Kone: Upgrade to Buy on Better Earnings & Lower Share Price

Rating Change (KNEBV FH) (Upgrade to Buy)

Highlights

• Kone shares have fallen 18% year-to-date; the P/E is now about 22x

• EBIT rebounded 41% in H1 and is guided to 95% of 2021 level for 2023

• Maintenance sales continue to build; Modernization is gathering speed

• EPS can grow at mid-single-digits even if China macro stays weak

• At €40.33, we see a 47% total return (13.2% p.a.) by end of 2026. Buy

Introduction

We are upgrading our rating on Kone to Buy, based on a lower share price and an improved P&L.

We downgraded our rating on Kone to Neutral in April, and shares have fallen by another 15.5% since then:         

Kone Share Price (Last 1 Year)

Source: Google Finance (21-Sep-23).

We believe elevator companies are good businesses, and have maintained a Buy rating on Otis since July 2020. (See our April article on Otis for the favourable characteristics of the elevator industry.) We originally had a Buy rating on Kone, but changed our mind because of its larger exposure to China and its higher valuation relative to Otis.

We believe Kone shares a…