February 15th, 2022 | 13:35 CET
Almonty Industries, Mercedes-Benz Group, Varta - Highs and lows, what to do?
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.
Almonty Industries - Only a few months to go
Tungsten is the chemical element with the highest melting and boiling point and is used in many industries. In general, China dominates the supply situation for critical raw materials, which is also the case for the whitish transition metal tungsten. Canada's Almonty Industries is well on its way to soon becoming a globally significant tungsten producer, thus making supply chains more secure.
Almonty plans to start its Sangdong mine in South Korea in the fourth quarter of this year. The mine hosts one of the world's largest tungsten resources and has the potential to produce 50% of the world's tungsten supply outside of China. According to recent company reports, 15% of the mine has already been constructed. The Canadians said that underground development is over 27% complete, six months ahead of schedule.
Recently, the Company also informed, after an extensive due diligence process was successfully completed, that it would soon receive a KfW loan of USD 75.1 million on favorable terms.
A purchase agreement with the Austrian Plansee Group, also a significant shareholder of the Canadians, was concluded a few months ago with a term of 15 years. Almonty receives an attractive minimum price which will be reflected in a sales volume of at least CAD 750 million.
The tungsten price has increased by 45% to USD 338 per mtu (metric ton) in the last 12 months. Demand remains high, especially from the semiconductor and battery sectors. With a market capitalization of CAD 191 million, the share also offers good opportunities from a timing perspective. If you want to know more: On 17.02. CEO Lewis Black will be at the IIF via Zoom and will report, live.
Mercedes-Benz Group - Better than expected
Good preliminary key data for the past fiscal year have excited analysts and the stock market. The private bank Berenberg raised the price target for the shares to EUR 90 - corresponding to an upside potential of 20% - and confirmed its "Buy" rating. According to the experts, the carmaker exceeded the consensus estimate, especially with its operating result (EBIT), and is moving towards a sustained double-digit margin.
Buoyed by a solid final quarter, the southern German Company achieved an adjusted return on sales of 12.7% in the Mercedes-Benz Cars & Vans segment, thus exceeding its self-imposed target range of 10 to 12%. Adjusted operating profit (EBIT) is expected to be in the region of EUR 14 billion.
Mercedes-Benz Group is clearly focusing on the future of electromobility. CEO Ola Källenius stated in the context of the recently published figures, "Our good result is the result of products that are in high demand as well as the focus on profitable growth and cost discipline. As the world's most valuable luxury car brand, we are accelerating into an all-electric, software-driven future."
Varta - Share price weakness continues
After falling below the EUR 100 mark, share prices have now also slipped below the EUR 90 mark. That means the Germans are still valued at EUR 3.5 billion. The 2022 P/E ratio is 27, and the 2023 P/E ratio is 25. After the price drop, an upside potential of 21% is calculated based on the average analyst price target.
While Varta is still the global market leader in microbatteries, competition from Asia is getting stronger, putting pressure on margins. The upcoming entry into the production of large batteries for e-cars presents opportunities and also significant risks, given the existing strong players. On March 31, the Group will publish its figures for the past fiscal year. We are eagerly awaiting the outlook.
Almonty Industries has exciting months ahead. The share is likely to attract great investor interest with the start-up of the tungsten mine. Business at Mercedes-Benz is running smoothly, and analysts see further upside potential. Varta's shares are subject to the greatest uncertainty.
Conflict of interest
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