Be it the razor, the torch or the alarm clock: the battery is a constant companion of modern life. Varta is one of the best-known brands in this segment. The German company looks back on a history of more than 130 years. Varta also presents itself energetically on the capital market. A good three years after its stock market debut in October 2017, the share is listed at more than six times its IPO price. This factor was even higher at the beginning of September. At EUR 138.70, the share reached an all-time high at that time. Varta had thus completed the v-shaped recovery that followed the slump in the first quarter in an exemplary manner. However, it was not enough to break above the EUR 125/130 resistance level for a sustained breakout. Instead, the share has been moving in a downward trend for a good two months.
Neither the recently presented nine-month figures nor the increase in the forecast supplied by the company could change this. Despite Corona, Varta has grown strongly. Even adjusted for the repurchased household battery segment, sales in the first three quarters of 2020 rose by almost 70%. The Baden-Württemberg company was even able to more than double the adjusted operating result (Ebitda level). This resulted in a margin improvement of 210 basis points to 28.00%. At 36.30%, profitability in the "Microbatteries & Solutions" segment was a full 9.3 percentage points above the previous year's level. This division includes a central growth driver of Varta. The company produces rechargeable lithium ion cells for consumer products. Here, in turn, the battery manufacturer is benefiting above all from the boom in smartphones with wireless headphones. In the opinion of CEO Herbert Schein, the trend towards True Wireless Stereo (TWS) headsets will continue to strengthen and accelerate in the future.
"Varta is well prepared for such a development", explains the CEO. In the coming year, Schein wants to increase production capacity by more than half and thus work even more efficiently. The company does not comment on rumours that Apple is behind the current investments, which are implemented with a focus on sustainability. However, an environmental manager of the US technology giant recently admitted to working with Varta quasi casually. In contrast, the German commitment to e-mobility is still a dream of the future. The CEO makes no secret of his interest in this growth market. He receives support from politics. In the middle of the year, Varta received a subsidy of EUR 300 million from the federal government and the states of Baden-Württemberg and Bavaria for battery cell production. With the expansion of its own product range, Varta should help to reduce the European dependence on high-performance batteries from Asia.
On the stock exchange, the first question that arises with the mid cap is how long the acute "voltage drop" will continue. Even the 100-day line could not alleviate the selling pressure at first. At the beginning of the week, Varta fell well below the moving average. This brought the upward trend launched in March into focus. Should this straight line break, a horizontal support would be waiting in the EUR 100 range. The 200-day line is another EUR 5 lower. Two new Softcallable Barrier Reverse Convertible give Varta even more room to maneuver downwards. The barriers of the yield enhancement products, which are optionally available in CHF and EUR, are uniformly fixed at 49% of the initial level. In contrast, the coupon payment is different: In the product currency CHF, Leonteq guarantees a payout of 12.00% p.a., in EUR there are 60 basis points more. During the term of 15 months in total, the issuer can call the Barrier Reverse Convertibles quarterly. If Leonteq makes use of the soft callable feature, investors receive the full nominal amount and the pro rata coupon.
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