GEA Group's First Quarter Mixed on Tough Comparables

We are making no changes to our forecasts and our EUR 35 fair value estimate for wide-moat GEA Group following a mixed first quarter. Shares are trading in line with our valuation, and a more promising revenue outlook would be the key driver to any upside in our forecasts, as our EBITDA margin targets are already slightly above management's targets. The company's restructuring has been going well with visible margin gains on headcount reductions and procurement savings, but revenue growth has been uneven. We think the company still has work to do on portfolio adjustments and acquisitions may be part of management's next playbook, possibly announced with the September capital markets day. Its debt ratings and liquidity position have improved since the restructuring started in 2019, paving the way for acquisitions. Revenue growth trends have been less impressive than margins relative to management's 2019-2022 targets with the company recently raising the floor margin target by 100 basis points but leaving the revenue target at an unimpressive 2%-3%.