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August 10th, 2023 | 08:30 CEST

Palantir, First Phosphate, E.ON - A decade of growth

  • Mining
  • phosphate
  • Utilities
  • Software
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The climate transition requires significant investments in energy infrastructure, which should benefit companies like the utility provider E.ON well beyond the current decade. Another beneficiary of this transformation are producers of the raw materials needed for the energy transition, for which demand already exceeds scarce supply in some areas.

time to read: 4 minutes | Author: Stefan Feulner

Table of contents:

    E.ON - Driven by the energy transition

    As the CFO of the energy supplier E.ON, Marc Spieker, told the financial news agency dpa-AFX in an interview, E.ON expects "at least one decade of growth. During this period, the expansion of the energy infrastructure will have to be massively accelerated." In this context, the Essen-based group is uniquely positioned. The Group's energy network is of central importance for achieving the energy turnaround in Germany. High investments are necessary. "There is only one answer now: invest, invest, invest," said the manager.

    Against a backdrop of weakening net interest income, the energy giant posted lower earnings in the second quarter than last year. For the period from April to June, the Company reported a profit of EUR 1.16 billion, down 19%.

    At the end of July, E.ON had already published preliminary half-year figures, which have now been confirmed, as has the full-year forecast, which was revised upward two weeks ago. Part of the updated targets is a more ambitious investment budget: for 2023, E.ON intends to invest EUR 5.8 billion, an increase of EUR 1 billion compared to previous estimates. In the first quarter, EUR 1 billion was already invested, and after six months, the figure was EUR 2.4 billion, an increase of more than a third year-on-year.

    Following the quarterly figures, US bank JP Morgan renewed its price target of EUR 13 with an "overweight" investment rating. At the current share price, this means a potential of around 20%.

    First Phosphate - Excellent results

    The Canadian company First Phosphate is benefiting enormously from the energy turnaround by switching from combustion engines to battery-powered cars. John Passalacqua, CEO of First Phosphate, pointed to a potential shortage in phosphate, an essential component for lithium iron phosphate (LFP) batteries, expected to hit the industry by 2026. Along with copper and lithium, phosphate is central to battery storage in modern vehicles. LFP batteries have recently gained acceptance due to their superior fire safety, longevity, and cost-effective benefits. Automotive industry heavyweights such as Tesla, Volkswagen and Mercedes are increasingly relying on this technology instead of traditional lithium-ion batteries. Data from Fortune Business Insights suggests that the global market for LFP batteries will grow from USD 10 billion in 2021 to USD 50 billion by 2028.

    First Phosphate is strategically positioning itself in a dynamically growing sector. With its primary focus on the extraction and processing of phosphate for the production of cathode material for LFP technology, the Company has fully acquired properties in the Saguenay-Lac-St-Jean region of Quebec. This over 1,500 sq km land area offers excellent infrastructure and rare anorthosite igneous phosphate rocks from which high-quality phosphate is extracted without harmful impurities. This raw material goes through various processing steps to eventually enter the production chains of well-known North American LFP battery manufacturers as high-purity, battery-grade phosphoric acid.

    A significant step forward in First Phosphate's history was the recent start-up of a pilot phosphate concentrate production facility owned by SGS Canada Inc. in Quebec. Another milestone has now been reached with the presentation of preliminary economic viability calculations. The figures forecast a mine life of 14.2 years and a fiscal payback period of 4.9 years with expected cash flow of CAD 567 million in the first 5 years. A key finding from the PEA is the economic viability of the project. It is expected that 425,000t of phosphate concentrate grading over 40% P2O5 will be produced annually, as well as 280,000t of magnetite and 97,000t of ilmenite. At a discount rate of 5.0%, a pre-tax net present value of CAD 795 million and an internal rate of return (IRR) of 21.7% are calculated. Tax adjusted, the pre-tax net present value is CAD 511 million, and the IRR is 17.2%.

    The market value of First Phosphate currently stands at CAD 17.87 million. A letter of intent for the purchase of up to 400,000t of phosphate concentrate per year by the Belgian company Prayon Technologies already exists. Nevertheless, according to the PEA, there is a capital outlay of CAD 550 million until production starts, so strong strategic investors must continue to be found. Should this succeed, First Phosphate faces a revaluation.

    Palantir - Damper following the numbers

    In addition to the transformation of business and industry, artificial intelligence is at the beginning of a supercycle. The fourth technical revolution based on information and communication technology and driven by artificial intelligence found its entry into the mainstream with the launch of the chatbot ChatGPT 3.5 in November last year. Since then, companies in this sector have been bullish. One of those primary beneficiaries is data analytics company Palantir. Since the beginning of the year, the Denver-based company's stock has peaked at more than 240%, reaching an annual high of USD 20.24.

    However, with the release of the second-quarter results, this upward movement was temporarily halted. In the course of trading, the paper lost more than 12% and is quoted in the area of USD 16.80. A setback even to the zone of USD 14 is possible for a further increase. In the long term, the Palantir share will likely tackle much higher realms due to its market position.

    The data analytics experts generated revenues of USD 533 million in May-June. That marks a 13% increase over the corresponding year-ago quarter and is right in line with analyst consensus estimates. Palantir's net income was USD 28 million, resulting in earnings of USD 0.01 per share and marking the third consecutive profitable quarter.

    For the third quarter, the management, led by CEO Alex Karp, forecasted revenue in the range of USD 553 million to USD 557 million. The market consensus expected USD 553 million. The Company reports Adjusted Operating Income from USD 135 million to USD 139 million, significantly above the USD 131 million predicted by Wall Street analysts. Concurrent with the earnings presentation, Palantir announced a USD 1 billion share buyback program.

    E.ON expects strong growth for at least the next decade. First Phosphate is benefiting from the transformation of transport, while Palantir is one of the outstanding players in the artificial intelligence sector.

    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

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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