June 22nd, 2022 | 14:39 CEST
Golden times for Nel and Varta? Tension is rising at First Hydrogen
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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 will get exciting from September
First Hydrogen is still relatively unknown but has exciting technology and strong partners. The Canadian Company aims to become the leading manufacturer of zero-emission, long-range hydrogen-powered commercial vehicles in the UK, EU and North America. This market is developing very dynamically. Between 2020 and 2027 alone, the experts at Allied Market Research expect growth of 21.4% per year. During this time, the market volume is expected to grow to USD 41.2 billion annually. To tap this potential, First Hydrogen relies on a manufacturer- and technology-neutral best-of strategy. By integrating existing technologies and a proven chassis - both significant cost and time advantages can be realized.
Currently, First Hydrogen is developing a light commercial vehicle with its "Utility Van" and is relying on the integration of existing technologies and a proven chassis from MAN. Starting in September, the first vehicles are expected to be approved for road use and can be tested by potential customers. Through cooperation with two global market leaders, production will be ramped up to deliver between 10,000 and 20,000 units of the utility van per year. The partners are two global market leaders: Ballard Power, one of the world's leading fuel cell specialists, is providing support for the technology. For the design, First Hydrogen is working with AVL Powertrain Limited. Due to the exciting second half of the year, the share has held up well in the stock market quake of recent weeks and is just above the price of EUR 1.60 from the beginning of the year. An all-time high of EUR 2.50 was reached as recently as April. The Company is currently valued at around EUR 100 million. If the test runs in the second half of the year are convincing and result in orders, significantly higher prices should be possible.
Will Varta soon turn over more than EUR 2 billion?
Unfortunately, investors also waited in vain for new detailed information about the plans in the field of batteries for electric cars at yesterday's Annual General Meeting of Varta. But at least Goldman Sachs is backing the MDAX group. The US investment bank sees Varta as a beneficiary of the electrification of the automotive industry. European manufacturers, in particular, are currently stepping on the gas in the switch to electrification. Accordingly, battery production in Europe is also being ramped up. Until now, batteries have mainly come from Asia. That is set to change significantly. For example, 40 factories are to be built by 2030. That should bring European production to almost 100% and make up the major part of the market, which will be worth more than USD 900 billion in 2035. According to Goldman analysts, Varta will be able to take a good slice of this pie. On the other hand, they are more cautious in their assessment of newcomers, such as the Norwegian Company Freyr. Varta has years of experience in battery production and is already taking the first step into the market for e-car battery cells with its V4Drive technology and has its first customer in Porsche. Thus, analysts expect that Varta could increase sales by 14% per year to EUR 2.5 billion between 2025 and 2030. That would be more than twice as much as in 2021. Therefore, Goldman Sachs recommends the Varta share as a buy with a price target of EUR 102. Currently, the share is trading just below EUR 90.
Nel shares a buy, but when will the major orders come?
Analysts are also praising Nel ASA. Not only that, but the entire hydrogen sector would have to grow much faster than previously assumed to meet demand. By 2030, more than 400 GW of electrolyzers would be needed worldwide to produce hydrogen. However, capacity will only be 79 GW by then. These are the estimates of Jefferies. Accordingly, the analysts recommend the Nel share as a buy. However, competitors would increasingly emerge, especially in China and India. But with a view to the vast market, the analysts remain positive for Nel and renew their buy recommendation. According to Bloomberg Intelligence, green hydrogen could cover around 12% of gas consumption in Europe alone in 2030. So the opportunities are plentiful. However, as Plug Power has already done, Nel must finally land larger orders again. Most recently, the Norwegians reported smaller orders like this: The Norwegian metal refiner Glencore Nikkelverk, for example, has ordered an electrolyzer for green hydrogen from Nel. The alkaline electrolyzer system is to be built in the middle of next year to supply green hydrogen for the production of hydrochloric acid in the future. The order is worth EUR 3 million.
Hydrogen and electromobility are markets with huge potential. To benefit from this, Nel is in a good position. However, at around EUR 2 billion, the Norwegians are already sportingly valued. First Hydrogen is still a long way from that. Therefore, the road tests starting in September will be all the more exciting for investors. Varta can play an important role in battery production in Europe.
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