Vaisala |

• Group result: Orders received grew by 5% y/y and order book was on a solid level at EUR 167.4m (+6% y/y). Net sales at EUR 130.8m, with y/y growth of 9%. The increase in net sales was driven by W&E’s growing market segments. Gross margin was a bit below the comparison period. EBIT improved but was negatively impacted by the low volumes and soft gross margin of IM. The deceleration in fixed costs growth was positive news for us. EPS amounted to EUR 0.22.
• Industrial measurements (IM): Orders received decreased by 6% and order book was flat at EUR 37.2m. Net sales declined by 3% to EUR 52.8m, due to decrease of life science. Gross margin came in soft, driven by unfavorable sales mix and elevated price competition. EBIT amounted to EUR 6.8m with a margin of 12.9%.
• Weather and Environment (W&E): Orders received increased by 14% and order book was on a good level at EUR 130.2m (+8% y/y). Net sales increased by 18% to EUR 78.0m. The growth was driven by renewable energy, roads and automotive as well as meteorology market segments. Gross margin came in above our expectations, with higher share of more profitable businesses. EBIT came in surprisingly strong at EUR 4.9m, 6.3% of net sales.
• Market outlook: Vaisala expects its high-end industrial instruments and life science market segments to grow moderately. Renewable energy and roads and automotive market as well as power and energy and liquid measurements segments are anticipated to grow. The company foresees aviation market segment to be stable or grow and meteorology market segment to be stable.
• 23 guidance intact (revised on July 17th): net sales between EUR 530-560m and EBIT between EUR 65-75m.

• Revised guidance for 2023: net sales of EUR 530-560m (prev. 530-570m) and EBIT of EUR 65-75 (prev. 70-85m). The midpoint implies y/y growth of 6% and an EBIT margin of 12.8%.
• Preliminary Q2 figures show growth and profitability below our expectations: net sales of EUR 130.8m (Evli: 135.6m) and EBIT of EUR 11.9m (Evli: 14.1m).
• IM’s orders received declined by 6% y/y, attributed to delayed investments among industrial customers. Meanwhile, W&E’s orders received saw a robust increase of 14% due to strong customer demand. Overall, Vaisala’s Q2 orders received grew 5% to EUR 129.3m.
• Vaisala’s Q2 net sales grew by 9% to EUR 130.8m with W&E’s y/y growth of 18%, attributed to strong demand in roads and automotive and renewable energy segments as well as in subscription sales. Meanwhile, IM saw a 3% decline due to soft customer demand.
• Group’s Q2 gross margin amounted to 55.1% which was almost in line with the comparison period. The gross margin was negatively impacted by price competition and unfavorable sales-mix in IM, and positively impacted by increased product margins of W&E. The negative impact of spot-components decreased during the quarter, by having no large impact on the gross margin.
• With a softer gross margin, soft sales, and elevated fixed costs, IM’s EBIT saw a significant decrease to EUR 6.8m (12.9% margin). Conversely, W&E’s Q2 EBIT saw a notable increase, amounting to EUR 4.9m (6.4% margin). Overall, group EBIT improved by 15% to EUR 11.9m in Q2.
• Vaisala reports its official Q2 results on Friday, July 28th. We update our estimates in the coming days before the company’s Q2 report.

• Q1 group result: Orders received grew by 11% y/y while order book stood at EUR 163.7m (+12%). Group net sales grew by 11% to EUR 131.8m, a bit above our estimates (129.1/127.6m Evli/cons.). Growth was mostly driven by IM while W&E grew by mid-single-digit. Gross margin was approx. flat y/y, while it improved q/q. Profitability was weak and fell short of our expectations. EBIT amounted to EUR 13.3m (17.2/17.9m Evli/cons.), reflecting a margin of 10.1%. EBIT was impacted by elevated fixed costs. EPS amounted to EUR 0.27 (0.37/0.39m Evli/cons.).
• Industrial measurements (IM): Orders grew nicely by 9% (FX 10%) y/y and order book was on a strong level at EUR 38.6m (+10%). Net sales increased by 19% y/y to EUR 63m, above our estimates (Evli: 59.5m). The growth was driven by all main segments, while the growth was especially strong in industrial instruments, life science and power. EBIT amounted to EUR 15m (23.8% margin) and was negatively impacted by softer gross margin and increased fixed costs.
• Weather and Environment (W&E): Orders received grew by 13% (FX 12%) y/y and order book was up by 13% y/y. From strong comparison period, W&E’s net sales grew by 5% (FX 4%) to EUR 68.8m, felling a bit short of our expectations (Evli: 69.6m). The growth was strong in road weather and automotive, by X-Weather increasing by 27% y/y. Gross margin improved while increased fixed costs pushed EBIT negative to EUR -1.7m.
• Market outlook: Industrial instruments, life science, power and energy and liquid measurements to grow. Renewable energy, road weather and automotive to grow. Aviation to remain flat or grow. Meteorology to remain flat.
• 23 guidance intact: Net sales of EUR 530-570m, mid-point implying ~7% growth. EBIT is estimated to reach EUR 70-85m, midpoint indicating a ~14% margin.

• Group result: Order received continued in a growing trend with y/y increase of 17%. Order book was strong at EUR 181.5m, but declined q/q. Driven by both businesses, net sales topped our estimates, by increasing by 13% to EUR 141.6m (140.0/139.0m Evli/cons.). Gross margin remained flat. With volumes high, EBIT also improved to EUR 12.6m, but fell short of our and cons. estimates (15.2/18.3m Evli/cons.). Profitability was harmed by higher fixed costs. EBIT margin was 8.9% (Q4’21: 9.5%). EPS amounted to EUR 0.25 (0.3/0.42 Evli/cons.).
• Industrial measurements (IM): Orders received increased by 11%. Order book was yet again record high, at EUR 41.8m. 27% y/y growth in order book was supported by good sales in industrial instruments, life science, and power. Net sales amounted to EUR 60.2m (Evli: 61.4m), representing y/y growth of 20%. Growth was good in all market segments. Q4 EBIT improved and amounted to EUR 10.8m (Evli: 12.6m), reflecting a margin of 17.9%.
• Weather and Environment (W&E): Orders received grew strongly by 24%. Order book was also strong, at EUR 139.6m, but below Q3’22. 10% y/y change in order book was driven by renewable energy and road weather. Net sales amounted to EUR 81.3m (Evli: 78.6m) and grew by 9% y/y. EBIT amounted to EUR 1.8m (Evli: 2.7m) and was affected by higher fixed costs. EBIT margin was 2.2%.
• 22 DPS: The BoD proposes EUR 0.72 (0.7/0.71 Evli/cons.) dividend per share for FY’22 with a payout rate of ~60%.
• Market outlook: Industrial instruments, life science, power and energy and liquid measurements to grow. Renewable energy, road weather and automotive to grow. Aviation to remain flat or grow. Meteorology to remain flat.
• 23 guidance: Net sales of EUR 530-570m, mid-point implying ~7% growth. EBIT is estimated to reach EUR 70-85m, mid-point indicating a ~14% margin.

• Group result: Orders received grew nicely by 25% and the orderbook was 14% higher than in the previous year. Net sales grew by 20% y/y to EUR 133.3m (133.3/133.3m Evli/cons.). The growth was driven by both Vaisala’s business units. Spot-component impact continued stronger than a year ago, and gross margin fell short that of the previous year. EBIT slightly improved and amounted to EUR 22.0m (22.0/22.0m Evli/cons.), EBIT margin of 16.5%. EPS amounted to EUR 0.44 (0.45/0.47 Evli/cons.).
• Industrial measurements (IM): Orders received grew by 30% (FX: 21%) y/y and the orderbook was 60% higher than a year ago. Net sales increased by 22% (FX: 14%) y/y to EUR 57.6m (Evli: 59.9m). A weaker gross margin had an impact on the EBIT margin which amounted to 25.3%. Profitability was under pressure of increased material and fixed costs.
• Weather and Environment (W&E): Orders received increased by 21% (FX: 14%) y/y and the orderbook was 6% higher than a year ago. Net sales grew by 18% (FX: 11%) y/y to EUR 75.7m slightly beating our estimates (Evli: 73.4m). Spot-component purchases weakened the gross margin, but surprisingly EBIT margin improved to 9.9% against our expectations.
• Market outlook: High-end industrial instruments, life science, power industry, and liquid measurements are expected to grow. Meteorology and ground transportation are expected to be stable. Aviation is expected to recover towards pre-pandemic level. Renewable energy market is expected to continue to grow. The global shortage of components is expected to continue during Q4’22 causing additional material costs.
• Guidance intact (revised on 14th Oct): Net sales of EUR 500-520m and EBIT of 62-72m.

