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Power to change the world

Ballard Power Systems 15 October 2020 QuickView
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Ballard Power Systems

Power to change the world

Alternative energy

Deutsches Eigenkapitalforum 2020

15 October 2020

Price

US$18.72

Market cap

US$4.6bn

Share price graph

Share details

Code

NASDAQ: BLDP;
TSX: BLDP

Shares in issue

244.3m

Net cash at end June 2020 (excluding US$17.8m IFRS 16 lease liabilities)

US$170.3m

Business description

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

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.

Ballard is investing in capacity to maintain or increase share as market grows.

Bear

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

Widespread adoption of FCEVs dependent on achieving cost-downs.

Ballard not yet at cash breakeven.

Analyst

Anne Margaret Crow

+44 (0)20 3077 5700

EDISON QUICKVIEWS ARE NORMALLY ONE OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.

Sixty-six countries have announced net zero carbon targets for 2050, 20 of which, collectively representing about 70% of global GDP, are proposing hydrogen strategies or roadmaps as key elements of their decarbonisation plans. Ballard is well placed to benefit from hydrogen adoption since it has already commercialised its fuel-cell technology and the c 1,000 buses and 2,200 trucks powered by its fuel cells have driven over 50m kilometres between them. Importantly Ballard is focused on heavy and medium duty motive applications including bus, truck, rail and marine, where fuel cells offer distinct range advantages over batteries.

Addressing the Chinese market with Weichai Power

China’s government has recently set a target of achieving one million fuel cell electric vehicles (FCEVs) on its roads by 2030, supporting the adoption of FCEVs in selected demonstration regions in China. This is a significant opportunity for Ballard, as its technology is in around half of the c 7,200 FCEVs in the country. The new policy coincides with Ballard’s manufacturing JV in China’s Shandong Province coming on line with an annual capacity of over 1 Gigawatt of fuel cell stacks. This JV was formed in November 2018 with Weichai Power, a major manufacturer of diesel engines used in vehicles, marine vessels and power generation. Weichai holds a 51% stake and Ballard 49%. In 2018 Weichai also made an equity investment in Ballard, taking a 19.9% ownership position.

Europe also an attractive market

During FY20 Ballard established a marine centre of excellence at its facility in Denmark where it is designing and manufacturing heavy duty fuel cell modules for the marine industry, with capacity for up to 200 modules a year. For example, it intends to deliver three 100kW fuel cell modules in 2020 for a vessel transporting goods between Berlin and Hamburg. In September Ballard announced a collaboration agreement with MAHLE, a Tier 1 supplier to the commercial vehicle and automotive industry, addressing the $100bn global market for commercial truck engines.

Still to reach cash breakeven

Ballard is not yet profitable or cash generative. Total H120 revenues were US$49.8m generating a US$19.2m operating loss. Free cash-outflow (including capex and investment in the JV) totalled US$44.7m, offset by an at-the-market (ATM) equity distribution agreement raising US$64.7m (net). An ATM in September raised c US$245m (net) and resulted in the issue of 16.5m shares from treasury.

Consensus estimates

Year
end

Revenue
($m)

PBT
($m)

EPS
($)

DPS
(c)

P/E
(x)

Yield
(%)

12/18

96.6

(27.0)

(0.15)

0.00

N/A

N/A

12/19

106.3

(39.0)

(0.17)

0.00

N/A

N/A

12/20e

116.0

(42.1)

(0.18)

0.00

N/A

N/A

12/21e

154.1

(23.1)

(0.11)

0.00

N/A

N/A

Source: Refinitiv

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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

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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

New York +1 646 653 7026

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

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

New York +1 646 653 7026

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

General disclaimer and copyright

This report has prepared and issued by Edison as part of a road show package for companies attending the Eigenkapital Forum. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

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.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

New York +1 646 653 7026

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

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

New York +1 646 653 7026

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

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