November 20th, 2023 | 07:20 CET
BYD, First Hydrogen, Nikola - Mobility in transition, which shares have long-term potential?
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"[...] Why should a modular electrolyzer cost more than a motorcycle? [...]" Sebastian-Justus Schmidt, CEO and Founder, Enapter AG
BYD - High gross profit margin brings record figures
The former battery manufacturer BYD has set standards in the field of electromobility with its blade batteries. In October, the Group sold a total of 301,833 electric vehicles. This means that around 2.4 million vehicles have been sold this year, a good 71% more than in the same period last year**. This strength was already evident in the figures for the third quarter. Despite weaker demand and increased competition, a record profit was achieved. Net profit rose by 82.2% to RMB 10.41 billion (approx. EUR 1.34 billion). At the same time, turnover increased by 38.5% to RMB 162.2 billion (EUR 20.94 billion), which did not quite meet analysts' forecasts.
Nevertheless, the Group was able to meet its profit forecasts. In the end, net profit for the third quarter amounted to RMB 10.4 billion (EUR 1.34 billion), within the predicted range of RMB 9.55 billion to RMB 11.55 billion (EUR 1.23 billion to EUR 1.49 billion). Earnings per share amounted to RMB 3.58 (EUR 0.46) and exceeded expectations of RMB 2.41 (EUR 0.31). This quarter's high gross profit margin of 22.3% is responsible for these good figures. Other car manufacturers can only dream of this. One of the reasons for BYD's resilience lies in its vertical value chain, such as its own battery and semiconductor production.
After the figures, there was praise from Charlie Munger, the man next to Warren Buffet at Berkshire Hathaway. For the future, the Group is primarily planning internationalization. A plant is also to be built in Europe, and the location is to be announced by the end of the year. According to media reports, Hungary is currently leading the race for the factory. A plant is also to be built in Mexico. The share has been trading sideways since the beginning of September and is currently trading at EUR 28.91, significantly below Goldman Sachs' target price of EUR 40.65.
First Hydrogen - Presentation to major customers
First Hydrogen specializes in the development of light commercial vehicles powered by hydrogen. The Company seeks a significant market advantage by applying an engineering and integration strategy that incorporates the best of existing technology and design. This includes proven, tested and available components such as the MAN chassis or the Ballard fuel cells. The van, which already has road approval and has been thoroughly tested by various fleet operators, offers a range of 600 to 1,000 km depending on the load, can be refueled in under 10 minutes and is low-maintenance. A report by Rivus, a fleet operator who has already had the opportunity to test the vehicle, states: "...overall, the vehicle performed very well during the tests and appeared much more robust than a BEV (Battery Electric Vehicle)...".
To introduce the vehicle to a larger group of customers, the Company attended Fleet & Mobility Live and held the 1st Track Day on October 31, where 20 large fleet operators were invited. The guests had the opportunity to test the van on the Horiba Mira test track. Among the participants were some of the largest companies in Europe and the UK, from parcel services, supermarkets, utilities and more. First Hydrogen wants to offer these companies the complete value chain - starting with the vehicle, through the refueling systems to the green hydrogen, everything is to be available from a single source.
The Company is working with German partner FEV Consulting GmbH for the filling stations. For the production of green hydrogen, a 35-megawatt plant is to be built in Quebec, which will produce 15,750 kg of hydrogen per day. A total of 3-5 sites are to be developed in order to be able to supply the vans sold with hydrogen. First Hydrogen's shares have come under pressure following the Plug Power quake and are currently trading at CAD 1.65. The long-term prospects for hydrogen are good, as both governments and industry want to drive forward development in this area. Hydrogen production alone is expected to generate USD 230 billion in sales by 2030.
Nikola - Running out of money
Nikola specializes in trucks and has always aimed to offer both electric and hydrogen trucks. On November 2, the Company presented its Q3 figures. A recall of around 200 battery-electric trucks due to safety problems is financially impacting the Company. The necessary measures are expected to cost around USD 62 million. USD 250 million was raised via a convertible bond, which increased cash and cash equivalents by USD 136.2 million. Negative sales of USD 1.73 million were reported due to cancellations, and the net loss amounted to USD 425 million.
The 47 new orders for battery-electric trucks and the 277 pre-orders for the hydrogen fuel cell truck are positive. However, the Company's executive bodies have not been so positive for some time. On November 17, CFO Anastasiya Pasterick announced her departure, although she had only joined the management team in March of this year. CEO Michael Lohscheller resigned in August. This is certainly also related to the announcement in February that they had to report that they might not be able to sustain operations in the next 12 months.
There is currently no opportunity for investors to enter the Company, as the losses are simply too high. At the end of the year, the net loss is likely to exceed USD 500 million. A capital increase could be used as a lifeline, which would put the share price under pressure, and the existing shareholders would then be significantly diluted. One share currently costs USD 1.04. Below USD 1, the NASDAQ listing would be at risk in the long term.
Hydrogen and electric drives will be at the heart of emission-free mobility in the future. BYD is in the process of taking market share from the established car manufacturers. The growth story is likely to continue with internationalization. With light commercial vehicles, First Hydrogen has chosen an emerging market and, with its fuel cell approach, offers the solution to remedy the weaknesses of electric vehicles. This offers potential. Nikola will find it difficult to maintain its operations due to the high losses. If at all, only through capital measures, which are likely to weigh on the share price.
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