Betolar H1'25: New technology sets the tone for H2

Translation: Original published in Finnish on 07/21/2025 at 08:05 am EEST

We reiterate our EUR 1.2 target price and Reduce recommendation for Betolar. We find the overall picture of the half-year report quite neutral, with the main items roughly in line with our forecasts and new orders returning to growth. We made revisions to our cost structure forecasts for the coming years, but overall, the changes were minor. Betolar's new production innovation enhances growth potential looking towards the turn of the decade, but risks related to achieving the potential and the financing situation turn the risk/reward ratio modest in our opinion.

H1 progressed as expected

Betolar’s H1’25 revenue of 0.4 MEUR and EBITDA of -2.1 MEUR were slightly below our estimates. Order intake, in turn, reached our expected level of 0.5 MEUR, so we think the overall picture of the report was quite neutral. We believe the received orders included the announced Anglo American development project related to Betolar's new technology. Thus, the immediate financial impact of the announced project is limited, but on the other hand, a customer reference from a large mining company is valuable.

All means harnessed in commercialization

Betolar guides for revenue growth this year. We expect the company to easily reach its broad guidance and growth to accelerate in H2’25. For the current financial year, we expect revenue of 1.2 MEUR, mainly consisting of solutions for the mining industry. Although we do not expect the new technology enabling metal separation and green cement production to be ready for production for another two years, we expect commercial research projects related to the new technology to provide slight support to revenue in the coming years, as demonstrated by the recently published Anglo American collaboration project. We expect commercialization to take a step forward next year among mining industry clients, which should drive revenue growth to 6 MEUR. However, growth investments in the coming years require successful completion of financing arrangements. Thus, financial risks are high in the near future.

Promoting the commercialization of Betolar's new production method is the company's primary goal in the near future. Based on the comments, the next steps in commercializing the method are making decisions related to outsourcing process operations, converting ongoing sales leads into new customers, and concluding long-term raw material agreements to ensure the availability of suitable slags. Thus, even more significant strategic realignments appear to be under consideration, as we suspect that taking a larger role in the method's production chain would require significant capital and new resources for the company. Also, achieving the license-based, capital-light business model, which was previously at the core of the investment story, no longer seems to be at the top of the priority list. We believe that expanding the approach and flexibility based on customer needs is highly justified for achieving commercial traction, even though Betolar cannot afford particularly large investments with its current financing.

Valuation relies on far-reaching potential

The 2025 and 2026 EV/S valuation ratios based on our forecasts for Betolar are 20x and 6x, which we consider high considering the risks related to commercializing Betolar’s innovations and reaching industrial scale. The value of the DCF model based on our long-term forecasts is at our target price. Limited commercial evidence and the elevated financial risk warrant caution on the stock at the current price.