May 23rd, 2023 | 08:30 CEST
Analysts euphoric - Varta, First Phosphate, Freyr Battery
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"[...] The collaboration with CVMR offers two primary advantages for Power Nickel: We can cover a larger portion of the value chain in the future, and despite the extensive cooperation with all its positive outcomes, we have remained significantly independent. [...]" Terry Lynch, CEO, Power Nickel
Varta AG - Disagreement among analysts
The figures for the first quarter at the former German innovation company are out and, as expected, they turned out sobering. Revenues fell 11% to EUR 164 million due to weak demand, with sales in the lithium button cell sector down 92% and microbattery sales down 21%. In contrast, the energy storage systems segment recorded significant growth. The adjusted EBITDA was a loss of EUR 2 million. In addition, restructuring costs of about EUR 6 million and a multiplication of financing costs put pressure on the result of the Ellwangen-based company. Despite the recent capital measure of EUR 51 million and the prolongation of bank financing up to EUR 26, it remains to be seen whether there could be further capital increases in the future.
Meanwhile, the various analyst firms were divided in their assessment of the current situation. Alster Research does not yet see a turnaround in sight despite the financing steps taken and includes higher overall risks in its calculations for an investment in Varta. Due to this, the price target was lowered from EUR 18 to currently EUR 16. The investment rating remains at "sell". In contrast, the experts of the US investment bank Goldman Sachs are more optimistic. The key figures for the first quarter were in line with the low forecasts. Neither the price target of EUR 30 nor the "neutral" rating were changed.
First Phosphate - Clear sign of confidence
Currently, the lithium-ion battery is still the standard for electric vehicles, but this is likely to change soon due to the advantages of new technologies. Major players in the EV market, such as Tesla, Volkswagen and Mercedes, are already turning to alternative sources and raw materials. First Phosphate, a promising newcomer on the stock exchange floor, focuses on the extraction and purification of phosphate for the production of active cathode material for the lithium iron phosphate battery industry. The advantages of the lithium-iron-phosphate battery are obvious. Neither nickel, manganese, nor cobalt are needed. In addition, they have a much longer life span and can be recycled better due to their fire resistance. For the global market, analysts from Business Insights see annual growth rates of more than 25% from 2021 to 2028 to a volume of USD 49.96 billion.
The Canadians strive to produce with a high degree of purity, in compliance with all ESG standards and with a low carbon footprint. First Phosphate owns more than 1,500 sq km of land rights in the Saguenay-Lac-St-Jean region of Quebec, which has world-class infrastructure and is being progressively developed. The properties contain rare anorthosite igneous phosphate rock that yields high-quality phosphate material without elevated concentrations of harmful elements. Through a series of processing steps, this can yield high-purity battery-grade phosphoric acid. Vertical integration from the mine directly into the supply chains of major North American LFP battery manufacturers requiring active battery-grade LFP cathode material is planned.
Recently, the Company announced the successful completion of an oversubscribed CAD 2.34 million financing round. The proceeds will be used to drill First Phosphate's phosphate projects in Quebec - Bégin-Lamarch and Lac à l'Orignal. Management also delivered another vote of confidence by entering into an agreement to acquire 50% or 2.7 million First Phosphate common shares currently held by Glen Eagle Resources. Glen Eagle acquired First Phosphate common shares in September 2022 by selling its flagship Lac à l'Orignal project to First Phosphate. To date, First Phosphate's largest shareholder has been CEO John Passalacqua, with a 16.84% stake.
First Phosphate has a market capitalization of CAD 22.71 million. The high demand for phosphate on the part of the electric car industry could create an important player in North America in the long term.
Freyr Battery - Bullish forecasts
This Luxembourg-based company, which develops batteries and battery cells, specializes in the production of materials needed to make battery cells. It also sells batteries and battery cells to markets that include electromobility, energy storage systems, and marine and aerospace applications.
For the quarter ended March, the Company reported an adjusted loss of USD 0.09 per share. Reported revenue was zero, with analysts expecting USD 2.09 million. Freyr Battery reported a quarterly loss of USD 12.9 million. Cash at the reporting date was USD 474.80 million. In the first quarter, the focus was on the construction of Giga Arctic in Norway. Of the USD 64.1 million capital expenditure, 75% went into the main project, while the remaining capital was mainly needed to complete the Customer Qualification Plant.
For further growth, Freyr Battery relies on cooperation with strong partners. The Company has been in talks to form a strategic coalition with Glencore, Caterpillar, Siemens AG and Nidec Corporation to drive the expansion of sustainable battery solutions in Europe, North America and beyond.
Freyr's stock is currently trading at USD 7.19. Analysts listed on Reuters Refinitiv gave the stock "strong buy" ratings three times, "buy" ratings four times and "hold" ratings twice, with an average analyst price target of USD 15.00, implying a potential upside of more than 100%.
Analysts are divided on the battery manufacturer Varta after the figures. In contrast, the expert consensus on Freyr Battery is around 100% above the current price. First Phosphate could become one of North America's most important phosphate suppliers.
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