September 2nd, 2024 | 07:00 CEST
Almonty Industries, Rheinmetall, Intel - The invisible engine of high-tech applications is called tungsten!
Tungsten, often operating behind the scenes, plays a central role in some of the most innovative and technologically sophisticated industries in the world. As a high-tech raw material, tungsten is essential for the production of modern microchips and electronic devices that shape our everyday lives. At the same time, it is an indispensable component in the defense industry, where its exceptional hardness and resilience contribute significantly to the development of advanced weapons systems. Due to its properties, tungsten is also being used increasingly in batteries. Nevertheless, the importance of this critical raw material is often underestimated.
time to read: 4 minutes
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Author:
Armin Schulz
ISIN:
ALMONTY INDUSTRIES INC. | CA0203981034 , RHEINMETALL AG | DE0007030009 , INTEL CORP. DL-_001 | US4581401001
Table of contents:
Author
Armin Schulz
Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.
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Almonty Industries - US has a strong interest in tungsten
Almonty Industries, a Canadian mining company, recently hosted a delegation from the US government to inspect the progress of the restart of operations at the Sangdong tungsten mine in South Korea. Tungsten is a critical metal used in weapons production, semiconductors, and industrial cutting machines, among other applications. The largest tungsten deposits are currently in the hands of China. The delegation, led by experts from the US Geological Survey (USGS), focused on the development of the underground mining facilities and the processing plant. This inspection underlines the strategic importance of resuming tungsten production outside China.
Almonty Industries' half-year figures show a clear upward trend. Revenue increased by 24.8% to CAD 15.76 million in the first half of 2024, while income from mining activities improved by 291.5% to CAD 1.82 million. EBITDA at the Panasqueira Mine amounted to CAD 2.4 million, which is attributable to increased production and higher revenues. EBITDA of CAD 10 million is planned by the end of the year. Despite a net loss of CAD 5.58 million due to investments in the Sangdong mine, this balance sheet shows a positive development compared to the previous year.
The latest report from Sphene Capital highlights Almonty's excellent half-year results and raises the price target from CAD 2.13 to CAD 2.31. The analysts issued a clear "Buy" recommendation and see Almonty as a major future supplier of conflict-free tungsten. The report also highlights the increasing global demand for tungsten, which is expected to grow by 3 to 7% per year, particularly due to increased demand from the defense industry, further strengthening the Company's long-term growth prospects. In mid-August, the share price broke out of its sideways phase and is currently trading at CAD 0.81. As soon as production begins at the Sangdong mine, the share price should have further potential.
Rheinmetall - New orders and strategic expansion
As part of the second ring swap, Rheinmetall is supplying 14 Leopard 2A4 tanks and one Buffalo armored recovery vehicle to the Czech Republic. The order value is in the low three-digit million euro range. The first tanks are expected at the end of 2024, the rest by April 2025, and the armored recovery vehicle will be delivered in early 2026. This agreement, which was signed in Prague at the end of July 2024, strengthens support for Ukraine through the transfer of Czech military equipment. In the Rheinmetall Automotive division, however, the Düsseldorf-based company also received an order for the production of exhaust gas recirculation valves for a major car manufacturer. This will further utilize the Company's production capacities until 2031.
Rheinmetall expands its market presence in the US with the acquisition of Loc Performance Products. The agreement, signed on August 13, 2024, provides for the acquisition of the Plymouth, Michigan-based vehicle manufacturer for USD 950 million. This acquisition strengthens Rheinmetall's position in the largest defense market. It increases the chances of winning major contracts such as the XM30 and CTT programs, which have a total volume of over USD 60 billion. Rheinmetall is also integrating highly qualified employees and modern production capacities from Loc Performance.
The Company recorded a 33% increase in consolidated revenue to EUR 3.8 billion in the first half of the year, driven by strong military and civilian business. The consolidated operating result increased by 91% to EUR 404 million. Free cash flow improved by EUR 306 million to EUR -19 million. Due to the positive business development, Rheinmetall confirms its annual forecast for 2024 and continues to expect consolidated revenue of around EUR 10 billion and an operating profit margin of 14% to 15%. The share has formed a double top at EUR 569. On Friday, one share was priced at EUR 542.
Intel - A challenging year
Intel recently disappointed with its weak performance in the second quarter. Revenue amounted to USD 12.83 billion, corresponding to a slight decline from the previous year and missing analysts' expectations. Particularly painful was the earnings per share of only USD 0.02 - a drastic decline compared to USD 0.13 in the previous year. Margins also suffered considerably from competitive pressure from companies such as AMD, Nvidia, and TSMC, to which the Company responded with pessimistic forecasts for the coming quarter. Accordingly, investor-friendly restructuring measures were announced.
To meet the economic challenges, Intel is planning savings of over USD 10 billion by 2025. This includes a 15% reduction in headcount as well as a reduction in operating costs, product costs, and capital expenditures. Despite these measures, most analysts remain skeptical about a short-term improvement. The relocation of production to a high-cost Irish factory in order to remain competitive is a long-term oriented but costly short-term move that is likely to continue to weigh on margins. In addition, there are uncertainties due to new export controls and government subsidies.
Although Intel is investing in major projects such as the EUR 30 billion plant in Magdeburg, which is scheduled to start in 2027, and in the expansion of its foundry services, competition from TSMC remains a major hurdle. The high investment costs in high-wage regions and the ongoing loss of market share to AMD and Nvidia are further risks. Despite an attractive valuation level of a P/E ratio of 10.6 for 2026 and a possible boost from new products such as the Gaudi 3 in 2025, caution is currently advised. The share is currently trading at USD 22.04.
The significance of tungsten for high-tech applications is still not widely recognized by many investors, even though it is essential for modern technologies and the defense industry. Almonty Industries is benefiting from the increasing demand and the development of the largest tungsten mine outside China, the Sangdong mine. The ongoing production of its other projects recorded a revenue increase of 24.8% in the first half of 2024. Rheinmetall has secured a strong market position through strategic orders and acquisitions and increased its revenue by 33% in the first half of the year. Intel, on the other hand, is struggling with challenges and announced cost-cutting and restructuring measures but remains future-oriented thanks to significant investments in projects such as the plant in Magdeburg.
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