Global Elevators & Escalators

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION®

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Research Analysts

Global Elevators & Escalators

September 2015

Industry Primer – All you need in 20 slides

Andre Kukhnin, CFA

44 20 7888 0350

[email protected]

Tiantian Li

44 20 7883 1552

[email protected]

Max Yates

44 20 7883 8501

[email protected]

Jonathan Hurn, CFA

44 20 7883 4532

[email protected]

Specialist Sales: Andy Bell

44 20 7888 0479

[email protected]

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

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Global E&E market forecast

Slide 2

E&E market by value & growth rate

Source: Company data, Credit Suisse research

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

0

10

20

30

40

50

60

70

2007 2008 2009 2010 2011 2012 2013 2014 2015E2016E

Total value (€bn) Growth rate (RHS)

E&E market split by geography by value

Eurpe35%

Asia Pac43%

Americas20%

Other2%

CREDIT SUISSE MARKET PLAYERS SUMMARY (BIG 4)

2013A 2014A 2015E 2013A 2014A 2015E 2015E-2025E 2015 / Near-term Longer-term

NEW EQUIPMENT - ORDERS, in Units

Global 828,000 869,700 897,563 6.0% 5.0% 3.2%

China 502,500 562,350 584,844 17.0% 11.9% 4.0% 2015 level is within 10% of mid-cycle Flat Positive

Europe 138,000 142,140 149,247 -5.2% 3.0% 5.0% In-line with GDP c2% growth Slow recovery

Americas 48,000 51,360 56,496 6.0% 7.0% 10.0% In-line with GDP c10% growth Ongoing recovery

MAINTENANCE - INSTALLED BASE, in '000 Units

Global 11,948 12,491 13,069 4.3% 4.5% 4.6% 4%-5% sustainable annual growth 4%-5% growthSustained growth but dampened

by c2% attrition

China 3,050 3,598 4,160 24.5% 18.0% 15.6%10% annual growth, slowing gradually.

Conversion ratio development is key15%-20% growth Strong

MODERNISATION c€6bn c€6.2bn c€6.5bn 0% 3% 5% Low to mid single-digit overall growth Small growthPositive for US & Asia.

Moderate growth for Europe

SIZE GROWTH OUTLOOK OUTLOOK

New equipment (ex-China)

22%

China new equipment

22%Maintenance (ex-China)

41%

China Maintenance

5%

Modernisation10%

Global E&E market


Slide 3

E&E market split by value, 2014 E&E market profit split, 2014

New equipment

outside China6% China new

equipment16%

Maintenance outside China

64%

China Maintenance

8%

Modernisation6%

E&E market share by value, 2014

Otis17%

Schindler14%

Kone13%

Thyssen12%

Hitachi10%

Fujitec3%

Shanghai Mechanical

4%

Other27%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Europe Asia Pacific America

Other

Thyssen

Kone

Schindler

Otis

Regional E&E market share by value, 2014

The total elevator and escalator

(E&E) market value is estimated

to be about €56bn in 2014.

Maintenance accounts for about

half of the overall E&E market,

with new equipment accounting

for 40% and modernization 10%.

The largest 4 players in total

account for more than half of the

global market. However, the

maintenance market is much more

fragmented with many small third-

party players present.

EMEA15%

North America

3%

South America

2%

Japan and Korea

3%

China69%

Rest of Asia

Pacific8%

Otis18%

Schindler15%

Kone16%Thyssen

13%

Other38%

New Equipment NI by geography, units in 2014

NI Price per unit, 2003-2014


0

5

10

15

20

25

30

35

0

100

200

300

400

500

600

700

800

900

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Units, '000 VALUE, € bn (RHS)

0

10

20

30

40

50

60

70

80

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Americas Europe Asia Pacific Market average

NI market share of key players by value, 2014

NI market size 2003-2014 The global New Equipment/

Installation (NE/ NI) market has

reached 815,000 units in 2014,

with a value exceeding €25bn.

China accounts for almost 70%

of the global market by units.

Otis is still the largest player in

the NI market by value.

However, KONE has been

catching up aggressively in

recent years, claiming 19%

market share by units in 2014

(lower market share by value

due to lower ASP in China).

