We initiate tracking of the value with a buy recommendation (“Buy”), supported by a potential increase of about 120%. The company appears undervalued in light of its development prospects and the growth of its markets. It has demonstrated its ability to pursue its organic growth strategy in order to expand its portfolio of activities, both in terms of offer and geographical coverage.
ROTH2, originally specialized in the manufacture of pressure tanks, was created in its current form in 1975 to incorporate hot spinning technology. This technology is the basis of ROTH2’s original expertise in the manufacture of equipment such as hydropneumatic accumulator bodies, diving bottles, and other industrial applications. Spinning involves the deformation of metals, creep, between a mandrel and one or more rollers, between which the material flows.
Today, based on its know-how, the company has developed its range in the promising market of hydrogen accumulators. The initial idea being that the company has the skills necessary for the design and manufacture of hydrogen tanks, ROTH2 plans to take advantage of the strong expected development of the consumption of this gas, which is obviously based on the energy transition and the possibility of producing low (or even zero) carbon footprint energy.
Growing markets
The markets targeted by ROTH2 are the transport of all gases for industrialists such as LINDE, Air Liquide already addressed by type 4 tanks among others, but also those of mobility (for example tanks and reservoirs typically equipping trucks).
These markets are set to develop considerably, considering that the transport sector is one of the most polluting in terms of greenhouse gas emissions (20% of the total worldwide according to the IEA). It is therefore one of the main sectors where the development of the use of hydrogen will be favored, with potentially very substantial savings in terms of emissions.
Since the beginning of the war in Ukraine, the need to produce shells in Europe has become increasingly decisive: on the one hand to support Ukraine and on the other hand to regain a certain strategic autonomy. In this context, ROTH2’s technology, which it is the only one to hold in Europe with Faber, allows it to make shell bodies.
A “green player”
ROTH2 has obtained the exclusive European license for type V composite pressure tanks developed by COVESS in collaboration with Air Liquide.
This exclusive license constitutes a considerable development lever for ROTH2. Indeed, the main industrialists in the sector such as Air Liquide or Linde have extremely important needs that are not currently adequately covered by type IV. As an indication, Air Liquide and its partners need to eventually replace their container fleet which is currently 20 million units. This represents a huge potential market that could quickly represent more than 500,000 units per year just for Air Liquide and its partners.
Significant appreciation potential
Our valuation comes out at €2.28/share. It is based on the group’s business plan, which we consider prudent, again because of the development prospects of the group’s markets and its entry into new markets (type V, shells…). Our recommendation therefore comes out as a Buy with a potential for revaluation of c.+120%.
