January 4th, 2023 | 07:08 CET
The big energy question in 2023: BYD, Altech Advanced Materials, Varta, BASF - Is the thread breaking?
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"[...] Boron is one of the most versatile elements in the whole world! Everyone reading this text regularly uses hundreds of products that depend on boron. [...]" Tim Daniels, CEO, Erin Ventures
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.
BASF - The positive voices are increasing
The Ludwigshafen-based chemical giant knows what it is talking about when it comes to fossil fuels. No other industry is as dependent on oil and gas as chemical energy. These energy sources not only serve as the basic material for thousands of products, but they also supply important energy to the manufacturing processes. Gas, for example, is used for high heat and local foaming and gassing. While BASF has reduced its gas hunger by about 20%, there will be no getting around some basic demand in 2023.
Analysts are currently evaluating different sides of the industry. On the one hand, input prices on the raw material side have increased dramatically. However, BASF has been able to largely pass on its increased costs due to its unique market position in chemical raw materials for the processing industry. Therefore, the figures for the third quarter of 2022 were above expectations, and the full-year guidance was confirmed. The BASF share has lost around 24% in 2022 and is preparing to regain the EUR 50 mark. Fundamentally, the stock trades at a 2023 P/E ratio of 10 and offers a 7% yield. JPMorgan rates the stock "Overweight" at the start of the year. Technically, a move to the resistance level of EUR 55 is easily possible.
Altech Advanced Materials - A new battery in the quiver
In the search for suitable next-generation technology stocks, one comes across the still-young Altech Advanced Materials AG (AAM for short) from Heidelberg. The Company's goal is to participate in the market for lithium-ion batteries for electromobility through innovative and high-performance anode materials. Another focus is on solid-state batteries for stationary storage needs.
With a fresh EUR 7 million from a multi-stage capital measure in the fall of 2022, AAM is now pushing ahead with its investments. The ultimate goal is to capture a share of the global market for energy storage systems in the coming decades. According to recent studies, it is expected to triple in volume from about USD 4.4 billion to more than USD 15 billion by 2027. Together with its Australian parent company Altech Chemicals Ltd and the Fraunhofer Institute for Ceramic Technologies and Systems IKTS, the Company formed a promising joint venture in 2022. The resulting Altech Batteries GmbH aims to establish a solid-state battery production facility at the Schwarze Pumpe site in eastern Germany, where the first line with an annual output of 100-MWh will be implemented. AAM owns 18.75% of the entire company, which is driving the development of the revolutionary CERENERGY® solid-state sodium alumina battery (SAS). Using renewable sources, it is a resource-efficient alternative to lithium-ion batteries for commercial and industrial energy storage. The basic material of this battery technology is common salt, with the extensive use of critical and environmentally harmful materials such as lithium, cobalt, graphite and copper being obsolete.
In addition to the CERENERGY® joint venture, AAM has opened up another core area with Altech Chemicals Ltd. It involves a novel and patented process for nano-coating. Under the name "Silumina Anodes", anodes are coated with high-purity aluminum oxide and an enrichment of silicon, which increases the performance of a battery by 15% and extends its lifetime by an astonishing 30%. With these parameters, it is certainly possible to find a partner in the market to take on mass production. The market capitalization of Altech Advanced Materials is currently just under EUR 19 million. The narrow market share was already at EUR 6.50 and can now be purchased at EUR 4.00. AAM could become a game changer in the energy storage market in 2023.
BYD and Varta - Out of the cellar?
Varta shareholders did not enjoy their paper in 2022. After three profit warnings in a row, the technology company from Ellwangen plummeted by a whole 80%. The latest word from management headquarters is that the Company's V4Drive technology is being delivered for testing at a rate of 10,000 units per week. However, there is still no binding declaration of acceptance. Thus, after several corrections to the outlook and continued high-cost factors, there is a latent danger that 2023 could also be a challenging year. In addition, there are currently some eruptions in the electric mobility market, as the market leader Tesla remains far below expectations with its sales. Government subsidies will also fall in 2023, so consumers must decide on a mobility technology under real conditions. From our point of view, who will win the race between the electric car and the combustion engine remains to be seen.
BYD's performance at the beginning of the year looked somewhat better, but the share price had also almost halved after its high of EUR 41. After all, the Chinese market leader is clearly ahead of Tesla in its own country, but sales figures are also falling slightly here. Is this just an overdue market correction after the frenzy in 2022? In any case, major investor Warren Buffett has significantly reduced his investment from 26% to 14% and reaped billions in profits for the time being. However, BYD is now very well positioned and has a global investor base. By covering the entire value chain and having its own battery and chip production, the Company remains well-equipped for geopolitical distortions.
The BYD share price turned significantly at the EUR 20 mark and is currently heading back to EUR 25. The share is attractive with a current P/E ratio of around 22, but after a 70% drop in share price, industry leader Tesla is now no longer overpriced. Investors should avoid the entire sector for the time being as long as the new year does not deliver rising sales figures for e-cars. With a stronger economic downturn, the strained e-mobility market would be severely affected by reduced new purchases. In Berlin Grünheide, there are currently 3,000 Tesla vehicles ready for delivery, but they have not yet been definitively ordered.
Under the current framework conditions, the energy issue is becoming the linchpin of mobility. Although subsidies can facilitate the purchase decision, the consumption comparison and the line components will still determine the purchase decision. With electricity prices doubling and oil and gas prices falling, it will be very difficult for battery drives to compete with internal combustion engines. Altech Advanced Materials has good modular solutions for an innovation-driven market.
Conflict of interest
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