Green Hydrogen Delays Will Dampen Market Potential Amid Battery Competition

Key Takeaways

• Overreliance on government incentives and slow hydrogen infrastructure adoption threaten revenue stability, while intensifying battery-electric competition challenges long-term market potential.
  
• High R&D spending, ongoing restructuring, and volatile industry conditions undermine profitability and risk further shareholder dilution without margin or cash flow improvement.
  
• Expansion into hydrogen transit, aerospace, and North American electric trucks, combined with aggressive cost cuts, is boosting revenue visibility, profitability prospects, and long-term growth.

Catalysts

Provides hydrogen and battery energy storage solutions.

• The ongoing delays and weaker-than-expected adoption of green hydrogen infrastructure globally have led to project postponements from Hexagon Purus' key customers, resulting in persistently underutilized hydrogen assets and a fragile revenue outlook, which could suppress future top-line growth well below current market expectations.
  
• Growing competition from battery-electric solutions, which are rapidly gaining traction due to falling costs and expanding charging infrastructure, threatens to shrink the market for hydrogen-powered vehicles, placing sustained pressure on Hexagon Purus' core hydrogen mobility and distribution businesses and creating a long-term revenue headwind.
  
• Heavy dependence on public policy and government incentives for hydrogen and zero-emission vehicle adoption exposes Hexagon Purus to significant risk if regulatory support weakens or incentives are removed, which could sharply reduce demand and undermine both revenue growth and operating margin resilience.
  
• High R&D intensity relative to scale and persistent requirement for capital expenditures, seen alongside recurring restructuring and capacity adjustments, are likely to keep operating margins deeply negative for years, while increasing the risk of further shareholder dilution through new capital raises.
  
• Downward pressure on gross profit margin and free cash flow persists as supply chain bottlenecks, fluctuating raw material costs, and industry boom and bust cycles create an unpredictable operating environment, further limiting Hexagon Purus' ability to achieve sustainable profitability or reliable positive earnings.

Hexagon Purus Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Hexagon Purus compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Hexagon Purus's revenue will grow by 17.3% annually over the next 3 years.
• The bearish analysts are not forecasting that Hexagon Purus will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Hexagon Purus's profit margin will increase from -101.2% to the average NO Machinery industry of 6.1% in 3 years.
• If Hexagon Purus's profit margin were to converge on the industry average, you could expect earnings to reach NOK 134.0 million (and earnings per share of NOK 0.26) by about August 2028, up from NOK -1.4 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 9.1x on those 2028 earnings, up from -0.6x today. This future PE is lower than the current PE for the NO Machinery industry at 25.6x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.21%, as per the Simply Wall St company report.

Hexagon Purus Future Earnings Per Share Growth

Risks

• The company reported a 33% increase in order book from the prior quarter, with broad-based growth across multiple applications, indicating stronger revenue visibility for the second half of 2025 and improved prospects for cash flow as new orders convert to sales.
  
• Hexagon Purus is aggressively expanding and executing a NOK 350 million cost reduction program, prioritizing high-potential and cash-generative segments, which lowers the breakeven point and directly improves the outlook for future net margins and EBITDA profitability.
  
• The company's strong momentum in hydrogen transit bus markets-especially in Europe, where hydrogen bus adoption is rising by 80% year over year and new incentives cover up to 80% of hydrogen bus price premiums-supports sustained revenue growth in a fast-expanding zero-emission segment.
  
• Growth in the aerospace and defense sector, backed by increased government and private sector spending in the US and higher launch activity, is translating into a growing and more predictable revenue stream for Hexagon Purus' onboard storage cylinders.
  
• The expanded relationship with Hino to supply battery-electric trucks for the North American market leverages shared technology and facilities, requires minimal additional capital investment, and targets vehicle classes (6 and 7) expected to see faster electrification, which could drive top-line growth and operating leverage in future years.

Valuation

• The assumed bearish price target for Hexagon Purus is NOK1.7, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Hexagon Purus's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NOK6.2, and the most bearish reporting a price target of just NOK1.7.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be NOK2.2 billion, earnings will come to NOK134.0 million, and it would be trading on a PE ratio of 9.1x, assuming you use a discount rate of 11.2%.
  
• Given the current share price of NOK1.9, the bearish analyst price target of NOK1.7 is 11.8% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• 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.