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April 26th, 2023 | 07:50 CEST

Tesla, BYD and Volkswagen are all looking for the perfect battery. First Phosphate, BASF and Varta in focus

  • Mining
  • phosphate
  • renewableenergies
  • Batteries
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The battery is becoming the linchpin of e-mobility. As the batteries age, their performance diminishes, which will soon affect this technology's first buyers. Although there are fewer wearing parts on an electric vehicle than on a conventional combustion engine, the battery is one of the most expensive components. Therefore, its replacement is anything but cheap. Meanwhile, big manufacturers like Tesla, BYD and VW are working on the ultimate battery with increased power and range. Volkswagen is investing EUR 10 billion in a new gigafactory near Valencia. The sector is betting on the new mobility, and the industry is adapting accordingly. Which shares have their noses in the wind?

time to read: 4 minutes | Author: André Will-Laudien

Table of contents:

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    BASF - The long-awaited dividend is flowing

    Next week the annual general meeting of the Ludwigshafen-based chemical giant BASF will take place. Shareholders will again receive a handsome dividend. At EUR 3.40, the payout has reached a record level; in 2005, it was only EUR 1.00. The Ludwigshafen-based company has always paid dividends, even in the darkest hours of the German economy.

    However, the environment for BASF is not exactly booming. Like the entire chemical sector, the industry leader has felt weak demand in recent months, and its strong position in the battery materials business is not helping much. The year 2023 started with a slump in sales, with turnover and profits plummeting. At just under EUR 20 billion, revenues were about 13% lower and adjusted EBIT lost 30% to EUR 1.9 billion. Only because of the write-off of Wintershall DEA in the previous year did the net surplus show an increase of 28% to EUR 1.6 billion.

    Due to the poor framework conditions in the European energy landscape, the Group wants to cut 4,200 jobs at its main site in Ludwigshafen and thus save about EUR 500 million. Larger investments, however, will be made in China with EUR 10 billion. For the current year, the guidance is EUR 84 to 87 billion in sales. EBIT should end up at EUR 4.8 to 5.4 billion, about 30% below the previous year. Everything seems priced into the share price, and shareholders hope for better times. There will be news at the AGM, and the economic optimist remains invested with a stop at EUR 42.

    First Phosphate - Several good deals bagged

    When thinking about batteries, one must look to the future. The current standard of Li-ion technology could soon become obsolete. After all, e-mobility needs fast charging cycles, technical durability and a long service life. Precisely these points are fulfilled by other technologies that could soon come to light.

    First Phosphate (PHOS) from Montreal focuses on this potential game-changer in the electric mobility revolution and is betting on phosphate. So far, China dominates the global market with CATL and BYD, but Volkswagen, Daimler and BMW have taken corresponding initiatives to recapture the global market to some extent. An expected growth of over 15% per annum is luring investors into the market to consider alternative materials and develop better technologies. Phosphate could also banish the highly toxic and unsustainable element cobalt, from production.

    First Phosphate stands for this technological renewal and wants to kick-start the production of active LFP cathode material with its high-purity phosphate project. At the end of March, the Company signed an agreement and a licence agreement for the use of lithium iron phosphate (LFP) production technology with the UK company Integrals Power Ltd (IPL) from Milton Keynes. It secures access to production facilities for active LFP cathode materials. The partners plan to use First Phosphate's access to green hydroelectric power in the Saguenay-Lac-St-Jean region of Quebec to expand IPL's future production facilities. A fruitful cooperation is brewing here!

    With a market capitalization of just CAD 25 million, the PHOS share is not too expensive. The Canadians were able to quickly refinance themselves in April at CAD 0.80 with CAD 2 million. The price is currently consolidating at around CAD 0.52. A highly exciting battery stock of the next generation.

    CEO John Passalacqua will provide more information at the 7th International Investment Forum (IIF)
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    Varta - The deep fall

    The shares of battery and storage manufacturer Varta seem to have lost their appeal, as the stock has been consolidating in the EUR 23 to EUR 26 range for several weeks now. Shortly before the announcement of the quarterly figures today, April 26, the mood could not be more depressed. Of the 10 remaining analysts from the Refinitiv Eikon platform, there is no longer an active buy recommendation. The median of the 12-month price target is also close to the current level at EUR 26.45. The highlight of the negative opinions comes from Hamburg from Warburg Research with "Sell" and a price target of EUR 18.50.

    Meanwhile, there is important news in the direction of restructuring. The banks involved have approved the Company's restructuring plan. In a recent agreement, the extension of the financing until the end of 2026 and changes in the credit terms are now to be stipulated. Varta published its restructuring plans in March, but the whole package was still subject to bank approval. The Company had already raised nearly EUR 51 million in fresh capital through a capital increase. The money is to be used to realign the ailing core business.

    In an expert opinion demanded by the creditor banks, the consulting firm KPMG concluded that Varta could be restructured but that new growth perspectives must be developed in addition to a strict austerity course. With so much negative energy, it can only go up, one might think. With today's release of the figures, we should not expect miracles. Let's wait and see!

    E-mobility will still have to go through several stages of development before the road is completely electrified. New technologies may even come onto the market that will be significantly more efficient than a battery filled with fossil fuels. BASF remains a sought-after standard stock, First Phosphate is also in the running, while Varta will still need some time.

    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") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
    In this respect, there is a concrete conflict of interest in the reporting on the companies.

    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 also 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

    André Will-Laudien

    Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.

    About the author

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