First Berlin Equity Research has published a research update on Enapter AG (ISIN: DE000A255G02). Analyst Dr. Karsten von Blumenthal reiterated his BUY rating and maintained his EUR 17.00 price target.
Enapter is the technology leader in Anion Exchange Membrane electrolysis (AEM-EL). This technology does not need iridium. This is a key difference between AEM-EL and the main competing technology, Proton Exchange Membrane electrolysis (PEM-EL), where iridium oxide is (so far) irreplaceable as an anode catalyst. The predicted strong growth of PEM electrolysis will lead to a significant increase in demand for iridium. Iridium is one of the rarest metals on earth, but standalone mining is not worthwhile due to the small volume involved. Iridium is extracted as a by-product of platinum mining (annual iridium production: approx. 7 – 9 tonnes). The supply of iridium is therefore largely inelastic. It hardly reacts to price signals. This results in two dangers for PEM-EL: 1) Iridium becomes so expensive (currently one kilogram costs about $158,000) that PEM technology as a whole becomes relatively expensive and thus loses competitiveness. 2) Iridium scarcity limits the growth of PEM-EL. If these threats materialise, Enapter as the AEM technology leader would be a major winner as AEM-EL is similar to PEM-EL in important respects (fast responsiveness to fluctuating power supply, trouble-free part-load operation, compact design) and thus available as a substitute. If PEM-EL producers fail to adequately limit the problem of iridium scarcity by reducing the amount of iridium used per MW, by iridium recycling or by iridium substitution, a significantly faster expansion of AEM-EL technology would be a very good alternative from today’s perspective. Investors who want to play the iridium scarcity theme can do so very easily by investing in Enapter shares. Enapter is the only company with a commercial product with a multi-year track record in the market and is the undisputed technology leader in AEM-EL. We reiterate our Buy recommendation with an unchanged price target of €17.