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April 24th, 2024 | 07:30 CEST

Is China getting serious? Rheinmetall and Almonty Industries profit! Varta share on the brink?

  • Mining
  • Tungsten
  • Defense
  • armaments
  • renewableenergies
Photo credits: pixabay.com

Is China really preparing for an attack on Taiwan? It is well known that China is massively increasing its gold reserves. But why tungsten, too? After all, China itself is the largest producer of this raw material, which is not only in demand in the arms industry. However, as noted recently by the CEO of Almonty at an investor conference, the Chinese are currently buying large quantities of tungsten. We can only speculate about the reasons behind this. What is clear is that the Western world needs to secure its tungsten supply. Almonty Industries is already producing in Europe and plans to commission a huge tungsten mine in South Korea later this year. Revenue and profits should then rise sharply and lead to a revaluation of the share. Rheinmetall has undergone a revaluation in the past two years. Can it reach EUR 600? Varta, on the other hand, is on the brink. Analysts do not see any upside, even at the current price level.

time to read: 4 minutes | Author: Fabian Lorenz
ISIN: ALMONTY INDUSTRIES INC. | CA0203981034 , RHEINMETALL AG | DE0007030009 , VARTA AG O.N. | DE000A0TGJ55

Table of contents:


    Almonty Industries: Why is China buying on the global market?

    "The price of tungsten is currently at a high level. There are several reasons for this. One that I cannot explain is China. The fact is that there are currently huge imports into China, including from Australia and Europe. This has dramatically changed their approach," reported Lewis Black, CEO of Almonty Industries, last week at the IIF virtual investor conference (Link to recording). The fact that China is buying on the global market is so surprising because the country, together with Russia, dominates global production. According to Lewis Black, one reason could be that tungsten is increasingly used in the semiconductor industry. Due to growing tensions with the US, China has announced that it will massively expand its domestic chip industry. In addition, tungsten is also used in the defense and solar industries, among others, and is vital in the production of batteries for electric vehicles. These are all areas where China is one of many players.

    How does Almonty benefit from these developments? Firstly, the Company already has established tungsten mines in Spain and Portugal. They also ensured that the Company achieved a positive EBITDA of EUR 2.2 million in 2023 - despite significant investments. The driver for the share is in South Korea, where the Sangdong mine is due to be ramped up this year. With the opening of the new mine in South Korea, Almonty is set to become one of the major players, which should lead to a revaluation of the share. Incidentally, the project is being co-financed by the German KfW to the tune of EUR 70 million, emphasizing the global significance of tungsten. According to Almonty's CEO, talks are also being held with European governments, and representatives from the US Department of Commerce have already inspected Almonty's activities on the Iberian Peninsula.

    For a personal impression of the management, we recommend watching the recording of the presentation from the IIF investor conference (here).

    Rheinmetall: Are new highs possible?

    The arms industry is a major beneficiary of the war in Ukraine and global tensions. In the current year alone, the shares of Rheinmetall, Hensoldt & Co. have posted significant double-digit gains. After some profit-taking in the meantime, and it looked as if the rally was over, Rheinmetall shares are already working their way up again. One of the reasons for this is presumably the fact that the US has now approved an aid package worth billions to rearm Ukraine. Yesterday, the share climbed back above EUR 517. Are new highs possible? JP Morgan sees further upside potential of more than 20%. For the analysts, Rheinmetall's long-term prospects are bright, even if there should be a weaker quarter. After all, capacities have to be built up in the defense industry, and that takes time. The analysts, therefore, recommend the shares of Germany's largest defense company with an "Overweight" rating and a price target of EUR 600. The Company will report on its performance in the first quarter of 2024 on May 14.

    Varta share without upside?

    While Rheinmetall will soon be reporting on the first quarter, Varta shareholders are still waiting for the figures for 2023. However, the delay in the annual financial statements is one of the more minor problems for the former German battery hopeful. The collapse of the core business, a failed attempt to expand into electric vehicle batteries, and financing problems weigh heavily on the Company and its shares. And then a cyberattack further delayed the preparation of the annual financial statements, making exclusion from the SDax likely. It is, therefore, not surprising that the share price has plummeted from EUR 20 to EUR 9 since January alone. To put this in perspective, in August 2021, the share stood at around EUR 160.

    But even at the current level, analysts see no upside potential. Warburg recently reduced the price target from EUR 15 to EUR 8. The recommendation is consequently "Sell". DZ Bank also rates Varta as a "Sell". The target price here is EUR 8.80. The analysts currently see no way out of the muddled situation of weak demand, strong competition, and uncertain financing.


    The Varta share is likely only for gamblers, even if financing is secured. Operational success is anything but assured, and the Company is still valued at EUR 380 million. On the other hand, things are getting really exciting for Almonty this year. The closer it gets to the opening of Sangdong, the more likely it is that the share price will rise significantly. Rheinmetall now boasts a hefty market capitalization of EUR 22.5 billion. However, the geopolitical environment offers the Company the opportunity for sustainable growth. However, there can always be price setbacks, as seen last week, or even a major correction. However, the long-term prospects remain favorable.


    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") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Fabian Lorenz

    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.

    About the author



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