Jefferies Exhibits Caution on New Elevator Demand Outlook in China
Jefferies expresses caution regarding the outlook for elevator demand in China, despite recent optimism in the construction sector. They expect stable 2025 outlooks for European OEMs but caution about potential reductions in demand forecasts. Schindler is favored over Kone, with differing margin improvement projections and challenges ahead for Kone’s profitability.
Jefferies demonstrates caution regarding the outlook for new elevator demand in China. Although signs of optimism in the country’s construction market have emerged recently, Jefferies emphasizes that it is not completely recovered. Specifically, while home sales in major Chinese cities are encouraging, key metrics pertinent to the elevator industry continue to decline.
Furthermore, Jefferies anticipates that European Original Equipment Manufacturers (OEMs), namely Kone and Schindler, will largely maintain their outlooks for 2025. However, there is an increased likelihood that both companies will slightly downgrade their projections for new elevator demand in the Americas to flat growth for 2025, down from a previously expected slight increase.
Regarding the two companies, Jefferies recognizes greater potential for internal improvements at Schindler compared to Kone in 2025. Consequently, it has reiterated a “buy” rating for Schindler while downgrading Kone’s rating from “buy” to “hold.” Jefferies projects a margin development of 90 basis points for Schindler, in contrast to only 30 basis points for Kone, which is expected to largely occur towards the end of the year.
Additionally, Jefferies points to increasing pricing pressure, a lack of cost savings in early 2025, and rising wage difficulties as significant factors that are likely to hinder Kone’s margin progression during the first half of the year.
In conclusion, Jefferies maintains a cautious stance on the future of elevator demand in China, highlighting declining metrics despite some positive developments in the construction sector. The outlook for leading European OEMs suggests a stable yet cautious approach while adjustments to growth expectations may be necessary. Overall, these insights reflect the ongoing challenges and variability within the market landscape for elevator demand.
Original Source: www.tradingview.com
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