Vestas Wind Systems A/S climbed for a 10th day in Copenhagen, the longest streak since May, as HSBC Holdings Plc and Jyske Bank A/S raised price estimates after the Danish wind-turbine maker increased its cash-flow guidance.
HSBC today boosted its target for Vestas to 215 kroner from 190 kroner, a day after the Aarhus-based producer upgraded its cash flow guidance for 2013. Jyske analyst Janne Vincent Kjaer changed her estimate to 220 kroner from 200 kroner.
“Given the strong order flow and prudent cash management, we expect management to guide strongly for 2014” when Vestas publishes annual results on Feb. 4, HSBC’s Sean McLoughlin in London and Christian Rath in Dusseldorf said a note today. “Vestas stands to benefit from order strength in the U.S.”
It jumped as much as 8.9 percent to the highest since April 2011 and was up 5.5 percent at 196.4 kroner by 12:54 p.m. in Copenhagen. Vestas last year rose fivefold as the unprofitable producer cut thousands of jobs and sold factories in a two-year turnaround program that ended in December.
It took more than 1.3 gigawatts of orders last month, with 830 megawatts in the U.S. Since August, it had 1,770 megawatts of orders in the country. HSBC said Vestas may get as much as an extra 2.7 gigawatts under framework deals, “many of which we believe should materialize into new firm orders during 2014.”
Shipments may rise 20 percent in 2014 to 5.4 gigawatts and a further 4 percent in 2015 to 5.6 gigawatts, the bank said. It previously forecast gains of 17 percent and 2 percent. Vestas’s margin on earnings before interest and tax was raised by HSBC by 70 basis points to 4.9 percent in 2014, and by 90 basis points to 5.7 percent in 2015. The bank rates the stock “overweight.”
Vestas yesterday upgraded its estimate for free cash flow in 2013 to about 1 billion euros ($1.4 billion), from previous guidance of 500 million euros to 700 million euros, citing a “better-than-expected development of net working capital.”
“For us, it indicates a very high level of activity in the fourth quarter of 2013,” Jyske Bank’s Kjaer wrote. That affects free cash flow as Vestas get a “very large” chunk of customer payments when turbines are delivered, the analyst wrote.
Cash flow is “the crucial gauge” for Vestas’s financial health, according to Jacob Pedersen, an analyst at Sydbank A/S in Aabenraa, Denmark, who said the company’s recovery means it may be able to pay a dividend by as early as 2015.
“It’s a strong signal only a year after Vestas was at the center of heavy financial turbulence,” Pedersen said. “The debt has gradually been reduced and the fear of the worst scenarios for Vestas’s future have decreased drastically.”