October 16th, 2023 | 07:05 CEST
Attention: Turnaround with 100% chance! Hydrogen stocks Nel and Plug Power are looking for the bottom and dynaCERT with large orders
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"[...] Why should a modular electrolyzer cost more than a motorcycle? [...]" Sebastian-Justus Schmidt, CEO and Founder, Enapter AG
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.
Plug Power - The US takes the next step
The United States government, with the Department of Energy (DoE), has just fired the next H2 rocket. Seven of the coveted hydrogen gigahub sites have now been identified. They span the country; states that win the bid are in favor of further follow-on investment. Plug Power hopes the extensive letters of intent from politicians will provide a good portfolio of orders for the next few years, and it wants to take advantage of the tax incentives that have been announced. According to analyst consensus estimates, Plug Power's revenue will increase from USD 1.2 billion to USD 5.6 billion within the next 5 years. Strong statement.
"Unlocking the full potential of hydrogen - a versatile fuel that can be produced in virtually any part of the country from nearly any energy resource - is critical to realizing President Biden's goal of an American industry powered by American clean energy, providing American families and businesses with less volatility and more affordable energy options," said US Energy Secretary Jennifer M. Granholm. "With this historic investment, the Biden-Harris Administration is laying the foundation for a new US-led industry that will drive the global transition to clean energy while creating high-quality jobs and providing for healthier communities in all parts of the country."
US-based hydrogen specialist Plug Power provided promising newsflow this trading week around its symposium. Morningstar analysts were enthusiastic, reiterating their positive rating for PLUG stock with a price target of USD 11.50. Unfortunately, the Latham, New York-based company has little cash reserves left in its coffers to pre-fund growth. What form the company will take to raise the necessary funds remains an open question. According to Morningstar, Plug Power is currently evaluating primarily non-dilutive forms of financing. A large bond issuance is expected but will burden the balance sheet with interest payments. Chart-wise, the USD 8.60 line needs to fall before significant follow-on buying ensues. For now, Plug Power remains a plaything of speculators. Keep watch!
dynaCERT - Significant follow-up contracts from South America
While the industry as a whole is making slow progress, dynaCERT, a specialist in the provision of fuel-saving H2 applications, has little to complain about at the moment. Their order books are filling up more and more. The Toronto-based company has just reported an order for an additional 161 HydraGEN units through its sales partner, H2 Tek. The units will be supplied to several mining customers in South America, with payments to be made before the end of 2023. This helps conserve the Canadians' cash reserves and allows for swift delivery.
Joao Araujo, Vice President of Global Operations and Partner at H2 Tek, said: "Our customer is a major mining operator in South America. The HydraGEN solution aligns perfectly with its commitment to improving performance through clean energy and reducing greenhouse gas emissions in its operations and value chain. This project is just the first step for us in supporting our customer's ESG goals."
H2 Tek has already installed dynaCERT's HydraGEN technology in certain mining operations in Chile, Peru, Brazil, Argentina and Australia as pilot projects to introduce local companies to the benefits of the technology. The focus is on large engine applications because of the potential to make a significant contribution to reducing carbon emissions and pollution. Mine operators, in particular, are under pressure to meet imposed environmental and ESG requirements for their operations. The ecological benefits of emissions reduction offer significant cost reductions in addition to increasing reputation. As part of the growing global hydrogen economy, dynaCERT's patented technology creates a unique on-demand electrolysis system for hydrogen and oxygen. Transportation and mining companies can easily install it in their trucks.
Furthermore, the completion of the all-important VERRA certification is expected soon. With this news, dynaCERT's stock ended its consolidation at around CAD 0.12 and shot up over 30% with high trading volumes. The current market capitalization of CAD 65 million is even below the development costs of recent years. A further boost in sales from additional deals could quickly accelerate the stock further upward.
Nel ASA - Nervously heading into the reporting season
The next 10 days will be very exciting at Nel ASA. On October 25, the Norwegian hydrogen pioneer is set to report on the third quarter. Analysts surveyed expect an average loss per share of NOK 0.105, or about one Euro cent. The Company's chart suggests that a negative surprise may be looming. Some experts anticipate costs to remain high and margins to be under pressure, as the high purchase prices for manufacturing materials and rising labor costs cannot be passed on directly to sales prices. This is a situation that can only be resolved over time.
Due to the significant drop in the share price, however, the fundamental framework parameters have become somewhat more affordable. Based on estimated sales of NOK 2.5 billion for 2024, this currently results in a price/sales valuation of 4.6. In the past, this ratio has been in double digits. Furthermore, the break-even point is not expected until 2026. According to the half-year results, the Norwegians are still sitting on a liquidity cushion of around NOK 4.1 billion and can, therefore, easily pre-finance sales for the next 2 years. As we described in our last reports, the devaluation process is ongoing. Last week, the stock accelerated to EUR 0.725, only to exit the market again at EUR 0.66 on Friday. The positive sign: Turnover on the stock market is enormous - it already looks suspiciously like a final sell-off. At the moment, only traders have their pleasure with the share!
The hydrogen sector is waiting for major government investments because it still makes little sense for the private sector to enter. Green hydrogen should be provided by public producers to start momentum. Nel ASA and Plug Power have reduced their valuation by over 80% and already appear somewhat more affordable. Over time, dynaCERT has developed top technology that allows significant emission reductions on-site and requires only a manageable investment.
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