Sandvik (Hold, TP: SEK165.00) - SMS burdened by underproduction
For Q3 we are 7% below consensus on adj. EBIT. Sandvik has improved operationally in recent years, and become more agile with a lower breakeven point, especially within SM&RT. However, as in the Q2 report, we believe Q3 should raise questions over the structural improvement in SMS, where we expect an adj. EBIT margin of 21.0% versus consensus at 22.7%. In SM&RT we still expect good margins and orders. We reiterate our HOLD and SEK165 target price.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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