Following a particularly weak FY24 with plunging sales amid largely distressed end markets (falling battery prices with the resulting "wait and see" mentality of customers and several insolvencies) LION looks set to have passed the trough, in regards to reported figures and new project developments. H1 sales of € 10.4m were up 71% yoy as the company benefitted from the cyclical upturn in demand for battery-packs used in mobility solutions.
More importantly, management was able to turn the bottom-line around, improving EBITDA from a € 4.8m loss a year ago to a positive € 1.3m thanks to a tight grip on costs, the absence of development costs for the new chemistry cells but mainly positive implications from a better fix-cost coverage. The EBITDA margin for H1 stood at 12.1%, clearly ahead of our estimates for FY25 (0.9%). Operating cash flow also turned positive, € 3.3m compared to a € 5.8m deficit last year thanks to the notably improved operational performance as well as further optimized inventory levels.
Thanks to good visibility through the order book which should allow a continuation of the momentum, management confirmed its FY25 guidance of € 28-35m sales (eNuW: € 32m) and positive EBITDA (eNuW: break-even).
Strategic partnership with LeapEnergy to unlock access to the thriving but highly competitive energy storage market. This deal grants LION exclusive BESS distribution and service rights in major European markets and Canada, diversifying beyond e-mobility into a fast-growing segment. Combining LeapEnergy's manufacturing scale with LION's integration expertise and market access creates new, scalable revenue streams, strengthens growth visibility, and enhances the investment case through portfolio expansion and improved margin potential. This bodes well with the announced strategic partnership with Münchner Solarkraftwerke, which has over 40 hybrid (PV + BESS) projects in its pipeline. As most of those projects are at an early stage, potential revenue recognition will span over several years, starting with H2 2026 (eNuW).
Immersion cooled LIGHT battery update. While the project with the premium OEM is experiencing delays due to adjustments to their Innovation projects (~1 year as mentioned during the earnings call), LION launched a new/additional development project with a German truck manufacturer looking to create an electric truck that can sufficiently recharge its battery during mandatory breaks to cover the distance between two mandatory breaks. Further, LION is testing integration with advanced heat exchanger and pump technology.
Our take: LION's H1 performance with a return to profitability and positive cash flows underscores the likelihood of a successful operational turnaround. This coupled with BESS sales gaining momentum during the next few years, LION looks well positioned to sustainably generate cash and hence also turn the balance sheet around.
BUY with a € 2.9 PT based on DCF.
ISIN: CH0560888270
