Classification of NuWays AG to Nabaltec AG

Revised FY25 guidance due to FX effect and weaker demand

With the release of its preliminary Q2 figures Nabaltec also lowered its FY25 sales guidance, expecting a 1-2% yoy decline (old: 3-5% yoy sales growth, eNuW old: 5.7% sales growth). This is the result of an adverse FX effect ($ 30m exposure with USD/EUR of 1.17 vs 1.05 at the beginning of the year) but also continued weaker demand from industrial and automotive customers, especially for boehmite (coating solution for separator foils in EV batteries. Positively, management left the FY EBIT margin guidance unchanged at 7-9% (eNuW old: 9.7%) despite lower sales volumes as the material cost ratio improved (lower energy price mix). The H1 margin stood a 8.4%.

Q2 recap: Preliminary Q2 group sales decreased by 4.6% yoy to € 51.8m. Specialty Alumina remained weak at € 13.6m (-8.1% yoy) due its dependency on the steel industry. Functional Fillers sales of € 38.2m were down 3.3% yoy, mainly as a result of continued weak demand for boehmite. The sales decline witnessed during recent years (FY24 -25% yoy) looks set to persist throughout FY25 due to lackluster EV demand across Europe and the ongoing absence of notable cell and separator production capacities.

Positively, the underlying demand for its core product, aluminum hydroxide (ATH), the environmental friendly flame retardant used in cables and plastics, but also the visco-optimized gap filler remained strong. After the latter has grown some 100% yoy in FY24 to € 10m, we expect anther 25% increase for FY25e. The EBIT margin in Q2 came in at 9.1% (-1.7pp yoy), notably better than in Q1 as energy prices moved in favour of Nabaltec.

While the current operational performance remains subdued, the prospects remain promising. Nabaltec is able to benefit from growing demand for ATH on the back of tightening regulations across its core end markets, vast investments into data centers and renewable energies but also Germany‘s € 500bn infrastructure spending bill. The latter is seen to also turn into a tailwind for the company‘s Speciality Alumina segment, which is strongly tied to the European steel industry. While boehmite sales have been declining for several years, the product continues to have potential during the mid-term, depending on European ramp up of battery cell productions. From 2026e onwards, first positive implications as well as general demand normalizations are seen to materialize, eNuW.

Amid the currently subdued operational performance, the valuation remains low with shares trading 15% below their book value. Further, Nabaltec offers a healthy balance sheet with good sustainable operating cash flow generation throughout economic cycles. We hence continue to regard Nabaltec as a must own stock within its space. BUY with a new € 18 PT (old: € 24) based on FCFY 2025e.