TK Elevator Topco GmbH

Overview Key strengths Key risks Leading market position (no. 4 globally) in producing and servicing elevators and escalators. Highly leveraged capital structure with an expected debt-to-EBITDA ratio (excluding payment-in-kind notes) of around 9.5x-10x in fiscal 2023 and 7.5x-8.0x in fiscal 2024. Strong technological capabilities, including developing new elevator platforms (EOX and Multi), that sharpen its competitive edge. Lower profitability compared with peers, with S&P adjusted EBITDA margins of 11%-14% for fiscal years 2022-2024. Longstanding relationships, high customer diversification, and service network provide effective barriers to entry. Limited product diversity compared with its more broadly diversified, large, industrial peers. High share (45% of revenue) of stable after-market sales provides earnings stability as proven during the pandemic. Depressed sentiment for new construction

...A robust order backlog and growing service business will support TK Elevator's expansion over the next 12-18 months. The company's order intake was about 7 billion in the first nine months (Oct. 1, 2022, to June 30, 2023) of its 2023 fiscal year (book-to-bill ratio of 1.06x). This compared with 6.8 billion in the same period in fiscal 2022, resulting in an order backlog of 6.5 billion as of June 30, 2023. Ten percent growth in the modernization business and 8% growth in the service business more than compensated for a lower order intake in the new installation business (decline of 7%), which had seen a strong previous period. The company witnessed particularly strong growth in the Asia-Pacific region, stable growth in Europe and Africa, and high demand for its Access Solutions across all regions. Based on the still sound order intake and strong order backlog we estimate strong sales growth of 6.0%-6.5% for the full 2023 year in our base case. This is in line with a revenue increase in the...

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