Topic: LION E-Mobility published its FY23 prelims and FY24 guidance. While the latter came in below our estimates, it offers plenty of room for upside. Valuation remains highly attractive.

FY23 revenues increased by 4% yoy to € 56.1m, whereas € 26.3m came from Q4 alone. FY EBITDA stood at € -0.7m; Q4 € -0.8m. Worth highlighting, the operating cash flow improved strongly from € -6.8m in FY22 to € 2.1m in FY23 (€ 1m in Q4), which should have largely been carried by a normalization of inventory levels. Mind you, the company build up a stockpile of completed battery packs at the end of FY22 to service customers throughout the transition period.

FY24 guidance points to 7-16% yoy growth (€ 60-65m). While the growth targets came in well below our old estimates of € 86m, management stretched the conservative approach during the earnings call. With the company significantly ramping up its sales efforts (increased headcount and trade show appearances, from 4 to 30), strong growth ambitions from important customers such as Karsan (electric buses and mini-buses) and plenty of spare capacity at its production site in Hildburghausen. Further, the company is currently active in more than 20 design-in projects, of which some should turn into firm orders. EBITDA is seen to come in at € 0.5-1m (eNuW old: € 1.1m) 

FY25e with accelerated growth (eNuW: 34% to € 90m) on the back of the partnership with SVOLT, which will allow LION to produce higher energy density (20% more vs currently used cells) NMC and LFP battery packs from H2 2024 onwards. The latter should turn into a notable tailwind as it allows LION to fully break into the thriving energy storage market, which prefers LFP over NMC cells. As a result, the share of storage sales should exceed 50% during the next few years (FY23: 41%).

Immersion cooling progress. As highlighted during the earnings call, the company is progressing well with the development of its immersion cooled battery packs. Until the end of the year, LION should receive additional feedback (so far "promising") from the premium OEMs currently testing the pack on the road. Note: We have currently reflected no value for LION’s immersion cooling technology in our valuation.

Reiterate BUY with a new € 8 PT  (old: € 10.50) based on a sum-of-the-parts valuation.