• Group result: Q2 orders received grew nicely to EUR 131.9m (+10% y/y) and the order book amounted to EUR 182.9m (+11% y/y). Net sales grew by 10% y/y to EUR 120.5m, being slightly above our expectations (EUR 118.1m/118.1m Evli/cons.). With smart pricing decisions and a favorable sales mix, the gross margin was flat y/y despite continued spot component purchases. Fixed costs increased by 19% and EBIT came in below our expectations at EUR 10.3m (EUR 12.5m/14.6m Evli/cons.), reflecting an EBIT margin of 8.6%. EPS amounted to EUR 0.18 (EUR 0.26/0.32 Evli/cons.).
• Industrial measurements (IM): Driven by industrial instruments, life science, and power, IM’s orders saw a strong y/y increase, amounting to EUR 56.2m. Order book was 43% higher than a year ago, amounting to EUR 37.2m. Driven by industrial instruments, life science, and power, net sales amounted to EUR 54.7m (Evli: EUR 49.8m), reflecting y/y growth of 24%. EBIT improved y/y and amounted to EUR 11.5 (Evli: EUR 10.8m), reflecting an EBIT margin of 21%.
• Weather & Environment (W&E): W&E’s quarter was solid with its orders received amounting to EUR 75.7m and order book accounting to 145.6m, reflecting y/y growth of 4%. Net sales increased by 1% (constant currencies -3%) y/y to EUR 65.9m (Evli: EUR 68.3m). Growth was good in aviation while road weather and renewable energy were flat. With a softer gross margin and increased fixed costs, W&E’s EBIT fell below zero to EUR -1.1m (Evli: EUR 2.2m), implying an EBIT margin of -1.6%.
• 2022 guidance intact: expecting net sales between EUR 465-495m and EBIT between EUR 55-70m.
• Market outlook: IM’s markets are expected to continue their growth while W&E’s markets are estimated to be rather stable (renewable energy is expected to grow).

Expecting solid growth to continue
Vaisala’s Q1’22 included some positive seasonality and revenue was on a great level although Q1 has been historically the quietest quarter. We expect Q2’22 to contain less seasonality and revenue amount to EUR 118.1m, reflecting y/y growth of 7.9%. Revenue growth is driven by solid order book of W&E and strong sales development of IM as well as Vaisala’s delivery reliability during uncertain times. Our IM’s Q2 revenue estimate amounts to EUR 49.8m (+12.9% y/y) while W&E’s revenue estimate lands at EUR 68.3m (+4.4% y/y). So far, the company has been able to deliver all its orders without delays despite issues in its supply chain. We remain to wait for the news of the company’s order book development and management’s comments on the market environment as there have been some signs of slowdowns in the global industrial activity.

Some supply chain disruptions might affect margins
With the lack of crucial components, the company has sourced components from spot markets which have increased material costs during recent quarters. So far, robust topline growth and sales mix have offset the spot component impact on profitability and Q1 EBIT was surprisingly high. However, the company’s management pointed out that it’s increasingly difficult to purchase spot components. With the revenue growth, we expect Q2 EBIT to also improve y/y to EUR 12.5m but the weaker gross margin to restrict the EBIT margin development to 10.6%. We foresee some increases in the OPEX development y/y. The uncertainty lies in the gross margin development that in turn is associated with the level of spot component purchases and sales mix, and therefore our EBIT estimate include some uncertainty.

Estimates intact, valuation elevated ahead of Q2
We have made no changes to our estimates ahead of Q2. Like before, the company’s valuation remains quite elevated which is in our view justified, given Vaisala’s technology leadership and delivery reliability, but not providing a reason for a rating upgrade. We retain our HOLD-rating and TP of EUR 45.0.

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).

• Group results: Orders received was EUR 119.0m (+6% y/y) and order book totaled EUR 160.0m (+16% y/y). Net sales grew by 17% y/y to EUR 125m (125.5/123.5m Evli/cons.). EBIT decreased by -2.5% y/y to EUR 11.9m (16.4/16.8m Evli/cons.). Driven by soft EBIT the EPS was EUR 0.21 (0.39/0.40 Evli/cons.).
• Industrial Measurements (IM): Orders received grew very strongly by 42% y/y to EUR 58.2m and order book was at record level EUR 32.9m (+83% y/y) after Q4. Revenue grew strongly by 26% y/y to EUR 50.1m (49.5/49.5m Evli/cons.). Revenue growth was driven by high-end industrial measurements, life science, liquid measurements, and power. More expensive components bought from spots markets (negative impact of 4%-p.) drove down the gross margin to 59.9% (prev. 63.3%).
• Weather & Environment (W&E): Orders received declined by 14% y/y to EUR 60.8m and order book was at EUR 127.1m (+6% y/y). Net sales grew by 12% y/y to EUR 74.9m (76/74m Evli/cons.). Revenue grew in renewable energy and meteorology, while it was flat in aviation and transportation. Gross margin declined to 48.9% (prev. 51.1%) due to higher component prices (negative impact of 2%-p.).
• 2022 guidance: Net sales between EUR 465-495m (2021: EUR 437.9m) and EBIT EUR 55-70m (2021: EUR 50.1m).
• Dividend proposal: EUR 0.68 (0.63/0.64 Evli/cons.)
• Market outlook: Markets for high-end industrial instruments, life science, power industry, and liquid measurements are expected to grow. Markets for meteorology and ground transportation are expected to be stable. Aviation market is expected to recover towards pre-pandemic level. Renewable energy market is expected to grow.

Expecting a clear earnings improvement in Q4’21
We expect solid net sales growth of 17.4% from a weak comparison period, topline totaling EUR 125.5m vs. 123.4m cons. The growth is driven by both BUs (W&E +13.4% & IM +24.1%). We expect group adj. EBIT to improve by 29.6% y/y to EUR 18.3m (14.6% margin) vs. 16.8m cons. In our estimates, W&E contributes the EBIT with EUR 7.8m (10.3% margin) and IM with EUR 10.9m (22% margin) respectively. With the profitability improvement, we expect clear 60% EPS growth. We estimate the BoD to propose a dividend of EUR 0.63 vs. 0.64 cons.

Strategy execution continued, but component shortage disturbs topline growth in 2022
The company has successfully continued its strategy execution by its solid revenue growth in both BUs. The company also acquired software company AerisWeather to strengthen its growth in DaaS and SaaS recurring revenue businesses during Q1’22. Vaisala obtains valuable data-service and software development capabilities through the acquisition in addition to a few million recurring revenue impact. In 2022, we expect the growth pace to slow a bit down to 8.3% mainly due to uncertainties regarding component availability. Despite the supply chain issues, we expect solid 16% earnings growth in 2022.

HOLD with a target price of EUR 43
Vaisala has historically been trading with EV/EBITDA multiple around 20x. Currently, with a 21-22E EV/EBITDA of 22-19x, the company trades with a slight premium compared to its peers, but given Vaisala’s quality and lower risk profile, we find the premium justified. With our estimates intact, we retain our HOLD-rating and TP of EUR 43.

Well-executed Q3
Vaisala received a fair number of orders (EUR 109.9m, +29% growth y/y) and the order book was on a record level at EUR 164.8m (+22% growth y/y). Topline growth was strong (+19% y/y), totaling EUR 111.5m (Evli: 111.5m). Industrial instruments, life-science, and power industry segments drove the IM to grow by 35% y/y, totaling EUR 47.1m (Evli: 48.1m). W&E grew by 9% y/y to EUR 64.4m (Evli: 63.4m), driven by renewable energy and aviation. Gross margin remained flat and was on a good level at 57.7%. Vaisala’s EBIT margin weakened from 20.7% to 17.3% due to exceptional costs relating to old M&A activities and settlement payments. EBIT ultimately amounted to EUR 19.2m. In Q3, Vaisala invested EUR 12.5m in R&D (11% of net sales).

Some segments are still in recovery mode
The demand in Vaisala’s target segments is one after another brightening up, but there are still some segments stalling. W&E’s meteorology in developing countries is expected to take a longer time to recover. After crawling for a while, IM’s liquid measurements are expected to continue to recover. The good news is that aviation has given some signs of life and the segment is expected to recover gradually. There are still some uncertainties regarding component availability and the company has noted that the visibility has weakened. Vaisala expects the component shortage to last at least to H1’22. So far, Vaisala has been capable to compensate the additional costs of spot priced components by revenue scalability. However, the growth outlook is improved and therefore we have raised our Q4’21 estimates so that the FY’21 figures add up to the upper limit of the company’s guidance. We expect FY’21 revenue to grow by 15.5% y/y to EUR 438.5m and an EBIT margin of 12.5%. During 2022-23, we expect revenue to grow by 8.3% and 6.8% respectively. We estimate the company to reach an EBIT margin of 12.8% and 13.9% respectively.

