Peel Hunt has initiated research on ITM Power (LON: ITM) and the broker believes it is in a good position to be a leader in the electrolyser market. Peel Hunt has set a target price of 500p.
Sheffield-based ITM Power develops and manufactures electrolyser technology that can produce hydrogen from green sources. This could be in the form of gas, ammonia or methanol.
An electrolyser uses electricity to split water into hydrogen and oxygen through electrolysis. The hydrogen can be stored as compressed gas or liquified.
Electrolyser market
In 2020, there was 90 million metric tons of hydrogen produced using natural gas that was used by industrial businesses. There was 50% used in chemical manufacturing, 40% used in oil refining and 10% in iron and steel production. There are new uses that replace fossil fuels.
By 2030, the IEA expects green hydrogen to provide 85 million metric tons out of 210 million metric tons of hydrogen production. By 2050, green hydrogen should account for 340 million metric tons out of a total of 545 million metric tons.
Peel Hunt believes that ITM Power could become profitable in the year to April 2025. That is based on revenues of £233.8m. On that basis, there should not be any need for further cash injections in the next few years. ITM Power raised £250m last year.
Cash could still be around £135m by the end of April 2025, if the forecasts are proved correct. This could then help to fund the expansion of capacity.
The full year figures are due to be published on 8 August. Total backlog was 755MW at 1 June 2022. Revenues of £5.1m and a loss of £27.7m is estimated. ITM Power has been quoted for nearly two decades. It has taken a long time but it is getting to an important point in its development.
