Renewable Weekly – 29 April 2024

This week, we summarise our Q1 previews for the sector.

Nel: Capacity reservation agreement with Hy Stor Energy

This morning, Nel announced a multi-year capacity reservation agreement (CRA) with Hy Stor Energy, representing more than 1GW of alkaline electrolyser capacity combined over 2025/2027, for its Mississippi Clean Hydrogen Hub (MCHH) project. The project is still pending regulatory approvals, financin

Nel (Sell, TP: NOK3.50) - Rough start to the year

Nel reported soft Q1 figures, with revenue at its lowest since Q3 2022 (adjusted for the Nikola one-off gain), and EBITDA below our estimate. Put in context with poor backlog coverage for 2025e, the lack of large orders remains a concern and success is required in the near term. We have lowered our revenue for 2024e by 10% and for 2025e by 6%. We reiterate our SELL and NOK3.5 target price.

Nel: Slowdown starting FY24

This morning, Nel has reported Q1 2024 revenue at NOK387m, which is 30% below consensus (NOK550m). This was also sequentially slower than in Q4 2023 (-28% QoQ), but still higher on an annual basis (+14% YoY). While customer deliveries slowed in Q1, Nel benefited from the renegotiation of Nikola's s

Nel (Sell, TP: NOK3.50) - Facing one-off tailwind in Q1

We forecast Q1 EBITDA of NOK4m, well above consensus of NOK-59m, as we believe consensus does not fully capture one-off gains related to compensation for the cancellation of the Nikola agreement. We still see a risk to collections of the missing payments from its largest client last year (representing 26% of revenue), and any comment on this project should be key. Still-limited order intake raises concerns about future growth, as our estimates and consensus assume large-scale orders materialisin...

Nel: tapping further on US subsidies

Yesterday, Nel announced additional support from the US DoE and the state of Michigan regarding its 4GW electrolyser production plant project in the country. USD75m in cash incentives and grants will be made available to Nel at the time of the project's FID. This adds to last year's USD50m US DoE s

Nel (Sell, TP: NOK3.50) - Proposed spin-off likely value-destructive

In an integrated Nel, we believe the challenged fuelling division (lack of growth, significant losses, and product quality issues) is benefiting from higher multiples than it would as a standalone business. Hence, we deem the proposed spin-off value-destructive for shareholders. Combined with Nel trading at a meaningful premium to peers, we have thus lowered our target price to NOK3.5 (4). We reiterate our SELL.

Nel: Steady FY23, rising clouds for 2024/2025

NEL has reported FY2023 revenues above consensus expectations at NOK1773m (+7% vs consensus at NOK1653m, +12% vs BGe at NOK1576m), also accompanied by a lower than expected EBITDA loss of NOK474m (5% ahead of cons. at -NOK499m, +20% vs BGe at -NOK596m). NEL delivered fairly steady sequential growth

Nel (Sell, TP: NOK4.00) - Outlook and collections in focus

While we are just above consensus on Q4e revenues and EBITDA, we believe investor focus in the results (due on 28 February) will be on other items. First, the outlook for new projects and orders (no announced orders in Q4). Second, Nel built significant working capital over 9M 2023 related to a project with an undisclosed US client (likely fertiliser start-up J Westling & Co according to a news article), and collections on this 200MW project are key. Reflecting cuts to our estimates and peer mul...

Nel (Sell, TP: NOK4.50) - Mind the premium – c35% downside to peer gro...

Despite trading down 10% today, hitting its lowest share price since 2019, Nel continues to trade at a premium to peers. Based on consensus EV/sales for other large cap electrolyser peers, we estimate a fair equity value of cNOK4.5 per share, representing c35% downside risk from current trading levels. As highlighted yesterday, we believe a key read-across from the contract termination is: 1) increased focus on backlog quality (its largest client YTD has failed to make timely payments); and 2) g...

Nel ASA: 2 directors

Two Directors at Nel ASA bought/maiden bought 56,000 shares at between 8.010NOK and 8.014NOK. The significance rating of the trade was 53/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors ove...

Nel (Sell, TP: NOK4.50) - Need to rebuild investor confidence

While management highlighted record-high revenues of >NOK1bn YTD with the Q3 results, we believe focus is on the fact that what appears to be its largest client YTD remains significantly behind on payments, with past-due receivables continuing to grow. Combined with softer outlook comments regarding new orders, this more than offset the positive of lower losses from operations than expected, in our view. We see a risk of reduced investor confidence until the above payment situation has been reso...

The legacy paradox

Following the publication of our industry note entitled "H2’oween: Trick or treat in hydrogen", we have downgraded Nel from Neutral to Sell and revised our price target from NOK12 to EUR6.9. Although it continues to benefit from its historical prominence in the sector, Nel is slowly but surely fall

H2’oween: Trick or treat in green hydrogen

Decarbonisation must ultimately abide by economic laws. In a maturing market with many competing technologies, those with the most efficient power-to-power ratios generating the highest energy returns on investment are the ones that should succeed. This contrasts with the earlier stages of green hy

Nel (Sell, TP: NOK6.00) - Downward spiral could jeopardise growth plan...

With the share price a downward spiral, we believe Nel’s access to fresh capital at accretive terms, which has been its main advantage over the past couple of years, could come to an end. As highlighted earlier, we estimate that there is a meaningful shortfall (NOK2.0– 2.5bn) to fully scale up Herøya and the planned 4GW Gigafactory. With a shareholder base consisting mostly of retail investors and reduced investor appetite, we could see a scenario where the funding gap results in the stock tradi...

Nel (Sell, TP: NOK7.00) - Record cash burn overlooked

Nel traded up 11% after reporting Q2 sales 27% above consensus, a move we consider overdone as cash burn and accounts receivable were at record highs and order intake muted. It appears a key client (representing 30% of H1 revenues) has missed its payments, which we believe could cause some concerns among investors. Further, we estimate the current valuation implies a c30–50% market share by 2030, or 18–29GW of production capacity (versus 0.5GW today and a targeted 6.5GW including the announced g...

Northern Lights

Nel (Sell, TP: NOK7.00) - Downside potential remains

While we expect a somewhat smaller EBITDA loss than consensus for Q2 (NOK-124m versus NOK-138m), with a similar picture for the next few years, we maintain our muted view on Nel. We believe its valuation looks demanding standalone and on a relative basis. Also, the recent IPO of close peer thyssenkrupp nucera brought the market another reference point, and suggests c45% potential downside to Nel, with a wider peer group implying ~50% downside potential. We reiterate our SELL and NOK7 target pric...

Insights from the Clean Mobility & Sustainability conference

Earlier this week, we held the Clean Mobility & Sustainability conference at the Novotel Eiffel Hotel in Paris, gathering 13 listed companies for in-person meetings, mostly at C-level, and more than 100 participants.

Nel (Sell, TP: NOK7.00) - Too much market share priced in

On the one hand, we believe Nel stands out among several hydrogen-focused companies with a functional product offering and being well capitalised after having opportunistically raised equity several times. On the other hand, we struggle to defend its valuation, which seems excessive relative to hydrogen peers and fundamentals. We estimate the current valuation implies a c30–50% market share by 2030, or 18–30GW of production capacity (versus 0.5GW today and a targeted 6.5GW including the recent g...