One-Off Costs Dent Wartsila’s Profitability Despite Strong H1 Demand; FVE Reduced to EUR 10.80

We are decreasing narrow-moat Wartsila’s fair value estimate to EUR 10.80 from EUR 11.50, which is attributable to a combination of a EUR 200 million impairment to exit its business in Russia and additional costs required to shut its engine manufacturing plant in Italy to centralize manufacturing. Order growth in the first half was 18%, driven by strong demand for services in the marine and energy segments, and is tracking in line with our expectations. We view shares as undervalued, but emphasize the group’s Morningstar Uncertainty Rating of High due to highly cyclical end markets, which is being exacerbated by current conditions.