Green Shoots in China's Property Market Point to Potential Demand Recovery for Kone in H2 2023

Kone's full-year 2022 results were in line with our expectations on revenue and slightly ahead on the operating income margin. Importantly, the elevator sector's largest new equipment market, China, is showing some green shoots in demand. Kone's 2022 organic revenue grew by 3% and was primarily driven by price. Management expects more of the same in 2023, flat volume, but positive pricing driving around 3% organic growth. We think that's an achievable forecast, but also one with upside, depending on the timing of the Chinese property market recovery. Kone's current backlog is roughly equal to around one year's worth of deliveries, meaning management has a high level of visibility on 2023 revenue already. We think any recovery in China would boost the outlook, but we expect the recovery to be visible mainly in the second half of 2023. We maintain our wide moat rating and EUR 56 fair value estimate.