“Life punishes those who arrive too late” is the famous Gorbachev quote. The inverse could be applied to hydrogen at this time: The stock market punishes those who come too early. The shares of H2 companies are trading at a price level as if the supermolecule has no future. Far from it! The stock market wisdom of contrary opinion recommends doing the opposite of what the majority of investors are doing at the stock market.
Warren Buffett would add that you should not change your mind at the stock market if the general mood suggests it. On the contrary: Buy shares whose whole stories are simply “round,” and despite short-term disruptive factors remain unperturbed, as long as the outlook is right. Looking at the current situation, there are many opinions that view hydrogen and fuel cells critically. Also the increasing employment of batteries will then be brought into the field and their advantages underscored, such as energy density, travel range, new materials and recycling. But that is not a convincing counter-argument, because there are real synergies between the battery and hydrogen. However, if we apply the above contrary opinion to shares in the H2 sector, one should buy now and reduce the price or engage this complex of topics completely newly at the stock exchange, as prices have bottomed out and are set to rise gradually and sustainably.
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The stock market thrives on dreams, and they are clearly present here – climate change and decarbonization are setting the pace. Every day, projects around the globe are announced that deal with the production and use of hydrogen in various applications and markets. All of this is real, even if the implementation will still take some time and some projects are still in the planning phase. Worldwide, projects with a volume of over 500 billion USD have been announced – and probably only five to ten percent of these are in actual implementation. Note, however: These are clearly defined projects.
Different speeds
The ramp-up and concrete implementation of hydrogen projects are taking place at different speeds – from region to region, from country to country, from business to business. The reasons for this are manifold. It is often regulation that prevents, delays or, on the contrary, accelerates important developments.
Current examples: A few weeks ago, US president Biden launched a program of seven billion USD to support the construction of seven H2 hubs in the USA. The good thing about it: Private capital of an additional 40 billion USD will be stimulated by the the 7-billion-dollar boost through the market economy. And just as the Inflation Reduction Act pragmatically makes capital available to companies, other countries and economic zones should likewise proceed to spark comparable dynamics.
Interesting is the glance at certain markets such as long-haul transport by truck. In agreement are the majority of truck manufacturers that hydrogen will be the energy source especially for heavy goods, whereas on short treks, it’ll be the battery or a hybrid of the two – depending on field of application and radius. Emissions legislation and CO2 levies will make the transition from diesel to hydrogen and batteries necessary. We’re talking about several million trucks that step by step need to be modified for the future.
In parallel, the charging or refueling infrastructure will be established. Tesla with its Supercharger network is a good example for this, because the company itself has solved the chicken-and-egg problem. That the ramp-up will take a few years yet is clear to see. Companies such as Ballard Power, Cummins Engine, Nikola Motors, Hyzon Motors and many others are in the process of positioning themselves perfectly for the ramp-up. And what applies to heavy transport also goes similarly for maritime transport (here again are Ballard, Bloom Energy, Cummins) and rail. Companies that position themselves correctly in terms of technology and create the necessary capacities will benefit from the future development.
South Korea and Japan are leading the way, as is China. In the USA, it is California, as the highest-performing federal state, that has fully recognized the potential of hydrogen. Interesting is also a glance at the world map in terms of ammonia as a basis for the transport of regeneratively produced hydrogen: 177 major projects have been announced worldwide – the production of hydrogen and transport over long distances via ammonia (NH3) will then increase sharply starting 2026, which also ensures that hydrogen will be available in ever larger quantities at falling prices (up to 1 USD per kilogram is the forecast for the next 10 to 15 years).
At the major trade fairs and conferences, spirits were high even though the companies know that the implementation of many projects will take a while – longer than expected. The large number of partnerships and project descriptions makes it impossible not to be optimistic. In my view, a boom will emerge that will be based on and boosted by development in countries such as China.
Analogous to 2020
The stock market, in my opinion, is entering a new phase that can be compared with the period from 2017 to 2020, when there was a price explosion in H2 shares. The difference between the years around 2020 and those from 2024 to 2030, however, is that in the future there will be a steady, long-term and sustainable upturn in the H2 sector – surely again with some price exaggeration upwards as well as downwards, but rising in trend.
Companies have built up production capacities, optimized their products, realigned their business models and are preparing for the ramp-up. They will be able to deliver when the market demands it. The stock exchange will anticipate this step by step, provided the industry proves that it is possible to earn money with regeneratively produced hydrogen. Then, a comparison with the years 2017 to 2020 is inappropriate in that the prices in the future will sustainably rise, because a new megatrend is running its course – worldwide.
