The Sheffield-based energy storage company ITM Power (LON:ITM) will be announcing its finals on Thursday morning (15th) and they will not be as bad as previously feared.
Green Hydrogen
The declared vision of the business is to help the world reach net zero through the power of green hydrogen.
Net zero is the internationally agreed goal for mitigating global warming by 2050.
Geopolitical uncertainty has accelerated the need for both energy and food security.
Electrolysers, when coupled with renewable power, are the only vehicle through which green hydrogen can be produced.
The World Economic Forum in discussing green hydrogen states that:
“Hydrogen is the simplest and smallest element in the periodic table.
No matter how it is produced, it ends up with the same carbon-free molecule.
However, the pathways to produce it are very diverse, and so are the emissions of greenhouse gases like carbon dioxide (CO2) and methane (CH4).
Green hydrogen is defined as hydrogen produced by splitting water into hydrogen and oxygen using renewable electricity.
Green hydrogen is an important piece of the energy transition.
It is not the next immediate step, as we first need to further accelerate the deployment of renewable electricity to decarbonise existing power systems, accelerate electrification of the energy sector to leverage low-cost renewable electricity, before finally decarbonise sectors that are difficult to electrify – like heavy industry, shipping and aviation – through green hydrogen.”
The Business
The £340m capitalised ITM has been designing and manufacturing electrolyser systems that generate green hydrogen based on proton exchange membrane (PEM) technology for the past twenty years.
Its electrolysers require just renewable energy and water, with oxygen as the only by-product.
ITM manufactures integrated hydrogen energy solutions to enhance the utilisation of renewable energy that would otherwise be wasted.
CEO Dennis Schulz states that:
“To meet the fast-growing demand for Green Hydrogen, ITM is evolving from first-of-a-kind technology to becoming a highly efficient and reliable technology and manufacturing company.”
Green Hydrogen, produced by proton exchange electrolysers and powered by renewable energy and water is the only net-zero fuel source.
Unlike other fuels, it doesn’t remove oxygen from the atmosphere – or add more water vapour to the atmosphere than it consumes during production – which helps retain the earth’s existing oxygen and water balance.
What’s more, it has no negative impact on air quality.
Recent Guidances
In its Trading Update announced on 6th June the company stated that it expected the EBITDA loss for the 12 months ended 30th April 2024 to be between £39.0m and £44.0m, improving on the previous guidance of £45.0m to £50.0m.
That EBITDA guidance included a provision relating to disputes on legacy projects.
On 2nd August the company updated further by noting it had now concluded those matters and accordingly can release the provision for FY24.
The company stated that it expects that the EBITDA loss for the year to improve to between £30.0m and £32.0m.
The Equity
There are some 617.4m shares in issue.
The larger holders include Linde Plc (16.20%), JCB Ltd (5.95%), Investec Wealth & Investment (5.76%), Peter Hargreaves (4.49%), Deutsche Wertpapier Service Bank (3.52%), Legal & General Investment Management (3.32%), DZ Bank Securities (3.24%), ING-DiBa AG (3.18%), Hargreaves Lansdown Asset Management (2.77%) and HSBC Trinkaus & Burkhardt (2.69%).
Analyst Views
RBC recently cut its Price Objective to 100p (150p) per share, but still rates them to ‘outperform’.
Analyst Nick Walker at Peel Hunt has maintained his ‘buy’ recommendation with an aim of 200p a share.
After the recent guidance analyst Daniel Slater at Zeus Capital noted that:
“The ongoing strategic resetting of the business should put ITM in an improved position to take advantage of the increasing global interest in hydrogen, and to capture market share as demand for related equipment develops, on the back of supportive government policy and private sector investment.
We anticipate further progress on the new strategy, manufacturing delivery and build-out, new orders, new partnerships with global names, and an eventual significant uptick in revenue growth.”
The analyst has a 107p share DCF valuation.
In My View
Continuing an improving trend in guidance since August 2023, the company has now cut its anticipated pre-tax profit losses for 2024 by 25%.
Ahead of this Thursday’s final results announcement and further guidance and fresh ratings, the group’s shares are up 5% this morning to 55p and looking capable of subsequent price strength.