Green transformation stocks are back on tidal of demand

Equities 5 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  Our green transformation basket is up 12% in the past five weeks as investor appetite has come back on the back of lower inflation expectations and a commodity market that is cooling down. The green transformation is Europe's big chance to win a technology vector and risk capital is being mobilised along side many European initiatives to accelerate the decarbonization of its economy. Today's successful French IPO of NamR, a technology company within energy optimization and efficiency, is a sign of Europe's new "green equity wave".


As we alluded to in our Saxo Market Call podcast this morning, our green transformation basket is staging a comeback from the recent lows following a 27% drawdown from the all-time highs. We touched on this theme a month ago in our research note The second collapse of green vs traditional energy where we showed that oil and gas majors had outperformed clean energy companies by 45% from the recent relative peak. What happened in green transformation companies is a bit like what happened during the dot-com bubble. Investors got carried away by the outlook and managements failure to correctly align investor expectations with the outlook (because they have the best insight into a potential disconnection), caused a temporal bubble and subsequent burst.

However, the burst could still be ongoing, but the past couple of weeks we have noticed a strong recovery in green transformation stocks coinciding with lower inflation expectations and consensus moving towards the transitory inflation view. Raging commodity prices were seen as a potential toxic risk source for green transformation companies as they rely heavily on low input costs from commodities. Our green transformation basket is up 12% in the past five weeks. It seems investor demand is coming back as the demand outlook for green technologies looks to be incredibly high in the decade to come as the world tries to decarbonize.

Source: Bloomberg

The table below shows our global green transformation basket and in our upcoming Q3 Outlook we will present a European decarbonization list with 40 companies that provide good exposure to the current policy trajectory on decarbonization. As the table shows, analysts are not budging much on their estimates and price targets with the median price-to-price-target being 19% with the fuel cells & hydrogen segment seeing the most aggressive price targets and thus expectations.

NameTechnologyMkt Cap (USD mn.)Sales growth (%)EPS growth (%)Diff to PT (%)5yr return
Panasonic CorpBattery & energy storage28,214-10.6-25.623.462.6
Ganfeng Lithium Co LtdBattery & energy storage25,26618.93.35.0436.5
Albemarle CorpBattery & energy storage19,649-7.9-24.3-1.3126.8
Alfen Beheer BVBattery & energy storage1,91132.191.60.2NA
CarbiosBioplastic52613.3-50.228.5260.4
Avantium N.V.Bioplastic189-28.63.970.1NA
Good Natured Products Inc (*)Bioplastic18994.3-67.377.8603.2
Symphony Environmental Technologies PLCBioplastic4818.746.4NM234.8
Aker Carbon Capture ASA (*)Carbon capture1,239NANA25.2NA
Tesla IncElectric vehicles595,04038.12617.10.11,317.2
NIO IncElectric vehicles76,273202.337.929.0NA
XPeng IncElectric vehicles34,185216.9NA13.5NA
Zaptec AS/NorwayElectric vehicles35440.4NA97.9NA
Blink Charging CoElectric vehicles1,723105.8-62.12.3105.2
Waste Management IncEnvironmental services59,1910.7-4.81.4145.0
Veolia Environnement SAEnvironmental services18,331-4.3-50.116.263.0
TOMRA Systems ASAEnvironmental services7,9333.836.0-14.9437.7
Cleanaway Waste Management LtdEnvironmental services4,179-1.142.0-0.5303.1
Plug Power IncFuel cells & hydrogen17,373NA-314.354.51,646.9
Ballard Power Systems IncFuel cells & hydrogen5,304-14.2-35.137.31,201.5
Bloom Energy Corp (*)Fuel cells & hydrogen4,35619.067.827.0NA
NEL ASA (*)Fuel cells & hydrogen3,13912.0NA45.0820.7
ITM Power PLCFuel cells & hydrogen2,910-82.3-37.255.51,967.0
Ceres Power Holdings PLCFuel cells & hydrogen2,71223.5-33.480.71,016.3
China Yangtze Power Co LtdHydro72,58217.418.017.8101.1
Verbund AGHydro31,959-35.427.9-19.0573.9
Brookfield Renewable Partners LPHydro18,8712.5-182.85.0240.0
Meridian Energy LtdHydro9,747-2.4-56.12.1192.6
Enphase Energy IncSolar20,03619.341.330.07,245.8
Xinyi Solar Holdings LtdSolar16,88935.482.93.2511.7
Sunrun IncSolar9,41119.6NA65.2665.3
SolarEdge Technologies IncSolar12,623-9.6-35.522.11,067.6
First Solar IncSolar8,357-2.632.76.162.5
Scatec ASASolar4,40942.2NA19.9595.1
Orsted ASWind59,503-27.2-86.316.6280.5
Vestas Wind Systems A/SWind36,73815.0-24.46.3184.1
Siemens Gamesa Renewable Energy SAWind21,4691.3NA23.284.7
China Longyuan Power Group Corp LtdWind13,4794.118.64.8151.5
Northland Power IncWind7,7319.7-50.519.2131.5
Boralex IncWind3,3156.522.324.9143.0
Aggregate / median values1,257,35210.9-4.819.2280.5

Source: Bloomberg and Saxo Group
* Peter Garnry has personal holdings in these companies

French NamR IPO is a sign of Europe’s “green equity wave”

Today, the French company NamR started trading after a very successful IPO raising €8mn on the Euronext Growth segment in Paris with shares up 14% from the IPO price. The company’s business model is collecting data on buildings and infrastructure to improve energy efficiency combining many different technologies from geolocated data, natural language processing, deep learnings etc. NamR’s IPO is a sign that Europe has a flourishing green technology sector and risk capital available to lift these companies into public markets and accelerate growth through raising equity capital. As we write in our soon to be released Q3 Outlook, the green transformation is Europe’s chance to win a technology vector since the continent lost the digitalisation to US companies.

NamR intraday share price on first day of trading

Source: Bloomberg
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