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On Thursday, Deutsche Bank (ETR:DBKGn)’s analysts adjusted their outlook on Sandvik AB (SAND:SS) (OTC:SDVKY), lowering the price target from SEK205.00 to SEK203.00, while maintaining a Buy rating on the shares. The revision reflects concerns over the company’s earnings visibility for the current year, which has been impacted by a roughly 20% decline in the share price over the last month. This decline is attributed to the increasing risk to the recovery of short-cycle demand.
The analysts noted that despite these challenges, Sandvik’s mining sector exposure continues to perform well. There has been sustained growth in aftermarket services and an unexpectedly strong demand for equipment orders. Given that approximately 60% of the group’s earnings stem from its Materials Technology (SMR) and Rock Processing Solutions (SRP) divisions, Sandvik is considered to be somewhat shielded from short-cycle fluctuations.
The commentary from Deutsche Bank acknowledges the disconnect between the company’s share price movements and its resilient mining segment. This resilience is seen as a buffer against the volatility experienced in the short-cycle demand sectors.
Sandvik’s performance in the mining sector, particularly in aftermarket growth and strong equipment orders, has been a highlight for the company. Despite the limited visibility for this year’s earnings and the recent contraction in share price, the maintained Buy rating indicates a positive long-term outlook on Sandvik’s stock from Deutsche Bank.
The price target adjustment to SEK203.00 from SEK205.00 by Deutsche Bank is based on the current market conditions and the company’s earnings potential. It reflects the balance between the risks posed by short-cycle demand recovery and the strength of Sandvik’s mining-related businesses.
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