Hydrogen Fueling Corridors And Rising Station Utilization Will Drive Long Term Opportunity

Catalysts

About Cavendish Hydrogen

Cavendish Hydrogen develops and operates reliable hydrogen fueling solutions for heavy duty and public mobility fleets worldwide.

What are the underlying business or industry changes driving this perspective?

• Accelerating policy mandates for hydrogen fueling corridors and national networks across Europe are expanding the addressable market for high capacity stations, supporting a sustained recovery in equipment order intake and multi year revenue growth.
• Rising utilization at key bus and truck hubs in Germany, Poland, the Netherlands and Italy, with several stations already approaching capacity, increases pull through demand for additional modules and new sites, lifting station sales and improving operating leverage on service revenues.
• Demonstrated reliability and high flow performance at flagship projects, including Olympic transport in Italy and high heating bus depots in Poland, strengthens Cavendish Hydrogen's positioning in tenders, supporting better win rates and potentially firmer pricing power that can enhance gross margins.
• Strategic exit from non core, complex regions such as South Korea and the completed restructuring program are simplifying operations and lowering the fixed cost base. This allows future revenue upturns from Europe and the U.S. to translate more directly into improved EBITDA and net margins.
• Growing fleet deployments of hydrogen powered buses, trucks and taxis on existing Cavendish stations, combined with a rising base of installation and commissioning projects, builds a recurring aftermarket and services stream that should reduce revenue volatility and support more stable earnings.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Cavendish Hydrogen's revenue will grow by 19.4% annually over the next 3 years.
• Analysts are not forecasting that Cavendish Hydrogen will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Cavendish Hydrogen's profit margin will increase from -120.6% to the average NO Electrical industry of 5.4% in 3 years.
• If Cavendish Hydrogen's profit margin were to converge on the industry average, you could expect earnings to reach €1.9 million (and earnings per share of €0.06) by about December 2028, up from €-24.7 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 18.3x on those 2028 earnings, up from -0.9x today. This future PE is lower than the current PE for the NO Electrical industry at 54.5x.
• 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 8.45%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Despite strong long term policy support for hydrogen, Cavendish is currently experiencing low order intake for new stations and cautious revenue guidance into the first half of 2026. This could mean secular demand materializes more slowly than expected and keeps revenue growth below the trajectory implied by the narrative, limiting operating leverage and earnings.
• The business remains loss making with negative EBITDA and relies on cost reductions and higher utilization to improve margins. Any delay in converting firm bids into orders or any price pressure in tenders could prevent the company from achieving the margin expansion assumed in the long term view, weighing on net margins and earnings.
• Project specific risks, highlighted by the terminated U.S. project, uncertain commissioning timelines and backlog reductions, suggest that execution and counterpart risks may remain elevated. This could lead to lumpy or delayed equipment and services revenue and increase the risk of further write downs that pressure profitability.
• The strategy of exiting complex regions such as South Korea and focusing on Europe and selected U.S. opportunities simplifies operations but also concentrates exposure in a still nascent heavy duty hydrogen ecosystem. If large scale deployments or AFIR driven station rollouts in Europe are delayed or scaled back, structural underutilization could persist and constrain revenue and cash generation.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of NOK9.62 for Cavendish Hydrogen based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be €34.9 million, earnings will come to €1.9 million, and it would be trading on a PE ratio of 18.3x, assuming you use a discount rate of 8.4%.
  
• Given the current share price of NOK7.8, the analyst price target of NOK9.62 is 18.9% 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.