JPMorgan Upgrades Epiroc, Downgrades Sandvik on Shifting Commodity Outlook

JPMorgan has reversed its preference among European mining equipment manufacturers, upgrading Epiroc to Overweight while downgrading Sandvik to Neutral. The investment bank's decision reflects a strategic shift favoring exposure to copper and growing concerns over the risk-reward profile of tungsten prices.

Ratings and Price Targets Adjusted

In a note to clients, JPMorgan raised its rating on Epiroc to Overweight from Neutral, reversing a call it had held since the beginning of the year. The bank increased its price target for Epiroc to SEK 320 from a previous SEK 300.

Conversely, Sandvik was downgraded to Neutral from Overweight. Its price target was cut to SEK 400 from SEK 460, with analysts applying a lower 15.0x EV/EBITA multiple, down from 17.0x, to "reflect downside risk to estimates."

Copper Exposure Drives Epiroc Upgrade

JPMorgan's positive revision for Epiroc is rooted in its significant exposure to the copper market, which the bank believes is poised for a new wave of investment. Analysts noted that several large copper projects are approaching final investment decisions.

Key factors supporting the upgrade include:

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• Epiroc's mining orders have a 36% exposure to copper, compared to 21% for Sandvik.
• The bank raised its order growth forecast for Epiroc’s Equipment & Service division to 11.6% in fiscal 2027.
• Epiroc is also seen as an "early beneficiary" of a recovery in greenfield exploration, a business that has grown at a 17% compound annual rate since 2023.

Tungsten Overhang Weighs on Sandvik

The downgrade for Sandvik stems from what JPMorgan termed a "negative risk/reward" outlook for tungsten prices, which had previously been a tailwind for the company's earnings. Analysts now see this benefit diminishing and posing a risk to estimates.

The bank expects the price/cost benefit in Sandvik's Powder business to turn negative starting in the third quarter. This follows company guidance of a SEK 200 million tungsten benefit in Q3, a significant drop from the SEK 550 million reported in Q2. JPMorgan analysts see "risk to the downside as new mine supply outside of China comes online."

Broader Sector View

Despite the ratings shuffle, JPMorgan reiterated its broader preference for downstream mining equipment companies over upstream names. The bank's pecking order currently favors Weir and FLSmidth (both rated Overweight) ahead of Epiroc, Metso, and Sandvik.