29. April 2021 | 09:03 CET
ThyssenKrupp, Defense Metals, Rheinmetall - Equipment for the portfolio
Every day, in our private and professional lives, we ask for products and services. And we expect "it" to work. When things do not go as planned for an extended period of time - and this does not necessarily mean a global pandemic that paralyzes supply chains - we feel the effects. In the following, we take a look at two areas that are essential for us: Energy and critical raw materials. We also have three pearls of return for your portfolio.
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ISIN: DE0007500001 , CA2446331035 , DE0007030009
THYSSENKRUPP AG - New hydrogen order
For almost two years now, the Group has been undergoing an increasingly concrete restructuring process aimed at creating a high-performance "Group of Companies" with a lean management model and a structured portfolio. With the sale of the elevator business for EUR 17.2 billion last year, the ailing steel and industrial Group had sold its silverware and had another chance to turn the tide with the inflow of funds.
The attempt to sell the ailing steel business to the British Liberty Group failed. Now the Group wants to get the steel business back on track and make it independent. To this end, 3,750 jobs will be cut. As part of the Group's restructuring, many business areas were put under the microscope, including hydrogen - but more on that in a moment. One business area with a long tradition in the Group is "Marine Systems." ThyssenKrupp is one of the leading global systems suppliers for submarines and naval vessels. The Group is also active in the civilian maritime sector.
However, the share price has been driven by other plans of the company's management in recent months. CEO Martina Merz wants to make the construction of plants for the production of hydrogen a new core business. At the beginning of the year, ThyssenKrupp had already won a contract to build a major electrolyzer in Canada. A few days ago, a new significant order was received, now from the USA. The industrial Group will build a 20 MW water electrolysis plant for US fertilizer manufacturer CGF Industries in Louisiana. The hydrogen will then be converted into green ammonia.
Ammonia serves as highly efficient storage for renewable energy. Production is scheduled to start in 2023. The share has performed brilliantly in recent months. Given the strategic changes and the new focus, a revaluation of the share can increasingly be seen in the increased price targets of the analysts. The share is currently trading at around EUR 11. The analysts at Deutsche Bank have formulated a target price of EUR 17. What to do? Buy.
DEFENSE METALS CORP - Rare earths play with a lot of potential
Rare earths are relevant for many industries, including the defense industry. China's dominant market position in these critical commodities generally leads to a desire for production to occur outside the People's Republic, making supply chains more secure. The emerging gap between supply and demand will lead to rising prices in the medium term. Defense Metals intends to clearly differentiate its future production by implementing ESG criteria in the production of rare earths.
The Canadian Company is still in an early corporate stage. The exploration company focuses on the further development of the Wicheeda Rare Earth Project with a size of approximately 1,700 hectares in the state of British Columbia. To date, the following indications of rare earth metals have been made on the project: indicated mineral resources of 4.89 million tonnes averaging 3.02% light rare earth elements ("LREO") and suspected mineral resources of 12.1 million tonnes averaging 2.90% LREO. A preliminary feasibility study is expected to be released in a few months. In addition, a drill program to further upgrade and increase the size of the deposit is planned for the summer.
A few days ago, Defense Metals announced it had successfully completed a 26-tonne flotation pilot plant campaign. From this, 1,200 kilograms of high-grade REE mineral concentrate was recovered. Once commenced and subject to the Company securing sufficient funding, completion of the various staged pilot campaigns is expected to take approximately 6 months. With a market capitalization of only CAD 29 million, the stock will sooner or later be kissed awake by project progress or rising rare earth metals.
RHEINMETALL AG - Group restructuring makes analysts optimistic
The Group can look back on a long tradition. Rheinmetall was founded in 1889 as "Rheinische Metallwaaren- und Maschinenfabrik Aktiengesellschaft" and is today an integrated technology group with two divisions. In the Automotive sector, the Company occupies a leading position worldwide as an automotive supplier of modules and systems for engines, with well-known brands such as Kolbenschmidt and Pierburg. However, its second mainstay, its activities as a leading European systems house for defense and security technology, often dominates its image.
But nothing is forever. At the beginning of April, the Group announced strategic changes. According to this, the existing structure with the two divisions Armaments and Automotive, will be abandoned. 5 divisions will take their place under the direct leadership of the Group's Executive Board. The technological exchange between the divisions is to create added value. In the process, the Armaments and Security division will gain significantly in weight. The Group intends to divest its pistons business in the auto supply sector and reports several interested parties. The automotive business resulted in high write-downs in the past fiscal year.
Given the potential of electromobility, this step is only logical. In addition, the Group sees a great future in fuel cells. Sales in the core business are expected to rise to around EUR 8.5 billion by 2025. For the current fiscal year, revenue of just under EUR 5.9 billion is forecast, with an operating margin of between 8% and 9%. The strategic focus, the outlook and the recently presented Q1 data make analysts very optimistic about the stock. We also see further upside potential for the MDAX stock.