April 20th, 2023 | 09:10 CEST
BYD overtakes Volkswagen! Do Manuka Resources and Varta benefit from battery demand?
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"[...] Internally we expect the resource to significantly grow the deeper we mine. [...]" Dennis Karp, Executive Chairman, Manuka Resources
BYD flexes its muscles in Shanghai
BYD managers are not lacking in self-confidence at the moment. At the Shanghai Auto Show, which is currently underway, they let it be known that by the end of the year, half of all passenger cars sold in China will be electric. In 2022 it was only 22%. The start of 2023 has been promising for BYD. Within three months, 441,000 vehicles were sold - either hybrid or fully electric models. That is 68% more than in the same period last year and more than any other manufacturer in Q1. Even VW - the market leader in China since the 1980s - sold only 428,000 vehicles, including internal combustion engines. This shows that in the world's largest car market, the turnaround towards electromobility is progressing rapidly. And BYD is outpacing all the others. Even pioneer Tesla has been overtaken.
And BYD continues to go full throttle. While the market launch in Germany and other European countries is underway, new models are being presented at the auto show in Shanghai. The Company is also attacking luxury manufacturers such as BWM, Mercedes and Ferrari. The U8, for example, is a luxury SUV. The all-electric vehicle looks like a mixture of G-Class and Range Rover. The performance data are impressive: 1,100 hp ensures acceleration from 0 to 100 km/h in three seconds, and the battery capacity is supposed to be enough for 1,000 km - VW is currently celebrating itself for the 700 km of the ID.7. The price of the U8 is concluded to start at around USD 160,000. And BYD plans to be even more exclusive. The U9 is a thoroughbred super sports car with which BYD wants to attack the likes of McLaren and Ferrari. One thing is clear: European car manufacturers have a lot to look forward to, no matter which segment.
Manuka Resources has several irons in the fire
Regardless of which manufacturer wins the race, the demand for batteries for cars and other applications will increase. Investors who want to profit from this should look closely at Manuka Resources. The Australians are not only profiting from the battery trend but are also involved in precious metals. As with lithium stocks, the share price has suffered in recent weeks. After a capital increase was completed at the beginning of the week, there is now an interesting entry opportunity.
The South Taranaki Bight (STB) project, which was taken over at the end of 2022, could lead to a complete revaluation of Manuka Resources. The project off the coast of New Zealand involves iron sand with vanadium-titanium and magnetite. Interestingly, vanadium is a critical mineral that helps improve energy storage and battery life. The estimates for the STB project are a JORC resource of 3.8 billion tonnes and a vanadium content of 0.5%/tonne. That could give Manuka a 15% global market share and make it the third-largest vanadium producer. A mining licence to mine 5 million tonnes annually is already in place. The mine life was initially estimated at 20 years. The revenue estimate is around GBP 55 million per year.
When valuing Manuka, it should be remembered that the Company was already able to generate a positive operating cash flow of AUD 8.9 million in the last financial year (ending June 30). This week's successful capital increase has injected a further AUD 2.4 million into the Company's coffers, particularly to ramp up gold production. This should allow Manuka to benefit from the rising gold price. After all, the Mt Bobby project, taken over in 2020, is one of Australia's historically richest gold mines. Manuka wants to start production in June and produce about 25,000 ounces of gold annually over the next 3 years. Interested investors can learn about the details and future plans on May 10, 2023. CEO Dennis Karp will present on this day at the 7th International Investment Forum (IIF) virtual investor conference (Link https://ii-forum.com).
Varta: Signs of life on April 26?
And what has become of the German battery hopeful Varta? After its steep rise to become the leading manufacturer of micro-batteries for Apple's Airpods & Co, the technology company crashed in 2022. Competition in its core market increased, and it had to deal with supply chain problems. In addition, the expansion into the field of batteries for e-cars was anything but successful. After several profit warnings, management changes and restructuring concepts, it has been quiet around the Company in recent weeks. The share seems to have found a bottom at around EUR 25. Most recently, Berenberg adjusted its estimates and reduced the price target from EUR 31 to EUR 29. The analysts' rating for the Varta share is "hold". Shareholders should mark April 26 in their calendars. That is when Varta will publish its annual financial statements for 2022. Hopefully, there will be something more on future prospects then.
BYD shares have weakened recently, but operationally the Company continues to go full throttle. Hopefully, German manufacturers will be able to keep up. The coming months will be exciting for Manuka Resources. The share should pick up at the latest when Mt Bobby starts production, if not sooner. There is currently no reason to buy the Varta share.
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