Sandvik (Buy, TP: SEK280.00) - Held back by misperceptions
We believe the market is underestimating Sandvik’s growth potential and the structural headwind in its automotive exposure has been misperceived (set to contribute to growth until 2025e and have only a negligible negative impact thereafter), while the mining business is in a growth sweet spot. We are 3–7% above consensus on 2022–2024e adj. EBIT and believe that, trading at a modest 2023e EV/EBIT of 11.5x, an SMT spin-off in Q2–Q3e could trigger a re-rating. BUY reiterated, but target price cut to 280 (290).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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