Vaisala - Industrial demand softening
Some of Vaisala's industrial customers have recently postponed their investment decisions which was reflected in the BU’s preliminary Q2 figures. W&E experienced better-than-expected growth and profitability during Q2. With revised guidance and milder Q2, we cut our 23-24E EBIT estimates by approx. 9%.
23E EBIT guidance reduced, industrial demand soft
Vaisala revised its 23E net sales guidance to a range of EUR 530-560m (prev. 530-570m) and reduced its EBIT expectations to EUR 65-75m (prev. 70-85m). Our view is that the decrease in EBIT is primarily attributed to the weakened market environment of IM. Meanwhile, the demand for W&E was strong with its recurring service sales and renewable energy showing robust growth. In the preliminary Q2 figures, the overall topline saw a 9% increase, reaching EUR 130.8 million, largely driven by W&E's remarkable 18% y/y growth. Meanwhile, IM experienced a 3% decline in revenue, facing challenges from soft demand in the markets. Q2 EBIT improved to EUR 11.9m (9.1% margin) with the help of W&E, while IM’s EBIT saw a significant decline due to soft sales and an unfavorable sales-mix. Preliminary Q2 figures show that pressures in fixed costs have eased, and W&E’s 23E EBIT is likely to come in above our previous expectations.
We made some estimate adjustments
In light of the new guidance and preliminary Q2 figures, we adjusted our group estimates downwards. Our 23-24E EBIT estimates saw a significant downgrade of approximately 9%, primarily attributed to the weaker-than-expected performance of IM. However, the decline is partly offset by revisions made to W&E’s estimates. Our 23E EBIT estimate now stands at EUR 66.2 million, which nears the lower end of the company's new guidance range. We foresee that achieving the EBIT target of 15% in 2024 is likely to become even more challenging due to the softness of the industrial market.
Valuation favorable
We value Vaisala with 23-24E EV/EBIT of 23-18x, which, with estimate revisions, implies a target price of EUR 42.0 (44.0). In our view, Vaisala's current valuation portrays a more turbulent performance outlook than we anticipate. With that, we raise our rating to BUY (HOLD), reflecting moderate valuation relative to the company’s history and its peers.
Vaisala revised its 23E net sales guidance to a range of EUR 530-560m (prev. 530-570m) and reduced its EBIT expectations to EUR 65-75m (prev. 70-85m). Our view is that the decrease in EBIT is primarily attributed to the weakened market environment of IM. Meanwhile, the demand for W&E was strong with its recurring service sales and renewable energy showing robust growth. In the preliminary Q2 figures, the overall topline saw a 9% increase, reaching EUR 130.8 million, largely driven by W&E's remarkable 18% y/y growth. Meanwhile, IM experienced a 3% decline in revenue, facing challenges from soft demand in the markets. Q2 EBIT improved to EUR 11.9m (9.1% margin) with the help of W&E, while IM’s EBIT saw a significant decline due to soft sales and an unfavorable sales-mix. Preliminary Q2 figures show that pressures in fixed costs have eased, and W&E’s 23E EBIT is likely to come in above our previous expectations.
We made some estimate adjustments
In light of the new guidance and preliminary Q2 figures, we adjusted our group estimates downwards. Our 23-24E EBIT estimates saw a significant downgrade of approximately 9%, primarily attributed to the weaker-than-expected performance of IM. However, the decline is partly offset by revisions made to W&E’s estimates. Our 23E EBIT estimate now stands at EUR 66.2 million, which nears the lower end of the company's new guidance range. We foresee that achieving the EBIT target of 15% in 2024 is likely to become even more challenging due to the softness of the industrial market.
Valuation favorable
We value Vaisala with 23-24E EV/EBIT of 23-18x, which, with estimate revisions, implies a target price of EUR 42.0 (44.0). In our view, Vaisala's current valuation portrays a more turbulent performance outlook than we anticipate. With that, we raise our rating to BUY (HOLD), reflecting moderate valuation relative to the company’s history and its peers.