Vaisala - Strong start to an uncertain year
Strong performance in the first quarter gave Vaisala a solid start to the FY but the ongoing trade uncertainties will likely challenge it during the rest of the year.
Some negatives, yet Q1 was mainly positive
Vaisala’s Q1 net sales came close to our estimate at EUR 135.6m (Evli est. EUR 133.5m) with growth of 21% as the company bounced back from weaker Q1/24 as was expected. On the other hand, the profitability was at significantly higher level than we expected as EBITA climbed to EUR 20.5m (Evli est. EUR 14.2m) with a margin of 15.1%. Industrial Measurements net sales grew 24% y/y while gross margin climbed to 64.4% (58.4% in Q1/24) driven by both volumes and sales mix. Due to the same reasons, Weather & Environment gross margin improved to 51.8% (Q1/24 51.0%). While the gross margin was the major driver behind the stronger than expected profitability, the company was also able to manage its operating expenses well. The main negative from the report was the development in renewable energy were net sales declined very strongly. The wind park investments have slowed down, and, in the US, the market is in a stand still especially on offshore side as the permitting practices for wind projects are under review by the current administration.
A degree of headwind is expected ahead
After the Q1 figures and some estimate changes, we now forecast net sales of EUR 602m (prev. EUR 607m) and EBITA of EUR 97m (EUR 95m). Vaisala’s guidance remains unchanged as the company expects net sales to land in between EUR 590-620m and EBITA between EUR 90-105m. For W&E, we expect the declining renewable energy market to continue to hurt going forward while we expect strong backlog to continue to drive growth, in addition to subscription sales which are further supported by inorganic growth. In IM, the company expects the industrial and life science markets to continue growing throughout the rest of the year, with also power market expected to grow. We see that the company can pass on the tariffs to prices quite well especially for private customers in the US market. According to our understanding, the strong performance of the Americas market in Q1 was marginally influenced by front-loaded demand ahead of the tariffs.
Underlying fundamentals developing well
After minor estimate revisions we retain our TP at EUR 52 and rating at BUY. We see that the profitable growth story is developing well yet external uncertainties beyond the company's control limit the visibility going forward.