Alfa Laval Bounces Back With Strong Second-Quarter Results; Shares Fairly Valued

Wide-moat Alfa Laval delivered strong second-quarter results, which should reassure investors that any operational hiccups in the previous quarter are being effectively managed. Demand exceeded management’s expectations and remains healthy, evidenced by 18% order growth (8% organic), to reach a record level. Second-quarter revenue growth of 19% exceeded operating profit growth of 13%, due to supply chain issues hitting deliveries in the food and water division, and Alfa Laval’s marine backlog being priced prior to significant cost inflation. We believe both are short-term issues rather than structural concerns for the business. We reiterate our SEK 280 fair value estimate and view shares as fairly valued.