Umicore Will the real cash flow generator please stand up?

Last week's long awaited strategy update highlighted Umicore's ambition to try to monetize past investments in Battery Materials, acknowledging that some additional capex and equity investment into the Ionway JV are still necessary to achieve this. In the meantime, the company will actively explore partnerships in Battery Materials. The financial targets for Battery Materials were above our expectations and the same can be said for the foundation businesses, particularly Catalysis, which is to be supported in the next few years by recent contract wins in the gasoline LDV segment. The 2028 adjusted EBITDA target of € 1-1.2bn was well above our forecasts, which incorporated only minimal growth vs the 2024 adjusted EBITDA of €763m. Whilst the electrification of transportation will eventually put meaningful long term pressure on Catalysis and to a lesser extent potentially also Recycling, given the important weight of PGMs, we believe the strategy update is comforting. The major share price pressure of the past months looks overdone and we see meaningful valuation upside, prompting us to reiterate our Accumulate rating and € 12 target price.