December 15th, 2022 | 12:05 CET
E-car boom in Germany: BYD, Plug Power and dynaCERT are profiteers of the energy transition
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"[...] Why should a modular electrolyzer cost more than a motorcycle? [...]" Sebastian-Justus Schmidt, CEO and Founder, Enapter AG
For more than twenty years, the Cologne native has been intensively involved with the stock market, both professionally and privately. He is particularly passionate about national and international small and micro caps.
BYD: Will the launch succeed in Europe?
BYD, the high-flyer of 2022 in the field of e-cars, will enter the European market next year. As a result, the German market will also see a reshuffling of the cards. The Chinese carmaker reports new sales records monthly, but it is almost exclusively active in its home country. BYD sold around 114,000 pure e-cars there in November 2022 alone and has now replaced Tesla as the market leader. But in the coming year, foreign expansion will become more important for BYD. Because as of today, subsidies in China will cease on January 1. Although Jefferies expects that 8.5 million e-cars will be sold in China in 2023 and the market will grow by 31%, competition will become tougher. Accordingly, success in Europe will be important. In Germany, the Chinese are starting with three models: The ATTO 3 and Tang SUV and the Han luxury sedan. On the one hand, sales are to take place via flagship stores in major German cities. On the other hand, six dealer groups with a nationwide network of car dealerships carrying established premium brands such as Mercedes-Benz and BMW are to offer BYD vehicles. According to manager magazin, BYD plans to sell 120,000 electric cars in 2026 in Germany alone. That would correspond to a market share of around 10%.
Unfortunately, share sales by the largest shareholder Berkshire Hathaway has again had a brief negative impact. According to a statement, the Company of star investor Warren Buffet has sold another 1.3 million BYD shares. Berkshire remains the largest BYD shareholder, with a share of about 15%. The latest sale is surprising. The BYD management had previously emphasized several times that Buffett is convinced of his investment in BYD. As a result, the share price calmed down. Now the fear could come back that Berkshire will also sell the remaining shares gradually. This would likely weigh on the price for several weeks or months.
dynaCERT: Will Q4 bring the breakthrough?
The coming weeks should also be exciting for dynaCERT. With its HydraGEN technology, the Canadians offer systems to reduce CO2 emissions and fuel costs of fleet vehicles. In doing so, they offer an important technology to counteract climate change. After all, it will be many years before the majority of the world's vehicles are electrified. In recent weeks, dynaCERT announced several orders from major customers. With an order from Fiorentino Bros. Contracting Ltd. (FBC), for example, the Company gained access to the forestry sector in Canada. FBC owns over 100 pieces of heavy equipment and a fleet of over 70 motorized vehicles. International orders have also been landed through its distributor H2 Tek LP. Internationally renowned companies such as Nexa Resources, Vale S.A., CODELCO, Arauco, Sigma Alimentos and one of the ten largest mining companies in the world, Antamina, were welcomed as new customers. While the individual unit numbers are still manageable, a foot is in the door, and dynaCERT should succeed in commercializing the technology in 2023.
What matters now in the coming weeks? The ongoing Verified Carbon Standard program must be completed. This is an important building block for the dynaCERT ecosystem around emissions reduction and carbon credits. Firstly, it should accelerate customer acquisition, and secondly, it should enable recurring revenues from emission trading. The issuance of the first carbon credit convertible bond with a volume of CAD 10 million has already been announced. This is also important in order to work off the existing order backlog in the coming year. So if the certification and placement of the convertible bond succeed, a revaluation of the Company would be likely. The Company is currently valued at around CAD 70 million. A recent presentation by management at the IIF virtual investor conference can be seen on this YouTube link.
Plug Power: 2023 loss to be halved
Plug Power will also be under pressure in 2023. Because in the coming year, investors expect progress in operational development, and this had disappointed in 2022. In the third quarter of 2022, the hydrogen specialist increased sales from USD 143.9 million to USD 188.63 million compared to the same period of the previous year. But it also expanded significantly. Thus, in Q3, there was USD 170.8 million. In the same quarter of the previous year, this figure was "only" USD 106.67 million. That corresponds to a loss per share (basic) of USD 0.30 (previous year: USD 0.19). Things do not look much better for the first nine months of the year as a whole. Revenue of USD 480.7 million was offset by a net loss of USD 500.5 million. Plug Power stressed that it is not currently a demand problem but is due primarily to delays caused by supply chains and the timing of some large projects. Accordingly, the Company is optimistic about the coming year. In 2023, sales are expected to increase to USD 1.4 billion, and margins are expected to improve. This is what investors are waiting for. The share has been trading around USD 15 for weeks.
Analysts expect a significant reduction in losses in the coming year. According to marketwatch.com, estimates for the loss per share in the current year range from USD -0.96 to USD -1.19. The consensus is USD -1.07. In the coming year, the range of analyst estimates is from USD -0.19 to USD -0.80. Here, the average is USD -0.58. Accordingly, the loss is expected to be halved.
Hydrogen, electromobility and energy efficiency are topics of the future. BYD has rolled up the Chinese market in the current year and plans to do something similar in Europe. If this succeeds, higher prices should only be a matter of time. However, the ongoing uncertainty about Berkshire Hathaway's share package could be a burden. Orders are now coming in at dynaCERT. If it now also works out with the emission certificates and the bond placement, the corks will pop in 2023. Plug Power must finally deliver on growth and loss reduction in 2023. Only then is a sustained increase in the share price likely.
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