(Tiper Stock Exchange) – Intesa Sanpaolo has coverage started on the title ErreDue, a company listed on Euronext Growth Milan and active in the design and production of solutions for the on-site production, mixing and purification of technical gases (hydrogen produced by electrolysis of water, nitrogen, oxygen). The target price was set at 14.3 euros per share (for a potential upside of around 26%), while the judgment on the title is “Buy“. The Tuscan company was listed on December 6 with a placement price of 12 euros per share.
Thanks to its decades of experience in the generation of electrolytic hydrogen, analysts think that ErreDue is well on its way to contributing to the energy transition process with new larger hydrogen electrolysers (from 1MW up to 5MW), already in an advanced stage of development, to be applied to green mobility and power-to-gas systems.
Other positive factors are: the R&D driven business model and the technological know-how that is difficult to replicate, which represent a competitive advantage over competitors; the vertically integrated model, which results in a short supply chain and supports margin retention, while also enabling the company to offer customization opportunities for customers; an already profitable platform, ready to reap the benefits of the hydrogen economy.
Intesa Sanpaolo expects that i core revenue of ErreDue will grow at a CAGR of 41% in period 2021-25driven by the growth of the hydrogen electrolyser business with a scale-up of processing capacity, which translates into CAGR ofEBITDA and ofNet income 44% and 51% respectively. “The capital-intensive nature of the business, prudent commercial working capital management, and robust operating cash flows should support a lean balance sheet and improved net cash position over the forecast period,” the research reads.
However, some potential business risks for ErreDue are also highlighted, including: a execution risk on the delivery of the electrolysers as planned, related to the planned production scale-up, the technological reliability of the plants and the development of research and development; the intensification of competition given the investments in hydrogen; the current local approach of ErreDue (marketing only in Italy), which must evolve towards a more international platform.