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1. Company Snapshot

1.a. Company Description

AB SKF (publ) engages in the design, development, and manufacture of bearings, seals, lubrication systems, and services worldwide.It operates in two segments, Industrial and Automotive.The company offers rolling bearings, mounted bearings and housings, super-precision bearings, slewing bearings, plain bearings, magnetic bearings and systems, industrial and automotive seals, lubrication management solutions, maintenance products, condition monitoring systems, power transmission solutions, test and measuring equipment, vehicle aftermarket, and waste electric and electronic equipment products.


It also provides various services, including application engineering, asset management, condition-based maintenance, mechanical maintenance, remanufacturing and customization, and training solutions.The company offers its solutions for various industries, including aerospace, agriculture, cars and light trucks, construction, food and beverage, general machinery, machine tools, marine, material handling, metals, mining, mineral processing and cement, ocean energy, oil and gas, pulp and paper, railways, trucks, trailers, buses, two and three wheelers, and wind energy.AB SKF (publ) was founded in 1907 and is headquartered in Gothenburg, Sweden.

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1.b. Last Insights on SKF

AB SKF's recent performance was driven by its Q2 2025 earnings resilience, with the company maintaining its margin despite industry headwinds. The sale of its non-core aerospace business in the U.S. to Carco PRP Group for $70 million is a strategic move to focus on core areas and exit non-strategic business lines. Additionally, SKF's partnership with Proteus Marine Renewables to deliver cutting-edge technology for MeyGen, the world's largest tidal stream array, positions the company for growth in the renewable energy market.

1.c. Company Highlights

2. Earnings Beat Expectations Amidst Challenging Market Conditions

The company reported net sales of SEK 22.4 billion, with an organic growth of 2%. The adjusted operating margin improved to 12.3%, despite headwinds from FX and challenging market conditions. Earnings per share (EPS) came in at 3.96, beating analyst estimates of 3.83. The company's Industrial business area had an organic growth of 4% and an adjusted operating margin of 15.5%, despite significant FX headwinds.

Publication Date: Oct -31

📋 Highlights
  • Improved Adjusted Operating Margin:: Achieved 12.3% adjusted operating margin despite FX headwinds and challenging markets.
  • Industrial Business Growth:: Organic sales growth of 4% and adjusted operating margin of 15.5% in Industrial, offsetting FX impacts.
  • Automotive Challenges:: Negative growth in Automotive due to Americas and Europe, but expects to compensate for tariff impacts through pricing.
  • One-Off Costs:: SEK 755M incurred for Automotive separation and restructuring, impacting Q3 results.
  • Q4 FX Impact:: Currency effects expected to reduce operating profit by SEK 650M in Q4, with seasonal profitability decline of 70-80 bps.

Segment Performance

The Industrial business area was a bright spot, with organic growth across geographies. In contrast, the Automotive business area had a negative growth, driven by Americas and Europe. However, the company expects to largely compensate for the tariff impact. As Rickard Gustafson noted, "Our Industrial business achieved organic growth across geographies, while Automotive is still volatile."

Valuation Metrics

With a P/E Ratio of 21.03 and an EV/EBITDA of 9.71, the stock appears to be reasonably valued. The company's return on equity (ROE) stands at 9.53%, indicating a decent return on shareholders' equity. The dividend yield is 3.12%, providing a relatively attractive income stream.

Outlook and Guidance

The company's outlook for Q4 is uncertain, with market demand expected to remain similar to Q3. The company expects an organic sales growth to be relatively unchanged year-over-year. The currency impact on operating profit remains high, and the company estimates it to be minus SEK 650 million. The full-year tax rate guidance has been adjusted to 28%, driven by FX implications.

Operational Progress

The company is making strong progress in the Automotive separation, with significant milestones achieved. The Industrial business is also showing signs of growth, driven by price mix and regionalization efforts. The company is guiding CapEx to come down, but expects extraordinary items or items affecting comparability to come up.

