FormerXBC Inc XEBEQ

Ballard's valuation

[Ciao]

TD has upped the share price target to $40 USD, the gap has widened between BLDP and XBC (25%+ Hydrogen exposure in 2021)

Details: We are downgrading Ballard Power to HOLD (from Speculative Buypreviously), with an increased target price of $40.00 ($27.00 previously). Thedowngrade is ultimately a valuation call and we note that Ballard's share price hasincreased by almost 60% year-to-date (eight trading days) due to a confluenceof factors, including several broader industry developments with positive read-throughs.

Valuation Considerations: We believe that investors are approaching hydrogensector valuation very differently than what is typical in other sectors, and note thatBallard's admittedly high 2021E and 2022E EV/Sales multiples of 76.7x and 49.5x,respectively, are not particularly helpful in coming to a valuation conclusion. Wehighlight that our revised target price of $40.00 is based on an NAV approachthat features a 10-year discounted cash flow analysis with a 44% revenue CAGR(including its proportionate share of the Weichai JV), EBITDAS margins that gravitatetoward major global automotive manufacturers over time, and a 25.0x terminalmultiple (up from 15.0x previously). Using an alternative approach, we calculate thatcurrent enterprise value represents an ~2.5x multiple of 2030E revenue and ~12.0xmultiple of 2030E EBITDAS (including its proportionate share of the Weichai JV)based on our NAV scenario. As a result, we believe that Ballard's intrinsic value inan optimistic commercialization scenario is fully reflected in the current share price