High-tech bottleneck: Rheinmetall, Defense Metals, JinkoSolar, Nordex: Strategic metals are more necessary than ever!

Rheinmetall - Much advance praise for the defense company

Between March and June, Rheinmetall shares had the best share performance since the founding of the Company. After a 20% correction from the high, the stock is still up 120% after 12 months, and investor and analyst interest is undiminished.

After initial over-speculation, it is clear how Rheinmetall can profit from the EUR 100 billion special assets of the German armed forces. It is all about innovation, replacing old war equipment and, ultimately, exports. After all, German weapons systems are in greater demand worldwide than ever before. And even the red-green government, which for years opposed arms exports, now sees a great need to catch up, especially in NATO. Because of the faltering arms deliveries to Ukraine via ring exchange, FDP politician Strack-Zimmermann is now also open to directly delivering German tanks to the country attacked by Russia. The chairwoman of the Bundestag's defense committee admits that the Eastern European allies have been unable to provide replacements for their arms deliveries to Ukraine as quickly as expected. "If this is problematic for the partners, we should stop the ring exchange and deliver directly to Ukraine - if necessary, also the Leopard 2 main battle tank. Time is pressing," Strack-Zimmermann told the Deutsche Presse-Agentur.

Even if the tank is produced by Krauss-Maffei Wegmann, for Rheinmetall, this political change of heart would probably be the next order accelerator. The analyst consensus sees the stock of the Düsseldorf-based techno-smith as a buy with a medium price target of EUR 204.6. The stock is currently trading at EUR 179.50, around 13% below the weighted price target. After falling below the EUR 192 mark, our hold recommendation has expired due to the activated stop loss.

Defense Metals - Closer and closer to production

North America and Europe have declared important metals as strategic metals and are taking appropriate measures to ensure future supply. It requires an excellent negotiating performance with China, as 80% of all rare earth metals come from the Middle Kingdom. China's three largest state-owned rare earth enterprises merged in December 2021 to form the China Rare Earth Group. The Company is now the world's second-largest rare earth mining and refining group, producing nearly one-third of China's output.

British Columbia is home to the exploration company Defense Metals. For some years now, it has been focusing on further developing the Wicheeda Rare Earth Project, which covers an area of around 4,244 hectares. The property was recently doubled in land area for this purpose. A preliminary economic assessment (PEA) has already been carried out in 2021, providing a solid after-tax discounted net present value at 8% of CAD 517 million. A major benefit of the current REE project is the production of a saleable, high-grade flotation concentrate. A geotechnical field drilling program has now been underway since May. It is intended to provide data for a pre-feasibility study that will be completed by 2023. In the second half of the year, the hydrometallurgical flowsheet will also be finalized, and the rare earths recovered from the pilot plant will be used to approach the first potential customers.

Defense Metals (DEFN) stock has also entered the downtrend in resource stocks. Unjustly so, we believe, given the great potential. For this, however, the underinvested investor gets another chance to enter at around CAD 0.19. With 178.8 million shares, the current market value is just under CAD 34 million. The speculative investor will take advantage of this interesting level.

JinkoSolar and Nordex - GreenTech will not work without rare earths

The GreenTech companies JinkoSolar and Nordex are heavily dependent on strategic metals. The fundamental difference, however, is the geographic location in China and Germany, respectively. JinkoSolar has been reporting sold-out production batches for several weeks, as have the Germans. However, delivery by Nordex is delayed, as the interrupted supply chains strike mercilessly and lead to scheduling problems in the production.

In any case, it is worth taking a deeper fundamental look at the two manufacturers of alternative power generation equipment. Both have a large order pipeline. For Nordex, the location factors in Germany have unfortunately become extremely more expensive, and the predicted margin will thus slide into negative territory in 2022. Nordex tried to adjust its equity base to the complex overall scenario with several capital increases, but the share price is still not moving out of the cellar.

Chinese solar expert JinkoSolar is at the peak of the company's development. However, the next quarterly figures will not be announced until early September. Profits are expected to rise by around 120% YOY. As the solar module manufacturer recently reported, the Company plans to buy back common shares worth up to USD 200 million within 18 months. Chart-wise, both stocks are currently in correction mode, but Jinko is up 40% on a 12-month horizon, while Nordex shareholders are facing a shambles with the price halving.

Strategic or rare metals are not necessarily rare in geological terms, but they are difficult to find in real terms due to the small number of profitable projects. For high-tech companies, this is a limiting factor. Rheinmetall has mutated into a standard stock on the stock market, and JinkoSolar is also on the list of institutional investors. Nordex must first achieve a turnaround, and Defense Metals could quickly return to an upward trend with further project progress.