Automation And Electrification Leadership Will Support Long Term Mining Equipment Demand

Catalysts

About Epiroc

Epiroc supplies equipment, tools, automation, electrification and digital solutions for mining and infrastructure customers globally.

What are the underlying business or industry changes driving this perspective?

• Customer focus on productivity upgrades, brownfield expansions and exploration in gold and copper, which together represent 65% of mining orders, supports ongoing demand for equipment and aftermarket that can feed into revenue and earnings.
• Leadership in automation, including more than 3,900 driverless machines in operation and large reference projects like Roy Hill and Cadia, positions Epiroc to benefit as mines increase remote and continuous operations, which can support higher service intensity and margins.
• Growing adoption of battery electric vehicles and trolley solutions, with 40 mines ordering BEVs and electrification accounting for 3.8% of group revenue, creates a higher value installed base that can support parts, service and digital revenue over time.
• A large, aging fleet with an average age of 8.6 years and customer share above 50%, while only about one third of the fleet is on service contracts, provides room to grow service penetration, which can support revenue resilience and operating margins.
• Cost efficiency programs, footprint consolidation and use of global hubs such as India, combined with active tariff and input cost mitigation, are aimed at protecting profitability so that revenue growth from mining and infrastructure can translate more effectively into operating profit and cash flow.

Assumptions

This narrative explores a more optimistic perspective on Epiroc compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Epiroc's revenue will grow by 7.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 13.9% today to 16.7% in 3 years time.
• The bullish analysts expect earnings to reach SEK 13.0 billion (and earnings per share of SEK 10.73) by about February 2029, up from SEK 8.6 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as SEK10.9 billion.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 31.7x on those 2029 earnings, down from 37.3x today. This future PE is greater than the current PE for the SE Machinery industry at 25.0x.
• The bullish analysts expect the number of shares outstanding to grow by 0.06% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.64%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistent tariff headwinds and higher logistics costs could weigh on margins for several years if price increases and supply chain adjustments only partly offset the impact, which would put pressure on adjusted operating margin and EBIT.
• Material cost inflation in key inputs such as tungsten, where prices more than doubled in 2025, may squeeze profitability in Tools & Attachment if Epiroc cannot fully pass higher costs through to customers, which would affect segment margins and group earnings.
• Prolonged weakness or only a slow recovery in construction and attachments demand, after nearly two years at low activity levels, could limit growth in the 21% of orders tied to infrastructure and construction, weighing on revenue growth and reducing operating leverage.
• Ongoing softness in certain commodities like nickel, where multiple mines remain under care and maintenance, may continue to dampen aftermarket demand for parts and service in those fleets, which would cap service revenue growth and reduce the resilience of earnings.
• Rising capital intensity in automation, electrification and digital offerings, combined with integration work and efficiency programs, could lead to periods of higher costs and execution risk if scaling is slower than planned, which would affect operating margin progression and cash generation.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Epiroc is SEK280.0, which represents up to two standard deviations above the consensus price target of SEK232.45. This valuation is based on what can be assumed as the expectations of Epiroc's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK280.0, and the most bearish reporting a price target of just SEK185.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be SEK77.8 billion, earnings will come to SEK13.0 billion, and it would be trading on a PE ratio of 31.7x, assuming you use a discount rate of 6.6%.
  
• Given the current share price of SEK265.2, the analyst price target of SEK280.0 is 5.3% 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.