EQUITY RESEARCH: VESTAS WIND SYSTEMS A/S

The present document is the report of an Equity Research of Vestas Wind Systems A/S according to the recommended format by the CFA Institute. Vestas is a Danish manufacturer and service provider of wind turbines, and a global leader in sustainable energy solutions. Given the growing awareness of the importance of environmental sustainability, the transition to renewable energy sources has become a plan on the world’s agenda. Therefore, performing an analysis of an industry-leading company contributes to a greater understanding of this key topic and, particularly, of how the shift in the global energy system can unfold. The analysis performed provides in-depth coverage of the business description, management, and ESG of Vestas Wind Systems A/S, and an industry overview. In terms of valuation, the integrated DCF approach was the preferred method, but complemented with other methods. This report issues a BUY recommendation for Vestas Wind Systems, with a price target of 26.59€/share for 2023YE, representing an upside potential of 18% against the closing price of 24.36€/share, as of June 30th, 2023, with medium risk. The recommendation is mainly based on: i) Forefront innovative technology which unlocks higher output capacity, putting Vestas ahead of its competitors; ii) Strong offshore expansion beginning in 2025F, that along with higher power solutions revenues, will also increase the service segment revenue; and, iii) Uncertain Energy Transition and Bureaucratic Processes that slow down wind farms construction. The company valuation is subject to significant risks. Supply chain disruptions and commodity prices were the main risks that affected the company in 2022, and must be taken into consideration for future years, as it led to negative results. Furthermore, technological advancements and higher competition, due to the entry of oil and gas companies into the renewables industry, can threat Vestas’ market share