Americas have the highest ASP

due to the higher average height

of buildings with lifts installed. It

has seen notable price recovery

in 2014 while ASP declined in

other regions.

Slide 4

Global E&E installed base has been

growing steadily over the past few

years, reaching about 13.4m units in

2014.

Europe is the largest market for

maintenance, with EMEA accounting for

about half of the global installed base.

As compared to ten years ago where

c70% of the market opportunity was in

the developed world, China now

accounts for 23% of the global installed

base. We forecast China may account

for 40% of the global installed base in

2020 (with over 7m units).

Global maintenance market – ‘ever-growing’ installed base Installed base by geography, 2014

Installed base by unit & growth rate


Figure 16: NI by geography (by units) Figure 72: Installed base by geography in 2013

Americas6%

Europe17%

China65%

Other Asia/Pacific

12%

North America

9%

South America4%

Japan & Korea10%

China25%

Rest of Asia Pac6%

France4%

Spain7%

Italy7%

Belgium1%

Greece2%

Portugal1%

Rest of EMEA24%

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Maintenance base market share, 2013

Otis16%

Schindler11%

Kone8%

Thyssen10%Shanghai

Mitsubishi1%

Other54%

Installed base evolution by units

We introduced the concept of the 'ever-

growing' E&E installed base in our

previous detailed market primer report

in April 2012 (link).

Looking to model the size of the future

installed base, we refine our model and

introduce a retirement rate of around

1.5-2% for 2014-2016E. With this and

our expectations of the new installation

market growth in this period, we expect

the installed base to continue to grow at

c5% pa in the next three years,

reaching 14m units in 2016.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2014 2020E

China

Japan & Korea

Rest of Asia Pacific

South America

North America

EMEA

0%

1%

2%

3%

4%

5%

6%

7%

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 20142015E2016E

Global installed base '000 (LHS) Growth rate (RHS)

https://plus.credit-suisse.com/u/QBN0QI

Otis is the leading E&E manufacturer with 18% of the market share in 2012, followed by

Schindler, ThyssenKrupp and Kone.

A few Japanese players are also prominent in this space, including Hitachi, Fujitec and

Mitsubishi. Mitsubishi is particularly strong in China being the No.1 there for installed

base.

Otis has the largest share of maintenance in their business split, while Kone has the

smallest as they have been growing their NI business aggressively in recently years.

In terms of geographical exposure, Kone and Otis both have a large exposure to Asia,

and Kone and Schindler are strong in Europe. Thyssen has the largest exposure in

Americas.

Key Players: Market Share & Business split Global market share by value, 2014

Sales by business lines in 2014 Geographical exposure in 2014

Source: Company data as of FY 2014, Credit Suisse research

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Kone Schindler Thyssen Otis

Maintenance NI & Modernisation

0%

20%

40%

60%

80%

100%

Kone Schindler Thyssen Otis

Europe America Asia & others

Otis17%

Schindler14%

Kone13%

Thyssen12%

Hitachi10%

Fujitec3%

Shanghai Mechanical

4%

Other27%

Key Players: Sales & order growth Order Index, 12m rolling average Organic sales index

Source: Company data

Note: KONE and Otis orders exclude Service

10-year EBIT margin development Organic EBIT index

60

70

80

90

100

110

120

130

140

150

160

Mar-

08

Jul-0

8

Nov-0

8

Mar-

09

Jul-0

9

Nov-0

9

Mar-

10

Jul-1

0

Nov-1

0

Mar-

11

Jul-1

1

Nov-1

1

Mar-

12

Jul-1

2

Nov-1

2

Mar-

13

Jul-1

3

Nov-1

3

Mar-

14

Jul-1

4

Nov-1

4

Mar-

15

KONE Schindler Thyssen OTIS

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

24%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

KONE Schindler OTIS Thyssen

100

120

140

160

180

200

220

240

260

280

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

KONE Schindler OTIS

100

150

200

250

300

350

400

450

500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


China NI – Near-term drivers

Source: China NBS, Credit Suisse research

Slide 8

New floor space started

declined by -c16% in H1 2015

and the rate of decline has

narrowed from earlier in the

year.

Real Estate Investment and

Floor Space Under

Construction grew by c5% in

H1 2015, supportive of c5%

growth in E&E order volume.

