Berenberg lowers target price on ITM Power

Berenberg said it was updating its ITM Power model to incorporate a simplified top-down valuation approach, as well as "a more cautious" outlook on the company's long-term manufacturing capacity build-out.

The German bank stated that although it believes the company to be on "a firmer footing" under new management, operational and contracting improvements will "take time" to be reflected in better financial performance.

Berenberg also noted that against a backdrop of slower-than-expected industry activity during 2023 and "a challenging macro environment", it had opted to retain its 'hold' rating on the stock.

"On our updated forecasts, ITM is trading on FY24/25 EV/sales of 18x/9x respectively," said Berenberg. "In the short-term, we make a slight adjustment to our pricing assumptions, and also adjust our margin assumptions slightly. The result is a 2%/7% reduction in our FY24/25 revenue forecasts, respectively. EBITDA and EPS are essentially unchanged in FY24, although we see a widening in EBITDA and EPS losses of 6%/3% in respectively in FY25. In the long run, we reduce our 2030 manufacturing capacity to 2.0GW (from 2.5GW) due to a more cautious outlook on industry scale-up. The net result is a 12% reduction in our valuation."

Reporting by Iain Gilbert at Sharecast.com