The pricing power difference between Peder and David
n Trigger I: Drifting on a 19% CAGR industry to 2020. We have upgraded our forecasts for the global wind power market and extended
our global view into 2020. In 2020, we see total installed based narrowing the 1,000,000MW, yielding a CAGR of 19% over that period.
n Trigger II: move towards multi MW turbines We claim that gearbox manufactureres have more to gain from the multi-MW move as they
have been able to charge premium prices for higher MW gearboxes, unlike turbine manufactures. Vestas should be able to grasp a sizable
upside from the 3MW as we have seen a significant acceleration of 3MW order announcements since November '07. But our preferred
route to play this theme is via Hansen Transmissions, which is the sole supplier for Vestas' V90- 3MW.
n Trigger III: offshore Both 2008 and 2009 are set to become offshore wind boom years in Europe with a planned total volume of 1,507 MW
of new installations coming online. We believe Siemens will leapfrog current market leader Vestas (market share of 60%) as Vestas
suffered from issues on its 3MW offshore.
n Trigger IV Ascending the value chain : Gearbox supply has been the main supply bottleneck within the wind industry chain,
strengthening our case for higher pricing power. On the other hand, turbine manufacturers are better placed to exploit geographical
premium prices and benefit from optimal cash requirements.
n Neutral on Vestas : new in-house capacity should allow sales CAGR of of 21%, upside from ASP increase still visible in order book, but
likely to loose momentum. Based on our EBIT margin dynamics model, we see limited upside to 10-12% margin target on raw materials
increases (weakness of outsourcing model). We increase our rating to Neutral and PT to DKK 508.
n Buy on Hansen Transmissions : With an estimated 94% market share in 3MW/3MW+ market, we see Hansen as the key beneficiary of
the move towards higher MW. Capacity multiplication will be the main driver behind sales CAGR of 30% to 2013, together with strong
pricing power (>10% ASP increase for key selling product range as from Jan'09 indicative) should translate into a decupling of net income
(on quadrupling sales). We initiate coverage with a Buy rating and PT of GBP 2.92.