Global investment bank Canaccord Genuity says Redflow (ASX:RFX) has a highly competitive and cost-effective battery for the fast-growing energy storage industry.
The broker suggests a 12-18mth price target in the range of A$0.41 - A$0.85. Redflow last traded at $0.22 before the report was published.
The following is an extract from the report.
Monetising the global shift to solar and storage
Strong leverage to the storage thematic
Redflow has developed a cost-effective battery for the fast-growing electricity storage industry.
While lithium-ion batteries are the higher profile battery type in the sector, other battery technologies such as Redflow's 'zinc-bromine flow battery' are highly competitive for some major applications, providing strong leverage to the storage thematic.
Solar and storage forecast to grow ten-fold within four years
- Continued growth of solar is now due to lower costs, not subsidies. As incentives expire, consumers will want storage rather than providing cheap electricity to utilities.
- Solar and wind energy is ramping up globally, and the fact that these energy sources are intermittent increases the requirement for storage.
- Cost reductions for batteries are expected to follow a similar path to photovoltaics, which have seen 50% cost reductions over the last 5 years, and 75% over 10 years.
- Solar + storage can already be cost competitive with grid power, and stands to be seriously disruptive.
- The global market for grid-connected residential solar + storage is predicted to grow tenfold, to more than 900MW by 2018, up from just 90MW in 2014.
Redflow positioned for key storage markets
- RFX's zinc-bromine battery of 10kWh capacity is bulkier and heavier than lithium-ion batteries of the same capacity making it competitive for stationary applications such as home storage and mobile phone towers.
- If Redflow can capture just 5% of the Australian market for residential energy storage, this would translate to 10,000 units per annum within 3-5 years, representing annual revenues of $50-60m. The global opportunity is even bigger.
- There are about 5m mobile phone towers globally. At least 2m are located off-grid or in locations with unreliable power. While this is just one commercial application, it is a key market segment targeted by Redflow. Even 5% market share represents 100,000 towers, needing on average two batteries (20kWh), driving a revenue opportunity of over $1 billion.
Significant revenue opportunities
It is due to these significant revenue opportunities that we are presenting Redflow as a Canaccord Colt, with the goal to transition to institutional coverage in the coming 12-18months as the strategy de-risks.
We regard Redflow as very well placed to drive strong revenues during this immediate growth phase, with scenario analysis suggesting a 12-18mth price target in the range of A$0.41 - A$0.85.
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