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January 9th, 2023 | 17:38 CET

An explosive start to 2023 for GreenTech and battery shares - BASF, Manuka Resources, Freyr and Varta in turnaround

  • Mining
  • Silver
  • Gold
  • GreenTech
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In 2023, international pressure to initiate the climate turnaround remains. One potential path is seen in e-mobility. Despite the enormous development efforts of the last 5 years, no battery solution has yet been launched that could match the performance characteristics of a last-generation diesel powertrain. Key characteristics here are cost and sustainability in manufacturing, range, lifetime and safety. Nevertheless, progress is being made in the chemical mix of battery components, and some companies are making a name for themselves here. We analyze the current status.

time to read: 5 minutes | Author: André Will-Laudien
ISIN: BASF SE NA O.N. | DE000BASF111 , Manuka Resources Limited | AU0000090292 , Freyr Battery | LU2360697374 , VARTA AG O.N. | DE000A0TGJ55

Table of contents:

    BASF - New battery deal in Asia

    Ludwigshafen-based chemical company BASF is one of the largest suppliers of starting materials for the GreenTech industry. Here, substances are produced and mixed with high-energy input, important chemical precursors for high-tech manufacturers in the alternative energy and e-mobility sectors. Now BASF has added an important customer and will become a strategic supplier of cathode materials for e-car battery cells from Prime Planet Energy & Solutions (PPES), the battery joint venture of Toyota and Panasonic. The materials will be supplied by BASF's majority-owned joint venture BASF Toda Battery Materials (BTBM). It is a newly developed product from the high-performance cathode materials portfolio.

    It is not yet known in which e-vehicles the new battery will be installed. According to BASF, a tailor-made product has been developed to meet battery requirements for higher performance, longer life and improved efficiency. BASF shares rebounded strongly to over EUR 50 in 2022 from lows of around EUR 38. At currently EUR 52.8, the value is still analytically favourable. That is because, on a 2023 horizon, investors are currently paying a P/E of just under 11 and will receive a payout of around 6.5% if the current earnings trend can be maintained.

    Manuka Resources - One of the largest vanadium projects in the world

    Resource companies are often under discussion because of sustainability criteria. It is, therefore, essential that urgently needed metals are mined in a particularly environmentally friendly manner. Manuka Resources Limited, based in the Cobar Basin, New South Wales, operates according to strict ESG criteria. The Company owns two highly prospective projects in gold and silver with historical production. It is also positioning itself in the critical metals sector with its recent acquisition of the South Taranaki Bight Project (STB).

    The giant vanadium deposit, located off the west coast of New Zealand, represents a quantum leap for the Company. Mineable, it contains around 3.8 billion tons of iron sand, vanadium and titanium. For the world's strained supply chains of critical metals, extracting these resources would be a valuable contribution to solving global green projects. Vanadium, in particular, is very rare and is hard to find except in China and Russia.

    The transaction to acquire 100% of the Company's shares in Trans-Tasman Resources Limited (TTR) has now been completed in 2022, and a bankable feasibility study (BFS) for the offshore iron sands project has already commenced. With the grant of the mining license, Manuka aims to initially produce approximately 5 million tonnes of vanadium-bearing titanomagnetite (VTM) iron ore concentrate per year over a mine life of roughly 20 years. Aside from its steel-hardening properties, vanadium is also at the forefront of the GreenTech industry. It plays a critical role in improving energy storage and battery life in the new vanadium redox flow battery (VRFB). The international race for the most efficient battery is entering the next round with the collapse of the Tesla share. Manuka can become a medium-term supplier of a very competitive sector in the new lineup.

    In December, the Company received about AUD 4.1 million via a capital increase. The acquisition of TTR increased the number of shares to 502 million, and the share price settled at around AUD 0.09 after the measures. That gives the Australians a market capitalization of just under AUD 44 million. Manuka Resources has what it takes to take off in 2023 with rising gold and silver prices and its GreenTech metals.

    The Wonawinta project is the largest primary silver producer in Australia as of March 2022. Source: Manuka Resources

    Varta and Freyr Battery - Big targets, weak share prices!

    Varta gave its investors a heavy loss-making year in 2022. With several profit warnings, it went down by a full 80% last year. However, the group is preparing to get its operational woes under control in the new year. To this end, the new Varta CEO, Markus Hackstein, has brought in the restructuring experts from Boston Consulting.

    The reason for this is the massive increase in the cost of materials to around EUR 400 million per year. With planned sales of around EUR 870 million in 2023, the Company will likely remain in the red if no veritable cost-cutting solutions are found. Currently, the high costs cannot be passed on to the products since the international competition has not had to bear Germany's unique industrial location problems since the beginning of the Ukraine war.

    Well-known analysis houses such as DZ Bank and Goldman Sachs have lowered their ratings for Varta to Hold and Neutral, respectively, and adjusted the 12-month price targets to EUR 25 and EUR 30, respectively. Warburg even votes with "Sell" and a price target of EUR 17.50. However, the share is still EUR 10 away from this, as there was a first sign of life at the end of the first trading week in 2023. If the resistance at EUR 28 now also falls, it could go up quickly and dynamically with momentum and speculative trend followers. Fundamental investors should wait for management's first outlook for 2023. The environment remains tense.

    Norwegian GreenTech competitor Freyr Battery has also fallen back to its 2021 starting price of EUR 8, a whopping 50% loss from the highs. The startup provides clean solutions to the fast-growing demand for competitive battery cells, specifically for stationary energy storage, electromobility and marine applications. Profits are not expected before 2027 due to investment. However, 6 out of 7 analysts are positive on the plans and expect a median price target of USD 19.50. Despite the positive backing, the Luxembourg-based company has yet to show any sales but is already valued at EUR 1.2 billion. At the end of the third quarter of 2022, there was still USD 419 million in cash for research and development, and the next capital round will probably have to be initiated in mid-2023. Very speculative!

    GreenTech stocks are making a splash again. After a disruptive year of war, the world finally wants to be able to breathe again. The stock market is therefore starting the new year on a very optimistic note. However, companies will first have to show in their outlooks that the expected economic downturn will bypass their books. BASF and Manuka look quite good. For Varta and Freyr, the boot camp might be exhausting.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
    In this respect, there is a concrete conflict of interest in the reporting on the companies.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
    For this reason, there is also a concrete conflict of interest.
    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    André Will-Laudien

    Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.

    About the author

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