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Original-Research: Nabaltec - from NuWays AG

10.10.2024 / 09:01 CET/CEST
Dissemination of a Research, transmitted by EQS News - a service of EQS
Group AG.
The issuer is solely responsible for the content of this research. The
result of this research does not constitute investment advice or an
invitation to conclude certain stock exchange transactions.

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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 EUR 6.5m in FY24e. In light of current production capacities that
allow ~ EUR 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 EUR 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 EUR 8m, positively impacted by a EUR
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 EUR 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 EUR 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 EUR 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 EUR
300m sales, EUR 55m EBITDA and EUR 40m FCF (eNuW).

Q3 to come in as another good quarter. Following a strong H1 with EUR 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 EUR 50.5m sales and a 9.1% EBIT margin
(eNuW) despite the seasonally weak August and the absence of a EUR 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, EUR
2-2.5m p.a.), raw materials (mainly alumina) should have an opposing effect,
mostly offsetting each other.

Shares remains attractively valued. At EUR 15 per share, Nabaltec trades
roughly 11% below its book value of EUR 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 EUR 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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Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss
bestimmter Börsengeschäfte.
Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben
analysierten Unternehmen befinden sich in der vollständigen Analyse.
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2005621 10.10.2024 CET/CEST

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