Rothschild lifts Sandvik to Buy on ’multi-year hard rock mining equipment cycle’

Investing.cim -- Rothschild & Co Redburn upgraded Sandvik to Buy from Neutral and raised its target price to 335 Swedish kronor per share from 275 kronor, implying around 20% upside from current levels.

The broker said the move follows a strong set of third-quarter orders and a sharp rally in gold and copper prices, which have risen 33% and 10% respectively since the second quarter.

“We see a favourable multi-year hard rock mining equipment cycle led by a decade of underinvestment, continued ore grade deterioration, deepening mines, exploration recovery, and elevated copper and gold prices and aftermarket improvement led by an aged and larger fleet and improved service penetration,” analysts James Moore and Adam Parr wrote.

Rothschild said its SEK 335 target price, based on a DCF model implying fair value rising from SEK 298 today to SEK 368 in two years, reflects upgraded FY27 EBITA forecasts and extended mining growth assumptions beyond 2027.

Sandvik’s Mining division, which accounts for more than half of group sales, recorded a 24% year-on-year increase in orders in the third quarter, with large gains in Africa and North America. Equipment orders surged 75% organically, helped by brownfield projects and strong activity in copper and gold, while aftermarket orders rose 6%.

Analysts forecast Sandvik’s mining margins to climb from 21.9% in 2026 to 23.5% by 2030 — about 50 to 140 basis points ahead of consensus — supported by improved aftermarket profitability, digital mining technologies, and expanding surface equipment.

They now expect group orders to grow 9% organically in 2025, with EBITA rising 6% in 2027 and earnings per share up 7% from prior forecasts.

The analysts also pointed to minimal capacity constraints despite the surge in equipment orders, as Sandvik has expanded production lines in Finland and Malaysia and maintained flexible sourcing. “We have confidence in management’s assertion that they can maintain normal lead times of 9 to 12 months,” they said.

Rothschild added that the outlook for copper and gold mining capex remains structurally positive as the industry enters a new investment cycle.

Key risks include longer regulatory approval cycles, limited new copper discoveries, slower electrification growth, and margin pressure in Machining from Chinese competition.

Sandvik’s valuation at 17 times 2027 earnings is in line with its 10-year average and justified by improving growth visibility across mining and rock processing, the analysts said.