Epiroc Earnings: Organic Order Growth Tops Expectations, Boosted by Service and Large Orders

Demand for narrow-moat Epirocs mining equipment and services continued at an impressive pace in second-quarter 2024, growing 1% organically year over year and beating company-compiled consensus of a slight contraction. Order intake benefited from SEK 950 million worth of large equipment orders, compared with SEK 550 million during second-quarter 2023, an indication that underlying confidence in mining investment remains at high levels. Organic order growth for services of 5% year over year is impressive and consistent with our short- and long-term forecasts, underpinned by secular growth themes of midlife service rebuilds and demand for automation offerings to improve customer efficiencies. Shares are trading 5% lower on disappointing operating margins. However, we are confident that Epirocs operating margins can return to typical levels of more than 20% following the implementation of its recent restructuring program and integration of its record acquisition of Stanley Infrastructure. Shares continue to trade at a 15% premium to our SEK 180 fair value estimate, which we maintain.