Ballard Power Systems — Decarbonising heavy-duty mobility

Ballard Power Systems — Decarbonising heavy-duty mobility

The European Commission’s ‘Fit for 55’ package and the US Department of Energy’s Earthshot programme, which were both announced this summer, identify the use of hydrogen as an energy source as key to achieving carbon dioxide emissions reductions in hard-to-abate sectors. Ballard is well placed to benefit from greater hydrogen adoption since it has already commercialised its fuel cell technology, and the c 3,500 buses and trucks powered by its fuel cells have driven over 100m kilometres between them. Importantly, Ballard is focused on heavy- and medium-duty motive applications including bus, truck, rail and marine, where fuel cells are a compelling zero-emission option because of range and refuelling times.

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Written by

Ballard Power Systems

Decarbonising heavy-duty mobility

Alternative energy

Deutsches Eigenkapitalforum 2021

25 October 2021

Price

US$15.63

Market cap

US$4,651m

Share price graph

Share details

Code

BLDP

Listing

Toronto, Nasdaq

Shares in issue

297.6m

Net cash at end June 2021

US$1,243.0m

Business description

Ballard Power Systems develops and manufactures proton exchange membrane fuel cells, which are used to provide electric power for buses, commercial trucks, trains, marine vessels and forklift trucks. It is headquartered in Canada, with operations in Denmark and an office in China. It also has a 49% stake in a JV with Weichai Power (SEHK:2388) in China. Weichai holds a 15.5% interest in Ballard.

Bull

Governments are incorporating hydrogen roadmaps as part of decarbonisation strategies.

Fuel cells have range advantages over batteries for heavy- and medium-duty motive applications.

Weichai JV is lower-risk model for addressing bus and commercial vehicle markets in China.

Bear

Heavy investment in battery electric vehicles by other companies supporting cost reductions.

Reliant on a relatively small number of programmes and customers.

Ballard not yet at cash break-even.

Analyst

Anne Margaret Crow

+44 (0)20 3077 5700

The European Commission’s ‘Fit for 55’ package and the US Department of Energy’s Earthshot programme, which were both announced this summer, identify the use of hydrogen as an energy source as key to achieving carbon dioxide emissions reductions in hard-to-abate sectors. Ballard is well placed to benefit from greater hydrogen adoption since it has already commercialised its fuel cell technology, and the c 3,500 buses and trucks powered by its fuel cells have driven over 100m kilometres between them. Importantly, Ballard is focused on heavy- and medium-duty motive applications including bus, truck, rail and marine, where fuel cells are a compelling zero-emission option because of range and refuelling times.

Increasing penetration of bus and truck markets

Over three-quarters of Ballard’s revenues are attributable to the heavy-duty transportation sector. Around half of these are from sales of fuel cell modules to companies such as Weichai Ballard, Wrightbus, Solaris, New Flyer and Van Hool to power buses and trucks in China, the UK, the Netherlands, Germany and California. The other half are attributable to customer development programmes including ongoing work with the Weichai Ballard JV, Siemens and Audi.

Initiatives underpinning future growth

Ballard is increasing its investment in the design and development of new fuel cell stacks and modules, while working on reducing the costs of existing products. Its new FCmove-HD+ high-power density fuel cell stack for buses and trucks is more than 40% more compact and over 30% lighter than its previous 100kW module and has 50% fewer component parts, resulting in an estimated 40% improvement in total lifecycle cost, encouraging adoption. The company continues to form strategic partnerships with leading companies in key target markets and verticals. For example, it is working with electric vehicle integrator QUANTRON, on fuel cell electric trucks for initial delivery in the second half of 2022, and with smart battery experts Forsee Power on fully integrated solutions combining a fuel cell and a battery system for heavy-duty mobility applications.

Still to reach cash break-even

Ballard is not yet profitable or cash generative. Total H121 revenues were US$42.6m, generating a US$33.6m adjusted EBITDA loss. Free cash outflow (including capex and investment in the JV) totalled US$48.0m, offset by a deal offering in February raising US$527m at US$37.0/share.

Consensus estimates

Year
end

Revenue
(US$m)

EBIT
(US$m)

PBT
(US$m)

EPS
(US$)

DPS
(US$)

P/E
(x)

12/19

105.7

(25.4)

(35.3)

(0.15)

0.00

N/A

12/20

103.9

(39.8)

(49.3)

(0.20)

0.00

N/A

12/21e

105.2

(69.1)

(71.9)

(0.25)

0.00

N/A

12/22e

147.1

(63.9)

(60.4)

(0.21)

0.00

N/A

Source: Refinitiv

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This report has been prepared and issued by Edison. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

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1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: TMT

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