Goldman Sachs upgrades Epiroc to Buy, arguing that margin repair is back on track

Overview

This is a Goldman Sachs company research and rating-change report on Epiroc. The core conclusion is that after years of margin decline and share underperformance, 1Q26 order growth and margin recovery provide enough evidence of an inflection point, so the rating is upgraded to Buy. The report emphasizes that a mining capex upcycle in OE, replacement of aging equipment, recovery in the Service business, improving T&A demand, and the rollout of earlier cost actions will together drive improvements in revenue, margins, and ROIC.

Core views

The main views are: first, 1Q26 group organic order growth of +23% and margins back above 20% show that margin repair has started to materialize; second, Equipment orders grew +44% in 1Q26, supporting the view of a mining OE upcycle, and the report raises its FY26 Equipment organic order growth forecast to +23.9%; third, the Service business is expected to recover in 2026 from low growth in 2025, supported by high metal prices, mid-cycle upgrade demand, and easing operational issues; fourth, the T&A business is expected to post +7.6% organic order growth in FY26 as channel destocking ends and Attachments demand improves; fifth, if cost savings prove structural, Epiroc could regain a leading margin position in the industry and earn a higher valuation multiple.

Analysis framework

The report combines fundamental forecasting, peer comparison, and valuation multiple re-rating. On the fundamentals side, it analyzes 1Q26 orders, margins, Equipment and Service growth, T&A demand, tungsten cost inflation, cost savings, and operating leverage. On the relative-comparison side, it compares Epiroc with Sandvik and the European multi-industry coverage universe, focusing on growth, margins, ROIC, and share-price performance. On valuation, Goldman Sachs uses a relative-to-industry EV/IC versus ROIC/WACC framework and raises the multiple on improving ROIC prospects.

Methodology notes

• Valuation methodsEV/IC to ROIC/WACC

  Relative-to-industry valuation framework

  The target price is based on an industry-relative EV/IC and ROIC/WACC approach. The report rolls valuation forward to 9m27/3m28E and raises the multiple from 2.3x to 2.7x on improving ROIC.

• factor_profileGS Factor Profile

  Growth, financial return, valuation multiples, and composite factors

  Goldman Sachs Factor Profile compares the company with the market and industry peers across growth, financial return, valuation multiples, and composite percentiles to provide investment context.

• corporate_actionM&A Rank

  M&A probability score

  Goldman Sachs ranks covered companies from 1 to 3 based on the probability of being acquired; Epiroc's disclosed M&A Rank is 3, indicating a low probability of being a takeover target and typically not included in the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Epiroc equity

  Directly covered name in the report

  Strengths

  Strong 1Q26 orders, margins back above 20%, cost actions beginning to deliver, and support from the mining OE cycle and Service recovery.

  Weaknesses

  Margins have disappointed for the past three years, the share price has materially lagged peers, and the stock is already up +27.2% year to date.

  Comparison

  The report says Epiroc's past underperformance versus Sandvik was mainly due to slower growth and margin decline; as Epiroc's 1Q26 organic order growth nears Sandvik Mining, market-share concerns should ease.

  Risks

  If growth slows, cost inflation runs above expectations, or T&A demand recovery is weaker than expected, margin repair and valuation re-rating could be delayed.

• Sandvik

  Main peer comparison

  Strengths

  Earlier order growth was relatively strong, making it an important benchmark for Epiroc's share-price underperformance.

  Weaknesses

  The report argues that Sandvik's relative advantage could narrow as Epiroc's orders recover.

  Comparison

  Epiroc underperformed Sandvik by about 55 ppts over the past 12 months, but 1Q26 Epiroc group organic order growth of +23% was close to Sandvik Mining's +22%.

  Risks

  If Sandvik continues to lead on orders and market share, Epiroc's valuation recovery may be limited.

• European Multi-Industry coverage universe

  Valuation and rating relative-comparison benchmark

  Strengths

  If Epiroc achieves margin and ROIC expansion, it could command a premium valuation versus high-quality peers.

  Weaknesses

  Valuations in the diversified industrial sector are influenced by the cycle, rates, and capex expectations.

  Comparison

  The report argues that Epiroc appears undervalued relative to high-quality peers and prices it using an industry-relative EV/IC versus ROIC/WACC framework.

  Risks

  If sector valuations compress overall, share-price upside may remain limited even if company fundamentals improve.

Key data

• Rating changeBuy from NeutralGoldman Sachs upgraded Epiroc from Neutral to Buy.
• Target priceSEK315 from SEK230The 12-month target price was raised, mainly reflecting higher FY27/28 adjusted EBIT forecasts, valuation roll-forward, and improved ROIC prospects.
• Expected upside+16%Based on the new 12-month target price.
• 1Q26 group organic order growth+23%The report sees this as important evidence of an inflection in growth and easing market-share concerns.
• 1Q26 Equipment order growth+44%Supports the view of a mining OE upcycle and replacement demand for aging equipment.
• FY25-30E margin expansion>380bpsDriven by organic growth, structural cost savings, and operating leverage.
• FY26/27 adjusted EBIT forecast change+7%/+13%Goldman Sachs raised its FY26/27 adjusted EBIT forecasts.
• Market capitalizationSkr329.7bn / $35.4bnData disclosed on the report cover.
• Enterprise valueSkr336.4bn / $36.1bnData disclosed on the report cover.

Impact & implications

If the report's call is borne out, Epiroc's investment narrative would shift from past margin disappointment and growth lag to accelerating orders, margin recovery, and ROIC expansion. The market may award the stock a higher valuation multiple, especially if the company re-proves that its cost savings are structural, T&A recovery continues, Service returns to its historical growth trend, and the mining OE cycle persists. For investors, the near-term focus is on confirming whether 1Q26 marks a sustainable inflection point rather than a one-quarter bounce.

Risks

• Margin improvement could be slower than expected due to weaker-than-expected growth, an unfavorable product mix, or higher-than-expected cost inflation, such as tungsten and logistics costs.
• A deterioration in infrastructure demand could slow the expected recovery in the T&A business.
• Mining customers may delay capex because of changes in commodity prices, mine operational issues, weather or seismic activity, diesel shortages, or regional wage inflation.
• Global events such as conflict in the Middle East could disrupt supply chains, raise logistics costs, delay shipments, or disturb Service revenue and new-order commitments.
• Digital acquisition integration and scaling may fall short of expectations, causing margin improvement to lag.
• Foreign exchange volatility may affect earnings delivery.
• Rising trade tariffs could pressure margins or cause market-share loss, especially in U.S. import-related business.

What to watch

• The Capital Markets Day on June 8 in Orebro, Sweden, with focus on the margin path, capital allocation, and mixed-fleet automation TAM.
• Whether group margins stay above 20% in subsequent quarters and whether year-on-year margin expansion continues.
• Whether Equipment and Service orders keep growing, especially replacement demand for aging mining equipment and mid-cycle upgrade demand.
• Whether T&A demand recovery, Attachments volume improvement, and dilution from STANLEY-related margins continue to fade.
• Whether tungsten cost inflation can be offset by price increases and surcharges.
• Whether consensus EBIT and margin expectations for FY26/27 keep moving higher.
• Whether Epiroc's order growth and share performance relative to Sandvik continue to recover.