First Berlin Equity downgrades ITM Power, but raises target

Analysts at First Berlin Equity Research downgraded their recommendation on shares of ITM Power following the company's latest interims, arguing that its valuation had gone too far.

In a research note published on 12 February, the analysts said that the company's £760.0m valuation was "too far ahead of the company's commercial progress".

They added that it was "very high" even if the hydrogen power specialist's 2022 revenues reached their forecast for £50.0m.

Over the six months to 31 October, the firm's income had fallen 24% to £3.8m, with sales 100% higher to £2.4m.

On a more positive note, an updated discounted cash flow model yielded a new target price of 105.0p, which was up from 60.0p beforehand.

As well, the figures did not "overshadow" ITM's transformative £58.8m capital increase nor its joint-venture with Linde Engineering to deliver green hydrogen to large scale industrial projects.

The broker also highlighted ITM's building of its new electrolyser production site, which with a final capacity of 1,000 MW would be the world's largest.

Furthermore, that factory would come "at the right time", given that many countries had just "significantly" increased their support for green hydrogen.

"Although we welcome ITM's positive strategic development, we believe that the valuation is too far ahead of the company's commercial progress."

First Berlin downgraded the shares from 'add' to 'sell' but raised its target price from 60.0p to 105.0p.