We explore the relationship

between E&E NI growth rate

and construction lead

indicators and found it to be

lagging New Floor Space

Started by c6m but is much

less volatile.

It seems to correlate well with

growth in Real Estate

Investment as well as Floor

Space Under Construction.

China NI orders vs New Floor Space Started, % change yoy

China NI orders vs Floor Space Under Construction & Real Estate Investment, % change yoy

-10%

0%

10%

20%

30%

40%

China NI orders % change yoyReal Estate Investment % change yoyFloor space under construction % Change yoy

-20%

-10%

0%

10%

20%

30%

40%

50%

Floor space started % Change yoy

China NI orders % Change yoy

YTD New Floor Space Started, % change yoy YTD Floor Space Under Construction & Real Estate Investment, % change yoy

-300

-200

-100

100

200

300

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Feb-1

1

Au

g-1

1

Feb-1

2

Au

g-1

2

Feb-1

3

Au

g-1

3

Feb-1

4

Au

g-1

4

Feb-1

5

Au

g-1

5

Monthly floor space started (m sqm)

YTD Floor space started yoy change

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Feb-11 Oct-11 Jun-12 Feb-13 Oct-13 Jun-14 Feb-15

Floor space under construction YTD yoy change

YTD Real Estate Investment change yoy

China NI – Elevator Intensity in New Starts

Source: Credit Suisse research

21/09/2015 Slide 9

China’s E&E new orders intensity in

new construction has increased

from c250 in 2008 to c300 in 2014,

driven by higher quality of

construction (thus higher demand of

lifts). Based on current run-rate of

new starts and 5% E&E order

growth in 2015, intensity would rise

to c350 this year, which is close to

South Korea’s level in 2011. We

believe E&E order is driven by both

new starts and floor space under

construction which is running at 4x

of new starts in 2014 (see chart next

page). 0

50

100

150

200

250

300

350

400

2000 2005 2010 2015E

Japan 2013 Korea 2011

100

150

200

250

300

350

199

7

199

8

199

9

200

0

200

1

2002

2003

200

4

200

5

200

6

200

7

200

8

200

9

201

0

2011

201

2

201

3

201

4

201

5E

E&E order Intensity in new construction (6m lag, adjusted)E&E order Intensity in new construction

Non-residential

35%

Residential45%

Social housing

20%

China E&E Intensity based on new construction, order units per m sqm

E&E Intensity based on new construction, China vs Japan 2013 and Korea 2011

China E&E Intensity in new construction, units per m sqm

China E&E Intensity in new construction, units per m sqm

Part of the increasing intensity is

also driven by higher growth of non-

residential construction segment,

which has higher E&E intensity as

compared to the residential segment.

We estimate the non-residential E&E

density to be about 2-3x residential

density in terms of units per sqm of

construction.

Residential73%

Commercial13%

Office3%

Other11%

China NI – Forecasting Floor Space Under Construction

Source: China NBS, Credit Suisse research

Slide 10

Growth of E&E orders has historically shown a strong

correlation with growth of Floor Space Under Construction,

which in turn drives Real Estate Investment in China.

To forecast growth of Floor Space Under Construction for 2016,

we show the sensitivity analysis based on forecast of New

Floor Space Started and project cancellation rate.

Building a scenario based on 4% project cancellations /

suspensions and a 10% further decline in new floor space

started (after 4.5% cancellation/ -15% decline in 2015), we

arrive at a 1% growth for floor space under construction for

2016, which is supportive for a flat elevator order growth.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Floor space under construction

Floor space completed

Floor space started

Floor space under construction: Calculated

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

-250

-200

-150

-100

-50

0

50

100

150

200

250

Difference: implied cancellation/ suspension

Suspension as % of under construction

Floor space under construction – 2016 growth sensitivity based on project cancellations & new starts

Floor space under construction vs starts/ completion Implied project cancellations in China construction market

