September 6th, 2022 | 11:50 CEST
The Tesla hunters: BYD, VW, Altech Advanced Materials, Varta - Which share is ahead?
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"[...] We know exactly what we are doing and are implementing what we consider to be a proven technology in an industrially applicable and scalable way. [...]" Uwe Ahrens, Director, Altech Advanced Materials AG
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.
Varta AG - It just takes too long
In times of energy scarcity and environmentally friendly generation, energy storage is also essential. Engineering offices worldwide are currently searching for the "super battery". It should contain fewer pollutants, be rechargeable many times over, allow a high capacity and not cause any problems during later disposal.
Varta AG, based in Ellwangen, Germany, has been researching energy storage for a very long time and has established products on the market in the consumer and micro-battery segments. However, there are always rumors about a new high-performance traction battery. What is meant is the quantum leap for the lithium-ion division. At the beginning of 2022, Varta announced its intention to extend the V4Drive technology to the overall battery electric vehicle market, i.e. to produce significantly larger formats. For example, the so-called 21700 cell should be charged within just 6 minutes and still be powerful even at extremely low temperatures. So far, there has only been a report that further test series are being carried out, and there is no further cooperation with a vehicle manufacturer.
Operationally, things did not go so well in the 2nd quarter either. Sales came in at EUR 191.5 million after a forecast of EUR 195 to 205 million. Adjusted EBITDA also ended up at EUR 30.8 million, 15% below the expected range of EUR 34 to 38 million. The shortfall in the forecast is explained by higher costs for raw materials, energy and logistics, as well as delays in customer projects. For the full year, Varta is now lowering its targets by a good 7%. Analysts at DZ Bank are also reducing their target price from EUR 71 to EUR 69. The experts at S&P Capital IQ see earnings per share for the current year at EUR 1.61 after EUR 1.97, and the forecast for 2023 has been lowered to EUR 2.19 after EUR 2.86. At EUR 63.5, the Varta share has come under pressure and is now 52% down for the 12-month period. We had suggested a stop at EUR 83.8 and remain on hold due to the still high valuation.
Altech Advanced Materials - More capital and expansion of the research laboratory
The young technology company Altech Advanced Materials AG (AAM for short) from Heidelberg is consistently moving forward on its innovative path. In addition to the first patent applications for the Company's proprietary Silumina AnodeT battery material technology, Perth's research and development laboratories have now been expanded. This technical expansion will enable the production of Li-ion batteries in a pouch cell design format, suitable for testing high-performance applications in electric mobility under any thermal and physical conditions. The pouch cell design is currently mainly used in industrial and electromobility applications. Manufacturing a pouch cell with multiple layers requires more anode material and additional cell manufacturing assembly equipment. To this end, Altech in Perth has now commissioned a larger specialized ceramic treatment facility.
AAM has set out to revolutionize the lithium-ion battery market. The Heidelberg-based company relies on an innovative process that compensates for the disadvantages of conventional lithium-ion batteries, which lose up to 15% of their power after the first charging cycle. This power loss continues over the life of the battery. With an ultra-thin, ceramic coating of the anode material with aluminum oxide, the negative effect of lithium bonding no longer occurs, and the battery becomes significantly more durable.
The production of battery materials costs a lot of money, which is why Altech and its financially strong parent company Altech Chemicals Limited have set up the joint venture Altech Industries Germany GmbH (AIG). The aim is to set up a production plant for the ceramic coating of anode material with an annual capacity of 10,000 metric tons. A preparatory profitability analysis (PFS), which the Company published back in April, attests to the high economic viability of the planned production project.
In order to finance the running costs, a capital reduction in a ratio of 2:1 with a subsequent capital increase of 2:3 at an issue price of EUR 1.00 was resolved at the AAM Annual General Meeting. The current stock market value based on the old number of shares of 5.6 million is only EUR 7.6 million, but the PFS from April certifies a net present value of EUR 420 million for the joint venture (JV share 25%). Those who want to bet on AAM's technology should therefore subscribe heartily in the upcoming capital increase.
Further details on AAM's technology can be found in a detailed study on researchanalyst.com.
BYD versus VW - The market leaders in e-mobility
Besides the first mover, "Tesla", the global market leaders in e-mobility are clearly the manufacturers from Europe and Asia. Hardly any other market like China is implementing the topic of e-mobility so impressively, and the sales figures of the most important suppliers are rolling over from month to month. Despite increasing production capacities, however, the waiting time for customers of the Chinese market leader BYD has not shortened due to the continuously increasing order backlog. Currently, there is said to be an unfilled order backlog of 700,000 vehicles. The reason is the extreme heat and the lack of water, which leads to power outages. In August, vehicle deliveries were affected by the power shortage and COVID restrictions. Nevertheless, BYD was able to sell 174,915 New Energy Vehicles last month, which is a new record. By the end of this year, the Chinese manufacturer aims to increase its monthly deliveries back to 280,000 units.
However, the reform of the tax credit for electric vehicles in the US and the shortening of the German subsidy from 2023 could have a negative impact on sales figures. In terms of overseas market development, BYD will probably now make Europe one of its main targets. The plan is to enter the market with three e-models before the end of this year.
At Volkswagen, the topic of Porsche's IPO is currently dominating. The Management and Supervisory Boards are meeting to decide whether to float the subsidiary on the stock market this fall. Porsche could use the proceeds to finance its e-strategy, among other things. The sports car brand is wholly owned by the Volkswagen Group, but the latter is controlled by the Piech and Porsche families as majority shareholders. A 25% plus 1 stake in Porsche could be sold to the family consortium before the IPO, which would already bring in some fresh capital.
At prices around EUR 144, the Volkswagen Group trades at a P/E ratio of just under 4.5 and still offers a dividend yield of over 7%. The VW chart has been pointing solidly upwards again since the June sell-off to EUR 120. With BYD, we had already pointed out the precarious situation in the chart. The stop at EUR 28.50 was activated. Now we should calmly watch how far the overdue correction can run. The cyclical low of the share dates back to March at around EUR 18.35. However, it should no longer run here. VW has now surpassed BYD again in terms of market capitalization. In terms of e-car sales, however, VW will now face serious competition from Asia in Europe. However, the looming economic downturn could slow down the momentum of both stocks.
The automotive sector is at the beginning of a cyclical downturn, as high commodity prices, supply chain issues and reduced private budgets are having a full impact on sales figures. VW could still benefit from the weak euro, but Porsche's IPO will likely run into difficult conditions. Altech Advanced Materials is highly interesting from a speculative point of view but is still at the beginning of the development curve.
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