UBS raised its recommendation on FLSmidth & Co. A/S to buy from neutral and bumped up its 12-month price objective to DKK 550 from DKK 450 after reassessing the Danish miner-equipment maker's outlook following first-quarter results.
The broker said the stock, which had tumbled 23% over the prior three months to DKK 457, now appears attractively valued versus global mining equipment peers. Shares of the company were down 3.9% at 06:48 ET (10:48 GMT).
UBS noted that FLSmidth is trading on a forward EV/EBIT multiple of 11x versus a peer group average of 17x. That gap implies roughly a 30% discount to peers, wider than the company’s historical typical discount of about 18%.
Analyst Ed Hussey at UBS pointed to three elements underpinning the upgrade after the quarter:
- more favorable commentary on large greenfield orders;
- continued market share expansion in the Process, Crushing & Valves - PC&V - division; and
- strong order momentum overall.
Hussey highlighted that book-to-bill in both Service and PC&V was robust at 1.21x, a level that provides solid visibility on revenue growth and an improving margin trajectory over coming quarters.
On profitability, FLSmidth’s adjusted EBIT margin climbed to 13.9% in 2025 from 7.0% in 2023. UBS attributed part of the margin improvement to the company’s divestiture of its lower-margin Cement business. The broker projects further margin gains to 15.2% in 2026 and 15.5% in 2027.
Return on invested capital rose to 16.6% in 2025 from 14.3% in 2023, with UBS forecasting ROIC to reach 19.6% by 2027. The firm also observed that FLSmidth should report the lowest net debt-to-EBITDA ratio among its peers at 0.9x for 2026.
Despite these improvements, UBS flagged cash conversion as the company’s weakest operating metric. Free cash flow to EBIT was just 15% in 2025, markedly below the mining equipment peer average of 79%.
The broker identified working capital movements and taxes as the principal drags on cash flow. In 2025, taxes paid reduced operating cash flow by DKK 630 million, while working capital outflows subtracted another DKK 946 million, according to UBS.
UBS expects cash conversion to improve gradually, helped by lower tax assumptions. FLSmidth’s effective tax rate remains above 30%, higher than several peers named by UBS, including Sandvik, Epiroc, Metso and Weir.
On earnings, UBS lifted its 2026 diluted EPS forecast by 14.1% to DKK 38.20, citing stronger revenue assumptions and the lowered tax outlook. The broker’s DCF-based target price of DKK 550 implies a 2027 EV/EBIT multiple of 13x, which UBS said still reflects a discount to peers because of FLSmidth’s smaller scale and its weaker cash conversion metrics.
Bottom line: UBS’s upgrade reflects visible improvements in orders, market share and margins, but the firm still sees limits to valuation appreciation while cash conversion lags peers.