1% 1% 2% 3% 4% 5% 6%

-25% 1% 0% -1% -2% -3% -4%

-20% 2% 1% 0% -1% -2% -3%

-15% 3% 2% 1% 0% -1% -2%

-10% 4% 3% 2% 1% 0% -1%

-5% 5% 4% 3% 2% 1% 0%

0% 7% 5% 4% 3% 2% 1%

5% 8% 6% 5% 4% 3% 2%

10% 9% 7% 6% 5% 4% 3%

15% 10% 8% 7% 6% 5% 4%

20% 11% 10% 8% 7% 6% 5%

25% 12% 11% 9% 8% 7% 6%

% of cancellation/ suspension

Growth rate

of new starts

China NI – Long term density comparison

Source: Industry Association, Government data, Credit Suisse research

Slide 11

Figure 43: Elevator density per 1,000 population

0

2

4

6

8

10

12

14

16

18

20

Spain Italy Korea WesternEurope

HongKong

France Shanghai2013

Japan Russia Turkey USA China2013

Brazil India China2013

China2015E

China2020E

China2025E

By urban population only

Source: Company data, Credit Suisse estimates

Figure 45: Elevator density vs GDP per capita in China – bubble size represents population size

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

0 20 40 60 80 100 120

Ele

vato

r d

en

sit

y,

un

it/ '0

00 p

op

ula

tio

n

GDP per capita, RMB '000

Gansu

Anhui

Jilin

Guangxi

Hunan

Xizang

Helongjiang

Yunnan

Xinjiang

Gansu

Henan

Neimeng

Jiangxi

Shanxi

Guizhou

Sichuan

Shandong

Hebei

Hubei

Hainan

Chongqing

Ningxia

Shaanxi

Qinghai

Fujian

Liaoning

Guangdong

Tianjin

Jiangsu

Zhejiang

Shanghai

Beijing

Source: Industry Association, Government data, Credit Suisse estimates

China's elevator density (number of E&E units

per 1,000 people of population) is currently

c2.2, as compared to 10 in Hong Kong, 6 in

Japan and close to 4 in Russia. When

considering only the urban population of

China, the density is currently still merely 4.2.

Assuming a 635k mid-cycle level delivery

from 2016-2025, China will reach an installed

base of c10.4m E&E units in 2025 and

density ratio of 11.5 E&E units per 1,000

people in the urban population – an average

of Hong Kong and South Korea in 2012.

The vast majority of China provinces still have

a very low E&E density ratio, including a

number of relatively wealthy provinces with

dense population. Hence the 'catching-up' of

these regions offers scope for overall density

growth in the country.

Elevator density vs GDP per capita in China – bubble size represents population size

Elevator density per 1,000 population

China maintenance market – potential for positive surprise

Source: Credit Suisse research

Slide 12

The E&E maintenance market in China currently has low conversion rate,

low unit value and low quality due to lack of regulation and shortage of

qualified labour.

We believe the new regulation effective from 1 Jan 2014, Law on Safety

of Special Equipment, will help the market to move in the right direction by

specifying more responsibility of elevator OEMs and operators.

We believe the maintenance market in China offers scope for positive

surprise in the medium term given that maintenance currently only

accounts for less than 10% of the OEM’s revenue in China.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Globalaverage

Chinaaverage

Europeaverage

Otheraverage

0% 20% 40% 60% 80% 100%

Thyssen

Kone

Schindler

Yungtay

Otis

Shanghai Mitsubishi

Hitachi

Domestic players

China avg

Europe avg

OEMs25%

Self-maintained

35%

Small players

40%

Maintenance value in China vs RoW Maintenance market share in China

Conversion rate in China

China competitive landscape

Source: Industry Association, Credit Suisse research

Slide 13

In China, large international players

have majority of the OE market

while the largest local player only

has c2% market share.

We estimate that these new

production facilities in total add

about 120k-150k units of production

capacity p.a., which is close to 30%

of the major players' production

volume in 2013. However, we do not

see pricing as a major concern in

the short term mainly due to the

flexibility in production and exits of

smaller players.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2010 2011 2012 2013

Otis Shanghai Mitsubishi

Kone Schindler

Hitachi

Kone10%

GiantKone4%

Schindler4%

Xiji2%

Thyssen6%

Otis (including all brands)

13%

Mitsubishi12%

Hitachi10%

Fujitec5%

Guangri2%

Canny2%

SJEC2%

BLT1%

Yungtai3%

Other24%

Figure 57: China E&E capacity addition by major players 2013-2015

Company Location ProductExpected data of

completionArea Capacity addition Investment

Canny Wujiang, Jiangsu E&E and components (construction started

in Oct 2012)535,000 sqm N.A. 1.5bn RMB

GiantKone Nanxun, Zhejiang E&E (not specified) End of 2014 28,000 sqm 13,000 units p.a. 100m RMB

