April 27th, 2021 | 12:04 CEST
Samsung SDI, Rock Tech Lithium, Nikola - The future is electric, and these stocks are going with it
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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
The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.
Samsung SDI - Well-positioned as the world's number five in battery production
The subsidiary of the world's largest electronics manufacturer Samsung, is the world's fifth-largest producer of car batteries. Founded in 1970, the Company is a pioneer of lithium-ion technology. In Europe, the Company has a battery plant in Hungary, from where it supplies batteries to the BMW and Volkswagen groups.
The Company announced only in February of this year that it would expand its production capacity in Göd, Hungary, near Budapest, from 30 GWh to 40 GWh p.a. through an investment injection of around EUR 740 million. The expansion is to be financed partly by loans and partly by a capital increase at the Hungarian subsidiary SDI Hungary Zrt. Plans also emerged that Samsung SDI was considering building a second plant in Hungary. However, no further details were given on this. In any case, it looks as if the battery giant wants to maintain its good position in the competitive field and further consolidate its market position in Europe.
Due to the emerging increase in demand, we currently see the Company in an excellent starting position. Another factor in favor of the stock is its current valuation: most recently, the stock had fallen to a price of KRW 670,000. However, analysts see the fair price at an average of KRW 858,484. The stock thus has a price potential of around 30%. Therefore, for us, now is precisely the right time to enter.
Rock Tech Lithium - Leading the mobility revolution with investments in Germany
The Canadian Company, Rock Tech Lithium and its German Chairman Dirk Harbecke, plan to address a major problem of battery manufacturers worldwide and thus benefit massively from the mobility shift towards e-drives. The Company plans to supply lithium, a raw material currently found in the form of lithium hydroxide, in pretty much every battery produced. Currently, over 80% of lithium production takes place in China. Due to tensions in global trade, lithium has often been a political pawn in the past, leading to wildly fluctuating prices. Rock Tech now plans to secure the lithium supply in Europe by mining its mines in the Canadian province of Ontario and refining it into lithium hydroxide at an eastern German site in Saxony-Anhalt. The geographical proximity to Tesla's Gigafactory in Grünheide, Brandenburg, and to BASF's new cathode plant in Schwarzheide, also in Brandenburg, as well as the high level of support promised by the state of Saxony-Anhalt, played a significant role in the choice of location.
Production is scheduled to start in 2023. To this end, the Vancouver-based Company plans to build an initial converter plant with a production capacity of 24,000 metric tons of lithium hydroxide p.a. in the first step, which corresponds to around 500,000 car batteries. Sales in the event of trouble-free production will be around EUR 250 million. At the current lithium price of EUR 10,000 per ton of lithium carbonate, the expected profit is EUR 40 million, with the Company's market capitalization currently at just EUR 160 million. Of course, there are still dilution effects here. Rock Tech is on a very good path: the Company has recently started a metallurgical test program to convert its lithium deposits into industrially usable lithium hydroxide, which will later be used in its converter plant in Germany. Final results of lithium hydroxide samples are expected in May.
We think the story is very timely. It will not be possible to turn back the mobility revolution that has started. More and more car manufacturers are stating that they are phasing out the production of internal combustion vehicles. The Swedish manufacturer Volvo, which now belongs to the Chinese Geely Group, will no longer offer combustion engines from as early as 2025. The Daimler Group has also already heralded the end of the gasoline engine. Battery-electric drives will become increasingly popular in goods transport with long-haul truck traffic, particularly predestined for this technology due to its uniform battery load. The demand for lithium will therefore continue to grow strongly in the future. Risk-averse investors are taking advantage of the current price level to enter the Company, which is also traded in Frankfurt. They are looking forward to seeing movement in the share after the publication of the test results in May.
Nikola - Cooperation for a hydrogen filling station network
Nikola shareholders are used to suffering. After the report by Hindenburg-Research on various false statements by former CEO Trevor Milton in September 2020 and the subsequent share price collapse, the shares mark new lows every week. Since then, the Company has taken many steps to present a possible future for Nikola to the capital market. However, the recent past was also marked by several setbacks. The cooperation agreement with GM, including the planned cross-participation, failed. The order for 5,000 garbage trucks was canceled. Nikola itself had to reduce the planned number of FE trucks to be delivered from the original 600 units to 100 units and announce the discontinuation of his SUV project Badger.
All this combined with a 2020 annual loss of USD 383 million sent the share price plummeting to below USD 10. But towards the end of last week, there was finally a sign of life again: Nikola announced the signing of a cooperation agreement with the American gas station and rest stop operator TravelCenters of America. In the greater Los Angeles area and the Central Valley in Southern California, two refueling stations are initially to be converted to supply trucks with hydrogen. Commissioning is planned for Q1/2023. The infrastructure is explicitly said not to be limited to Nikola trucks but will also be open to other manufacturers planning to enter hydrogen powertrains for commercial vehicles, such as Toyota, Hyundai or GM. The good news caused the share price to rise to currently USD 12. The decisive factor for the share will be how successfully Nikola can implement its planned next steps. The Company would like to launch its purely battery-powered vehicle series Elektro-Tre towards the end of this year. To do so, however, the Company needs about USD 100 million in capital to complete its production facility in Arizona.
It remains to be seen whether the Company, currently valued at USD 4.5 billion, will succeed in raising the money. If Nikola fails to do so, the future looks bleak. However, if vehicle deliveries start as planned at the end of the year and the expansion of the service station network also goes ahead as planned, investors should regain more confidence in the Company. Nikola is, therefore, a case for investors who are willing to take risks. In principle, the story is a good one. This is shown by the plans of established manufacturers such as Toyota and Traton, who all want to follow Nikola's technological direction.
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