Nabaltec AG

Further op. improvements // FY guidance conservative

Christian Sandherr27 Jun 2024 06:04

Topic: Despite the recent 30% share price increase since the low in March, Nabaltec remains on our Alpha List with the key reasons for it being (1) further operational improvements in Q2 and a too conservative FY guidance, (2) the promising optionality of boehmite and (3) an attractive valuation with shares below the book value.

Following a solid Q1 with € 54m sales and a 9% EBIT margin, Nabaltec looks set to report further operational improvements in Q2; eNuW € 55m sales (+12% yoy) and a 9.1% EBIT margin (+2.4pp yoy). While demand growth for boehmite should remain muted, its environmental flame retardants (~63% of group sales) are seen to be the key driver as they benefit from rising investments into data centres.

FY guidance looks increasingly conservative. Mind you, management expects to grow FY24e sales slightly with an EBIT margin of 7-9%. Considering the expected (eNuW) H1 performance with € 109m sales (+2.7% yoy) and a 9.2% EBIT margin (+1.2pp yoy), the lower end of the margin guidance implies a margin of only 4.6% for the remainder of the year.

Lagging boehmite demand, yet a promising optionality. During the past 1.5 years, demand for boehmite, the high-margin coating material for separator foils and electrodes of lithium-ion batteries in EVs, has been weak with sales falling from € 24m in FY21 to € 17m last year. The main reason behind this was a strong oversupply in China (lacklustre EV demand growth), the core market for EV battery production as well as a slower than initially expected ramp up of production capacities in Europe and the US. Yet, with demand for ceramic coating solutions expected to 4x until 2028, boehmite should return to growth; eNuW: From € 17m in FY23 to € 25m by FY25e.

Valuation remains highly attractive. At € 16.2/share, Nabaltec still trades below its book value (€ 16.70/share at the end of Q1). For comparison, the company has historically been trading at ~2x P/BV throughout the last 10 years. At the same time, the company offers 10% FCF yield (FY24e) and a healthy balance sheet.

We confirm our BUY rating with an unchanged € 25 PT based on FCFY 2025e and keep Nabaltec on our Alpha List.

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