Vestas: Top Maker of Wind Turbines, with Growing Service Revenue

Adam Crocker of Logbook Investments presented his in-depth investment thesis on Vestas (Denmark: VWS) at European Investing Summit 2019.

Thesis summary:

Vestas is the world’s largest manufacturer of wind turbines. The company benefits from 1) Scale barriers deterring competitive entrants, 2) Service revenue, expanded from mid-single digits to 18% of total, providing greater predictability and profitability, and 3) Secular industry growth as the world shifts from fossil fuels to renewable energy sources. The company has also dramatically transformed its supply chain since 2012, resulting in a more agile and cash generative enterprise. Through the cycle, management expects to earn EBIT margin >10% , ROIC >20% and positive annual FCF. As investors witness Vestas’ reduced cyclicality based on the above factors, in addition to wind recently becoming the lowest cost unsubsidized source of energy, this growing company is likely to trade above its current 12x FY19E EV/EBIT.

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About the instructor:

Adam Crocker, CFA is Founder and Chief Investment Officer of Logbook Investments, a value fund with core positions based on insights from books. Logbook launched in 2016 and is seeded by his former employer. Prior to Logbook, Adam was a co-manager at Metropolitan Capital Advisors, a long/short equity fund founded in 1992. Before joining Metropolitan, he was an analyst at Morgan Stanley Investment Management conducting research on behalf of growth and value investment teams. He began his career in Leveraged Finance investment banking at JPMorgan. Adam is a 2005 graduate of the Value Investing Program at Columbia Business School and has an undergraduate degree in Economics from Columbia University.