09. September 2021 | 10:42 CET
SMA Solar, Standard Lithium, Almonty Industries: Between profit warning and supercycle!
It is not only semiconductors that are in short supply, but also numerous industrial raw materials. The situation is only getting worse. In the case of lithium, demand is expected to increase fivefold in a few years. Tungsten is also in demand, and China is an unreliable quasi-monopolist. As a result, raw materials are in short supply, and prices are rising. More and more companies are suffering as a result, like Germany's SMA Solar. The inverter manufacturer had to cut its forecast and analysts promptly reduced their price targets. On the other hand, some companies are benefiting from the situation. Highflyer Standard Lithium is one of them. Due to positive industry and company news, the share is accelerating again. Almonty Industries is also facing exciting months.
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ISIN: SMA SOLAR TECHNOL.AG | DE000A0DJ6J9 , STANDARD LITHIUM LTD | CA8536061010 , ALMONTY INDUSTRIES INC. | CA0203981034
"[...] 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: Soon to be the most important tungsten producer outside China?
Tungsten receives little attention, but it is all the more important. In the past few months alone, the price has risen by over 50%. The metal is as heavy as gold, as hard as diamond and more heat resistant than iron. So it is no surprise that tungsten is essential to today's high-tech industry: from power and lighting to aerospace, telecommunications and medical technology - they all need the rare commodity. Almonty Industries (ISIN: CA0203981034) supplies it. The Canadian-based Company specializes in mining, processing and shipping tungsten concentrate. Currently, it comes from two mines in Portugal and Spain. In addition, Almonty is investing heavily in the development of new mines. These are located in Sangdong in South Korea and Valtreixal in the northwest of Spain.
Production at the Sangdong mine is scheduled to start as early as mid-2022, and so far, the Company says it is on schedule. It was integrated into the Almonty Group in September 2015 by acquiring a 100% interest in Woulfe Mining Corp. Almonty has since secured the funding necessary for the final development. In addition to issuing new shares and placing a loan, a supply agreement has been concluded with the Austrian Plansee Group. Plansee is now one of the Company's major shareholders alongside Deutsche Rohstoff AG, which holds 12.2% of Almonty Industries.
Important for investors: The project in Sangdong is expected to be the largest tungsten mine outside China. With around 85% of global tungsten production currently coming from China, Almonty will likely account for about 30% of non-Chinese tungsten production in a few years. That gives Almonty strategic importance and makes the Company a takeover candidate. Therefore, the consolidation of the share could soon be over.
Standard Lithium: Demand is about to increase fivefold
Lithium producers will likely not have to worry about weak demand in the foreseeable future. Car manufacturers are introducing new electric models on an almost daily basis. The latest example is Daimler's new EQE. With the triumphant advance of e-mobility, demand for lithium - the essential component of the batteries needed - is likely to rise sharply in the coming years. The consulting firm Boston Consulting Group predicts that demand for lithium will increase almost fivefold by 2030. Good news for Standard Lithium (ISIN: CA8536061010). In recent days, the share has already gained a good 20%. Thus, the correction seems to be over. Good news also comes from the Company directly. The installation of the lithium carbonate plant "SiFT" has been completed. All important connections to the existing plant have been made, and the plant has been commissioned. Lithium extraction can begin.
SMA Solar: Forecast shock and analyst reaction
Commodity producers are pleased, but more and more manufacturing companies are hurting. On Monday, SMA Solar (ISIN: DE000A0DJ6J9) shocked investors with a profit warning. The manufacturer of inverters for the solar industry expects sales of only EUR 980 million to EUR 1.03 billion for the full year 2021 (previously EUR 1.075 billion to EUR 1.175 billion). EBITDA is expected to be between EUR 50 million and EUR 65 million (previously EUR 75 million to EUR 95 million). The reason for the significant reduction is an "undersupply of electronic components currently affecting the entire electronics industry." Following the announcement, investment bank Jefferies reduced its price target for SMA shares from EUR 43 to EUR 40. The recommendation remains at "Hold". Bankhaus Metzler has reduced their price target more significantly, however, from originally EUR 79.10 to EUR 58.00. Since this is still significantly above the current price of the SMA share, the price target remains "Buy". The long-term growth prospects are still positive, but after three years of successful restructuring, the development is nevertheless a setback.
One man's sorrow is another man's joy. That is how one can summarize the current situation in the commodity market. While SMA Solar has to reduce its forecast, Standard Lithium and Almonty are potentially only at the beginning of a supercycle.