Upgrade to OW. Reduced cyclical risks, with an early-mover advantage in Physical AI

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Upgrade to OW. Reduced cyclical risks, with an early-mover advantage in Physical AI

uld argue that the risk-reward skew on Kion is attractive, with 105%

upside in our bull case, versus -20% downside in the bear case.

The Forklift truck cycle - a volatile period since COVID. Similar to other parts of

the industrial value chain, there was significant 'early-ordering' of Forklift Trucks in

2021-22, and then subsequent normalization that followed. We see current 2Q26

ITS truck order run-rates as being broadly consistent with the 2023-25 quarterly

average, and therefore are less concerned about any further sizable unwind from

early ordering / pre-buying. In unit terms, Kion's order intake was ~200k Forklift

truck units in 2017, orders peaked in 2021 at ~300k (~50% higher), and we are

currently annualizing 2026 at ~275k units. In unit terms, this implies that Kion's

Forklift orders have grown at a 3.6% CAGR in 2017-26, across a period when

European Industrial production growth has effectively been flat. While Kion's ITS

(Forklift) division remains over-indexed to Europe (84% of sales), we do think that

there are secular growth drivers for the Forklift truck market that include an

increase in online retailing, customers investing to strengthen and improve

efficiency of their supply chains, and a rise in penetration of Electric and Intelligent

Forklifts. For context, we think recent growth rates (ie 2017-26) have improved

compared to history, where the 'Forklift market in Western Europe' grew at a CAGR

of 1.7% in 2007-17.

Cyclical Indicators for European Industrial activity suggest the outlook for Kion's

ITS segment is increasingly de-risked. We have seen the European manufacturing

PMI new orders rise to modestly above 50 for five consecutive months, having been