The big bang failed to materialize, but so did the big boom. After Nel ASA published its quarterly figures on Thursday, the stock of the Norwegian hydrogen specialist went down briefly to 1.55 euros, but it recovered on the same day and closed at 1.63 euros. After a weak Friday, however, the Nel stock continued to lose in Frankfurt on Monday, trading at 1.55 euros at midday. On a monthly basis, however, this is still a substantial gain. And clearly, the company itself is also confident – and actually keeps its word.
Nel ASA increases sales and losses
This is not so much that Nel ASA reported revenue of NOK 183 million (around EUR 18.61 million) in Q2 2022, up 12 percent on Q2 2021 (Q2 2021: 164 million). This is because EBITDA, which was a loss of NOK 197 million (EUR -20.03 million), was also significantly higher than the loss of NOK -120 million in the same quarter last year. Rather, it is a matter of an announced expansion measure at the Nel headquarters on the Norwegian peninsula of Herøya.
This is because, as Nel also announced during the presentation, the company has decided to build another fully automated production line, doubling its capacity for the production of alkaline electrolyzer stacks to around one gigawatt (GW). “The expansion means that Nel is strengthening its position as a global pioneer in the development and industrialization of green hydrogen technology, providing Norway with a great opportunity to take the role as a leading exporter of electrolyser equipment in a fast-growing market,” said Hakon Volldal, CEO at Nel since July.
Nel expands in Herøya after record order
The investment decision was made just weeks after a record order for 200 MW of alkaline electrolyzer stacks from a U.S. customer. “The expansion at Herøya supports what we have communicated previously: If the demand is there, we will increase capacity,” Volldal says. The recent $45 million contract will not be a one-off, the Nel CEO is certain. “And since we see potential for more large orders in the foreseeable future, we have decided to expand our production capacity.”
Nel’s Herøya plant claims to be the world’s first fully automated factory for the production of electrolysers and was officially opened by Norwegian Energy Minister Terje Lien Aasland in April this year. However, production has already been underway since the end of 2021. Nel’s new factory in Herøya is “a step in the right direction toward a future without emissions,” Aasland said in his inaugural speech.
35 million investment in electrolyzer production
The plant is currently running three shifts “and setting production records on a weekly basis,” Nel ASA proudly proclaimed. While the current production capacity is 500 MW, it could be expanded to a total of 2 GW, “which will also create a significant number of new direct and indirect jobs in the Herøya and Porsgrunn area.” The new production line is expected to be operational from April 2024. The total investment commitment for the equipment will be approximately €35 million.
In view of the extended loss, however, investors seem to have become a bit more cautious again. However, following the record order, reported on July 18, the Nel stock had rallied significantly, which is still reflected in the share price performance.
1 week: -6.2 percent
1 month: +17.1 percent
6 months: +17.4 percent
12 months: +15.6 percent
Analysts continue to set high price targets
The majority of analysts are also positive. For example, the U.S. bank Goldman Sachs had lowered the price target for Nel ASA before the weekend from 21 to 20 Norwegian kroner, but left the rating at “Buy”. And clear: Converted 2.03 euros still mean a price potential of about one third. Analyst Zoe Clarke had confirmed her estimate for this year’s earnings per share in her study, but reduced her forecasts for this key figure for 2023 and 2024. Overall, however, she was confident for Nel: the missed expectations for the second quarter “did not call into question the growth prospects of the hydrogen manufacturer, as evidenced by the strong increase in the order backlog.”
RBC expects even more: the Canadian bank had left its rating for Nel ASA at “Outperform” with a price target of 23 Norwegian kroner after quarterly figures, about 50 percent above the current price level. Lower electrolysis sales weighed on the hydrogen company’s results, analyst Erwan Kerouredan wrote in an initial assessment Thursday, according to finanzen.net. Investors are likely to focus on expansion plans.
Wide discrepancies in expectations for Nel stock
Others had not yet commented after the figures. However, there is a large discrepancy in the share price targets that are still valid, as the following table shows. Whether the share price falls by just under 30 percent or rises by a good 60 percent, anything seems possible.