Morningstar | Mixed Thyssenkrupp 2Q Results; Elevator Business Solid; Shares Attractive
No-moat Thysssenkrupp reported lackluster second-quarter results across the company's disparate divisions. Group orders and revenue were flat year over year, on an organic basis, and the group EBIT margin was down 270 basis points year over year (both including the steel business which, due to regulatory pushback, will no longer be contributed to a joint venture with Tata). We are maintaining our EUR 20 fair value estimate, and see upside to the shares from the newly announced potential IPO of the elevator business, which is the largest and most attractive asset in the group.Demand for elevators continues to be solid, with order and sales growth of 4% organically in the quarter. China, the sector's largest market, has experienced a slowdown in new elevator growth as a result of aggressive pricing by rivals bidding for new business. Encouragingly, TKA's demand for new installations in China increased year over year. However, the company's second-quarter margins were down 100 basis points year over year because of inflation from raw material price increases and incremental U.S. tariffs. The EBIT 10.6% margin is well below peers, leaving room for upside as TKA has a comparably sized installed elevator base on which to drive long-term high margin/high return service revenue.
The second largest division, components technology, which supplies automotive components and systems with peers Bosch and Tenneco, posted decent results in an environment with lower demand from China and Western Europe. Orders were up 5% year over year organically, while sales grew by 3%. The EBIT margin was down 150 basis points because of low utilization rates following the drop in volume demand from China and Europe.
ThyssenKrupp is the parent company of the ThyssenKrupp Group. Co. has six business areas: Components Technology, which provides components for the automotive and machinery sectors; Elevator Technology, which supplies passenger and freight elevators, escalators and moving walks, passenger boarding bridges, stair and platform lifts; Industrial Solutions, which comprises the System Engineering and Marine Systems units; Materials Services, which focuses on materials distribution and technical services; Steel Europe, which develops, produces and markets flat carbon steel in the European market; and Steel Americas, which produces, processes and markets steel products in North and South America.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.