HOLD with a target price of EUR 43.0 (42.0)
We made minor adjustments to our 2021-23 estimates, based on target markets’ outlook and the company’s recent performance which gives a ground for a target price revision. On our new target price and a 22E P/E multiple of 29.3x, Vaisala is trading approx. in line with its peer group. Given Vaisala’s strong performance during difficult times, technology leadership, and IM’s growth potential, we find a premium to peer group justified during less uncertain times. We raise our TP to EUR 43.0 (42.0) and retain our HOLD-rating.

• Group results: As expected, net sales grew by 19% y/y to EUR 111.5m vs. 111.5/111.5m Evli/cons. and EBIT amounted to EUR 19.2m (17.3% margin) vs. 19.2/19.2m Evli/cons. EPS was slightly below our expectations, EUR 0.44 vs. 0.46/0.47 Evli/cons.
• Orders received and order book: Orders received grew by 29% y/y, totaling EUR 109.9m. Order book was on a record level and grew by 22% y/y, totaling EUR 164.8m. Aviation over doubled its orders received, while industrial measurement, life-science, and renewable energy received strong number of orders.
• Weather & Environment (W&E): W&E grew by 9% y/y to EUR 64.4m (Evli: 63.4m). Growth was driven by renewable energy and aviation. EBIT totaled to EUR 5.3m (8.2% margin).
• Industrial Measurements (IM): IM grew by 35% y/y to EUR 47.1 (Evli: 48.1m), driven by industrial measurement, life-science, and power industry. EBIT totaled to EUR 14.2m (30.2% margin).
• No change in FY’21 guidance (revised on Oct 19th): net sales of EUR 425-440m and an EBIT of EUR 48-58m.
• Market outlook: High-end industrial instruments, life science, and power industry markets is expected to continue to grow. Liquid measurements market is expected to continue to recover. Meteorology market in developed countries is expected to remain flat, while in developing countries demand is expected to continue to suffer and recovery is expected to take longer. Aviation market is expected to recover gradually. Ground transportation market is expected to be stable. Renewable energy market is expected to continue to grow.

Strong 3rd quarter
Preliminary orders received and net sales were strong, EUR 109.9m (growth 29% y/y) and EUR 111.5m (growth 19% y/y) respectively. Preliminary EBIT was a bit weaker at EUR 19.2m (19.5m), 17.3% (20.7%) of net sales. To our understanding, the profitability was burdened by increased material costs. The company had a robust Q3 and demand for Vaisala’s offering continued strongly in both BUs, especially in Industrial Measurements. Despite the component shortage, Vaisala found solutions to most availability issues together with suppliers and by purchasing higher-priced components from the spot market.

The component shortage is expected to continue
The global shortage of components is expected to continue during the fourth quarter and the first half of next year. Vaisala estimates, that component shortages will continue to generate additional material costs during the fourth quarter of 2021. We have revised our net sales and EBIT estimates for 2021-23E to reflect the company’s strong performance and a solid outlook. We expect the company to grow by 14.5% to EUR 434.5m driven by 26.1% growth in IM, while we expect W&E to grow by 7.4% in 2021. We estimate the company to reach an EBIT margin of 12.6% in 2021. For 2022-23E we expect Vaisala to grow by 8.3% and 6.8% respectively.

TP of EUR 42 (prev. EUR 38) with HOLD-rating
On our revised FY 22 estimates, Vaisala trades at a premium compared to its peers. Vaisala has performed well during FY 21 but considering the uncertainties relating to component shortage and availability, we do not find the valuation overly stretched (premium of 27% and 9% to 2022E EV/EBIT and P/E peer median). With our raised estimates, we adjust our TP to EUR 42 (prev. EUR 38) and retain our HOLD-rating.

Continuity by increasing growth ambition
According to the company’s management Vaisala’s strategy has so far been successful and thus the renewed strategy saw no significant changes. What is new in the strategy, is the increased ambition to grow and scale the businesses. The company will continue investing in R&D, maintain a leading position in flagship markets, grow in growth markets and generate new business in emerging markets. The company’s management noted some factors to create synergies between BUs and scale the business such as: units using common software and hardware modules and platforms in their products, continuously developing the company’s production system, and improvement of processes, tools, and competences.

Targets are set relatively high
During 2021-2024, Vaisala aims for an average annual revenue growth rate of 7% (prev. 5%). The profitability target is to achieve a 15% EBIT-margin (prev.12%) during the strategy period. During 2015-2020 Vaisala has achieved an annual growth rate of ~3% and achieved an EBIT-margin of ~10% on average. The new target is set relatively high, which reflects a higher ambition level. The company’s management highlighted that increases in revenue will scale and improve the EBIT-margin. According to the company’s management, the target growth rate doesn’t include inorganic growth, and thus our focus is on organic performance of IM and W&E’s capabilities to generate new businesses such as renewable energy and air quality. In fact, IM has grown relatively well in past few years and there is potential in W&E’s new emerging markets and applications, such as renewed energy and Data/Software as a service (DaaS/SaaS). We see the targets to be achievable should the company continue to perform well in its flagship markets and growing and generating new growth/emerging markets.

HOLD with a TP EUR 38.0 (36.0)
We increased our estimates for FY 2022 and 23 and expect the company to grow 7.7% and 6.8% respectively. We expect the EBIT-margin to gradually improve towards the long-term target level and estimate a 13.9% EBIT-margin in FY 2023 driven by scalability and revenue growth in both business units. Vaisala’s valuation is quite stretched compared to peers. We still accept a premium to Vaisala’s valuation due to the company’s technology leadership, good market position, and increased growth and profitability outlooks. We retain our HOLD recommendation and increase our target price to EUR 38.0 (36.0).

Solid growth driven by Industrial Measurements
Vaisala reported its Q2 results, which with the preliminary figures given ahead of the quarter did not come as a larger surprise. Revenue growth was at a solid 20% and the operating result also improved clearly y/y to EUR 10.9m (Q2/20: EUR 7.9m). Both BU’s posted double-digit growth figures, with IM growth at 31% and W&E at 14%. Orders received grew 25% to EUR 120.1m and the order backlog as a result was up 14% to EUR 165.3m. Vaisala updated its guidance ahead of Q2, expecting revenue of EUR 400-420m and EBIT of EUR 40-50m. Vaisala will hold its Capital Markets Day on September 21st.

Underlying profitability better than expected
We have raised our estimates slightly, now expecting revenue of EUR 418.4m (prev. EUR 409.9m) and an operating result of EUR 48.2m (prev. EUR 45.0m). Vaisala’s Q2 result included an additional of EUR 2.2m relating to an update of the valuation of contingent considerations and the underlying profitability as such was clearly better than the reported operating result figures. The availability and cost of components was highlighted as a potential concern for H2, which we have reflected also in our estimates. Should the impact turn out to be small or negligible, the current guidance would appear to be rather conservative.

HOLD with a target price of EUR 36.0 (35.0)
On our revised estimates we adjust our target price to EUR 36.0 (35.0) and retain our HOLD-rating. Vaisala’s performance in Q2 was solid, but the already stretched valuation (30.3x 2022 P/E) and uncertainty relating to component cost and availability is something to consider.

• Group level results: Q2 net sales increased by 25% to 109.5 MEUR (pre-announced). Q2 EBIT came in at 10.9 MEUR (pre-announced), resulting in a 10.0% EBIT-margin (Q2’20: 7.9 MEUR, 8.7% EBIT-margin)
• Gross margin was 55.3% vs. 54.5% last year.
• Orders received were 120.1 MEUR vs. 95.9 MEUR last year. Orders received grew by 25%; 17% in W&E and 41% in IM. Order book was 165.3 MEUR vs. 145.3 MEUR in Q2’20.
• Weather & Environment (W&E) net sales increased by 14% to 65.4 MEUR vs. 65.9 MEUR our expectation. W&E EBIT was 1.0 MEUR (1.7 MEUR Evli). W&E’s orders received grew by 17%. Orders received growth was very strong in the meteorology market segment and increased also in renewable energy and aviation market segments. Net sales grew in meteorology and renewable energy market segments, whereas net sales in ground transportation and aviation market segments decreased. Industrial Measurements (IM) net sales grew 31% to 44.1 MEUR vs. 43.6 MEUR our expectation. IM EBIT was 10.5 MEUR (9.6 MEUR Evli), resulting in a 23.7% EBIT-margin (Q2’20: 20.9%). IM order intake growth was 41%. Orders received increased very strongly in life science and industrial instruments market segments. Net sales growth was strong in industrial instruments and life science market segments, and good in power industry market segment.
• Vaisala raised its business outlook for 2021 ahead of Q2, expecting net sales to be in the range of 400–420 MEUR and EBIT in the range of 40–50 MEUR.

