Af Jeffrey Vonk, CEFA, Morningstar Aktieanalytiker.
Europe's largest wind turbine manufacturer, Vestas, reported second-quarter 2018 results in line with our expectations, as strong revenue growth in service (sales up 11% with EBIT margin of 25.2%) was more than offset by continued pricing pressure in power solutions. We foresee continued price declines (the average selling price for order intake, expressed per megawatt-hour, declined by 12% year on year in the quarter), as the increased allocation for large renewable wind projects based upon the action mechanism is having a dampening effect on prices. In the second half of 2018, we expect large auctions in Argentina, Brazil, Colombia, and Australia. We also project intense competition among players due to overcapacity. Given this competitive environment, we think the Vestas performance in the quarter on deliveries (up 7% year on year), revenue (flat), and EBIT (margin of 11.5 of sales, down 110 basis points year on year) is a decent result. We maintain our no-moat rating and fair value estimate of DKK 570 per share for the Danish shares, and EUR 76 for the European shares. Given recent share price weakness, we believe the shares are attractively valued. Our positive stance is supported by eye popping order intake growth (EUR 2.7 billion for second-quarter 2018 versus EUR 2.2 billion for second-quarter 2017) and increased combined backlog of wind turbines and service agreements (EUR 23 billion at end of June 2018 versus EUR 20.2 billion at end June 2017).
We are happy with the strong growth and rising profitability in the service segment (revenue up 11% year on year with margins expanding 570 basis points). Vestas' strong increasing installed base of turbines supports our positive view for the firm's high-margin service business as it helps to offset revenue and margin swings in the company's equipment offerings.
Vestas announced another share buyback of EUR 200 million at the second-quarter results, but we still believe an increased dividend payout ratio is a more appropriate instrument by which to adjust Vestas’ inefficient capital structure (net cash position at end June 2018 stood at EUR 2 billion), given the firm’s structurally improved earnings. Thus, despite the announced share buybacks and growth in the absolute dividend (the payout ratio remained at 30% in 2017), we clearly see scope for increased shareholder remuneration.
Alle estimater og vurderinger er per 15. august 2018 af Jeffrey Vonk, CEFA, Morningstar Equity Analyst.
Jeffrey Vonk har ingen positioner i de nævnte værdipapirer.
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