29. September 2021 | 10:18 CET
Rheinmetall, Almonty Industries, Siemens Healthineers: Here the signs point to growth
In 2019, the world's nations spent a whopping USD 1917 billion on armaments. That is more than they have spent since 1988, stresses the Stockholm-based International Peace Research Institute. Germany increased its spending more than any other country in the process. The incidents in Afghanistan have shown that it is of great importance to be able to act if one wants to play a role on the international stage. The pandemic shows that health can also take on a global dimension. Here, too, experts expect rising expenditures. Reason enough to take a closer look at well-known representatives of both sectors.
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ISIN: RHEINMETALL AG | DE0007030009 , ALMONTY INDUSTRIES INC. | CA0203981034 , SIEMENS HEALTH.AG NA O.N. | DE000SHL1006
"[...] 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
Rheinmetall: Solid value breaks new ground
Rheinmetall's stock is not 100% dependent on armaments. At around 35%, the automotive sector also contributes a significant share to sales. Recently, both sectors have been performing well. The auto industry has been on the up again, and more armies are ordering new ammunition. In the summer, a EUR 500 million order from the German armed forces ensured that Rheinmetall's capacities would be fully utilized for the next two years. Even so, the Company remains conservative and has not raised its forecast. Sales could still grow at the higher end of the 7-9% range. The margin could be 10% or slightly less.
In the future, Rheinmetall also plans to restructure its business and place an additional focus on sensors and electronics. In this way, new lucrative business areas are to be opened up - the goal is to achieve sales of EUR 8.5 billion by 2025 and continue to grow. The central pillar will be the defense business. Here, the investment trend is likely to continue. Rheinmetall is well-positioned for this.
Almonty Industries: Tungsten offers unique opportunities
One Company that could also benefit from increased defense spending is Almonty Industries. The Company mines tungsten. This element has unique properties and plays a role whenever metal needs to be made heat-resistant. In the past, tungsten has also been in ammunition and armor. Almonty is active with smaller projects in southern Europe and is bringing a megaproject into production with the Sangdong mine in South Korea. The mine is considered the largest project outside China. Almonty has completed almost all preliminary work and is nearing the finish line - the Company has already celebrated the ground-breaking ceremony. The Kreditanstalt für Wiederaufbau (KfW) is on board as a financing partner.
A customer for the subsidized tungsten has been found in the Austrian Plansee Group, and key data for delivery has been finalized. That this has been achieved before the mine reaches its full production capacity can be seen as a sign of confidence. Tungsten is considered a challenging element in the mining scene. Operating such mines is something that even experienced operators are happy to leave to experts. Almonty has proven that it can be a successful operator at its Los Santos project in Spain - increasing recovery rates from 35 - 40% to around 50%. The stock has consolidated in recent months but is likely to be on some investors' lists - the Company is now listed in Australia, Canada, and Germany.
Siemens Healthineers: Health as a growth area
In addition to tungsten's use in heat-resistant alloys for the military, the unique element is also found in medical technology devices, such as those used in imaging procedures. One representative of this sector is Siemens Healthineers: At around 60%, imaging procedures account for the largest share of sales at the Company. Other areas include diagnostics and advanced therapies. In 2021, the Company's sales growth is expected to be up to 12%. Recently, all areas have developed positively. The reason for this is the increasing investments in the healthcare sector. However, the share has weakened in recent weeks. Currently, there are signs of a sideways movement between EUR 55 and 60. Those who want to enter the market in the longer term should take these levels into account.
Both Siemens Healthineers and Rheinmetall are solid stocks. However, both companies are growing rather organically and steadily. In the case of Almonty Industries, the success of the South Korean Sangdong mine is far from priced in. In addition, with Almonty, investors can bet on two growth markets simultaneously, i.e. healthcare and defense. Rising inflation could also play into the stock's favor in the medium term.