Strong start to the year

Vaisala’s Q1 result beat our and consensus expectations thanks to solid performance in both BU’s. Q1 net sales increased by 5% to 92 MEUR (86.5 Evli / 85.7 cons). Q1 EBIT came in at 8.1 MEUR (5.9 Evli / 5.0 cons), resulting in 8,8% EBIT-margin (Q1’20: 5.2 MEUR, 6% EBIT-margin). Orders received grew by 18% to 106.1 MEUR (Q1’20: 88.7 MEUR). As a result of strong order intake, order book was record high at 155.4 MEUR (Q1’20: 141.6 MEUR). IM continued its strong performance; net sales grew 12% to 39.7 MEUR (39.5 MEUR Evli). IM EBIT was 9.4 MEUR (8.9 MEUR Evli), resulting in 23,8% EBIT-margin (Q1’20: 21,4%). IM net sales growth was strong in life science and power industry market segments and good in industrial instruments, but net sales declined in liquid measurements. IM’s order intake growth was 22% coming from all market segments and boosted by the economic recovery in China. W&E net sales increased by 1% to 52.2 MEUR (47 MEUR Evli). W&E EBIT was -0.9 MEUR (-2.6 MEUR Evli). W&E net sales grew in renewable energy, ground transportation, and meteorology market segments, but decreased in aviation, where market is still weak due to Covid-19. W&E’s orders received grew nicely by 15%. W&E orders received increased in renewable energy and ground transportation market segments, whereas meteorology market segment was flat, and aviation decreased compared to previous year.

Outlook updated, more positive outlook upgrades likely to follow

As a result of strong start to the year, Vaisala raised the lower limits of its business outlook for 2021; net sales are expected to be between 380–400 MEUR and EBIT between of 35–45 MEUR (earlier net sales 370-400 and EBIT 30-45). The outlook update did not come as a surprise given the strong orders received and order book end of last year. We see further positive guidance improvements likely given the strong order intake and order book, improving market environment, and deliveries proceeding well.

Target price €33 (prev. €32) with HOLD rating

We have increased our net sales and EBIT estimates for 2021-23E to reflect the expected market improvement. In 2021E, we expect +4,6 net sales growth driven by +7% growth in IM, while we expect W&E growth to be around 3%. We expect EBIT of 44.6 MEUR (11,2 % margin), driven by good performance in IM. Both our net sales and EBIT estimates are at guidance upper range. For 2022-23E we expect similar net sales growth and Vaisala to achieve above 12% EBIT margins as IM continues strong and W&E’s profitability improves. On our renewed estimates, Vaisala is still trading at clear premiums compared to our peer group and we continue to see valuation stretched given Vaisala’s weaker financial performance compared to peer group. Based on our renewed estimates and improved outlook, we raise our target price to €33 (prev. €32), our rating is now HOLD (prev. SELL). Our TP values Vaisala at 22-23E EV/EBIT multiples of 22x and 21x which is above the peer group, reflecting Vaisala’s technology leadership position, strong sustainability profile, healthy dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

• Group level results: Q1 net sales increased by 5% to 92 MEUR (86.5 Evli / 85.7 cons). Q1 EBIT came in at 8.1 MEUR (5.9 Evli / 5.0 cons), resulting in 8,8% EBIT-margin (Q1’20: 5.2 MEUR, 6% EBIT-margin)
• Gross margin was 54,8% vs. 56,4% last year.
• Orders received were 106.1 MEUR vs. 88.7 MEUR last year. Orders received grew by 18%; 15% in W&E and 22% in IM. Order book was 155.4 MEUR vs. 141.6 MEUR in Q1’20.
• Weather & Environment (W&E) net sales increased by 1% to 52.2 MEUR vs. 47 MEUR our expectation. W&E EBIT was -0.9 MEUR (-2.6 MEUR Evli). W&E’s orders received grew by 15%. Orders received increased in renewable energy and ground transportation market segments, whereas orders received in meteorology market segment were at previous year’s level. Aviation market improvement has stalled, and orders received in this segment decreased compared to previous year.
• Industrial Measurements (IM) net sales grew 12% to 39.7 MEUR vs. 39.5 MEUR our expectation. IM EBIT was 9.4 MEUR (8.9 MEUR Evli), resulting in 23,8% EBIT-margin (Q1’20: 21,4%). IM order intake growth was 22%. Increase in orders received was strong in all market segments. Relative growth was strongest in power industry applications, although its share of orders received was still below 10%.
• As a result of strong start to the year, Vaisala raises lower limit of its business outlook for 2021: net sales will be in the range of 380–400 MEUR and EBIT in the range of 35–45 MEUR (earlier was net sales 370-400 and EBIT 30-45).

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.

Maneuvering pass a challenging 2020

Vaisala has managed to maneuver pass the corona pandemic rather unscathed. Due to lowered operating expenses caused by the pandemic and good order book & deliveries, performance has been good in both BU’s. Currently, W&E is weighed down by the weakened outlook for aviation and lack of larger infra projects, especially in developed countries. IM on the other hand, is expected to be less affected by COVID going forward.

 Profitable growth with R&D leadership strategy

Looking at the coming years, we see Vaisala’s targeted above 5% sales growth and >12% margins achievable despite current gloomy outlook for aviation. We expect the growing share of more profitable IM sales to continue supporting Vaisala’s growth and operating margin. In 2021E-22E, we estimate Vaisala’ net sales to grow by 4.5% and 5.3%, and EBIT margins of 12.2% and 12.6% respectively. We expect W&E market to begin to gradually recover in 2021E-22E with an annual growth rate of approximately 3% and W&E’s EBIT margins to gradually improve towards 7% in 2022E. For IM, we expect 2021E-22E continued profitable growth at 7% and 9.6% annual growth rates, respectively. We expect IM’s EBIT margins to stay above 20% in 2021-22E.

 Maintain SELL as valuation is expensive

Vaisala’s share price has rallied in last few years and is currently around all time high levels. The share price rally is also visible in Vaisala’s valuation multiples, which have increased strongly since around mid-2019, resulting in a clear sustained valuation premium of 20-60% during this period. As peer group multiples have rerated as of late, Vaisala’s EV/EBIT and P/E valuation premium is now around 20-30% on our 2021-22E estimates. Despite recent surge in valuation multiples, we see valuation too expensive given Vaisala’s weaker growth rates and margins compared to our technology peer group. Thus, we maintain our target price of 32€ and our SELL recommendation. Our target price values Vaisala at 21-22e EV/EBIT multiples of 23x and 21x which is above peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

Sales mix boosted profitability, orders and sales decreased
Q3 net sales decreased by 11% to 94 MEUR mainly due to the decline in W&E’s project business. Gross margin improved to 57.7% (55.3%) and EBIT to 19.5 MEUR (16.3 MEUR), 20.7% (15.5%) of net sales. W&E’s EBIT improved to 11.1 MEUR (9.7 Evli) and IM’s was 8.6 MEUR (10.3 Evli) According to Vaisala, lower share of less-profitable project business, improved profitability of digital services in W&E and higher share of IM sales boosted margins. Operating expenses also decreased compared to previous year due to less travelling and some non-recurring positive impacts. Orders received decreased overall by 19% as W&E’s order intake was impacted by COVID-19 especially in airports segment and emerging markets. IM’s orders received increased 2% supported by strong order intake in APAC (+19%).

Our estimates broadly unchanged
Vaisala reiterated its 2020 outlook issued last week, as expected, estimating FY20 net sales to be 370-390 MEUR and EBIT to be 40-48 MEUR. Based on the report, we keep our estimates broadly unchanged. We expect 20e sales to decline 5.3% to 382.1 MEUR and EBIT to increase to 46.7 MEUR. W&E outlook is weighed by the weakened outlook for aviation and restrictions will cause delays in project deliveries. Thus, we expect W&E 20e sales to decrease by 7.3% to 242.1 MEUR and EBIT to decrease to 16.7 MEUR. We expect IM to remain relatively resilient with 20e sales down 1.7% to 140 MEUR and EBIT increasing to 30.1 MEUR. In 21e, we expect IM sales to continue growing (+7%), while W&E is expected to recover only slightly (+3%) due to uncertainties and decreased order intake.

