Vaisala - The growth story continues

Growth was strong, but increased costs tightened margins
Vaisala delivered strong Q4 figures with orders received totaling EUR 119m and order book at a record level of EUR 160m. Strong order intake was driven by IM, while W&E experience a 14% decline partly due to strong comparison figures. Group net sales grew by 17% y/y to EUR 125 driven by both BUs. IM grew by 26% y/y, driven by all its market segments. W&E experienced a 12% increase in net sales, driven by renewable energy and meteorology. Increased usage of spot-priced components decreased the gross margin to 53%. EBIT decreased by 3% y/y to EUR 11.9m, driven by lower gross margin and increased fixed costs. Q4 EBIT included one-time costs worth EUR 1.1m. EPS declined by 11% y/y to EUR 0.21. Board proposed a dividend of EUR 0.68. Despite losing some margins, Vaisala gained market share and “long-wanted” customers from its competitors with its ability to respond to the demand in a difficult environment.

We made some adjustments to our estimates
Despite the problems on the supply side, the underlying demand remains strong. We made minor adjustments to our estimates, reflecting a solid outlook, but also risks stemming from the component shortage. The order book is strong and thus we expect both BUs to grow also during 2022. We expect IM to grow by 16% y/y to EUR 209.8m in 2022, driven by all its market segments. In 2022, we estimate W&E to increase by 6.3% y/y to EUR 273.1m, mostly driven by renewable energy. 2022 group revenue amounts to EUR 482.9m, near the mid-point of the guidance. Vaisala’s management noted that some price increases have been made in Q1’22, but the visibility to component availability remains weak and we expect material costs to increase and gross margin to be a bit lower than in 2021. In our view, IM suffers less from the component shortage with its pricing power, while W&E’s gross margin falls more aggressively. Although the gross margin is a bit softer, we expect EBIT to rise to EUR 59.9m (12.4% margin), driven by scalability. IM contributes the EBIT with EUR 52.4m and W&E with EUR 9m.

HOLD with a TP of EUR 41 (43)
Vaisala’s valuation is quite stretched compared to its peers. With 22E EV/EBITDA of 19x, Vaisala trades with a ~20% premium. We, however, find a premium justified, given Vaisala’s technology leadership, increased market share, and growth outlook. Our new TP values Vaisala at 22-23E EV/EBITDA of 17.6-16.4x. With the acceptable valuation level decreased and uncertainties in component availability, we retain our HOLD rating and adjust our target price to EUR 41 (43).