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Vaisala - Navigating through the tougher market

Vaisala delivered strong profitability amid a difficult market for Q3. Net sales fell short of our estimates, yet EBIT was robust. After minor estimate revisions, we adjust our TP to EUR 37.0 (prev. EUR 39.0) with BUY rating intact.

Solid Q3 figures despite the difficult market

Vaisala’s net sales decreased by 2% (+2% excl. FX) to EUR 130.4m, below our estimates (139.2/137.8m Evli/cons.). The sales decline was mostly driven by the IM segment and FX effects for both of the segments. Through improved gross margin and cost discipline in OPEX, the company’s EBIT improved to EUR 25.2m (EUR 22.0m Q3/22). The main driver behind the gross margin improvement was the significantly lower impact of the spot component purchases. W&E order intake was 2% lower (+2% FX) yet the backlog at the end of the period increased 7% y/y to EUR 131.5m. IM order intake decreased 14% (-8% FX) and the order backlog stood at EUR 34.3m at the end of period, down 12% y/y. Vaisala now sees that the markets for high-end industrial instruments and life science have somewhat declined and do not expect recovery this year.

 

Slower growth expected, yet margins stay firm

With the lower than anticipated sales for IM and declined outlook for some of the markets, we have taken growth estimates down for both Q4 2023 and 2024E. We also updated our growth projections for W&E, and despite the revisions, we continue to anticipate y/y growth in the fourth quarter of 2023. Moreover, we have slightly reduced our W&E growth predictions for 2024E. In terms of profitability, we upgraded our estimates for IM as the Q3 showed a quick rebound from the lower levels of Q2. With the estimate adjustments, we now expect net sales of EUR 538.1m and reported EBIT of EUR 68.9m for FY 2023. Our updated estimate is well within the guidance range as Vaisala kept its guidance for 2023 unchanged at net sales of EUR 530-560m and EBIT of EUR 65-75m.

 

BUY with a TP of EUR 37.0 (39.0)

With the slight adjustments to our estimates and lower peer group multiples, we revise our TP to EUR 37.0 (39.0) while keeping the rating at BUY. We continue to consider Vaisala as moderately valued, trading at a roughly 10% discount compared to our peer group on adj. EV/EBIT basis (23-24E).

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