.6-1.1bn in FY24 vs. VA consensus'' EUR932m (2023/24e margin: 1.4% / 4-6%), the Street''s EUR0.8bn FCF 24e looks rather ambitious. Key points from the call - positive on pipeline, softer message on 10% EBIT margin by ''25 Mmgt. provided a generally confident message for orders in 2024 across regions, while highlighting that the key driver behind the guided margin uplift is better execution and pricing, with lower warranty provisions a relatively smaller factor. But while the message on the Q3 call was for a 10% EBIT margin in 2025 (VA cons: 9.2%), mgmt. was less clear this time around and did not offer specific guidance for next year at this point. Model update yields unchanged DKK160 TP at 14x EV/EBIT 25e We have only fine-tuned our model to reflect lower growth in service that should be offset by Power Solutions, resulting in a broadly unchanged absolute EBIT. While Vestas is making good progress on its margin recovery path, this is already reflected in consensus expecting EBIT to almost double in 24-25e. We maintain our SOTP-based TP of DKK160 backed by our DCF (terminal...
Q4e: we expect adj. EBIT of EUR 110m, -20% vs. cons. EUR 137m. Massive order beat in Q4 won't hit the P&L until 2025 and onwards. '24e P/E 43.6x vs. historical 12m fwd range of 15-20x – HOLD.
Vestas delivered a beat across the board versus the company-complied consensus. The order intake during the quarter was encouraging and ASPs remained at high levels. Revenue growth was propelled by good execution and better pricing, which helped improve the gross profit and EBIT in the Power Solutions segment. The Service business contributed a decent performance. CFO and FCF improved but remained in negative territory. Lastly, Vestas narrowed its outlook and now expects the 2023 EBIT margin to be positive.
Beyond a good print for headline figures (orders, sales, EBIT/DA) and a constructive call, questions remain as to what will take the shares higher from here. Not only we think a 10% over-the-cycle EBIT margin for a project business with a (5)% NWC quota rich, but we also can''t escape the impression that execution should be flawless, not to mention risks related to new product launches. As valuation looks full at 15x EV/EBIT 25e - giving VWS credit for 15% sales CAGR 23-25e and a 8% margin - and headroom to consensus limited, we maintain Underperform with a new DKK 160 target price. Q3 review - a better than expected print for orders and EBIT, while FCF remained weak We consider Q3 results overall a good print with both order intake (OF/SE driven) and adj. EBIT (thanks to a c.10% revenue beat in both PS and SE, a declining share of legacy projects and good cost control) exceeding expectations, while weak FCF should reverse (somewhat) in Q4, in our view, due to seasonal NWC release. We find the mid-point of the narrowed FY23 EBIT range of EUR 0m-310m meeting consensus expectation and looks in reach, requiring a ~2.5% margin in Q4 after 1.6% in Q2. Key takes from the call - +ve comments on pipeline, min. 10% EBIT margin target 25 reiterated Mgmt. provided a generally confident message for orders in Q4, not only in Europe, but also pointed to continued good momentum in the U.S. and decent potential in APAC (via Australia). Yet, mgmt. refrained from giving additional colour on the EBIT range of EUR 0-310m (9M: EUR 40m), while reiterating that +ve FCF is unrealistic in FY23. The key relief is the once more confirmed 2025 EBIT margin target of min. 10% (VA consensus: 9.0%) citing pricing discipline (ON ASP: flat y/y in 9M23) and a normalisation in the LPF / warranty provisions as the key levers besides growing volume. Generous SOTP and DCF assumptions give new TP of DKK 160 implying 14x EV/EBIT 25e 1.4x EV/sales 2024 in cap goods is not cheap,...
Mixed Q3: ASP & deliveries better, warranties & Service weaker. Estimates down: Service margins under pressure. '24e P/E ~35x vs. historical 12m fwd. range of 15-20x – HOLD.
Q3e: we expect adj. EBIT of EUR 19m vs . cons. EUR 24m. Wide range for H2; taking a cautious view on margins. Recovery already priced in – HOLD.
Despite an overall in-linish Q3 print for most headline KPIs, reiterated full-year targets that appear in reach and a solid call, the shares closed 2% lower. We attribute this to ON related downside risk to consensus on a slower than expected volume recovery (especially in the U.S.), and tail risks related to OF as PSAs might be pushed out or cancelled. Our 5% cut to EBIT 2024/25e puts us 20%/11% below the Street prompting our new TP of DKK 170 (implied EV/EBIT 25e: 15x), so we reiterate U/P. Q2 recap - KPIs mostly in line, but order weakness triggers questions on 2024 consensus Q3 were solid with sales/adj. EBIT of EUR 3.2bn/(70)m broadly meeting sell-side expectations, while we regard the EUR 136m FCF burn as 1) seasonal and 2) reflective of the operating loss and ongoing capex spent (about stable y/y, but up EUR 73m q/q), while NWC was sequentially stable. However, orders missed consensus by 14% with LTM order volumes at only 11.7GW per Q2, thus questioning consensus'' EBIT trajectory 23-24e that banks on a material uptick in deliveries beyond a swift gross margin uplift. FY23 EBIT target range of EUR (280)m-465m was confirmed requiring a ~2.5% margin in H223 to make consensus'' EUR 189m in 23e, which looks in reach given c. EUR 2bn higher sales. Q2 call with an overall confident message, however, almost exclusively focused on 2023 Mgt conveyed a generally confident message in regards to orders in H2, once more hinting to an expected improvement in IRA clarity in the US in Q3 to unlock more project awards, and reiterated the earlier commitment to return to positive EBIT this year (FY22: EUR (1.5)bn), while calling positive FCF ''not realistic'' (VA cons: EUR (139)m). The greatest relief relates to a comforting message around the order book at OF with VWS ruling out potential charges related to PSAs, and as to not seeing any impact from the warranty issues at TPIC. Asked for volumes in 2024, mgt did not make any directional comments; yet, the...