There is a need to differentiate between the various FC sectors and individual companies, however. It depends on how one as a company is positioned in the “right markets,” because competition in terms of profit margins is also increasing in parallel. For example, the production of electrolyzers in China is up to 70 percent cheaper than the global competition. Companies that earn money from hydrogen as a consumable and commodity are, in my opinion, better valued by the stock market than pure plant builders. The business models will influence the development of share prices in various ways, since what counts in the end is the return on investment (ROI), the company’s profit.
Book tip, indirectly on the topic (German-language): “Zukunft – eine Bedienungsanleitung” by Florence Gaub (ISBN 9 78323 283724)
But what you need as an investor is composure and time. Buy and leave and buy again little by little to achieve a good average price. Safer than individual investments in this are of course H2 funds (ETFs), of which there are plenty and which do not differ greatly in the composition of the securities. According to the cost-average principle, always buy more. Consider this: Facebook, Tesla, Google and Amazon were also not a success story right from the start, but rather after various numbers of beginning years demanded enormous capital expenditures and also justified logical losses in the start-up phase.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Author: Written by Sven Jösting, December 15th, 2023
My number one in this segment was and remains Bloom Energy, even if the share price, despite the recent price gains, does not come close to reflecting the prospects. In the third quarter, the turnover was able to rise nearly 37 percent to over 400 million USD. There is much to suggest that the current fourth quarter will also show a strong upward trend – 1.4 to 1.5 billion USD should be the total for 2023. The non-GAAP profit margin was able to rise in the quarter an impressive 12.4 percent from the previous year to 31.6 percent. Non-GAAP profit in the third quarter amounted to 51.8 million USD, so an improvement of 80.3 million USD compared to a non-GAAP loss of 28.5 million USD in Q3 2022. I am concentrating here on the non-GAAP figures, as these exclude special factors and one-off effects.
In year 2024, Bloom should not only be cash flow positive, but also operationally profitable. The cash on hand of 650 million USD at the end of the third quarter must also be seen from the aspect that material inventories with value of over 400 million USD (capital employed) were significantly increased, so existing orders can be processed quickly and, because of the parts on hand, there are no supply chain problems.
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Production sites centrally consolidated
Bloom is concentrating fully and completely on the Fremont location, because production there is highly efficiently automated (state-of-the-art facility). As a result, nearly 100 employees were let go (overhead in Sunnyvale), which was interpreted to mean that the company was not doing well (comments in chat rooms and analyses) – by no means the correct interpretation, because higher automation saves on costs. Everything has an upside and a downside.
Exciting is the outlook of CEO K. R. Sridhar: The enormously increasing energy demand – for example for AI – will be drive the business of Bloom and its energy servers, because it’s not just about the quantity of clean energy, but also about its permanent availability (24/7) and security. Power-to-heat models enable the simultaneous use of generated energy for electricity and heat, as the energy generated in the process and its waste heat can be used immediately for heating (process heat) and also for cooling. The perfect cycle. As the electricity grids are reaching the limits of their capacity, island solutions like that of Bloom are coming in the focus of many businesses. While natural gas is still being used for the time being, it will successively be replaced by hydrogen in its many colors.
In parallel, the company’s own carbon capture technology will reduce the CO2 footprint. Here Sridhar also makes interesting allusions to the potential of its own high-temperature SOEC electrolysis. All the same, Bloom with its electrolysis technology is participating in four out of the seven hydrogen hub projects of the Biden administration (seven billion USD investment in seven H2 production centers spread across the USA). The business with the electrolysis will start in 2024, but will then make a real contribution to the company’s growth starting 2025. CEO Sridhar has said, “Bloom Energy is executing at a high level on innovation and growth.” Summary: The stock market story is round. In year 2024, we should see again prices over 30 USD, if the company’s forecasts are met.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Author: Written by Sven Jösting, December 15th, 2023
Setting up various production lines for stacks is at the focus for Ballard Power. With these, the company can act and deliver during the ramp-up in the next years. With still nearly 800 million USD in the bank, Ballard is in a comfortable situation and is able to finance all investments from its own resources. That the company is valued at the stock exchange with only about one billion USD seems incomprehensible in view of the prospects.
Strategically interested companies could and should seize the opportunity and get on board with Ballard stock as long as the stock market valuation is so low. What if a Mr. Adani were to come knocking again? Or automotive suppliers such as Dana, Tyco or Magna? Anything is possible. The only protection against this: significantly higher share prices, so a stock market valuation that matches the future prospects.