Hitachi Chengdu, Sichuan Elevator March-13

Hitachi Guangzhou, Guangdong Escalator April-13

Hitachi Guangzhou, Guangdong Motor July-13

Mitsubishi Electric Shanghai

Electric Elevator Shanghai High-end elevator July-15 25,500 sqm 10,000 units p.a. 120m RMB

Schindler Shanghai Escalator Q1 2014 (replacement and expansion)

Schindler Shanghai Elevator 2015 (replacement and expansion)

ThyssenKrupp Zhongshan, Guangdong Elevator End of 2014 100,000 sqm20,000 units p.a. (replacement

and expansion)300m RMB

XJ Schindler High-speed elevator June-14 91,019 sqm 5,000 units p.a. 300m RMB

Yungtay Chengdu, Sichuan E&E (not specified) Q3 2015 5,000 units p.a. 150m RMB

From 70,000 units p.a. in 2013 to

100,000 units p.a. in 2015

Source: Company data, Press research

China: Key players’ capacity addition 2012-2015

China: market share of key players by production units, 2013

China: market share of key players, 2010- 2013

Major players’ China geographical presence

Source: Company data

Slide 14

Schindler – 100 offices in 2014

Otis – >300 service and sales points in 2014

KONE – c500 service and sales points points in 2014

ThyssenKrupp – c200 offices & branches in 2014

We believe that an important factor

that explains the market share

change is the footprint expansion in

China, while Kone has been leading

on this front with over 500 locations

as of June 2014.

We believe a strong local presence

in the service market will also help

OEMs in winning new NI business

as the elevator operators are

increasingly being held responsible

for elevator safety.

China: Insights from local players


Slide 15

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Cannyelevator

GuangriOE

SJECescalator

Cannyescalator

BLTElevator

SH Mech SJECelevator

BLTEscalator

AvgLocalsales

growth

Avg IntOrdergrowth

Marketorder

growth

2012-14Avg

LocalsOE

growth

2012-14Avg Int

OEgrowth

2012-14Avg

marketgrowth

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Cannyelevator

Cannyescalator

SJECelevator

SJECescalator

SH MechE&E

BLTElevator

BLTEscalator

GuangriOE

KONEChinasales

2012 2013 2014

China: Growth of local players by products, 2012-2014

China: Growth comparison of key players vs market growth, 2014

2014 New Equipment (NE) sales growth was

on average c13% for the listed local players vs

17% for international players. Interestingly,

both groups (large listed local players and

larger internationals) appear to have outgrown

the broader market (c+10%).

China: Insights from local players

Slide 16

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

2012 2013 2014

Canny price change SJEC price change

BLT price change Canny unit change

SJEC unit change BLT unit change

-30%

-20%

-10%

0%

10%

20%

30%

40%

2012 2013 2014

Canny price change SJEC price change

BLT price change Canny unit change

SJEC unit change BLT unit change

China: Elevator ASP of key players, change yoy, 2012-2014

China: Escalator ASP of key players, change yoy, 2012-2014

Local players' ASP was

broadly flat / slightly

declining in 2014. We did

not find a consistent

overarching trend in the past

three years suggesting price

cuts drive higher volume

growth but the particular

dynamics between Canny

and SJEC in 2014 support

this theory. Despite sluggish

pricing, reassuringly, NE

profitability generally

increased, driven by

cheaper raw materials &

bought-in components as

well as by increased vertical

integration in some cases.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Cannyelevator

Cannyescalator

SJECelevator

SJECescalator

ShanghaiMech E&E

GuangriOE

BLTElevator

BLTEscalator

2013 2014

China: Gross profit margins for new equipment


Figure 66: E&E market size index – China rebased to 1989 vs. India rebased to 2001

0

1000

2000

3000

4000

5000

India NI indexed (rebased to 2001) China NI indexed (rebased to 1989)

India2001

India2010

India2013

India2018E

Source: Elevator World, Credit Suisse estimates

India – Can it be the next China?

