JP Morgan upgrades Vestas and raises target price on improved onshore wind outlook
Investment bank also sees more realistic profit margin consensus and notes offshore business risks are better understood
JP Morgan has upgraded Vestas to ‘neutral’ from ‘underweight’ and raised its target price for the Danish wind group to DKr161 ($23.58) per share from DKr140 on an improved growth outlook onshore, a more realistic consensus regarding profit margin expectations and a “better understood” risk in its offshore business.
Vestas shares rose by 1.07% to DKr179.54 in early afternoon trading at the Copenhagen stock exchange Monday.
“While wind offers an attractive LCOE [levelized cost of energy], grid and permitting bottlenecks have impacted growth. LTM [last twelve months] onshore orders at 12GW are still 37% below the prior peak in Q3 19 but onshore book-to-bill at 1.17x (LTM) provides visibility on growth after declines in onshore sales in 2022-23,” the note said.
The book-to-bill ratio indicates the ratio of orders received to units shipped and billed for a specified period.
The investment bank also mentioned that Vestas’ growth outlook through 2030 has increased when compared to expectations a year ago but cautioned: “Chinese competition is a risk but troubles at SGRE [Siemens Gamesa] provide a tailwind for the next couple of years.”
The analysts mentioned that the consensus for Vestas’ profit margin next year has decreased and is now within the 2-6% margin range JP Morgan itself expects, adding that few investors see the manufacturer actually reaching its target of a 10% profit margin in 2025.
“We still expect Vestas to miss its €3bn Offshore revenue target for 2025 and forecast €1.95bn sales vs. consensus €2.65bn. However, we believe offshore risks are now better understood amongst the investor base,” the bank said.
(Copyright)