DnB Markets - Epiroc AB Class B (EPI B) Epiroc (Buy, TP: SEK160.00) - Solid as a rock

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DnB Markets

Olof Larshammar

EUR 465.57 For Business Accounts Only

Epiroc (Buy, TP: SEK160.00) - Solid as a rock

We reiterate our BUY and have raised our target price to SEK160 (150). With high mineral prices putting the fundamentals in place for miners to maintain high opex, we expect Epiroc to show among the strongest revenue growth in the Capital Goods sector over 2021–2022. We also see prospects for above-market growth in service from a higher share and, lastly, believe the solid balance could be used for M&A or extraordinary DPS.

10/12/2020 20 EN

Underlying

Epiroc AB Class B

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SE0011166941 Nasdaq Nordic Stockholm Sweden

Provider

DnB Markets

DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.

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Analysts

Olof Larshammar

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Epiroc (Hold, TP: SEK200.00) - Continued high activity

Ongoing high mineral prices have put the fundamentals in place for miners to maintain high opex. Longer-term, we like the secular growth from lower-ore grades, more underground mines, and electrification and digitalisation of equipment. However, in the short to medium term, we expect stable high-level order intake. In conjunction with the relative strong share price YTD, resulting in a rich relative valuation, we reiterate our HOLD and SEK200 target price.

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Epiroc (Hold, TP: SEK200.00) - Order intake still strong

Q2 order intake was strong, up 45% organically YOY and 6% above consensus. High minerals prices continue to put the fundamentals in place for miners to maintain high opex. Long-term, we like the case of secular growth from lower-ore grades, an increasing number of underground mines, and electrification and digitalisation of equipment. However, in the short to medium term, we expect a more stable order intake. Combining this with the rich relative valuation and strong share price performance YTD, we reiterate our HOLD and SEK200 target price.

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Epiroc (Hold, TP: SEK200.00) - Time for a breather

We like the long-term case in Epiroc with secular growth from lower ore grades, more and more underground mines, and electrification and digitalisation of equipment. However, we have downgraded the stock to HOLD with a SEK200 (210) target price. We expect near-term equipment order intake to weaken somewhat from the high Q1 levels. Additionally, increased political risk in Chile and Peru could lead to a lower likelihood for new projects. Lastly, the stock outperformed the OMXS30 by 8% YTD and by 46% over the last year, which has left the valuation at a relative high level.

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Sinch (Buy, TP: SEK52.00) - New reporting structure implemented

With a new reporting structure, focus will be on headline numbers (the Q1 report is due at 07:30 CET on 7 May). We forecast 6% organic gross profit growth YOY, and we believe this is about in line with consensus. We reiterate our BUY and SEK52 target price.

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Truecaller (Buy, TP: SEK46.00) - Facing easy comparables in Q1

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Safe Bulkers Minor model adjustments

We have updated our estimates, owing to the Q1 report and its updated contract backlog at healthy rates providing visibility on cash flows for the coming quarters. The market is still pricing Safe Bulkers at c50% of NAV, which screens at a noticeable discount to peers’ average P/NAV of ~0.8x. This, along with its contract portfolio, continues to provide relatively attractive exposure to the dry bulk segment, despite potential downside risk to demand on fundamental drivers in China (importer of ~50% of all volumes). We do not consider these changes to be material, and we have not changed our BU...

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Epiroc (Buy, TP: SEK160.00) - Solid as a rock

Epiroc (Hold, TP: SEK200.00) - Continued high activity

Epiroc (Hold, TP: SEK200.00) - Order intake still strong

Epiroc (Hold, TP: SEK200.00) - Time for a breather

Sinch (Buy, TP: SEK52.00) - New reporting structure implemented

Truecaller (Buy, TP: SEK46.00) - Facing easy comparables in Q1

Safe Bulkers Minor model adjustments

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