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.