First Berlin – ITM Power Plc Research Update (12/02/2020)

First Berlin Equity Research has published a research update on ITM Power Plc (ISIN: GB00B0130H42). Analyst Dr Karsten von Blumenthal downgraded the stock to SELL but increased the price target from GBp 60.00 to GBp 105.00.

ITM Power has reported H1 figures (period May-October) which were below our forecasts. Total income was down 24% at GBP 3.8m due to lower grant income and grants receivable for capital projects. Sales, however, were up 100% at GBP 2.4m showing that ITM is gaining traction in the market. The loss from operations increased y/y from GBP 5.3m to GBP 9.8m. The figures do not overshadow the transformative GBP 58.8m capital increase, of which Linde took 20%, and the formation of a joint venture with Linde Engineering to deliver green hydrogen to large scale industrial projects. ITM is building an electrolyser production site with a final capacity of 1,000 MW. The factory will be the largest electrolyser production site worldwide and will start operation at the right point in time, after many countries (e.g. South Korea, Germany) have significantly increased their support for green hydrogen. Although we welcome ITM's positive strategic development, we believe that the valuation is too far ahead of the company's commercial progress. ITM is currently valued at almost GBP 760m, which is very high even if 2022 revenue reaches our forecast of ca. GBP 50m. An updated DCF model yields a new price target of GBp 105 (previously: GBp 60). The share price has roughly multiplied eightfold since we initiated coverage in February 2019. We downgrade the stock from Add to Sell.