November 23rd, 2022 | 11:43 CET
China causes a bang in Qatar: Opportunity for Nel ASA, Plug Power, First Hydrogen, ITM Power
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"[...] Why should a modular electrolyzer cost more than a motorcycle? [...]" Sebastian-Justus Schmidt, CEO and Founder, Enapter AG
First Hydrogen: Things get exciting in January
First Hydrogen has significantly outperformed Nel and Plug Power this year. The share price has doubled and the Canadians, with a market capitalization of around CAD 200 million, are still significantly cheaper than the two top dogs. At the same time, things are also going well operationally: the Company's own H2 filling station network in North America is possible, and now that the EU has agreed on a concrete strategy to promote renewable energies, First Hydrogen is also expanding in Europe. Fleet operators with light commercial vehicles are to be recruited for test deployments. Testing in Germany and France is scheduled to begin in early 2024. First Hydrogen's hydrogen-powered light commercial vehicles (LCVs) have already received road approval in the UK. Fleet tests with major UK operators are planned for January 2023.
A total of 14 fleet operators from various industries are participating in the trials through the UK Aggregated Hydrogen Freight Consortium (AHFC). The Canadians also plan to unveil a new next-generation vehicle soon. It is expected to impress in terms of range, payload and total cost of ownership. This brings First Hydrogen closer to tapping a billion-dollar market. The Company estimates that the global light-duty vehicle market will reach USD 786.5 billion by 2030. Balraj Mann, Chairman and CEO of First Hydrogen, said: "Our automotive team, led by Steve Gill, has made significant progress over the past 18 months. From just a conceptual idea and two agreements (with Ballard Power and AVL Powertrain), our LCV is now being successfully deployed on the test track. And we will unveil our new next-generation vehicle in the coming weeks. These are exciting times for our company with successes we are proud of."
In addition, First Hydrogen is exploring green hydrogen production options. That is because the EU's goals are ambitious: By 2030, it should be possible to provide 20 million tons of green hydrogen. Half of this is to be produced within the EU, and the rest imported. First Hydrogen may be able to announce further details at the upcoming IIF online investor conference. The Company will present on December 7 at 10:00 a.m. (register for free here: https://ii-forum.com/timetable-5-iif/).
Nel: Partnerships give hope
Nel shareholders can only dream of a doubling of the share price this year. Although the share price has recovered from its low for the year of EUR 1, it is still only trading at EUR 1.34, just below the level at the beginning of the year. Operational progress has been too slow this year to justify the market capitalization of over EUR 2 billion. Nevertheless, the Norwegians are among the leading hydrogen specialists worldwide. This is also appreciated by authorities and corporations. Nel recently received research funding from the US Department of Defense, among others. With USD 5.6 million, Nel's research in the field of advanced PEM electrolyzers is being supported. The new developments are expected to enable low-cost hydrogen storage and robust applications. Auto giant General Motors is also collaborating with Nel. GM's fuel cell expertise is expected to support Nel in scaling up. GM will receive unspecified payments for support in development work and the transfer of intellectual property. Should successful product developments occur, GM would also receive royalty payments.
Analysts remain largely confident in Nel. In the current month, Jefferies and RBC have renewed their buy recommendations. Analysts at RBC have confidence in the Nel share at NOK 23. Jefferies has a price target of NOK 19. They say the current order backlog makes it easy to plan for sales development until mid-2024. Therefore, Nel is the "top pick" in the hydrogen sector for the US investment bank.
Plug Power: The calm before the storm?
Plug Power is the second heavyweight in the hydrogen sector alongside Nel. After the disappointing quarterly figures at the beginning of the month, it has become quiet around the US company. The share price is trading at EUR 14.50, just above its low for the year. At the beginning of the year, the stock was trading at around EUR 25. Most analysts believe the Company can reach a price of USD 20. Oppenheimer is the most optimistic, with a target price of USD 31. Citigroup and RBC see the Plug share fairly valued at USD 20 and BMO Capital at USD 18.
Among the hydrogen disappointments of the year is ITM Power. After several profit warnings, the stock has crashed from 364 to 87 British pence this year. Even at this level, Jefferies sees no reason to buy the share. The analysts downgraded ITM Power to "hold" from "buy" and cut the price target to 105 pence from 185 pence. Revenue estimates for 2024 were more than halved for the hydrogen specialist.
In the hydrogen sector, the wheat is separating from the chaff. Nel and Plug Power remain among the favorites, but sales and earnings need to move in the right direction in the coming year. First Hydrogen is among the winners in 2022, and if fleet operators order in 2023, the upward trend should continue. ITM Power is one of the losers of 2022 and must not only get back on its feet operationally in 2023 but also regain lost trust.
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