Operating turnaround intact thanks to several structural trends

Christian Sandherr11 Jun 2024 05:44

LNG remains a material mid-term growth opportunity. R. Stahl is the globally leading provider of explosion protection for LNG tankers, terminals and liquification/regassification plants (25-75% market shares). Independence from Russian energy imports lead to a rising demand for LNG in Europe. Of the nine planned LNG terminals in Germany, five floating terminals are already running, and another terminal (Wilhelmshaven II) is set to become operational in H2 2024. Germany is next to China and the Netherlands one of the most important LNG importers in the world and is expected to further expand its import capacity in the coming years. LNG accounts currently for c. 10% of R. Stahl’s revenue (eNuW) and is seen to be one of the key growth drivers in the mid-term.

Lighting in the German chemical industry. After seven quarters of declining production volumes, the chemical industry returned to yoy growth in Q1 (5.4%). At the end of 2023, the German Chemical Association (VCI) expected a slight yoy decline of production volumes for 2024. This has now changed to a 3.5% increase due to the good start into 2024. Nevertheless, according to VCI president Markus Steilemann the situation remains tense as Germany is still too expensive for chemical production which can only be changed by politics. Higher production volumes could lead to increasing investments in the chemical industry and with that to a higher demand for R. Stahl’s explosion protection products. We estimate the chemical industry to be responsible for c. 1/3 of R. Stahl’s revenues.

Nuclear shows positive momentum. R. Stahl is supplying lighting technology worth c. € 10-12m (eNuW) for the two reactors currently being built at the Hinkley Point C nuclear power plant in the UK. Even more important, the UK project is partially owned by the French utility company EDF, which also manages France’s 56 power reactors. C. 54 of these need to be refurbished within the next 20 years and at least 6 new reactors are planned by 2050. With an estimated revenue of € 5m per refurbished reactor and € 10m for the new ones, this implies a € 330m revenue opportunity for R. Stahl (eNuW).  

Demand for R. Stahl’s products remains high. Order intake in Q1 FY24 came in at € 92.3m, a 24% increase qoq and only slightly below the extraordinarily strong Q1 FY23 (€ 96.7m). Hence, we expect to see mid-single-digit sales growth for FY24e in combination with low double-digit EBITDA margins. Reiterate BUY with an unchanged PT of € 29.00 based on DCF. 

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