Digital Solutions And Aftermarket Services Will Transform Mining Operations

Key Takeaways

• Expansion of resilient, high-margin service and aftermarket operations, alongside cost base optimization, sets the stage for sustainable earnings growth and improved margins.
  
• Streamlined focus on mining, brownfield upgrades, and decarbonization strengthens market leadership, positioning the company for enhanced cash flow and shareholder returns.
  
• Heavy reliance on cyclical mining capex and slow structural transition to services leave FLSmidth exposed to volatile revenue, margin pressure, and risks from industry shifts or poor execution.

Catalysts

Provides flowsheet technology and service solutions for the mining and cement industries in Denmark, the United States of America, Canada, Chile, Brazil, Peru, Australia, North and South America, Europe, the Middle East, Africa, and Asia.

• FLSmidth's focus on expanding its service and aftermarket business (which generates recurring, higher-margin revenue and is more resilient through cycles) positions it to sustainably grow net margins and earnings stability, especially as the company replicates successful practices from its high-growth, high-profitability PCV segment across its Service operation.
  
• The company is proactively streamlining its fixed cost base (SG&A and corporate overhead) and rightsizing the Product division to ensure a scalable platform; when capital equipment demand recovers (expected towards late 2026/2027), operating leverage should drive a step up in EBITA margin and earnings as volumes rebound.
  
• Strength in brownfield upgrades, process optimization, and digital solutions-closely aligned with mining clients' needs to improve resource efficiency and comply with stricter environmental standards-positions FLSmidth to capture a greater share of customer spend and grow both topline and gross margins as decarbonization and circularity become more important in the industry.
  
• FLSmidth's leading installed base and dominant market position in key growth geographies (notably Chile for copper), combined with the industry's long-term need for minerals essential to the energy transition, is set to boost order intake and revenue growth once major project sanctions resume and mining capex rebounds.
  
• Ongoing disposal of the low-margin Cement business, portfolio simplification, and a focus on high-aftermarket potential equipment will free up capital, reduce risk, and enhance overall return on invested capital, supporting improved cash generation and shareholder returns over time.

FLSmidth Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming FLSmidth's revenue will decrease by 7.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.8% today to 12.2% in 3 years time.
• Analysts expect earnings to reach DKK 2.0 billion (and earnings per share of DKK 27.9) by about August 2028, up from DKK 1.2 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.8x on those 2028 earnings, down from 19.7x today. This future PE is lower than the current PE for the GB Machinery industry at 19.1x.
• Analysts expect the number of shares outstanding to grow by 0.44% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.12%, as per the Simply Wall St company report.

FLSmidth Future Earnings Per Share Growth

Risks

• Persistent softness and volatility in the Product (capital equipment) business segment, with cyclical, lumpy demand, high fixed costs, and current negative EBITA, expose FLSmidth to prolonged periods of weak revenue and earnings, especially if the anticipated upturn in late 2026/2027 is delayed or softer than expected.
  
• Customer hesitancy and delays in sanctioning new mining projects-particularly in core markets like South America-reflect a broader global trend of capital expenditure caution, regulatory uncertainty, and potentially longer cycles, creating downside risk to order intake, revenue growth, and cash flow.
  
• FLSmidth's dependence on mining sector capex cycles and overexposure to large, one-off product orders heightens revenue volatility and limits resilience to structural shifts such as decarbonization policies, resource nationalism, or technological disruption (e.g., Industry 4.0, alternative processing solutions) that could shrink the addressable market or redirect investment to new solutions beyond FLSmidth's portfolio.
  
• Ongoing rightsizing and restructuring efforts in Products and SG&A reductions signal underlying challenges with adapting the legacy business model to a scalable, service-led operation; execution risk, slow transition, and failure to fully align cost base could result in margin compression and suboptimal profitability, especially in a capex-light market.
  
• The successful transformation to a higher-margin, recurring revenue service and PCV business is heavily reliant on replicating internal best practices and commercial excellence across regions; if these efforts fall short, or if intensified competition, substitution by alternative solutions, or supply chain disruptions increase, FLSmidth's net margins and earnings stability could be undermined.

Valuation

• The analysts have a consensus price target of DKK426.75 for FLSmidth based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of DKK455.0, and the most bearish reporting a price target of just DKK344.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be DKK16.0 billion, earnings will come to DKK2.0 billion, and it would be trading on a PE ratio of 14.8x, assuming you use a discount rate of 6.1%.
  
• Given the current share price of DKK408.8, the analyst price target of DKK426.75 is 4.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.