Værdiansættelse af Vestas Wind Systems A/S

Bo La

Student thesis: Diploma thesis


The bumpy road seems to continue for the global wind industry. The wind industry has seen a strong growth over the last few decades but aftershocks of the financial crisis, the continuing Eurozone crisis and the regulatory and political turmoil especially in the traditional markets in North America and Europe continue to harper the industry. The main purpose of this thesis is to analyze and valuate Vestas Wind Systems A/S. The thesis consist of three major sections as an actual valuation based on preliminary analysis of the company. The thesis is the final result from the bachelor level education at Copenhagen Business School and represents the combined knowledge, methods learned from theoretical literature and associate professors together with my own learning process. The first section comprises the strategic analysis including a general description of Vestas Wind Systems A/S to provide a general comprehension and understanding of the company. The analysis analyzes the overall micro and macro environments by using the PEST model and Porters Five Forces combined with a value chain analysis to gain a comprehension of the activities within the organization together with the internal and external non-financial factors. The most important among these factors for Vestas on a large scale was the company’s dependency of volatile price movements on raw materials used in the production of Vestas’ products and carbon trading prices. Vestas as a company is highly influenced by financial situation, credit crisis, and political support of wind power as a renewable energy source. The high technological development in the industry and prices has challenged and reduced Vestas’ market share from 22.8 percent in 2007 to 14 percent in 2012. The offshore market is forecasted to be the wind industry’s next upcoming market growth until 2020. Vestas’ development of the world’s biggest offshore 8 MW wind turbine seems to be following the company’s plan. Vestas is negotiating with the gigantic Mitsubishi Heavy Industry on an agreement for development of this offshore wind turbine. It is unknown whether the agreement will lead to a joint venture or a direct acquisition. The historical accounts were measured and combined with the result from the strategic factors. The results of Vestas historical key performance indicators showed that they have been in a very difficult period as a result of the financial crisis. The strategy that Vestas have implemented in the company with increased investment in production capacity was not suited for competitive and penetrated markets. The return of Equity was calculated to be negative with -11.57 % which indicates that Vestas have been worse to gain profit according to the invested capital, actually not making profit. To forecast the future performance for Vestas up to 2020 it has been necessary to use the observations and results from the strategic analysis and historical accounts. The forecast was based on Global Wind Energy Council’s (GWEC) predictions for wind industry. To ensure the predictions validity and applicability the data was related to the strategic analysis and historical accounts. The forecast is encumbered with high risks because the predictions are sensitive to cyclical changes in the environment. The valuating of Vestas was based on the FCFF model which is one of the most commonly used tools for valuation according to analytics and corporate consultancy companies. The FCFF model showed an output from all the previous analysis to valuate Vestas share price to DKK 62.41 compared to the share price of DKK 46.50 on the 29-03-2013. The calculations were highly sensitive of small adjustments in the calculated wacc. The market seems to undervalue the share price compared to the calculations of this thesis. The valuation of Vestas results in a buy recommendation of the share but states the considerable uncertainty and risks associated with the forecasts and estimates. In order to validate the precision of the results it was necessary to prepare a sensitive analysis to illustrate the effect of the factor included in the valuation. The analysis showed that the share price was highly sensitive to changes in wacc and growth rates. The decline in the share price from DKK 692 in 2008 to DKK 46.50 in 2012 is not only affected by the company’s strategy errors but also that the market has been through the industry’s largest crisis in modern history together with the political turmoil in the American market.

EducationsGraduate Diploma in Accounting and Financial Management, (Diploma Programme) Final Thesis
Publication date2013
Number of pages112