Original-Research: LION E-Mobility AG (von NuWays AG): Buy

Classification of NuWays AG to LION E-Mobility AG

Company Name:	LION E-Mobility AG
ISIN:	CH0560888270
Reason for the research:	Update
Recommendation:	Buy
from:	08.11.2024
Target price:	EUR 3.60
Target price on sight of:	12 months
Last rating change:
Analyst:	Christian Sandherr

LIGHT battery closer to commercialization // TÜV SÜD stake sold

LION E-Mobility announced the successful completion of high-temperature tests for its LION LIGHT battery, which includes advanced immersion cooling technology, in collaboration with a German premium OEM. The battery exceeded test standards, demonstrating robust performance under extreme conditions and making it unique in the market for meeting the OEM's requirements.

This is a significant milestone, as it validates the product and puts LION closer to commercialization. Here are the expected next steps: Once final testing is completed (in our view only a matter of form), LION should receive a request for quotation from the premium OEM. With this, the company is seen to put serial production plans into terms. In our view, the most likely situation would be a production JV with a Tier 1 supplier. Importantly, no exclusivity agreement has been signed with the OEM currently testing the battery. We hence expect LION to also be in early talks with additional potential customers.As the commercial aspects and concrete timeline until the fist serial production could be live are still difficult to grasp, we have not yet included the LIGHT battery in our estimates.

What's more, LION announced the divestment of its 30% stake in TÜV SÜD Battery Testing to boost liquidity, as mentioned in its H1 report. In FY23, TÜV SÜD Battery Testing achieved € 16m in sales (+ 41% yoy) with an 18.9% EBIT margin, driven by a strong, ongoing demand for battery testing services. While the company has so far not announced a price, we expect the buyer (the joint venture partner TÜV SÜD AG) to pay roughly the book value recorded in the FY23 annual report of € 5.6. The proceedes will mainly be used to repay outstanding liabilities.

Operations remain burdened during the short-term. As reflected by the FY24 guidance, which was cut with H1 figures, demand for battery pack solutions is seen to remain lackluster during H2, despite significantly improving vs. the first half of the year. FY24e sales are seen to decrease by 41% to € 33m (eNuW). In our view, this should to a large extent be driven by strongly falling battery prices and the resulting “wait and see” mentality of customers. This is not expected to change until H2 2025, in our view. While we expect FY25e to show a strong yoy sales increase, our figures are still below the reported numbers from FY22/23. Yet, this should be sufficient to get close to op. cash flow break even.

LION E-Mobility remains a BUY with an unchanged € 3.6 PT based on SOTP.

You can download the research here: http://www.more-ir.de/d/31231.pdf
For additional information visit our website: www.nuways-ag.com/research

Contact for questions:
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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