Slide 17

Figure 67: China E&E density growth path vs India Figure 68: China & India urbanisation rate 1960-2013

0.0

1.0

2.0

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5.0

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1992

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India density on urban populationIndia densityChina density on urban populationChina density

India2013

India2006

India2018E

0

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601960

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61968

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99

01

99

21

99

41

99

61998

200

02

00

22

00

42006

200

82

01

02

01

2

China

India

Source: Credit Suisse estimates Source: World Bank

India appears to have followed China’s growth path

closely in the past 12 years, and is currently about

1/10 of the market size in China (~54,000 units in

2013). The key question now is whether it can see a

similar acceleration as China had seen since 2001.

We found that India’s growth has been mainly driven

by E&E density among urban population, while in

China urbanization has been a much stronger driving

force.

Elevator World forecasts the India market to grow 14%

p.a. for the next five years. For this to happen, density

in urban population has to rise faster than China had

experienced during similar period.

Source: Elevator World, World Bank, Credit Suisse research

China & India urbanization rate 1960-2013 China E&E density growth path vs India

E&E market size index – China rebased to 1989 vs India rebased to 2001

Big 4 benchmarking

Slide 18

Revenue in 2014 Organic Sales Index Operating Profit Margin

Operating Profit Index

Otis Kone Schindler Thyssen

Business Split

Geographical

exposure

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Europe Asia Pacific America

Other

Thyssen

Kone

Schindler

Otis

100

150

200

250

300

350

400

450

500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

24%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


100

120

140

160

180

200

220

240

260

280

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

KONE Schindler OTIS

Maintenance

44%New

equipment46%

Modernisation10%

Maintenance

37%

Modenization

10%

New equipment

48%

Others5%

Maintenance35%

Modernisation & repair19%

New Equiopm

ent46%

Europe &

others39%

America34%

Asia27%

New Equipme

nt55%

Maintenance32%

Modernization13%

Europe & others

34%

America37%

Asia29%

Europe & others

44%

America15%

Asia41% Europe

& others43%

America28%

Asia29%


Major E&E player comp sheet

Source: Company data, Credit Suisse estimates for KONE, Schindler, ThyssenKrupp; Thomson Reuters for UTX (CS restricted)

Slide 19

18 Sep 2015 Acct Share Target Div Shares Mkt Cap Mkt Cap ND/ Year

Company Country Rating Curr Price Price Upside Yield - 1m - 3m YTD - 1yr - 3yr 15E Local (m) Euro (m) 15E 16E EBITDA End

KONE Finland OUTPERFORM EUR 35.1 45.0 28% 3.4% -6% -4% -7% 9% 33% 521 17,049 17,049 -1,293 -1,551 -0.9 Dec

SCHINDLER Switzerland OUTPERFORM CHF 152 180 18% 2.1% -2% -5% 6% 15% 31% 113 17,226 15,720 -2,097 -2,201 -1.8 Dec

THYSSENKRUPP Germany NEUTRAL EUR 18 26 45% 0.6% -19% -22% -16% -19% 2% 566 10,130 10,130 4,288 4,114 1.5 Dec

