Pitt Street says Pure Hydrogen’s competitive advantages make it worth triple its current share price
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Pure Hydrogen’s unique technology for producing turquoise hydrogen with carbon by-products are what Pitt Street Research believes are significant competitive advantages.
In its research report, Pitt Street analysts Stuart Roberts and Cheng Ge highlighted the company’s technology advantages such as a modular plant that ensures production scalability and ability to relocate.
Pure Hydogen’s (ASX:PH2) unique methane pyrolysis method also is capable of producing about 1,500kg of turquoise hydrogen per day from methane at a lower cost than green hydrogen competitors using renewable energy to power electrolysers that split water into hydrogen and oxygen.
Adding further interest, the ability to produce high-value, solid carbon by-product such as graphite and carbon nanotubes, which are currently experiencing high demand due to their use in rapidly growing markets such as electric vehicle batteries, adds further to this competitive advantage.
The technology is also well-proven, enabling Pure Hydrogen to be an early mover in the sector.
This is highlighted by the company working on five hydrogen projects with a near term focus on achieving commercial production at its initial hub at Miles, Queensland, as early as the second half of 2022.
Adding further value is what Pitt Street describes as an “underappreciated gas business” consisting of a portfolio of unconventional gas resources in Australia and Botswana.
These have a combined best estimate contingent resource of about 460 petajoules.
At least part of this resource can be converted into proved and probable reserves in the near-term when and if commercial gas flows can be proved from the ongoing testing of Pure Hydrogen’s Project Venus pilot well.
With the gas market on Australia’s east coast expected to experience a supply gap by 2023, Pitt Street noted in its paid report that the gas resource would be a positive for Pure Hydrogen.
This gas resource could also be used as feedstock for the company’s hydrogen production, which would further de-risk the gas projects.
Pitt Street believes that these competitive advantages value Pure Hydrogen at about 60c per share on a base case and 83c per share on a bullish case using a sum-of-the-parts approach.
Importantly its hydrogen business alone would justify a share price of about 21c, just above the current price of 20c.
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.