Despite challenging industry conditions that have pushed several larger peers close to breakeven, Nabaltec continues to deliver resilient margins and robust operating cash flows. At the same time, the company now boasts a significantly strengthened balance sheet. Nevertheless, the shares are trading at their lowest level in over a decade, a valuation disconnect that we believe is unwarranted.
Q4 to put NTG in the mid-points of the FY25 margin guidance. With Q4 sales showing similar trajectory as the first three quarters (9M -2.4% yoy), the expected € 44.4m sales (eNuW) are to put NTG at the lower end of the FY sales guidance (1-2% yoy sales decline). Importantly, despite an expected margin of only 4.3%, NTG should meet the guidance mid-point of 8%. With this, the company outperforms most of its listed chemical peers, which are around the break-even point (e.g. Lanxess, and Wacker Chemie)
FY26 to return to growth. For the current year, we expect Nabaltec to return to mid single-digit sales growth (5.6%) despite some pricing headwinds compensated for by higher volumes. Most importantly, demand for ground hydroxides (ATH) is seen to remain robust thanks to several secular trends (AI being one of them). At the same time, further volume increases of viscosity optimized hydroxides should overcompensate for the still weak boehmite demand. Next to boehmites, Specialty Alumina is likely to continue moving sideways. Margins to remain well, under continued challenging circumstances; eNuW 8.3% EBIT margin.
Current capex program coming to an end. In FY25e, NTG should have spend some € 25m on capex, slightly below our old € 32m estimate due to some postponements. With this, FY26e capex is seen at € 30m (eNuW), returning to a sustainable level of € 15m p.a. thereafter. With this, all major maintenance investments as well as the production capacity expansions for viscosity-optimized hydroxides and boehmite should be finalized, enabling potential group sales of up to € 300m. Importantly, even if boehmite demand does not recover as quickly as anticipated, the additional capacity can be flexibly utilized by shifting production toward ATH.
Valuation remains compelling. The shares continue to trade at a significant 37% discount to book value, despite the company navigating the current market environment effectively. Notably, the last time Nabaltec traded below book value, the company was highly leveraged and struggling with margins (€ 4-5m EBIT with more than € 50m net debt), a strong contrast to today's much stronger financial position (close to no net debt). Over the past five years (incl. 2025e), Nabaltec has generated € 141m in operating cash flow, underpinning solid cash conversion. Accordingly, adjusted free cash flow yield (maintenance capex only) is an attractive 14.8% in FY25e.
We hence confirm our BUY rating with an unchanged € 18 PT, which is based on a blended FY25/26e FCFY approach.
ISIN: DE000A0KPPR7
