voestalpine confirmed at HOLD, TP EUR 24.5 - Model update: Neutral stance unchanged after 3Q results

In the aftermath of mostly in-line 3Q 19/20 figures we confirm the HOLD recommendation and the target price of EUR 24.5 for voestalpine. Except for a (primarily) tax-driven EPS beat, 3Q figures contained no major surprises, in our view. Impairments and (restructuring) provisions were slightly lower than flagged (EUR 345 mn vs. EUR 360 mn). The worst in terms of steel margin pressure seems behind us, but at the same time we do not consider the risk-reward profile attractive enough to return as buyers. CEO Eibensteiner was vocal that re-stocking demand at the beginning of the calendar year (i.e. in voestalpines 4Q) has been substantial, going beyond normal seasonal effects as supply chains have been very depleted (although admitting that it is mostly related to the auto sector). The sequential uptick in 4Q vs. 3Q should be foremost volume-driven (e.g. steel shipments should rebound to 1.3-1.35 mn t, ca. +200k t vs. 3Q). However, this is arguably baked in the confirmed EBITDA target of EUR 1.2 bn, which we do not consider a given even under normal circumstances. The emergence of the Coronavirus adds an additional element of uncertainty. While the direct China exposure (some EUR 550 mn of sales) seems manageable, the implications on global trade conditions, supply chains, etc. remain blurry. However, according to our in-house economists, short-term pain could be compensated for by increasing public stimulus spending once the critical situation has been resolved. Bottom line, our neutral stance on the investment case remains unchanged. While the trading conditions seem to stabilise at low levels, we remain on the sidelines amid insufficient upside potential and because trading multiples are already above long-term averages.