Strong Q2 earnings beat and guidance raise Nokia delivered a top line beat of 2%, a gross margin beat of 340bps and an operating margin beat of 510bps. The top line beat was across Mobile Networks, Network Infrastructure and Nokia Technologies. More impressive was the extent of the operating margin beats at Mobile Networks (10.5% vs 1.9% consensus) and Network Infrastructure (9.1% vs 5.9% consensus), as the company continues to benefit from strong 5G rollout momentum, structural growth trends in Fiber Broadband Connectivity at Home and beyond (FTTx). Management has increased FY21 guidance but left FY23 guidance unchanged which we think is cautious given ReefShark self-help and broader 5G market momentum as the mid-point of guidance only implies 50bps increase in operating margins between FY21-FY23. FY21 operating margins are now guided to be 10-12% (versus previously 7-10%) with ''clearly positive'' FCF (versus previously ''positive FCF''). Nokia has also successfully won 4% share in recent China 5G tenders (link), which is a positive signal of product competitiveness. Strong FCF generation underappreciated We recently upgraded Nokia to Outperform (link) as we see structurally higher and more sustainable FCF generation going forward. Despite the strong reversals driving working capital increases, Nokia still managed to generate positive EUR 77m FCF in Q2 (we were expecting negative FCF this quarter). LTM FCF amounted to EUR 2.3bn, and this is before IPR negotiation cash inflows and higher operating margins still to come. We increase our earnings estimates and our TP to EUR 7 (from EUR6.4) We increase our earnings estimates driven by higher operating margins at Mobile Networks, and now expect FY23 FCF (CFO-Capex) of EUR 2.3bn, generating a TP of EUR 7 at 5.5% FY23 FCF (CFO-Capex) yield. We remain Outperform on Nokia and continue to think that the market is underappreciating the strong FCF generation at Nokia with current share price indicating...