First Berlin – SFC Energy AG Research Update (16/02/2021)

First Berlin Equity Research has published a research update on SFC Energy AG (ISIN: DE0007568578). Analyst Dr. Karsten von Blumenthal upgraded the stock to BUY and increased the price target from EUR 17.00 to EUR 44.00.

SFC Energy has published preliminary 2020 figures, 2021 guidance and a new accelerated growth plan which foresees organic and inorganic expansion to sales of up to €350m to €400m by 2025, as well as a widening of the EBITDA margin to above 15%. The growth plan is based on the extremely dynamic development of global demand for hydrogen and methanol fuel cells in stationary applications. 2020 sales were in line with our forecast at €53m (-9% y/y), and adjusted EBIT was better than expected at €-0.6m (FBe: -€1.6m). In the previous year, adjusted EBIT amounted to €0.3m. For 2021 SFC is guiding towards sales between €61m and €70m (FBe: €66.8m), underlying EBITDA between €3.5m and €6.0m (FBe: €4.8m) and underlying EBIT between €-0.9 and €1.6m (FBe: €0.4m). 2021 guidance is thus in line with our 2021 forecast which is largely unchanged. The accelerated growth plan entails very strong regional expansion, especially in Asia. There, a JV-based approach could generate a sales contribution of up to €100m in 2025E. Furthermore, the Indian market, where SFC already has a foothold, has strong potential (FBe revenue contribution in 2025: €26m). Hydrogen fuel cells (HFC) will be a strong revenue growth driver simply because unit prices look set to be ca. 10-20 times the unit prices of direct methanol fuel cells (DMFC) as HFCs have a much higher capacity than DMFC. The revenue contribution from acquisitions could be up to €65m. We raise our forecasts from 2022 on and expect sales of €256m in 2025. Our model does not contain any growth from acquisitions. We remain more conservative regarding the EBITDA margin than SFC and forecast a figure of 13% by 2025. An updated DCF model yields a new price target of €44 (previously: €17). We upgrade the stock from Add to Buy.