SKF (Buy, TP: SEK200.00) - Solid cost control – set for more
We expect SKF to continue to generate good cash flow, and to beat consensus in Q2 (we are 39% above on adj. EBIT) and 2020 (we are 15% above) despite a weak demand environment, as cost savings assist and the price/mix remains positive. We believe Q1 provided more evidence that SKF is better placed to handle falling volumes than in the past. We view the valuation as attractive, with the stock trading at a 2021e EV/sales of 0.9x, a 16% discount to its historical average, and reiterate our BUY and SEK200 target price.AB SKF is the parent company of the SKF Group, which supplies products, solutions and services within rolling bearings, seals, mechatronics, services and lubrication systems. Services include technical support, maintenance services, condition monitoring, asset optimization, engineering consultancy and training. Co.'s business areas are: SKF Industrial Market - Strategic Industries, which includes bearings and bearing accessories and lubrication systems; SKF Industrial Market - Regional Sales and Service, which develops SKF Solution Factory facilities providing engineering capability; and SKF Automotive, which develops and manufactures bearings, seals and related products and services.
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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