March 20th, 2023 | 08:00 CET
BYD, Defense Metals, JinkoSolar - Energy transition reloaded! This is what matters now
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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: Luck has run out for the top dog
The BYD share was long regarded as the popular high-flyer from the Far East. Star investor Warren Buffet caused a stir over ten years ago when he bought BYD shares. In the meantime, the former battery hope for the daring has become a global corporation. The Chinese company owns electric cars, battery storage systems and even its own chip division. Most recently, BYD has also expanded into Europe with its electric cars. However, the Chinese did not start a price war. Consequently, BYD's market entry did not make a big splash. Whether the group has missed an opportunity to gain market share will become clear in the coming quarters when figures on the new markets are available for the first time. In case of doubt, BYD should have every opportunity to be even more aggressive with discounts in the coming years.
Last year, a plant was also launched in Brazil, which is to produce two million solar panels annually. In addition, innovations relating to photovoltaic systems are planned or have already been implemented in some cases. Smartphone components also account for a significant share of sales, contributing around 40% to BYD's revenues. First and foremost, these are batteries for smartphones. In the past, Samsung and Apple were among BYD's customers. Despite BYD's comprehensive profile, the share price has stagnated in the past year - little can be seen of the former dynamic growth. Reasons could be the increasing awareness of environmental protection as well as the geopolitical tensions - China is risky from both points of view.
Defense Metals - Facing decisive phase
The Defense Metals share is already a beneficiary of growing geopolitical tensions. The Inflation Reduction Act in the US has sparked interest in local resource projects across North America. Defense Metals is developing the Wicheeda rare earths project and announced a few weeks ago that it would begin construction of a pilot plant. "We are pleased to reach this important milestone with the construction and operation of the hydrometallurgical pilot plant, which is expected to be operational by the end of March. Pilot operations will be conducted in two phases and should be completed by the end of April. A successful pilot plant program will be essential to finalizing the engineering design and economics of the planned pre-feasibility study," said CEO Craig Taylor. The events should provide a steady news flow in the coming weeks. Recently, the Company has repeatedly announced small details important for economic feasibility.
Moreover, with US President Joe Biden in recent weeks expanding opportunities to mine rare earth projects due to their strategic importance, Defense Metals should get an additional tailwind. The stock has come down slightly in the wake of the recent market turmoil but is certainly showing relative strength compared to other growth stocks. On a one-year horizon, Defense Metals could be in an uptrend. As there is also some important news in the coming weeks, investors should keep the stock in focus. The demand for rare earths is increasing, and projects in safe jurisdictions will likely be most in demand.
JinkoSolar: Flagship company under pressure
Solar panels and photovoltaic panels are also undoubtedly in demand. JinkoSolar has a very competitive offering and impresses with both quality and price. However, as with BYD, the stock suffers from investors' growing aversion to China. Whether goods and commodities will continue to ship as smoothly from East to West in the future as they did before the pandemic remains questionable. First, more and more customers are relying on supply chain redundancy, and second, given the war in Ukraine and the division of the world into East and West, trade barriers are always on the horizon. Although China, the US, and the EU are likely to be interested in ensuring that the situation does not escalate, shares such as those of JinkoSolar could be heading downward for the time being. The stock is already in a downtrend on a one-year horizon, and things could get even more uncomfortable below USD 40. Solar panels from JinkoSolar are a better investment than the stock at the moment.
If you want to invest in green solutions and the energy transition, you no longer have to focus solely on market position and technology leadership. The origin of companies is now also decisive. For years, stocks from China have benefited disproportionately due to their growth potential, but the wind has changed. Stocks such as BYD and JinkoSolar are no longer self-perpetuating. On the other hand, commodity projects in North America, such as Defense Metals' Wicheeda project, are receiving new attention. Critical raw materials are in demand, especially if they can be mined sustainably in industrialized countries.
Conflict of interest
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