Vestas Reports Weak First Quarter and Lower 2022 Guidance; FVE Maintained

No-moat Vestas reported a disappointing EUR 894 million operating loss and cut full-year guidance due to a combination of ongoing supply chain constraints, which are hitting the industry, and once-off write-downs. Vestas has increased prices on its new order intake but the existing backlog has remained susceptible to raw material and energy inflation. Company-specific write-downs related to legacy offshore activities and plans to adjust its manufacturing footprint as part of the decision to withdraw from Russia also weighed on weaker results. Despite lowering guidance, operational performance at Vestas is expected to outperform Siemens Gamesa and thus it remains our preferred pick. Having adjusted our 2022 estimates to reflect slightly lower revenue and weaker profitability, we maintain our DKK 176 fair value estimate. Vestas’ investment case is based on the structural shift toward wind energy in the long term, which is where most of the intrinsic value lies and thus a weaker 2022 does not have a material impact on our fair value estimate. Vestas’ order backlog remains healthy at EUR 48.9 billion, approximately three years of revenue. Shares are fairly valued.