Berenberg lowers target price on ITM Power

Analysts at Berenberg lowered their target price on energy storage and clean fuel company ITM Power from 225.0p to 185.0p on Monday, stating risks to both consensus expectations and the stock’s rating remained "skewed to the downside".

Berenberg pointed out that while ITM Power's share price may have halved since its downgrade to 'sell' in September, it remains convinced that further risks remain for the stock.

The German bank said delivering on full-year 2023 consensus expectations will be straightforward – with many of ITM's scale-up challenges coming to the fore in the 2022 financial year.

Berenberg stated that while ITM still trades at an April 2023 enterprise value/sales ratio of 24x, falling to 12.7x for April 2024, this compares to Nel, McPhy, and Plug Power at 9.1x, 4.5x, and 4.1x for December 2023, respectively.

"With our longer-term concerns also still unanswered, we retain our 'sell' rating, with our new 185.0p price target valuing the business at £1.1bn," said Berenberg.

"We use a market sizing exercise to value ITM with our price target falling due to: 1) a reduction in the expected success rate from 50% to 40% given recent challenges; and 2) a reduction in the terminal EV/EBIT multiple from 20x to 15x based on changes to equity market valuations."

Reporting by Iain Gilbert at Sharecast.com