Nabaltec will publish its H1 figures on August 20. Following a soft Q1 (sales -2.7% yoy), management guided for a gradual return to revenue growth starting from Q2, driven by a broad-based demand pick-up. The release should hence serve as the first proof point for the implied acceleration (6.6-9.3% yoy growth required for the remainder of the year to reach the 4-6% FY guidance). Our preview in detail:
Q2 group sales are seen to increase 6.2% yoy to € 55m (eNuW), implying H1 sales of € 108m (+1.6% yoy). In segment detail:
Functional Fillers sales are estimated at € 40.5m, up 6% yoy (eNuW). The return to growth should be carried by fine hydroxides (FH) as demand for environmentally friendly flame retardants used in data centre cables continues to accelerate (reaffirmed by key cable manufacturers such as Nexans and Prysmian). Viscosity optimized hydrates (VH) look set to continue their strong momentum (Q1: +28% yoy; eNuW Q2: +35% yoy to € 6m). Yet, boehmites should remain a drag with a flat-ish yoy sales development. Mind you, while battery cells (boehmite application area) are largely produced in China, the pack assembly and assembly into the car is indeed done in Europe (VH).
Specialty Alumina sales are estimated at € 14.5m, +6.6% yoy (eNuW) as demand from key end markets such as the refractory industry should have passed the trough.
Q2 EBIT is expected at € 4.1m (7.4% margin, eNuW). While the margin is seen to be down 1.7pp yoy (burdened by risen energy prices but also higher levels of depreciation stemming from the ongoing production capacity buildouts), we expect it to show notable improvement compared to the last two quarters. Mind you, the scheduled maintenance of the waste incineration plant next to the German site (key supplier of production-relevant steam) falls into Q2/Q3. So far, the process has been running smoothly, not forcing NTG to produce its own steam using LNG at currently elevated prices, which is reflected in the lower end of the FY margin guidance.
Guidance check. H1 growth would stand at 1.6% yoy with further sequential improvements expected, putting the FY sales growth guidance of 4-6% (eNuW: 4.2%) well in reach. On profitability, an H1 EBIT margin of 6.3% (eNuW) supports our view that the lower end of the 5-7% EBIT margin guidance looks rather conservative, especially in light of an improving top-line momentum in H2, compensating for potential input cost risks.
Attractive long-term set-up. Nabaltec is a globally leading player in the market for environmentally friendly flame retardants, which is driven by tight regulations and structurally growing demand, especially in the area of data centres. New products such as VH add additional growth levers. Despite the currently challenging specialty chemicals market, Nabaltec stands out with a strong balance sheet, still good margins and plenty of capacity (€ 300m revenue potential, eNuW) to be utilized during the mid- to long-term, not adequately reflected by the current valuation.
We confirm our BUY rating with an unchanged € 16 PT based on FCFY26e.
ISIN: DE000A0KPPR7
