Translation: Original published in Finnish on 10/29/2026 at 09:o0 am EET

KONE's Q3 earnings were slightly below market expectations, reflecting revenue development, while order intake developed as expected. The company made only minor positive adjustments to its full-year guidance, and overall estimate changes for the coming years were minor. However, attention is currently focused on the progress of the TK Elevator arrangement, regarding which divestment rumors have intensified recently. Following a clear upward adjustment in the share price, we see the risk-adjusted expected return as warranting a move to the sidelines and lower our recommendation to Reduce (was Accumulate). Reflecting small upward revisions to our estimates and the recovery of peer valuation, we nonetheless raise our target price to EUR 56 (was EUR 52).

Q3 earnings slightly below expectations, but orders grew as expected

KONE's adjusted EBIT of 369 MEUR was largely in line with our expectations (372 MEUR) but below the consensus (376 MEUR). However, the company's margin was in line with expectations (12.7%), and the earnings miss was actually driven by a slightly lower revenue development. In turn, reported order intake (2,293 MEUR, +7% y/y) was in line with both our and market expectations. The earnings release provided no significant additional information regarding the TKE arrangement, but the company commented that the transaction has progressed as planned. The company's webcast can be viewed here.

Only minor positive revisions to estimates

KONE made only minor revisions to its guidance for the current year and now estimates revenue growth to be 4-6% in comparable currencies (previously 3-6% growth). Conversely, it expects the adjusted EBIT margin to be within the range of 12.5% to 12.9% (previously 12.3-13.0%). The company downgraded its market outlook for the remainder of the year only for New Building Solutions in China by a notch, but especially the modernization market is expected to grow rapidly. The preliminary comments regarding next year were also unsurprising and followed recent lines. We made only minor positive adjustments to the operational estimates for the standalone KONE. We expect the company's reported revenue to grow by some 5% this year (previously +~ 4% y/y), and the adjusted EBIT margin to be 12.7% (previously 12.5%). Next year, we expect the margin to rise to the lower end of the target range (2027 adj. EBIT-%: 13-14%) at 13.2% (previously 13.1%).

Following the share price increase, we move to a wait-and-see stance

The EV/EBIT multiples for a standalone KONE for 2026 and 2027 are approximately 19x and 17x. The corresponding P/E ratios are around 24x and 23x. In our view, following the share price increase, the multiples are once again quite neutral relative to KONE’s historical median multiples (last 5 years, 12-month forward EV/EBIT ~18x and P/E ~24x). Valuations of KONE's competitors (especially Schindler) have also shown signs of recovery. However, we do not currently view the earnings-based valuation of standalone KONE as the main driver of the stock but rather believe the focus is on the TKE arrangement. Recently, in connection with the transaction, there have been news reports about potential major divestments related to TKE's European operations. However, no decisions have been made regarding divestments or their scope, and we estimate that these will, in principle, depend on decisions by the EU Commission. Based on our rough scenarios, we estimate that the divestments, at least under the rumored terms, would decrease the expected return of the arrangement and make it back-loaded. On the back of the share price increase, value creation is once again more heavily dependent on achieving the targeted synergies, leaving generally less of a safety margin for the assumptions. We feel the scales have tipped toward staying on the sidelines for the being, watching the emergence of the industry's probable future. Our view is also supported by KONE's neutral valuation as a standalone company (DCF EUR ~56/share).