Classification of NuWays AG to Nabaltec

Company Name:	Nabaltec
ISIN:	DE000A0KPPR7
Reason for the research:	Update
Recommendation:	Buy
from:	10.10.2024
Target price:	EUR 25
Target price on sight of:	12 months
Last rating change:
Analyst:	Christian Sandherr

Conference feedback: Too cheap to ignore

During last week's European MidCap conference in Paris, the CEO of Nabaltec provided insights into key topics. Here are our takeaways:

Continued strong demand for Nabaltec’s core product. Mind you, ATH is an environmental friendly flame retardant, which is primarily used in cables and wires. As during recent quarters, demand from investments into data centres and renewable energy sources as well as an improving US construction industry are seen to sustainably drive sales growth.

Gap filler with growing importance, investments in capacities. Initially introduced in 2021, sales from the white powder, that significantly improves thermal management capabilities of adhesives used in EV batteries, is seen to reach € 6.5m in FY24e. In light of current production capacities that allow ~ € 10m sales and a clear commitment from customers, Nabaltec is increasing 4x its production capacities. Importantly, the new production line is fully automated and frees up ~ 20kt ATH production capacities. Total investment stand at around € 25m, spend until the end of FY25e.

Boehmite remains slow following a stronger H1 due to a positive one-off. During H1, boehmite sales stood at roughly € 8m, positively impacted by a € 1.8m (eNuW) order from a Chinese customer. Unlike last year, the second half of this year should not be marked by a notably up tick in demand (FY24: -18% to € 14.5m). Mind you, >80% of the separator production is located in China. While management expects strongly growing demand for ceramic coatings in e-mobility, we model only a slight growth for next year.

Current capex program to be paid for by op. cash flow. This and next year, Nabaltec plans to spend a cumulative € 50-55m on capex to lay the foundation for further growth of ATH, its gap filler and boehmite. Importantly, the company’s operating cash flow during those two years should be largely sufficient to cover the whole investment program. Mind you, the op. CF at the end of H1 FY24 stood at € 24m, thanks to the good operating performance but also a normalization of working capital.

Attractive growth potential. Taking into account the available capacities across its three production site following the current investment initiative, Nabaltec should be able (once fully utilized) to generate some € 300m sales, € 55m EBITDA and € 40m FCF (eNuW).

Q3 to come in as another good quarter. Following a strong H1 with € 108m sales (+2.2% yoy) and a 9.9% EBIT margin (+1.9pp yoy), the third quarter is seen to paint a similar picture with € 50.5m sales and a 9.1% EBIT margin (eNuW) despite the seasonally weak August and the absence of a € 1.7m positive boehmite one-off from Q2. With this, the 9M sales growth figure should be inline with the FY guidance of 2-4% yoy sales growth and ahead of the targeted 7-9% EBIT margin with 9.8%, eNuW.

Expiring gas/raw material contracts no reason for concern. Nabaltec usually enters into multi-year gas/raw material supply contracts, which are due to be renegotiated (for several years) at the end of this year. While the currently higher gas price levels should have a notable P&L impact (eNuW, € 2-2.5m p.a.), raw materials (mainly alumina) should have an opposing effect, mostly offsetting each other.

Shares remains attractively valued. At € 15 per share, Nabaltec trades roughly 11% below its book value of € 16.7, while offering 11.7% adj. FCFY, a strong balance sheet and significant mid- to long-term potential. We confirm our BUY rating with an unchanged € 25 PT.

You can download the research here: http://www.more-ir.de/d/31027.pdf
For additional information visit our website: www.nuways-ag.com/research

Contact for questions:
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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