SKF: Industrial Sector Energy Efficiency Is a Key Secular Tailwind; Lifting Our FVE 9% to SEK 240

We’ve raised our fair value estimate for narrow-moat SKF by 9% to SEK 240 to account for the secular tailwind, which the trend toward greater energy efficiency in motorized equipment and systems is likely to represent for SKF’s industrial bearings segment. We think the industrial sector will invest significantly in energy-efficient capital equipment, systems, and interventions in the coming decade as it seeks out its lowest cost route to eventual decarbonization. Energy-efficiency interventions are a sweet spot for the industrial sector, offering low carbon abatement cost options, which are often value-accretive capital expenditures that provide a positive net present value. The greater incorporation of advanced bearings in motorized industrial equipment represents one such energy-efficiency opportunity, with the rising use of advanced bearings likely to drive an expansion in the global addressable market for industrial bearings. SKF—as the industry leader in the global bearings market—is well positioned to benefit.