BUY RECOMMENDATIONS for RENK and Desert Gold! SHOCK for Evotec!

Desert Gold: Gold Production in 2 Months

Desert Gold's stock is currently impressing with its relative strength. While the gold price is consolidating, the exploration company's shares are on an upward trend and trading at a multi-year high of CAD 0.15. And there are good reasons for further price increases. GBC Research recently reaffirmed its "Buy" recommendation, and the analysts believe the stock could reach CAD 0.93.

Desert Gold is making operational progress at its Barani East Zone in Mali. The company is thus approaching the transition from explorer to gold producer. Preparations for the start of production are currently underway. To this end, approximately 52,000 sqm have already been prepared for the processing plant, workshop, and tailings areas. In addition, initial foundation work and infrastructure measures are underway. The geophysical targeting program has been completed, and 13 prioritized drill targets have been identified. Technical acceptance of the 200-ton-per-day gravity plant and the 650-kVA generator was successfully completed in China. The equipment has since been shipped and is expected to arrive at the site by the end of June. Gold production is scheduled to begin in mid-July.

Barani-East is part of the massive SMSZ project. Desert Gold plans to launch operations in this sub-area with an efficient production facility. This would be a true milestone for the company, generating cash flow and attracting the attention of potential partners. At the same time, the resource for the entire project is being expanded. To this end, a 4,250-meter RC drilling program is underway. The goal is to expand existing mineralization and identify additional near-surface oxide resources. In particular, the Barani Gap and Kolon Soa targets are considered potentially important additional feed sources for the planned processing.

Overall, GBC views Desert Gold's investment case as significantly strengthened by the recent progress. Analysts expect Desert Gold to ramp up production to approximately 1,200 tons per day by the fourth quarter. Analysts estimate operating costs per ounce at around USD 1,110. At a very conservative selling price of USD 2,850 per ounce, Desert could already generate USD 33.06 million in revenue in 2027. EBITDA could then reach a robust USD 20.19 million. Cumulatively over the modelled life of the mine, Desert Gold could generate free cash flow of more than USD 155.9 million. The entire company is currently valued at only about CAD 50 million on the stock market. And production at Barani-East is just a small part of the entire SMSZ project.

Event Note: Desert CEO Jared Scharf will present live at the upcoming International Investment Forum on Wednesday, May 20, 2026. Attendance is free for investors.

RENK: Buy Recommendation Following Sell-Off

Since its all-time high in October 2025, RENK's stock price has halved. Yet geopolitical tensions have done anything but ease. However, investors' growth expectations were apparently simply too high. Following the sector-wide price slide, valuations appear to be returning to an attractive level.

mwb research recently upgraded RENK shares from "Hold" to "Buy." The price target remains unchanged at EUR 53. However, the stock is currently trading below EUR 44. In October 2025, it was still around EUR 90. For the analysts, the 20% price drop over the past few weeks is the main reason for the "Buy" recommendation. From the analysts' perspective, the sell-off was triggered by a conference call from Rheinmetall, during which the market was presented with too few optimistic arguments regarding the future of traditional land systems. However, mwb research believes the negative market reaction regarding RENK is exaggerated. The company reported solid figures in the first quarter. Furthermore, management has signalled that it expects to reach the upper end of its own annual forecast.

The analysts also emphasize that potential cyclical risks in the defence sector are now significantly better priced into the stock. mwb research continues to classify the development as cyclical rather than a structural growth story and has already factored in a precautionary revenue adjustment of about 10% in its valuation model. However, RENK also possesses a key unique selling point. The rapidly growing aftermarket business (spare parts and service), which is expected to account for approximately 50% of total revenue in the 2030s, provides the company with a stable earnings base that many competitors lack. Furthermore, the company is well-positioned for the long term thanks to its record order backlog of EUR 6.9 billion.

Analysts therefore expect continuous and stable growth in revenue and profitability in the coming years. In the current year, RENK is expected to generate EUR 1.54 billion in revenue and achieve an EBITDA of EUR 350 million. This momentum is expected to continue in the following years. For 2027, mwb research forecasts revenue of EUR 1.82 billion and EBITDA of EUR 406 million. In 2028, RENK is then expected to generate revenue of EUR 2.14 billion and an EBITDA of EUR 481 million.

Evotec: How Are Analysts Reacting?

Evotec shocked the market last week with a capital measure. Analysts have not yet commented on this, but the dilution for shareholders should soon be factored into the models.

Last Tuesday, the biotech company announced a convertible bond and placed it on the same day. Excluding subscription rights, EUR 116.1 million was raised. The convertible bond matures in 2030 and bears interest at 2.625%. Repayment at maturity will be made at an increased redemption amount of 110% of the nominal value. Taking this accretion into account, the effective conversion price of the bonds at maturity is approximately EUR 7.1844. Notably, this conversion price is significantly above the current share price level. Prior to the announcement of the transaction, the share was trading at around EUR 5.20. However, the issuance appears to have caught investors off guard, as the Evotec share price subsequently fell to around EUR 4.60.

Perhaps it is due to the use of proceeds. The net proceeds from the offering are intended to finance the liquidity requirements for the transformation program—some also call it a restructuring program—"Project Horizon." With the Horizon program, Evotec is responding to weak demand in its core business. Radical cost-cutting measures and a reduction to 10 global centers of excellence are intended to secure long-term profitability. However, this initially requires funding. EUR 100 million is budgeted for the period from 2026 to 2028. Analysts have repeatedly criticized Project Horizon for lacking clear growth prospects.

Defence stocks are currently coming back down to earth. With falling prices, valuations at RENK are becoming more attractive again. However, the segment lacks momentum. The situation is quite different at Desert Gold. The stock has momentum and relative strength. The company is set to become a gold producer in a few months. At Evotec, the momentum seems to have run out for now.