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redT energy#: Valuation Update

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In September, energy storage company redT energy (LON:RED) released results for the six months ended 30 June 2018 showing revenue of £1.2m (84% from its US carbon business) and a loss before interest and tax of £5.7m, largely in-line with our expectations. This was followed in early October by a £5m placing and an announcement that it was seeking strategic partners to support and finance the continued growth of the business. Since then it has also confirmed that its flagship 1MWh Australian project is now operational.

Key Orders Point to Growing Market Acceptance

In H2 2018 RED has made considerable in-roads into its key target markets of Commercial & Industrial, Grid-Scale and Large-scale Solar, all of which have the potential to lead to significant orders for RED’s flow machines over the next few years.

Pipeline Has Increased Threefold

The company’s gross order pipeline now sits at more than one billion pounds, having increased more than three times since the €357m reported in December 2017. This has been conservatively risk-weighted by the company to £188m, an amount that almost covers our revenue forecasts for the next four years. In its interim results, the company also provided a split of its gross pipeline across its three key target sectors – Commercial & Industrial (£115m), Grid-Scale (£702m) and Large-scale Solar (£256m).

RED has enough orders in its pipeline to deliver on our forecasts for the next couple of years and as such much of the company’s effort will now be focused on securing infrastructure financing for key orders, scaling up production via its manufacturing partners, and striking one or more strategic partnerships, to satisfy these.

Recommendation and Target Price

We have made some adjustments to our near-term forecasts (see page 7). We maintain our BUY recommendation but move our target price to 21p.



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