Wartsila Earnings: Order Intake Beat Estimates, but Profitability Remains Subdued Despite Progress

Narrow-moat Wartsila delivered an impressive quarter, reporting organic order intake growth of 29% to EUR 1.7 billion, comfortably above company-compiled consensus of EUR 1.5 billion. Demand was broad-based across operating segments, but the energy segment continues to drive the outperformance, supported by a 3.5-fold increase in demand for the group’s energy storage solutions. However, the energy storage subsegment continues to have a dilutive impact on group profitability, and despite margins improving 70 basis points to 6.0%, remains well below our medium-term expectations and group targets. While the market is impressed with results, which sees the stock up 8% following its earnings release, we view shares as fairly valued to our EUR 9.20 fair value estimate, which we maintain.