Topic: R. Stahl reported a strong Q2 underpinning the op. turnaround, which should continue due to favourable structural trends. FY23 sales and EBITDA guidance was specified towards the upper ends.

Q2 sales grew 13% yoy to € 77m, thanks to the strong order backlog at the end of Q1 (€ 126m) coupled with unbroken demand across its key end markets incl. LNG and pharma, and supported by further easing bottlenecks in supply chains and increased production efficiencies. With an order intake of € 89m (+16% yoy), the group's backlog grew to a new record high of € 138m.

Adj. EBITDA jumped by 123% yoy to € 8.7m, implying a 11.3% margin (+5.5pp yoy) as the implemented price increases, improved operational efficiency, higher utilization rates and tight cost control overcompensated for risen input  (raw materials) and production costs (electricity and labour).

The FY23 sales and EBITDA guidance was specified towards the upper ends € 305-320m sales and € 30-36m EBITDA (eNuW: € 318m sales and € 37.3m EBITDA) thanks to good visibility on further improving operations during the second half.

Why to own the stock:

• Efficiency measures to pay off. Following years marked by a declining top-line (the former key end market, oil & gas, was cutting back on up-/downstream investments) and deteriorating profitability (neg. op. leverage), the company now seems well on track to fully reap the benefits from its efficiency programs. Management cut costs (excl. material) by 7.5pp (in % of sales) compared to 2017.
• Plenty of attractive growth drivers. R. Stahl is the globally leading provider of explosion protection for LNG tankers, terminals and liqufication/regassification plants (25-75% market shares). Further, R.Stahl has begun supplying its LED solutions to outdated nuclear plants in the UK (France to come soon) and offers explosion proof solutions for industrial automation projects within the pharma, chemical and upstream oil and gas industry. Group sales are seen to grow at 9.5% CAGR (2022-25e).
• Undemanding valuation. Assuming that R. Stahl is able to meet our estimates for ´24/´25e, its shares are trading on an implied valuation of 8/7x PE, while generating double-digit ROCEs.

We confirm our BUY rating with a slightly increased € 31 PT (old: € 29) based on FCFY 2024e.