Goldman Sachs has upgraded FLSmidth & Co. (CSE:FLS) to "buy" from "neutral," raising its 12-month price target to DKK430 from DKK340, citing increased margin expectations and improved profitability prospects.
Shares of the Danish tech company were up 3.4% at 04:46 ET (09:46 GMT).
In the coming years, the brokerage predicts operating margins will rise significantly due to cost-saving measures and an increase in service and Process, Cyclones and Valves (PCV) product mix.
According to Goldman Sachs, FLSmidth’s ongoing restructuring and focus on self-help initiatives are forecast to boost adjusted EBITA margins by 320 basis points to 14.2% by 2027.
This marks a substantial improvement from the company’s recent performance and positions it above consensus estimates.
The new outlook also places Goldman’s adjusted EBITA estimates about 2% higher than the Visible Alpha consensus for 2025.
The note flags that FLSmidth is currently trading at a 12-month forward EV/EBIT multiple of 9.9x, below its 10-year median of 11.5x and under the 14.35x average of its mining equipment peers.
Analysts at Goldman Sachs argue this valuation discount is unwarranted in light of the company’s improving margins and return on invested capital (ROIC), particularly as it approaches the end of its transformation into a pure-play mining business.
One potential catalyst identified by the bank is the possible divestment of FLSmidth’s Cement division.
The company confirmed it is in exclusive negotiations to sell the unit, a move that would complete its pivot toward mining.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. Goldman Sachs notes that such a transaction, if completed, could support a re-rating of the stock by removing business complexity and enhancing focus on higher-return assets.
In the near term, Goldman Sachs remains cautious about original equipment (OE) order trends, citing tariff uncertainties.
However, it expects these headwinds to be offset by growth in the service business and PCV segment.
The analysts also anticipate that project study activity currently underway with EPCM partners could convert into new orders by fiscal year 2026.
FLSmidth reported a 13.9% adjusted EBITA margin in the first quarter of 2025, beating consensus estimates by 240 basis points.
The company also reported a low net debt to EBITDA ratio of 0.33x, well below its 2x target. Goldman Sachs expects the company to reach a net cash position by 2027, even before accounting for any proceeds from the potential Cement divestment.
The upgraded rating is underpinned by forecast EPS growth of 25.4% in 2025 and 10% in 2027. Goldman Sachs’ revised EPS estimates for 2025–2027 are 8–11% higher than previous forecasts.
This strong outlook is aided by margin expansion, a favorable revenue mix shift, and reduced interest expenses.
