Shares of Ballard Power Systems (BLDP) rose in late morning trading after an analyst from Roth Capital said that channel checks indicate that a "material catalyst" for the company is near.
ROTH NOTE: Roth Capital analyst Craig Irwin said in a research note to investors that his channel checks show reinstatement is "imminent" for China's hydrogen fuel cell truck and bus subsidies, which he said will likely occur by the end of August. Irwin, who maintained a Buy rating and $25 price target on Ballard Power, said that this is a "material catalyst" he has been eyeing as it directly affects both short- and medium-term revenue for the company. The analyst now expects fourth quarter recognition of $10M deferred and related revenue, and added that he will look for Weichai to "rapidly build" an order book into year-end after an official policy release. The Fly notes that Ballard operates a joint venture with China's Weichai to support China's fuel cell electric vehicle market.
Commenting further, Irwin said that while the exact details of the China fuel cell subsidies have yet to be finalized, he understands draft versions of the subsidy policy are currently circulating, adding that he anticipates a four-year subsidy commitment. There will likely be 5-7 regions selected by the central Chinese government for participation, and approximately half of the funding is currently anticipated to come from the central government with the balance funded by selected regions, Irwin contended. The analyst also noted that the requirements for funding of fuel cell buses and trucks will also likely tighten annually over the term of the program.
Q2 COMMENTS: Along with the company's second quarter earnings report, which was released earlier this month, Ballard Power president and chief executive officer Randy MacEwen said that "important recent developments in key geographic markets" support the group's conviction that a "strong future" is coming for the deployment of FCEVs. MacEwen added that he expects the Weichai-Ballard JV to "optimize" manufacturing processes and begin a production ramp through the remainder of 2020.
WHAT'S NOTABLE: Earlier this week, TD Securities analyst Aaron MacNeil upgraded Ballard Power to Speculative Buy from Hold and raised his price target on the shares to $20 from $14, saying he believes the catalyst-rich investor day would positively affect investor interest in the stock. The analyst added that he sees additional details on the company's guidance of a 70% module cost reduction by 2024, increased subsidy support from several countries as "green" stimulus programs are increasingly announced in Ballard's core geographies, an upcoming partner announcement with a major European Automotive OEM in the next six months, and an ~50% increase in its sales pipeline year-to-date that should translate into backlog momentum in the coming quarters. National Bank analyst Rupert Merer also upgraded the stock this week, bringing the rating to Outperform from Sector Perform.
PRICE ACTION: In morning trading, Ballard Power shares are up about 7%, trading at $16.09.
Ballard Power
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