Demand for Mining Equipment Drives Q1 Order Growth for Sandvik; Raising FVE but Shares Remain Rich

Narrow-moat Sandvik’s exposure to cyclical end markets with low visibility leads to volatile swings in demand. In first-quarter 2021 this was favorable, buoyed by high commodity prices leading to a record order intake level for the mining segments. We are raising our fair value estimate to SEK 193 from SEK 158 per share, which is driven by a reduction in our weighted average cost of capital due to divestments and restructuring that have lowered the systematic risk of Sandvik, rather than a material change in our forecasts. Shares remain richly valued and are currently trading at an all-time high.