September 1st, 2022 | 12:29 CEST
BYD after Buffett shock - Better to bet on JinkoSolar and Meta Materials?
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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
BYD: Buffett shock overshadows good figures
For more than a month, there has been speculation that Warren Buffett's Berkshire Hathaway could divest itself of BYD shares. At the time, a BYD position equal in size to Berkshire's appeared in the Hong Kong stock clearing system under a Citibank account. A stock market report now shows that the stake in BYD fell from 20.49% to 19.92%. The block of shares sold was worth USD 47 million. Not much, but now, there is speculation as to what will happen to the remaining shares. Will more pieces be thrown on the market? Maybe Buffett will part with the entire stake?
Buffett first took a stake in BYD in 2008. Since then, the share has increased more than twenty-fold. As a result of the report, the BYD share does not benefit from the otherwise good quarterly figures. BYD sold 355,021 vehicles (hybrid and all-electric) in the second quarter, 256% more than in the same period last year. Compared to the first quarter of the current year, the increase is still 24%. Sales increased by 68% YOY to CNY 83.77 billion. BYD is also making progress in terms of profitability. Thus, net profit climbed by 198% to around CNY 2.8 billion in the reporting period. Following the figures, Credit Suisse analysts raised their earnings estimates for the years up to 2024 by up to 40% and the price target to HKD 400. However, this could not slow down yesterday's selling pressure. In trading on the Hong Kong Stock Exchange yesterday, the share lost 12%.
Meta Materials: Patent octopus brings chip veterans on board
Operationally, Meta Materials is currently picking up speed. However, the technology company is still at a very early stage, and the focus is on research. Nevertheless, the Canadians, listed in Germany and on the NASDAQ, increased sales in the second quarter by 432% to USD 3.3 million. Meta Materials is working hard to develop high-performance functional materials and nanocomponents. One application example with huge market potential is early detection in the medical field - including strokes. According to the World Stroke Organization, stroke is the second leading cause of death worldwide. Meta Materials is working on a portable and low-cost radio wave imaging scanner. In this effort, Meta Materials aims to provide higher image resolution and faster scans than previous products, all without radiation. Meta's approach has been featured in several technical articles and has already been secured as a US patent. The patent covers a wide range of potential applications, including image detection of breast cancer, brain clots, and the diagnosis of internal bleeding.
Meta Materials now has a total of 410 active patent documents - of which 251 are issued patents, and 159 are pending patent applications. In the future, high-performance materials with nanotechnology should make it possible to redirect light, sound, heat or radio waves. The potential is gigantic and spans all industries such as 5G communications, health and wellness, aerospace, the automotive industry and renewable energy. As the Company grows, it is also evolving in terms of personnel. For example, Jack Harding, the former executive of chip giant Advanced Micro Devices, was recently appointed Chairman of the Board. Harding is a true veteran of the chip industry. In addition to his time at AMD, he also oversaw the billion-dollar merger of RF Micro Devices and TriQuint Semiconductor to form Qorvo. Should the research and subsequent monetization be successful, a billion-dollar valuation could also be possible for Meta Materials. Currently, the market capitalization of the hot stock is around USD 280 million.
JinkoSolar: Fair value at USD 71 or USD 35?
JinkoSolar has already reached a market capitalization of over one billion. When looking at the current figures, however, there could be even more to it than the approximately USD 3.3 billion. This opinion is shared by analysts at BOC International, among others. The experts recommend the share of the Chinese solar cell and solar module producer with "Buy" and a price target of USD 71. In contrast, Goldman Sachs has renewed its sell recommendation. The analysts are skeptical about the coming quarters. Thus, JinkoSolar has problems with cash flow generation and the debt-equity ratio.
Regarding the numbers: The Chinese company benefited from high demand for its solar modules in the second quarter. Solar modules with an output of 10,183 MW and cells and wafers with 349 MW were delivered. All in all, this was equivalent to around double the previous year's figure. Compared to the same period of the previous year, sales increased by 138% to USD 2.81 billion. However, JinkoSolar's results were disappointing, and the Company even slipped into the red. Thus, the net loss was USD 93 million, compared to a net profit of over USD 9 million in the same quarter last year. In the full year 2022, 35 to 40 GW (modules, cells and wafers) are to be delivered.
BYD is in a top position operationally, but one should not underestimate the image damage from the Buffett sale. At the hotstock Meta Materials, the new chairman of the board of directors is creating an improved image. JinkoSolar must finally get a grip on profitability, which does not seem to be the case at the moment.
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