RBC initiates coverage of ITM Power

RBC Capital Markets has initiated coverage of hydrogen electrolyser manufacturer ITM Power with a target price of 310p.

The bank, which has a ‘sector perform’ rating on the renewable energy specialist, said ITM was “on the cusp of substantial revenue growth, and we expect its end markets to continue to be supported by energy transition related to government policy”.

However, it acknowledged that ITM’s valuation metrics “look extreme, even relative to out-of-industry peers, and cash constraints may cause headwinds”.

RBC continued: “Green hydrogen is likely to be a structural growth area through the energy transition, driven by a stronger push to limit carbon emissions globally and the rapidly falling cost of renewable energy.

“In this context we see ITM becoming an important player in the hydrogen value chain, with its PEM electrolyser technology gaining traction due to favourable characteristics versus other technologies.”

RBC concluded: “ITM offers a strong business growth case supported by healthy demand and very constructive developments on the policy front. However, an extended valuation and future cash requirements prevent us from being more constructive at that stage.”

As at 1300 BST, shares in ITM were ahead just over 1% at 375.6p.