Atlas Copco's First Quarter Shows Supply Chain Constraints Testing Limits on Cost Inflation Offsets

Atlas Copco's experienced another quarter of strong demand across all divisions; however, the exceptional growth is starting to weigh on profitability. Organically group orders and revenue were up 23% and 7%, and the adjusted operating margin stable, supported in part currency tailwinds. Stripping out the positive currency contribution, the compressor and power divisions still had positive margin contributions but vacuum and industrial technique were negative. We maintain our narrow moat rating and SEK 380 fair value estimate.