Wartsila Oyj Abp: Competition continues to rise in the DC primary power Engine space. Stay Underweight.

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Wartsila Oyj Abp: Competition continues to rise in the DC primary power Engine space. Stay Underweight.

IdeaMCatalysts. Wartsila's group pre-silent CFO call is on 23rd June. It is clear the

message on the quarter will remain upbeat given announced orders ( Exhibit 3 ), but

clearly the market will also continue to be focused on indications on pricing on

orders. Then, 2Q26 results on 21st July, where Wartsila has already commented it

will not update its EBIT margin targets for the Energy and the Marine divisions. We

think the new targets for Energy will come at the 3rd November Capital Markets

day, where we expect Wartsila to increase its target for the Energy division to an

18% operating margin.

Exhibit 1: Wartsila's price per MW (€mn) on Energy orders has not shown any

pick up in the past two years, even as data center orders have started to be

booked. While we appreciate management's comments that scope can differ on

orders (and impact price per MW), we still believe that Wartsila's valuation

embeds an overly optimistic scenario for margin improvement in Energy.

Rolling 4Q Average Pricing per MW (EURmn/MW)

1.20

1.00

0.80

0.60

0.40

0.20

0.00

4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 2Q25 3Q25 4Q25 1Q26

Source: Company data

Exhibit 2: Wartsila orders in Energy (MW). We expect a strong quarter of orders

in 2Q26, with the largest quarter of data center announcements. Clearly this helps

with increasing visibility, but we are less convinced there is upside to 2028-29

consensus, even with this relatively strong order quarter. There will also be a

focus on the 21st May CFO pre-silent call, and the 23rd July 2Q26 results, on any

detail around pricing and margins on this orders.