Wheels in Motion—Deutsche Bank Adds Grease to SKF’s Valuation

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Deutsche Bank upgraded its target price for SKF AB (STO: SKFb.ST) to SEK 204 from SEK 194, demonstrating optimistic caution on the firm's ongoing strategic overhaul, such as the planned demerger of its Automotive unit.

1. What's Behind the Upgrade?

The fresh target follows SKF's plan to demerge its Automotive business into a separate listed entity by 2026, which Deutsche Bank believes will release shareholder value.
In upgrading the stock, the bank has retained its "Sell" rating based on unchanged fundamentals and lack of clarity on financial targets and cost structures post-demerger.

2. Financial Snapshot

Reporting in its Q2 2024 results:
Net sales of SEK 25.6 billion
Adjusted operating margin of 13%
Organic growth decline of 7%

Weak demand in the wind power division as well as the persistent headwinds from currencies still beleaguer the company, although the balance sheet is strong with net debt at SEK 10.7 billion.

3. Market Outlook

Investors are eagerly waiting for an update on the Automotive demerger timeline, target financials, and ROCE of the residual Industrial business.
Analysts maintain that margin expansion in the Industrial segment—currently sitting at more than 16%—will be a priority metric to track.

Sources: Investing.com, MarketScreener, Markets Insider