3. NewsRoom

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Nov -14

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SKF AB (SKFRY) Q3 2025 Earnings Call Highlights: Navigating Growth Amidst Challenges

Nov -05

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SKF launches The Patent Bay - a platform for sharing technologies that could reduce environmental impact

Nov -04

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Oct -07

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Sep -29

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SKF redesigns Industrial organization to increase competitiveness

Sep -24

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.21%)

6. Segments

Industrial

Expected Growth: 3.5%

SKF's 3.5% growth in the Industrial segment is driven by increasing demand for energy-efficient solutions, growth in renewable energy, and expansion in the aerospace and defense industries. Additionally, the company's focus on digitalization, electrification, and innovation in bearings and seals contributes to its growth momentum.

Automotive

Expected Growth: 2.5%

AB SKF's 2.5% growth in Automotive segment is driven by increasing demand for electric vehicles, rising adoption of advanced driver-assistance systems, and growing need for energy-efficient solutions. Additionally, the company's focus on innovation, cost savings, and strategic partnerships contribute to its growth momentum.

7. Detailed Products

Bearings

SKF offers a wide range of bearings, including ball bearings, roller bearings, and plain bearings, designed to reduce friction and wear in various industrial applications.

Seals

SKF provides a variety of seals, including radial shaft seals, axial clamp seals, and cassette seals, designed to prevent leakage and contamination in industrial applications.

Measuring and Lubrication Systems

SKF offers a range of measuring and lubrication systems, including condition monitoring systems, lubrication systems, and hydraulic systems, designed to optimize equipment performance and reduce downtime.

Couplings

SKF provides a variety of couplings, including flexible couplings, rigid couplings, and elastomeric couplings, designed to transmit power and accommodate misalignment in industrial applications.

Linear Motion

SKF offers a range of linear motion products, including linear bearings, linear guides, and linear actuators, designed to provide precise and smooth motion in industrial applications.

Actuation Systems

SKF provides a range of actuation systems, including electric actuators, hydraulic actuators, and pneumatic actuators, designed to provide precise and reliable motion control in industrial applications.

8. AB SKF (publ)'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for AB SKF (publ) is medium due to the presence of alternative products and services in the market, but the company's strong brand reputation and quality products mitigate this threat to some extent.

Bargaining Power Of Customers

The bargaining power of customers is low for AB SKF (publ) as the company operates in a niche market with a strong brand presence, making it difficult for customers to negotiate prices or demand customized products.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium for AB SKF (publ) as the company relies on a few key suppliers for raw materials, but it has a diversified supply chain and strong relationships with suppliers to mitigate this risk.

Threat Of New Entrants

The threat of new entrants is low for AB SKF (publ) due to the high barriers to entry in the bearing manufacturing industry, including significant capital investments and technological expertise required to compete with established players.

Intensity Of Rivalry

The intensity of rivalry is high in the bearing manufacturing industry, with several established players competing for market share, but AB SKF (publ) has a strong market position and competitive advantages to maintain its market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 26.98%
Debt Cost 6.74%
Equity Weight 73.02%
Equity Cost 9.05%
WACC 8.42%
Leverage 36.95%

11. Quality Control: AB SKF (publ) passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Logista

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Value: 7.0

Growth: 5.9

Quality: 5.8

Yield: 10.0

Momentum: 6.0

Volatility: 10.0

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Strabag

A-Score: 6.6/10

Value: 8.1

Growth: 4.7

Quality: 6.2

Yield: 8.1

Momentum: 10.0

Volatility: 2.7

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DMG MORI

A-Score: 5.9/10

Value: 4.5

Growth: 2.4

Quality: 7.1

Yield: 3.8

Momentum: 7.5

Volatility: 10.0

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Wallenius Wilhelmsen

A-Score: 5.8/10

Value: 9.2

Growth: 8.2

Quality: 7.9

Yield: 6.2

Momentum: 1.0

Volatility: 2.3

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SKF

A-Score: 5.8/10

Value: 4.4

Growth: 4.6

Quality: 5.0

Yield: 6.2

Momentum: 7.0

Volatility: 7.7

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SFS

A-Score: 5.1/10

Value: 4.5

Growth: 5.4

Quality: 6.5

Yield: 3.1

Momentum: 2.0

Volatility: 9.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

250.1$

Current Price

250.1$

Potential

-0.00%

Expected Cash-Flows