Atlas Copco Sees No Slowing Demand Yet in China or Semis; Supply Chain Remains Tight

Atlas Copco's second quarter continued a breathless pace of demand and order growth that we expect to hit a wall at some point, but not likely as soon as the third quarter. Organic orders and revenue were up 54% and 21%, respectively. Tightness in the company's supply probably muted revenue growth, with second-quarter orders supporting third-quarter growth. In addition, management has seen no slowdown in demand from semiconductor customers, China, or any other end market or region. We expect to tweak our full-year forecasts but don't expect this to have a material impact on our fair value estimate. The shares look expensive versus our valuation and are trading at a 36 times 2021 P/E consensus-based multiple, around 50% above the 10-year average.