voestalpine confirmed at HOLD, TP EUR 20.5 - No changes to estimates after better than expected 1Q

We appreciate voestalpines considerable earnings outperformance in 1Q, both compared to its prior indication and market forecasts. However, for us this does not (yet) imply an inflection point for the investment case. Based on the indication that 2Q EBITDA should be sequentially up, we feel fine with our unchanged FY 20/21e estimate of EUR 861 mn, i.e. well in the upper half of the groups guidance range of EUR 0.6-1.0 bn. Our FY EBITDA forecast implies a bit more than EUR 500 mn for 2H, or 15% below the adjusted 2H 19/20 figure. Despite certain customer sectors like O&G and aerospace (low revenues share but high-margin business) likely to remain in the doldrums, the scope of improving automotive demand (~1/3 of group sales) and gradually rising steel volumes (company expects shipments slightly above 4 mn t) coupled with sustained cost savings (above all personnel) warrant confidence in our earnings projections. We stand by our neutral view on the investment case as the stock already discounts quite a pronounced earnings recovery (FY 21/22e EBITDA RCBe EUR 1.31 bn, consensus EUR 1.36 bn). Even on this steep upward trajectory voestalpine should struggle to generate economic value. On our estimates the groups ROCE should fall well short of value generating territory even in FY 22/23e. Also in terms of cash flow generation the current year is expected the render a modest figure, leaving little room for a net debt reduction. We tweak the TP to EUR 20.5 from EUR 19.5 and maintain the HOLD rating. With the exception of P/B (arguably reflecting low return expectations, long-term fwd median 1.0x), current trading multiples do not appear overly compelling (long-term fwd median EV/EBITDA ~6x, P/E ~11x), in our view, bearing in mind arguably low earnings visibility.