KONE Q2'25: Consistent performance

Translation: Original published in Finnish on 7/21/2025 at 8:14 am EEST.

KONE's Q2 result was quite in line with our forecasts and the consensus, though orders received were slightly below expectations. As expected, exchange rate developments negatively affected the quarterly figures reported. The company only made a minor clarification to its guidance, resulting in minimal forecast changes except for slight adjustments due to currency effects. Based on this overall picture, we believe the stock is still largely correctly priced, and we reiterate our target price of EUR 55 and our Reduce recommendation. 

Q2 result in line with expectations, orders slightly below estimates

In Q2, KONE’s revenue grew by just under 2%, which was in line with our estimate and slightly above the consensus. KONE's adjusted EBIT for Q2 was 347 MEUR, which was fully in line with the consensus and just below our forecast. This corresponded to an adjusted EBIT margin of 12.2%, in line with market expectations. However, the reported order intake for Q2 (2,316 MEUR, -0.5% y/y) was slightly below both our expectation (2,374 MEUR) and the consensus expectation (2,352 MEUR). Order growth in comparable currencies was in the high single digits outside of China (around -10% y/y in China). Meanwhile, the margin on orders received was stable relative to the comparison period. 

Only a small clarification to the guidance

In connection with the report, the company specified its guidance for 2025 and now estimates revenue growth to be 2–5% in comparable currencies (previously, 1–6 % growth). Conversely, it expects the adjusted EBIT margin to remain within the range of 11.8% to 12.4%. According to the company, if exchange rates remain at July's levels, the negative impact on adjusted EBIT would be around 50 MEUR. As expected, the overall guidance remained unchanged, except for the slight clarification. Similarly, the market outlook was updated only for New Building Solutions in North America, and the market is now expected to remain stable (previously slightly declining). Otherwise, the outlook was unchanged and especially the modernization market is expected to grow rapidly in all geographical areas. In China, the company expects New Building Solutions to continue declining at a double-digit rate this year. Based on our interpretation, the company was also slightly more cautious about the timing of the stabilization of market activity in China. 

Against this backdrop, the forecast changes also remained minimal, in addition to the slightly lower estimates due to currency effects (2025e-2026e adj. EBIT ~-2%). We now forecast the company's reported revenue to grow by just under 2% this year (was +~ 4%), and its adjusted EBIT margin to settle at 12.1% (was 12.2%). Our longer-term projections also remain on track, and we expect KONE to achieve its targeted margin improvement (2027 adj. EBIT-%: 13-14%) within the target schedule through efficiency measures and an improved sales structure.

We believe the share is tightly valued

With our updated forecasts, the EV/EBIT ratios considering KONE’s strong balance sheet in 2025 and 2026 are approximately 20x and 18x. The corresponding P/E ratios are around 26x and 24x. Overall, we think the multiples are at a justified level for a defensive quality company like KONE, but see no upside in them, also considering the still elevated uncertainties related to the global economy. Therefore, we estimate that the expected return on the stock is based on a dividend yield of just under 4% over the next 12 months. Our view of the stock being fully priced is also supported by our DCF model, which emphasizes long-term potential and is roughly in line with the share price.