October 23rd, 2023 | 07:00 CEST
Attention, take advantage of the sell-off now! Bombed-out prices at JinkoSolar, SolarEdge, Manuka Resources and BYD!
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"[...] Internally we expect the resource to significantly grow the deeper we mine. [...]" Dennis Karp, Executive Chairman, Manuka Resources
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.
JinkoSolar and SolarEdge - The moment of truth
Solar power generation fits 100% into the concept of a future free of fossil energy. However, high-margin production facilities have long since shifted to China due to high costs in Europe; the Middle Kingdom supplies 75% of all solar projects worldwide. But manufacturing costs are also rising in the Far East, causing producers' margins to collapse.
For the inverter expert SolarEdge, the last quarterly report ended with a disaster. The Israeli company had to issue a profit warning due to a lack of new orders. As part of preliminary key data for the third quarter, SolarEdge announced that revenues are now only seen in a range of USD 720 to USD 730 million, compared to guidance of USD 880 to USD 920 million. Experts on the Refinitiv Eikon platform had expected an average revenue of USD 909 million, a full 25% above the announcement. The operating margin falls analogously from an expected 28% to 30% to just over 20%. CEO Zvi Lando places the blame on European distribution partners, who have incurred high cancellation rates. Due to the ongoing destocking, management also expects "significantly lower revenues" in the fourth quarter. SolarEdge shares lost more than 28% to EUR 77.40 in Friday's close, with the year's high at an impressive EUR 322.75. It is going lower and lower, hard to believe.
Out of sympathy and industry affiliation, the shares of the Chinese module manufacturer JinkoSolar also fell. The share price has already experienced a 35% slide in 2023. On Friday, the value fell a further 7.5%, and well-known solar ETFs collapsed between 8% and 10%. It will now be exciting on October 26, when there will be financial results from China. Caution is still advised. The industry trend remains uncertain.
Manuka Resources - Well positioned for a leap in growth
A future supplier of battery materials could be Australia-based Manuka Resources Ltd (ASX symbol: MKR). Manuka is a mining and exploration company that, in addition to its gold and silver deposits in the Cobar Basin (New South Wales), also sits on significant quantities of vanadium through a 2022 M&A transaction. Following the acquisition of Trans-Tasman Resources Limited (TTR), the Australians became the owners of the Taranaki vanadium-titanium-magnetite (VTM) project. This puts the Company in a very promising position for the future. While gold and silver are subject to relatively constant global demand, the signs point to a storm in the battery metals sector. In the future, the replacement of lithium-ion batteries may draw the attention of technology producers to the particularly rare metal vanadium. It has long been on the list of strategic metals of US and EU governments because of its exceptional importance. For resource-poor Europe, geopolitically secured access in Australia is particularly important.
To provide a constant cash flow, drilling continues at the active Mt Boppy gold mine and advances into deeper regions. Silver production is also an option at higher market prices; so far, the Company does not want to offer the precious ore at these low prices. The 1,150 sq km area also hosts base metals that can be further explored. In the medium term, management's expectations are clearly based on addressing the battery, energy and e-mobility markets with vanadium. CEO Dennis Karp provided deeper insights into his forward-looking strategy at the recent International Investment Forum (IIF).
Manuka Resources Ltd. has issued 562 million shares and is holding its AGM in Sydney on November 16. There will undoubtedly be exciting information here again. The shares are currently trading at around AUD 0.045, so the corresponding market value is AUD 23 million. Once the vanadium project makes progress, these were definitely still affordable entry prices.
BYD - Things are getting better
The car manufacturer "Build Your Dreams" (BYD), co-financed by Warren Buffett, is currently rehearsing its European entry. In China, it has already outstripped VW and Tesla, and now it wants to gain a foothold in Europe with 5 new models. That the Chinese are serious was shown in September at the IAA Mobility Show in Munich, where they had the largest, most dazzling exhibition space. German manufacturers currently can't demonstrate this kind of progress in the market, as they have already fallen far behind in the development of modern mobility concepts.
**Within its corporate structure, BYD has clear strategic advantages. On the one hand, it is already located in a highly technical country with the best infrastructure. On the other hand, the Group has already integrated all vertical process steps into its value chain for some time. BYD has its own software, processors, batteries and vehicle expertise that has grown over the years. In geopolitically challenging times, this structure is robust against the unstable supply chains of European manufacturers, which have 70% of their preliminary products produced abroad. Time and again, there are drastic production stoppages when there is a crisis somewhere.
The BYD share has already overtaken VW in terms of valuation but is currently also suffering from the global sell-off in technology shares. After a long sideways trend between EUR 26 and EUR 32, it must technically go through resistance with large turnovers before investors can hope for more significant gains again. In the long term, however, BYD is a top pick for the portfolio in the high-tech segment.
For a long time, newcomers had to wait for more favorable prices. Due to the crisis, opportunities are now lighting up on the screen. Therefore, It is worth taking a closer look at yesterday's best performers, as they will be at the forefront again in the next upswing. The solar sector should still consolidate a bit. BYD continues to grow operationally, even without price movements. Manuka Resources can be added as an opportunity stock because a lot should happen here in 2024.
Conflict of interest
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