Ballard Power is still a pass, says Roth

Clean energy company Ballard Power Systems (Ballard Power Systems Stock Quote, Charts, News, Analysts, Financials NASDAQ:BLDP) has seen its stock drop dramatically from highs of two years ago, but don’t expect a rebound anytime soon. That’s the call from Roth Capital Partners analyst Craig Irwin, who provided a report to clients on Friday where he maintained a “Neutral” rating on the stock, saying Ballard needs to increase production volumes and improve its margins in order for investors to get interested.

Vancouver-based Ballard makes Proton Exchange Membrane (PEM) fuel cell technology products for industries such as telecom backup power, heavy duty transport and material handling. The company recently held its first Capital Markets Day since 2020 and provided participants with business updates. 

Ballard said it will invest $18 million on bipolar plate manufacturing and aims to automate its manufacturing to deliver better results. In a June 12 press release, the company said its new plate manufacturing will decrease energy costs and increase production capacity.

“We’re thrilled to announce a project that delivers economic and environmental value for Ballard. Not only will we be able to reduce the cost of our bipolar plates and improve customer economics, but we will also consume far less energy, water, and material resources in the process,” said Mark Biznek, Ballard’s Chief Operating Officer, in a press release.

At the Capital Markets Day, BDLP said with a Power Products backlog now at all-time highs it’s shifting focus to that segment, while the company also highlighted 30 announced federally funded hydrogen programs and 23 others under consideration.

At the same time, Irwin said the company has indicated that it may be putting less emphasis on its China investment, given that management spoke more of a growing demand in the EU and North America, saying it’s reviewing its pledge to invest $130 million in its Weichai joint venture.

That’s part of a worrying picture, Irwin said.

“Ballard continues to work on remediating the business strategy, and management confirmed the team could back out of its pledge to invest $130 million in the Weichai JV for the China market. The shift in focus to Power Products pivots the discussion from underperformance in Heavy Duty,” Irwin said.

“We believe Ballard is seeing increased Heavy Duty competition and management’s response seems to be competing directly on price. We are also cautious on the cost-out strategy as this is likely dependent on increasing revenue, while visibility remains low,” he said.

With the update, Irwin maintained a 12-month target price of $4.00 on BLDP, which at press time represented a projected return of negative 14 per cent.