November 18th, 2022 | 10:15 CET
Shares of Nordex, BYD, and Almonty Industries: Winners of the energy transition
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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
Almonty before revaluation: Over 100% price potential
Sphene Capital initiated coverage of Almonty Industries with a Buy rating and a price target of CAD 1.67. Currently, the stock is trading at CAD 0.67. The German research house believes that the tungsten producer is facing a re-rating due to the ongoing expansion of its own value creation through the construction of a vertically integrated nano-tungsten oxide processing plant to supply South Korea's battery anode and cathode industry. Almonty's shares are valued at less than 1.8 times sales and less than 5.5 times EBIT for 2024. According to the analysts, this is too low. Analysts expect Almonty to generate revenue of about CAD 104 million and an EBIT of CAD 35 million in 2024. Earnings per share are expected to be CAD 0.12 in 2024.
Almonty Industries is a Canadian-based mining, exploration and
development company that holds a portfolio of four high-grade
tungsten projects in stable Tier 1 countries in South Korea and the
Iberian Peninsula. The group's flagship tungsten deposit is Almonty
Korea Tungsten. It is scheduled to come on stream in 2023 and is expected to be the largest tungsten mine outside China. A supply contract has already been signed with the Plansee industrial group. At a minimum price of USD 235 per MTU, Almonty could generate an operating cash flow of at least USD 580 million with Plansee alone within the minimum term of 15 years. The agreement covers about 50% of the expected production. It should be possible to sell the remaining volumes, as South Korea is the largest per capita consumer of tungsten, and tungsten is in demand worldwide - e.g. for photovoltaic and battery manufacturing. Download the full study for free.
Nordex: Everything should get better from 2023 onwards
The Nordex share has made strong gains in recent weeks. It went up from around EUR 7.50 to around EUR 11.50. Investors are putting the poor operating performance in 2022 behind them and hoping that the wind turbine manufacturer will get a grip on its production problems in 2023 - Because the order books are full. Just yesterday, the next significant order was reported. A subsidiary of the Polish group RE Alloys has ordered ten N131/3600 turbines with a total capacity of 35 MW. In addition, Nordex will also be responsible for servicing the turbines for a period of 15 years. Construction of the "Dzwola" wind farm is scheduled to begin in autumn 2023. The first electricity is to be produced from the beginning of 2024. "The wind farm is part of a wider program to ensure that RE Alloys' energy needs are met entirely from its own renewable sources. This program will help the environment because RE Alloys, as the third largest producer of ferrosilicon in Europe, consumes more energy than the city of Katowice," said Miroslaw Wilczek, CEO of RE Alloys.
However, with the recent rally in the share price, analysts' price targets have almost been reached. Goldman Sachs sees the Nordex share as fairly valued at EUR 13.10. Most recently, Goldman analysts sharply reduced their estimates for 2022. With a price target of EUR 14 Jefferies is somewhat more optimistic. From the analysts' point of view, the third quarter showed that Nordex is getting a better grip on its production problems. They trust the wind turbine producer to achieve the 8% EBITDA margin target by mid-2024.
BYD: The first three models for Germany are fixed
Even though BYD recently had to cancel the IPO of its chip division, things are going well for the Company operationally. The Chinese company has sold another electric bus to the San Francisco Muni Transit Association (SFMTA). The SFMTA is testing three BYD buses for their suitability for the difficult-to-ride hills in San Francisco. If the test phase is successful, BYD can hope for further orders. San Francisco, for example, has set itself the goal of becoming completely electric and climate-neutral by 2040. BYD is also making inroads in the school bus sector. It recently unveiled a new electric school bus for the US market. Production is to take place in California. This shows that BYD is not only stepping on the gas with electric cars.
The passenger car segment will remain the growth engine as BYD is setting its sights on the European market in the coming year. This year, three models will be launched on the German market: The ATTO 3 and Tang SUV and the Han luxury sedan. As reported by manager magazin, BYD aims to sell as many as 120,000 electric cars in Germany by 2026. That would correspond to a market share of around 10%. On the one hand, sales are to take place via flagship stores in major German cities. On the other hand, six dealer groups with a nationwide network of car dealerships, which also carry established premium brands such as Mercedes-Benz or BMW, are to offer BYD vehicles.
2023 will be exciting! Nordex has to get its costs under control, and then higher share prices are also possible. The new tungsten mine will sooner or later lead to a revaluation of Almonty shares. Whether BYD's European expansion will be successful, we will be able to follow live in Germany.
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