Green transformation stocks are back on tidal of demand

Green transformation stocks are back on tidal of demand by Saxo Group
Our green transformation basket is bouncing back from a 27% drawdown as investors got scared over rising inflation expectations and rising commodity prices, but the recent sentiment shift of lower inflation expectations and massive government incentives in the green transformation have lured investors back into green stocks.

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.

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.

Name Technology Mkt Cap (USD mn.) Sales growth (%) EPS growth (%) Diff to PT (%) 5yr return
Panasonic Corp Battery & energy storage 28,214 -10.6 -25.6 23.4 62.6
Ganfeng Lithium Co Ltd Battery & energy storage 25,266 18.9 3.3 5.0 436.5
Albemarle Corp Battery & energy storage 19,649 -7.9 -24.3 -1.3 126.8
Alfen Beheer BV Battery & energy storage 1,911 32.1 91.6 0.2 NA
Carbios Bioplastic 526 13.3 -50.2 28.5 260.4
Avantium N.V. Bioplastic 189 -28.6 3.9 70.1 NA
Good Natured Products Inc (*) Bioplastic 189 94.3 -67.3 77.8 603.2
Symphony Environmental Technologies PLC Bioplastic 48 18.7 46.4 NM 234.8
Aker Carbon Capture ASA (*) Carbon capture 1,239 NA NA 25.2 NA
Tesla Inc Electric vehicles 595,040 38.1 2617.1 0.1 1,317.2
NIO Inc Electric vehicles 76,273 202.3 37.9 29.0 NA
XPeng Inc Electric vehicles 34,185 216.9 NA 13.5 NA
Zaptec AS/Norway Electric vehicles 354 40.4 NA 97.9 NA
Blink Charging Co Electric vehicles 1,723 105.8 -62.1 2.3 105.2
Waste Management Inc Environmental services 59,191 0.7 -4.8 1.4 145.0
Veolia Environnement SA Environmental services 18,331 -4.3 -50.1 16.2 63.0
TOMRA Systems ASA Environmental services 7,933 3.8 36.0 -14.9 437.7
Cleanaway Waste Management Ltd Environmental services 4,179 -1.1 42.0 -0.5 303.1
Plug Power Inc Fuel cells & hydrogen 17,373 NA -314.3 54.5 1,646.9
Ballard Power Systems Inc Fuel cells & hydrogen 5,304 -14.2 -35.1 37.3 1,201.5
Bloom Energy Corp (*) Fuel cells & hydrogen 4,356 19.0 67.8 27.0 NA
NEL ASA (*) Fuel cells & hydrogen 3,139 12.0 NA 45.0 820.7
ITM Power PLC Fuel cells & hydrogen 2,910 -82.3 -37.2 55.5 1,967.0
Ceres Power Holdings PLC Fuel cells & hydrogen 2,712 23.5 -33.4 80.7 1,016.3
China Yangtze Power Co Ltd Hydro 72,582 17.4 18.0 17.8 101.1
Verbund AG Hydro 31,959 -35.4 27.9 -19.0 573.9
Brookfield Renewable Partners LP Hydro 18,871 2.5 -182.8 5.0 240.0
Meridian Energy Ltd Hydro 9,747 -2.4 -56.1 2.1 192.6
Enphase Energy Inc Solar 20,036 19.3 41.3 30.0 7,245.8
Xinyi Solar Holdings Ltd Solar 16,889 35.4 82.9 3.2 511.7
Sunrun Inc Solar 9,411 19.6 NA 65.2 665.3
SolarEdge Technologies Inc Solar 12,623 -9.6 -35.5 22.1 1,067.6
First Solar Inc Solar 8,357 -2.6 32.7 6.1 62.5
Scatec ASA Solar 4,409 42.2 NA 19.9 595.1
Orsted AS Wind 59,503 -27.2 -86.3 16.6 280.5
Vestas Wind Systems A/S Wind 36,738 15.0 -24.4 6.3 184.1
Siemens Gamesa Renewable Energy SA Wind 21,469 1.3 NA 23.2 84.7
China Longyuan Power Group Corp Ltd Wind 13,479 4.1 18.6 4.8 151.5
Northland Power Inc Wind 7,731 9.7 -50.5 19.2 131.5
Boralex Inc Wind 3,315 6.5 22.3 24.9 143.0
Aggregate / median values 1,257,352 10.9 -4.8 19.2 280.5

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

Topics: Equities Green Energy Technology Saxo Equity Baskets

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