Topic: After a convincing FY24e, we see another solid year for R. Stahl ahead. However, due to a low order book and an uninspiring demand in Q3, sales and earnings could potentially be soft in H1'25e.
R. Stahl started with a solid order intake of € 181m (book-to-bill 1.04x) into the first half of FY24e before demand came down to € 74m in Q3 (book-to-bill 0.85x). A major reason is the still struggling European chemical industry where investments remain on a historically low level. In addition, larger decisions were delayed during the months before the presidential election in the US. Nevertheless, there should be a catch-up effect in Q4'24e and Q1'25e. Beyond that, president-elect Trump is expected to be a positive driver for the oil and gas industry.
While sales in Q3 still benefited from a sound backlog in the oil and gas industry in Americas, the order book has come down considerably to € 108m end of 9M'24 (vs. € 132m 9M'23). Consequently, we expect to see sales coming down for Q4'24e (eNuW: € 83m). Further, due to the lower visibility, H1'25e is now more dependent on new order intake in Q4'24 and H1'25e. For FY25e, we expect sales to slightly increase to € 355m, despite a potentially weaker H1.
We also expect the adj. EBITDA margin to improve slightly (eNuW: 10.8%), thanks to the EXcelerate strategy program. The implementation of the program created one-time costs of c. € 3.7m in 9M'24 (c. € 4.5m in total until 9M'24) and should amortize within 1-2 years as stated in the Q3 CC. On the other hand, pressure from wage inflation should persist throughout FY25e, although we expect the overall headcount to slightly decrease. Adj. EBITDA is seen to stay at a solid level of € 38m (eNuW).
Even though the upcoming quarters might be challenging, we continue to be optimistic in the mid- to long term. R. Stahl is not losing market share due to its positive brand recognition and it's just a matter of time until the demand for R. Stahl's explosion protection products recovers back.
We reiterate our BUY rating with an unchanged PT of € 25 based on DCF.
ISIN: DE000A1PHBB5
