After Lanxess shock, now time to invest in gold? Barrick, Manuka Resources, Evonik

Manuka Resources: Start of gold production also starting signal for share?

During the AI hype of recent months, gold shares have faced significant challenges. Smaller companies, in particular, were overshadowed. However, the situation can quickly change when things are going well operationally, as is the case with Manuka Resources. The Australian junior gold mining company announced a few days ago that gold production at the former Mt. Boppy gold mine has resumed. As the Company reported, 20,000 to 25,000 ounces of gold are to be produced annually in the future. This year, it will likely be around 10,000 ounces of gold.

This should significantly increase Manuka's revenues in the coming quarters. In the last quarter ending March 31, 2023, the Company had already generated a cash flow of AUD 1.3 million. In addition to ramping up production, Mt. Boppy's resource estimate is expected to increase further. Exploration will also continue at the McKinnons Mine and Pipeline Ridge projects. Manuka has already secured the financing through a capital increase.

With the resumption of gold production, there is now the potential for the share price to pick up momentum once again. The share is quoted at AUD 0.06 and listed on the Frankfurt Stock Exchange. In the summer of 2020, the share price reached AUD 0.63. At that time, the Company was still far from commencing gold production, which is now beginning.

Lanxess: Analysts react to the profit warning

On Tuesday, Lanxess let the cat out of the bag: the specialty chemicals company expects EBITDA pre exceptionals for Q2 2023 to amount to EUR 100 million, which is below current average market expectations. Against this background, the Cologne-based company also adjusted its forecast for the full year 2023. The very weak demand and ongoing customer de-stocking in the first quarter continued into the second quarter. In particular, weak demand from the construction, electrical/electronics industries and even for otherwise stable consumer-related products impacted the result. The weak demand is expected to continue in the second half of the year. As a result, Lanxess expects full-year 2023 EBITDA pre exceptionals of EUR 600 million to EUR 650 million.

In response, analysts have reduced their price targets, in some cases significantly. Yesterday, Jefferies downgraded Lanxess from "buy" to "hold". The price target was reduced significantly from EUR 40 to EUR 28. The analysts pointed to a major refinancing in two years. Due to declining profitability and persistently high interest rates, this is likely to concern shareholders. DZ Bank also downgraded Lanxess shares from "buy" to "hold". The price target was reduced from EUR 43 to EUR 28. For the analysts, the size of the profit reduction in the current year is a surprise. There is no improvement in sight.

Berenberg continues to be among the optimists. The analysts stick to their buy recommendation for the Lanxess share. The price target was reduced only slightly from EUR 56 to EUR 49. The chemicals group's shares were trading around EUR 26.45 yesterday.

Evonik & BASF: Also with problems?

After Lanxess' profit warning, one naturally asks, what about Evonik and BASF? The shares of the two chemical companies also lost on Tuesday but stabilised again on Wednesday. Analysts are also still relatively relaxed. JPMorgan recommends Evonik as "Overweight". The demand situation currently needs to be improved throughout the industry. However, the valuation is now also favourable in a historical comparison.

At BASF, Jefferies slightly reduces the price target from EUR 49 to EUR 47. The rating remains at "hold". The Ludwigshafen-based company is also struggling with weak demand and de-stocking on the customer side. However, Jefferies' EBIT estimates are already below consensus. Therefore, the analysts do not currently see any major need for action.

BASF will publish its quarterly figures on July 28. According to the financial calendar, Evonik will open its books on August 10. The possibility of profit warnings during this period cannot be ruled out.

There are increasing signs that the economy is not doing as well as the stock market indices suggest. The chemical industry is having problems, and this is a leading indicator that should not be underestimated. Therefore, chemical stocks like Lanxess and BASF remain hot irons. Gold stocks could be poised for a comeback. Manuka Resources is an example of an operationally positive story that has been ignored in recent months.