Fig. 1: Share price performance of the companies discussed – last quarter
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Source: www.wallstreet-online.de, Share prices on March 15, 2023
The phase of many of the companies analyzed here is gradually moving from positioning to scaling, where the right growth figures are locked in sight. The transition to the profit zone is only a question of time, but will then lead to sustainable growth once achieved. In doing so, 2024 will be the first year in which some companies in the industry will start with full order books and then be able to increasingly exploit the already established capacities.
The stock market as an anticipation mechanism – the future is fed into the prices – thus assumes its actual role. That the past two years there, with COVID as an influencing factor, had been the reason for much disappointment will soon be forgotten. Because global climate change, the desire for energy security and sufficient availability, and the legal provisions regarding clean, renewable energy are helping all the markets in which hydrogen is increasingly replacing fossil energy carriers like natural gas, coal and petroleum.
As this is a new megatrend (20 years running), it’s still only now gaining speed, even if this requires time, since all this does not happen overnight. First, the necessary infrastructure must be in place (gas pipelines made H2-ready). New H2 refueling stations will be the basis for, first, serving commercial vehicles such as buses and trucks with hydrogen, especially on long-distance routes, until passenger cars, too, are increasingly put on the road equipped with fuel cells and hydrogen in a few years and series production begins.
Hydrogen as a storage medium for regenerative energies will gain significance, but the required quantities will be handled and transported from all over the world as a commodity in the form of derivatives like ammonia. The electrolysis, in its different variants, will have particular importance in this. Here, enormous new world markets are emerging, but also new areas of competition. For this reason, I am taking great care to ensure that the listed companies covered here are among the winners of the trend, because they have the important know-how and experience as well as business models that allow for good profit margins.
Fig. 2: Worldwide, interest in electrolyzers is continuing to grow: an Asahi Kasei alkaline water electrolysis pilot test plant for hydrogen production in Kawasaki, Japan
Asahi Kasei alkaline water electrolysis pilot test plant.jpg
Source: Asahi Kasei
Out of many pilot projects around the use of the fuel cell as well as hydrogen as an energy carrier (trains, ships, backup power, drones, planes, trucks, among others) will come large series in a market that promises exciting growth prospects for most participants. This ramp-up is generating share price fantasies, and it can be assumed that a great number of joint ventures will arise that will – with a whole range of products for the topic of hydrogen – be perceived as one-stop partners and offer complete solutions: from the production of hydrogen (electrolysis) to its utilization in gas-fired power plants, industry (steel, chemicals) and transportation in its many forms, and also hydrogen-based e-fuels as fossil fuel substitutes.
Companies that have the relevant know-how and IP, produce hydrogen themselves and are able to make it part of their business model will be the winners – including at the stock exchange – is my forecast. Institutional as well as private investors will, out of their own conviction and due to the lack of alternatives in terms of sustainability, provide this market segment with the necessary growth capital and then, via rising stock quotes, profit themselves from it the most.
Shares of the new, disruptive megatrend hydrogen are now starting to take off. However, the ramp-up needs time, which is also a prerequisite for any investment in this segment. Just look at what the studies of notable business consultancies like McKinsey and PwC are forecasting for these markets (heavy transport for example) in the next five to fifteen years. After that, investments in companies with the right solutions and products will be a sure thing with above-average potential.
So it's irrelevant if it takes a year or two for the whole thing to get off the ground and gain momentum. The companies discussed here, I am fully convinced, will be among the winners in the megatrend hydrogen.
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.
Written by author Sven Jösting, March 5th, 2023
