Epiroc’s Stellar 2021 Performance Meets Our Expectations; Shares Are Overvalued

Narrow-moat Epiroc delivered record revenue, profit, and order growth for 2021, which met both our own expectations and company-compiled consensus. Organic order intake grew 26% to SEK 45.6 billion driven by a 47% increase in equipment orders. We aren’t overly concerned by the sequential decrease in quarterly orders that we attribute to the lumpiness of large orders, of which there were three in the fourth quarter compared with five in the third quarter. Demand levels are expected to remain high despite peak level demand, supported by strong commodity prices and customers embracing Epiroc’s digital offering to improve productivity. We maintain our SEK 132 fair value estimate and view shares as richly valued, which are currently trading at 29 times company-compiled consensus earnings for 2022.