May 24th, 2022 | 12:21 CEST
Altech Advanced Materials, Varta, Mercedes - This way!
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"[...] We know exactly what we are doing and are implementing what we consider to be a proven technology in an industrially applicable and scalable way. [...]" Uwe Ahrens, Director, Altech Advanced Materials 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.
Altech Advanced Materials - Pre-feasibility study underlines great potential
The results of the pre-feasibility study (PFS) for the planned plant for ceramic coating of anode composite material in Schwarze Pumpe, south of Cottbus, have given the share a significant boost to date. The market capitalization of the micro-cap, currently just under EUR 7 million, is offset by a much higher potential value.
The Heidelberg-based company develops innovative processes to make batteries significantly more powerful. The nanocoating of battery materials with high-purity aluminium oxide and an enrichment of silicon can prevent the deposition of lithium particles on the electrodes. The problem of standard processes that lead to a loss of capacity after the first charge is thus eliminated.
The Company expects to develop batteries with 30% higher energy density and improved battery life using the ceramic-coated anode composite material. This technology could prove to be a game-changer.
According to the PFS, the project's pre-tax net present value (NPV) is around EUR 420 million! That puts the value of Heidelberg's ownership stake of 25% at around EUR 105 million. The high profitability is also reflected in an internal rate of return (IRR) of 40% and an investment payback period of just 3.1 years. Ten thousand tons per year (TPY) can be produced at total production capacity. On average, the Company expects an annual operating profit (EBITDA) of around EUR 52M.
In view of the technological potential of the Altech solution and the high expected return, the valuation discrepancy between stock market value and project value should be significantly reduced in the medium term.
Varta - Significant recovery forecast for the second half of the year
After an opening quarter marked by the Ukraine war and the long-term consequences of COVID-19, in which revenues and operating income fell, the southern German company prepared the investment community for a problematic Q2. For the second quarter, the Company has forecast revenues of between EUR 195 million and EUR 205 million and adjusted EBITDA of between EUR 34 million and EUR 38 million.
The group expects new product launches from customers such as Samsung and Apple in the second half of the year, which should significantly boost demand for lithium-ion button cells for wireless headphones. For this reason, Varta confirmed its guidance for the full year with consolidated sales of between EUR 950 million and EUR 1 billion, corresponding to growth of up to around 10%.
Berenberg and JPMorgan formulate a price target of EUR 95 for the share certificates, which results in a potential of around 20%. At EUR 3.2 billion, the Company is thus valued at a good three times its expected sales in 2022. According to average analyst expectations, the 2022 P/E ratio is a sporty 30 and drops to 25 in the following year. More visibility regarding the e-mobility business, i.e. the planned production of high-performance batteries, should help the share price performance.
Mercedes - "Class instead of mass"
By spinning off its car and transport division (Daimler Truck Holding) a few months ago, Mercedes Holding is focusing on its strategy. The group wants to bring Mercedes to the fore as a luxury brand. After all, in times of semiconductor shortages and supply chain disruptions, price increases in the high-priced segment can be passed on unproblematically to the affluent clientele.
But the topic of e-mobility is also a strategic cornerstone. The Company already announced its intention to push in this area last year. The foreign trade data of the German automotive industry support these plans. The Federal Statistical Office recently announced that about 90% of the approximately 328,000 e-cars produced in Germany were exported, worth EUR 12.6 billion. The United Kingdom, the United States and Norway saw the highest demand.
Investors who joined the Company 12 months ago enjoyed a dividend payment of EUR 5 per share certificate in April. However, the share price has not moved on the bottom line. Analysts believe the share has an average upside potential of a good 40%. With a P/E ratio of 5 to 6 for the current and the next fiscal year, the Company's valuation can be classified as moderate.
E-mobility solutions made in Germany - that is what the three companies mentioned stand for. Mercedes and Varta have formulated ambitious goals. Altech could turn the industry upside down with its innovations. The share price should then be at a completely different and much higher level.
Conflict of interest
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