Material Solutions surprises in Q1, FY26 guidance up

Q1p revenue rose 9.7% yoy to € 442m (eNuW: € 425m), driven mainly by significant price increases in Material Solutions. To recap, BETEK (51% of Material Solutions sales in FY25) had already proven largely resilient to the tungsten supply situation in H2 25, with a dynamic and proactive mitigation approach. Infrastructure and Engineering developed in line with guidance. We view Infrastructure to have grown moderately yoy, due to favorable weather conditions. In Engineering positive first-time revenue consolidation effects are seen to mitigate continued underlying demand softness, while typical seasonality holds. From acquisitions, we estimate inorganic first-time group revenue at approx. € 8.7m (eNuW).

Q1p adj. EBITA nearly doubled to € 42.5m (eNuW: € 25.7m). The adj. EBITA margin improved by 3.4pp yoy to 9.6%. Here, the price increases in Material Solutions clearly outweighed the raw material cost increases recorded in the quarter. In our view, this was supported by minor margin improvements in Engineering (eNuW: +3bp) and Infrastructure (eNuW: +3bp) as well as cautious cost management and operational excellence measures across the group. The Free Cash Flow decreased by € 50.5m to € -74.1m, due to raised Working Capital.

Seizing the opportunity and seeking a larger market share in tungsten products. Currently, some of BETEKs smaller competitors are signaling quiet retreats from tungsten products, opening up opportunities. BETEK and larger competitors are signaling their commitment to maintaining in the market. This could reflect in volume increases, despite delays and cancellations from some customers. We view the decision of INDUS to maintain supply capacity as sensible. Risen Working Capital is seen as a temporary fallout from this decision. Although part of the increase is also related to seasonal factors (i.e. Infrastructure ramping up for stronger performance in the summer).

FY26 guidance raised. FY26 revenue is to come in between € 1.85bn and € 2.05bn (previously € 1.8bn to 1.95bn). Adj. EBITA margins are expected to come in higher between 8-10% (previously 7.5% to 9.5%), resulting in FY 26 adj. EBITA of € 160m to € 190m (previously: € 150m to € 170m). We view this raised guidance as realistic, given the strong price-driven momentum in Materials Solutions and adjust our own estimates in line of the aforementioned developments to € 1.92bn in revenue (eNuW; previously € 1.83bn) and € 179m (eNuW; previously € 167m), implying an adj. EBITA margin of 9.3%.

INDUS clearly proves dynamic and resilient amid current special situations. Despite geopolitical developments having raised general macro uncertainty once again, a somewhat soft industry data backdrop in mechanical engineering outlined by VDMA as well as seasonal patterns influencing developments, INDUS performed strong in Q1 26. Net positive effects from volume and pricing provide short-term positive catalysts for Material Solutions. Maintaining BUY while raising PT to € 37.0 (previously € 34.5), based on FCFY 26e.