FLSmidth & Co. A/S: Buy Rating Backed by Margin Improvement, Attractive Valuation, and Strategic Divestment

In a report released today, Christian Hinderaker from Goldman Sachs upgraded FLSmidth & Co. A/S (0OJA – Research Report) to a Buy, with a price target of DKK430.00.

Christian Hinderaker has given his Buy rating due to a combination of factors, including the anticipated improvement in FLSmidth & Co. A/S’s profit margins. This expectation is driven by projected savings in SG&A expenses and a favorable shift in the service and PCV mix, which are expected to bolster the company’s profitability.
Furthermore, Hinderaker notes that FLSmidth’s current valuation is attractive, as its forward EV/EBIT multiple is below its historical median, despite the company’s promising margin outlook. The ongoing exclusive negotiations to divest its Cement business are seen as a potential catalyst, transforming FLSmidth into a focused mining entity with a strong emphasis on copper and gold, which could enhance its returns profile. Additionally, the company’s low leverage and potential cash inflow from the divestment provide opportunities for growth investments, both organic and inorganic, further supporting the Buy rating.

In another report released on May 16, Jefferies also maintained a Buy rating on the stock with a DKK420.00 price target.