Vestas Wind Systems A/S (OCSE:VWS)
Opportunity Summary:
- Vestas holds the top position among wind turbine manufacturers.
- The industry has attractive economics (high ROIC) and long-term growth prospects; wind as an energy source has crossed the threshold of being able to compete with fossil fuels without the aid of subsidies.
- Vestas (>16% market share in cumulative capacity & new builds), Siemens Gamesa (~15% market share), and GE (~12% market share) are the dominant players.
- Due to scale advantages and cost cutting initiatives started in 2011, Vestas has the best EBIT margin (>10-% vs. 5-8% for GE & Siemens and <5% for most other competitors).
- Vestas’ stock is down 50% in the past few months based on concerns on how well wind energy can fair against other energy sources without government subsidies and competitive industry pricing that was predicated on the industry’s move to an auction system. My research suggests these risks are overblown considering the already cost competitive nature of wind and Vestas’ competitive position / profitability.
- Management has done a great job of running the company over the last few years, having reduced fixed and variable costs by streamlining the business and by growing the highly profitable / fast growing / sticky services business.
- My first pass at a valuation suggests that the stock could do well as a long-term holding.
NOTE: I first became aware of the opportunity via VIC. See link for detailed write-up:
https://valueinvestorsclub.com/idea/Vestas_Wind_Systems/141645
I would love to hear your thoughts if you have some industry insight or have looked at the opportunity. Send me a reply here in the thread, or directly at [email protected].
Cheers,
Kevin
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