ITM Power initiation

Valuing an industry trail blazer using Private Equity metrics – initiation price target of 43.8p

ITM Power is a renewable energy specialist which manufactures hydrogen energy systems for use in energy storage and the production of clean fuel.

  • Inflection point to future cash flow positivity now reached

    Having spent £84 million on developing its cutting edge hydrogen fuel cell technology, ITM is now on the cusp of sustained economic profit generation. The firm is applying its proprietary technology to a number of industries, including hydrogen cars and power to gas, in the latter case solving the very much needed grid re-balancing problem.

  • Current EV a significant discount to invested capital

    From being valued at almost £400 million ten years ago to an enterprise value of approximately £32.8 million currently, ITM is now being valued at less than 40% of the capital invested in growing and establishing its IP.

  • Shares trade at a large discount to UK peers on Price/Sales metrics

    Providing further valuation uinderpinning, the shares also trade at a large discount to certain UK listed peers based on forecast 2017 and 2018 price to sales valuation multiples.

  • Private equity modelling results in valuation well ahead of current levels

    In modelling realistic cash flows and a growth profile out to 2028, we arrive at a valuation band of 25.9p to 76.5p per share. Using the mid-point valuation of a 20% discount rate and 10 times exit multiple we arrive at a price target of 43.8p – some 2.6 times the current stock price. Accordingly we initiate full coverage of ITM Power with a Conviction Buy recommendation.


    ITM Power is a research client of Align Research. Align Research owns shares in ITM Power. A Director of Align Research holds a personal interest in ITM Power. For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.

Table: financial overview
Year to end Apr 2015A 2016A 2017E 2018E
Total income (£m) 5.06 8.19 10.87 15.11
PBT (£m) (5.71) (4.36) (2.81) (1.50)
EPS (p) (3.39) (2.17) (1.25) (0.65)
Source: Company accounts & Align Research