Siemens Energy unstoppable! BYD in a trade war? First Hydrogen share set for a price jump?

First Hydrogen: 500 million revenue potential vs. 20 million valuation

In the hydrogen sector, the wheat is being separated from the chaff. The old favourites Nel and Plug Power are not breaking even despite high sales, and the stocks are hitting one multi-year low after another. Yet hydrogen is set to become an energy source of the future. This has just been reconfirmed by the EU, among others, with its funding programs. Investors should, therefore, consider new sector frontrunners with innovative business models. First Hydrogen is one of these emerging players. The Canadian company has developed innovative hydrogen-powered fuel cell commercial vehicles (FCEV) in recent years. These vehicles have shown their efficiency and even advantages over battery-powered models in extensive real-world tests across the UK. Among notable users, the e-commerce giant Amazon has utilized First Hydrogen's vehicles.

The sales potential is huge. In Canada, preparations are already underway for the construction of an assembly plant with an annual capacity of around 25,000 vehicles for the North American market. In Europe, production capacities are already in place for bulk orders. A major German carmaker will install First Hydrogen's fuel cell powertrain in its proven small van. At a sales price of EUR 50,000 and 10,000 vehicles sold, annual sales would be EUR 500 million. By way of context: First Hydrogen's market capitalization is less than EUR 20 million. This makes the stock an exciting speculative addition to a portfolio, especially since the stock has formed a solid bottom since August.

Siemens Energy: Overheated?

There is no sign of a bottom forming at Siemens Energy - quite the opposite. In the current year alone, the share price has more than tripled and is trading at an all-time high of over EUR 37. As recently as October 2023, the specter of insolvency was still around and the share price fell below EUR 8. Since then, the problems in the wind power sector have at least stabilized – although there are no really positive reports coming from the sector – and the conventional energy and grids sector is being boosted by the imagination surrounding the hunger for energy of artificial intelligence. The market capitalization is now an impressive EUR 30 billion.

In about two weeks, Siemens Energy will report on developments in the fourth quarter. Given the share price performance and the valuation, expectations are high. The stock's growth potential is seen as limited for now, with some mixed analyst opinions. Goldman Sachs, for example, recommends buying Siemens Energy shares with a price target of EUR 40.80. Berenberg also has a "Buy" recommendation but notes that the price target of EUR 35 has already been exceeded. At Bernstein Research, the target price for Siemens Energy shares is only EUR 15. The rating is consequently "Underperform". However, this assessment might not carry as much weight, as Bernstein largely missed the stock's recent rally.

BYD: EU imposes punitive tariffs

And what is BYD doing? Last week, we reported that the Company is not satisfied with the pace of expansion in Europe. In response, it wants to take over distribution partners, among other things, or at least exert more influence. It is clear that the Chinese e-carmaker intends to step on the gas in Europe.

A trade dispute between the EU and China is certainly inconvenient right now. On Tuesday, the EU confirmed the imposition of new punitive tariffs of around 35% on the import of Chinese electric vehicles. They came into force yesterday and will apply for five years. The German government, in particular, had spoken out against the punitive tariffs. Finally, a reaction from Beijing is now expected, which could hit the already beleaguered German manufacturers again. In an initial response, China announced it would file a complaint with the World Trade Organization (WTO).

Ongoing negotiations between the EU and China are set to continue. The EU is demanding that China reduce subsidies to its domestic automotive industry, such as through low-interest loans. China has signalled that it is willing to make changes, but so far, these are not specific enough for the EU. Incidentally, it has already been reported that Chinese automakers could withdraw their investments from European countries that supported the new tariffs on imported vehicles.

Conclusion

Overall, the impact of the punitive tariffs on BYD's development should not be overestimated. Currently, EU sales represent only a minor share of BYD's total revenue. In the medium term, BYD plans to manufacture vehicles intended for the EU market in local factories within Europe or potentially in Turkey. Meanwhile, First Hydrogen's shares will likely break out of their sideways trend as soon as a significant order is announced, which could make it worthwhile for investors to have built up an initial position beforehand. At Siemens Energy, expectations continue to rise, and the stock remains strong.