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May 23rd, 2023 | 08:30 CEST

Analysts euphoric - Varta, First Phosphate, Freyr Battery

  • Mining
  • phosphate
  • Batteries
  • renewableenergies
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Battery technology has made significant progress in recent years. Companies are investing heavily in research and development to create batteries with a more extended range, faster charging time and longer life. However, with the growing interest in electric vehicles, the demand for raw materials such as lithium, cobalt, nickel and phosphate is increasing enormously. The existing supply is already reaching its limits due to the high demand. Profiteers are the producers of the scarce goods.

time to read: 4 minutes | Author: Stefan Feulner
ISIN: VARTA AG O.N. | DE000A0TGJ55 , FIRST PHOSPHATE CORP | CA33611D1033 , Freyr Battery | LU2360697374

Table of contents:

    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.

    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") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    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 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

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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