October 11th, 2022 | 13:14 CEST
Demography and electricity - two birds with one stone: BASF, TubeSolar, JinkoSolar
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"[...] When we acquire something, we want to make sure that the acquisition fits with our strategy and has the potential to be successful for our shareholders. [...]" John Jeffrey, CEO, Saturn Oil & Gas Inc.
BASF: Long-term success, short-term failure
BASF from Ludwigshafen is known worldwide as a chemical giant. However, not many people know that the Company is also closely linked to the agricultural industry. The Palatinate-based company generates around 10% of its sales with agricultural chemicals and a further 8.2% in the "Nutrition and Care" division. In the field of agricultural chemicals, BASF is even considered the world leader and scores with insect repellents and other helpers for the agricultural industry. Even if crop protection products do not have a good reputation in this country, their use in monocultures, i.e. large cultivated areas without mixed planting, is considered a must in order to secure yields and keep agriculture profitable on a large scale.
In view of the growing world population and the increasing demands of climate change, it will be even more critical in the future to protect yields and secure food supplies. While a move away from monocultures in some areas could also be a response to the challenges of climate change, there is likely to be a market for BASF's agricultural products for some time to come. By contrast, the situation is much worse in the basic chemicals sector. Here, BASF is suffering from logistics problems and rising energy costs. The Company is also still heavily dependent on fossil fuels. Consequently, BASF is not yet seeing any fantasy around demography and the agricultural economy of the future.
TubeSolar: Double harvest for farmers - and shareholders?
The situation is different at TubeSolar. The German company offers answers to the current energy crisis and, at the same time, opens up new sources of income for farmers. How does it work? It allows farmers to roof existing fields with photovoltaic systems without sacrificing crop yields. Farms then harvest crops or vegetables on the ground and generate electricity above them. TubeSolar's tubular modules allow light and water to pass through to the plants while providing yields similar to those of traditional flat modules. Thanks to the partial shading of cultivated areas, water requirements are even supposed to be reduced, and plants are protected from excessive solar radiation. As we remember, just two months ago, many plants burned in the hot sun.
The Company TubeSolar emerged from the former fluorescent tube production of Osram in Augsburg and is located on the former premises of Osram in Augsburg. The technology is patented and has been in use since 2019. TubeSolar has been funded by the Bavarian Ministry of Economic Affairs since 2020. Since its start on the stock exchange, TubeSolar's share has not been a success story, but it has recently shown signs of stabilization. The decision to increase capital is likely to have contributed to this. The Company wants to raise around EUR 8 million to drive the business forward. The good thing about this is that shareholder BF Holding GmbH guarantees to take over all new shares not subscribed by existing shareholders. Given the investment story, investors can make a note of TubeSolar. After the completion of the capital measures, the Company could take off again thanks to its convincing business model.
JinkoSolar: Top dog with problems
A much bigger player than TubeSolar is the Chinese top dog JinkoSolar. The share, however, has run into some trouble in the wake of the new tensions between East and West. In addition, even companies like JinkoSolar have limited ability to pass on rising commodity prices to customers in a competitive market. The situation is different at TubeSolar: Thanks to its tube modules, the Company has almost a unique selling proposition but arguably much less competition. Nevertheless, JinkoSolar remains one of the most important players in PV modules. The Chinese stand for outstanding quality and large quantities. This is the key to long-term success, even under difficult conditions. Currently, the share is in an exciting situation. If the value does not hold above the support zone of EUR 50, it could go down further. The share is currently not pushing through.
If you want to bet on demographic factors and long-term trends in general on the stock market, you have to be careful that these developments are not overshadowed by short-term processes. At JinkoSolar, these include dwindling margins and geopolitical tensions. At BASF, it is the energy crisis in general. At TubeSolar, the share price seems driven more by the fantasy of the innovative business model. If there is success news here, the current valuation of around EUR 50 million could quickly become moot. However, if no customers are found, there is also downside risk. In spring 2023, TubeSolar will launch a pilot project in the Hallertau hop-growing region near Munich, which is intended to increase agricultural yields and generate electricity.
Conflict of interest
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