November 13th, 2023 | 07:00 CET
Plug Power falters, Almonty Industries and Rheinmetall with exclamation marks
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Plug Power - The last optimists driven away
After announcing third-quarter figures, a sell-off ensued for the fuel cell pioneer Plug Power. However, this time, it was business as usual. The ambitious targets set by CEO Andy Marsh were once again not met. One might not assume that the marketing strategist has a strategy behind this. However, considering that Plug Power was still forecasting sales of USD 1.2 billion for 2023 just last month, incidentally representing a hidden profit warning, and now looking at the sales for the first nine months, which amount to just USD 669 million, it is reasonable to question this. In other words, revenues of at least USD 531 million would have to be booked in the final three months.
The situation on the profitability side looks even more dramatic for the Company. In the third quarter alone, the loss grew to a staggering USD 283.50 million, which means a loss of USD 0.47 per share. The analysts' consensus, which had already significantly lowered expectations, expected a much smaller loss of USD 0.31 per share. After nine months, the operating loss amounted to USD -863.90 million, compared with USD -522 million in the same period of the previous year.
The Company's continued existence is in jeopardy due to the never-ending series of losses - Plug Power has yet to be able to break even in any quarter in its 26 years of existence. Plug Power informed the US Securities and Exchange Commission (SEC) that there are "significant doubts about the Company's ability to continue its operations." As of September 30, the cash position amounted to USD 1.2 billion. This sum will not even last the US company another 12 months. In line with our warnings in various reports to avoid an investment in Plug Power, we maintain our stance even at significantly lower levels.
Almonty Industries - Explosive jump in profits expected
Analysts have kept their thumbs down on Plug Power since the announcement of the third quarter figures. In contrast, they anticipate considerable potential for the global mining company Almonty Industries, which focuses on the mining and exploration of tungsten. The experts at Sphene Capital see a price target of CAD 1.66, representing an upside potential of over 240% to the current share price. The reasons for the exorbitant upside are manifold.
In addition to the fact that the Los Santos mine in Spain is back in production, the Sangdong mine in South Korea is expected to significantly contribute to increasing sales and profits from 2024. The project in South Korea is seen as a beacon of hope for the West, as the mine is expected to be responsible for around 30% of global supply outside China at full capacity and would significantly reduce the supply chain's dependence on China.
Almonty already has a 15-year purchase agreement with the Austrian Plansee Group for the tungsten produced, which secures a cash flow of USD 590 million. The Sangdong deposit has a potential life of 90 years and is to be developed in two phases with an annual production of 2.3 million tons to 4.8 million tons of tungsten oxide.
Due to the increasing demand for tungsten from the aerospace industry and the growing demand for electrodes, filaments, and contacts in renewable energies, Almonty Industries has a bright future ahead of it, thanks to its market-leading position.
Rheinmetall AG - Entry opportunity
While the quarterly figures for hydrogen companies are still largely underwater, the sun is shining on the integrated technology group Rheinmetall. The Düsseldorf-based company benefits from the further armament of the Western world. The order backlog grew by 42% to EUR 36.5 billion. Rheinmetall also confirmed its sales and earnings forecast for the full year 2023, with revenues expected to range between EUR 7.4 billion and EUR 7.6 billion. The operating margin should be in the region of 12%.
Following the publication of the final figures, analysts did not hold back in raising their price targets. Following the figures, DZ Bank no longer sees the fair value at EUR 305, but now even at EUR 316. The Group's profitability and order intake were convincing. The US bank JPMorgan raised its price target from EUR 320 to an impressive EUR 340. According to analyst David Perry, the details of the figures and the conference call of the defense and automotive supplier had some positive things in store.
Last week, the armaments group tested the previous all-time high of EUR 281.30 but then briefly fell back again. A break above this level would result in prices above the EUR 300 mark.
The lights are slowly going out at Plug Power. In contrast, the defense group Rheinmetall is shining with a high-order backlog. According to analysts at Sphene Capital, Almonty Industries is poised for a jump in profits in the next financial year.
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.
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