Nel ASA, dynaCERT, Daimler Truck - Into the future with hydrogen

Nel ASA - Strong revenue, weak profits

Nel ASA is considered a hydrogen specialist in Europe. Despite the Company's long-standing presence, it has only produced losses so far. This trend did not change with the second-quarter figures. However, sales grew significantly by 159% year-on-year to NOK 475 million. Last year, the figure was only NOK 183 million. All business areas, including refueling, PEM electrolysers and alkaline electrolysers, contributed to this growth. Order intake increased 81% to NOK 428 million in the quarter, with electrolysers accounting for 54% of orders.

Nel's order backlog increased significantly by 106% to NOK 2,964 million compared to Q2 2022, mainly due to electrolyser projects. EBITDA improved from NOK -197 million in Q2 2022 to NOK -138 million. Net loss for the quarter was NOK -342 million, impacted by operating losses and a negative net fair value adjustment of investments, while cash was NOK 4,122 million, compared to NOK 3,646 million in Q2 2022.

Operationally, things are progressing thanks to some large electrolyser orders, but the Company is still highly valued. In addition, the refueling business is still operating at a high loss. The bottom line is a market capitalization of about NOK 21 billion at a share price of NOK 11.70. Analysts expect sales of about NOK 1.5 billion this year. A valuation of 14 times annual sales with simultaneous losses should be considered ambitious. The backing of politicians is there; now, the group needs to turn a profit as soon as possible to justify such a high valuation.

dynaCERT - Electrolyser sector takes off

dynaCERT uses hydrogen in its patented HydraGEN technology to optimize diesel engine combustion. This reduces emissions and fuel consumption and extends engine life. Using the HydraLytica software, the savings are recorded, which will be compensated with CO2 certificates in the future. To this end, the Company is working with VERRA, and according to the Company, it is close to approval. This news would be a game-changer for the Company because almost all companies with large diesel engines will have to purchase CO2 certificates in the future in order to be climate neutral. But dynaCERT has already been able to announce major orders in recent months.

The latest large order for 3,000 units dates back to May 26. Although the Company has received the first payment for the first HydraGEN units, there have been delays in delivery due to outstanding issues, such as electrical voltage. To resolve this, two versions have been delivered to Guyana to clarify which one is needed locally. The Company is ready to ship all units as soon as this has been clarified. Also, in the collaboration with Cipher Neutron (CN), in which dynaCERT holds the option for 50% of the shares, there was an order for an AEM electrolyser stack with a capacity of 10 kilowatts from Kuper Group Africa. In addition, a letter of intent was signed for CN to supply additional electrolysers with a total capacity of up to 10 megawatts.

The AEM electrolysers will be manufactured by dynaCERT. To further refine the technology, CN is in discussions with the University of Alberta regarding a collaboration. This will involve the development of special membrane catalysts. On August 16, a cooperation agreement was reached between dynaCERT, CN and Strategic Resources. The use of ARM electrolysers at the metallurgical plant of the BlackRock project will be tested. The final target is to produce up to 30 tons of green hydrogen per day. The stock returned to CAD 0.19 after its high of CAD 0.315 in mid-June. The main reason is likely to be the delay in the delivery of the HydraGEN units. As soon as the open issues are resolved, the share should rebound.

Daimler Truck - CEO temporarily also CFO

Daimler Truck is focusing not only on e-trucks but also on trucks with fuel cell drive systems. This rounds out the Group's "Ambition 2039" strategy, which aims to put only CO2-neutral vehicles on the road. Depending on the application, the customer can be offered the right truck. It is anticipated that series production for hydrogen vehicles will start in 2025. By then, significantly more green hydrogen should also be available at more favorable prices. The transportation industry is facing a major challenge. This can also be seen in the second-quarter figures at Daimler Truck.

Almost all figures were convincing, only the order intake disappointed analysts' expectations. These fell by around 13%. The transport companies seem to be exercising restraint because no one knows exactly how the transition from combustion engines to clean technologies will proceed. In the long term, everyone will have to convert their fleets. At EUR 13.9 billion, sales in the second quarter were 15% higher than in the prior-year period. EBIT was up by as much as 28% to EUR 1.38 billion.

These promising figures were also due to the death of CFO Jochen Goetz, who died suddenly and unexpectedly at the beginning of August, aged just 52. He leaves behind a gap that the Company must now fill. In a provisional capacity, CEO Martin Daum will step in. Analysts currently see the share as undervalued. In August, there were 6 buy recommendations with price targets between EUR 43.00 and EUR 53.00. The share is currently trading at just EUR 33.89 and still has some upside potential.

With the expansion of renewable energies, green hydrogen is also becoming increasingly available. This makes it possible to store and utilize electricity for both the energy-intensive industry and the transportation sector. Nel ASA benefits from increased demand but has still not reached the profit zone. dynaCERT offers fleet operators and other companies with large diesel engines the opportunity to reduce both their emissions and fuel consumption. The payback period is less than one year. There are also initial orders in the electrolysis business. Daimler Truck is dual-tracking with electric and hydrogen drive, making them well-prepared for the future.