Valuation still challenging
On our estimates, Vaisala is still trading at clear premiums compared to our peer group and we see valuation stretched given the weaker financial performance compared to peer group. Based on the report, we retain our TP of 32€ and SELL rating. Our TP values Vaisala at 21-22e EV/EBIT multiples of 22.9x and 20.7x which are above the peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

• Group level results: Q3 net sales decreased by 11% to 94.0 MEUR.
• Gross margin was 57.7% vs. 55.3% last year.
• Orders received were 85.3 MEUR vs. 105.1 MEUR last year. Orders received decreased by 19% due to weakened order intake especially in W&E’s airports markets and emerging markets. Order book was 134.6 MEUR vs. 154.4 MEUR in Q3’19.
• Weather & Environment (W&E) net sales decreased by 14% to 59.2 MEUR vs. 59.9 MEUR our expectation. W&E EBIT was 11.1 MEUR (9.7 MEUR Evli). W&E’s orders received decreased by 29% and was impacted by decreased order intake mainly from MEA and Latin America.
• Industrial Measurements (IM) net sales declined 3% to 34.8 MEUR vs. 34.5 MEUR our expectation. IM EBIT was 8.6 MEUR (10.3 MEUR Evli). Industrial Measurements’ order intake growth was 2% and orders received grew by 19% in APAC, while order intake in EMEA and Americas decreased partially offsetting increase in APAC.
• Business outlook for 2020 maintained: Vaisala estimates its full-year 2020 net sales to be in the range of EUR 370–390 million and operating result (EBIT) to be in the range of EUR 40–48 million (updated on October 21st).

Sales expected to be 370-390 MEUR and EBIT 40-48 MEUR
Vaisala narrowed net sales estimate and increased EBIT estimate, and now expects 2020 sales to be between 370–390 MEUR and EBIT to be between 40–48 MEUR (prev. sales 370-405 MEUR and EBIT 34-46 MEUR). Vaisala also provided preliminary figures for January–September 2020. Preliminary net sales were 273 MEUR (277.2 MEUR Evli) and EBIT was 33 MEUR (25.6 MEUR Evli).

EBIT clearly better than expected despite the decline in sales
Pandemic has affected negatively especially airports customer segment and emerging markets, and W&E has been missing larger project orders. Some project deliveries have also been delayed due to restrictions related to COVID-19. IM’s industrial instruments and liquid measurements products has not met growth targets due to volatile market situation during Q2 and Q3. On the other hand, Vaisala’s profitability has developed clearly better than expected in Q3 (EBIT 19.9 MEUR vs. 12.6 MEUR Evli). According to Vaisala, W&E’s digital services and IM’s product and service businesses improved their gross margins. In addition, the decline in operating expenses caused by the prolonged pandemic, has improved EBIT more than expected.

Valuation remains stretched
Based on the update, we have cut our sales estimates and increased EBIT estimates for 2020e. We expect 2020e net sales to decline 5.2% to 382.5 MEUR and EBIT to increase to 46.6 MEUR. We have also revised EBIT estimates slightly upwards for 2021e. Despite the margin improvement, COVID-19 continues to pose significant near-term uncertainties. Vaisala’s share price rally has continued and, on our estimates, Vaisala is trading at clear premiums compared to our peer group and we see valuation stretched given the weaker financial performance compared to peer group. We look forward to hearing more about the drivers of margin development in connection with Q3 report next Tuesday. With the better than expected profitability development we raise our TP to 32€ (29), but downgrade to SELL (HOLD).

W&E stronger than expected, while IM soft

On a whole, Vaisala’s Q2 result was broadly in line. Q2 net sales decreased -5% to 91,4 MEUR vs. 93,5 MEUR Evli and 94 MEUR consensus. Q2 EBIT improved 9,7% y/y to 7,9 MEUR (8,7% margin) vs. 8,1 MEUR our expectation (cons. 7,9 MEUR). EPS was 0.16 (0.19 Evli, 0.20 consensus). Gross margins held up nicely (54,5% vs. 54,2% last year) despite lower volumes. Orders received decreased -2% to 95,9 MEUR due to weakened order intake in IM and especially in APAC region. Overall, W&E fared slightly better than we expected with Q2 EBIT at 0,7 MEUR (0,2 MEUR Evli) and decent orders received +1% due to strong EMEA. On the other hand, IM was softer than we had expected. IM net sales declined -5% to 33,8 MEUR (37,1 MEUR Evli) and EBIT was 7,1 MEUR (7,9 MEUR Evli), due to lower net sales. IM order intake declined -8% in all regions, especially APAC. According to Vaisala, IM’s high-end humidity and high-end carbon dioxide markets were affected by COVID as customers suspended operations and delayed decision making.

2020 outlook maintained

Vaisala estimates that lost order intake during H1 was roughly 15–25 MEUR and lost net sales was in range of 5–15 MEUR. Looking forward, it’s clear that uncertainties will continue. W&E outlook is weighed by the weakened outlook for aviation and lack of larger infra projects, especially in developed countries. IM is also expected to suffer short term from COVID repercussions. Vaisala maintained its 2020 outlook it issued in April, expecting FY20 net sales of 370–405 MEUR and EBIT of 34–46 MEUR. Our estimates remain broadly unchanged after the report. We believe pulling out of COVID will help IM fare better in H2, and our 20E estimates are at midpoint of guidance. We expect 2020e net sales to decline roughly 4% to 388 MEUR and reported EBIT to decline to 39,5 MEUR. Our 2021-22E estimates remain unchanged and we continue to see Vaisala’s targeted above 5% sales growth achievable and road to >12% margins resuming after pandemic resides.

Valuation remains challenging

On our estimates, Vaisala is still trading at premiums compared to our peer group, and as noted before, we see valuation stretched given Vaisala’s weaker financial performance compared to peer group. Peer group valuation multiples have however risen, and premiums are now more acceptable. Although there are still short-term risks related to the pandemic, we see Vaisala coming out rather unscathed from the pandemic, and therefore we are ready to emphasize more the coming years and Vaisala’s post-COVID performance. We raise our target price to 29€ (prev. 26€) and maintain our HOLD recommendation. Our target price values Vaisala at 21-22e EV/EBIT multiples of 22x and 19x which is above peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

• Group level results: Q2 net sales decreased 5% to 91,4 MEUR vs. 93,5 MEUR our expectation and 94 MEUR consensus. Q2 EBIT was 7,9 MEUR (8,7% margin) vs. our expectation of 8,1 MEUR (cons. 7,9 MEUR). EPS was 0.16 (0.19 Evli, 0.20 consensus).
• Gross margin was 54,5% vs. 54,2% last year
• Orders received was 95,9 MEUR vs. 98 MEUR last year. Orders received decreased by -2% due to weakened order intake in Industrial Measurements and especially in APAC region. Order book was 145,3 MEUR vs. 141,6 MEUR Q1’20.
• Weather & Environment (W&E) net sales decreased -5% (-5% excl. FX) to 57,6 MEUR vs. 56,4 MEUR our expectation. W&E EBIT was 0,7 MEUR (0,2 MEUR Evli). Order intake growth was 1% with strong orders received in EMEA offset by weaker APAC and Latin America.
• Industrial Measurements (IM) net sales declined -5% (-5% excl. FX) to 33,8 MEUR vs. 37,1 MEUR our expectation. IM EBIT was 7,1 MEUR (7,9 MEUR Evli), due to lower net sales. Industrial Measurements order intake declined -8% in all regions, especially APAC.
• Business outlook for 2020 maintained: Vaisala estimates that its full-year 2020 net sales will be in the range of 370–405 MEUR and EBIT will be in the range of 34–46 MEUR (updated previously on April 21st)

No major impact of corona in Q1
Vaisala delivered a better than expected Q1 result as corona did not have major impact on business in the quarter and delivery capabilities remained good. Q1 net sales grew 4% to 87.2 MEUR vs. 84.5 MEUR our expectation and 84.3 MEUR consensus. Q1 reported EBIT was 5.2 MEUR (6% margin) vs. our expectation of 2.1 MEUR (3.2 MEUR consensus). EBIT improvement was due to strong 3pp improvement in gross margins (56.4% vs. 53.2% Q1’19), which was attributed to projects and digital services in W&E and exceptionally high GM of 65.8% in IM. Q1 order intake decreased -21% due to lower order intake in W&E. It’s worth noting however that order intake comparison period was exceptionally good (including two large projects) and variations between quarters can be large depending on timing of projects. Order book grew +2% q/q and -6% y/y. The Ethiopian project order (13 MEUR) is not yet included in order book.

W&E business exposed while IM continues on track
Vaisala reiterated its 2020 guidance (updated on April 21st); expecting net sales of 370–405 MEUR and EBIT of 34–46 MEUR. With W&E’s current strong order book, descent order intake, and delivery capabilities remaining at current acceptable levels, we expect W&E business to perform well in H1. The effects of the corona pandemic impact more on W&E business in H2, where delays or postponements of projects become more likely if current situation is prolonged. Vaisala sees developed countries market remaining more stable while developing countries being more hit by the pandemic. IM is expected to continue growing, albeit slower than last year’s organic growth of roughly 9.5%.

