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On Wednesday, Citi analysts, led by Vivek Midha, resumed coverage on NEL ASA (NEL:NO), a Norwegian hydrogen technology company, assigning a Neutral rating and setting a price target of NOK2.50. The move comes after a significant corporate development where Samsung Engineering (KS:028050) & Construction (E&A) acquired a 10% stake in NEL ASA through a share placement.
The analysts updated their model following the announcement of Samsung (KS:005930) E&A’s investment and the subsequent collaboration agreement signed with NEL for engineering, procurement, and construction (EPC) services. This partnership is viewed as a positive step for NEL, providing additional financial flexibility and instilling investor confidence through the addition of a new anchor shareholder.
Despite these positive developments, Citi analysts expressed caution regarding NEL’s revenue prospects. They pointed out concerns about weak order intake and potential delays or cancellations within the existing backlog, which management has previously flagged. The analysts noted that NEL’s stock is trading at a premium compared to its peers, with a 3x 2025 estimated enterprise value to sales (EV/Sales) ratio based on their projections.
The analysts believe that the current stock price reflects expectations of a significant recovery in sales volumes. However, they emphasized that the key driver for NEL’s stock would be an increase in order intake. Given the challenging environment for green hydrogen, with uncertainties in the broader market, Citi analysts have decided to maintain a cautious stance and observe from the sidelines for the time being.
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