Q3 sales increased by 16% yoy to € 86m (eNuW: € 85m) thanks to the strong order backlog at the end of Q2 (€ 138m) and unbroken demand across most of its key end markets incl. LNG and pharma, and supported by further easing supply chain bottlenecks and increased production efficiencies (9M +19% yoy to € 241m).

Q3 adj. EBITDA  rose by 42% yoy to € 13.5m (9M +100% yoy to € 32.5m), implying a 15.7% margin and coming in ahead of our € 11.8m estimate, thanks to better utilization rates, an improved gross margin (+2pp yoy to 66.6%) and the efficiency program from recent years bearing fruit. The group’s EBIT increased 68% yoy € 8.6m, a 10% margin.

FY23 guidance raised. Management increased its FY adj. EBITDA expectation to € 35-40m (old: € 30-36m, eNuW new € 39m) while at the same time specifying the sales guidance (€ 305-320m) towards the upper end. Our new FY estimates imply a Q4 with € 77m sales (+7.2% yoy) and a 9.2% adj. EBITDA margin. The sequential slowdown can be explained by seasonality (less working days) but also a continued demand slowdown across the European chemicals industry as reflected by the decreased order backlog (-4% qoq to € 132m).

Importantly, we expect Europe's chemical industry's investment reluctance, especially with regards to greenfield projects, to carry well into FY24e. With a revenue share of ~20% this is seen to temporarily weigh on growth (FY24e growth expectations reduced by 4pp) while other growth areas such as nuclear and LNG should compensate for that reluctance in the mid-term.

Despite the current weakness of the European chemical industry, R. Stahl’s prospects remain bright as the company strongly benefits from (1) its superior market shares along the LNG value chain (liquefaction and shipping: 75%, natural gas production: 50% and regasification 25%), (2) a rising need for production automation across offshore oil and gas rigs, and production plants of several industries and (3) the ongoing nuclear renaissance across Europe.

With that, R. Stahl is well positioned to gradually improve margins, returns and cash flow generation. As shares are trading on 5.5x EV/EBITDA 2024e we confirm our BUY rating with a € 31 PT, based on FCFY 2024e.