Sandvik (Buy, TP: SEK260.00) - Material upside to SMM for 2023e
We have raised our adj. EBITA by 6–9% for 2023–2025e after increasing our organic sales growth estimate from 0% to 4% YOY for 2023. We are now 9% above consensus on 2023e adj. EBITA. Our higher estimates are mainly driven by SMM (2023e organic sales growth raised from -8% to +1%), with support from the strong guidance of peers SKF (mid-single digit organic growth YOY for Q1 and 2023) and Kennametal (5–9% organic growth YOY for Q1). This has led us to believe our previous estimates were too conservative and indicates upside potential to consensus on Sandvik. We reiterate our BUY and have increased our target price to SEK260 (235).Sandvik is organized into five business areas: Sandvik Mining, Sandvik Machining Solutions, Sandvik Materials Technology, Sandvik Construction and Sandvik Venture. Sandvik Mining specializes in equipment, tools and service for the mining industry. Sandvik Machining Solutions focuses on tools and tooling systems for metal cutting. Sandvik Materials Technology specializes in products made from stainless steel grades and special alloys. Sandvik Construction specializes in equipment, tools and service for the breaking, drilling and crushing niches. Sandvik Venture generates value by promoting growth of small and medium-sized businesses of particular interest to the Sandvik Group.
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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