KONE is one of the global elevator & escalator oligopolists, with a high-margin, recurring maintenance and modernisation service base attached to a vast installed equipment fleet. Adjusted ROIC of 46% and +€817M economic profit reflect an asset-light, annuity-like franchise with pricing power — exactly the kind of business that compounds.
The reverse-DCF's −31% 'fair value' is a perpetuity artefact for so high a ROIC; the more useful reading is that the €50 price embeds ~4.5% perpetual growth, which is defensible for KONE. So the equity is fully (not over-) valued, with the China new-equipment downturn the swing factor over the next 18–24 months.
Because adjusted ROIC (46%) vastly exceeds WACC, a single-year NOPAT perpetuity understates value; the implied-growth lens is the right one. At €50.46 the market prices ~4.5% perpetual growth — reasonable for an oligopolist with a maintenance annuity, hence fair rather than cheap. We anchor the base near the price.
Base €50 (flat); bull €60 as China property stabilises and service-margin mix expands; bear €40 if China new-equipment weakness deepens and drags group growth.
The market pays today’s enterprise value for roughly 12.8% NOPAT growth over 5 years. The business earns 51% on capital against a 8% cost of capital (spread +43.5 pp); the no-growth value is €31/share (61% of price), so the rest is priced-in growth.
| Scenario | 24m target | Impl. g | Upside | Prob. | Driver |
|---|---|---|---|---|---|
| Bull | €60 | +17% | +18% | 30% | China stabilises; service-margin mix expands |
| Base | €50 | +12% | -2% | 45% | Fair: price embeds ~4.5% perpetual growth |
| Bear | €40 | +6% | -21% | 25% | China new-equipment weakness deepens |
| Prob-weighted | €50 | — | -1% | 100% | Scenario-weighted expected value |
| WACC \ g | 0% | 3% | 5% | 8% | 10% | 15% |
|---|---|---|---|---|---|---|
| 6.50% | 42 | 48 | 52 | 59 | 64 | 78 |
| 7.25% | 36 | 41 | 44 | 49 | 53 | 65 |
| 8.00% (base) | 31 | 35 | 38 | 42 | 46 | 55 |
| 8.75% | 28 | 31 | 33 | 37 | 40 | 48 |
| 9.50% | 25 | 28 | 30 | 33 | 36 | 42 |
Green = fair value above the current price of €50.82. The reverse-DCF conclusion is dominated by WACC and growth — see the whole surface, not a single fair value.
⤓ Download the full model (.xlsx) — formula-driven sheets; flex the blue input cells and the model cascades in Excel.
A vast installed base generates high-margin recurring service and modernisation revenue — the durable compounding core.
A consolidated global industry (KONE/Otis/Schindler/TK) supports pricing and 46% ROIC.
Low capital intensity converts earnings to free cash flow funding a reliable dividend.
Ageing global elevator stock drives a long-duration modernisation upgrade demand.
Growth in higher-margin service vs cyclical new equipment lifts blended margins.
KONE is a high-quality compounder at a full price, with China the key swing factor. We rate it HOLD, medium conviction; base target €50 (flat) — a quality holding to accumulate on weakness, not to chase here.
We would upgrade toward the low-€40s, where the maintenance annuity provides support and the China downturn would be largely discounted.