Originally a manufacturer of agricultural machinery, Schindler has now become a global provider of elevators and escalators.
Schindler has reinvented itself several times throughout its long history, since the company also manufactured cranes, safes, munitions, pumps and even trams and railway carriages!
The company was founded in 1874 in Lucerne. The employee regulations then provided for a working week of... 63½ hours and a 14-day notice period!
The first hydraulic freight elevator was delivered by Schindler in 1890. The first electric elevator with belt drive was manufactured in 1892. In 1902 the first electric passenger elevator with automatic push-button control was delivered.
In 1915, Schindler started producing elevator motors. The 48-hour week was introduced in 1921 (this was already better, but we had to wait until 1988 for the 40-hour week...). The first escalator was installed in 1936.
Schindler is today the world leader in escalators and moving walkways. (these are those funny conveyor belts that you find in airports, for example) and the number 2 for elevators. The company employs more than 60,000 people.
The world leader in elevators is Otis, which is part of the American conglomerate United Technologies. Schindler's other competitors are the Finnish Kone (no. 3) as well as the “Elevators” division of ThyssenKrupp (no. 4). It is therefore only possible to invest directly in the elevator sector with the "pure players" Schindler and Kone.
You can invest in Schindler by purchasing either participation certificates (Schindler PS) or registered shares (Schindler N). Schindler sold its stake in its subsidiary in 2017 Also, a wholesaler of computer products in which he had invested in 1988.
In 2017, turnover increased by 5% and net profit by 7% (and even 15% if we do not take into account the exceptional non-recurring gains of the previous year). Unfortunately, operational cash flow does not speak the same language, since it went from 929 million in 2016 to 810 million in 2017.
Schindler creates value for its shareholders over the long term, which is reflected in particular in the share price that has gained more than 3,000% in 30 years!
The net profit margin (NPM) as well as the return on equity (ROE) are rather high and above all constantly improving: the NPM went from 7.2% in 2011 to 8.2% in 2017 and the ROE from 19.6% to 25.2%.
China is by far the most important country for elevator manufacturers since it is home to approximately 30% of the world's elevators! In addition, this country accounts for approximately 60% of new installations at Schindler. Demand in China stabilized in 2017 and ended the downward trend observed in the previous two years.
With 37% of equity and 2.15 billion of liquidity (i.e. 10% of its market capitalization!), the company is healthier than the Seine...
Who dared to say that Dividinde's puns were rotten? While I refrained from talking about Schindler's List! And I avoided banalities like "Schindler: it goes up, it goes down"! Not to mention the story of the ashtray who takes the elevator because he wants to go down...
The ordinary dividend has just been increased to CHF 4, compared to CHF 3 the previous year and CHF 2 in 2011. The dividend yield nevertheless remains rather paltry (currently 2%).
Schindler has also decided to increase the payout ratio from 35 to 65%, compared to 35 to 45% previously. In addition, the group regularly carries out share buybacks.
At 204 (Schindler PS), the 2018 PER is estimated at 23 (or around 21 if we subtract 10%'s cash from the market capitalization). This is a rather high valuation, despite Schindler's undeniable qualities.
The main assets:
- Balance sheet full of cash
- Improving margins
- Take advantage of urbanization
- Relatively non-cyclical sector and low capital-intensive business model for the industrial sector.
The main risks:
- Pressure on prices
- Rising raw material costs
- Great dependence on China.
In conclusion, I am currently neutral on the stock but will become a buyer if the price were to fall further by around 10%. Finally, let us note that the Finnish competitor Kone is also a good alternative to Schindler and also offers a more lucrative dividend.
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Wonderful analysis for a wonderful company.
My followers will remember that I was following this wonder in my Ex-US strategy back in the day.
Indeed a little expensive unfortunately.
Thank you for this divine revival!
Yes, it's a real gem. I bought it for around 100 francs and resold it for around 125, I'm still kicking myself today!
It happens often, you have to put it into perspective.
And never go and look at the prices of the securities sold!
And at the current price is Schindler worth it?
Still a bit expensive in my opinion. And above all still in a downward phase.
Same for me, as I wrote in the article, I would buy around 180 fr., or 10% less than currently.
Schindler is also the Gillette effect. That is to say that when the elevator is installed, it offers recurring income to Schindler, just as someone who bought a Gillette razor was forced to buy the blades afterwards. This type of company, whose customers are "prisoners", is very interesting.
Absolutely Thierry…
Already heard this sentence somewhere 😉
Would you be a big football fan? 😉
Absolutely divine! Especially the third half.