Topic: Despite a strong competitive quality, R. Stahl had difficulties translating it into operating performance between 2016 and 2021. Thanks to R. Stahl having done its homework by implementing changes on the back of efficiency and structural trends kicking in, shares look poised for a re-rating.

R. Stahl has begun to supply LED lightning solutions to a nuclear plant in UK (Hinkley Point C) with a total expected revenue of € 10-12m, of which c. € 3.5m are already booked as revenue in FY23e (eNuW). Importantly, the UK project is partially owned by the French utility company EDF, which also manages France’s 56 power reactors. C. 54 of these need to be refurbished within the next 20 years and 6 new reactors are planned by 2050. With an estimated potential revenue of € 5m per refurbished reactor and € 10m for the new ones, this implies a € 330m revenue opportunity for R. Stahl (eNuW).   

LNG delivers a material mid-term growth opportunity. R. Stahl is the globally leading provider of explosion protection for LNG tankers, terminals and liquification/regassification plants (25-75% market shares). Independence from Russian energy imports leads to a rising demand for LNG in Europe. For instance, Germany opened its first LNG terminal in Wilhelmshaven during December 2022 to compensate for the Russian gas imports. Until 2027, nine LNG terminals are planned in Germany, to import capacities of up to 69 billion cubic meters, of which the majority is seen to come from USA and Qatar.  

In contrast to the booming LNG business, the chemical industry in Germany was rather weak since the Russian invasion, due to substantially increased energy and gas prices. We expect the softening to carry well into FY24e, as the German chemical association (VCI) expects a revenue decline of 3% during 2024e for its home market (2023: -12%). Despite the short-term challenges, in the long-run we do not see the local chemical industry in severe danger. It should hence remain an integral part of the company.

Order intake increased for the third consecutive year up to € 343m (+9.3% yoy) leading to a strong order backlog of € 115m at the end of FY23e. We expect to see mid-single-digit sales growth for FY24e in combination with low double-digit EBITDA margins. Yet, valuation looks undemanding. Shares are trading on a mere 5.0x EV/EBITDA (9x PE) 2024e, clearly below the historical average of roughly 7x. This is despite the structural demand tailwinds, which should fuel mid-term sales and margin growth.

Hence, we reiterate our BUY rating with an unchanged PT of € 31, based on DCF.