Vaisala - Underlying demand continues strong
Vaisala delivered strong topline growth in Q4. Orders received and order book increased by double-digits which provides a firm foundation for 2023. The company guides solid growth and clear EBIT improvement for 2023. With adjusted estimates, we raise our TP to EUR 44.0 (41.0). Our rating remains at HOLD, reflecting a neutral valuation.
Topline came in above expectations
In Q4, Vaisala grew by 13% (FX adjusted 8%) y/y to EUR 141.6m. The growth was supported by IM’s all segments and W&E’s aviation and meteorology. Spot component purchases continued, but the group gross margin remained flat. With relatively high growth in fixed costs, EBIT fell short of expectations. Q4 EBIT amounted to EUR 12.6m, reflecting a margin of 8.9%. Vaisala expects the component availability to neutralize during H1’23, and there have emerged signs of improvements already. In our view, this should result in an improved gross margin from H2’23 onwards. For 2022, the BoD proposes a DPS of 0.72.
The hot market supports demand also during 2023-24
Underlying megatrends provide continuity for Vaisala’s growth story. In addition, the company has made the right decisions during the past few years in our view, which has resulted in an expansion of market share. For example, investments in digital and renewable businesses have boosted W&E’s topline and we foresee that earlier-known steadily growing and somewhat cyclical business becomes more resilient to economic fluctuation. Moreover, with higher product margins, we see some room for profitability improvement. In addition, the company never halted R&D investments during the hardest times of COVID which enhanced Vaisala’s technology leadership position in our view. Vaisala has also benefitted from pent-up demand due to the pandemic which however likely fades away. In other words, achieving annual double-digit growth becomes even harder. We however see Vaisala as an attractive investment case with coming scalability providing EPS growth.
HOLD with a target price of EUR 44.0
With estimate revisions made, our 23E EBIT saw a 5% increase. Vaisala trades approx. in line with its peers. We retain the HOLD rating and adjust TP to EUR 44.0 (41.0), reflecting increased 23-24E estimates.
In Q4, Vaisala grew by 13% (FX adjusted 8%) y/y to EUR 141.6m. The growth was supported by IM’s all segments and W&E’s aviation and meteorology. Spot component purchases continued, but the group gross margin remained flat. With relatively high growth in fixed costs, EBIT fell short of expectations. Q4 EBIT amounted to EUR 12.6m, reflecting a margin of 8.9%. Vaisala expects the component availability to neutralize during H1’23, and there have emerged signs of improvements already. In our view, this should result in an improved gross margin from H2’23 onwards. For 2022, the BoD proposes a DPS of 0.72.
The hot market supports demand also during 2023-24
Underlying megatrends provide continuity for Vaisala’s growth story. In addition, the company has made the right decisions during the past few years in our view, which has resulted in an expansion of market share. For example, investments in digital and renewable businesses have boosted W&E’s topline and we foresee that earlier-known steadily growing and somewhat cyclical business becomes more resilient to economic fluctuation. Moreover, with higher product margins, we see some room for profitability improvement. In addition, the company never halted R&D investments during the hardest times of COVID which enhanced Vaisala’s technology leadership position in our view. Vaisala has also benefitted from pent-up demand due to the pandemic which however likely fades away. In other words, achieving annual double-digit growth becomes even harder. We however see Vaisala as an attractive investment case with coming scalability providing EPS growth.
HOLD with a target price of EUR 44.0
With estimate revisions made, our 23E EBIT saw a 5% increase. Vaisala trades approx. in line with its peers. We retain the HOLD rating and adjust TP to EUR 44.0 (41.0), reflecting increased 23-24E estimates.