Nokia Corp.

We expect the improving EBITDA margin will support Nokia's solid cash flow generation in 2021 and 2022. As a result, FOCF after leases could reach €500 million-€700 million in 2021 and €600 million-€900 million in 2022, depending on changes in working capital (we assume €500 million-€600 million negative working capital changes per year). The stable outlook reflects our expectation that Nokia will post about 1%-2% revenue growth on a reported basis in 2021. We expect Nokia's adjusted EBITDA margin will improve to 11%-13% (from 10.2% in 2020) as a result of mobile network product cost reductions and employee expense savings. This would support FOCF generation of €700 million-€900 million (€500 million-€700 million after lease payments) and adjusted debt to EBITDA

...We have revised upward our 2021-2022 base case for Nokia, following a solid first half of 2021. Nokia reported a 9% revenue growth in constant currency (4% reported growth) in first-half 2021 driven by positive performance across all segments, particularly network infrastructure. For full-year 2021, we anticipate about 2% reported revenue growth, below that of the first half but above our previous flat revenue expectation. The expected slowdown in growth in the second half will be driven by the contracts signed in North America in 2020, leading to a lower market share and pricing erosion. The full year growth does not solely stem from the telecom market; the enterprise segment providing industrial 5G applications has growth potential, albeit on a small scale (representing 6.7% of total net sales in second-quarter 2021). As a result of the positive performance in first-half 2021, we revised our base case in line with the company's comparable margin guidance of 10%-13% for 2021-2023, which...

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