September 28th, 2023 | 07:10 CEST
BYD unstoppable. Sell Varta shares? 200% with Almonty Industries?
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Almonty Industries: Jump in sales and profits from 2024 onwards
Can a commodity producer double its sales in a year? Yes, if, for example, it starts up a new mine. This is on the horizon for Almonty Industries in 2024. The Canadians will soon begin operating their tungsten mine in South Korea. The Sangdong mine will be one of the largest tungsten mines in the world in just a few years, potentially making Almonty the most important supplier of the coveted raw material outside China and Russia. The Company also has mines in Spain and Portugal. According to analysts, this is expected to generate revenue of CAD 28.9 million in the current year. However, the result is still negative due to the development of the Sangdong project.
In the coming year, things will get exciting: Analysts expect sales to jump by over 100% to CAD 60.9 million. EBITDA is expected to climb to CAD 20.6 million, and positive earnings after tax (EAT) of CAD 6.0 million are expected to remain in the Company's coffers - with a further upward trend in the coming years. In 2025, the revenue mark of CAD 100 million should already be cracked, and EBITDA and EAT should increase to CAD 49.1 million and CAD 27.3 million, respectively. Correspondingly, the P/E ratios for 2024 are currently 19.2 and 4.7 for 2025. Too little, say the analysts. They recommend the Almonty share as a Buy with a price target of CAD 1.59, representing a price potential of over 200%.
Almonty will be presenting live at the 8th IIF - International Investor Forum on October 10, 2023. Also presenting are exciting companies such as K+S, 3U Holding and Altech Advanced Materials. Click here to go to the free registration.
Varta: Not a buy even at this level?
At Varta, on the other hand, analysts are much more skeptical. It has been almost a year since the battery manufacturer sent investors a profit warning. The Company had completely miscalculated its plans to set up production for e-car batteries, and then its core business collapsed. The consequence was liquidity problems and a share crash from over EUR 60 to under EUR 20. The share is currently trading at EUR 18. Has the bottom been reached, and is it time to buy? While the bottom may have been reached, prospects for price increases are lacking, at least according to DZ Bank. After the last quarterly figures, their analysts have increased the price target from EUR 10 to EUR 15, but the recommendation remains "Sell". The experts consider the Company's outlook for the second half of the year to be too optimistic. The analysts also fail to understand where the demand for the 2024 sales targets is to come from. Therefore, the forecasts are fraught with risks. Warburg Research analysts also view the outlook as ambitious. Their price target is also EUR 15, with a corresponding "Sell" recommendation.
BYD's targets are also ambitious. However, the Chinese company is delivering. Most recently, the production of the 500,000th BYD Dolphin was reported. That would make the compact SUV the most-sold vehicle in its class in China since its August 2021 launch. And now, the all-electric SUV can also be purchased in Germany. According to its own figures, BYD has already produced more than 5.1 million passenger cars with alternative drives - i.e. fully electric or hybrid - worldwide. It will be exciting to see how the brand sells in Germany and the rest of Europe.
And BYD is not only a leader in electric cars. The Chinese company is also going full throttle** with batteries, buses and other vehicles. Most recently, an order was reported from the US. BYD has delivered the first three K9M battery-electric buses to the Woods Hole, Martha's Vineyard and Nantucket Steamship Authority. The order is intended to help the US customer electrify its bus fleet step by step.
The BYD share has not been able to benefit from the operational growth in recent months. This year, it has lost around 8% in value and is trading 30% below its all-time high from the summer of 2022. Almonty's share price of CAD 0.44 is also far from its highs. But with the commissioning of Sangdong, there is considerable share price potential. At Varta, there is currently a lack of prospects for sustainably rising prices.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
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