Danish
wind
turbine
maker
Vestas
impressed
the
markets
with
its
full
year
earnings
report,
sending
its
shares
6%
higher
on
the
Copenhagen
stock
exchange.
Although
expectations
were
high
ahead
of
Vestas
(VWS)
earnings
report,
after
announcing
several
large
orders
in
the
fourth
quarter,
the
Danish
wind
turbine
maker
managed
to
surprise
investors
with
a
record
order
intake.
“Vestas
delivered
a
blockbuster
fourth
quarter,
which
included
record
order
intake
and
strong
sequential
improvement
in
its
profitability”
Morningstar’s
equity
analyst
Matthew
Donen
says,
leaving
the
fair
value
estimate
unchanged
at
197
DKK,
despite
an
increase
in
the
share
price
on
Wednesday.
Vestas
Returns
to
Profit
The
impact
of
higher
selling
prices
for
its
wind
turbines
has
seen
the
group
return
to
profitability
during
the
last
two
quarters,
leading
to
full-year
operating
profit
of
€231
million
(a
1.5%
EBIT
margin)
compared
to
a
€1.2
billion
(£1.02
billion)
loss
in
the
previous
year.
“Guidance
of
revenue
between
€16
billion
and
€18
billion
at
a
5%
EBIT
margin
at
the
midpoint
falls
broadly
in
line
with
our
expectations
and
is
clear
indication
that
Vestas’s
positive
momentum
will
continue
into
fiscal
2024,”
Donen
adds.
During
the
quarter
Vestas
received
its
largest
ever
US
order,
which
helped
propel
full-year
order
intake
55%
higher
year
on
year
to
€18.5
billion,
exceeding
consensus
estimates
of
€18.1
billion.
Its
order
backlog
grew
by
€10.6
billion
to
€60.1
billion
as
at
the
end
of
the
2023
financial
year,
offering
investors
with
roughly
three-and-a-half
years’
visibility.
Investors
worried
about
Vesta’s
balance
sheet
will
be
reassured
by
the
free
cash
flow
of
€1.7
billion
during
the
fourth
quarter,
which
more
than
offset
the
preceding
three
quarters
of
cash
outflow.
And
for
the
second
consecutive
year
the
wind
turbine
maker
declared
no
dividend,
which
also
helped
bolster
the
group’s
financial
position
according
to
Donen.
Key
Morningstar
Metrics
For
Vestas
Stock
•
Fair
Value
Estimate:
197
DKK;
• Current
Price:
198.56
DKK;
• Morningstar
Rating:
★★★;
• Morningstar
Economic
Moat
Rating:
None;
• Morningstar
Uncertainty
Rating:
High.
Vestas
Faces
Chinese
Competition
A
more
selective
approach
in
its
bidding
and
higher
turbine
prices
will
help
provide
further
margin
expansion,
but
Morningstar’s
Donen
can
see
some
dark
clouds
forming
far
away
on
the
horizon.
“We
remain
skeptical
on
the
group’s
10%
long-term
EBIT
margin
target
due
to
the
competitive
nature
of
the
industry
which
includes
the
increasing
threat
of
Chinese
competition
and
accelerating
product
cycles
required
to
produce
more
efficient
and
thus
larger
turbines
in
order
to
keep
the
levelised
cost
of
wind
energy
low,”
Matthew
Donen
explains.
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