Ballard Power Systems Inc

Ballard Power Systems Inc (TSX: BLDP) is an alternative energy company based out of Canada and is engaged in the business of designing, developing, manufacturing, selling, and servicing of PEM (Proton Exchange Membrane) fuel cell for multiple uses including Technology Solutions, Portable Power, Backup Power, Material Handling and Heavy-Duty Motive.

Q1 FY2020 Trading Update with Significant Revenue Increase and Strengthened Balance Sheet

(Source: Company Website)

On 5^th May 2020, Ballard Power Systems released an update on the trading performance of the first quarter of the financial year 2020. Driven by higher revenue from Technology Solutions and increased shipments of Heavy Duty Motive products, the revenue increased by 50 per cent to $24.0 million on a year-over-year basis for the period. Reflecting the higher revenue mix for the period, the gross margin stood at 22 per cent. The group’s cash operating costs surged by 31 per cent to $12.2 million, due to an increase in product development expenses and increased expenditure on technology. Driven by higher equity loss from JV Weichai-Ballard, the group reported adjusted LBITDA of $9.1 million in Q1 FY2020 versus an adjusted LBITDA $8.6 million in Q1 FY2019. The net loss and adjusted net loss for the period stood at $13.5 million with a net loss per share and adjusted net loss per share of $0.06. The cash reserves as at 31^st March 2020 stood at $181.6 million, reflecting an increase of 10 per cent and 33 per cent versus Q1 FY2019 and Q4 FY2019, respectively. The company made an additional capital contribution of $6.5 million to the joint venture between Weichai and Ballard in the Q1 FY2020. Ballard received new orders of $14.8 million and made the delivery of orders worth $24.0 million.

Share Price Performance

Daily Chart as of 6^th May 2020, after the market close (Source: Refinitiv, Thomson Reuters)

Ballard Power Systems Inc shares closed at CAD 14.42 at the time of writing after the market close on 6^th May 2020. Stock's 52 weeks High is CAD 18.78 and Low is CAD 4.36.

Key Risks

The market conditions in which the company operates is full of challenges and might impact the operation performance and reduce financial performance as well. Any change in regulations and government policies could affect the overall business of the company. Risks related to environment and climate change could hamper the operations of the company. Liquidity and interest rate risks could affect the operations of the company.

Conclusion

The company has shown a decline in financial performance in the first quarter of the financial year 2020. Despite an increase in the revenue, the bottom-line performance has declined, and profitability remained in the negative zone for the period. The group needs to manage its operating expenses unless it results in further deterioration in financial performance in the coming years. The company has received new orders which will increase the revenue further and improve its profitability in the later period. BLDP has signed an agreement with SFC Energy AG and adKor GmbH for 500 FCgen®-1020ACS fuel cell and will be integrated to backup power systems of Jupiter for deployment in Germany based radio tower sites in end of 2021. Presently, the company is trading near its 52-week high, raising doubts at its upside potential at current prices.

Based on the factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the closing price of CAD 14.42 (as on 6^th May 2020), with support from few catalysts needs to be evaluated at a later stage.

Disclaimer

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