Kone: Resilient Through 2020, Long-Term Growth Drivers Intact (Preview)

Summary

• Structural growth in the number of elevators continued in 2020 despite COVID-19, with Kone's installed base gaining another 4.5%.

• Even with some buildings being used less or closed during the pandemic, maintenance revenues were back to growing at 2% in H2 2020.

• Sales growth rebounded to 9% in Q1 2021 and, for the full year, Kone is guiding to a 2-6% sales growth and a 0.5-11% EBIT growth.

• Inflation may have an impact temporarily, mostly through people costs; raw materials are only 5% of sales and already included in guidance.

• With Kone stock at €66.86, we expect a total return of 40% (10.2% annualized, including a 2.6% Dividend Yield) by 2024. Buy.

Introduction

We review Kone OYJ, 11 months after we initiated a Buy rating on its stock, followed shortly by the same on its closest peer, Otis Worldwide.

Since our initiation, Kone stock has gained 13% while Otis stock has gained 40% (both figures in local currencies and include dividends). However, Kone stock lost more than 10% in the 3…