December 27th, 2021 | 10:40 CET
Varta, Graphano Energy, BYD, NIO: 2022 analysis - The Tesla hunters are gaining momentum!
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"[...] Nickel, therefore, benefits twice: firstly from its growing importance within batteries and secondly from the generally growing demand for such storage. [...]" Terry Lynch, CEO, Power Nickel
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.
E-mobility on the rise
According to Statista, the share of electric cars in the passenger car population in Germany has risen steadily in recent years and was approximately 1.22% (BEV and PHEV) in 2021. Regarding new registrations, the share of electric cars was distributed as 6.7% BEV and 6.9% PHEV, with an upward trend. According to researchers' projections, electric vehicles could already account for 11.1% of the fleet by 2025 and are expected to grow to as much as 24.4% by 2030.
BYD - The pursuer NIO is hot on the heels of the first mover
One of the major manufacturers from China is the BYD "Build Your Dreams" technology group. BYD shares were one of the stock market stars in 2021. Although the stock had corrected by a full 50% to EUR 15 in May 2021, the subsequent upswing led to a new high of EUR 36.50 in November. From there, there was a renewed profit-taking phase with a 25% loss in just 4 weeks. By the end of the year, the stock was back at its support line at EUR 30, still showing a 46% gain for the year. How will 2022 go now?
Besides China and Europe, North America is an important expansion target for BYD. In Lancaster, California, the group operates an assembly plant for electric buses and other commercial electric vehicles such as e-trucks and e-forklifts. BYD's passenger cars have no relevance in North America, but they are widely used in China. Against the backdrop of ongoing tensions between the two superpowers, China and the US, it is increasingly difficult for the Chinese to get a foot in the door in the US electric vehicle segment. A new law still enacted by former US President Donald Trump came into force in mid-December. Accordingly, companies from China will be cut off from US government subsidies, making it much more expensive for government organizations to purchase BYD's electric buses. Not a good setup for the Chinese market leader overseas.
The dynamic startup NIO recently attracted attention at a trade show in Texas. With their still young model range, the Chinese also dare to tackle the ambitious project of autonomous driving. NIO presented an electric vehicle with an unusual design concept with the newly presented Model Eve. The car's visionary UFO-like shape attracted a great deal of international attention. The manufacturer placed particular emphasis on a well thought-out interior concept, which embodies luxury and wellness as well as offering sufficient space for sleeping and working. These are the concepts of future urban mobility.
In contrast to the established manufacturer BYD, NIO is still a startup - but its ideas are visibly ambitious. NIO has recently come under a little more pressure in a direct price comparison, and the 12-month return remains negative at minus 26%. Positive cash flow will probably only be achievable for NIO from 2025; BYD has been profitable since 2014. Both manufacturers are eclipsed by industry leader Tesla, as Elon Musk's stock could rise over 70% in 2021, and temporarily it was already plus 100%.
Graphano Energy - Newer batteries need more graphite
The development of electromobility hinges on one issue: the development and availability of powerful electricity storage units. Thousands of development offices worldwide are searching for the super battery, as the need for energy storage puts high-tech producers worldwide in a bind.
Investors in these sectors should not only focus on the popular lithium and copper stocks, as the latest studies indicate that graphite is also an essential material for battery production. After processing, graphite functions as an important anode material and is indispensable in the Li-ion cell according to today's design. In addition, it is a multifunctional building material in the high-tech industry because of its flexibility in processing.
A spin-off of Canada's Manganese X-Energy, Graphano Energy explores graphitic carbon (Cg) at its Lac Aux Bouleaux (LAB) property in Quebec. The area is known for its stock of natural graphite. The upcoming drill program for 2022 will commence on schedule, and related financing was successfully completed at year-end. Through a private placement, the Company was able to issue 1,562,500 flow-through units at CAD 0.80 per unit, including a half warrant at an exercise price of CAD 1.10 for total gross proceeds of CAD 1.25 million.
Since the Company's listing on the TSX Venture Exchange on September 30, 2021, Graphano Energy has been actively conducting detailed exploration work, which has resulted in identifying several new graphite occurrences in the eastern and southern areas of the LAB property. Additional geophysical surveys and trenching are now being conducted within the property to identify additional deposits. Graphano's shares peaked at CAD 1.28 and are currently trading at approximately CAD 0.54; they are also very liquid in Germany. The market capitalization is only CAD 7.7 million - this can change quickly in the new year.
Varta - Listless trading and waiting for the 2021 annual figures
Another battery specialist is Varta AG from Ellwangen, Germany. The Varta share entered somewhat heavier waters at the end of the year due to cautious company forecasts. After rising to EUR 135 in October, the value fell to below EUR 110. Therefore, the trading range of EUR 105 to 135, which we have often formulated, is still valid. Before Christmas, a rebound to EUR 114 was achieved due to a general techno rally.
According to the Company calendar, the 2021 financial statements will not be published until the end of March, but there could be indicative figures before then. It would be crucial that Varta at least achieves the recently corrected outlook. Despite earnings development in the first 9 months of 2021 in line with company expectations, Varta's figures deviate negatively from analysts' estimates. Measured against the consensus, the Company was down 7.5% in sales and 6.8% in adjusted EBITDA. The Company's margin was slightly above analyst estimates at 0.6 percentage points. Overall, this is too weak for the hype in the stock. The negative base trend is likely to continue for a while.
Technically, the 200-day line has entered a sideways trend, but it is still at EUR 127, MACD and Momentum are neutral. Nevertheless, with further publications on the progress in battery development for e-mobility, the value could again attract a lot of attention in 2022. We had taken the stock off the list after reaching the stop at EUR 127.50. We now wait to see what is reported fundamentally. The EUR 100 to 110 zone is suitable for initial buybacks, so stay close to the ball with Varta.
The e-mobility market will continue to concentrate strongly on the new battery technologies in 2022. Companies that can deliver here will be able to attract high investor interest. Graphano can quietly continue its exploration activities. The Company's hour will come at the latest with a significant find or a sudden takeover by an industry giant looking to secure a graphite raw material source.
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