August 8th, 2022 | 10:10 CEST
Analyst comments on BYD, Barsele Minerals and Rheinmetall
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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
Rheinmetall AG - Cleared for launch
The stock of MDAX member Rheinmetall came under heavy fire after the publication of the half-year figures. The Düsseldorf stock exited Friday trading down 11.75% at EUR 166.85. The reason for the sell-off of the armaments group and automotive supplier was the lowering of estimates for the full year despite record results. Thus, the annual forecast communicated to the capital market in March was updated.
Against the backdrop of continuing high risks with regard to the development of global automotive production, the Company now expects organic sales growth in the current fiscal year of around 15% to be at the lower end of the previous forecast range, which envisaged organic growth of between 15% and 20%. By contrast, Rheinmetall has made no changes to its earnings forecast. The Düsseldorf-based Company expects an improvement in operating profit and an operating return on sales of over 11%.
Armin Papperger, CEO of Rheinmetall, commented in a press release: "Rheinmetall remains on its growth course. In terms of sales and operating profit, we are up on the previous year after six months. That makes us very optimistic for fiscal 2022 as a whole. We are recording rising order intake - also in our civil business, where we are making significant contributions to the technological transformation towards climate-friendly mobility and new forms of energy supply, for example, with the aid of hydrogen technology. And given the current security situation, our products will help strengthen defense capabilities in many countries in the coming months and years. With our military systems, we bear responsibility for security and thus also for peace and freedom."
Despite the rather gloomy outlook, analysts' consensus remained positive on the stock. Following the publication of the half-year figures, US investment bank Goldman Sachs reiterated its buy rating with a target price of EUR 290. The experts at the major Swiss bank UBS also rate the share as a "buy" but are somewhat more cautious with their price target at EUR 226. From a chart perspective, however, the share is battered. With the break of support at EUR 171.45, a new sell signal was generated. The next minor stop could now be the area around EUR 162.95. In addition, both the relative strength indicator and the MACD on a daily basis turned downward. The 200-day line is currently at EUR 145.
Barsele Minerals- Significant upside potential
In 2016, the Royal Bank of Canada (RBC) conducted a valuation of the Barsele gold project for Agnico Eagle. At a gold price of below USD 1,350, the experts calculated a project value of USD 375 million. Since then, a lot has happened at the Barsele project, where Barsele Minerals holds 45% and Agnico Eagle 55%. Operator Agnico Eagle has advanced exploration and drilled some 155,000 meters, with 404 wells drilled.
Then in 2019, Barsele released a resource estimate of 2.41 million ounces of gold, which was prepared by independent consultant InnovExplo. Since the resource estimate was prepared, an additional 93 drill holes have been created, and approximately 20,000 meters of drilling have been completed. The next target is a resource estimate of 3.5 million ounces.
The Barsele project is located in the Västerbottens Län mining region of northern Sweden, 600km north of Stockholm and covers 34,500 hectares in the Fennoscandian Shield. The planned takeover of Agnico Eagle's share by the Canadians failed last year. However, the Belcarra Group, which manages Barsele Minerals, is still working on a complete takeover. The Company's stock market value, which is listed in Toronto and Frankfurt, currently amounts to EUR 29.33 million and shows a clear discrepancy compared to the available studies.
With regard to a long-term rising gold price, smaller exploration companies such as Barsele Minerals also possess significant leverage.
BYD - Lots of buy recommendations
The Chinese market leader, the electric car maker from Shenzhen, is hailing with buy recommendations. UBS raised the price target for BYD from HKD 320 to HKD 345 and continues to see the Company as a buy candidate. Down under, the development of the "Build Your Dream" company is also viewed positively. The Australian investment bank Macquarie confirmed the "Outperform" rating and increased the price target from HKD 276 to HKD 357. Citigroup even sees the Company, which is backed by Warren Buffett, as a "sector top pick" and sees a price of HKD 640 for the mobility company.
Fundamentally, BYD continues to run like clockwork. In July, 162,530 electric cars were shipped, a threefold increase over the same month last year. According to a company announcement, net profit for the first six months of 2022 is around USD 533 million, up more than 200% from the first half of 2021. Despite the positive news, the chart picture of the BYD share has clouded and points to a, at least short-term, consolidation. Although a new high of USD 43.61 was marked, this was not confirmed.
Despite a forecast reduction, analysts are still bullish on Rheinmetall shares. BYD continues to be at the forefront of the financial analysts' favor. The Bank of Canada's assessment of the Barsele project is far above the current stock market valuation.
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