Topic: Nabaltec released Q4 prelims, exceeding expectations on EBIT and reaching the upper ends of its FY guidance. For 2023, management is cautious due to risen costs and partially weakening demand.

Q4 sales increased by 11.2% yoy to € 51.6m (eNuW € 51.4m, eCons € 52.4m) on the back of positive price effects, which overcompensate for lower sales volumes of ATH, as customers begun reducing inventories and for a weaker boehmite business. While Specialty Alumina grew by 27% yoy, Functional Fillers showed only 5% yoy growth. FY22 sales grew by 17% yoy to € 218.8m, reaching the upper end of the guidance range (13-17%). FY sales volumes of boehmite decreased by roughly 1.5kt to 5.5kt.

Q4 EBIT came in at € 5.5m (eNuW € 4.5m, eCons € 3.4m) a 26% yoy decline, implying a margin of 11.7%. FY EBIT grew by 19% yoy to € 29.2m (13.4% margin vs guidance: 12-13%) despite the weakness of the high-margin boehmite business.

For 2023, management is guiding for 3-5% yoy sales growth, factoring in price increases of 5-10% across all products as well as weaker demand stemming from filled customer inventories, a trend towards cash management and some end market weaknesses (i.e. construction); eNuW +1.7%, eCons -1.3% yoy. The EBIT margin guidance of 8-10% (eNuW 10.9%, eCons 10.4%) implies a 3-5pp yoy decrease as hedges and price commitments for electricity and alumina expired at the end of 2022. Yet, we continue to regard our estimates as reachable, thanks to an expected improving demand for boehmite from mid-Q1 onwards, the current round of price increases and improvements at its US sites.

Bright mid-term prospects from boehmite prevail. Nabaltec is in the midst of doubeling it boehmite production capacity at its German site, targeting 24kt by the end of 2024e. Despite declining boehmite sales in 2022 due to a challenging automotive industry, pronounced structural trends should support strong growth from this year onwards. Following two years of nearly no progress in terms of battery cell production capacity in Europe, recent newsflow points towards a change. For instance, CATL is moving forward with its 24GWh plant in Germany and a 100GWh plant in Hungary (kick-off expected for H2´23). Assuming a sales price of € 3k/t (-15% vs today) and a 30% margin, a fully utilized German production, which is sufficient for roughly 240GWh of battery cells, would yield € 72m sales and € 22m EBIT.

We reiterate BUY with an unchanged € 36 PT based on FCFY 2024e.