Great potential in the defense sector! RENK, Hensoldt, NEO Battery Materials

NEO Battery Materials: Imminent Transition from R&D to Commercialization!

The transition from technology developer to producer is likely one of the most exciting and often most critical phases for a company. This is precisely where NEO Battery Materials finds itself right now. The Canadian company has developed a new generation of batteries for megatrends such as robotics, drones, and electromobility. They are more cost-effective, store more energy, and charge faster.

NEO Battery is no longer a pure research and development company, but the Company is expected to generate business from diverse downstream markets including drones, robotics, automotive, consumer electronics, and energy storage for AI data centers. In order to begin production quickly, the technology company signed a long-term lease agreement for an already operational battery electrode manufacturing facility in South Korea. In the first phase, NEO Battery intends to supply electrodes for existing major car manufacturers and other customers in the battery value chain, thereby leveraging existing relationships with OEMs. Customers are already in place.

As production ramps up, the plant will then be gradually converted to manufacture customer-specific, silicon-optimized battery materials – particularly for new applications in drones, robotics, and consumer electronics. Management is talking about a turning point: By leasing the facility, NEO Battery saves the high upfront costs of a new building, reduces construction and commissioning risks, and can immediately deploy its own technology on an industrial scale.

The production facility provides NEO Battery immediate access to manufacturing capacity in the megawatt-hour range, forming the basis for the commercialization of silicon-based anode materials. Through longer shift times and additional automation, the Company aims to roughly double capacity in the coming months, positioning itself for accelerated scaling of its products. The lease agreement initially runs for three years and includes full use of the production facilities, offices, storage space, and infrastructure.

RENK: 50% price loss too much?

While NEO Battery Materials has already signed supply contracts for batteries for drones, tank manufacturers could also become customers in the future. The US Army, for example, is currently developing a lighter, hybrid-electric version of the M1 Abrams battle tank. The British company BAE Systems is already equipping the CV90 armored personnel carrier with a hybrid electric drive to save fuel.

And things are also happening in this area in Germany. RENK is increasingly positioning itself in the field of military vehicle electrification. The Company is going beyond traditional transmission supplies and developing complete hybrid powertrains that combine mechanical transmissions with electric motors, power electronics, and control technology. At the heart of this is the "Hybrid Mobility" line, in which solutions such as ATREX combine an integrated hybrid transmission with two electric motors, military-grade power electronics, and drive-by-wire functionality. This allows battle tanks weighing 50 to 70 tons to be moved with a total output of up to 1,500 kW, including purely electric driving over short distances, "silent watch" in observation mode, and regenerative braking.

At the same time, RENK is expanding its portfolio through collaborations to include electric cross-drive transmissions such as the E-X-Drive, which was developed by the British defense company QinetiQ. These electro-mechanical cross-drive systems are scalable, targeting manned and unmanned platforms up to UGVs under 20 tons, and complement the existing EVO hybrid transmissions, which offer additional functions such as boost power, "silent mobility," and increased power generation for on-board electronics.

Citigroup sees the recent correction in defense stocks as an interesting entry opportunity. RENK, for example, has lost around 50% of its value since its high of around EUR 90 at the beginning of October, too much, in the opinion of Citi analysts.

Hensoldt: Citigroup's favorite

In their industry study, Citi analysts highlighted Hensoldt. The sensor specialist's stock has corrected from EUR 117 to EUR 66 in recent weeks. The experts' price target for Hensoldt is EUR 101. Therefore, they consider the stock a "Buy". A positive factor is that 60% of the order backlog comes from German defense spending, making it easy to plan. In view of the double-digit growth rates expected by the capital market for the Company in the coming years, the stock is too cheap.

However, not all analysts share Citigroup's optimism. This applies, for example, to colleagues at mwb research. The downside risk is now low, but that is all. The experts believe that Hensoldt's sales momentum will cool noticeably after 2030. Therefore, mwb currently only recommends "Holding" the sensor specialist's shares. The price target is EUR 65.

NEO is on the verge of commercializing its battery technology, and the Company aims to expand its end-user markets to become a unique, high-quality Western manufacturer of battery solutions. Defense stocks are currently running out of steam. However, the shares of Rheinmetall, RENK, Hensoldt, and others appear to have found a bottom.