Valuation stretched given weakened financial outlook in W&E
We’ve only made small adjustments to our estimates based on the report. We expect IM to continue performing well, while W&E to decline in H2 partly due the pandemic and high comparison period. We expect 2020e net sales to decline 3% to 392 MEUR and reported EBIT to decline to 39 MEUR, mainly due to the lower performance in W&E in H2. On our estimates, Vaisala is still trading at clear premiums compared to our peer group. Also, our 2020-21e PPA-adjusted EV/EBIT multiples of 22x and 19x, are ~25% above our peer group. Given the uncertainty to W&E’s performance this year, we do not see short term risk/reward profile particularly attractive now. Based on our slightly raised estimates, we raise our target price to 26€ (prev. 25€), our recommendation is now HOLD (prev. SELL). Our target price values Vaisala at 20-21e EV/EBIT multiples of 23.5x and 20x which is above peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

W&E’s project and services business suffering from corona
Vaisala expects delays or interruptions particularly in project and services deliveries due to the extensive restrictions imposed by governments and authorities. Demand in W&E has to some extent already weakened and Vaisala estimates that the situation will become more challenging as governments have tighter budgets, especially in emerging markets. The profit warning did not come as a complete surprise given that Vaisala’s largest segment, W&E, consists roughly 40-45% of projects and services, and the growth is very dependent on investments from emerging market governments. Vaisala does not expect demand for IM to change materially, but growth will slow down from last year (+22.2%).

New guidance broader as predicting is currently difficult
Vaisala’s now expects 2020 sales will be between 370–405 MEUR and EBIT between 34–46 MEUR (prev. sales 400–425 MEUR and EBIT 38–48 MEUR). The outlook’s range for both net sales and EBIT is wide due to high uncertainty related to the duration and impact of coronavirus pandemic as well as unknown speed of recovery. Vaisala will provide an update to its market outlook in connection with its Q1 report due next week on Tuesday 28th.

Valuation still stretched given weakened financial outlook
Based on the new outlook, we have cut our estimates for 2020e and the coming years. For 2020e, we’ve cut our sales and EBIT estimates with 8% and 20% respectively. We expect 2020e net sales to decline 3% to 390 MEUR and reported EBIT to decline to 34.9 MEUR, mainly due to lower performance in W&E. On our renewed estimates, Vaisala is still trading at clear premiums compared to our peer group, which we do not see justified given the financial performance outlook currently weighed down by W&E. We maintain our SELL with new target price of 25 euros (prev. 29.5). Our target price values Vaisala at 20e EV/EBIT multiple of 25x which is still above peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

A good finish to a solid year

Vaisala ended a solid 2019 with a good Q4 that beat expectations. Q4 net sales grew 9% y/y to 118.1 MEUR (118 Evli, 116 cons) and EBIT improved +27% to 17.7 MEUR (16 MEUR Evli/cons.). Dividend proposal is 0.61 (0.60 Evli/cons.). Net sales growth was driven by good level of delivery volumes thanks to record high order book during end of last year. Q4 EBIT improvement was driven by gross margin improvement of 170 bps due to net sales growth and scale benefits.

Both business areas fuelled by M&A

W&E Q4 net sales grew 5% (1% excl. FX and M&A) to 81.9 MEUR (80.0 Evli), with growth in all regions except China. W&E Q4 EBIT was 12.1 MEUR (10 Evli). W&E order intake growth was -3%, -8% growth excl. FX and M&A, due to less larger projects during Q4. IM Q4 net sales grew 18% (5% excl FX and M&A) to 36.3 MEUR (38.0 Evli) and was strong in all regions. IM Q4 EBIT was 5.5 MEUR (7.6 Evli). IM order intake grew by 19%, 8% excl. FX and M&A. Both acquired companies, i.e. Leosphere (W&E) and K-patents (IM), have been successfully integrated to Vaisala’s platform and contributed significantly in FY’19 growth. Half of IM’s FY’19 net sales growth came from K-Patents acquisition, while W&E FY’19 net sales growth excluding FX and M&A was 2%. Vaisala has indicated the possibility of further add-on acquisitions in liquid measurements area. With its platform, strong balance sheet and current valuation, Vaisala is in a good position to continue value accreditive acquisitions in our view.

2020 outlook slightly soft as expectations already in upper end

Vaisala estimates its 2020 net sales to be in the range of 400–425 MEUR and EBIT in the range of 38–48 MEUR, which practically means 0-5% growth and 9-12% EBIT margins. Given that our previous 2020 estimates, as well as consensus figures (FY’20E net sales 423M, EBIT 48.3 MEUR) were already in the upper end of the outlook, the guidance is cautious. Vaisala expects W&E market segments to be stable or somewhat grow, while industrial and liquid measurement market segments are expected to continue to grow.

Estimates unchanged, valuation is running ahead of things

Apart from a slight trim to our sales estimates, our estimates are unchanged for the coming years. With the acquired businesses integrated into Vaisala’s sales channel and continued stable to good organic momentum in both W&E and IM, we see Vaisala’s targeted above 5% sales growth achievable and road to >12% margins progressing well. The underlying main driver for growth is continued good growth in industrial business supported by further bolt-on acquisitions. As a result, we estimate IM share of Vaisala’s EBIT to grow to 66% in ‘21E (vs. 56-57% in ’17-’18), driving ~10% EBIT growth in coming years. Vaisala’s share har continued to rally, pushing new all-time highs. On our estimates, Vaisala is trading at PPA amortizations adjusted EV/EBIT multiples of 24.7x and 22.4x for ‘20E and ‘21E, a ~50% premium to our peer group median despite exhibiting lower profitability profile than our peer group. On our adjusted ‘20E P/E multiples, premium is roughly 50% as well. Despite Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions, we see current valuation too stretched given our current growth and earnings estimates (which do not account for further M&A). We maintain previous TP of EUR 29.5, which values Vaisala at EV/EBIT 23.5x and 21x on ’20-21E, still at ~40% premium to our peer group. Due to continued share price rally our recommendation is now SELL (prev. HOLD).

• Group level results: Q4 net sales grew 9% to 118.1 MEUR vs. 118 MEUR our expectation and 116 MEUR consensus. Q4 EBIT was 17.7 MEUR vs. our expectation of 16 MEUR (cons. 16 MEUR). EPS was 0.41 (0.35 Evli, 0.34 consensus).

• Dividend proposal is 0.61(0.60 Evli, 0.60 consensus).

• Gross margin was 56.0 % vs. 54.3 % last year.

• Orders received was 103.3 MEUR vs. 99.1 MEUR last year. Orders received increased by 4% and growth without currency impact and acquisitions was -3%.

• Weather & Environment (W&E) net sales grew 5% (1% excl. FX and M&A) to 81.9 MEUR vs. 80.0 MEUR our expectation. EBIT was 12.1 MEUR (10 MEUR Evli). Order intake growth was -3% in Weather and Environment, -8% growth excl. FX and M&A.

• Industrial Measurements (IM) net sales grew 18% (5% excl FX and M&A) to 36.3 MEUR vs. 38.0 MEUR our expectation. EBIT was 5.5 MEUR (7.6 MEUR Evli). Industrial Measurements order intake grew by 19%, 8% excl. FX and M&A.

• Business outlook for 2020: Vaisala estimates its full-year 2020 net sales to be in the range of EUR 400–425 million and its operating result (EBIT) to be in the range of EUR 38–48 million.

Continued good momentum in both business areas

Vaisala cited that strong demand in both business areas has continued. In Q3 Vaisala’s orders received YTD was up +34% yoy with bulk of growth being organic, supported by acquired businesses. Strikes in November and December have been a significant risk to production and logistics, but Vaisala has been able to maintain its good delivery capacity also during Q4. The continued strong demand has had a positive impact on gross margin and project margins have also remained at a good level. However, there are still uncertainties related to the rest of the year, like the ongoing strikes in France, and estimating the impact of these is challenging.

Outlook upgrade not a surprise, estimates slightly upwards

Vaisala now estimates 2019 net sales of 395-405 MEUR and EBIT to be in the range of 36-42 MEUR. Previous outlook was net sales of 380-400 MEUR with EBIT of 25-35 MEUR including 10-12 MEUR acquisition related amortization and one-off expenses. As our 2019E estimates for net sales of 398 MEUR were in the upper range of the previous guidance and our EBIT estimate of 36.4 MEUR was slightly above previous guidance, the outlook upgrade did not come as a surprise. We have slightly adjusted our 2019 and onwards estimates upwards reflecting the continued good momentum. As noted previously, with acquired businesses integrated into Vaisala’s sales channel and continued good organic momentum in both W&E and IM, we see targeted 5% sales growth clearly achievable and road to >12% margins progressing well. The driver for profitability improvement is larger volumes and continued good growth in industrial business. We estimate IM share of Vaisala’s EBIT in ’20-21E to grow to 66% (vs. 56-57% in ’17-’18), driving Vaisala’s ~10-12% EBIT growth and EBIT margins of 10.5-11% (12-13% adj. for IAC).

