August 25th, 2022 | 13:12 CEST
Finding the best GreenTech stocks: BYD, Defense Metals, JinkoSolar and Nordex in focus
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"[...] Nickel, therefore, benefits twice: firstly from its growing importance within batteries and secondly from the generally growing demand for such storage. [...]" Terry Lynch, CEO, Power Nickel
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 - The Chinese manufacturer knocks on Europe's door
Since Warren Buffet's entry, the "Build Your Dreams" share (BYD) underwent a fabulous development. In the meantime, the group has become one of China's largest integrated technology companies. Its market capitalization recently surpassed that of Volkswagen, the world's largest car manufacturer.
In addition to Japan, the Company has now made its way to Europe. At the upcoming Paris Motor Show in September, it plans to unveil 4 models to the general public. Active talks are also already underway with potential dealers about a sales partnership. The European automotive industry is still lagging somewhat behind China and the US in e-mobility but has caught up considerably in the last 2 years. Now there is a trial of strength between German and international engineering. However, since lithium-ion technology is not really getting off the ground, the most favorable supplier will ultimately win the race.
BYD has already set up camp in Norway. What sounds a bit ambitious to the ears of many is an attempt to break into different segments. While the BYD SUV Tang is aimed more at families, the Han is a chic sedan that appeals more to Model 3 or even Model S enthusiasts who might find a Tesla too expensive. And then there is the Atto 3, a mid-size car with a hatchback intended for the masses. It could become a competitor to the VW ID.3 or CUPRA Born. The BYD share, which is no longer cheap, is currently consolidating between EUR 35 and EUR 40. Investors should set a tight stop at EUR 33.80 and quietly watch what happens.
Defense Metals - Excitement with a view to 2023
Another protagonist among the GreenTech stocks is the Canadian rare earth explorer Defense Metals. The Company focuses on substances commonly used in the energy market, military and national security. These rare metals are especially important in the production of green energy technologies because they enable high-strength alloys and provide magnets for generators.
Defense Metals' proprietary Wicheeda property consists of 9 mineral claims covering an area of 4,244 hectares located approximately 80 km northeast of the city of Prince George, British Columbia. Figures from the 2021 Pre-Feasibility Study provided significant results. For example, an open pit mine with mill throughput of 18 million tonnes is expected to be possible, and the mine life is calculated at 19 years. At an internal rate of return of 18%, this results in a present value of CAD 517 million. An average of 25,423 tons of rare earths could be produced annually. Preliminary work will continue until mid-2023, and management facilitated a site visit for strategic stakeholders and analysts in mid-August. Interest in the property is exceptionally high.
For North America, a new supplier of rare earths would be a small step toward greater independence from China, which accounts for 85% of the world market. With the latest results, Defense Metals (DEFN) shares are stabilizing quite well between CAD 0.17 and CAD 0.22. With 183.4 million shares, the current market value is just under CAD 36 million. Looking ahead to 2023, we believe much higher prices should be expected.
JinkoSolar and Nordex - It is not that simple after all
Large consumers of strategic and rare metals are the GreenTech companies JinkoSolar and Nordex. However, due to their different focus and location, both have to deal with very different requirements and problems.
JinkoSolar from China had raised over USD 1.5 billion in funds a few months ago to stem further developments in panel technology. This was at a time when markets were open to capital raises. Currently, China is struggling with weaker domestic demand and exports are also suffering from global recessionary trends. It is not yet a burden for Jinko because the backlog of orders from the climate protection programs, especially from Europe, is still significant. However, the euro is gradually weakening and undermining future growth opportunities. Due to the ongoing drought in Sichuan province, the state has now rationed electricity, which is affecting manufacturing capacity at the plants there. As of now, it is uncertain when JinkoSolar's production facilities will be running at full capacity again. Since JinkoSolar followed a steep upward trend until recently, doubts should now be raised as to whether the high at just under EUR 77 has not marked the end of the line.
Nordex has now procured fresh capital from the scolded shareholders several times. After two profit warnings in a row, the Company now believes it will not be profitable again until 2023. However, Nordex was able to land new major orders from Germany and Scandinavia in July. The linchpin for the Hamburg-based company's profitability remains the high cost of preliminary products, a lack of personnel and constant disruptions in the supply chains. However, these issues will only ease in the long term and are a heavy burden. After a brief rally to just above EUR 11, the stock has now landed back at EUR 9.70. However, it is still a long way from the low of EUR 7.04. The mood for the share is slowly improving, but we do not expect a miraculous rally in the short term. However, additional purchases in the EUR 7.50 - 8.50 range make sense in the medium term.
The availability of strategic metals could become the linchpin of essential products in the future. In order to drive GreenTech forward, an abundance of different metals is needed, which are not so easy to find everywhere on the globe. China is in the driver's seat here, while the Europeans are finding it increasingly difficult to maintain a solid position politically. Defense Metals is poised to provide an important building block in the foreseeable future.
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