Pareto Securities on Quantafuel: BUY, TP NOK 19

Pareto Securities just published a research on Quantafuel. New analyst, new price target, the bullish story remains. Another bullish report after ABG, that I wrote here about on Monday.

We are bullish on Quantafuel and have been buyers in the last month.

Do look at the yesterday note on Biovica Capital Markets Day. Biovica has a strong catalyst coming by the end of June, which could easily double its share price. We are very bullish on Biovica.

Pareto Securities summary of the 15 page research on QFUEL:

Transferring coverage with BUY, TP NOK 19
After Quantafuel’s Proof of Concept milestone, we believe it is interesting to take a closer look at the company and its updated project pipeline. Our estimates include the five pipeline projects in addition to Skive and Kristiansund.  Including assumptions in the low end of company targets, we retrieve a fair value of NOK 19 per share, while more aggressive assumptions return values above NOK 40. For now, we maintain our Buy rec. for this transfer of coverage and introduce a TP NOK 19. old    

Over NOK 0.5 bn in 24E revenue, and cash flow positive beginning of 2025
On our estimates, which reflects the company’s guiding, we foresee 2022E revenues of NOK 134m, reflecting QFUEL reaching run rate production near its maximum capacity for both Skive and Kristiansund during Q4’22. From 2023-2025E our estimates reflect a CAGR of 100%. Due to overall high project risks still being present, we are hesitant to reflect more than the pipeline projects for now. However, should the company build additional factories, each new project will add NOK ~4/sh, given similar economics as the designed modular plants. 

Ambitious roll out plan requires substantial capex funded by equity
From 2023-2026, QFUEL is expected to start operations at 5 new plants, comprising the Esbjerg Phase 1, Sunderland, Dubai, Esbjerg Phase 2 and Amsterdam projects.  The five new projects will require NOK ~2.1bn in capex, given that QFUEL finds financial partners to all projects, willing to engage in a 50/50 JV. We also predict NOK ~200m of yearly overhead costs as Quantafuel has become an organization of size, counting over 100 employees. Furthermore, we apply a plant lifetime of 30 yrs to all the projects. Ultimately, to fund the pipeline projects we estimate that the company needs to raise equity of NOK 1.7bn, to be fully funded. To our understanding, project capex typically starts occurring 3 years before initial operations. To keep up with the pace of QFUEL’s project pipeline, we expect an equity raise in Q4’22.  

Transferring coverage with a Buy recommendation and TP NOK 19
Our valuation is based on a DCF reaching steady state after all announced projects have come on stream during 2026. We apply a WACC of 9.5%, which one could argue is somewhat aggressive, but when taking the guided plant economics into account, in addition to favorable market conditions for petroleum alternatives, we believe it is fair. Even though we expect the company to have a large capital need, we still see upside to current market pricing and transfer coverage of Quantafuel with a Buy recommendation TP NOK 19. 


Pareto today published research on HydrogenPro. We have a small stake in the company as a way to play a potential Hydrogen revolution. In this area we also have warrants on Fusion Fuel Green, an innovative company listed by Fearnley last year. We prefer Fusion Fuel to HydrogenPro. Both are very interesting and both are cheap vs where they were trading last year. Both have progressed nicely.

Fusion Fuel announced today their partnership with Toshiba. Link to the announcement is below :

Pareto Summary on HydrogenPro: Too Cheap vs Peers

Too cheap vs peers
We look for comments and further colour on recent contract awards and the manufacturing roll-out plans at HydrogenPro’s upcoming Q1’22 report. The company was in April awarded another Mitsubishi contract and suggests large long-term potential in Asia as well as the US. With its offering and validation from Mitsubishi, we foresee large growth and thus find the current discount to other hydrogen companies unjustified, despite its short history. Buy, TP NOK 30 reiterated.    

Financials will not be the focus at the Q1’22 report
HydrogenPro will release its Q1’22 report 25 May. We expect revenues to grow slightly q/q as the company should book some revenues from the Norwegian Mitsubishi order. In the greater scheme of things however, the Q1 financial result is negligible. We include USD 2.5m in revenues and -2.3m in EBITDA. We look for comments and further colour on the manufacturing roll-out plan, recent contract awards from Mitsubishi, development with DG Fuels and other potential projects. 

Big in Japan?
In April, HydrogenPro received its third contract from Mitsubishi. While the first two was from Mitsubishi Power Americas (one pilot in Norway and one larger order of USD >50m in the US), the last one was received from the parent, Mitsubishi Heavy Industries, for a large electrolyser in Japan. Japan has extensive hydrogen targets and aims at becoming a leader in the hydrogen industry, with the nation having allocated USD 3.4bn for hydrogen projects from its USD 20bn Green Innovation Fund. Although this latest contract was for USD 3m “only”, the potential in Japan is great. Should Mitsubishi follow in its own footsteps with first ordering a pilot sized delivery followed by a large order, we would expect larger contracts in Japan to follow. We just make small revisions to our estimates ahead of the report and foresee large growth for HydrogenPro. The electrode efficiency, the capital-light fabrication roll-out plan (partner-model in capacity expansions) and validation from Mitsubishi support our thesis in our view.    

Buy, TP NOK 30 reiterated 
We reiterate Buy and our NOK 30 TP. While we believe there is substantial upside also beyond this, we would like to see the company firm up some larger contracts before increasing our fair value further. The company trades at a large discount to other hydrogen names, which despite its short history, is something we find unjustified given recent order intake. The company trades at 0.7x 23E EV/sales on our estimates (and a mere 1.4x the two recent Mitsubishi orders alone), vs hydrogen peers at 9x in the same period.        

Enter your email address to subscribe to this blog and receive notifications of new posts by email.


The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

Leave a Comment

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s