On Wednesday, Citi updated its financial outlook for Alfa Laval AB (ALFA:SS) (OTC: ALFVY), raising the price target to SEK430.00 from the previous SEK377.00, while keeping a Neutral rating on the stock.
The adjustment follows Alfa Laval's recent performance, which saw the company's shares reaching new heights and outperforming the SXNP by 10% over the past month. This surge has offset the stock's earlier stagnation, with year-to-date figures now showing a more positive trend.
The company's management is scheduled to present at an Industrials conference tomorrow, which comes after the CEO's presentation at a global industrials event in Miami a month ago. The firm's analyst highlighted several factors contributing to Alfa Laval's robust February Marine contracting numbers, including AI-led growth in the datacenter business, starting from a lower base.
Moreover, management appears to be managing well through the current weakness in the heat pump and general HVAC markets, maintaining capacity in anticipation of an end to the destocking phase during the summer.
Alfa Laval's valuation now stands at a 20% premium in terms of EV/EBITA, a decrease from the 35% peak observed when Citi downgraded the stock to Neutral in September. The analyst noted that while the datacenter sector represents a smaller portion of the group's exposure, it is significantly lower compared to companies like Schneider, which has over 20% exposure.
There is also some caution expressed regarding Marine orders, as Alfa Laval is largely fully booked for the year, including areas outside of offshore.
This stock price target increase reflects Citi's response to Alfa Laval's recent achievements and market performance. The company's advancements in the Marine sector and its efforts to capitalize on AI technology within its datacenter operations have been recognized as key drivers behind the improved financial outlook.
Despite this, Citi's neutral stance suggests a careful approach, acknowledging both the strengths and potential challenges that lie ahead for Alfa Laval.
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