New capital returns the positive event, but higher NWC ahead Nokia delivered an in-line set of earnings given the pre-announcement. Weaker Mobile Networks revenues due to the Verizon impact was offset by stronger Network Infrastructure revenues from strong CSP spending in Fixed Wireless Access and Fiber. Mobile Networks operating margins continue to outperform expectations. FY23 margin guidance was abandoned in favour of greater or equal to 14% margins in the long-term which we think is conservative given FY22 margin guidance of 11-13.5%. FY22 FCF guidance was issued at 25-55% adj. EBIT conversion, which is a step-down from FY21 levels of 87% due to higher NWC (higher inventory, receivables), despite repeated comments from the company that there were no one offs driving the 2021 FCF performance. FCF conversion is expected to increase back to 55-85% levels in the long-term. Despite the step-down in FCF, Nokia is still expected to generate over EUR 1bn+ in FCF in FY22. Dividends (EUR 0.08) were reinstated alongside an initiation of a EUR600m buyback (over two years) which we think are positive signals of management''s confidence in the strength and longevity of the company''s FCF generation. Supply Chain remains tight, but has stabilized Management commented that the supply chain situation while managed well currently, still remains tight which is driving some cautiousness in the earnings guidance. On the plus side, management has observed that the supply chain situation has stabilized. Inflation will also be mitigated through higher prices negotiated with clients. Remain Outperform. Lower target price from EUR7 to 6.2 on weaker cash flow outlook Give the weaker FCF outlook, and the weak growth near term and limited margin upside longer term (3-5 years), we lower our target price. We move from using FCF yield to using 9x EV/EBIT, in the middle of the 6-12x historic range, and a discount to the 10x we use for Ericsson, which has higher growth,...