Deutsche Bank-Industrial Logic Seizing le grand opportunity-110332238

15 September 2024Chart of the week: Dodge momentum index vs. Legrand's organic growthWhen Fed Chair Powell said "the time has come for policy to adjust" at Jackson Hole last month, we heard it as "the time has come to upgrade Legrand", which we did earlier this week. The market is currently pricing in over 250bps of rate cuts by the end of next year, which if realized, should help make market conditions more conducive towards moving construction projects forward, supporting Legrand's growth dynamics where non-resi makes up 45% of sales, followed by resi at 40% and data centers at 15%. Our chart this week shows the Dodge momentum index (DMI), which represents the value of non-resi building projects going into planning in the US, and leads non-resi construction spend by a year. The DMI for August rose by 24% YoY and 3% MoM highlighting the optimism building up ahead of the "stronger market conditions" expected for next year. Within the mix, commercial planning grew 42% YoY/2% MoM, supported by broad-based improvements including a pick up in warehouse projects, while data centers continued to dominate the segment. Meanwhile institutional planning was up 8% YoY/6% MoM driven by growth in the healthcare space.Figure 1: Dodge momentum index vs. Legrand's organic growth-60%-40%-20%0%20%40%60%-40%-30%-20%-10%0%10%20%30%40%Q3-03Q3-04Q3-05Q3-06Q3-07Q3-08Q3-09Q3-10Q3-11Q3-12Q3-13Q3-14Q3-15Q3-16Q3-17Q3-18Q3-19Q3-20Q3-21Q3-22Q3-23Q3-24Legrand organic growthDodge momentum index YoY - RHSSource : Dodge Construction Network, Legrand, Deutsche BankGael de-Bray, CFAResearch Analyst+33-1-4495-6562John KimResearch Analyst+44-20-754-18699Nabil NajeebResearch Associate+44-20-754-17410Lars Vom-CleffResearch Analyst+49-69-910-13526Seetharaman RamakrishnaResearch AssociateDeutsche Bank AGIMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, 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. MCI (P) 041/10/2023. Deutsche BankResearch Europe Capital Goods Industry Industrial Logic Date Periodical Seizing le grand opportunityDistributed on: 15/09/2024 12:02:07 GMT7T2se3r0Ot6kwoPa15 September 2024Capital GoodsIndustrial LogicPage 2Deutsche Bank AGThe pick up in momentum for warehouse projects is supportive for KION, where orders for its warehouse automation division have remained soft this year despite a strong pipeline of projects that await final investment decision. On data centers, we also heard from US peer Vertiv at a competitor conference on Thursday, where they noted an unchanged underlying demand environment, although as the size of orders get ever larger the timing of large order bookings can have a greater impact on the quarterly intake than before.Last weekAl