Andritz: Delivery of Montes del Plata as share price trigger (upgrade to Buy)

- The latest sell-off after the profit warning, combined with a better than expected order intake and the shortly expected delivery of the troubled Montes del Plata, prompted us to increase our target price to EUR 53.3 (from EUR 42.8), translating into a Buy recommendation (from Hold).

- The macro environment has improved in Europe and the US, but PMIs have hinted at a mixed development in emerging markets. While the former is positive for Andritz, the latter could indicate weaker order intake in the coming month. Oil and gas prices have picked up lately, while energy and pulp prices are still on low levels.

- Andritz provisioned for the delay of Montes del Plata until the end of March. We expect the delivery of this troubled project to act as a positive share price trigger. In the case of further delays, Andritz will need to build further provisions impacting 1Q14. In such a case, we tend to see limited downside, with the upside simply postponed until delivery.

- Our new estimates reflect provisions for the troubled project Montes del Plata (2013: EUR 140mn) as well as for the Schuler restructuring (2013: EUR 40mn, 2014: EUR 15mn). On the positive side, we have also incorporated cost savings of around EUR 30mn for Schuler from 2015 on.