Sandvik Earnings: Raising Fair Value to SEK 200 From SEK 193 After Impressive EBIT Margin Expansion

Narrow-moat Sandvik delivered a notable second quarter, which shows the group is outperforming its closest competitor Epiroc, who reported earnings yesterday. We are most impressed with Sandvik’s better-than-expected 120-basis-point EBIT margin progression to 18.9%, which has led us to raise our margin estimates, and subsequently increase our fair value estimate to SEK 200 from SEK 193. We anticipate Sandvik will be able to maintain its current EBIT margin, supported by robust demand for higher-margin aftermarket mining services. We view shares as fairly valued.