European Machinery: Debate of the Day – Epiroc vs Sandvik

Research evidence excerpt

European Machinery: Debate of the Day – Epiroc vs Sandvik

European Machinery

23 June 2026 Citi Research

Figure 1. On our sensitivity, strong 2Q26 Machining margin short-lived, risk to Street margin further out

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Source: Visible Alpha, Company Reports and Citi Research Estimates

Epiroc: order expectations look low, still slow revenue recognition – We’ve previously said that order expectations still look

low both in service and equipment; into 2Q we see 20% org order growth vs 16.5% VA consensus. Slower billings however

although improving vs 1Q could weigh on EBIT in 2Q (Citi 2% below consensus). The debate today is focusing on a likely weaker

drop-through in E&S following a possibly weaker internal service mix. We don’t see this as a cause of concern and if anything it

will likely be short-lived. The highest margin in the service division parts and kits (50% of service sales with potential to reach

45% EBIT margin, in our view) will likely see accelerating growth following the very strong equipment growth currently (6-12m

warranty period/growth lagged up to 12m on new machines sold). At the CMD, we were also encouraged to hear of the strong

circular/rebuild pipeline where margin is the second highest in service, in our view (we think 20-25%). The strong service growth

in 1Q26 (12%) was partly driven by strong rebuild growth, if this growth can continue together with upside to parts and kits then

the 9.6%/7.8% cons order growth 2026/27 in service looks beatable to us and the internal service mix should improve. Also the

target is to expand the customer share further over 50% supported by a shift to larger and more sophisticated machines running

at higher utilization.

Figure 2.