December 2nd, 2021 | 12:52 CET
Nevada Copper, Varta, Aumann - Catching up!
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"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Nevada Copper - Bulging coffers
Experts paint a rosy future for copper stocks. According to a study by Wood Mackenzie, primary copper demand will increase by 30% to about 25 million tons by 2030. The basic assumption for higher price levels in the medium term is the strong global increase in demand, which significantly exceeds supply.
Nevada Copper was recently able to secure a substantial CAD 114 million for the expansion of the Pumpkin Hollow project via a capital increase. The placement was made at CAD 0.77 and included a half warrant with a subscription price of CAD 1.00. In addition, further funding and financing commitments were secured from KfW and core investor Pala Investments.
The Pumpkin Hollow Copper Project in the US state of Nevada has significant reserves and resources of copper, gold and silver. In addition to ongoing high-grade production at the underground mine, an open pit project is in the development stage and on track for a feasibility study. In recent months, several unplanned shutdowns of underground production have delayed the Company's target of processing 5,000 tons of ore per day. As a result, this has put enormous pressure on the share price.
The Company is currently valued at around CAD 280 million at a share price of around CAD 0.63. The majority of analysts classify the share as a doubler. The basic scenario of a rising copper price and an expansion of production speaks for the title. It is only a question of time when the liberation blow will come.
Varta - Dead end?
A significantly slower sales growth than expected by the market in the next few years, coupled with poor Q3 data, continues to weigh on the technology and innovation leader in micro-batteries. Group CEO Herbert Schein had lowered the sales forecast for the current fiscal year from EUR 940 million to EUR 900 million at the beginning of November. The outlook was much more disappointing. For the next two years, Varta only forecasts sales growth of around EUR 100 million each year. The adjusted EBITDA margin is expected to be around 30%.
For some time now, increasing competition from Asia in the core micro battery business has led to slower growth and falling margins for the Germans. Meanwhile, the planned entry into the battery business for cars is still too elusive. Given the slow growth for a technology stock, the current valuation with a market capitalization of EUR 2.6 billion, a 2021 P/E of 38, and a 2022 P/E of 32 is quite sporty. That is also the view of the analysts and market observers. The experts classify the stock as a hold with a price target of EUR 116, which means upside potential of only a few percent.
Aumann - Turnaround?
Aumann is one of the leading manufacturers of automation solutions for electromobility. The Company posted a high order intake in the third quarter. In the nine months of the current fiscal year, sales of EUR 114.1 were achieved. However, the 9M operating result was in the red with an EBITDA of EUR - 2.0 million. According to analysts' estimates, a loss will remain in fiscal 2021. The 2022 P/E ratio is 57, but analysts still believe the stock has an average upside potential of 25%. The experts believe that the technology leader in energy storage will achieve dynamic growth in the future. An important major e-mobility order in the field of battery technology in Q3 can be seen as an indication of this. The Company's market capitalization is currently around EUR 220 million.
To invest directly in e-mobility stocks or to invest in commodities? Both areas should make investors happy in the future. Given the moderate growth, the Varta share is a hold. We have more confidence in Aumann. Those looking for an exciting commodity stock in the copper sector should take a closer look at Nevada Copper. The basic scenario of a rising copper price and an expansion of production speaks in favor of the stock.
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