February 23rd, 2023 | 15:03 CET
Unknown and better than Tesla? BYD, First Phosphate, Varta
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"[...] The collaboration with CVMR offers two primary advantages for Power Nickel: We can cover a larger portion of the value chain in the future, and despite the extensive cooperation with all its positive outcomes, we have remained significantly independent. [...]" Terry Lynch, CEO, Power Nickel
BYD: Operational progress, the share stands still
Chinese company BYD started in 1995 as a battery specialist and quickly outperformed Asian competitors thanks to low labour costs in China. In 2003, it took over a Chinese car manufacturer and more or less successfully copied Japanese models. But it was not until BYD started using its batteries in electric scooters and the first cars that the story became so popular that Warren Buffett also joined BYD as a major shareholder in 2008. While today's record sales figures are primarily due to successes in the domestic market, BYD has long been active in other regions as well.
In Europe, the Company launched a few months ago and is taking an extremely confident approach: The discount battle expected by many observers has yet to materialize. BYD also sells its cars at the level of Western manufacturers in terms of price, although the margins left room for a more aggressive approach. The share has recently lost some of its spirit and has gone into reverse gear. On a six-month horizon, the stock has even posted significant losses. Even in the long term, the share does not give the impression that it will become a success story again in the medium term.
First Phosphate: Exciting IPO
The situation is quite different for the Canadian company First Phosphate. The Company addresses the growing demand for phosphate in the wake of the mobility revolution. Between 2021 and 2028, the market is expected to grow from USD 10 billion to USD 50 billion, according to market researchers. Currently, about 90% is produced as lithium iron phosphate batteries in China. More critical industrial products are expected to be manufactured within the US as part of the push for greater independence from China, also called for by the Inflation Reduction Act. However, existing sources of phosphate currently feed close to 100% of the fertilizer industry. First Phosphate wants to develop new sources with its phosphate project in the Canadian district of Québec and participate in further value creation for the battery industry.
The Lac à L'Orignal project looks promising after preliminary geological work - work is also underway for an initial economic feasibility study. The projects in Québec are accessible by road and located near a deep sea port. In addition to Lac à L'Orignal, there is further exploration potential on 1,500 sq km. Yesterday, the share started trading in Canada and is also listed in Germany. The stock could be exciting because of its approach, which includes processing the lithium iron phosphate for the North American market in addition to mining. First Phosphate is a candidate for the watch list.
For more information, see CEO John Passalacqua's presentation at the 6th International Investment Forum (IIF) held last week:
Varta: Hearing aid instead of a turbocharger
While First Phosphate's stock is starting on the stock market without any legacy issues, investors in Varta are always likely to look to the past - the share was well into triple digits just a few years ago. At that time, Varta was traded as the German battery hope. The Company offers high-performance batteries to be installed in sporty vehicles. After a profit warning, however, the share went even further down. The EUR 30 mark was a resistance for the value several times in recent weeks. The great e-car fantasy surrounding Varta has faded - the share currently exudes more the esprit of a manufacturer of button cells for hearing aids.
While BYD should have most of its development behind it and the Varta rocket has yet to really take off, First Phosphate could become an insider's tip in the coming weeks and months. Today, lithium iron phosphate batteries are predominantly sourced from China. Becoming more independent here is the declared goal of Western governments. Given a promising project and involvement in the broader value chain, investors can keep First Phosphate on their radar.
Conflict of interest
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