UNITED TECHNOLOGIES US RESTRICTED USD 93 R R 2.5% -6% -19% -19% -14% 14% 912 83,102 72,896 12,787 12,728 1.1 Dec

Performance % Net Debt

18 Sep 2015

Company 14 15E 16E 14 15E 16E 14 15E 16E 14 15E 16E 14 15E 16E 14 15E 14 15E

KONE 1.51 1.87 2.09 7,335 8,732 9,455 1,143 1,367 1,519 1,059 1,266 1,418 1,027 962 1,090 1.2 1.4 1.3 1.4

SCHINDLER 6.44 6.38 7.35 9,246 9,366 9,881 1,114 1,159 1,273 957 993 1,107 728 736 808 3.2 2.4 2.0 2.7

THYSSENKRUPP 0.04 0.84 1.77 41,304 43,441 45,840 2,466 2,926 3,185 1,117 1,447 1,965 -491 -1,022 315 0.1 0.3 0.4 3.4

UNITED TECHNOLOGIES 6.82 6.20 6.78 65,100 57,712 59,587 11,676 11,158 11,383 9,769 9,354 9,495 6 5 7 2.4 2.5 2.9 2.4

EBITDA Adjusted EBITAAdjusted EPS Div. CoverSales DividendFree Cash Flow

18 Sep 2015

Company 14 15E 16E 14 15E 16E 14 15E 16E 14 15E 16E 14 15E 16E 14 15E 16E

KONE 17.0 15.8 14.8 83% 92% 98% 9.1 8.1 7.1 39% 42% 42% 6% 5% 6% 3.4% 3.8% 4.3%

SCHINDLER 17.2 16.8 16.2 80% 82% 88% 5.9 6.0 5.9 25% 24% 27% 4% 4% 5% 2.1% 1.6% 1.6%

THYSSENKRUPP 3.2 2.8 2.6 1% 9% 16% 3.4 3.1 2.5 1% 14% 24% -5% -10% 3% 0.6% 1.4% 2.2%

UNITED TECHNOLOGIES 2.2 2.2 2.4 R R R R R R R R R 1% 1% 1% 2.5% 2.7% 3.0%

Dividend YieldEV/IC ROIC Free Cash Flow YieldROEP/BV

18 Sep 2015

Company 14 15E 16E 14 15E 16E 14 15E 16E 14 15E 16E 14 15E 16E 14 15E 16E

KONE 23.2 18.8 16.8 8% 24% 12% 2.27 1.88 1.72 14.5 12.0 10.7 15.7 13.0 11.4 14.4% 14.5% 15.0%

SCHINDLER 23.6 23.9 20.7 10% -1% 15% 1.68 1.64 1.54 13.9 13.2 12.0 16.2 15.4 13.8 10.4% 10.6% 11.2%

THYSSENKRUPP 422.1 21.3 10.1 nm nm nm 0.51 0.50 0.47 8.6 7.5 6.7 19.0 15.1 10.9 2.7% 3.3% 4.3%

UNITED TECHNOLOGIES 13.7 15.0 13.8 10% -9% 9% 1.63 1.81 1.76 9.1 9.4 9.2 10.8 11.2 11.0 15.0% 16.2% 15.9%

EV/EBITA (Adj) EBITA MarginEV/Sales EV/EBITDAEPS (Adj) GrowthAdjusted PE

Companies Mentioned (Price as of 18-Sep-2015)

Brilliant (002689.SZ, Rmb7.53) Canny (002367.SZ, Rmb13.34) GRI (600894.SS, Rmb15.08) Kone Corporation (KNEBV.HE, €35.1, OUTPERFORM, TP €45.0) SJEC (601313.SS, Rmb11.65) Schindler-Holding AG (SCHP.VX, SFr149.6, OUTPERFORM, TP SFr180.0) Shanghai Mechanical & Electrical Industry Co ., Lt (600835.SS, Rmb23.99) Thyssen Krupp AG (TKAG.F, €17.9, NEUTRAL, TP €26.0) United Technologies Corp (UTX.N, $93.31, RESTRICTED [V])

Disclosure Appendix

Important Global Disclosures

Andre Kukhnin, CFA, Max Yates, Jonathan Hurn, CFA and Tiantian Li each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

3-Year Price and Rating History for Kone Corporation (KNEBV.HE)

KNEBV.HE Closing Price Target Price

Date (€) (€) Rating

11-Oct-12 28.42 23.50 U

20-Feb-13 32.00 31.00 N

24-Oct-13 31.58 33.50

28-Aug-14 31.78 37.00 O

02-Feb-15 39.57 44.00

23-Apr-15 40.10 45.00

* Asterisk signifies initiation or assumption of coverage.