No big warranty charges a relief in Q2. Wide range for H2; we reduce our margin spread to guidance. Recovery already priced into multiples – HOLD.
Vestas reported Q2 figures that were broadly in line with the consensus across the board. Order intake grew yoy driven once again by Onshore while ASP remained at a high level. Revenues grew as lower delivery volumes were more than offset by strong Service activity and higher pricing on the deliveries. These factors also led to an increase in gross profit resulting in an expansion in the gross and EBIT margins. With these results, Vestas confirmed its 2023 targets.
March results in isolation would have supported our prior neutral-to-cautious view on Wind OEMs, but recent developments in German onshore wind and commentary from developers make us more constructive on future volumes. Add to this that the OEMs'' statements unanimously suggest that the inflection point for operating earnings and later on for FCF is in reach, we not only reinstate our positive view on Siemens Energy, but also upgrade Nordex to O/P (from Neutral) given its leading exposure to German onshore. We reiterate our cautious view on Vestas (consensus risk, valuation). March-quarter recap - weak, but nearing inflection point? On a company-by-company basis, we believe underlying operating profit came in on light side in the March-quarter, as did FCF. However, confidence at the OEMs has risen and we anticipate an inflection point and hence a return to breakeven in H2. Looking ahead, the question is if already high hopes in consensus forecasts will be supported by incoming orders, especially in onshore. Demand - U.S. order pick-up still unclear, other than momentum in German onshore wind One can debate how to treat large orders - especially when execution stretches over years (for both offshore and onshore) - but the bottom line is that BNEF sees onshore volumes outside of China as flat at best in 2024. While the US admittedly remains the key swing factor, not least for Vestas, we also see challenges in ramp-up, following material staff cuts and given the longer tenure of tax credits, which might slow the customer rush. On the contrary, we find that momentum in Germany is running ahead of expectations, as reflected in a 4GW run-rate vs. market forecasts at c. 3GW. ENR still our preferred pick, Nordex = to + on high German exposure/YTD underperformance We appreciate the OEMs'' constructive message on margin prospects and the apparent activity pick-up in Germany. Yet we acknowledge the challenges to consensus and the buy-side''s hopes for...
VWS VWS NDX1 ENR
Vestas’ Q1 figures were ahead of consensus expectations on revenues and EBIT. Revenue growth was supported by higher level of installations, relatively better pricing and good growth in Service. The EBIT beat was underpinned by the sale of the converters business but also somewhat better profitability. Order intake grew yoy driven solely by Onshore. CFO and FCF were negative on account of higher working capital requirements. The result showed some positive developments, but the group left its 2023 guidance unchanged.
The market is eyeing up greater political support for wind in the US and EU, but we remain cautious on timing. Add in a lower forecast for new wind installations (10% CAGR22-30e) than in solar and the complex nature of a project business, and we believe selectivity is key. We reinitiate on Vestas at Underperform and Siemens Energy at Outperform and launch on Nordex at Neutral. Big numbers, big impact? The capacity boost might take time Beyond the USD ~370bn and EUR ~250bn support under the US and EU IRA, there remain several unknowns on boundary conditions, including permitting and grid expansion, that might prevent a more dynamic build-out of wind capacity. Given that rapid wind expansion simultaneously requires back-up (peaker gas) capacity and large grids capex, we see Siemens Energy best positioned. Siemens Energy (+): Almost out of the woods? We think so - reinitiate at O/P, TP EUR24 Although it ticks many energy transition boxes, market scepticism prevails despite the share''s recent rebound from its trough. With the equity raise now behind, fundamentals are back in focus. Siemens Gamesa looks increasingly under control and our valuation of the gas turbine portfolio (~1/3 of sales) aims to account for the uncertain prospects in the long run. Still, we see c.30% upside. Vestas (-): Growth potential priced-in but not associated risks - reinitiate at U/P, TP DKK170 While Vestas should benefit from improved political support, we are less optimistic on 1) the impact in 2023/24 given long lead times and 2) on the sustainability of the 10% EBIT margin target by 25e. In our view, 1.7x EV/sales 24e does not reflect eventual project risks, potential warranty issues in offshore in future and a more competitive environment in offshore. Our TP leaves 10% downside. Nordex (=): A credible growth story but FCF outlook still subdued - launch at Neutral, TP EUR13 Despite doubling its market share, margins/FCF have remained fragile, due to weak...
Vestas confirmed its preliminary 2022 results with revenues at the lower-end of the guidance and EBIT below it. Order intake in Q4 was strong but that for 2022 was only marginally higher. Service revenues were above expectations but the margin was slightly below. CFO and FCF were negative and the board will not propose a dividend for 2022. The 2023 outlook is below our estimates but management indicated that the target of achieving 10% EBIT margin by 2025 remains realistic.
Vestas’ Q3 figures missed the consensus estimates across all metrics. The order intake declined due to lower offtake amid higher prices and cost inflation. Revenues were impacted by lower installations and general delays. The miss was greater on gross profit and EBIT owing to supply-chain hindrances and increased input costs. As a result, CFO and FCF were negative and the net debt increased. Following the release, the group narrowed its 2022 outlook to below our current estimates.
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