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ITM shares downbeat on expectations for full-year losses of £36m

Inside the ITM Power gigafactory

It’s been a bumpy year for the ITM Power [ITM] share price, but the hydrogen-focused energy storage and clean fuel company is well positioned to benefit from the shift away from oil and gas, particularly as the energy crisis in Europe heats up.

As the company prepares to report full-year fiscal 2022 results on Wednesday 14 September, investors will be hoping for further updates on the ITM Power’s continued expansion.

In its most recent trading update on 9 June, ITM Power reported that its total backlog was up 160% year-on-year from 290 MW to a record 755 MW. The company issued unaudited results for the year ending 30 April, with revenue forecasted to come in at £5.5m, up 27.9% year-on-year from £4.3m.

However, it expects EBITDA losses to widen from £21.4m to £36.5m, owing to the costs associated with increasing production and project delivery. ITM Power is also expected to maintain its robust balance sheet, with cash balance projected at £364m, up from £176m in the year-ago period.

Project pipeline strengthens

In its interim results for the six months ending 31 October 2021, published on 27 January 2022, ITM Power reported total revenue of £4.2m, up from £200,000 a year earlier. While its EBITDA losses widened from £10.4m to £12.9m, the company ended the half-year with a stronger balance sheet – its cash balance had risen more than six-fold, from £ 25.9m to £166.7m.

ITM’s tender pipeline more than doubled year-on-year from 331 MW to 880 MW, with the total backlog standing at 499 MW, up 206% from 163 MW a year earlier. The company had been awarded a number of major new projects, including a 24 MW ammonia application project and a €1.95m contract with the German government, both awarded in January 2022. ITM was also awarded a €32.4m grant by the European Climate, Infrastructure and Environment Executive Agency to build a 100 MW electrolyser at Shell’s energy and chemicals park in western Germany.

ITM offered guidance for the full year, expecting completed product production volumes to reach 33-50 MW, and core stack module production to exceed 55 MW. The company forecasts that revenue will be heavily weighted to the latter part of the year, though it expects long-term growth to be strong.

ITM shares tumble in 2022

Despite a growing pipeline of new projects and continued interest in the clean energy transition, the ITM share price has fallen 57.9% year-to-date as of 9 September.

Investors were disappointed by the 9 June trading update, with the company’s shares slumping 18.2% on the day of the announcement. While it rallied for a short time in July and in August, the stock ended August down for the month.

ITM Power suffered a small setback towards the end of August when it was announced that the planning application for its second electrolyser factory with an annual production capacity in excess of 1 GW, slated to be built in Sheffield, was to be delayed until September. The company previously stated that the factory will be operational by the end of 2023, and the upcoming full-year announcement is likely to reveal further information on the project’s progress.

However, amid ongoing difficulties for the energy sector, and with new UK Prime Minister Liz Truss calling for a fracking ban in England to ramp up gas output, the clean energy industry has not been in the spotlight. The stock recorded its 52-week low of 154.8p on 7 September, though it recovered somewhat to close at 160.5p the following day.

Analysts forecast upside in ITM Power shares

Ahead of its upcoming earnings announcement, analysts remain optimistic on the outlook for the ITM Power share price. A consensus among 19 analysts providing 12-month price targets for ITM Power on the Financial Times suggest an estimate of 500p, which would imply a 201.1% upside on its 9 September closing price.

Of the 23 analysts offering recommendations on the stock, it holds a consensus ‘outperform’ rating as of 7 September, remaining unchanged since almost a year earlier, with 16 analysts rating the stock either ‘buy’ or ‘outperform’.

On 1 September, MarketBeat reported that ITM Power had an average rating of ‘moderate buy’ from eight analysts offering recent coverage on the stock. However, other analysts were less optimistic. On 7 September, Bank of America reiterated an ‘underperform’ rating and a price target of 100p, which would represent a 39.8% downside on its 9 September closing price.

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