Topic: LION announced to have a singed a highly qualified successor for the current CEO, which is leaving at the end of January. Following LION‘s major transformation last year, the company looks poised for strong growth.

At the end of November, LION announced the departure of its CEO Winfried Buss end of January due to personal reasons. The company has already been able to find a successor, namely Dr. Joachim Damasky. Dr. Damasky has recently worked as Senior Advisor to BMW and ran the German Automotive Association. Until 2015, he was part of Webasto’s Management Board. This bolsters well with hire of Dr. Urlich Eichhorn, former CTO of Volkswagen, as Chairman of its newly established Global Technical Advisory Committee at the beginning of November. Both hires, alongside an increased salesforce should allow for a continuation of the positive trends witnessed in Q4.

Mind you, during the Q3 earnings call in December, management highlighted € 25m of sales (vs. 9M of € 29m) from battery packs out of its own production in Q4 alone. With that, LION produced roughly 4.5k battery packs during FY23, significantly below the factory’s annual capacity of 45k. Over the next few years, we expect the utilization to gradually increase, partially carried by the introduction of its gen 2 battery packs during the second half of this year.

Thanks to the partnership with SVOLT, the company will produce higher energy density (20% more vs currently used cells) NMC and LFP battery packs. Especially the latter is set to turn into a notable tailwind as it should allow LION to fully break into the thriving energy storage market, which prefers LFP over NMC cells. Energy storage customers already account for roughly 50% of sales.

Coupled with customer wins in the mobility segment, the company looks set to strongly grow sales in the short- to mid-term (33% 2022-25e CAGR). During the same time, the EBITDA margin is seen to significantly increase to 4.6% by 2025e as the plant‘s operating leverage should kick in.

Valuation remains attractive. While LION has gone through a full transformation during 2023, the company should now be ready to reap the rewards of the hard work. Yet, this is still under-appreciated by the share price, which implies a valuation of only 0.6x/0.4x EV/sales FY2023/24e. LION remains a BUY with an unchanged € 10.50 PT based on DCF.