Knorr-Bremse: Post Q2 wrap - self-help story remains intact

Research evidence excerpt

Knorr-Bremse: Post Q2 wrap - self-help story remains intact

s sam.edmunds@jpmorgan.com

ahead and mitigating risks, with a clear focus on differentiation, supported by Key Changes (FYE Dec)

innovation. On the portfolio, management believes that now is not the time to Prev Cur Δ

separate the two segments into standalone companies but remains open to such Adj. EPS - 27E (€) 5.01 4.90 -2.2%

discussions in the future when the current plans to boost the profitbaility are

Style Exposure executed and market volumes return back to more normalised levels. The

meeting offered a glimpse of how management are challenging the top

managers to change the culture to become a more open and more

entrepreneurial organisation, which has also resulted in some management

turnover. In the medium term, management sees significant growth potential

from signalling, as well as expansion of the switchgear business, among other

things. The company sees China as a very dynamic market and a source of

talent pool. Management sees growth in China rail business as KB can help

CRRC with its export ambitions, while also highlighting risks in China truck

business (due to lower scope in electric trucks). The current production setup

(37 rail plants and 16 truck plants) is seen as inefficient and addressing the

footprint will also bring higher productivity. Management sees AI deployment

as providing an opportunity to maximise productivity from the white collar

workforce. The company has streamlined its R&D process, with around 200

ongoing projects today compared to 1500 when the CEO joined in early 2023.

This improved R&D focus should improve the payback on investments.

• Q2 results recap: Knorr-Bremse revenues and operating EBIT coming in