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Figures have little informative value
Current sales will be dramatically exceeded in the coming years, when the ramp-up of the FC markets for commercial vehicles of all kinds, ships and rail vehicles begins. In this respect, the quarterly losses in 2023 and 2024 are due to high R&D expenses and the expansion of capacity and have little to no meaning. What if in a few years’ time instead of the still scant individual orders of 50, 100, 200 FC modules per year, 1,000, 5,000, 10,000 and more FC modules were to be delivered – and for each individual market? Then Ballard would have the necessary capacities and could deliver.
Opening of the Still’s FC production site in location Hamburg
The forklift truck manufacturer Still (subsidiary of Kion, majority-held and part of the Chinese Weichai Group – which in turn holds about 15 percent in Ballard Power) is relying on the FC stacks from Ballard Power. On November 10, 2023 in Hamburg, the ceremonial opening of the first production line for 24-volt fuel cell systems took place. In the future, 4,000 FC forklifts will roll off the production line there every year.
7-billion-dollar hydrogen hub plan
Ballard benefits indirectly from the planned establishment of a US-wide network of seven hydrogen production centers (hydrogen hubs). This is because the widespread production of green hydrogen is a great opportunity for many – and even more so in the future – Ballard customers to invest in products that can use hydrogen: shipping companies, trucks, buses, ships, rail vehicles and many more. In six of the seven hubs, Ballard sees the perfect positioning for itself and its customers in hydrogen and fuel cells.
Forsee Power proves to be a stroke of luck
If you look at the current figures of the French battery manufacturer Forsee Power, you have to give Ballard credit for a good hand with the investment – Ballard is one of the largest single shareholders. A massive 83 percent increase in turnover in the third quarter to 47.9 million EUR. In the first nine months, that amounts to a plus of 67.6 percent to 126.6 million EUR. For the whole year, it is to be 160 million EUR, then 235 million EUR in 2024, and 850 million EUR turnover in 2028 is the goal.
The two companies work perfectly together, as the batteries from Forsee are put to use in, among other things, the FC systems of buses and Ballard customers. Forsee at around 2.50 EUR per share seems to me to be a good buy if you want to have batteries in your portfolio and see it as a complement to the fuel cell.
Solaris is the perfect forerunner
The Polish bus manufacturer Solaris is continuously ordering more FC modules from Ballard, 350 in total this year alone – another 62 were recently added. Since Ballard supplies various bus manufacturers as a partner for the fuel cell, Solaris is a very good example. This market is only at its start, and Ballard as number one and frontrunner already has experience of over 100 million kilometers traveled. The newsletter Information Trends see the market for FC long-haul buses in general as one of the fastest growing hydrogen markets.
In the next 15 years, globally over 73.4 billion USD are to be invested in new FC buses. The forerunner is China. FC buses are becoming increasingly cheaper, even if they’re still more expensive than pure battery-electric buses. Convincing here are the arguments of range and time or type of refueling. Parallel to this, the H2 infrastructure is being established. Consider this: Ballard has more than ten big bus manufacturers that exclusively rely on fuel cells from Ballard. In China, Ballard via a joint venture with Weichai Power is also the supplier for various bus manufacturers there – that is only one of the over 30 platform partnerships. Currently, there are tenders for over 17,000 buses worldwide.
Individual orders increasingly larger
Randy MacEwen as CEO has said: from small series occurs the ramp-up to large series. From batch sizes of 10 to 100, there are now massive numbers. The same goes for many other markets: The rail vehicle manufacturer Stadler reports that they are waiting for the acceptance for 25 hydrogen-powered trains, after having already received a firm order for four such trains in California.
In trucks, OEM partners such as the German company Quantron rely on Ballard: Among other things, they deliver hydrogen-powered small trucks Ikea. The platform partnership with Ford for the F-Max raises great expectations: What would it mean if Ballard were to supply FC modules for over 10,000 trucks per year? It is important to be, like Ballard, a technology leader and also have the ability to deliver (capacities).
My only concern: What happens when a big player in the market takes advantage of the situation and makes Ballard a takeover offer – like Cummins has done with Hydrogenics? A participation in a strategic partnership would be a share price turbo, though.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Author: Written by Sven Jösting, December 15th, 2023
In the past weeks, news reached us from The Central Country: China is repositioning itself in the field of hydrogen and intends to take the lead in various fuel cell and hydrogen markets around the world. When it came to the solar and wind energy sectors, or even battery-electric mobility, China stimulated them with its extensive subsidy programs and the People’s Republic quickly advanced to the position of global market leader. Will we now see the same development in the H2 and FC sectors?
