Now it is getting dangerous! Hydrogen crash: Nel and Plug Power down, dynaCERT steps on the gas!

Plug Power - Has the overvaluation now set in?

The US top dog in the hydrogen electrolyser business, Plug Power, has reported several large orders in recent months. This helped the share price jump in valuation by over 80% between May and August. Then, the Company published its half-year figures. Despite significantly increased sales, losses widened dramatically. Investors are asking themselves when the expected economies of scale will become noticeable. **Despite doubling sales in 2023 to around USD 1.4 billion, operating losses remain around USD 700 million. Breakeven is now expected in the course of 2025.

Considering a price-to-sales ratio of 6, analysts on the Refinitiv Eikon platform are still in an astonishingly good mood. 30 experts assess the figures, with 70% concluding with a buy recommendation. The achievable 12-month target price of USD 16.6 is around 100% above the currently traded price. Plug Power's largest single shareholder is a Korean conglomerate, SK Group. They took a 10% stake in 2021 at USD 29.90 and are currently developing the first Korean gigafactory for hydrogen with their US partner. In Canada, the SK Group is involved in another USD 5 billion project. One can only hope that the Nujioqonik megaproject also holds some orders for Plug Power because, currently, growth only comes through public contractors. The negative energy efficiency in the conversion of water does not yet attract private investors. We therefore expect further valuation discounts for Plug Power by the end of the year.

dynaCERT - One deal follows the next

Also in Canada is the technology company dynaCERT (DYA). The Toronto-based company surprises almost weekly with new technology partnerships and large orders. Together with its partner Cipher Neutron, they were able to seal a new contract with Strategic Resources for the production of green hydrogen in mid-August. It is for the supply of anion electrolysers to the metallurgical plant of the BlackRock project, owned by Strategic Resources in Saguenay, Quebec. The H2 project is a precursor to green steel production. The collaboration agreement will enable Strategic to accelerate its hydrogen development plan and work toward producing near-zero emissions of ferrous metal products for use in electric arc furnaces and steel foundries. The leased industrial site at the Port of Saguenay provides an ideal location for the deployment of Cipher Neutron's AEM Green Hydrogen electrolysers.

Last week, dynaCERT announced the formation of a funding team to implement the "Stream 2" program of the Green Freight Program of Natural Resources Canada, a division of the Government of Canada. The program provides financial assistance of up to 50% to qualified buyers in acquiring climate mitigation technologies, including dynaCERT's HydraGEN technology. This is another step in the decarbonization of Canada for the benefit of future generations. With a final commitment from VERRA, dynaCERT's products are also expected to receive the coveted environmental certification so that users can earn carbon credits for their savings. Eligible technology retrofits must be permanent modifications that have been shown to reduce diesel fuel consumption in medium- and heavy-duty vehicles and reduce greenhouse gas emissions by switching the fuel used to a lower-carbon alternative.

Shares of dynaCERT are currently actively trading in the CAD 0.19 to CAD 0.22 range. Presumably, these are already initial prepositionings on the expected news flow in the coming weeks. With a market capitalization of CAD 76 million, only the development investments already made are paid for, but the anticipated revenues from various decarbonization projects could be many times higher in the future.

Nel ASA - The chart is broken for now

With a sharp initial move, the Nel ASA price fell below the critical EUR 1.00 mark last week. For a long time, the price had been able to hold above the support, but due to continued weakness, dynamic selling has now set in. Operationally, however, things are not so bad. After all, the order book shows NOK 2.97 billion at mid-year, and there is still NOK 4.1 billion in cash to cover the necessary pre-financing.

Unfortunately, the popular public stock with a market capitalization of EUR 1.5 billion is still valued at 15 times sales. For many investors, the adjustment to significantly lower valuations is likely to continue for some time. From a technical point of view, the chart is now battered, and the next perceptible support can only be identified at around EUR 0.70. Until then, it is a case of buckle up or simply sell. On the Refinitiv Eikon platform, the 26 analysts are completely divided. The spectrum ranges from "Strong Buy" to "Sell". The experts likely need a few more months to assess the significantly weaker growth in the sector adequately. Caution on the platform edge!

The hydrogen sector is one of the weakest sectors in the first half of 2023. Losses run through all segments; growth expectations had been set too high in 2022. Plug Power and Nel ASA should consolidate further, whereas Canadian dynaCERT can already report significant progress in its operating business.