H1 trading update reassuring on cash, cost saving measures Meggitt''s H1 trading update proved reassuring, especially on the cash front, reiterating a target for positive FCF in FY20. With civil aftermarket and OE down 50% in Q2, Meggitt seems to have performed no worse than its main peers (Safran saw April revenues down 50% and expected a similar trend in Q2), which should allay some fears that Meggitt''s exposure to older aircraft would represent a major burden. Comments on cash savings being ahead of expectations on operating costs but offset by slower inventory reduction are also a net positive in our view, paving the way for a solid 2021 FCF. H1 detailed preview In this note, we provide a more detailed preview for H1 numbers, and expect sales of GBP877m (-15% organic), underlying operating profit of GBP86m (9.7% margin) and FCF of GBP(148)m. Estimates adjusted to reflect disposal, impairment in 2020 Changes to our estimates (EPS down 4%/7% over 2020/21) mainly reflect the Training Systems disposal with lower FCF in 2020 driven by more adverse working capital development in 2020, recovered in subsequent years. We also include GBP300m of impairments in 2020, representing c. 10% of the group''s intangibles, excluded from the underlying basis. Some rerating likely, we remain Outperform While yesterday''s performance was likely boosted by some short-squeeze, we believe Meggitt has potential for re-rating, with H1 results especially FY20 guidance a potential positive catalyst - we anticipate no significant changes vs. consensus - and if air traffic continues its recovery over the summer despite some concerns about the US. For this reason we slightly increase our valuation multiples, from 10.5x to 11x EV/EBIT, yielding our updated GBp375 target (vs. GBp320).