Last Tuesday, Canadian fuel company Ballard (BLDP) announced the closing of the $163 million collaboration with its now biggest shareholder, Weichai Power, a Chinese company that specializes in the sale of diesel engines. Along with a $20 million investment from equity investor Broad-Ocean, the transaction bails Ballard out. The cash also helps Broad-Ocean maintain a near 10% ownership position in Ballard. The company had been burdened by weak financial performance in the third quarter of 2018. This increases BLDP’s dependence on demand growth in the Chinese fuel market.
Weichai’s $163 million equity investment in Ballard will support the companies to establish a 51%/49% joint venture in the Chinese province of Shandong. The two plan to enter a $90 million tech transfer agreement with Ballard for the exclusive rights to the company’s fuel cell stack and power modules for buses, commercial trucks and forklifts in China. The blueprint also includes pencil prints to build and supply at least 2,000 fuel cell vehicles in the nation of the Great Wall by 2021. The details for the vehicles are still in the works. Or they haven’t been released yet…
Analyst Craig Irwin from Roth Capital says the money coming in alleviates his stress: “The transaction further increases the importance of demand from the Chinese fuel cell market. We continue to see tangible evidence of Chinese fuel cell vehicle demand, and progress in the Synergy and Weichai JVs as the most material valuation catalysts for Ballard as we believe a material portion of 2019-2021 revenue likely comes from the JV partners. The completion of these transactions will relieve our balance sheet concerns, with the receipt of $183.8m in cash.”
Irwin updates his model to incorporate the new investments and thus raises his price target to $3.00 from $2.50, but his rating remains the same – Neutral. (To watch Irwin’s track record, click here)
Overall, Wall Street is torn when it comes to whether to sing this fuel cell maker’s praises or assess with an apprehensive gaze, as according to TipRanks, out of 5 analysts polled in the last 3 months, 2 are bullish on Ballard stock while 3 remain sidelined. However, with a potential of nearly 32%, the stock’s consensus target price stands at $3.80. (See BLDP’s price targets and analyst ratings on TipRanks)