Vestas: We Expect It To Be Insulated From Headwinds at Siemens Gamesa

We believe the poor performance reported by Siemens Energy at its subsidiary Siemens Gamesa is largely restricted to the latter business and should not have a material impact on Vestas’ financial performance. Siemens Energy reported an operating loss of EUR 374 million at its subsidiary Siemens Gamesa during the second quarter and guided toward a full-year operating margin of negative 11% for the division. Siemens Energy’s share price fell by more than 35% on June 23, which spooked investors in wind turbine manufacturers and dragged Vestas’ share price lower by more than 5%. The poor outlook at Siemens Gamesa incorporates additional costs due to flaws in its onshore wind turbines, which may exceed EUR 1 billion, but we believe it shouldn't have an impact on Vestas. We reiterate our fair value estimate of EUR 197 for Vestas and view its shares as fairly valued.