Vanadium Flow Batteries Will Accelerate Global Grid Decarbonization

Key Takeaways

• Accelerated cost reductions, strategic automation, and supply chain localization position Invinity for early margin improvement and expanding market share over lithium-ion competitors.
  
• Manufacturing flexibility, increasing trust, and new end markets support larger contracts, robust revenue growth, and improved margins driven by policy and global energy trends.
  
• Exposure to technology shifts, high production costs, frequent capital raises, policy uncertainty, and supply chain risks threaten profitability, competitiveness, and reliable growth prospects.

Catalysts

Manufactures and sells vanadium flow batteries and related hardware for energy storage markets in Asia, Australia, Europe, and North America.

• Analyst consensus sees ENDURIUM's 70% cost reduction by 2030 as transformative for margins and addressable markets, but this may understate the impact: Invinity is materially ahead of its cost-down trajectory, integrating advanced automation and supply chain localization, setting the stage for cost leadership versus lithium-ion and enabling gross margin inflection potentially years sooner than expected, amplifying both profitability and market share.
  
• Whereas analysts broadly expect reliable execution based on recent project successes and positive customer feedback, evidence from Gamesa, Everdura, and repeat partner sales suggests that trust and bankability are translating into faster sales cycles, larger average contracts, and direct qualification for major procurement programs, which could drive sustained top-line acceleration and rapid operational leverage.
  
• The company's manufacturing footprint in the UK and Canada, plus swift capacity expansion enabled by modular automation, uniquely positions Invinity to capitalize on policy-driven preferences for local content-and as governments increasingly incentivize domestic or non-Chinese supply chains, this strategic flexibility could result in outsized contract wins and above-market revenue growth.
  
• With global grid decarbonization and surging data center power demand necessitating ultra-high cycling, nonflammable storage, Invinity's vanadium systems are set to capture new verticals beyond utilities-such as mission-critical data centers and industrial microgrids-which could transform the sales mix and deliver durable, higher-margin recurring revenue streams.
  
• As vanadium supply becomes more abundant and recycled material adoption accelerates, Invinity's cost base stands to structurally decline, while improved input security supports both price stability and margin enhancement, catalyzing significant net earnings growth in the medium to long term.

Invinity Energy Systems Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Invinity Energy Systems compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Invinity Energy Systems's revenue will grow by 199.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -454.6% today to 1.5% in 3 years time.
• The bullish analysts expect earnings to reach £2.0 million (and earnings per share of £0.0) by about September 2028, up from £-22.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 302.2x on those 2028 earnings, up from -4.2x today. This future PE is greater than the current PE for the GB Electrical industry at 14.0x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.86%, as per the Simply Wall St company report.

Invinity Energy Systems Future Earnings Per Share Growth

Risks

• Rapid declines in lithium-ion battery prices and potential breakthroughs in alternative chemistries could make Invinity's vanadium flow batteries less competitive, putting downward pressure on both revenue and net margins in the long term.
  
• Persistent challenges in achieving economies of scale and the need for ongoing cost reduction efforts suggest that production costs could remain structurally higher than rivals, limiting future gross margin improvements and restricting the path to profitability.
  
• Frequent and substantial capital raises required to support R&D and commercialization efforts have resulted in ongoing shareholder dilution, which may continue to suppress earnings per share and deter long-term investors.
  
• Reliance on government support programs, evolving regulatory frameworks, and inconsistent policy support-such as the lack of detailed incentives for UK manufacturing under Cap and Floor-introduce revenue volatility and raise uncertainty around projected deal pipelines.
  
• Global trade tensions, increasing protectionism, and exposure to Asian supply chains for critical components raise the risk of escalating input costs and supply disruptions, potentially compressing net margins and undermining Invinity's ability to deliver on large-scale projects.

Valuation

• The assumed bullish price target for Invinity Energy Systems is £1.05, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Invinity Energy Systems's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £1.05, and the most bearish reporting a price target of just £0.4.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be £134.5 million, earnings will come to £2.0 million, and it would be trading on a PE ratio of 302.2x, assuming you use a discount rate of 8.9%.
• Given the current share price of £0.22, the bullish analyst price target of £1.05 is 79.3% 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.