August 21st, 2023 | 08:15 CEST
BYD, First Phosphate, JinkoSolar - Benefiting from the growing energy storage market
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"[...] Silumina Anodes® is a ceramic-coated graphite/silicon anode composite material that we plan to produce in Schwarze Pumpe, Saxony. Here, we aim to supply manufacturers of batteries for e-cars with an application-ready drop-in technology that is low-cost, high-performance and safe. [...]" Uwe Ahrens, Direktor, Altech Advanced Materials AG
BYD - Renewed price war
There is hardly any segment where the demand for energy storage has increased as rapidly as in the automotive industry. Since almost all major manufacturers are active in this segment and see the future there, a lot of batteries are needed. But the battle for the best battery has only just begun. At the forefront is BYD, a Chinese manufacturer of electric vehicles that also produces batteries and microchips. BYD's Blade batteries are regarded as leading. They have even outpaced Tesla. Since then, a price war has been sparked in the Chinese market.
Although there was an agreement that was supposed to put an end to these price wars, it does not look as if all suppliers will adhere to it. Tesla has announced cheaper versions of its Model S and Model X. BYD offers affordable cars and a wide range of models, which has contributed to its enormous popularity in the Chinese auto market. Despite challenges such as inflation and interest rates, sales of electric vehicles remain strong worldwide, especially in the US, EU and China. BYD is expanding its electric vehicle and battery production capacity, with new plants in China scheduled to come on stream in the second half of 2023.
The group also plans to expand internationally, for example, to Thailand, where an EV factory is scheduled to start production in 2024. A plant is also being planned in Brazil. Since July 31, the share has been under pressure and lost around 22% at its peak until Friday. The share price ended up at EUR 25.86 in Germany. Reasons for this are quickly found, the renewed price war on the domestic market and statements by management, according to which BYD does not want to pursue the vision of autonomous driving. The easing of China's interest rate policy will also likely hit foreign investors. In the long term, however, BYD seems well positioned.
First Phosphate - PEA submitted
First Phosphate owns various properties in Quebec covering over 1,500 sq km. The properties contain anorthosite-eruptive phosphate rock, which is considered to be of high purity. Battery manufacturers need phosphate with a high purity content, and this is what the Company wants to make available to North American producers. On June 19, the pilot plant for the production of phosphate concentrate for battery-grade purified phosphoric acid was completed. As a result, over 900 kg of apatite concentrate had already been produced at that time, which was delivered to Prayon SA, the largest European producer of purified phosphoric acid, in Belgium, for appropriate refining. In the future, both companies intend to cooperate in various areas.
In mid-July, First Phosphate announced the signing of a non-binding letter of intent with NorFalco Sales to secure the supply of sulfuric acid for future production facilities. A final offtake agreement is expected to be developed over time. On July 26, a further milestone was reached with the positive results of the preliminary economic assessment (PEA) for the Lac à l'Orignal property. There, the Company plans to open-pit mine the material for the phosphorus concentrate. The project is expected to produce an average of 425,000 tonnes of processed phosphate concentrate, 280,000 tonnes of magnetite and 97,000 tonnes of ilmenite annually over a lifespan of 14.2 years. The project has a pre-tax internal rate of return of 21.7% and a pre-tax net present value of CAD 795 million.
The payback period is 4.9 years, assuming an after-tax cash flow of CAD 567 million in 5 years. First Phosphate's President Peter Kent expressed his satisfaction: "Our strategy of keeping capital costs low and controlling mine size reflects these PEA results very well." The Company is in a growth market. While the market volume in 2021 was still at USD 10 billion, it is expected to increase to around USD 50 billion by 2028. The stock is currently trading at CAD 0.34, giving it a market capitalization of just CAD 17.6 million.
JinkoSolar - China's real estate crisis weighs on the share price
Chinese shares do not have it easy at the moment, which also applies to JinkoSolar. The reason for this is the real estate crisis. First, it was Evergrande, and now it is the construction company Country Garden. JinkoSolar could also be indirectly affected by this, even if the figures for the 2nd quarter do not speak for it. The group was able to expand its module shipments significantly. Compared to the previous year, an increase of 74.4% and 36.2% compared to the 1st quarter was achieved. International demand was mainly responsible for this increase.
Total revenue increased to CNY 30.69 billion, up 31.5% quarter-on-quarter and an impressive 62.9% year-on-year growth. Gross profit also significantly increased, reaching CNY 4.78 billion with a gross margin of 15.6%. Adjusted net profit was CNY 1.43 billion. Management raised module shipment targets to 70 to 75 gigawatts. Despite the good numbers, the stock went on a dive.
Currently, the value is as low as it has been since May 2021. Yet the Company has improved its technology, delivers excellent figures, and is currently undervalued. Looking at Wall Street analysts, there are 6 buy recommendations, 1 hold recommendation and 1 sell recommendation in the last 90 days. The price targets range from USD 33 to USD 77. On average, the price expectation is USD 56.61. Currently, the stock is trading at USD 33.78. The support at USD 28.39 should hold, allowing the stock to initiate a rebound.
Electrification continues to progress. The market for energy storage will grow, and new developments should emerge. BYD has an ace up its sleeve with its Blade Battery. If internationalization succeeds, the stock has a lot of potential. First Phosphate wants to contribute to the North American battery industry and intends to supply purified phosphoric acid together with its renowned partners. The foundation for this has been laid with the PEA. JinkoSolar brings good numbers, is innovative and yet the stock is falling. Currently, the stock, like the other two, appears undervalued.
Conflict of interest
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