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SIT’s selection as the designer of Italgas’ next generation smart meters shows that the extensive R&D undertaken by the company is paying off. While Italian smart meter sales have fallen with market saturation, this move shows that the company will be able to benefit as the replacement cycle comes round. With hydrogen and biomethane functionality SIT it is also ahead of the game in targeting opportunities in the energy transition.
Companies: SIT S.p.A.
SIT’s first half results see overall revenue growth continue despite the expected continued slowdown in gas metering sales in Italy. Both heating and water metering have continued to grow strongly. EBITDA margin has dropped with higher transport and logistic costs but key component and raw material costs have been passed on. With the top end of full-year guidance reiterated, we see the company managing well in a volatile and uncertain market.
SIT’s Q1 results show the company shrugging off the expected slow down in Italian metering sales with strong growth in heating and even stronger growth in water metering. Margins have held well and SIT continues to manage supply chain risk effectively. Guidance remains comfortable giving us confidence in our forecasts.
SIT has set out a sustainability plan out to 2025 to align the company’s strategic goals with their ongoing environmental, social and governance commitments. The company enables key energy transition technologies providing gas heating components and smart gas meters and most notably key componentry for hydrogen gas use including meters. We see the plan as making the company more attractive to ESG investment mandates.
In this note, we review the recent performance of the Active Net Zero Clean Energy Index. We also take a deeper dive into the composition of the Index in terms of market cap, constituent end market / business model and, finally, geographic exposure.
Companies: ATOM ADN DRX EQT GSF ITM IES NESF PHE SAE SIT STRLNG TLG VLS
The IPCC Working Group III (WG3) report is a major summary of how society can limit climate change by delivering a net zero emission outcome. It also represents a major warning that we are running out of time to limit global warming to 1.5oC. Coupled with growing energy security concerns we are already seeing some signs of policy moving to improve action such as the recently announced UK government’s Energy Security Strategy. And the relative inflation of fossil fuels (fossilflation) against cle
SIT’s full year results were ahead of our forecasts at all levels and principally reflect strong growth in heating and water metering offsetting a well-signalled slow-down in gas metering. The company also continues to manage supply chain well and is maintaining margin. We expect to see continued strong growth in heating and have increased our forecasts for FY 23 and FY 24 accordingly. Our base case valuation rises from €12.1 to €13.0 as a result.
A new loan for SIT highlights the fundability of the company. We see the targeted spend on R&D facilities as important as new opportunities are emerging. Recent progress in hydrogen meters and in digital security shows the benefits of the company’s R&D work.
SIT has now achieved certification for both its residential and commercial hydrogen meters as well as digital security certification for both. With energy security concerns pushing hydrogen back up the agenda of many European governments, SIT is well placed to find new business beyond the existing trials in which it is participating.
The shipping industry is likely to be driven towards decarbonisation by the twin pressures of customer demand and regulation. Leading shipowners are already making significant strides in the right direction. Solutions are varied but are driven by considerations of emission reduction potential, fuel density, useability and cost. We think hydrogen and methanol stand out as key solutions in a market worth $105bn per annum with methanol taking an immediate role as commercially and technically viable
Companies: ADN ITM PHE SIT
SIT’s headline sales numbers for FY21 are broadly in line with our forecasts with the heating business showing a bounce from FY20 and the Janz acquisition delivering strong growth. Smart gas metering is slowing as expected while the geographic focus of demand transitions away from Italy. Other than truing up the revenues numbers we are not adjusting our forecasts and the broad picture remains unchanged in our view. We think the ability of the company to create performance from Janz shows its abi
The European Commission’s adoption of the Hydrogen and Gas Markets Decarbonisation Package marks a clear move of policy to support hydrogen in a net zero future. This is clearly positive for all companies involved in this rapidly growing industry. Specifically, the support for clusters or “valleys” is likely to accelerate demand and we also see the creation of a regulated hydrogen market as making the funding of projects easier. We also see certification of low carbon hydrogen as giving a boost
Companies: ADN DRX GSF ITM NESF PHE SAE SIT STRLNG TLG VLS
SIT has achieved certification for its 100% hydrogen meter, a world first, opening up the market for this new business line for the company. The meter is already being used in the Hy4Heat trials of 100% residential hydrogen supply in the UK but the certification now opens up possibilities in Europe and beyond.
While the outcomes of COP26 are mixed, we think that the watering down of ambition on coal power is positive for negative emission technologies and the moves to phase-out fossil fuel subsidies potentially makes green hydrogen more competitive. Broader support for clean energy and efficiency helps and annual monitoring is likely to ensure that support develops to the benefit of the sector. Policy remains an essential part of the clean energy mix especially in its ability to create or mitigate inv
SIT’s Q3 results see continued strong recovery in heating. While gas metering sales have fallen as expected with the maturing of the Italian market, the Janz water metering acquisition has also shown growth. Pricing power in the market has allowed the company to avoid the impact of supply chain cost increases and the EBTIDA margin has improved. With guidance maintained for the full year, we see these results as reassuring.
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Forecast and target price update
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XPD has a new management team, only recently appointed. They have a full plate, including fixing underperforming UK warehousing and freight forwarding units, cutting overheads, and improving management of working capital to reduce debt. But there are also some gems in the Group, the core Central & Eastern European (CEE) logistics operations continue to perform strongly despite the turbulence of the War in Ukraine. Hence H1 earnings show a mixed picture with Group revenue up nearly 50% to £189.3m
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Invinity announced results for 1H22 to June including a net loss of £11.6m with cash at £16.1m. Results will be weighted to 2H22 as vanadium flow batteries (VFBs) for the Elemental and Yadlamalka projects are shipped. The Base order book doubled and Invinity is focused on closing late-stage commercial deals by YE22. Good progress is being made on the next-generation VFB with Gamesa, now named Mistral. The business case for VFBs is improving as EV demand for lithium-ion batteries squeezes availab
Companies: Invinity Energy Systems PLC
Directa Plus has reported its interim results, which have been well trailed. Revenues increased by 39%, while EBITDA losses were contained to €1.3m (PY: €0.9m). The robust sales performance can be attributed to mgmt.’s proven ability to convert commercial opportunities as the interest in graphene continues to grow. This prompts us to leave our revenue growth forecasts unchanged, noting the significant upside potential should the DCTA win the Setcar contract. The challenging environment/inflation
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Singer Capital Markets
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Heads of Terms toward Sale of Deeside Project
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Despite ongoing supply chain disruption, the Group has reported results in-line with expectation. Adjusted EBITDA from continuing operations improved slightly to £12.7m with the Energy divisions growing by c.15%. Increased investment in the Medical division and the pivot away from 3rd party component manufacture resulted in an offsetting c.£1.5m EBITDA movement. The Group enters FY2023 with a robust order book that already provides 90% coverage for FY23E and 45% for FY24E. Our EBITDA forecasts r
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Invinity’s interim results show the company moving forward whilst executing on a sizeable delivery backlog and also focusing on near term opportunities. We see a macro outlook that is increasingly supportive of long duration storage technologies that can be deployed easily and rapidly to deliver energy security in decarbonising grids. In this environment Invinity’s relationships with US Vanadium and the potential embodied within Project Mistral are encouraging.
Water Intelligence reported a strong increase in revenues for 1H22 but that did not translate into profits which were held back by a sharp increase in other administrative costs. We understand that cost trajectory should flatten in 2H22 which, together with an increase in our revenue forecasts, means we maintain our EPS forecasts. The revenue performance underscores the strength of the growth story but given current market conditions and the need for Water Intelligence to demonstrate bottom line
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MeyGen tidal turbine redeployment
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