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First, China defined, among other things through the CO2 footprint, the various colors of hydrogen for itself at the end of July and then, August 8, through six central authorities (standardization administration, NDRC, ministry of industry and information technology, ministry of emergency management and national energy administration), set corresponding guidelines. According to the Formation Guidance for Standard System of Hydrogen Industry, standards for the use of hydrogen in various markets and application fields are to be established by year 2025. This covers the various production processes of hydrogen, safety aspects, storage and transport, H2 infrastructure and various fields of application/markets.
This can safely be viewed as a framework in which the Chinese government could soon launch support programs for companies, provinces, universities and research institutes on a grand scale. Perhaps as early as 2024? For three years, we’ve been waiting for such a program – one with a volume that could be comparable to the US Inflation Reduction Act (500 billion USD, a trillion even?).
As China has major problems in the infrastructure/construction sector, the swing in the direction of hydrogen and climate protection could represent the perfect counter: growth through sustainability. This should now become a reality in one to two years. China has long been by far the world’s largest producer and also consumer of hydrogen (natural gas-based). In the future, the hydrogen is to eventually become green, even if surely also the color blue (natural gas reforming with CCS) is used in the transition.
What does this have to do with the H2/FC shares discussed here?
China will be setting down specifications that will influence the entire H2 industry worldwide, is the expectation. The use of fuel cells in motor vehicles of various types (from commercial vehicles to passenger cars) could help this technology achieve a breakthrough, if for example a national quota were to be introduced like that previously made for battery-electric. The same goes for the corresponding infrastructure and, of course, also production, storage and transport.
Based on planning until now, China was to have 1 million vehicles with H2 drives on the road by year 2030. A suitable funding program could ensure that it becomes many millions. For comparison: South Korea plans to have around 6.1 million FC vehicles on its roads by 2040.
For such a ramp-up, many companies active in this field in China need to prepare themselves. Toyota and Hyundai, but also Ballard, Cummins and Bosch, with large investments in regional production facilities for among other things FC stacks, are already in position. It is only a question of time when the global industry of suppliers show their commitment here.
On the small scale, this can already be seen in individual provinces and major cities: Shanghai plans by year 2025 to build up the number of H2 refueling stations from the current 14 to 70 and the number of FC vehicles from today’s 2,500 to 10,000 (primarily buses and commercial vehicles). This allows the conclusion that Shanghai wants to be prepared for the plans (subsidies) of the central government.
Why is the year 2023 the start of the hydrogen megatrend?
Trend research is showing green – including with hydrogen. John Naisbitt in his bestseller “Megatrends” has shown through many examples that the number 20 has a special meaning. And exactly 20 years ago, in 2003, the book “The Hydrogen Economy: The Creation of the Worldwide Energy Web…” of visionary Jeremy Rifkin was published in German (the English edition a year before in 2002). After reading it, you’ll know what is possible in terms of hydrogen.
Today, it is real. The book was my entrée into this subject area. From trend research, we know that for a new megatrend to go from its starting to melting point, it takes an average of 20 years. We’re penning the year 2023. The stock market is in the starting blocks. Will Naisbitt and Rifkin be right? Looks that way.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
That the wind subsidiary Siemens Gamesa will still cost its parent company a lot of money has been the case for a while. Too great are the problems with some wind turbine types (onshore), and integration also costs money until synergies properly take effect and cost reduction potentials can be leveraged. Siemens Energy itself still see financial risks with this in the area of 1.5 to 1.7 billion EUR. It could, at the end of the day, as well be two billion. Provisions amounting to 1.6 billion EUR have already been set aside for this purpose, which will come into use in the coming two years. The second quarter brought an overall loss of 2.9 billion EUR (minus of 4.5 billion EUR for the entire year is expected). That’s as far as the negative news.
The good news: Siemens Energy will well be able to cover these losses (liquidity at over 4 billion EUR), even if this will have a very negative impact on the overall result for the current fiscal year and it could take one to two years to return to positive figures. Look at the bigger picture: The order intake worth tens of billions is reason to celebrate. In addition, the risk has now been named, so the stock market will be able to include this in its investment decisions. Investors with time to allow should profit from the turnaround through again rising share prices.
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The stock market adage “buy on bad news” is the perfect as a basis for the invest in Siemens Energy. Because Siemens Energy with an order volume of over 110 billion EUR is virtually flooded with orders relating to energy security, hydrogen and the like, but there are not many companies in the world that as a one-stop shopping partner are able to offer everything from a single source. Many of the business units are doing very well and are highly profitable.
If the share price weakens further, 13 or even 12 EUR would be the perfect entry price as well as usable for the price reduction of old stocks. In two years, I expect prices of over 30 EUR.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
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