A good set of results with a nice CF beat BAE results beat H2 expectations by 3% on sales and 7% on EBITA. We especially note strong sales on Cyber and Maritime and a large margin beat in the Air division. Demand was also strong, with a book to bill at 1.06 in H2. There was also a strong beat on FCF (c.GBP500m better than consensus). The FY20 FCF of GBP1.4bn (before a GBP1bn one-off UK pension contribution) beat guidance by GBP0.6bn thanks to GBP0.4bn of early customer receipts (German Typhoon, CV90 Switzerland and F-35) which will unwind in 2021, GBP0.1bn of profit improvement and GBP0.1bn of other working capital improvements. Solid cash outlook for 2021 and after BAE''s outlook (which includes greater disclosures than in the past) is based on an FX rate of 1.35 on GBP/USD, vs spot at 1.39. Apart from that, the outlook is in line with expectations. We note that the FCF is guided above GBP1bn (vs consensus at GBP1.1bn) despite the accelerated receipts of 2020, which reflects strong underlying cash conversion of earnings. BAE has also updated its 3-year cash outlook to ''above GBP4bn of FCF'' in total expected over 2021-23, despite the strong 2020 WC performance. Earnings and valuation fine-tuned - still a strong value play with limited momentum We have marginally increased our earnings forecasts by a low single-digit percentage, based on a 1% increase in sales forecast. Despite better cash position, our valuation is trimmed for higher IAS pension deficit. With less than 10x EV/EBITA 2022 and a strong 9% FCF yield that year (and growing), BAE still stands at the top of our Value investment list, with positive gearing to a possible inflexion in cash allocation. However, the share price remains held back by the lack of gearing to a cyclical recovery in a very momentum-driven stock market. We therefore recommend the stock to value investors looking for downside protection or eager to play a slow recovery over time. We reiterate our Outperform...