Strong Q4 prelims; FY25 guidance conservative

Q4 EBIT came in at € 5.5m, up 6% yoy and notably above our estimate of € 2.2m, implying a margin of 12.1%. The drivers behind this were the improved top-line but also positive implications from improved raw material costs. FY24p EBIT came in at € 22.3m (+22% yoy) with an implied 10.8% margin. With the better than expected EBIT, the operating cash flow should have come in at a strong € 35-40m.

The gap filler is growing in importance. Sales from the white powder, that improves thermal management capabilities of adhesives used in EV batteries, reached € 10m in FY24 (+100% yoy). For FY25e, we model another 30% increase. Once the current capacity expansion is completed, Nabaltec will be able to produce € 40m worth of product annually.

Boehmite remained on the sideline as FY24 sales decreased 25% yoy to only € 12.5m due to lacklustre EV demand across Europe and the absence of notable cell and separator production capacities.

Cautious FY25 guidance. Management expects to grow FY25 sales by 3-5% (eNuW: 7%) while achieving an EBIT margin of 7-9% (eNuW: 10.3%). As the mid points came in below our estimates, we believe the guidance to be conservative due to management's general cautiousness early in a year, opposing effects on the cost side (lower alumina prices partially offset higher electricity and natural gas prices as well as increased labour costs) and overall selling price increases (eNuW: ~ 3.5%).

Potential tailwinds from Germany’s € 1tn spending bazooka. On March 4th, election winner Friedrich Merz from the Christian Democrats (CDU) as well as the Bavarian Christian Social Union (CSU) and the Social Democrats (SPD) discussed a € 500bn special fund for infrastructure investments over the coming 10 years, next to a sizeable fund for defense. It is planned to pass the law before the new government takes office. With 25% of group sales being directly tied to Germany (Europe 76%) and construction being the most important end market, this could turn into a notable tailwind.

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Slight defense exposure but potential for more. Within the Specialty Alumina segment, Nabaltec also produces ceramics used in ballistic plates currently used in heavy vehicles and partially on naval vessels. While the sales contribution in FY24 should have been in the low single-digit euro million range, we see the potential for notably more during the mid-term, depending on defense spending decisions.

Valuation remains unjustified low. Nabaltec is trading at 16% discount to its book value, while the company offers a strong balance sheet and good free cash flow yield, even in a macro-economically challenging year. We continue to regard to stock to be mispriced and confirm our BUY rating with an unchanged € 25 PT.