Vaisala - Time to ramp up scalability
Vaisala’s recent growth has been supported by strong underlying demand and the alleviation of the pandemic's impact. As economic conditions have become more challenging, the company now has an opportunity to confirm its competitiveness and demonstrate the sustainability of its growth. Furthermore, the projected scalability should be unleashed from 2024 onwards.
Vaisala focuses on high-end measurements
Vaisala strategically targets niche segments within the global high-end measurements markets. The company focuses exclusively on providing solutions that deliver substantial value-add, thereby enhancing its pricing position and customer loyalty. Vaisala places great emphasis on R&D, considering it as a vital component of its growth. With an annual R&D investment of approximately 12% of net sales, Vaisala aims to ensure long-term growth and maintain its competitive edge. The company's steadfast commitment to R&D has yielded double-digit growth and an expansion of market share in recent years in our view.
Strategy has proceeded as expected
Vaisala updated its well-succeeded strategy in 2021 to better reflect the core of its business, vision, and megatrends applying to its industry. Simultaneously, the company elevated its growth and profitability targets. Vaisala has made significant progress in achieving its growth targets, although there is still work to be done to reach the EBIT margin target of 15%. Currently, the company is making substantial investments in its digital services and other growing business segments. Our view is that these segments will serve as the primary growth catalysts in the coming years, while the flagship businesses, particularly in W&E, are expected to develop moderately.
Figures seen to improve, valuation at a neutral level
We foresee a robust growth trajectory for Vaisala, with a projected CAGR of 7.4% (2022-25). The expected EPS growth is even more impressive, with a growth rate of 17.7%. We find Vaisala’s current valuation to be relatively neutral, as it’s trading in alignment with its historical and peer median multiples. With the recent upward trend in the share price, we downgrade our rating to HOLD (BUY). We reiterate our TP of EUR 44.0, with our estimates relatively intact.
Vaisala strategically targets niche segments within the global high-end measurements markets. The company focuses exclusively on providing solutions that deliver substantial value-add, thereby enhancing its pricing position and customer loyalty. Vaisala places great emphasis on R&D, considering it as a vital component of its growth. With an annual R&D investment of approximately 12% of net sales, Vaisala aims to ensure long-term growth and maintain its competitive edge. The company's steadfast commitment to R&D has yielded double-digit growth and an expansion of market share in recent years in our view.
Strategy has proceeded as expected
Vaisala updated its well-succeeded strategy in 2021 to better reflect the core of its business, vision, and megatrends applying to its industry. Simultaneously, the company elevated its growth and profitability targets. Vaisala has made significant progress in achieving its growth targets, although there is still work to be done to reach the EBIT margin target of 15%. Currently, the company is making substantial investments in its digital services and other growing business segments. Our view is that these segments will serve as the primary growth catalysts in the coming years, while the flagship businesses, particularly in W&E, are expected to develop moderately.
Figures seen to improve, valuation at a neutral level
We foresee a robust growth trajectory for Vaisala, with a projected CAGR of 7.4% (2022-25). The expected EPS growth is even more impressive, with a growth rate of 17.7%. We find Vaisala’s current valuation to be relatively neutral, as it’s trading in alignment with its historical and peer median multiples. With the recent upward trend in the share price, we downgrade our rating to HOLD (BUY). We reiterate our TP of EUR 44.0, with our estimates relatively intact.