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May 8th, 2023 | 07:20 CEST

Strongly growing demand - Rheinmetall, Almonty Industries, Nio

  • Mining
  • Tungsten
  • Electromobility
  • Defense
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The turn of the times and the resulting increase in military demand continue to fill the order books of defence companies worldwide. This trend will likely continue well beyond the current year due to the strategy of politicians enforcing peace with heavy weapons. Another boom that has just begun is the transformation of the transportation sector. Meeting the demand requires a significantly higher need for critical raw materials. However, the production facilities are primarily in Chinese hands. To maintain supply chains, alternatives in the Western world are fundamental.

time to read: 3 minutes | Author: Stefan Feulner
ISIN: RHEINMETALL AG | DE0007030009 , ALMONTY INDUSTRIES INC. | CA0203981034 , NIO INC.A S.ADR DL-_00025 | US62914V1061

Table of contents:

    Rheinmetall AG - Still on target

    According to Armin Papperger, CEO of the integrated international technology group, after the first three months of the 2023 financial year, Rheinmetall is clearly on course to meet the current annual forecasts. These were communicated on March 16 2023, with the publication of the 2022 annual report. Rheinmetall is targeting sales of EUR 7.4 billion to EUR 7.6 billion, with an operating return on sales of around 12%.
    In the months of January to March, the Düsseldorf-based company achieved consolidated sales of EUR 1.4 billion, an increase of 7.6% over the same period last year. By contrast, the operating result of EUR 73 million was EUR 19 million lower than in the first quarter of 2022, with negative contributions to earnings from the Chinese joint venture and another associated company cited as reasons for the decline. As a result, the Group's operating profit margin fell from 7.3% to 5.4%. On the other hand, earnings per share rose from EUR 1.08 in the previous year to now EUR 1.15.

    Analysts took a positive view of the figures presented. Deutsche Bank Research raised its price target for the DAX company from EUR 270 to EUR 275 and reiterated its "buy" recommendation. Incoming orders in the defence business were better than forecast, while the automotive business weighed on margins. US bank JP Morgan continues to see a price target of EUR 310 for Rheinmetall and reiterated its "overweight" rating.

    Almonty Industries - Update confirms successful construction phase

    The availability of critical metals became a central issue in politics and business after the start of the Ukraine war. Whether rare earth metals or tungsten, China dominates the market and controls both supply and demand. Due to the globally increasing demand for this critical metal, which is used as a hardening metal in alloys in the defence and high-tech industries and is elementary for the expansion of renewable energies, the construction of a mine in South Korea, which will take over about 30% of the worldwide tungsten supply ex-China when completed and fully utilised, comes at the right time.

    Woulfe Mining, a 100% subsidiary of Almonty Industries, is responsible for the construction. The Canadian company already owns a mine in Panasqueira, Portugal. It produces about 78,000 metric tonnes of tungsten trioxide annually, equating to gross revenues of over CAD 20 million. In addition, two other projects in Spain are in the permitting process and are expected to support European supply in the coming years.

    The mine expansion in South Korea is being granted pro-rata through a loan from KfW-IPEX Bank and initially amounted to USD 75.1 million. A recent construction and financing update revealed that the amount drawn under the KfW credit facility currently stands at USD 32.3 million.

    The construction work is proceeding according to plan. In March, a new 4 MW power system replacing the temporary 950-kilowatt system for the mine infrastructure was completed. Almonty also announced that 99% of the equipment for the Ball Mill and SAG Mill had arrived in South Korea. All engineering plans have been completed, and surface removal has begun to prepare the site for construction.

    Almonty Industries is currently trading at CAD 0.61. In their latest research report, analysts at Sphene Capital gave the stock a "buy" rating with a price target of CAD 1.66, which equates to a potential upside of over 160% at the current share price.

    Nio - Transition weighs on the company

    While sales at China's largest electric car makers continued to break new records in April, nearly doubling like market leader BYD, Nio's sales rose just 31% to 6,658 units from April 2022 due to weak demand and a production switch for its SUVs.

    Nio is in a transitional phase, shifting from the Nio Technology NT1.0 platform (EC6, ES6, ES8) to the new NT2.0 platform, which includes the ES7, known as EL7 in Europe, and ET5 models. In April, the Chinese company began deliveries of the new EC7 model and unveiled the ES6 at the Shanghai Auto Show. Deliveries of the ES6 to customers are scheduled to start in May, with the ES8 to follow a month later.

    Additionally, Nio plans to further expand into Europe, with the ambitious goal of challenging the Wolfsburg-based automaker Volkswagen. CEO William Li mentioned in Spiegel magazine that they aim to offer more affordable electric cars priced below EUR 30,000. Two new models targeting the mass market are expected to be launched later this year.

    After a crash of the Nio share, the carmaker lost another 20% this year alone, and a bottom could form in the area of USD 8.00 after reaching a new low for the year. Positive signs are coming from the indicators. Both MACD and RSI generated fresh buy signals.

    After the announcement of its quarterly figures, Rheinmetall AG is sticking to its annual forecasts. Nio plans further expansion into Europe. Almonty remains on track with the construction of the Sangdong mine.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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