SKF Posts Strong Top Line, While the Margin Is Tracking Below Previous Levels

SKF's 2022 revenue growth and 2023 revenue growth guidance were both strong; however, the company's operating income margin was less impressive. Full-year 2022 organic revenue growth came in at 8%, driven by demand for both its industrial and automotive market bearings, right in line with our forecast. However, our 4% 2023 forecast for organic revenue looks conservative relative to management's mid-single-digit guidance. The more optimistic company outlook is predicated in part on pent-up demand in China coming through toward the second half of 2023, with the Chinese economy gathering steam again following lockdowns during 2022. Demand from electric vehicles has also been strong. Management also mentioned current strength in Europe as a source of optimism. We expect to make adjustments to our forecasts but not enough to materially affect our SEK 210 fair value estimate. We retain our narrow moat rating.