Alfa Laval Earnings: Robust Shipbuilding Market Conditions Drive Strength in New Order Intake

Order intake remained strong for wide-moat Alfa Laval in the second quarter of 2024. New orders rose 4% year on year on an organic basis or 1.6% quarter on quarter, after adjusting for seasonality, buoyed by strong demand conditions for the marine segment. Second-quarter revenue rose 11% organically, supported by a very healthy order backlog that now stands at SEK 49.5 billion at June 30, 2024, which we expect will continue to drive strong top-line and earnings growth throughout the remainder of 2024 and into 2025. Alfa Laval’s EBITA margin firmed to 16.7%, up 30 basis points sequentially, driven largely by improvement in the food and water segment’s EBITA margin quarter on quarter. A marked uplift in food and water invoicing drove improved unit cost recoveries for the segment. Alfa Laval shares are up modestly at the time of writing and continue to screen expensively, trading at a substantive 31% premium to our unchanged SEK 360 fair value estimate.