Kone Reports a Mixed Quarter With Strong Order Growth but Weak Sales and Margin Compression

Cost inflation and a weak new equipment market in China led to a mixed first quarter and a lowering of the upper end of guidance for Kone. While the company's near-term execution is challenged by China and supply chain constraints, we think the shares offer good value at current levels. The company reported 11% order growth but a 0.4% revenue decline. Management lowered the upper end of 2022 guidance due to the weaker environment in China, which contributes 36% of revenue and is partly in lockdown. Cost inflation and continued pricing pressures in China also contributed. We maintain our wide moat rating and EUR 56 fair value estimate.