Topic: During the last weeks, LION published its FY23 annual report and hosted its AGM. Here are the key takeaways:

FY23 marked a milestone as the company transformed itself into an automated manufacturer of high-quality battery packs for mobility and storage solutions through the acquisition of the former BMW i3 battery pack production lines. The current set-up offers a production capacity of up to 40k battery packs p.a. with a revenue potential of some € 200m by 2028.

Despite the transformation, which was completed by the end of May 2023, LION's EBITDA came in break-even with roughly € 56m sales (~50% from pre-produced packs); op. cash flow stood at € 2.8m.

Worth highlighting, TÜV SÜD Battery Testing (LION holds a 30% in this JV) reported particularly strong FY23 results with sales up 41% yoy (€ 16.1m) and an 18.9% EBIT margin; € 660k P&L contribution to LION. Thanks to a structurally growing demand for battery testing capacities, TÜV SÜD Battery Testing looks set to continue growing at roughly 15% p.a. during the mid-term.

FY24 financial targets confirmed. Management expects FY24 sales to the tune of € 60-65 and € 0.5-1m EBITDA. Importantly, the current fix cost base should only slightly increase going forward (mainly due to ramping sales efforts, i.e. growing sales headcount and trade shows), providing plenty of room for operating leverage as sales increase.

Further, LION remains on track to launch an updated product portfolio during H2, featuring a higher energy density NMC pack as well as a LFP solution (both enabled by the SVOLT partnership). Especially the latter should enable LION to better benefit from the strongly growing stationary storage market.

Light battery remains an attractive option. With its immersion cooled pack, LION would add a high-performance pack, to be used in hyper cars. The project is developing as planned and LION expects a first request for quotations until the end of the year. A positive outcome would notably increase the likelihood of it becoming a notably sales driver during the mid-term (currently not part of our revenue model).

We confirm our BUY rating with an unchanged € 7 PT based on a sum-of-the-parts valuation, whereas € 6.50 are stemming from the battery pack manufacturing business and € 0.50 from the TÜV SÜD JV.