Top pick: Doosan Fuel Cell
The author is an analyst of NH Investment & Securities. He can be reached at ys.jung@nhqv.com -- Ed.
We believe that renewable energy policy momentum will renew strengthening from 2H21. In the case of Korea, revisions to hydrogen energy-related legislation and the announcement of ‘Roadmap 2.0’ for hydrogen economy revitalization are both on the way. In Europe and the US, with policies again being announced to expand the supply of renewable energy in order to reduce GHG emissions, concrete policy initiatives are expected to start in earnest. Even if major countries better coordinate their policy efforts, such a development would still likely be insufficient to achieve the targets of the Paris Agreement, so national policies have no choice but to be beefed up.
The share prices for global renewable energy players are sluggish in the 1H21, dragged down by: 1) a rise in discount rates due to interest rate hikes; 2) deterioration of profitability due to an increase in major raw materials and transportation costs; and 3) delays in the installation of new power plants due to the Covid-19 and consequent slowing in sales growth. In 2H21, these issues are expected to continue to weigh upon share prices over the near term, but we view related risks as already being reflected in share prices.
We present Doosan Fuel Cell as our top pick for the renewable energy industry in 2H21. There are some concerns towards its mid/long-term earnings growth potential due to a lack of orders amid the current policy transition period, but orders are expected to resume in 2H21 as detailed policies are announced. Expectations remain valid that newly developed products will provide mid/long-term earnings growth engines.
Top pick: Doosan Fuel Cell (336260.KS); TP of W67,000
In the run-up to the amendment of the Hydrogen Act, fuel cell orders are weak, leading to concerns are mounting over short-term and mid/long-term earnings visibility.
However, thanks to strengthening of domestic hydrogen policies, Doosan Fuel Cell’s mid/long-term growth prospects are improving. Policy support to create a hydrogen ecosystem (eg, CHPS and separate pricing of LNG for hydrogen production) is set to continue.
KOGAS has announced plans to construct a 10MW fuel cell power plant in Incheon LNG facility and a 200W fuel cell plant in Chungbuk Infrastructure Energy; these planned projects bode well for Doosan Fuel Cell’s potential order pool.
Doosan Fuel Cell is developing new products and expanding the scope of applications. The firm is expected to begin the Tri-gen business (for electricity, heat, hydrogen generation) from 2022, and is developing SOFC, fuel cells for ships, and electrolysis facilities.
The firm has presented 2030 sales guidance of W4tn. Recent share price levels appear to sufficiently reflect concerns over policy transition effects.