Global crisis impacts Q1; guidance maintained but with caution; PT down

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Varta’s Q1 2022 results were weak, as feared. Revenues declined on a temporary slowdown in demand in its lithium-ion solutions and micro-batteries (LISM) segment, while household batteries (HB) held up well. Profitability was dampened by the ongoing semiconductor crisis, supply-chain disruptions, input cost inflation, and geo-political tensions. Nevertheless, management reiterated its 2022 outlook, but with a cautionary tone, citing the current global challenges. Nevertheless, the expected rise in cash flow (ca EUR 0.65bn) over the next two years and ample financial headroom stemming from low net debt would offer Varta the flexibility to continue with its growth investments and enhance shareholder returns. We maintain our BUY rating but reduce our price target to EUR 100.00 (old EUR 114.00), amid lower top- and bottom-line expectations.

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