March 23rd, 2022 | 12:01 CET
Rheinmetall, Kleos Space, Lufthansa - Which shares benefit from the war-related supply chain problems?
Table of contents:
Rheinmetall - Stock performs very strongly
Since Germany imports a lot of metals and coal from Russia, Rheinmetall could also be indirectly affected by supply chain problems. Because if the steel industry cannot supply enough material, which is likely to become more expensive anyway due to high energy costs, there will be production difficulties in the long term. CEO Armin Papperger said in an interview with Wirtschaftswoche: "What the German armed forces needs now is not ready in the industry's warehouses." However, the Düsseldorf-based Company does not currently seem to have a raw material problem, as it says it could supply equipment worth EUR 42 billion.
It is thus clear that the defense group will be one of the big beneficiaries when it comes to distributing the 100 billion in special assets of the German armed forces. In addition, the government will increase defense spending to over 2% in the coming years to make the German armed forces fit for defense again. The Düsseldorf-based Company can be hopeful that sales figures will rise in the coming years. In 2021, the Group had not been able to meet analyst expectations in terms of sales. If you want to read a more detailed analysis of the Group, we recommend the report on researchanalyst.com.
The Düsseldorf-based Company's shares are still selling like hotcakes, and the stock is rushing from one high to the next. The trend is also fueled by analysts' ever-higher price targets. Bank of America is in the lead with a target price of EUR 220, followed by Warburg Research with EUR 210. UBS and Deutsche Bank call for EUR 187 and EUR 190, respectively. At its peak, the share has almost doubled since the beginning of the war. It is currently trading at EUR 180.80. As an interested investor, you should wait for a setback.
Kleos Space - Target price EUR 1.75
Sending goods by air freight is only economical in certain situations. The railroad line from China to Europe is at a standstill as it crosses Russian territory. So in many cases, the only option is by sea. However, there are still pirates on the way to Europe. It is here where Kleos Space comes in. The Company uses satellites in space to intercept radio frequencies and can use the data it collects to track the movements of ships. Customers can use this data to detect pirates, illegal fishing, smuggling, and border crossings, thus warding off these threats. Meanwhile, the Company also offers a ground solution.
On March 11, First Berlin Equity Research issued a report on the Company. If the assumptions hold true, 2022 will be the Company's breakthrough year. After total sales in 2021 amounted to only EUR 125,000, almost EUR 8.2 million are targeted for 2022. On the one hand, this is due to satellite cluster expansions, which will double to 16 by mid-2022, raising global coverage by 119 million sq km daily. More data means more accuracy, making the products increasingly attractive to governments and other customers. On the other hand, the Ukraine conflict and 52 evaluation contracts that were already available in 2021 but could not be started until 2022 will help. According to analysts' estimates, sales in the first quarter will amount to EUR 335,000. That would represent more than 2.5 times the full-year 2021 revenue.
The partnership with Satellogic should also provide better customer access, as the Company offers high-resolution satellite imagery. Together, therefore, there are great synergy effects. First Berlin has set the stock at buy with a price target of EUR 1.75. The share is currently trading at just EUR 0.342. That is due to a slide in the share price caused by the postponed launch of the third cluster. It was initially planned for January and is now rescheduled for April. No later than with the new clusters the business can take off.
Lufthansa - What does Kühne want?
During Corona, passenger air traffic virtually collapsed. Lufthansa, of course, felt the impact. The supply chain difficulties made visible by Corona, in contrast, helped the Company's cargo business. The record year for the cargo division in 2021 enabled the Group to cut its loss by two-thirds to EUR 2.2 billion. Although the Corona restrictions will be eliminated, the management only expects a passenger volume of 70% compared to the pre-Corona period. CFO Remco Steenbergen also refused to give a clear profit target.
In contrast, Klaus-Michael Kühne, has made a decision. He has bought into Lufthansa with EUR 350 million, making him Lufthansa's largest shareholder alongside the German government. Since then, there have been rumors about a possible split of the Group into the passenger and cargo divisions. For Kühne, the move makes sense because he owns a stake in the shipping sector with Hapag Lloyd. His own logistics company, Kühne & Nagel, covers the road sector. Aviation is still missing. It remains to be seen precisely what Kühne's plan will look like.
Analysts are also undecided. In March, there was one buy and one sell recommendation. Four analysts recommended holding. The price targets are between EUR 5.20 and EUR 8.30. Since March 7, the share has risen like a Phoenix from the ashes. From EUR 5.25 it went up to EUR 7.33, a plus of almost 40%. The share is currently very volatile. Here, too, one should wait for consolidation before entering, especially since no upward trend has been formed yet.
Supply chains will continue to be disrupted. If imports from China by air are not economical, the only option currently available is by sea. Rheinmetall does not seem to have any major supply problems for the time being. Kleos Space offers cargo ships protection against pirates, so large shipping companies or insurance companies could become customers. Lufthansa set a record in the cargo segment in 2021. This segment, at least, is sure to boom this year too.
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