Translation: Original published in Finnish on 7/23/2026 at 8:00 am EEST.

KONE's Q2 earnings were slightly below expectations, but the double-digit growth in orders far exceeded estimates. The company's guidance and market outlook remained unchanged, however, and estimate changes were minor. There was no substantial additional information obtained regarding the TK Elevator arrangement, and we estimate that the situation continues to be a balancing act between long-term potential and  Nevertheless, given the recent decline in the share price, we believe the scales have tipped in favor of long-term potential, and we raise our recommendation to Accumulate (was Reduce). Due to peer valuations and inflation risks, we slightly increased our required return, which in turn leads us to decrease our target price to EUR 52 (was EUR 56).

Q2 earnings slightly below expectations, but orders well above

KONE's adjusted EBIT of 370 MEUR was slightly below our expectations (378 MEUR) and marginally below the consensus (374 MEUR). In turn, the reported Q2 order intake (+10.6% y/y) clearly exceeded our (+3.0% y/y) and consensus (+4.7% y/y) expectations. According to the company, the margin of orders received declined year-on-year, but KONE emphasized that the decline was slight. No material additional information regarding the TKE corporate transaction was provided with the earnings report, but the transaction appears to have progressed in line with the company's expectations thus far, with no major surprises. The company's webcast can be viewed here.

Outlook and estimates largely unchanged

KONE did not change its guidance for the current year, which estimates revenue growth of 3-6% in comparable currencies and an adjusted EBIT margin in the range of 12.3-13.0%. The company also maintained its market outlook for the year, expecting the modernization market in particular to grow rapidly. The only negative area continues to be the New Building Solutions market in China. To date, geopolitical tensions do not appear to have had a material impact on KONE's demand situation. However, the company noted that these tensions have increased inflationary pressures, which it intends to address through active pricing and cost management measures. Overall, our operational estimates for independent KONE remained largely unchanged, though we slightly decreased our margin estimates. We still expect the company’s revenue to grow by some 4% this year and the adjusted EBIT margin to now reach 12.5% (was 12.7%). Next year, we expect the margin to increase further to the lower end of the target range (2027 adj. EBIT-%: 13-14%) at 13.1%.

Limited short-term drivers; potential attracts accumulation

Based on our estimates, independent KONE's EV/EBIT ratios in 2026 and 2027 are approximately 16x and 14x. The corresponding P/E ratios are around 21x and 20x. These multiples are clearly below KONE's historical medians (last 5 years, 12-month forward-looking; EV/EBIT ~19x, P/E ~24x). We estimate that the share's valuation is currently weighed down by inflation and interest rate concerns, as well as uncertainty related to the TKE arrangement. In fact, we do not currently view the earnings-based valuation of independent KONE as the main driver of the stock but rather believe the focus is on the TKE arrangement. We assume the transaction, which is shaking up industry dynamics, has also been reflected more broadly in the entire sector's valuation, as KONE's competitors' valuations have also fallen significantly below historical levels. At the same time, since the process will last well into next year at least, investors may have to wait for clear drivers for the sector's shares. However, we believe that the sharp decline in the share price presents an attractive opportunity to join what will likely be the future leader in the industry, based on our rough scenarios. In addition, the back-weighted nature of expected returns has decreased. Our view is also supported by KONE's attractive valuation as a standalone company (DCF ~EUR 53/share).