Topic: While profitability in Q4 (preliminary figures) came in significantly better than expected, sales fell slightly short of expectations. Although FY24 is seen to also be burdened by the challenging macro environment, valuation has more than factored it in, in our view.

Q4 sales came in at € 44.2m, down 14% yoy (eNuW € 52.2m). The shortfall to our estimates was driven by the particularly weak Speciality Alumina (S.A.) segment where sales declined 31% yoy due to customers' further inventory wind-downs, generally weak demand (46% of sales from refractory customers). Functional Fillers (F.F.) came in as expected at € 32.4m (-6% yoy). FY23 sales decreased by 8.6%;  with F.F.  down 4% yoy to € 142m and S.A. down 12% yoy to € 58m. Positively, boehmite sustained its recovery, yet from low levels. H2 volumes stood at 3.1kt, up ~64% vs H1, leading to FY volumes of c. 5kt (flat yoy, eNuW). Nabaltec is also gaining further momentum with its gap filler, APYRAL.

Q4 EBIT came in strong at € 5.2m, down only 6% yoy (eNuW: € 3m), a margin of 11.7%. This was the result of a positive mix effect, i.e. decent development of higher margin products like boehmite, APYRAL and ATH from Nashtec vs. a strong decline at S.A. FY23 EBIT came in at € 18.3m, a 9.1% margin.

Cautious FY24 guidance.  Management expects to grow FY24 sales slightly (eNuW new: 3.9%) with an EBIT margin of 7-9% (eNuW new: 8.6%). Growth is expected to be carried by a slight increase of boehmite volumes (+1kt yoy), further growing gap filler demand and improving utilization rates at its US plants, while the remainder of F.F. and S.A. should remain rather flat yoy.

The core business (ATH and S.A.) should remain solid going forward, yet with a certain degree of cyclicality as currently visible. Speciality products such as boehmite and APYRAL still have the potential to significantly drive earnings growth going forward. Yet, as a result of uncertainties regarding the build-up of significant European/US battery production volumes, timing and degree of growth remains difficult to assess. Mind you, boehmite is used to coat the separator film and the electrode in order to significantly improve safety/heat resistance of NMC, NMx and LFP batteries.

Unjustified valuation. Nabaltec is trading on 7.5x EV/EBIT FY24e  (10y avg. at 11.9x) and a 30% discount to its book value while having a rock-solid balance sheet (€ 94m cash, € 4m net cash) , good margins and offering a 16% FCF yield. Remains a BUY with a new € 25 PT (old: € 31) based on FCFY 24e.