January 12th, 2023 | 14:20 CET
Shares ready for takeoff: Nel, Plug Power, BASF, Almonty Industries
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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 Industries convinces analysts: When will the share jump?
Almonty Industries' share has yet to participate in the New Year's rally. That is because the Company wants to make history this year: The largest tungsten mine outside China is to be commissioned in South Korea. The Canadians are already operational in Spain and Portugal. They have increased sales in the first nine months of 2022 compared to the same period last year from CAD 14.8 million to CAD 18.1 million. Analysts said the new Sangdong mine is expected to multiply sales to more than CAD 100 million within a few years. As a result, the Sangdong project has the potential to trigger a re-rating of the share.
At the end of last year, analysts at First Berlin commented positively on Almonty (study available for download http://www.more-ir.de/d/26027.pdf). The analysts see Almonty on track to bring the flagship Sangdong project on stream in the second half of this year. This should then significantly increase revenues in a few years: after CAD 32 million in the current year, it should already be CAD 104.32 million in 2025. In addition, the analysts point to the long life of the mine until 2073, with the cost of the Sangdong mine at USD 248/t being less than half that of competing projects with similar tungsten content. That means that the tungsten mine in South Korea should literally become a gold mine for Almonty. After all, sales are likely to be assured: Tungsten is used in batteries and semiconductors, among other things, and today comes mainly from China and Russia. Therefore, tungsten sources from politically "stable" countries are desperately sought. And the analysts at First Berlin point to an additional trigger for the Almonty share: at Sangdong, Almonty also has a molybdenum deposit. The initial JORC-compliant resource estimate, they say, is an inferred 21.48 million tonnes grading 0.26% MoS2 based on a cut-off grade of 0.19%. The in-situ value of the resource is over USD 2 billion. As a result, analysts recommend Almonty shares as a buy with a price target of CAD 1.70. The share, also traded in Germany, is currently quoted at CAD 0.72. Incidentally, the German Sphene Capital is also convinced of the share of Almonty Industries. There, the price target is CAD 1.67.
Shares of Nel and Plug Power step on the gas
Nel has shown how quickly the sentiment can turn in a stock in recent years. After a disappointing 2022, it went up by about 20% in the first days of the new year. The share price jump was triggered by a major order and the visit of the German Economics Minister. Robert Habeck visited Nel's electrolyzer production facility together with Norwegian politicians. Hydrogen is to play an important role in Germany's future energy mix. The Company HH2E wants to contribute to this. It aims to achieve an installed capacity of 4 GW in Germany by 2030. As a first step, HH2E and Nel wish to cooperate on developing green hydrogen in Germany and prepare a FEED study. If the study is satisfactory, a purchase agreement is to be reached. According to this, Nel is to supply electrolyzers with a total capacity of 120 MW to the partner. The order volume would be in excess of EUR 30 million.
Alexander Voigt, co-founder and CEO of HH2E: "Our original plan to build 4 GW of green hydrogen production capacity in Germany by 2030 is being implemented at a rapid pace and is within reach. One of the prerequisites for achieving our growth targets is the availability of high-quality electrolyzers in Europe, such as Nel will supply." If Jefferies analysts have their way, investors can look forward to further share price gains for Nel. The analysts raised their stock price target from NOK 19 to NOK 20 shortly before Christmas. The order backlog at the end of 2022 largely covers the sales estimates for 2023. Further orders could therefore lead to an increase in estimates.
The entire hydrogen sector benefited from the positive news surrounding Nel. Thus, the Plug Power share was able to post double-digit gains within a few days and is currently trading at around USD 15 again. In the current week, the US company was able to underpin the good mood with an order. TC Energy has ordered two hydrogen liquefiers from Plug Power. The production capacity is 30 tons per day. Due to a hydrogen cooling circuit, the plants are to be particularly energy-efficient.
BASF: Bernstein sees significant share price potential
The BASF share has recently jumped back above the EUR 50 mark. One reason is likely to be the easing of gas prices. Fears that gas could become scarce in Germany during the winter have largely evaporated. The gas price has fallen accordingly. In addition, the analysts at Bernstein Research had renewed their "Outperform" rating for the shares of the DAX group. The price target is EUR 67. Although the environment in the chemical industry is still not euphoric, it is improving noticeably. Economic uncertainties are already priced in. On the other hand, there are positive impulses: the opening of China, declining inflation and falling raw material and energy costs. The agricultural boom is also likely to continue. Jefferies and UBS, however, are less optimistic. Jefferies has a price target of EUR 49, and UBS even sees BASF shares fairly valued at only EUR 40.
The start of 2023 has been successful. Among the winners are Nel and Plug Power. However, it is true for both that not only does the order intake count but that the operational development must finally pick up speed. Otherwise, the valuations can hardly be justified. If the gas price remains sustainably low and the global economy proves more robust than many expect, BASF should be among the winners in 2023. Almonty shares should also be among them if the Company starts up the tungsten mine in South Korea. Then a revaluation would be anything but unlikely. Therefore, it might be advisable to get a foot in the door already at the current level - before it is too late.
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