Winners of the supercycles - Rheinmetall, Defense Metals, BYD

Rheinmetall AG - The Powerhouse of the European Defence Industry

Since the beginning of the Russian invasion, not a week has gone by without new reports about the defence company Rheinmetall flickering across the ticker. The integrated technology group, represented in the DAX due to its brilliant share price performance and a market capitalization of currently EUR 12.06 billion, is becoming increasingly important in procuring and repairing weapon systems for Ukraine. Following a visit by the Company's CEO, Armin Papperger, to Ukrainian President Volodymyr Zelenskyy, it has now become known that Western tanks, howitzers and military vehicles will now be maintained and repaired in Romania.

According to a statement by the Deutsche Presse-Agentur, Rheinmetall will set up a maintenance and logistics centre in Romania for tanks supplied to Ukraine by the West. According to a company spokesman, the service station is located in Satu Mare, close to the Romanian-Ukrainian border, and will start operations as early as April. Rheinmetall plans that the maintenance centre will play a significant role in maintaining Western combat systems in Ukraine and ensure their logistical support. The centre will be able to repair main battle tanks, such as the Leopard 2 and the British Challenger, as well as self-propelled howitzers, infantry fighting vehicles, armoured transport vehicles and military trucks. In addition, combat vehicles of the NATO armies as well as their logistic vehicles will be serviced in Satu Mare.

After a record year with revenues of EUR 6.4 billion and an EBIT of EUR 754 million, the Düsseldorf-based company is planning another increase with revenues between EUR 7.4 and 7.6 billion. In a recent study, Goldman Sachs underpinned its price target of EUR 306 and continues to rate the stock a "buy".

Defense Metals - The supplier of the West

The rapidly growing market for armaments and renewable energies presents the western world with new challenges in procuring critical metals. In the case of rare earth metals, this could result in a dramatic shortage. On the one hand, there is already an excess demand due to the rising demand. On the other hand, China controls the entire value chain right through to the manufacture of components such as permanent magnets or, increasingly, end products such as batteries and computers.

The alternatives in the western world, on the other hand, are few and far between. Apart from the Mountain Pass mine in the US and the Australian mines of Lynas and Iluka Resources, there are currently few properties worth mentioning that are in production or could start production in the next few years. One is the 4,244-ha Wicheeda project, which is 100% owned by Canadian mining company Defense Metals. In addition to first-class infrastructure - the mine is located about 80 km northeast of the town of Prince George, a mining hub in British Columbia, Canada, and is strategically located on a major forestry road that connects to a highway - the most notable feature is the same metallurgy as at Mountain Pass. Last year, a preliminary economic assessment (PEA) showed an after-tax net present value of CAD 517 million. Production potential is 25,423 tonnes of REO per year, and revenue from the sale of rare earth mineral concentrates is expected to average CAD 381 million annually.

With the construction of a hydrometallurgical pilot plant, Defense Metals is now taking the next step to demonstrate the processing of flotation concentrates for the recovery of rare earths on a larger scale using the acid-sintering workflow diagram. In addition, the Canadians published that the 3D model of its deposit has been updated using over 10,000 m of new drilling undertaken after the PEA, which will adjust the mineral resource estimate upwards.

The market value of Defense Metals is CAD 64.39 million. After peaking at CAD 0.26, the share consolidated to the support area at CAD 0.18 and successfully defended it. With increasing demand from the defence industry and further demand from the accelerated expansion of renewable energy, Defense Metals should benefit doubly in the long run.

BYD - Positive trend continues

The success story of the Chinese market leader for electric cars continues in 2023. In March alone, the Shenzhen-based company sold 207,100 units, a whopping 97.4% increase compared to March last year. In the first quarter of 2023, NEV sales and production volume increased by 92.8% and 97.3% YOY to 552,100 and 567,000 units, respectively. In comparison, the main rival Tesla came up with only 422,875 electric cars.

In a recent report, the Japanese analyst firm DAIWA raised its price target for BYD from HKD 326 to HKD 349. The rating remains "buy". In addition, earnings forecasts were increased by up to 8%. At an analyst conference, BYD's management was optimistic that it would surpass the 3 million units sold this year, giving them a market share of 40-50% in China. In addition, the technology company wants to concentrate on developing further markets in Europe, South America and Southeast Asia.

Rheinmetall continues to establish itself as the most important defence company in Europe. At BYD, the positive trend remains intact. Defense Metals, with its high-grade rare earth project, should benefit long-term from demand from both the defence and automotive industries.