Invinity Energy Systems#: Power On
In April 2020, US-based Avalon Battery merged with AIM-listed redT energy (LON:RED) to create Invinity Energy Systems plc (IES LN). An equity fund raising of £8.0m was also undertaken for the new combined entity. With a highly experienced team, worldwide sales reach, a secure supply chain and low-cost manufacturing facilities, Invinity Energy Systems plc (“Invinity”) will seek to achieve real scale in battery storage markets for utility, industrial and commercial applications.
The £8.0m raised through the issue of new shares was to fund development of Invinity including investment in R&D, marketing and also working capital to increase volume to meet an identified project pipeline of just over 4,000 units (circa 161MWh). We estimate unit volumes to rise to 1,250 in 2021 and 3,200 in 2022, driving revenues of £21.2m and £52.2m.
Breadth of Applications
The Invinity Vanadium Redox Flow Battery (VRFB) has been designed to provide a standardised module that can be produced in high volume. There are already over 160 in use. Recent business wins, announced in the Invinity June 2020 Trading Update, reflect breadth of markets with orders secured from a global retailer, U.S. municipal utility and leading Asia-based energy storage project developer.
Recommendation and Target Price
Our peer group analysis supporting a DCF valuation sets an indicative valuation range of £180m-£200m which implies 255p-283p/sh. versus the current price of 119p (£84.1m). If Invinity achieve our 2022 forecasts and therefore scale, the future valuation could become substantially higher.
We initiate coverage with a Buy recommendation and Target Price of 269p/sh.
Phil Smith, Equity Analyst, Alternative Energy | T: +44 (0)20 3617 5187 | E: [email protected]
VSA Capital Limited, New Liverpool House, 15-17 Eldon Street, London EC2M 7LD | www.vsacapital.com
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