December 28th, 2022 | 08:12 CET
Goodbye Tesla shares - Now bet on the hydrogen rally 2023: Plug Power, First Hydrogen, Nel, Ballard Power
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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.
Nel ASA - Into 2023 with filled order books
Electric mobility is sputtering and hydrogen technology is now gaining momentum for dynamizing global climate protection efforts. Even the Emirates have decided to invest in modern energy generation methods alongside their abundant fossil reserves. The Desertec project of the turn of the millennium has given rise to the world's largest solar power plant on the Arabian Peninsula. The energy is to be used to produce exportable green hydrogen. This is a good opportunity for the protagonists in the US and Europe to step on the gas when it comes to H2. According to Goldman Sachs, the hydrogen sector could be a USD 12 trillion issue by 2030.
Nel, meanwhile, has surprised in the USA with a megadeal. The US subsidiary NEL Hydrogen US has agreed on a strategic partnership with the largest US automaker General Motors. The aim is to drive the innovative proton electrolyzer platform forward on an industrial scale as quickly as possible. Just before Christmas, Nel's US offshoot also announced a Capacity Reservation Agreement (CRA) for the supply of 16 hydrogen refueling stations with an undisclosed US energy company. Delivery of the refueling equipment is scheduled to begin in the fourth quarter of 2023 and run throughout 2024. The CRA is valued at approximately USD 7 million and was fully paid at signing, with the final order estimated by Nel ASA at roughly USD 17 million.
The NEL share has already gained 50% since October due to bulging order books. Currently, the share price is consolidating again somewhat. In the end, Nel ASA has nevertheless fallen 18% in 2022. The highs from 2020 are admittedly still more than 250% away. Put Nel ASA back on the momentum watchlist for 2023 because it could go up again quickly with good news.
First Hydrogen - Targeting the mass logistics market
The key to achieving climate targets lies, among other things, in the switch to green hydrogen as an energy carrier. Here, newcomer First Hydrogen has positioned itself with its "Hydrogen-as-a-Service" model and intends to cover the entire value chain in the future with the construction of zero-emission vehicles and the production and distribution of green hydrogen. The Company recognized early on that there are more viable options than a battery drive in logistics. Long charging cycles and short range are determinants that have so far made a network of delivery vehicles unprofitable.
In addition to the series production of novel utility vans, CEO Balraj Mann's comprehensive goal is to provide a holistic product offering of zero-emission light commercial vehicles and green hydrogen. In addition to developing a hydrogen refueling system, this also includes in-house production and the sale of hydrogen produced in-house. The projects have started very successfully in the UK and are now to be rolled out across the EU and North America.
A pilot project has now been agreed upon with the Canadian city of Shawinigan in the Quebec region to develop the first ecosystem. First Hydrogen has already officially begun securing and developing appropriate sites for local production of green hydrogen and assembly of zero-emission commercial vehicles. Electrolysis technology is expected to provide up to 50 megawatts of green hydrogen for the Montreal-Quebec City metropolitan area, which the relevant logistics partners can use for refueling the latest H2 fleets.
First Hydrogen is starting with a tangible concept in the hydrogen propulsion market. Especially the logistics industry is facing enormous challenges in adapting its services to today's sustainability principles due to climate change. Because of their extraordinary innovative power, the Canadians, with a market capitalization of only CAD 285 million, are a top pick for 2023 because the "real hydrogen wave" is arguably just beginning now.
Plug Power and Ballard Power - Sell-off at the end of the year
Plug Power and Ballard Power delivered dismal results to shareholders in 2022, with share price losses of nearly 60%. Both are still deep in the red in their business models, and the euphoria of investors from 2020 and 2021 has now been caught up in sheer reality. The conviction has long prevailed that profitable implementation of H2 concepts will take several more years, as the corresponding budgets of governments are only now coming into play. The war in Ukraine has once again illustrated, through the price spikes for fossil fuels, how dependent the Western industrialized nations still are on cheap energy availability.
Emission-free mobility solutions are essential to the European Union's climate plans, as this is the only way to ban the sale of petrol and diesel vehicles by 2035. Among other things, the EU has decided to reduce CO2 emissions from new cars by 55% by 2030 and from new vans by 50% compared to 2021.
Fundamentally, Plug and Ballard are still trading on a 2024 estimated price-to-sales ratio of 6. Plug Power expects positive EBIT in 2025, but free cash flow remains negative through 2026. Ballard Power's analyst estimates currently show no earnings even for 2026, although sales could quadruple by then. Research experts still overwhelmingly vote "Buy" on Plug Power, while Ballard Power has fewer supporters and averages "Neutral." The downtrends in both stocks could nevertheless technically turn into a recovery at the start of the year due to fiscal portfolio adjustments in 2022, but both stocks remain highly speculative.
The hydrogen sector is at the starting point of a longer-term boom phase. If the government funds flow as announced, many projects can be managed. So far, this investment drive has been lacking on the private side. This will continue to bring fantasy into the sector in the coming years, but the extraordinarily high valuations should not be lost sight of.
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