Inflation scares and reality hits green transformation basket Inflation scares and reality hits green transformation basket Inflation scares and reality hits green transformation basket

Inflation scares and reality hits green transformation basket

Equities 5 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  Rising inflation expectations will eventually hit nominal interest rates. Or at least that is the interpretation in equities, with yesterday's session showing our commodity sector basket was bid while interest rate sensitivity themes such as green transformation was selling off hard. Analysts are still very positive on green transformation stocks with a median price target 29% above the current price, but it is clear that investors are beginning to question whether they are paying too much for future growth. In today's update we also take a short look at Vestas which reported Q1 earnings today.

Back in early March, we first noted that green transformation stocks were turning from gold to dust as reality hit investors. While 2020 was a breakthrough year for green transformation stocks as oil and gas stocks were plunging on pandemic driven demand plunge for gasoline and jet fuel. This year, the table has turned with black energy and commodities taking the lead while green transformation stocks have been hit hard being the worst performing theme basket year-to-date down 9.1%. Our commodity basket is up 19.4% this year.

But yesterday’s session was interesting in that interest rate sensitive (those with either high debt leverage or aggressive equity valuations) theme baskets were hit hard, but without a big move in the US interest rates, while the commodity theme basket was up 0.5%. This was, otherwise, the pattern we observed back in February during the correction in Nasdaq 100. It indicates that the market is getting scared about inflation and how it will impact nominal interest rates and operating margins going forward.

Our green transformation basket (see below) has experienced pain across many of the sub-categories but especially the fuel cells & hydrogen segment and solar have experienced the biggest declines as strong performance last year has reversed. Our guess is that investors are beginning to calibrate their views on the green transformation and asking whether they are paying too much for future growth. As Warren Buffett said over the weekend at his shareholder meeting, it takes more to equity investing than a positive industry outlook. In other words, in the end it is all about the quality of the company.

NameCategoryMkt Cap (USD mn.)Sales growth (%)EPS growth (%)Diff to PT (%)5yr return
Panasonic CorpBattery & energy storage28,930-13.9-55.520.857.5
Ganfeng Lithium Co LtdBattery & energy storage21,93218.93.315.5400.0
Albemarle CorpBattery & energy storage18,921-12.8-27.9-2.8154.9
Alfen Beheer BVBattery & energy storage1,63432.191.615.8NA
Avantium N.V.Bioplastic187-28.63.970.6NA
Good Natured Products Inc (*)Bioplastic17765.5-57.665.0488.6
Symphony Environmental Technologies PLCBioplastic5518.746.4NM381.1
Aker Carbon Capture AS (*)Carbon capture1,080NANA36.4NA
Tesla IncElectric vehicles648,89938.12617.1-8.41,467.0
NIO IncElectric vehicles62,149202.337.953.3NA
XPeng IncElectric vehicles23,247151.8NA77.4NA
Zaptec AS/NorwayElectric vehicles46940.4NA50.2NA
Blink Charging CoElectric vehicles1,479125.8-60.651.310.1
Waste Management IncEnvironmental services59,4690.7-4.80.7157.8
Veolia Environnement SAEnvironmental services17,818-4.3-
TOMRA Systems ASAEnvironmental services7,1383.836.0-7.9361.3
Cleanaway Waste Management LtdEnvironmental services4,478-1.142.0-8.5302.2
Plug Power IncFuel cells & hydrogen12,36255.0-292.5122.11,181.3
Ballard Power Systems IncFuel cells & hydrogen4,838-14.3-26.975.81,061.4
Bloom Energy Corp (*)Fuel cells & hydrogen3,98015.358.360.3NA
NEL ASA (*)Fuel cells & hydrogen3,44712.0NA45.6434.3
ITM Power PLCFuel cells & hydrogen3,217-82.3-37.275.93,021.8
Ceres Power Holdings PLCFuel cells & hydrogen2,95923.5-33.462.11,173.2
China Yangtze Power Co LtdHydro70,14117.418.021.897.2
Verbund AGHydro28,350-20.324.9-19.6503.3
Brookfield Renewable Partners LPHydro15,2202.5-182.815.4211.6
Meridian Energy LtdHydro10,169-2.4-56.10.3188.4
Enphase Energy IncSolar17,34619.341.353.36,557.8
Xinyi Solar Holdings LtdSolar13,33435.482.957.2357.4
Sunrun IncSolar8,8457.4NA85.3478.7
SolarEdge Technologies IncSolar11,360-9.6-35.538.7880.6
First Solar IncSolar7,848-2.632.718.242.5
Scatec ASASolar4,09042.2NA29.6539.5
Orsted ASWind60,221-27.2-86.322.6NA
Vestas Wind Systems A/SWind40,66015.0-24.4-3.6207.3
Siemens Gamesa Renewable Energy SAWind23,0261.3NA13.796.0
China Longyuan Power Group Corp LtdWind11,7924.118.620.6150.6
Northland Power IncWind7,53724.220.429.3137.4
Boralex IncWind3,1406.517.039.9160.5
Aggregate / median values1,262,35712.03.329.3329.8

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

Despite the recent sell-off, analysts remain bullish on green transformation stocks with a median price target 29% above current price. Today, Vestas representing the second-biggest company in the wind segment published earnings. Vestas missed on Q1 operating income due to Covid-19 bottlenecks with components stuck in the Suez Canal and lower activity generally, but the market was buoyant about the order backlog hitting €44.7bn vs est. €34.1bn sending the shares up 8%. Like so many other companies Vestas is feeling the pressure from rising commodity prices on steel and transportation saying it will begin meaningfully increase prices on wind turbines.

Our view is still long-term positive on the green transformation and is the biggest transformation of our economy since the digitalization started 25 years ago. It will create huge opportunities for investors but over time many companies will not be able to live up to expectations. The biggest risk to the basket is aggressive equity valuations which could become a major headwind for equity returns despite growth if the uptake in revenue and earnings is slower than what the market is currently discounting.

Source: Saxo Group


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.