Ballard Power Systems, Inc. (NASDAQ: BLDP) engages in design, development, manufacture, sale and service of fuel cell products. It provides clean energy fuel cell products enabling optimized power systems for a range of applications. The company operates through Fuel Cell Products and Services.
In the recent past, Ballard has been continuously delivering good news to the market about its progress with Innovative Fuel Cells pipeline, new orders and strong backlog, which continues to drive up the share price of the company.
The fuel cell market continues to build strong momentum, as clean air becomes an increasingly important objective for countries across the world. Be it China, Japan, Europe and America, everybody is showing more interest and activity in fuel cell vehicles. Virtually in every mode of transport, the fuel cell is rapidly gaining strong traction, and Ballard’s business risk profile is well poised to benefit from this growing market.
On September 13, 2017, the company announced that it achieved an order backlog of $263.5 million as of June 30, 2017, representing the aggregate value of orders for which customers have made contractual commitments.
In addition, Ballard is announcing that it achieved a 12-month Order Book of $97.2 million as of June 30th, 2017; representing the aggregate value of that portion of the Order Backlog the Company expects to deliver in the subsequent 12-month period. Moreover, the company held an “Investor & Analyst Day” event in New York City the following day.
On the same day, Ballard informed about a new Letter of Intent to provide FCveloCity®-HD 100-kilowatt fuel cell engines to power 8 ExquiCity tram-buses to the SMTU-PPP (Syndicat Mixte de Transports urbains – Pau Portes des Pyrénées) and the STAP (Société de Transport de l’Agglomération Paloise). The delivery is scheduled to be made during the second half of 2019.
These will be the first hydrogen bus routes in France and the world’s first hydrogen tram-buses for a full BRT (Bus Rapid Transit) system. In addition to its environmental benefits, hybrid fuel cell tram-buses offer several important advantages, including: the highest level of operational flexibility and productivity; high levels of passenger comfort and safety; lower cost than a traditional tram.
As per management, this Letter of Intent from Van Hool, is a further testament to BLDP’s strong partnership and Van Hool’s confidence in Ballard’s fuel cell technology and products. The company is extremely bullish about the continued market expansion of fuel cell-powered mass transit vehicles in Europe, as typified by this tram-bus project. This is a further sign of the growing importance of zero-emission fuel cell solutions globally.
Just a day before, i.e. on September 12th, the company also announced its collaboration with Nisshinbo Holdings, an Environmental and Energy company based in Japan. Ballard has successfully incorporated a Non Precious Metal Catalyst for the development of a new 30-watt FCgen®-1040 fuel cell stack product. The new model is expected to be commercialized towards the end of 2017.
The aforesaid collaboration with Nisshinbo has enabled the development of an innovative breakthrough technology to reduce the amount of platinum in an air-cooled fuel cell stack by more than 80%. The platinum contributes 10 to 15% of the total cost of the fuel cell stack as of today. Thus, the potential increase in the earnings per share is expected to be very significant.
On September 18, 2017, the company announced that it has received a purchase order from Nisshinbo Holdings to engage a Technology Solutions program that will assess the potential development of fuel cell stacks using a Non Precious Metal Catalyst (NPMC) for use in commercial material handling applications.
As per management, based on the success of this program and the step-change in PEM fuel cell technology represented by the new Non Precious Metal Catalyst, they are interested in exploring its use for various commercial applications. The work done to date represents an important part of its Japan strategy where the company is focused on breakthrough technology development with select Japanese partners as well as penetration into the Japanese hydrogen economy with strategic channel partners in key applications.
Ballard has been making extremely solid strategic and financial break through. Its better-than-expected second-quarter results, which were reported in August, also support the growth expectations for the company. That said, the company is still reporting net losses, however, these losses are improving rapidly.
The Company’s stock has unsurprisingly found significant volume in the recent past, as it continues to beat expectations from all front and present many upcoming promising opportunities.
With all the momentum in the company’s business, financials, strategic, and operational performance, there are plenty of convincing reasons why the stock is still attractive from an investment perspective. In fact, driven by order book growth, increased certainty of execution in China, improving profitability and extremely favorable macro trends, analyst have revised their outlook on the company with a near/medium term price target of $6.50.
About the Company:
Ballard Power Systems (NASDAQ: BLDP; TSX: BLDP) provides clean energy products that reduce customer costs and risks, and helps customers solve difficult technical and business challenges in their fuel cell programs. It designs, develops, manufactures and sells PEM fuel cell technology solutions. The company was founded in 1979, owns more than 2,000 patents.
Recent progress in China:
24 buses delivered in Guangdong Province, 90 new buses entering service, Broad Ocean order for 600 FC engines, FCveloCity® engines integrated by 7 different bus OEMs, Ballard stacks integrated in 3 truck platforms, fueling infrastructure is being deployed and scaling up & Fuel cell modules are being integrated by CRRC for trams (commercial service in 2018)
Recent progress in Europe:
Delivery of modules for 3Emotion (21 buses) & 10 trolley buses in Riga, London bus now surpassed 25,000 hours in service, 291 fuel cell buses under JIVE programs by 2020, New initiatives for large fleet financing & 5 bus OEM’s using Ballard in Europe
Recent progress in North America:
Won award for 20 fuel cell buses in CA with AC Transit & Orange County with New Flyer, FTA testing of New Flyer & ElDorado fuel cell buses at Altoona ongoing, 13 buses for SARTA and SUNLINE under construction at Eldorado and Working on large bus programs for North America
2nd Quarter 2017 Financial Results:
- Revenue was $26.5 million, an increase of 50%, reflecting growth in both Power Products and Technology Solutions.
- Gross margin was 35%, an improvement of 6-points primarily due to a favorable shift in product mix toward higher margin Technology Solutions and Heavy-Duty Motive revenue, combined with improved manufacturing overhead and related cost absorption resulting from higher production volumes.
- Net loss was ($1.2) million, an improvement of $4.6 million or 79%.
- Net loss per share was ($0.01), an improvement from ($0.04).
- The company’s balance sheet/capital structure continues to be in good shape, ensuring that it has adequate financial flexibility/liquidity to respond to unforeseen market conditions.
- Ballard still has no debt on its balance sheet and, as of the end of the second quarter of 2017; it had $68 million in cash, an increase of 65% from the end of Q2 2016.
Key risk factors and potential stock drivers:
BLDP’s present product pipeline is still at a nascent stage and has not yet generated significant revenue. It’ll take years to determine if the new NPMS-based fuel cell will be a success for Ballard or not.
Notwithstanding, the recent improvement on profitability front, the company is still reporting net losses. Therefore, full-fledged improvement and its continuity is yet to be observed for the company.
The Management of Ballard mentioned the possibilities of M&A in the 2017-2018. Therefore, positive outcome of these activities would drive/shape-up the future direction for the company and its stock.
The upcoming positive commentaries from management for demonstrating company’s progress and promise could be a near term immediate trigger for the company.
Stock Chart:
On Friday, September 15th, 2017, BLDP closed at $4.43 (up by 3.26%), with an above average volume of 2.40 million shares exchanging hands. Market capitalization is $780.64 million. The current RSI is 74.15
In the past 52 weeks, shares of BLDP have traded as low as $1.61 and as high as $5.06
At $4.43, shares of BLDP are trading above its 50-day moving average (MA) at $3.03 and above its 200-day MA at $2.51
The present support and resistance levels for the stock are at $4.18 & $4.62 respectively.
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