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July 14th, 2023 | 07:30 CEST

Plug Power, First Phosphate, BASF - Turnaround in sight

  • Mining
  • phosphate
  • chemicals
  • renewableenergies
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After a sharp correction that lasted for months, companies in the renewable energy sector are forming a sustainable bottom. In recent trading days, the prices of water, wind and solar shares have moved significantly away from their lows. From a fundamental perspective, the future appears rosy, which could present a favourable long-term entry opportunity.

time to read: 4 minutes | Author: Stefan Feulner

Table of contents:

    Plug Power - Positive signs

    If Plug Power CEO Andy Marsh has his way, there is no limit to the hydrogen innovator's sales and profits over the next few years. Thus, despite a rather sobering first quarter, the Latham, New York-based company expects full-year sales of USD 1.4 billion with a positive gross margin. By 2030, it aims to produce more than 2,000 tons of hydrogen per day from its own hydrogen ecosystem. Plug plans to deploy 1 GW of stationary power generation products by 2030, 5 GW of electrolysers per year, and ship 500,000 fuel cell-powered forklifts.

    The US-based company has now been contracted by Countrywide Hydrogen, a subsidiary of ReNu Energy Limited, to supply two 5 MW proton exchange membrane electrolyser systems for green hydrogen projects in Tasmania, Australia. The electrolyser systems are to be installed at the planned production facilities at Brighton near Hobart and Western Junction near Launceston.

    After the horrendous losses of the past months, the chart picture of Plug Power is positive. Thus, the downward trend formed since January 2021 could be left. At USD 13.44, the 200-day line is currently in place, which at the current level of USD 11.50 represents a short-term potential of almost another 20%.

    First Phosphate - Positioned for the Change

    The rising sales figures of electric car manufacturers bring with them a problem, namely the growing demand for critical metals. In addition to copper and lithium needed for vehicle storage, First Phosphate CEO John Passalacqua says the shortage of phosphate, one of the key components of LFP batteries, will likely hit the industry as early as 2026. Lithium iron phosphate (LFP) batteries have gained significant market volume in recent years due to better fire safety, longer life, and lower cost. As a result, big players such as Tesla, Volkswagen and Mercedes prefer the LFP battery to the traditional lithium-ion battery. According to Fortune Business Insights, the global market for LFP batteries will explode from USD 10 billion in 2021 to USD 50 billion in 2028.

    This means the Company, which has been listed in Canada and Frankfurt since March of this year, occupies an exponentially growing market. The Canadians focus on the extraction and purification of phosphate for the manufacture of active cathode material for the LFP industry. First Phosphate owns more than 1,500 sq km of land rights in the Saguenay-Lac-St-Jean region of Quebec, which has world-class infrastructure. The property contains rare anorthosite igneous phosphate rock that yields high-quality phosphate material without elevated concentrations of harmful elements. This is to be processed through a series of processing steps to produce high-purity battery-grade phosphoric acid and then move directly into the supply chains of major North American LFP battery manufacturers requiring active battery-grade LFP cathode material.

    First Phosphate celebrated an important milestone in the Company's history with the commissioning of a pilot plant for the production of phosphate concentrate, located at the facilities of SGS Canada Inc. in Quebec. Test results to date show a recovery rate of 91.4%, and a total of 900 kg of concentrate with a phosphate content of 40.2% has been produced. The subsequent processing of the material will be carried out by the partners. Prayon is responsible for the production of purified phosphoric acid in LFP quality, while Hydro Quebec is responsible for the production of cathode-active material for the LFPs. All production is carried out in accordance with ESG standards. In addition to phosphate, there is the possibility of secondary recovery of iron, ferrous sulfate and titanium.

    After a sharp correction in recent months, First Phosphate's stock is forming a bottom in the CAD 0.35 area. Exceeding the CAD 0.44 level would form a prominent buy signal, with short-term potential to the CAD 0.55 area.

    BASF - Upward momentum despite profit warning

    Companies in the chemical industry have experienced more optimistic times. Weak demand due to the recessionary outlook is putting pressure on revenues and margins. After Clariant, Evonik and Lanxess had to cut their annual forecasts, BASF was also hit after a sobering second quarter.

    For the current fiscal year, the world's largest chemicals group expects sales in a range between EUR 73 and 76 billion and EBIT between EUR 4.0 and 4.4 billion. The Company's management originally expected sales of EUR 84 billion to EUR 87 billion and EBIT of between EUR 4.8 billion and EUR 5.4 billion. In the previous year, this figure was EUR 6.9 billion. After the industry had already lowered its estimates one after another, the sales and profit warning at the DAX-listed group came as no further surprise to analysts.

    After the quarterly figures, the experts at Deutsche Bank Research reiterated their target price for the industry leader of EUR 54 and voted "buy ". The US bank JP Morgan continues to see a price target of EUR 58 with an "overweight" investment rating.

    Despite a sales and profit warning, analysts are positive on chemical giant BASF. The chart picture for Plug Power has brightened considerably in recent days. First Phosphate reached a milestone with the start of a pilot plant.

    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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