Valuation is stretched, but justified

Vaisala’s share har rallied +105% YTD, being now at an all-time high. On our raised estimates, Vaisala is trading at PPA amortizations adjusted EV/EBIT multiples of 23x and 21.6x for ‘19E and ‘20E, a 30-38% premium to our peer group median despite exhibiting lower profitability profile than our peer group. However, a high valuation and premium are in our view justified due to the current stable outlook for W&E, strong ESG profile and growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions. On the back of our raised estimates, we raise our target price to 29.5 euros (prev. 24.5) and maintain our HOLD recommendation.

Strong quarter on all fronts, with contribution from W&E

On the back of a good Q2 report, Vaisala delivered an even better Q3, which clearly beat expectations. Orders received increased +37% y/y (+20% organic) to 105.1m (vs. 76.8m Q3’18), with orders received as well as sales growth coming from both business areas and all geographies. Order intake for W&E was +45% (+27% organic), with mostly mid-sized orders, a positive signal. Q3 net sales grew +25% to 105.2m (vs. 100.4m Evli / 99.7m cons.). With the help of strong sales growth (W&E +27%, IM +22%), EBIT was 16.3m (vs. 11m Evli/13m cons), an 15.5% EBIT margin. IM posted good figures, with +22.4% growth (9% organic), an all-time high quarter, and solid 23.6% EBIT margin (24.7% adj. margin). Biggest positive contribution was W&E with +27% (+14% organic) sales growth, and EBIT margin of 13.5% (16% adj. margin).

Outlook unchanged despite strong performance so far

Despite the beat and good figures YTD, Vaisala repeated its FY’19 guidance: sales between 380–400m, EBIT between 25–35m including 10–12m PPA amortization and one-offs. Our pre-Q3 estimates were already in the upper end of the guidance, and now with the result beat we have raised our FY’19E estimates slightly above the guidance. We also increase by ~2% our estimates for 2020E-21E due to better growth profile in both business areas. With the acquired businesses integrated into Vaisala’s sales channel and continued good organic momentum in both W&E and IM, we see targeted 5% sales growth clearly achievable. We estimate that IM share of Vaisala’s EBIT in ‘19E and ‘20E will be around 65-67% (vs. 56-57% in ’17-’18), resulting in ~13-17% EBIT growth and EBIT margins of 10-11% (12-13% adj. for PPA).

Valuation becoming stretched

Vaisala’s share har rallied +70% YTD and +30% since Q2 the report, being now at an all-time high. On our raised estimates, Vaisala is trading at adj. EV/EBIT multiples of 20x and 18.5x for ‘19E and ‘20E, a 20-26% premium to our peer group despite exhibiting a lower growth and profitability profile than our peer group. However, a high valuation and premium are in our view justified due to the stable outlook for W&E and especially IM’s highly profitable growth with possibility of further add-on acquisitions. On the back of our raised estimates, we raise our target price to 24.5 euros (prev. 21) and maintain our HOLD recommendation.

• Group level results: Q3 net sales grew 25% to 105.2 MEUR vs. 100.4 MEUR our expectation and 99.7 MEUR consensus. Q3 EBIT was 16.3 MEUR vs. our expectation of 11 MEUR (cons. 13 MEUR). EPS was 0.37 (0.23 Evli, 0.27 consensus).
• Gross margin was 55.3% vs. 55.9% last year
• Orders received was 105.1 MEUR vs. 76.8 MEUR last year. Orders received increased by 37% and growth without currency impact and acquisitions was 20%.
• Weather & Environment (W&E) net sales grew 27% (14% excl. FX and M&A) to 69.1 MEUR vs. 66.0 MEUR our expectation. EBIT was 9.3 MEUR (5.0 MEUR Evli). Order intake growth 45% in Weather and Environment, 27% growth excl. FX and M&A.
• Industrial Measurements (IM) net sales grew 22% (9% excl FX and M&A) to 36.1 MEUR vs. 34.5 MEUR our expectation. EBIT was 8.5 MEUR (6 MEUR Evli). Industrial Measurements order intake grew by 23%, 9% excl. FX and M&A.
• Business outlook for 2019 unchanged: 2019 net sales to be in the range of EUR 380–400 million and operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract.

Acquired businesses bearing fruit

Vaisala’s Q2 net sales were 96.1 MEUR vs. 94.2 MEUR our expectation (93.5 MEUR consensus). Q2 EBIT was 7.2 MEUR vs. our expectation of 3.2 MEUR (4.5 MEUR consensus). The EBIT beat was driven by slightly better sales growth and 4 percentage points higher gross margin (54% vs. 50% Q2/18) in both business units, which was a result of product and project profitability, and currency tailwind. W&E’s net sales growth was 16.7% and it came mostly from wind lidars. IM net sales growth was 26%, with K-Patents contributing around 12% of the growth. The integration of Leosphere is now complete and K-Patents is expected to be integrated during Q3, therefore sales synergies should start to become more visible during H2.

H2 seasonally stronger for W&E, estimates revised upward

After the solid Q2 result, Vaisala is on track to deliver in H2, which is seasonally stronger for W&E. Post Q2 result, we have adjusted slightly upward both our sales and EBIT estimates for this year and coming years reflecting the confidence we have in Vaisala’s strategy. We expect 2019E net sales to be 392 MEUR (12% growth yoy) and reported EBIT to be 35 MEUR (46 MEUR adjusted for PPA and one-offs), representing 9% EBIT margin (12% adj. EBIT margin). Our EBIT estimates are now in the upper end of the company’s 2019 guidance. For 2020-21E, we expect 4-5% net sales growth, and we estimate EBIT margin to gradually improve from 9% 2019E towards 11% 2021E (adjusted EBIT margin from 12% 2019E towards 13% in 2021E).

HOLD maintained with revised TP of 21 euros (prev. 20)

On our adjusted EBIT estimates, Vaisala is trading some 10-15% under our peer group on EV/EBIT multiples. Reflecting our estimates revisions, we raise our target price to 21 euros (prev. 20) but maintain HOLD recommendation.

• Group level results: Q2 net sales at 96.1 MEUR vs. 94.2 MEUR our expectation and 93.5 MEUR consensus. Q2 EBIT was 7.2 MEUR vs. our expectation of 3.2 MEUR (4.5 MEUR consensus). Adjusted EBIT was 9.4 MEUR vs. our 6.2 MEUR adjusted EBIT expectation. EPS was 0.14 (0.06 Evli, 0.08 consensus).
• Gross margin was 54.2% vs. 50.1% last year
• Order received was 98.0 MEUR vs. 71.1 MEUR last year
• Weather & Environment (W&E) net sales was 63.2 MEUR vs. 60.2 MEUR our expectation. EBIT was 0.6 MEUR (-1.5 MEUR Evli)
• Industrial Measurements (IM) net sales was 34.8 MEUR vs. 34.0 MEUR our expectation. EBIT was 7.5 MEUR (4.7 MEUR Evli)
• CEO comment: “Vaisala’s second quarter orders received and net sales were strong in all geographical areas. Around half of the order growth came from acquired companies. Excellent growth of orders received in Weather and Environment Business Area reached 49%. This growth was generated by medium-sized orders and especially in sounding and wind lidar businesses.”
• Business outlook for 2019 unchanged: 2019 net sales to be in the range of EUR 380–400 million and operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract.

Updated financial targets – more emphasis on growth

Vaisala targets an average annual growth exceeding 5% and EBIT margin exceeding 12%. Earlier Vaisala’s objective was growth with an average annual growth of 5%, and to achieve 15% EBIT margin. The slightly more ambitious growth target is based on both organic and non-organic opportunities, with key areas of growth being liquid measurements, new industrial instruments, digital solutions, and wind lidars. The recent acquisitions of Leosphere (wind lidars) and K-Patents (liquid measurements), provide growth areas for both W&E and IM segments.

Roadmap for profitable growth

We have made minor upward changes to our sales estimates based on the presented roadmap and new financial targets. We expect 2019E net sales to be 390 MEUR (12% growth yoy, driven by Leosphere and K-Patents acquisitions) and EBIT to be 31 MEUR (43 MEUR adjusted for PPA and one-offs), representing 8% EBIT margin (11% adj. EBIT margin). For 2020-21E, we expect above 4% net sales growth, and we estimate EBIT margin to gradually improve from 8 % 2019E towards 10% 2021E (adjusted EBIT margin from 11% 2019E towards 12% in 2021E). Non-organic growth is very likely (although not reflected in our estimates), hence we see above 5% growth very achievable.

HOLD maintained with TP of 20€ (prev. 18)

On our estimates, Vaisala is trading close to par with our peer group on adjusted EV/EBIT multiples. On EV/Sales multiples, Vaisala is trading below peers, reflecting the potential valuation upside should Vaisala succeed in accelerating its profitable growth. We raise target price to 20 euros (prev. 18) but maintain HOLD recommendation.

