06. May 2021 | 10:37 CET
BYD, Nevada Copper, Varta - A dedicated line for share price gains?
Electromobility is an important component of mobility concepts. To what extent other types of drive will overtake the electric car, or whether we will have to realize in 10 years that the whole topic was politically misguided, is another matter. The fact is that the demand for electric cars and batteries is growing enormously. The demand for the raw materials used in them, such as lithium and copper, is also increasing. We present three promising investments that reflect different facets of the investment trend.
time to read: 4 minutes by Carsten Mainitz
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
BYD - Do not call it a dream
If you have been on board with the BYD share for a long time, you can easily get over the recent correction. Berkshire Hathaway invested in Build Your Dreams many years ago. Investment legends Warren Buffett and Charles Munger hold an 8% stake in China's largest automaker. The affinity for Chinese shares comes - and this is an open secret - clearly, from Munger, Berkshire shareholders could get an idea of this a few days ago at the annual general meeting. Even if one or the other market participant did not like the latest quarterly data from BYD, a 113% increase in sales of e-cars compared to the previous year is apparently not enough and analysts have partially lowered the price targets; one should not get carried away. The crucial question is whether one trusts the Group to be successful in the medium term.
BYD is the leader in battery technologies and covers large parts of the value chain around e-cars. In the future, BYD intends to increasingly supply other manufacturers with batteries and thus fuel the price war - which should not make Varta shareholders particularly happy. Fiat was recently announced as a new BYD battery customer. The Group also let it be known that it would like to offer the blade batteries to other carmakers and is in talks with almost all brands. The advantage of this product category is the high range of around 1,100 km. With so much innovation and market power, it is not surprising that BYD was recently included in the "100 Most Influential Companies" list in relation to electric cars. So what do investors make of it? Follow Berkshire Hathaway's assessment.
NEVADA COPPER CORP - Project progress sends share price soaring 50%
Underground production problems have depressed the share price of copper producer Nevada Copper for many weeks. On April 21, when the Company reported significant progress and confirmed the production target, the share price started to jump within a few days, taking the share price to a 52-week high of CAD 0.26. Currently, the share is trading slightly below this level. In recent days, the paper has been among the TOP 25 by trading volume on the home exchange TSX-V. Even after the price jump, the Canadians are still not too expensive, with a market value of around CAD 470 million.
Investor interest is currently focused on the Pumpkin Hollow copper project in the US state of Nevada, which has considerable reserves and resources of copper, gold and silver. In addition to the ongoing high-grade production in the underground mine, an open pit project is in the development stage and on its way towards a feasibility study. In recent months, there have been several unplanned shutdowns of underground production that have delayed the Company's goal of processing 5,000 tons of ore per day. The investment community was skeptical that this production target could be achieved in Q3 as the Company had promised. However, in late April, Nevada Copper allayed these fears. In March, the Company achieved a weekly average mill throughput of 4,700 tons of ore per day and a maximum daily mill throughput of 5,000 tons. In addition, the concentrate grade continued to increase. Investors rewarded this news with a jump in the share price.
The significant ramp-up of production from Q3 onwards should bring the Company high profits at current copper prices. But further progress in open pit mining or the exploration of new zones will make the share perform well in our opinion. In general, the framework conditions for industrial metals and copper producers remain good.
VARTA AG - Zero-sum game
The price of the Varta share at the beginning of the year and now is almost identical. Did nothing happen? Far from it - at the end of January, the shares marked an all-time high in the area of EUR 180 and formed a double top in February around the EUR 170 mark, followed by falling prices and the recent sideways movement. The all-time high was linked to the assumption or hope of a short squeeze. In the fact camp, the following constellation was seen in recent months: the closing of a record year and payment of a dividend. But the fly in the ointment was the insufficiently dynamic earnings outlook for the current fiscal year.
In mid-March, the Group followed up by announcing its plans to enter the market for battery cells for electric cars. A pilot line for a large-format battery cell is to be set up at the Company's headquarters, and intensive talks are underway with several car manufacturers. The share price did not take off after that, as skepticism among investors prevailed. Undisputed is the technology and innovation leadership in microbatteries, which are used in wireless headphones, among other things. These are the foundation of the Group's profitability. But here, too, competition is getting stronger and recently, it was heard that Varta's most significant customer Apple will sell considerably fewer wireless headphones.
But back to the topic: the intriguing question is whether Varta can simply transfer its technology expertise to other areas such as large-format battery cells. The Germans are competing here against first-class Chinese players and Tesla. In our case, skepticism prevails. The valuation of around EUR 4.8 billion does not trigger a bargain impulse buy either. Next week, however, things may get exciting again. Varta will present its Q1 figures on May 12.