FLS: Model update - Good order momentum; reiterate Outperform

Research evidence excerpt

FLS: Model update - Good order momentum; reiterate Outperform

31.81 35.02EQUITY investments. However, management notes that engineering activity (i.e. Prev. 25.32 31.46 34.64

the order pipeline) remains elevated, supporting the outlook into 2027. We P/AEPS 21.0x 18.3x 15.2x 13.8x

also note that FLS received an order after the quarter worth DKK300m for

iron ore technologies in South Asia. All values in DKK unless otherwise noted.

Priced as of prior trading day's market close, EST (unless otherwise noted).

Mixed margin trends in Q1: FLSmidth delivered a 16.6% adj. EBITA Service

margin in Q1, well below the 19%-20% range consistently seen in previous

quarters. Management stated on the call that the margin was fully in

line with expectations, citing the timing of backlog conversion as well

as alluding to mix headwinds. They reiterated their expectation for the

FY2026 Service margin to land in the 19%-20% range. The Products adj.

EBITA margin of -0.7% was less bad than expected (albeit supported by

DKK25m-30m of provision releases), with management repeating that the

business can break even at a DKK2.8bn-3.0bn revenue run-rate, expected

towards the end of the year. The PC&V adj. EBITA margin of 24.0% was in

line with management and consensus expectations.

Outperform: FLSmidth is seeing good order momentum in its aftermarket-

focused divisions as an ageing base of mining equipment is operated at high

utilisation levels. We expect this to be augmented by larger orders in the

coming quarters (and years) as pipelines begin to convert. At the same time,

FLSmidth is now a much higher-quality company compared to five years

ago, focused only on mining equipment. It trades at a 2026 EV/EBITA of

13.5x, a 31% discount to our wider coverage. We reiterate our Outperform