Q1 miss, but order book and projects support outlook

Vaisala’s Q1 result miss was due to lower than expected seasonal net sales in Weather & Environment. W&E net sales were 49.6 MEUR vs. 55 MEUR our expectation, while Industrial Measurements net sales were 34.6 MEUR vs. 33 MEUR our expectation. On Group level, Q1 EBIT came in at 0.0 MEUR vs. our expectation of 2.3 MEUR. Despite Q1 miss, the outlook for both BU’s looks supportive with strong orders received (+30%) and recent pick up in larger W&E projects (15 MEUR Argentina and 7 MEUR Sweden deals announced).

Estimates unchanged, OPEX increase to weigh on 2019E EBIT

Post Q1, our estimates are unchanged. We expect 2019E net sales to be 382 MEUR (10% growth yoy) and EBIT to be 31 MEUR (41 MEUR adjusted for PPA and one-offs), representing 8.1% EBIT margin (10.8% adj. EBIT margin). Estimated EBIT decline in 2019E is due to acquisitions related increase in operating expenses, which we estimate to increase roughly 16% to 172 MEUR (vs. 148 MEUR 2018).

HOLD maintained with target price of 18 euros

On our estimates, Vaisala is trading at adjusted EV/EBIT and EV/EBITDA multiples of 17x and 14x for 2019E, which is 4-8% lower than our peer group. Looking at 2020E multiples, valuation looks slightly more attractive given our estimated EBIT improvement, but we are not ready to put emphasis on next year due to the on-going process of integrating the acquired businesses. We see current valuation as fair, thus we maintain HOLD and target price of 18 euros.

• Group level results: Q1 net sales at 84.2 MEUR vs. 87 MEUR our expectation and 88.5 MEUR consensus. Q1 EBIT was 0.0 MEUR vs. our expectation of 2.3 MEUR. Adjusted EBIT was 3.0 MEUR vs. our 5.0 MEUR adjusted EBIT expectation
• Gross margin was 53.2% vs. 51.3% last year
• Orders received was 113 MEUR vs. 87.1 MEUR last year
• Weather & Environment (W&E) net sales was 49.6 MEUR vs. 55 MEUR our expectation. EBIT was -4.3 MEUR
• Industrial Measurements (IM) net sales was 34.6 MEUR vs. 33 MEUR our expectation. EBIT was 4.6 MEUR
• CEO comment: “Integration of Leosphere is proceeding according to plan and integration of K-Patents has started well during the first quarter. We expect to complete these integration projects during the second half of this year.”
• Business outlook for 2019 unchanged: 2019 net sales to be in the range of EUR 380–400 million and operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract.

Outlook for 2019

Vaisala expects market for traditional weather solutions to be flat in 2019, while market for industrial measurement solutions is expected to continue to grow in all regions. Increasing investments in R&D and sales & marketing are expected to burden profitability in 2019. Vaisala estimates its full-year 2019 net sales to be in the range of EUR 380–400 million and its operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract. The new outlook with an adjusted EBIT range of EUR 35-47m was slightly weaker than what we had expected; our previous EBIT estimate of EUR 45m (46m cons) being in the higher end of the range.

Estimates revised down for 2019

We expect Vaisala’s 2019E net sales to be EUR 385m representing +10% growth y/y. Sales growth will be driven by the recent acquisitions, Leosphere and K-Patents, which we estimate to add around 24 MEUR and 12 MEUR to top line in 2019E. We’ve adjusted our 2019E EBIT estimates downwards to reflect increase in R&D and sales & marketing spend. We estimate 2019E reported EBIT to be EUR 31m (EUR 42m adjusted for EUR 11m PPA and one-off expenses). For 2020-21 we expect 3.6% and 4.3% growth, with operating margin improving to 11.6% and 11.8% respectively.

HOLD maintained with new TP of 18 (prev. 19)

On our revised estimates Vaisala is trading at EV/EBIT and EV/EBITDA multiples that are ~10% lower than our peer group, but we see this as fair given the near-term weaker outlook. We maintain HOLD recommendation with TP of EUR 18 (prev. 19).

• Dividend proposal is 0.58 (0.55 Evli / 0.58 consensus)
• Business outlook for 2019: Vaisala estimates its full-year 2019 net sales to be in the range of EUR 380–400 million and its operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract.
• Our estimates for 2019E are net sales of EUR 387m (382m cons.) and EBIT of EUR 45m (46m cons.)

Favorable mix in W&E and higher sales in IM impacted EBIT

In the fourth quarter 2018, operating result was higher than estimated due to higher than estimated gross profit and other operating income. In W&E, gross margin was higher than estimated due to favorable sales mix. In IM, net sales were higher than estimated resulting in higher operating result. Other operating income included EUR 1.5 million of reversal of earn-outs and other contractual liabilities related to acquisitions in the recent years.

2019E growth mainly non-organic, TP 19 and HOLD recommendation maintained

We estimate Vaisala’s net sales to grow 11% to 387 MEUR in 2019E. Growth is mainly driven by the Leosphere and K-Patents acquisitions (adding 24 MEUR and 12 MEUR to top line in 2019E). We estimate 2019E EBIT to be 45 MEUR. On our estimates Vaisala is trading at 2019/20E at P/E 20.4 and 17.9, which is ~17% higher than peer group. On our estimates, EV/EBIT multiples for 2019/20E are 14.5 and 12.8 respectively, which are in line with peer group. We await some more color from the Q4 call, especially regarding China and the W&E project outlook. We retain our HOLD recommendation and target price of 19 euros.

Timing of W&E projects caused some surprises

After the Q2’18 result, Vaisala estimated that the high share of project revenue will negatively affect W&E’s profitability during H2’18. However, Q3’18 turned out to be an exception: the timing of W&E projects resulted in weaker net sales but supported gross margin and EBIT margin, as the share of typically low margin project deliveries fell to 25% (37% in Q3’17) in W&E. According to Vaisala, project gross margins also happened to be better y/y.

Low W&E order intake continued in Q3’18

In Q3’18, W&E order intake amounted to 48.7 MEUR (-33% y/y) which was the second consecutive weak quarter, even when we adjust for the 6.3 MEUR Vietnamese contract order in Q3’17. According to Vaisala, the demand for W&E products in China has not changed significantly from Q2’18 to Q3’18. The company repeated its view that the Chinese demand for traditional weather observation equipment is expected to decline moderately y/y in 2018. Vaisala sees that the main Chinese customer for traditional weather stations may have saturated its network, which could explain the weaker demand in 2018. Meanwhile, Vaisala sees that sales to Chinese airports are a growing business.

HOLD maintained with a TP of EUR 19 (21) per share

We have updated our estimates, which now reflect the acquired Leosphere. In addition, we lower W&E sales growth estimates for other segments due to the continued weak development in order intake and continued cautiousness regarding the Chinese market. In our estimates the weak W&E order intake partly offsets the estimated growth boost from Leosphere. Our 2019E estimates and peer EV/EBIT multiples imply a value of 18.8 EUR per share when we adjust for Vaisala’s net debt. We maintain HOLD rating with a target price of EUR 19 (21) per share.

Industrial Measurements - Strong growth and profitability

In 2010-2017, Industrial Measurements (IM, 33% of sales) net sales grew at a CAGR of 8.2%. In the past five years, IM’s operating margin has improved from 12 to 20 percent, driven by scale economies. The business area follows a product leadership strategy and the current focus is on the power transmission and life sciences markets.

Weather and Environment – Focusing on growth areas

In 2010-2017, Weather and Environment (W&E, 67% of sales) net sales grew at a CAGR of 2.3%. Operating margin was 8.2% in 2017E. W&E is currently focusing on meteorological projects in developing countries, digital solutions, and air quality related solutions. Meanwhile, growth is relatively slow for traditional meteorological equipment in the developed countries.

Estimating EUR 376m sales, 13.7% EBIT margin in 2020E

Vaisala targets 5% CAGR sales growth (4.0% CAGR in 2010-2017) and 15% EBIT margin (12.3% in 2017) in the long term. We estimate 4.1% CAGR sales growth for 18E-20E, driven by IM sales and growth areas in W&E. We estimate that Vaisala’s EBIT margin improves to 13.7% in 2020E, driven by economies of scale and the increasing share of IM sales.

Initiating coverage with a HOLD rating and TP of EUR 21

Our 2019E estimates and peer EV/EBIT multiples imply a value of 20.4 EUR per share. Meanwhile, our DCF model implies a value of EUR 21.3 per share. We see that Vaisala’s current share price already reflects our expectations of continued growth and gradual profitability improvements. We initiate coverage with a HOLD rating and a target price of EUR 21 per share.