December 12th, 2022 | 10:45 CET
100% is possible: BYD, Varta, Power Nickel, BASF: E-mobility stocks for 2023!
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"[...] Nickel, therefore, benefits twice: firstly from its growing importance within batteries and secondly from the generally growing demand for such storage. [...]" Terry Lynch, CEO, Power Nickel
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
BYD - The Chinese number 1
Despite a mega deal with Sixt and the entry into the European automotive markets, the BYD share experienced the biggest correction in 3 years in the fall of 2022. "Build Your Dreams" first came into investor focus in 2008, when Berkshire Hathaway, the investment company of stock market guru Warren Buffett, invested in the Chinese manufacturer of electric vehicles and batteries.
BYD saw its best year in 2020, with the Chinese electric vehicle market booming and the Company unveiling the revolutionary Blade Battery. At the time, the new super unit for electric cars set new standards in the safety of e-cars due to its low heat generation. The battery innovation also provided more range and significantly longer service life. The stock market rewarded the innovation with a price increase of more than 400%, and Buffett's investment holding company earned handsomely. But because of increasing tensions between Washington and Beijing, many analysts recently advised caution. Berkshire owned, at the peak, almost 25% of BYD. Through substantial reduction, the share recently fell to below 16%. Thus the analysts from Omaha realized over USD 1 billion in profit.
Despite rising competition, BYD is still China's best-selling electric car brand. It has already clearly overtaken US rival Tesla on the domestic market. That is because while BYD shipped 103,157 pure electric vehicles from its Chinese plants in October, Tesla's total was just 71,704 units, according to CPCA data. After hitting a low of EUR 20.80, BYD shares have turned around and are again targeting the EUR 26 mark. Thus, the value is still a good 60% away from its high. If the EU electricity crisis does not put a spanner in the industry's works, e-mobiles should be able to capture an increasing market share in 2023 as well.
Power nickel - The next blockbuster nickel deposit
When thinking about battery technologies, there is no getting around nickel, graphite and cobalt in addition to lithium. The first commercially available lithium-ion battery was the lithium cobalt dioxide battery, or LiCoO2 battery, which Sony used primarily in video cameras in 1991. Nickel-manganese-cobalt (NMC) cathodes are currently the most successful lithium-ion system because they offer a good compromise between general electrochemical performance, high energy densities and production costs. The success of NMC cathodes is due to the combination of nickel and manganese; the nickel brings a high specific energy density to the material.
Since 2022, electric vehicle manufacturers have had a nickel procurement problem because the demand for lithium-ion batteries currently consumes 8% of the world's nickel production of 2.7 million tons annually. For NMC batteries, the nickel share is currently about 40%, with 75% of global production coming from Russia. Since the start of the Ukraine war, there have been enormous shortages of nickel, and car manufacturers are desperately looking for alternative sources of supply. VW, for example, wants to cover its nickel requirements from Indonesia, and several projects are underway in North America.
Canadian explorer Power Nickel (PNPN) has a flagship project called NISK in Quebec. With mineralization for nickel, copper, cobalt, palladium and platinum, NISK slays nearly all the major future metals in one property. Power Nickel was created in 2021 by its predecessor company, Chilean Metals. Today, the new Company has a mining investment portfolio that includes a 100% interest in the Golden Ivan project, a mineral deposit with polymetallic veins of silver, zinc, gold and copper. In addition, the Company is also well-represented with concession rights in Chile. They include five properties with over 50,000 acres strategically located in northern Chile's prolific iron oxide-copper-gold belt.
Power Nickel plans to focus on battery raw materials in the future. According to a 2021 study by the Nickel Institute, the proportion of Ni in modern batteries will increase from around 39% to 58% by 2025. With its NISK project, Power Nickel is well positioned to supply high-quality nickel to battery producers, as recent drill results returned a grade of 1.17% nickel with high purity. The Company was just able to refinance to the tune of CAD 4.19 million, which creates room for further operational steps. Despite the current poor environment for explorers, the promising PNPN share has been on the upswing for 6 weeks and has already made substantial gains.
BASF and Varta - Two interesting battery players with opportunities
Two shares from the industrial sector are currently making a splash. BASF reports good figures despite rising energy prices, and the raw materials subsidiary Wintershall-DEA is helping tremendously. At Varta, the current market conditions are a cause for concern because customers are hesitant, and the sharp rise in production costs cannot yet be passed on.
The analyst consensus for BASF has recently become much more positive again than was the case at the beginning of the Ukraine conflict. In the meantime, BASF has assured that it can manage quite well even with 50% less gas. At the same time, the increased prices on the world markets are playing into the cards of the market leader for chemical precursors. Because those who can currently deliver are in demand, supply chain problems have to be overcome. BASF has made a strategic decision to invest EUR 10 billion in China. Even though this is being loudly criticized in public, the Ludwigshafen-based company is systematically moving closer to the growth markets. Understandably, the prospects in Europe do not encourage major investments. Ultimately, the global corporation also has a duty to its shareholders and is not subject to dictates from Berlin or Brussels. BASF's claimed profits and attractive dividend policy entice investors to buy the stock in the EUR 47 range.
Varta recently had to cope with some problems, and the outlook had to be revised several times. The share followed the disaster and fell from around EUR 180 to EUR 26 since 2020. The selling pressure is easing again due to more positive analyst opinions, which creates room for a small technical recovery. Still, analysts do not see any fundamental reasons to buy at present. The mean price expectation on a 12-month horizon is at a low EUR 31.30. Leave Varta nevertheless on the watchlist and wait for positive statements from the management. The first 20% in the turnaround are known to be the riskiest and should be left to professionals.
The battery market is under high pressure. According to legislators, things have to move quickly so that the issue of climate protection finally delivers tangible progress. BYD, BASF and Varta occupy the industrial side. Power Nickel is to grow in the medium term to become a raw material producer in North America or will be taken over beforehand because of its attractive properties.
Conflict of interest
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