voestalpine confirmed at HOLD, TP EUR 24.5 - Model update ahead of 3Q 19/20 results

Ahead of voestalpines 3Q 19/20 results due February 6 we have updated our estimates, thereby reflecting the impairments and provisions for restructuring and headcount reductions resulting from the business review incorporating changes in the global macroeconomic framework. In total, charges of EUR 360 mn will be digested in the 3Q financials, composed of EUR 80 mn having an EBITDA impact (provisions, inventory write-down) and EUR 280 mn of asset impairments. Consequently, the management has taken down the FY 19/20 EBITDA guidance from roughly EUR 1.3 bn to ca. EUR 1.2 bn. EBIT should be barely positive. We have lowered our forecasts accordingly. A dividend reduction was flagged and we assume DPS of EUR 0.60 (last years DPS was EUR 1.10, prev. RCBe EUR 0.80). We interpret the managements remarks that both dividend yield (the company usually targets for 3-4% yield) and payout ratio will be taken into consideration as an indication to forego the long-standing yield-based policy. Our overall neutral stance on the investment case remains unchanged. While the worst could be behind as trading conditions seem to stabilise at low levels for the time being and earnings expectations have come down materially, we remain on the sidelines amid insufficient upside potential and trading multiples already above long-term averages. We maintain the HOLD recommendation and the target price of EUR 24.5.