Varta, BYD, NIO, Tesla, Almonty Industries - Battery becomes next billion-dollar topic!

Varta - Good figures for the Annual General Meeting, but the pressure is rising!

In the run-up to the AGM, the Varta share was able to make significant ground and break out of the sideways range of several months. Still, during the AGM, the share marked a new course high at EUR 142. In the absence of new buying arguments, however, the bulls ran out of steam. The change of mood on the US stock exchanges caused additional uncertainty.

In general, the business with its battery solutions is going well for Varta. The increased profitability and the low level of debt make it possible this year to pay the shareholders a dividend of EUR 2.48 and at the same time to continue to invest massively. The construction of a new lithium-ion cell factory at the Nördlingen site will start soon. The pilot line for the new, large-format lithium-ion round cell V4Drive at the Ellwangen site will also go into operation on schedule at the end of 2021.

Then, over the weekend, Porsche's plans to take the battery issue into its own hands became known. Porsche wants to produce high-performance battery cells on a small scale with Customcells, a cell specialist based in Tübingen, Germany. The battery factory is to be built in the Stuttgart area. Many market participants had put Varta into play here as a possible partner, but now things turned out differently. Again no good news for the Ellwanger; the analysts of the DZ Bank downgraded from Buy to Hold with the reason being - the potential is exhausted for the time being. Stay cautious, the Varta share has gained a full 30% in just 5 weeks.

BYD - The price for chips is raised significantly

BYD can currently enjoy great demand for its products. At the subsidiary BYD Semiconductor, there was recently an announcement about price increases of over 5%, affected are mainly the IPM and IGBT products, as Chinese media reported. Due to market changes, the costs for creating the Company's service portfolio are rising sharply, and the pressure at the supplier level is increasing analogously. Companies are still struggling with the disrupted supply chains related to the COVID pandemic. It will likely take months to regain equilibrium here.

The BYD share is certainly not cheap, with a 2022 P/E of 70, but it still has a P/E ratio compared to many other Chinese high-tech companies, so it is in the black. And the rumor mill continues to bubble with activity at BYD. Now it is apparently about a cooperation with the Chinese smartphone manufacturer Xiaomi. The upward movement is therefore probably not over yet. However, after a 50% increase in 6 weeks, they should set a tight stop at around EUR 23.5 to stay on the winning road after the rally.

NIO - Stronger growth than Tesla

The year 2020 went exceptionally well for the US electric car manufacturer Tesla, culminating in its inclusion in the S&P 500 Index on December 21. And its Chinese competitor NIO can also look back on a successful year, with the Company increasing its share price tenfold in 2020. However, neither Company is resting on its laurels and has already made major investment plans for its electric offensive.

Looking at the growth figures, NIO is ahead in the current comparison. Tesla is the pioneer in the electric vehicle business, especially compared to conventional car manufacturers, but innovation currently leaves a lot to be desired. Higher absolute sales figures are not less decisive in comparison; the Company's current focus is to achieve the highest growth in registration figures with its new models.

The expansion of the market position in China is proceeding rather sluggishly for Tesla. Although much ado has been made about the China-made Model 3 vehicles, Tesla has sold only a little over 80,000 of these cars by mid-2021. That was good enough to claim the third-largest market share but is certainly not a real gamechanger. While Tesla may dominate the global market, there is not yet much evidence of its supremacy in China. For investors who can cut through the "noise around Tesla" and Elon Musk and simply want to bet on the growth potential of China's electric vehicles, NIO is the better choice. Here, success has been "quieter" - NIO's stock has outperformed Tesla by 25% in 12 months.

Almonty Industries - Coveted commodity from South Korea

The issue of scarce raw materials plays right into Almonty Industries' hands. Political pressure around decarbonization is causing global demand for nickel, lithium and rare earth metals to explode. Already since 2019, an excess of demand could be seen for most metals due to mine closures. Yet the energy transition is only at the beginning of its long-term cycle, with the German industry not really getting electrification on the map until 2020. But the Paris climate resolutions are being taken very seriously in Europe.

Then, even under Joe Biden, the trade disputes with China keep coming up. China probably intends to impose strict export controls on 17 industrial metals, including rare earths. Global dependence on Beijing is once again preoccupying commodity strategists in the Western industrialized nations, leading to persistent price premiums. The same problem exists with the strategic metal tungsten, which is irreplaceable in many sectors of modern technologies due to its unique properties. And the dependencies do not only affect the chip industry, no - pretty much all high-tech industries have to live with this uncertainty factor.

Almonty Industries, a Canadian explorer and producer, based in Toronto, mines in Spain and Portugal and owns other mining rights to tungsten and molybdenum in South Korea. The current main business is mining, processing and shipping tungsten concentrate from the Los Santos mines in western Spain and Panasqueira in Portugal. In the next few years, production will increase, as, in 2015, they acquired the Sangdong mine. It is historically one of the largest and highest-grade tungsten mines in the world outside of China. Almonty's global market share would then increase to high single digits with the start of the mine.

Almonty's share price currently fluctuates in a corridor of CAD 1.10-1.20, bringing its market capitalization to just under CAD 200 million. Deutsche Rohstoff AG continues to hold a 12% stake as a core investor. Given the tense international situation around critical raw materials and expected news on the progress in South Korea, one should remain on the ball with Almonty Industries.