RE: Profitability28 Nov 2021 19:48
Gartmore, that really is the holy grail of investing isn't it? The numbers that have been stated through various interviews with this company and others are broadly this...
ITM are currently circa £800k per MW and forecasting £500k per MW around 2025. If you add other revenue sources to that you'd probably settle on something like £625m annual revenue for a 1GW output.
My own interpretation of those figures goes like this...
I'd ignore actual profitability for now and assume that Linde would be wise enough to allow ITM to make 'sustainable' profits as it would be awkward for them to get the blame for putting their business partner out of business.
So what market cap would you put on a business with £625m annual revenue? A quick look around publicly traded companies in the industrial sector you could pick out Renishaw and Rotork both in that range of revenue and both with a market cap around £3bn. That puts todays share price for ITM about right for 1 factory, albeit a fully operating one. I'd give ITM the benefit of the doubt right now as their confidence suggests they can fill this one easily - otherwise why plan for 5-fold expansion.
Simple arithmetic would say just multiply those figures for each 1GW added. Unfortunately immediate competition like Nel have already stated their aim is for electrolysers to drop to £222k per MW. So assuming ITM have to follow that, perhaps by year 2030, would approximately halve the revenue projection. My own guess is that we could see ITM capped at about £1bn revenue between 2027 and 2031 as prices fall and volumes continue to increase.
If £500k per MW can be maintained, I'd easily expect a £10bn market cap by 2030. If electrolyser prices are halved then ITM market cap could be stuck at £5bn for a protracted period at the end of the 20's. Although if the low price stimulates demand considerably then the volumes would carry us up as we build factory number 4, 5, 6, 7...
Anyway food for thought. I suggest you work through these numbers so you understand where I'm coming from, then put your own spin on things and draw your own conclusions.
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