Sell Varta shares? Nel and Altech Advanced Materials with new opportunities

Altech Advanced Materials: Attractive after price setback

The success of the energy transition and electromobility hinges on the continued advancement of battery technology. Positive developments are occurring in Germany, as seen in the new Porsche Taycan, boasting a 30% greater range and faster charging speed. This progress indicates a step in the right direction. Altech Advanced Materials AG also aims to contribute with innovations "Made in Germany." One such innovation is Silumina Anodes, involving metallurgical silicon coated with aluminum oxide. By adding it, the energy density - i.e. the performance - of lithium-ion batteries was increased by at least 30% in tests. In addition, lifespan and safety were also noticeably improved. In Saxony, the construction of the pilot plant for the production of Silumina Anodes should be completed soon. Letters of intent for the supply of battery materials have already been signed with German and US car manufacturers and battery producers. The main production plant is also already planned, and the feasibility study is convincing. With an annual production capacity of 8,000 tons of coated silicon, the average annual sales potential is EUR 328 million, and the EBITDA potential is EUR 105 million per year. The total net present value (NPV) before taxes amounts to EUR 684 million.

Altech is also involved in a second exciting project: the development of a solid-state battery. Its use in stationary storage systems for wind and solar energy is probably even more exciting than the Silumina Anodes. That is because the CERENERGY® sodium chloride solid-state battery is intended to open up the market for stationary energy storage systems. Experts predict that the market for energy storage systems will grow to USD 15.1 billion by 2027 - in 2022, it was only USD 4.4 billion. The Altech battery will consist of common salt, nickel and ceramics. Critical and expensive raw materials such as graphite, lithium and cobalt are not required. According to Altech, the cost advantage in stationary operation compared to lithium-ion batteries is around 50% when considering total costs and daily charging cycles. The feasibility study is currently underway.

The Altech share is currently trading at around EUR 6 and offers an attractive entry opportunity. In the summer of 2023, the share was already above EUR 15 and corrected significantly without negative news. A capital increase to finance the investments was successfully implemented at the end of 2023, and so far, Altech, with its strong partners behind it, has delivered what was promised. **All those interested to hear more from the Company should register for tomorrow's virtual investor conference, IIF. Altech will be presenting live at 10 am CET.

Varta shares a Sell?

Varta has not kept its promises in recent years. The former German battery success story failed to enter the market for batteries for electric vehicles, and then its core business with microbatteries also collapsed. This was compounded by liquidity problems. Operationally, the Company seemingly turned the corner in the second half of 2023. **But now there has been another setback: Varta had to report a cyber attack. The five production plants were affected. The extent of the damage cannot yet be quantified, but the impact should not be underestimated.

The analysts at Warburg Research share this view and anticipate the operational business will suffer from the consequences in 2024 and 2025. They consider predicting Varta's development challenging, citing a clear lack of visibility. They, therefore, rate the Varta share as "Sell". The price target has been reduced from EUR 16 to EUR 15. Incidentally, Warburg is not alone in its "Sell" recommendation. The analysts at DZ Bank and Goldman Sachs also rate Varta as a "Sell". At least Berenberg and JP Morgan rate the share as "Neutral". According to marketscreener.com, there are currently no buy recommendations for Varta.

Nel: Billions flow into the industry

The shares of Nel, and Plug Power & Co. have been among the losers in recent months. Now, the hydrogen industry is getting support from the political side. The EU Commission has cleared the way to promote hydrogen projects to support the energy transition. Accordingly, the EU states have a total of EUR 6.9 billion at their disposal to promote hydrogen projects. The EU Commission also expects a further EUR 5.4 billion to flow into the industry from the private sector. The project is called "IPCEI Hy2Infra" and was launched by seven EU member states, including Germany. It provides for 33 individual projects to be funded within the framework of public-private partnerships. Government funding is to be supplemented by the involvement of private companies, investors and universities. The aim is to create a Europe-wide hydrogen network.

The fact that governments globally subsidize hydrogen is nothing new. Therefore, the impact on the stocks of hydrogen companies is likely to be limited. Instead, Nel, for example, needs new major orders and must demonstrate over the course of the year that it will continue on its path out of the losses.

Nel & Co. shares will likely have a challenging time again this year. Interest rates are expected to fall more slowly than hoped, and at the same time, sharp price swings are probable. Altech is involved in the development of genuine innovations. One advantage is that they have financially strong partners on board. This means Altech only has to cover a small portion of the necessary investments in building production capacities. Varta is currently a black box and probably only suitable for risk-taking investors.