30. July 2021 | 13:28 CET
Aixtron, Defense Metals, Nordex - Strong growth
The global economic recovery and rising investment in more climate-friendly energy infrastructure are driving higher commodity prices amid supply chain disruptions. Shortages of industrial metals, which are urgently needed for climate change, are likely to materialize further in the coming years. The swelling trade conflict between the USA and China will exacerbate this significantly. There is a threat of massive bottlenecks in production and sharply rising prices for the respective materials.
time to read:
ISIN: AIXTRON SE NA O.N. | DE000A0WMPJ6 , DEFENSE METALS CORP. | CA2446331035 , NORDEX SE O.N. | DE000A0D6554
Defense Metals - Rare producer outside China
Lithium, nickel and copper are essential for producing renewable energy and batteries to power electric motors. In addition, rare earth metals, which are 17 chemical elements in the 3rd subgroup of the periodic table, play an essential role in the production of magnets for wind turbines and electric cars. In 2019, the United States imported 80% of its rare earth minerals from China, and the European Union sourced nearly 98% from the Middle Kingdom.
With the swelling trade war with China, Western industrialized nations now feel compelled to lessen their dependence. A bill to improve US competitiveness, which includes provisions to strengthen supply chains for critical minerals, was recently passed by the US Senate. Production and processing are to be significantly ramped up in cooperation with Western partners, such as Canada, to increase sustainable global supplies.
However, time is of the essence. It takes up to 10 years for a new rare earth metal project to reach production. Thus, existing deposits are in greater demand than ever. Along with Molycorp Mining's reopening of the Mountain Pass mine in California and Lynas' rare earth mine at Mt. Weld in Australia, Defense Metals' Wicheeda Rare Earth Project, covering approximately 1,708 hectares in the state of British Columbia, is considered one of the most promising ventures.
Due to the first-class infrastructure, Defense Metals can calculate drilling costs far below the industry average. According to management, mineral resources there are 4.9 million tons at an average grade of 3.02% LREO (light rare earth metals) and inferred mineral resources of 12.1 million tons at an average grade of 2.90% LREO. An additional 12 million tons are suspected in the area. Defense Metals recently secured CAD 5.0 million in the capital markets to carry out the core drilling program between 2km and 5km. Site selection and construction of the drilling platforms is expected to commence within the next few days. The purpose is to expand the area and further delineate the existing resources to prepare a feasibility study during the second half of the year.
Defense Metals' stock corrected in the wake of the capital increase already completed and is currently trading at CAD 0.16, about 50% below its high for the year. Due to the lack of rare earth metals, the share is speculative but promising in the long term.
Aixtron - Enormous demand
As expected, the Herzogenrath-based electrical engineering company, which produces equipment for compound semiconductors and nanomaterials, delivered strong half-year results. According to Aixtron CEO Felix Grawert, customer demand was very high in all relevant end markets. In particular, Aixtron's equipment for gallium nitride power electronics, for the manufacture of components for 5G network expansion and high-speed optical data transmission, is in demand. As a result, order intake increased from EUR 138 million to now EUR 263 million. Sales grew from EUR 97 million to EUR 117 million. Aixtron also more than doubled its earnings before interest and taxes to EUR 4.9 million.
Management continues to expect very dynamic revenue growth for the second half of the year, leading to forecasts of order intake between EUR 440 million and EUR 480 million and a profit margin before interest and taxes between 20% and 22%. The stock rose more than 7% to EUR 22.60 following the release of the strong figures. At EUR 23.57, a new all-time high beckons. In the long term, we continue to see rising prices.
Nordex - Analysts remain relaxed
Despite positive analyst opinions, wind turbine producer Nordex cannot free itself from the low level for the year at around EUR 16.0. Bank of America sees the stock as a potential doubling candidate within the next 12 months and assigns a price target of EUR 31. According to the experts, the Hamburg-based Company is exceptionally well-positioned in the high-growth 4-5 MW turbine segment. In addition, Nordex has a strong order intake with high demand for the Delta 4000 turbine model, which is why the US investment bank expects sales to increase by 20% year-on-year.
Jeffries also sees Nordex stock as a buy candidate and leaves the price target at EUR 25. The reason is the better capitalization of the Company after the capital increase, which puts the Hamburg company in a better position. From a chart perspective, a buy signal would be generated if the share price sustainably exceeded the broad resistance level of EUR 17.
The future belongs to renewable energies. Thus, the order backlog at wind turbine manufacturer Nordex should remain at a high level. Nordex will benefit in the long term from the improved capitalization due to the completed capital increase. Defense Metals should benefit from the scarcity of rare earth metals outside China.