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Friday, November 21, 2008
Vestas Wind Systems - 2009 Research
ClikImage: © 2008 Vestas Wind Systems

Vestas Wind Systems - 2009 Research Report - VWS

Vestas Wind Systems is a pure-play 100% zero emissions energy company, based in Randers, Denmark, that manufactures electricity generating wind turbines, and also manages a portfolio of wind turbine businesses. The last research report we did on Vestas Wind Systems was almost a year ago (January 6, 2008), and since then, much has changed within the global financial markets. The purpose of this report is to update our Vestas research against the scenario of the current economic climate.

Vestas Wind Systems is a renewable energy growth stock, and as a company they continue to be a stellar performer, and have an excellent long-term prognosis over the next twelve years. The company's primary trading market is the Copenhagen Exchange (Danish Krone), and under the trading symbol of VWS. Vestas Wind Systems is also traded in significant volume, in Euros, on the German XETRA DAX. With the worldwide financial markets selling-off dramatically in the last few months, Vestas Wind Systems stock has been pushed down significantly from a 2008 52 wk high (Jun 18, 2008) of 700 Krone to its recent low (Oct 28, 2008) of 180 Krone. It closed yesterday (Nov 20, 2008) at 206 Krone in Copenhagen.

Regardless of the current stock price, Vestas Wind Systems is strategically well placed as the world's number one wind turbine manufacturer, and the growth expectations between now and 2020 in this industry sector are expected to be enormous. Vestas is a 100% pure play stock in renewable wind turbine electricity and the future is bright, even if the present market conditions are bleak. There have been many worldwide commitments signed by governments, like within China and Europe, that guarantee significant growth in the wind turbine sector; and just common sense regarding the saving of the Planet means absolutely enormous growth in this sector. At the bottom of the article you can see the orders that were signed with Vestas for wind turbines in 2008.

From a Warren Buffett equity valuation perspective, Vestas Wind Systems is currently priced very well with respect to its long-term capital growth, future sales revenue, its marketplace leadership position, and its cohesive proven management team. The real short-term risk is just the general market sentiment towards worldwide equities being somewhat negative, and this could push Vestas to a slightly lower valuation if there is more overall market selling volatility. Otherwise, if you can stomach the general market short-term downside risk, the stock has significant upside at a very attractive PE of 15.82, with a closing price (Nov 20, 2008) of 206 Krone, or 29.4% of its 2008 high. 

In 2007, Vestas Wind Systems had a worldwide market share of 23 percent, with its next largest competitor being Spain's Gamesa (a 2007 market share of 15%). To date, Vestas have installed more than 35,500 wind turbines, since their first wind turbine commissioning in 1979. The recent Vestas Q3 (Nov 6, 2008) interim financial report painted a very positive perspective for the long-term future of both the industry and Vestas itself. Vestas posted a 2008 Q3 revenue of EUR 1.759m against EUR 1.150m for Q3 2007, or a 53% increase. This was also supported with an estimated profit after taxes for Q3 2008 of 97 mEUR versus Q3 2007 66 mEUR, or a 47% increase in profit. For a comparison of 9 months 2008 revenue vs. 9 months 2007 revenue, the numbers are EUR 3.554m versus EUR 2.977m (+ 19.4% increase over 2007).

Vestas indicates in their Q3 interim report that they expect a slight downturn in the industry because of the short-term investment climate, but they still predict some growth in profitability for 2009. They state that the industry as a whole must install close to 900,000 MW of capacity beween 2008-2020, and that this translates to an annualized industry growth rate between 20-25 % over the next twelve years.

Vestas is also refining and improving their supplier base, parts redundancy with suppliers, parts quality, global manufacturing operations integration, international sales offices, and improving the derived energy per square area of swept wind capture through improved designs. Vestas has stated that for the future, their wind turbines will have greater energy output per unit weight and size.

For the investor who can stomach general equity pricing volatility of the current market, Vestas is a stock to buy and hold for the avid long-term investor and probably a very good equity to consider for a pension income over the 15 year horizon. Investors should conduct due diligence of the financial house they use in the current economic climate for their equity trades and equity safekeeping.

VESTAS WIND SYSTEMS - 2008 ORDERS

Date             Country       Quantity       Type                     Purchaser       

10 Nov 08   Italy           35             V52-850 kW      Aerochetto s.r.l. Maestrae

10 Nov 08   USA            22             V80-2.0 MW      Puget Sound Energy & Northwest

30 Oct 08   Chile           23             V90-3.0 MW      Norwegian-SN Power

16 Oct 08   China          116           V52-850 kW      China Guang Dong Nuclear Wind

15 Oct 08   Turkey         5              V90-3.0 MW       Akenerji Elektrik Uretim

6  Oct  08   Bugaria        16            V90-2.0 MW       Raiffeisen Energy Environment

22 Sep 08   Brazil           17            V82-1.65 MW     Gargau Energetica S.A. 

21 Aug 08   China           24            V90-2.0 MW      CNOOC Beijing Energy

4 Aug 08     Czech Rep    9             V90-2.0MW        Austria Wind Power

4 Aug 08     China           20            V80-2.0 MW      FCG (Putian) Wind Power

24 Jul 08     China           100          V52-850 kW      China Guang Dong Nuclear

9  Jul 08     France          9              V90-2.0 MW      ENEL Erelis

3  Jul 08      France          24            V80-2.0 MW      EOLW Technologie Renew

16 Jun 08     Turkey          10            V90-3.0 MW     Belen Elektrik Uretim

27 May 08   Canada         22            V90-3.0 MW     TranAlta -Alberta

27 May 08   Italy              7             V90-1.8 MW      Trinacria Eolica s.r.l IVPC

27 May 08   Italy              11           V90-3.0 MW      Trinacria Eolica s.r.l IVPC

7  May  08   Turkey          15           V90-3.0MW        Borasco Enerji VE Kimya

5  May 08    Greece          34            V52-850 kW      REnInvest

18 Feb 08    Poland          16            V90-2.0 MW     ScanEnergy Denmark

18 Feb 08    Sweden         18            V90-2.0 MW      Vindkomp Aniet AB

13 Feb 08     Canada        22            V90-3.0 MW      TransAlta Energy Corp

22 Jan 08     Spain           15             V90-2.0 MW      Elecnor

22 Jan 08     Spain           12             V80-2.0 MW      Elecnor

14 Jan 08     Poland          16            V90-2.0 MW      Vortex Energy Group

Investor Note: The author has no material interest whatsover with Vestas Wind Systems, nor is he associated in any manner with someone, an institution, or any other collective gathering of individuals that have associations with Vestas Wind Systems. Statements made are not intended to influence any decision making process, but are instead a perspective from the author about the investment type in question. The reader is encouraged to seek other opinions in order to build their own collective understanding about this investment type.

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