U N D ERPERFO RM

N EU T RA L

O U T PERFO RM

3-Year Price and Rating History for Schindler-Holding AG (SCHP.VX)

SCHP.VX Closing Price Target Price

Date (SFr) (SFr) Rating

06-Nov-12 125.20 140.00 O

20-Feb-13 139.10 155.00

29-May-13 138.90 R

03-Jun-13 137.80 155.00 O

24-Oct-13 126.40 150.00

17-Feb-15 150.50 160.00

25-Mar-15 163.90 180.00

* Asterisk signifies initiation or assumption of coverage. O U T PERFO RM

REST RICT ED

3-Year Price and Rating History for Shanghai Mechanical & Electrical Industry Co ., Lt (600835.SS)

600835.SS Closing Price Target Price

Date (Rmb) (Rmb) Rating

17-Aug-15 36.80 35.00 N *


N EU T RA L

3-Year Price and Rating History for Thyssen Krupp AG (TKAG.F)

TKAG.F Closing Price Target Price

Date (€) (€) Rating

26-Nov-12 16.02 25.00 N

19-Dec-12 18.63 25.00 O

16-May-13 15.20 23.80

01-Dec-13 19.31 20.00

17-Feb-14 20.11 23.00

14-May-14 22.24 25.00

13-Jan-15 20.50 25.00 N

13-May-15 25.51 26.00


N EU T RA L

O U T PERFO RM

3-Year Price and Rating History for United Technologies Corp (UTX.N)

UTX.N Closing Price Target Price

Date (US$) (US$) Rating

13-Dec-12 80.37 R

04-Jan-13 84.98 93.00 O

23-Jan-13 88.07 94.00

19-Feb-13 91.02 98.00

23-Jul-13 105.12 114.00

27-Sep-13 109.36 120.00

06-Jan-14 112.79 125.00

19-Mar-14 114.01 130.00

22-Apr-14 119.19 135.00

22-Sep-14 106.47 132.00

25-Feb-15 123.37 138.00

07-Apr-15 117.49 137.00

23-Jun-15 115.23 135.00

20-Jul-15 110.48 R


REST RICT ED

O U T PERFO RM

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.

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*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s to tal return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant s ector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12 -month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011.

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Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

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Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

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*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

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Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 56% (30% banking clients)

Neutral/Hold* 29% (38% banking clients)

Underperform/Sell* 13% (31% banking clients)

Restricted 2%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other indivi dual factors.

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Price Target: (12 months) for Kone Corporation (KNEBV.HE)

Method: Our TP is based on a three stage DCF discounting a 15% mid-cycle margin, 5% organic growth, 2% terminal growth, tax rate of 25% and a 8% WACC.

Risk: A severe construction market correction in China driven by liquidity concerns. Lack of a recovery in the US or Europe. Increasing price competitiveness in service market in developed world. Normalisation of profitability in the Chinese New Equipment market (currently over 10% vs developed market at c3-5%). Performance issues with the new product introductions.

Price Target: (12 months) for Schindler-Holding AG (SCHP.VX)

Method: Our TP is based on a DCF discounting a mid-cycle margin of 14%, mid-term growth of 5%, a WACC of 8% and a terminal growth of 2%. Our TP is backed by the company EV/EBIT and P/E multiples relative to peers and its own history as well as by EV/Sales multiples vs the company expected through-cycle profitability.

Risk: Longer and deeper than currently expected down-cycle in developed world. Adverse pricing behaviour of competitors in new equipment (China) and service segments (Europe and US). Execution on the LEAP programme, new products roll-out and new factories ramp up.

Price Target: (12 months) for Thyssen Krupp AG (TKAG.F)

Method: Our Target Price is calculated inline with our sum of the parts valuation methodology using a set of peer companies to value each division of TK.

Risk: Outlook for global industrial growth, raw materials movements, steel prices, pricing dynamics in the elevators business, Risks to pricing and volumes in the services business (given the volatility of the distributor inventory cycle). The technologies business is based around long-term contracts, where there are risks of cost over-runs.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

The subject company (TKAG.F, UTX.N) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (UTX.N) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (UTX.N) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (TKAG.F, UTX.N) within the next 3 months.

As of the date of this report, Credit Suisse makes a market in the following subject companies (UTX.N).

Credit Suisse has a material conflict of interest with the subject company (UTX.N) . Credit Suisse Securities (USA) LLC is acting as an advisor to Goodrich (GR) in a potential transaction with United Technologies Corp. Credit Suisse is acting as exclusive financial advisor to Lockheed Martin Corp. (LMT) on its announced acquisition of Sikorsky Aircraft from United Technologies (UTX).

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Credit Suisse Securities (Europe) Limited.................................................... Andre Kukhnin, CFA ; Max Yates ; Jonathan Hurn, CFA ; Tiantian Li

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Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only

Global Elevators & Escalators

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