Af Jeffrey Vonk, CEFA, Morningstar Aktieanalytiker.
Europe's largest wind turbine manufacturer, Vestas, reported second-quarter 2018 results in line with our expectations, as strong revenue growth in service (sales up 11% with EBIT margin of 25.2%) was more than offset by continued pricing pressure in power solutions. We foresee continued price declines (the average selling price for order intake, expressed per megawatt-hour, declined by 12% year on year in the quarter), as the increased allocation for large renewable wind projects based upon the action mechanism is having a dampening effect on prices. In the second half of 2018, we expect large auctions in Argentina, Brazil, Colombia, and Australia. We also project intense competition among players due to overcapacity. Given this competitive environment, we think the Vestas performance in the quarter on deliveries (up 7% year on year), revenue (flat), and EBIT (margin of 11.5 of sales, down 110 basis points year on year) is a decent result. We maintain our no-moat rating and fair value estimate of DKK 570 per share for the Danish shares, and EUR 76 for the European shares. Given recent share price weakness, we believe the shares are attractively valued. Our positive stance is supported by eye popping order intake growth (EUR 2.7 billion for second-quarter 2018 versus EUR 2.2 billion for second-quarter 2017) and increased combined backlog of wind turbines and service agreements (EUR 23 billion at end of June 2018 versus EUR 20.2 billion at end June 2017).
