Source: Sharecast
Berenberg said that over the last two years, ITM had streamlined the business and its product offering, and transformed its manufacturing capabilities.
As previous legacy contracts are delivered, and the company ramps up production, Berenberg said it begins to see "a glide path to profitability".
"As these orders are delivered, our focus will turn to the potential orders from the recent series of announcements that signal over 500MW of orders and £350m-450m of potential revenue, 3x bigger than the current order book," said Berenberg.
The German bank, which hiked its target price on the stock from 59p to 100p, said it believes that ITM can scale up and deliver a roughly 20% gross margin on these orders, driving a "significant increase in the profitability of the business". It also noted that this potential backlog does not include the expected ramp-up in orders and delivery of NEPTUNE V contracts in the coming years.
"We amend our longer-term forecasts in line with our view that the company will build on its inflection point in FY28 and increase profitability thereafter. We now focus on a DCF and multiple-based approach to valuation. Given the significant and growing market backdrop for green hydrogen in ITM's target markets and improved operational delivery, and as we approach the inflection point, we upgrade to 'buy'," said Berenberg.
Reporting by Iain Gilbert at Sharecast.com