Epiroc (360) | Buy | More than a mining capex proxy

Research evidence excerpt

Epiroc (360) | Buy | More than a mining capex proxy

Epiroc Buy | SEK300.00

Table 1:Epiroc's financial goals and historical performance

Goals Description Q1 2026 2025 2016-2025

Growth Annual revenue growth of 8% over a business cycle. -8% -3% 10% p.a.

Profitability (EBIT) Industry-best operating margin, with strong resilience over the cycle. 19.8% 19.2% 20.3%

Capital efficiency Improve capital efficiency and resilience. Investments and acquisitions should 18.5% 18.9% 24.1%

(ROCE) create value.

Capital structure Have an efficient capital structure and have the flexibility to make selective Rating BBB+

acquisitions. Maintain an investment grade rating.

Dividend policy Provide long-term stable and rising dividends to its shareholders. The dividend 53% payout 51% payout ratio

should correspond to 50% of net profit over the cycle. ratio

Source: Kepler Cheuvreux, Epiroc

The average operating margin was 20.3% over 2016-25, despite exposure to mining

investment cycles, commodity-price volatility and, more recently, weak construction

markets, FX headwinds, and tariffs. We also note that Epiroc has experienced negative

organic growth only once since the spin-off, during the pandemic in 2020. Despite this,

margins remained resilient and strong cash generation allowed for rapid deleveraging that

year. To find a period in which margins came under more meaningful pressure, one has to

go back to the Global Financial Crisis in 2009, when the business was still part of Atlas

Copco and the operating margin declined to around 14%.

Chart 10:Organic sales growth and adj. EBIT margin (%) Chart 11:Capital employed (SEKm) and ROCE (%)

Source: Kepler Cheuvreux Source: Kepler Cheuvreux

Asset-light by design

Another quality attribute can be found in Epiroc's asset-light operating model.