ITM Power Lands £86.5 Million State Backing as Morgan Stanley Calls the Turnaround Early

ITM Power shares jump after Morgan Stanley nearly triples price target to 170p, citing earlier break-even and £86.5M state backing for next-gen Chronos electrolyser.

The electrolyser maker closed its 2026 financial year at €1.71 on XETRA, having clocked a near-15% gain in morning trade on the final day — a fitting end to a period that has reshaped the company’s trajectory. Trading volumes were more than double the monthly average, a sign that institutional and retail investors alike are piling into the stock.

The catalyst for Thursday’s surge was a dramatic upgrade from Morgan Stanley. On 29 April 2026, the bank lifted ITM Power from “Equal-weight” to “Overweight” and nearly tripled its price target to 170 pence from 60 pence. The analysts now expect the company to reach operating break-even in fiscal 2028 — a full year ahead of the consensus view. They forecast EBITDA of £13 million, where the broader market had pencilled in a loss.

Morgan Stanley’s conviction rests on a far more aggressive revenue trajectory. For 2028, the bank projects sales of £169 million, compared with the market’s £109 million estimate. The analysts also lowered the weighted average cost of capital to 9%, reflecting the reduced risk profile following the state injection.

That injection came in early April, when Great British Energy invested £40 million for a 10.8% strategic equity stake, and the Department for Energy Security added a £46.5 million grant. The combined £86.5 million is earmarked for the Chronos platform — ITM’s next-generation electrolyser — at the Sheffield facility. Chronos is designed to cut parts count by 50% versus the current Trident model and double power density to 2.5 MW/m², with a target nameplate capacity of 1 GW by 2028.

The grant remains subject to state-aid approval, with a decision expected in June 2026. That date is the next major de-risking event: if the green light comes, the biggest uncertainty around the Chronos project falls away.

The cash injection has transformed the balance sheet. ITM Power now guides for net liquidity of £210 million to £215 million for the current financial year, up from the previous £170 million to £175 million range. Analysts estimate that covers the current cash burn rate roughly five times over — a comfortable cushion for a company still posting negative margins.

The first half of the financial year already showed momentum. Revenue hit £18 million, the highest six-month figure in the company’s history, driven largely by equipment sales alongside engineering studies, spare parts and servicing. Management subsequently raised the full-year guidance to between £40 million and £43 million. The order book is also improving: the share of profitable contracts rose to 71%, from 60% in April 2025, reflecting a disciplined shift in pricing and project selection.

Alongside the state backing, ITM Power has diversified into defence. A cooperation agreement with Rheinmetall targets the Giga-PtX project, which aims to build hundreds of decentralised synthetic fuel plants for NATO forces across Europe. Each site would have up to 50 MW of electrolysis capacity and produce 5,000 to 7,000 tonnes of e-fuel annually. The initial focus is the UK market. In Germany, ITM has secured agreements with RWE and the Stablegrid Group for projects totalling more than 710 MW.

The stock now trades at a price-to-sales ratio above 35, a valuation that leaves little room for error. The Relative Strength Index has climbed to nearly 71, signalling that the shares are technically overbought in the near term. Yet the market is clearly pricing in the pipeline’s potential rather than current earnings.

The next hard data point comes on 15 September 2026, when ITM Power reports its quarterly numbers. But the June state-aid ruling will likely determine whether the stock can hold its gains — or whether the rally has run ahead of the facts.