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Vaisala - Cautious outlook

Vaisala’s Q4 missed expectations, but overall Vaisala managed to perform well in 2020 despite the pandemic affecting especially W&E. IM’s performance was once again strong, even in difficult environment. Vaisala’s guidance for 2021 was cautious, despite Vaisala seeing market starting to gradually recover and new orders picking up nicely. Based on the report, we’ve lowered our 2021-23E estimates and continue to see valuation expensive, thus we maintain our TP of 32€ and SELL rating.

Q4 orders received picked up nicely in both BU’s

Vaisala’s Q4 result missed ours and consensus expectations, but strong order intake growth for both BU’s surprised positively and order book remains at good level. Q4 net sales decreased by -10% to 106.9 MEUR (109.5 Evli /108 cons). Q4 EBIT came in at 12.2 MEUR (14 Evli / 13.6 cons), resulting in 11,4% EBIT-margin (Q4’19: 17.7 MEUR, 15% EBIT-margin). Orders received grew +8% to 111.9 MEUR vs. 103.3 MEUR last year. Orders received grew +7% in W&E and +11% in IM. Order book was 137.8 MEUR vs. 139 MEUR in Q4’19. W&E fell short of our expectations; net sales decreased by -16% to 67 MEUR vs. 73.5 MEUR our expectation. W&E EBIT was 5.2 MEUR (7.3 MEUR Evli), resulting in 7,8% EBIT-margin (Q4’19: 14,7%). After a few weaker quarters, IM continued its strong performance, beating our estimates; net sales grew 10% to 39.9 MEUR vs. 36 MEUR our expectation. IM EBIT was 8.3 MEUR (6.8 MEUR Evli), resulting in 20,8% EBIT-margin (Q4’19: 15,1%). Dividend proposal is 0.61 (0.63 Evli / 0.63 cons).

 Despite solid performance and expected market recovery, outlook remained cautious

Looking at 2020, Vaisala managed to perform well despite the pandemic affecting especially W&E and creating uncertainties regarding deliveries. IM’s performance was once again strong, even in difficult environment. While W&E 2020 net sales and EBIT declined -10% and -17,5% respectively (on high comparison figures), IM 2020 net sales and EBIT grew 1% and 22%. In addition, IM is currently seeing strong growth led by pharmaceutical customer segment which includes COVID-19 vaccine suppliers. Despite continued uncertainties due to the pandemic, Vaisala sees market gradually recovering in 2021, except for meteorology market in developing countries. Vaisala issued 2021 guidance expecting net sales between 370–400 MEUR and EBIT between 30–45 MEUR. Pre-Q4, both we and consensus 2021E expectations were above the EBIT guidance. The outlook was a disappointment, given the decent performance last year, new orders picking up, lower opex level and expected market recovery.

Maintain target price of 32 euros and SELL recommendation
 
Based on the report and new guidance, we have lowered our estimates for 2021-23E. In 2021E, we expect +1,6 net sales growth driven by +7% growth in IM, while we expect W&E growth to be slightly negative. We expect EBIT of 41 MEUR (10,6 % margin) which is above guidance mid-point, driven by good performance in IM. On our renewed estimates, Vaisala is still trading at clear premiums compared to our peer group and we continue to see valuation stretched given the weaker financial performance compared to peer group. We maintain our TP of 32€ and SELL rating due to lowered estimates and expensive valuation. Our TP values Vaisala at 21-22e EV/EBIT multiples of 28x and 22x which is still above the peer group, reflecting Vaisala’s strong sustainability profile, healthy dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.
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