Vestas Maintains Full-Year Guidance Despite Further Losses in Q2; FVE Intact

No-moat Vestas kept its full-year guidance unchanged, despite another quarter of operating losses that could be the first indication that a return to group profitability is on the horizon, and this has sparked a positive reaction from the market. While the second quarter fell short of company-compiled consensus, revenue declines of 6.5% and a contraction in profit margins in the service business were primarily driven by one-off impacts on specific projects. To combat significant raw material inflation, Vestas has raised the average selling price on its onshore turbines by 22% year over year, the highest price charged in the past decade, which will help turn around the group’s profitability as its turbine backlog of EUR 18.9 billion is delivered in the upcoming years. First-half operating losses of EUR 511 million implies a slight return to profitability in the second half of the year if we apply management’s midpoint EBIT margin guidance of negative 2.5%, with the increase in selling prices likely to have a positive impact in future years. While we plan to slightly revise our short-term forecasts, we reiterate our DKK 176 fair value estimate.