Vaisala: Industrial Measurements leads the way - Evli
Vaisala’s Q2 fell short of our estimates due to weaker than expected performance in W&E. Although W&E faces headwinds from various sources, IM momentum continues.
ANNONS
W&E headwinds proved to be firmer than we expected
The Industrial Measurements sales topped our estimates in Q2 as strong performance continued across all the geographical markets and market segments. While IM continued to perform, sales in Weather and Environment declined 10% y/y while we had expected decline of 2%. Product sales fell 25% (Evli est. -20%) as renewable energy market remained weak. Additionally, although subscription sales growth remained strong, organic growth was slightly below our expectations. Given the softer volumes and suboptimal sales mix (higher project sales, lower renewable product sales), the W&E profitability fell short of our forecasts. The renewable energy market is expected to remain weak through 2025. Wind farm investments have slowed in Europe and Asia, and in the US, the market is largely at a standstill due to policy changes. In addition to headwind from the renewable energy market, meteorology and aviation markets are slowing down with orders decreasing in both, mainly due to industrial cyclicality and public spending cuts in the United States.
Expecting similar development in the second half
With the weaker market in renewable energy, the company expects the business area’s net sales to trail 2024 by some EUR 15m on a full-year basis. Vaisala also specified its outlook and now estimates net sales in the range of EUR 590-605m (prev. EUR 590-620m) and EBITA of EUR 90-100m (EUR 90-105m). Our estimates for H2 remain relatively unchanged. We expect continued headwind for W&E product sales driven by weakness especially in renewable energy market yet also in aviation and meteorology. On the other hand, subscription sales growth will continue to be driven by both organic and inorganic growth. While subscription growth provides some support, we estimate the negative sales mix trend to continue. Although gross margin pressure is expected, the company should be able to protect margins by some self-help during the second half in W&E. After the Q2 actual figures and slight estimate revisions, we model net sales of EUR 591 (prev. EUR 598m) and EBITA of EUR 93m (EUR 97m) for the FY 2025.
ACCUMULATE with a TP of EUR 50 (prev. EUR 54)
Vaisala is priced at 18-16x EV/EBITA on our updated estimates for 25-26E. We revise our TP back to EUR 50 (prev. EUR 54). Our target price values Vaisala at 18x EV/EBITA on our 25-26E estimates which we see as a neutral level for the company.
