Sandvik Earnings: Higher Demand for Mining Equipment and Growth in China Boost Organic Orders by 3%
Narrow-moat Sandviks 3% organic order growth during the second quarter is impressive in the context of current global economic conditions. Demand was supported by SEK 1.5 billion worth of major orders for mining equipment and double-digit growth in China within its short-cycle machining segment, which enjoyed prebuying in anticipation of higher prices and is therefore unlikely to be maintainable in the future. A 2% decline in organic revenue year over year was underpinned by a mid-single-digit decline in its rock processing segment and is consistent with our estimates. We reiterate our SEK 210 fair value estimate and view shares as fairly valued.