Strategisk regnskabsanalyse og værdiansættelse Vestas Wind Systems A/S

Thomas Bjørn Hovgaard

Student thesis: Master thesis


The purpose of this report is to conduct a valuation of Vestas Wind System A/S based on a long term investor´ s point of view. The report has been conducted with the use of the DCF- model with budget assumptions that have been based on the strategic analysis and financial analysis of Vestas. In the strategic analysis the general environment was analyzed through the PEST model. I have analyzed up to the point, that it is the particular political, economical and technological factors that have an important influence on the market conditions in the wind power industry. For the political situation, each country´ s targets for the production of renewable energy are important. The targets are driven by the increased energy consumption and the reduction of C02 emissions. The analysis shows an average annual growth rate of approx. 10% up to 2016 in the wind power industry. The industry depends still on the political subsidies measures, in order to be competitive with the fossil energy sources. This is adversely affected by the financial and debt crisis, which has resulted in that many countries have dismantled their subsidies measures, and the failure to extend PTC in the USA and to find an international agreement to replace the Kyoto Agreement. Increased competiveness is and will be achieved through the technological development of wind turbines in order to reduce Cost of Energy. This must mainly be done through the development of the production capacity measured in MW per wind turbine. In the industry analysis, Porter’s Five Forces, I have reached the conclusion that the competitive situation has been considerably sharpened. I drew that conclusion from Vestas´ decline in the market share from approx. 20% in 2008 to approx. 13% in 2011, and it is assessed that the competitive situation will be more intensified in the future. The increased competition has been created by an overcapacity of wind turbines manufacturers, due to declining growth rates in the wind power industry. This has led to a decrease of selling prices per MW, which have fallen since 2008 and are expected to fall until 2013. Additionally, there are a growing number of competitors, especially from China. The Chinese producers have experienced a strong growth in the Chinese market and the competition is expected to increase in the future, when the Chinese producers will establish themselves in the global market. In the strategic analysis of Vestas´ resources and competences, Vestas’ large market share, broad based product portfolio and a strong product development are the important resources and competences of Vestas. The factors must differentiate Vestas from their competitors. The financial analysis was based on the period from 2009 until 2011. The period showed a downward trend, where ROIC has fallen from 8,9% to -4,3%. This tendency is particularly characterized by sales, which have not been increased since 2008 and a lack of cost adjustment to lower growth rates. This is especially the production costs and the depreciation, which have increased in the same period. It can contribute to strong investments in the development of new wind turbines and the expansion of production units, which has had a negative effect on the operating profit margin via increased depreciation and overcapacity but it has also affected the asset turnover ratio in a negative direction. Based on the above analysis, I have made the budget assumptions for the preparation of the budget for 2012 until 2021. In the valuation I have calculated WACC to 9,7% and the growth in the terminal stage to 3%. The valuation of Vestas is fair value calculated to DKK 126. The official market price was 54,95 DKK at the 9/2 2012. To support this valuation, an analysis of the sensitivity in the indication of the value has been made. This analysis proves that the estimated value is very sensitive to changes in WACC and growth. The estimation shows that Vestas has great potential but that risk is also part of the picture.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2012
Number of pages107