Boom After the War: BYD, RE Royalties, and SMA Solar in Focus!

Global Solar Shift

The growth of the solar industry has known virtually no bounds in recent years. China, in particular, has driven massive expansion, especially in the deserts of the north and west of the country. So it is no wonder that the world's most powerful solar park is now located in China. The Gonghe-Talatan Solar Park in Qinghai Province was built over the course of a decade starting in 2011 and now has a capacity of around 15.6 gigawatts. What makes it special is that it is a "solar hub" that combines vast photovoltaic fields with hydroelectric power plants. The project is so large that the microclimate in the Talatan Desert has already changed, and grass is now growing beneath the modules. And construction is still ongoing. Most recently, additional storage systems were integrated to keep the power supply stable even at night. This is just one example among many. According to the IEA (International Energy Agency), the installed capacity of solar PV systems is expected to surpass that of coal by 2027, thereby taking the top spot globally. Global capacity is projected to triple over the five-year period leading up to 2027. This process is accompanied by falling prices, as the capacity required for expansion is also increasing significantly. This boom is likely to continue in the coming years. The war in the Persian Gulf has exposed dependencies. And a shift in thinking is definitely noticeable, which puts the spotlight not only on renewable energy but also on electric vehicles.

BYD: The Champion from China

China has long since embarked on the path of electric vehicles. This has three advantages: first, there is no need to catch up with Japan and Germany in terms of combustion engine technology. Second, the demand for oil is dropping significantly. And last but not least, the air in China's cities has become much cleaner. By 2025, electric vehicles already accounted for 50% of new vehicle registrations. Over the course of the previous year, the Chinese company managed to overtake EV pioneer Tesla. In 2025, it sold 2.25 million pure electric vehicles, representing a 28% increase compared to the prior year. Total sales, including hybrid vehicles, even exceeded 4.5 million vehicles. BYD benefits from deep vertical integration, developing and producing its own batteries and chips, and is launching many new products on the market through a model offensive in Europe and South America. The company is thus evolving from a pure vehicle manufacturer into a technology conglomerate. This is likely to be an advantage in the wake of the global energy transition, promising significant growth due to the current war in the Gulf.

At first glance, BYD's Q4 and full-year 2025 figures disappointed the markets. The company reported a net profit equivalent to USD 4.5 billion. Revenue rose to USD 112 billion; both figures fell short of expectations. In the long term, however, the stock's potential appears far from exhausted. With its broad portfolio and now its push into AI, the stock, which has gained about a quarter since its low in late January, is worth analyzing. Analysts at JPMorgan continue to recommend buying ("Overweight") and see a price target of HKD 120, which corresponds to about EUR 13. They praise the company's dominance in the mass market and its technological leadership in batteries.

RE Royalties: Is a Sale on the Horizon?

RE Royalties has adapted a business model established in the mining industry to the renewable energy sector. The Canadian company provides project developers with capital to build solar parks or wind farms and receives license fees, known as royalties, in return. This benefits both parties. The project developer does not have to immediately give up shares in their company. RE Royalties, in turn, receives a share of revenue over the entire lifespan of the project, which often operates for 20 years or longer. The key point: Since gross revenue serves as the basis rather than profit, RE Royalties faces no disadvantages from rising operating costs. The royalty is typically coupled with a short-term loan (6 months to 3 years), from which interest income is generated. In the long term, the company builds up many cash flow streams in this way without taking on operational risks. The portfolio is strongly focused on North America and now comprises ~120 projects. In addition to solar and wind energy, the focus is also on battery storage and biogas. The current pipeline of potential investments has grown to a total of CAD 200 million.

The stable revenue has made RE Royalties a solid dividend payer. The company will soon have paid a dividend to shareholders for 30 consecutive quarters. In January, the company paid out 1 cent per share. Calculated on an annual basis, with a payout of 4 cents, this results in a current dividend yield of 10.9%. Consequently, management is dissatisfied with the stock's performance; the market capitalization stands at only around CAD 17 million. A strategic review has now been announced to "identify opportunities to maximize value for shareholders." This involves evaluating a broad range of potential alternatives, including partnerships, co-investments, and even the sale of the company. For this reason, management has commissioned PricewaterhouseCoopers to conduct the strategic review.

After a strong start to the year, the stock has recently been trading sideways. At CAD 0.365, however, it remains far from its 5-year high of over CAD 1. Should a sale actually take place, there would likely be at least a takeover premium.

SMA Solar: Those Declared Dead Live Longer

SMA Solar shareholders have been through quite a rollercoaster ride in recent years. The stock lost five-sixths of its value at times from its peak of EUR 100. In the meantime, the stock has successfully bottomed out. While the company's demise was once discussed due to fierce market competition, the Hessian firm has evolved from a pure provider of inverters to an expert in energy management. The year 2025 was still marked by restructuring. EBITDA, including one-time effects (impairments, provisions, restructuring expenses), stood at EUR –65.4 million. But there were also bright spots: a positive free cash flow of EUR 109.7 million was generated. This year, the Kassel-based company aims to generate revenue of EUR 1.475 to 1.675 billion and an EBITDA of EUR 50 to 180 million. The environment remains challenging, according to management. At EUR 176.4 million, net liquidity was clearly in positive territory, and the equity ratio of 28% is acceptable. Currently, only two out of seven analysts recommend buying the stock, which is rare. Furthermore, all price targets are below the current price of EUR 48. New research could therefore provide fresh momentum.

With BYD, investors are betting not only on the electric vehicle boom but also on batteries, energy storage, and AI. Many believe the Chinese company is poised for a wave of global success. With RE Royalties, dividend investors can cash in over the long term. A new strategy, including a sale, could offer a short-term premium. SMA Solar has turned things around after a difficult year and should benefit from the expansion of solar energy in the medium to long term.