Winners in electromobility: BYD, First Phosphate, Leoni, Tesla

First Phosphate: Current financing round offers entry opportunity

First Phosphate has been listed on the German stock exchange since mid-February 2023 and is probably only known to few investors - for now. Anyone who believes in electromobility should put the Company on their watch list. On its properties in the Canadian province of Quebec, First Phosphate has found rare anorthosite phosphate igneous rock. This can be used to produce battery-grade phosphoric acid. Since the US government strongly promotes domestic battery production, the sales market is on the doorstep.

There has been positive newsflow in recent weeks. First Phosphate plans to start pilot production in the coming months. Last week, the Company announced a licence agreement with the British company Integral Power Ltd (IPL). This secures First Phosphate long-term access to an advanced method for formulating the active LFP cathode material. The cathode material is made from lithium, iron and phosphate and is used in batteries and stationary energy storage systems, among other applications. LFP cathode material is considered relatively inexpensive and environmentally friendly compared to other cathode materials. Under the partnership, First Phosphate has invested approximately CAD 83,000 in IPL and has the right to make follow-on investments in future funding rounds. The pilot plant for LFP battery material, funded by the UK government, is scheduled to begin operations in late 2023. Then IPL will use the purified phosphoric acid and iron sulfate from First Phosphate to produce LFP-quality cathode material. In addition, First Phosphate has obtained a license to produce LFP cathode material in North America.

John Passalacqua, CEO of First Phosphate: "We have visited the IPL facilities in the UK. We have also examined the performance protocols of test battery cells made with IPL's active LFP cathode material. We are cautiously optimistic that IPL technology could be the answer to improved LFP battery performance." To finance the construction of its production facility, First Phosphate is currently conducting a financing round of up to CAD 2 million. Accordingly, the share price has come under pressure. But this offers investors a chance to get their foot in the door. At a price of CAD 0.63, the Company is valued at around CAD 30 million.

BYD: Analysts advise to buy

BYD has not yet announced a factory in North America, but this cannot be ruled out, and thus the Chinese manufacturer is also one of First Phosphate's potential customers. At least BYD builds its own batteries. And sales of the vehicles are still at a high level. In March alone, BYD sold 207,100 vehicles. That is around 97% - and almost twice as many - as in March 2022. In the first quarter of 2023, sales rose by about 93.8% to 552,100 vehicles. That puts the Company ahead of Tesla. However, BYD also sells hybrid models. Elon Musk's group remains the industry leader in purely electric vehicles.

Analysts were satisfied with the BYD figures. Jefferies raised the price target to HKD 262 and recommends buying the share. The carmaker's management is confident of achieving domestic sales of 3 million units this year. Jefferies, therefore, raised its estimates and now expects BYD to sell 3.3 million vehicles domestically and abroad this year and 4.5 million in 2024. Jefferies also increased its earnings estimates by 12% for 2023 and 16% for 2024. Jefferies sees BYD as a long-term winner within the sector. On Monday, Bank of America renewed its buy recommendation for BYD shares. The price target is HKD 380. The stock is currently trading at HKD 227.

Leoni: Shareholders face a total loss

While automotive suppliers around the combustion engine and the powertrain are among the big losers of electromobility, cable manufacturers should actually come through the industry change well. Unfortunately, this is not the case for Leoni. Although the restructuring concept has been approved, and the Company and the employees have thus been saved, shareholders are facing a total loss. Nevertheless, the share price has quadrupled in recent days to EUR 1. However, the share price fell again by more than 40% yesterday. Nevertheless, the share is still quoted at "at least" EUR 0.30. The target price of all experts is EUR 0. So the gamblers have taken over with the Leoni share.

Electromobility has winners and losers. Tesla is one of the winners, and BYD is also establishing itself as one of the leading manufacturers. The current year will show whether the Chinese will succeed in Europe. All manufacturers are launching new electric models on the market, and even Volkswagen will no longer offer a combustion version of its bestseller after the Golf 8. That illustrates the growing demand for batteries. First Phosphate wants to benefit from this. The Company is still in its infancy, but the valuation of the share seems anything but expensive.