Vaisala - Expecting strong earnings growth

Vaisala reports its Q4 result on Friday. In Q4, we expect revenue growth to scale till bottom rows and earnings improvement of 60% y/y. We retain our HOLD-rating and TP EUR of 43.

Expecting a clear earnings improvement in Q4’21
We expect solid net sales growth of 17.4% from a weak comparison period, topline totaling EUR 125.5m vs. 123.4m cons. The growth is driven by both BUs (W&E +13.4% & IM +24.1%). We expect group adj. EBIT to improve by 29.6% y/y to EUR 18.3m (14.6% margin) vs. 16.8m cons. In our estimates, W&E contributes the EBIT with EUR 7.8m (10.3% margin) and IM with EUR 10.9m (22% margin) respectively. With the profitability improvement, we expect clear 60% EPS growth. We estimate the BoD to propose a dividend of EUR 0.63 vs. 0.64 cons.

Strategy execution continued, but component shortage disturbs topline growth in 2022
The company has successfully continued its strategy execution by its solid revenue growth in both BUs. The company also acquired software company AerisWeather to strengthen its growth in DaaS and SaaS recurring revenue businesses during Q1’22. Vaisala obtains valuable data-service and software development capabilities through the acquisition in addition to a few million recurring revenue impact. In 2022, we expect the growth pace to slow a bit down to 8.3% mainly due to uncertainties regarding component availability. Despite the supply chain issues, we expect solid 16% earnings growth in 2022.

HOLD with a target price of EUR 43
Vaisala has historically been trading with EV/EBITDA multiple around 20x. Currently, with a 21-22E EV/EBITDA of 22-19x, the company trades with a slight premium compared to its peers, but given Vaisala’s quality and lower risk profile, we find the premium justified. With our estimates intact, we retain our HOLD-rating and TP of EUR 43.

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