AFC Energy “enormous potential for products in Data Centres and Maritime” says Zeus Capital

AFC Energy plc (LON:AFC) update expresses confidence in achieving published FY22 revenue forecasts and reveals a new Hybrid Fuel Cell. The update summarises the group’s agreements with ABB, Urban-Air Port, Mace, Altaaqa, ACCIONA and Julich and the entry into the maritime sector with VARD. The HFC platform will add fuel flexibility to the group’s offering, enabling the use of methanol as a feedstock. The investment thesis, which we refreshed in September, remains enticing and we reiterate our 186p valuation per share.

  • Commercial agreements outstanding are currently worth £4.5m – including the £4m ABB order announced on 16 November but the group expects this to increase further in 2022 as customer interest grows. Future agreements are expected to include outright sales, leases, funded customer development programmes and engineering fees. The last of this season’s Extreme-E races is also due this weekend giving more field experience and publicity.
  • “S” Series development – utilising AEM (Anion Exchange Membrane) technology – continues apace, with the first prototype stack recently completed. Semi-automated manufacturing equipment has been commissioned and stack deliveries to ABB are expected in late 2022 (a 100kW system) and early 2023 (giving them 200kW system with integrated ammonia cracker). 
  • Hybrid Fuel Cell technology – a development from the group’s “S” Series range – will enable customers to use reformed methanol as a feedstock as well as hydrogen. The concept requires nominal changes to system chemistry and design from the current “S” Series platform and utilises similar stack architecture. Proving times are much faster than with AEM technology so first deployments should be seen in H1 2022, most likely as a trial with ACCIONA.
  • Fuel flexibility. One of AFC Energy’s main value propositions is its ability to accept low-cost hydrogen carriers such as ammonia, as well as direct H2. HFC enhances its competitiveness by adding methanol to the mix. Ammonia and methanol are the most economic hydrogen vectors, so this gives AFC an important, and potentially unique, edge over its peers.
  • Zeus Capital forecast assumptions: We leave our projections unchanged ahead of the publication of the group’s FY21 results in early 2022.
  • Investment thesis: Our September note highlighted the enormous potential for the AFC Energy’s products in Data Centres and Maritime but our valuation is currently based on projected sales for high power EV charging in a handful of major markets and Distributed Power for customers such as the construction industry.  The potential could be greatly enhanced by the improved economics of the AEM “S” Series product and the fuel flexibility of the new HFC product.
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