SCHINDLER (=) : CMD preview: What to expect?

Research evidence excerpt

SCHINDLER (=) : CMD preview: What to expect?

Modernisation: Can modernisation be used as a lever to drive service growth?

The scale of opportunity for growth in modernisation has been well versed by Schindler

and peers at this point. However, what we find most interesting about the modernisation

opportunity is whether this can be used as a lever to boost portfolio recaptures and turn

the tide against market share losses to ISPs. Currently we estimate approximately one

third of Schindler and peers’ modernisations relate to units which are currently outside of

the service base and hence present a recapture opportunity. If this can continue to be

scaled, this could offer a path to regain share from ISPs who have minimal exposure to

modernisation today. We’d also expect comments around the current margin and the

potential margin expansion opportunity management see for the Modernisation business.

New Equipment: With growth stabilising, can margins stabilise?

Across the OEMs, we are seeing the pace of New Equipment order decline in China

starting to moderate, meanwhile Americas, Europe, and APAC ex-China are seeing solid

growth (see figure 5). This is driving an inflection in orders which in turn should support

industry revenues inflecting in the quarters to come. This comes as margins for New

Equipment are likely reaching historically low levels. Whilst Schindler, does not disclose

its New Equipment profitability, we can review OTIS as a proxy, which has seen margins

degrade over time driven mainly by China. Considering that growth is showing signs of

an inflection, a key question we’ve heard from investors is whether we can see margins

start to stabilise or even inflect as a result. In the near term, we are relatively cautious on