Bridge Street Capital thinks Pure Hydrogen’s rapidly advancing hydrogen strategy makes it a real steal

Bridge Street Capital initiates coverage of Pure Hydrogen with a buy recommendation
Company’s ability to secure HFC vehicle sales and move to build green hydrogen micro-hub highlighted
Existing vehicle trials expected to be converted into more meaningful sales volumes

Special Report: Pure Hydrogen’s pioneering efforts to promote the use of hydrogen fuel cell vehicles has led Bridge Street Capital to initiate research coverage of the company with a buy recommendation.

Pure Hydrogen (ASX: PH2) is focused on delivering hydrogen fuel cell vehicles that fulfil a very real need for zero emissions mobility with a focus on sectors where battery electric vehicles are not fit for purpose.

To complement this, the company is also involved in hydrogen production with moves to set up ‘green hydrogen micro hubs’ to prove the technology and pairing it with its hydrogen fuel cell vehicles before gradually building towards large-scale projects.

Capital-light expansion model

Bridge Street Capital acknowledged the company’s efforts, noting that supporting hydrogen vehicle sales with green hydrogen supply solutions was a key enabler for PH2’s integrated strategic plan and that its initial hydrogen micro-hub at Archerfield Airport in Queensland will be a significant milestone.

Stage 1 of the micro-hub is set up as a demonstration plant and will supply nearby commercial customers – including JJ Richards, which is running a trial of a fuel cell waste collection truck – as well as aviation industry demand.

This will take up a quarter of the 4000m2 site and is expected to produce 450kg of green hydrogen per day using on-site solar and green electricity to power module-built electrolysers that will offer 24-hour refuelling for hydrogen vehicles.

First production is expected in Q4 2024.

The Sydney-based corporate advisory firm added that it expects the company to secure additional sites to support market penetration in key urban centres across Australia.

The Taurus prime mover. Pic: Pure Hydrogen

Vehicle sales pipeline building

Bridge Street Capital also gave kudos to PH2’s ability to secure additional vehicle sales to high-profile customers within the Australian market.

It highlighted the company’s Taurus prime mover truck, on trial with PepsiCo and Barwon Water, as leading the charge along with the multiple sales of waste disposal vehicles to major waste recovery companies including JJ Richards and Solo, as well as prominent local governments such as the City of Newcastle.

Bridge Street noted that while the sales remain trials to date, it believed that with decarbonisation targets driving decision-makers and the short-comings of battery electric vehicles in industrial use, hydrogen vehicles are strongly positioned to take significant market share over the coming years in Australia.

This is also likely to be true in key overseas markets such as California in the US where subsidies are some of the highest in the world.

This aligns neatly with PH2 signing in July a memorandum of understanding with California commercial vehicles supplier Riverview International Trucks for the potential distribution and supply of its HDrive series of zero emissions trucks in California.

The Bridge Street Capital analysts added the company has established capacity to assemble up to 200 HFC or BEV vehicles a month to rapidly ramp-up the supply of vehicles and quickly create downstream pull for the hydrogen production and supply part of the business.

Near-term milestones

The other attribute that Bridge Street highlighted is PH2’s continued demonstration of its strong traction in the core Australian market, with customers increasingly motivated to deploy HFC vehicles within a broader fleet.

In the near-term Bridge Street expects to see ongoing vehicle trials emerge with large customers, as well as existing trials convert into more meaningful sales volumes.

Concurrently, the development of the initial hydrogen micro-hub will be a key demonstration of the capability and execution possible with the competitive edge of a nimble, innovative player looking to make strong inroads into the market over the near-term.

“Pure Hydrogen has established a strong competitive position in a rapidly growing green hydrogen market, driven by the decarbonisation “mega-trend”,” Bridge Street said.

“Over the near-term the company is at a significant potential inflection point as initial vehicle sales drive confidence in their commercial business case, giving way to potential larger scale orders, which supports the establishment of additional hydrogen production and supply hubs over time.”

Government support, which is important for green hydrogen to obtain scale, has intensified in recent years and capable companies such as PH2 are ideally positioned to unlock significant growth opportunities as leading solution providers, Bridge Street’s analysts added.

This article was developed in collaboration with Pure Hydrogen, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.