Wind Jammers: More ‘Buy’ Recommendations for Denmark’s Vestas

By Keith Johnson

Here’s a stumper: Why are shares in the global leader in the most mature renewable-energy technology so moribund?

Denmark’s Vestas Wind Systems, the biggest maker of wind turbines in the world, can’t get any love from investors. Its share price, after an up-and-down 2009, is roughly where it was at the start of last year.

Some analysts think that’s out of whack. HSBC today put a “buy” on Vestas shares and reiterated a target price of 500 Danish kroner; the stock today trades at around 333, well off the highs it reached last spring and summer. Jeffries Research also put out a “buy” recommendation today, though with a slightly lower target price.

HSBC’s reasoning is simple enough: Since the beginning of December, turbine orders have started to flow again. Vestas is maintaining its position behind General Electric as the number-two turbine company in the U.S., the world’s biggest wind market. And that market can only grow, the bank figures, as Washington hands out more clean-energy grants and prepares to pass a national renewable-energy standard. HSBC says that Vestas’ 30% discount to its peer group is “completely unjustifed.”

Jeffries makes similar arguments, highlighting a big new turbine order expected in Kenya to stress the strength of Vestas’ order book and its unparalleled global reach.

Sure, Vestas—like GE, Gamesa, Siemens and other big turbine makers—have worries. The explosion of China’s wind industry has proven a double-edged sword. First, that big and fast-growing market was partly closed to foreign suppliers. And the rapid growth of China’s wind industry has created scores of wind-turbine makers itching to start exporting their wares to Europe and America—which could, one day, threaten market share and margins for the established players.

In the meantime, HSBC says, investors could do a lot worse than to hitch their wagon to a global leader whose shares look cheap.