KONE: No Longer a Buy as Recovery is Again Postponed
(Preview) Company Update (KNEBV FH) (Downgrade to Neutral)
Summary
We downgrade our rating on KONE from Buy to Hold, following disappointment from 2022 results and the new 2023 outlook.
Shares are at 31.9x 2022 EPS and have a 3.7% dividend yield after EPS fell by 24% in 2022 due to a decline in sales in China.
EBIT grew year-on-year in Q4, service sales have continued growing, and the benefits of price hikes and cost cuts are materializing.
The main problem is the Chinese market, which represents 30% of KONE's sales, is expected to decline by another 10% in 2023.
With shares at €47.72, our reduced forecasts show a total return of only 24% (8.4% annualized) by 2025 year-end. Avoid.
Introduction
We are downgrading our rating on KONE Oyj from Buy to Hold, as we now expect a slower earnings recovery following disappointment from 2022 results and the new 2023 outlook. KONE's share price has fallen 6% since Q4 2022 results were released on January 26.
We initiated our Buy rating originally in June 2020. KONE's share price is currently 22% lower after just …