> Energy, Materials & Industrials ArcelorMittal — Bastian Synagowitz, BUY, close €28.7, €33 tgt, 15% upside ■ Despite having performed well recently, we believe the stock is still priced for a "cautious" $7bn EBITDA scenario. This appears too bearish as spot conditions remain strong and three structural changes have removed part of the downside risk: ■ Firstly, Europe is seeing the strongest consolidation dynamic since the creation of ArcelorMittal itself. ■ Second, trade policy continues to become stricter in MT's US and European core markets. ■ Third, China is aiming to cut capacity 10-20%. Our checks (and rising margins in China) support the view this is for real. ■ Although we model a steel price correction from spot (suggests $10bn EBITDA), we believe the stock comes with three free options beyond our base case scenario (stronger developed market margins, Brazilian recovery, commodity price holding up better) which means it could almost double in a blue sky. ■ MT should end 2017 with net debt of c.$10bn, vs Q4 run rate EBITDA of $8bn. Its strong 2018 FCF yield of 8-11% suggest high potential for attractive cash returns mid-term: $2.9bn of FCF, and just $0.3bn of divis in our model. ■ Valuation: MT trades at 5.0x 2018E EV/EBITDA, 14% discount to peers ■ Catalysts: trade policy, steel margins holding up better, further rebound in iron ore. Q4 results 9-Feb. Related DB Research: Notes from the road: US NDR (Synagowitz) Another round of upgrades and still room to go - BUY, PT to USD38 (Synagowitz) Deutsche Bank Expectations are sensible but the shares do not reflect the ongoing earnings recovery yet 120 — AM - share price performance (EUR) (LHS) — 1 yr rolling EBITDA consensus (USDm) (RHS) 100 2 yr rolling EBITDA consensus (USDm) (RHS) 80 60 40 20 0 14,000 12,000 10,000 8,000 6,000 4,000 Dec/09 Dec/10 Dec/11 Dec/12 Dec/13 Dec/14 Dec/15 Dec/16 Dec/17 Source Datastream Sales by end-market (2016) Mining. Chemica