Original-Research: Rock Tech Lithium Inc - von GBC AG

Einstufung von GBC AG zu Rock Tech Lithium Inc

Unternehmen: Rock Tech Lithium Inc
ISIN: CA77273P2017

Anlass der Studie: Research Note
Empfehlung: Buy
Kursziel: 4.26 CAD
Letzte Ratingänderung: 
Analyst: Marcel Goldmann, Cosmin Filker

Electric car market boom continues and is on verge of breakthrough; Rock
Tech in a good position to benefit from the e-mobility market; stock price
target CAD 4.26/EUR 2.90; rating still BUY
The electric car boom that began a few years ago continues unabated.
According to a market study by CAM, the number of electric vehicles sold
worldwide reached an all-time high of 2.1 million last year. The China
sales region once again proved to be the main driver of the global e-
mobility market.
According to our assessment, the worldwide demand for electric vehicles in
2018 was mainly driven by the improved product range offered by car
manufacturers (Tesla Model 3, etc.) and by more favourable purchase prices
for electric cars. In addition, regulatory factors such as electric car
sales quotas (China) or government incentive systems (e.g. purchase
premiums, tax advantages) and the expansion of charging networks have
spurred the positive market development.
The automobile research institute CAM estimates global sales of 2.7 million
electric cars in 2019, a leap in growth of 40.0% compared to the previous
Market experts anticipate a strong global rise in the electric car market
from 2020 as a result of a broad electric car product offensive that is
expected to be launched by (leading) global car manufacturers, as well as
an improved charging infrastructure. In our opinion, the significant
expansion of the electric car product range planned by the automobile
manufacturers is also due to the stricter EU emission standards that are
set to apply in the future (car fleet emission quotas). Vehicle
manufacturers that breach these EU standards will face severe penalties,
which could also harm their image. According to estimates by CAM's
automotive experts, between 11 million (pessimistic scenario) and 23
million (optimistic scenario) new electric vehicles could be approved
worldwide as early as 2025.
Many automotive experts expect (battery-operated) electric drive to become
the drive form of the future for private cars, with conventional drive
forms (combustion engines, etc.) becoming less and less significant. In the
long term, market experts in the automotive sector also believe that
alternative drive forms such as fuel cells have only a small chance of
becoming established in the market. In line with this, we expect that e-
mobility will achieve a breakthrough in the near future and, as a result,
electric vehicles will gain a significant share of the global private car
Recently, Rock Tech has mainly focused on expanding its resource base in
the area of its core asset, Georgia Lake. In the process, new drilling and
exploration work has allowed the lithium-containing resources to be
expanded to around 13.3 million tonnes (according to an NI-43-101-compliant
resource estimate). In our view, this has also made it possible to achieve
a 'critical mass' for the economically efficient mining of lithium as a
commodity. This is also indicated by the results of the preliminary
economic assessment (PEA) produced by commodity experts. This assessment
values the main area of the core project in Georgia Lake at around CAD
312.0 million (net present value, NPV) with an internal rate of return
(IRR) of 62.2%.
Following these major strategic steps, the company continues to work on
tapping its main asset, Georgia Lake (Canada), and plans to be ready for
production in the near future (2021). To achieve this, the company has
initiated various processes, such as authorisation procedures or studies.
Construction work is expected to begin on the production facility as early
as next year. To allow the company to implement the rest of the steps
necessary to begin production, it carried out a capital increase of USD
0.70 million (gross issue proceeds) at the start of the year. We anticipate
further financing measures in the near future, as these will be necessary
to allow us to begin production as planned (economic assessment, production
facility, etc.).
Against the backdrop of developments in the e-mobility and lithium sectors
and the existing NI-compliant resource base, we have valued Rock Tech using
our DCF valuation model and arrived at a fair value of CAD 4.26 or EUR 2.90
per share (previously: CAD 4.05 or EUR 2.71 per share). The increase in our
stock price target is due in particular to the roll-over effect (stock
price target basis now for the subsequent financial year 2020). Based on
the current price level, our previously issued BUY rating remains
unchanged. We believe that the company, with its extensive lithium deposit
and production planned to start in the near future, is in a very good
position to profit significantly from the expected e-mobility breakthrough.
Lithium as a key raw material for batteries will play an important part in
the ongoing transition to e-mobility within the automotive world.

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Datum (Zeitpunkt)Fertigstellung: 25.07.19 (10:58 Uhr)   
Datum (Zeitpunkt) erste Weitergabe: 25.07.19 (11:30 Uhr)

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