02. November 2021 | 13:26 CET
BYD, NIO, Defense Metals - Save the climate, make a profit!
No one at the G20 meeting had expected any great leaps forward in climate policy - the participants had already made sure of that in advance by lowering expectations considerably. Nevertheless, there was a common goal before the summit in Rome: to send a strong signal for the UN Climate Change Conference in Glasgow. So postponed is not canceled. Of course, everyone is aware that this is the least that the heads of state and government of the 20 largest industrialized and emerging countries can do. After all, together, their countries are responsible for 80% of global greenhouse gas emissions. If they do not act, climate protection will be in a dire state. We take a look at exciting investments with climate relevance.
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ISIN: BYD CO. LTD H YC 1 | CNE100000296 , NIO INC.A S.ADR DL-_00025 | US62914V1061 , DEFENSE METALS CORP. | CA2446331035
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
BYD - Electric vehicles for Latin America
The Chinese holding company "Build Your Dreams" (BYD) has been active in the battery and electric vehicle market for a long time. The technology group develops and produces automobiles and energy storage systems in its core business, with increasing shares also in electric and plug-in hybrid cars. In the Asian markets, BYD is a blockbuster among the suppliers and thus one of the major pioneers of the green revolution in the Middle Kingdom.
Last year, BYD Company Ltd. unveiled the Han EV, a new flagship all-electric sedan. The Chinese series thereby consists of three purely electrically driven models as well as a hybrid version. Now the Han EV has also reached Latin America and the Caribbean. The first batch recently arrived in Brazil, Mexico, Colombia, Uruguay, the Dominican Republic, Costa Rica and the Bahamas. This step is a significant milestone for international expansion.
Already in use in the Han EV are, among other things, NFC technology and an intelligent driving assistance system with cruise control, a forward-collision warning system and lane assist. Such unique AI-powered systems are an essential detail for traffic safety in the crowded Asian metropolises.
BYD shares were able to reach a new all-time high of just under EUR 35 again in October. After the sell-off in May, this is again an increase of around 130%. With a current P/E ratio of over 100 and a price-to-book ratio of 14, investors probably assume that sales will develop meteorically. And if only e-vehicles are allowed to be sold in Asia soon, the bet could even work out. We are curious!
Defense Metals - Rare earth metals for the green revolution
Manufacturing high-tech products also require several rare earth metals, 85% of which are mined in China. This dependence on particular raw materials leaves a dull feeling in the stomach area because worldwide, there are too few free resources to cover the enormous demand in the medium term. Rare earths, including neodymium, praseodymium and dysprosium, are critical to manufacturing magnets used in future industries for wind turbines and electric cars. In addition, these metals are found in consumer products such as smartphones, computer monitors and telescopic lenses.
To meet the pre-proclaimed goals of the upcoming Glasgow Summit, manufacturers of carbon-neutral devices and vehicles will need at least four times the number of rare earth metals by 2040 as they do today. The burgeoning resource problem is already a topic of discussion for the EU Commission, and the US Senate also passed legislation to improve American competitiveness after its last technology hearing. The current bottlenecks in supply chains, especially the clogged sea routes, are blocking industry even more than was the case at the height of the COVID lockdowns.
From this perspective, one of the few promising projects outside of China is emerging in Canada. British Columbia-based exploration Company Defense Metals is focused on advancing the Wicheeda Rare Earth Project, which covers about 1,708 hectares. To support the team, Dr. Luisa Moreno joined the Defense board in October. An expert in materials management, she is a leading rare earths analyst and has held senior positions at many GreenTech companies, primarily in the strategic minerals sector. On the operational front, Defense is nearing completion of its latest diamond drilling program to expand and delineate the Wicheeda rare earth deposit.
Considering the tight supply of strategic metals in the Western industrialized countries, the Defense share is more than attractive at the current level of around CAD 0.30. With about 80.4 million shares, the market capitalization is just CAD 24 million. The tip of one's toe should already be invested before the next hype starts.
NIO - Crash in sales
NIO is a Chinese start-up based in Shanghai that specializes in electric car manufacturing. In early 2020, the Company was on the verge of bankruptcy and could only be saved by government investment of around EUR 1 billion. In return, NIO had committed to building factories and research centers in Hefei, a city of millions. By January 2021, NIO again had a stock market value of the equivalent of EUR 80 billion.
However, the Company delivered a heavy disappointment with its October sales figures. A total of only 3,667 electric SUVs left the factory halls, a drop of 27.5% compared to the same period last year. In the previous month, deliveries by the Chinese hopeful were still at 10,628 units, which is also a significant minus in sequential terms.
NIO cited the significant reduction in production volume due to restructuring and upgrading production lines and preparing new products as reasons for the poor performance. According to the adjusted plan, ES8 production resumed towards the end of October, but the Company also admitted to some volatility in the supply chain. Again, the COVID lockdown shock still seems to be sitting deep.
NIO's share price performance was hardly affected by the bad news. After prices around EUR 28 at the end of September, the share price first rose by 20% to over EUR 34, in line with the Tesla rally. However, the January highs of around EUR 54 seem to have receded into the distant future. A market capitalization of USD 65 billion for expected sales of around USD 5 billion fits in with the electric hype of Tesla. Whoever is in will need strong staying power and the necessary conviction that NIO can grab a significant market share with its products.
The e-mobility hype is entering the next round. The two stocks BYD and NIO, are doing differently but are comparable in terms of valuation. Measured against Tesla, there is even room for improvement here. Defense Metals could become a new supplier of strategic metals as early as 2023/24; development work on this is in full swing.