Vesuvius has released a positive 4M update highlighting stronger than expected trading, a material margin improvement, and unchanged FY22 expectations. Current trading There was strong volume growth in the Steel division plus market share gains, particularly in Flow Control, across all regions. The Foundry division’s volumes were broadly in-line y-o-y as the auto market continued to weaken. Successful price increases were implemented that more than fully compensated cost inflation and this, with higher volumes and lower costs, generated 60% growth in trading profit. Working capital is up with higher sales and safety inventory, but net debt should be flat at the half-year. Outlook Despite a weakening economic environment, and lowering of growth expectations for steel and automotive production, management expectations for FY22 Group performance is unchanged given the strong start to the year and its ability to actively manage cost pass-through with pricing. Investment case & valuation Vesuvius has made strong progress over the last few years, with a proactive management team showing how a business with cyclical commodity customers can still generate good and reliable value. The long-term investment case is centred on its strong positioning for changes taking place in Chinese and Indian steel, as well as for growth in traditional markets, and we expect management to drive continuous improvement in the business. It has potential for rapid earnings momentum and valuation remains undemanding in relative terms. The shares are trading on a FY22E PE of 7.7x and EV/EBITDA of 4.9x, falling to 6.9x and 4.4x respectively in FY23E.