LIVE MARKETS-Miners' capex signals keep BofA wary on equipment makers
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MINERS' CAPEX SIGNALS KEEP BOFA WARY ON EQUIPMENT MAKERS
Europe's industrials stocks basket .SXNP is up over 8% so far this year while miners .SXPP have added a fifth. But even as miners talk about more growth ahead, BofA points out that capex guides are not golden just yet, and so they remain cautious on the mining equipment sub-sector.
Big growth plans are especially apparent in copper, the analysts say.
"But top 6 global miners still guide for only 3% y/y capex growth in '26," they write in a Monday note.
This figure is likely to rise as players reach more final decisions on projects, says BofA, and smaller miners (particularly in gold) may raise capex more aggressively too.
"But we estimate that mining equipment consensus forecasts already embed a large >20% increase to Big Miners' 2027-28 capex...implying 40%+ uplifts on copper & gold; in our view, valuations suggest that investor expectations are even higher."
BofA points out that mining equipment stocks generally are trading at around 5% EV/EBITA premium to the STOXX industrials basket .SXNP, versus its historical -50% to +20% range. And that's in spite of the basket's recent large electrification-driven re-rating, they say.
"We therefore remain cautious on the sub-sector, with Weir our only Buy rating. We are particularly cautious on Epiroc (Underperform) given demanding valuation, structural margin pressure and inferior aftermarket execution."
Sweden's Epiroc has seen shares surge 25% year-to-date.
As for investors, they are falling into two distinct camps. On the one hand, BofA says botton-up stockpickers now agree that valuations are hard to justify.
But the generalists are taking more of an interest - they are "looking for copper/gold derivatives and 'hard asset' exposure amidst software uncertainty," says BofA.
(Lucy Raitano)
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