Global Decarbonization Policies Will Fuel Green Hydrogen Momentum

Key Takeaways

• Positioned to benefit from rising global green hydrogen demand, with policy support and growing engineering contracts pointing to strengthened long-term growth and order visibility.
  
• Service expansion, strategic acquisitions, and advanced R&D support higher-margin revenues, improved earnings quality, and greater competitiveness in core and emerging markets.
  
• Revenue and earnings are at risk due to project delays, weak order intake, high reliance on a few large contracts, and ongoing innovation pressures.

Catalysts

Engages in the development, engineering, procurement, commissioning, and licensing of high-performance electrolysis technologies in Germany, Italy, the Middle East, Africa, South America, Asia, and internationally.

• Recent project delays and smaller average project size have weighed on near-term revenues, but thyssenkrupp nucera sits at the center of a major long-term shift as global decarbonization policies and corporate net-zero mandates support the structural ramp-up in green hydrogen demand, likely driving a reacceleration in order intake and revenue growth as regulatory certainty and infrastructure buildout progresses.
  
• The increasing volume of paid FEED (Front-End Engineering Design) and engineering contracts-especially in Europe, which remains the most active region for green hydrogen-signals forthcoming conversion into firm, large-scale orders within 6-12 months, offering improved medium-term revenue visibility.
  
• Expansion of the service and aftermarket business in the chlor-alkali segment (with rising orders from the Middle East, Central Europe, U.S., and China) is boosting recurring, higher-margin revenues-evidenced by the stable or growing EBIT in this segment-supporting gross margin expansion and enhanced earnings quality over time.
  
• Strategic technology acquisitions (such as Green Hydrogen Systems) and accelerated R&D, including SOEC pilot plant launches, are enabling thyssenkrupp nucera to lower the levelized cost of hydrogen, strengthen its technological edge, and address a broader spectrum of industrial decarbonization use cases, improving the company's long-term competitiveness and margin potential.
  
• U.S. policy support for green hydrogen, driven by recent clarity on funding eligibility and tax incentives, is creating renewed momentum in a key growth market; strong positioning on advanced projects there and in the Middle East means the company is poised to benefit from increased order activity and improved revenue trajectory once permitting and FID hurdles resolve.

thyssenkrupp nucera KGaA Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming thyssenkrupp nucera KGaA's revenue will decrease by 2.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.5% today to 4.2% in 3 years time.
• Analysts expect earnings to reach €37.7 million (and earnings per share of €0.28) by about August 2028, up from €24.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €43.9 million in earnings, and the most bearish expecting €19.4 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 47.5x on those 2028 earnings, down from 49.7x today. This future PE is greater than the current PE for the DE Construction industry at 28.9x.
• Analysts expect the number of shares outstanding to decline by 0.25% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.04%, as per the Simply Wall St company report.

thyssenkrupp nucera KGaA Future Earnings Per Share Growth

Risks

• Delays and cancellations in large-scale green hydrogen projects, especially due to offtake risks, lack of infrastructure, and regulatory uncertainty, have led to a downsized and less valuable project pipeline, which could result in lower revenue growth and reduced order intake over the coming years.
  
• Order intake in the green hydrogen segment has been soft, with project postponements and client reluctance to make final investment decisions, raising the risk of a slowdown in sales and order backlog impacting future top-line growth.
  
• Workload in green hydrogen is currently declining, and the company expects a phase of sales slowdown next year due to lagging order intake this year-potentially leading to lower revenue and underutilization of fixed costs, which may pressure net margins and earnings.
  
• Persistent competitive and technological pressures require continued investment in R&D and new product development (such as scaling up SOEC and pressurized AWE), but high capital intensity and the need for recurring innovation could weigh on operating efficiency and long-term margins if operating leverage is not achieved.
  
• The company's near
• and mid-term sales outlook is heavily reliant on successfully converting paid engineering contracts and final investment decisions (FIDs) on a handful of large projects, introducing significant concentration risk that could translate into material revenue and earnings volatility if these projects face further delays or cancellations.

Valuation

• The analysts have a consensus price target of €12.0 for thyssenkrupp nucera KGaA based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €17.0, and the most bearish reporting a price target of just €8.7.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €901.5 million, earnings will come to €37.7 million, and it would be trading on a PE ratio of 47.5x, assuming you use a discount rate of 6.0%.
  
• Given the current share price of €9.45, the analyst price target of €12.0 is 21.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.