SKF (Buy, TP: SEK245.00) - Rolling in the deep value
We have upgraded SKF to BUY (HOLD) and raised our target price to SEK245 (205). While we consider SKF’s bold ambition of 8% sales growth by 2030 out of reach, we expect c3% organic growth, with a ‘free option’ from its cleantech business (8% of 2021 sales), which alone could add 1–2% annually. Trading at a 2022e EV/EBIT of c8x, in our view the valuation fails to reflect any upside potential from the cleantech business and savings from factory closures. We estimate an 11% 2021–2024 adj. EBIT CAGR and are 4–10% above consensus.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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