The £198 Million Question Hanging Over ITM Power’s 400% Rally

ITM Power shares quadruple in a year, hitting 170p after Morgan Stanley and Jefferies upgrades, but retail profit-taking and a 38x price-to-sales ratio spark valuation debate.

The numbers are stark. ITM Power’s shares have quadrupled over the past twelve months, peaking at 166.50 pence. Yet on Monday, retail investors dumped the stock in such volumes that the selloff eclipsed even blue-chip names like Shell and AstraZeneca on trading platforms, sending the price sliding to 143.30 pence on heavy volume. By Thursday morning, the shares had recovered to around 170.4 pence — a level that happens to align precisely with Morgan Stanley’s freshly upgraded price target.

That target, raised from 60p to 170p, represents nearly a tripling of the bank’s previous valuation. Morgan Stanley also lifted its rating on the Sheffield-based electrolyser manufacturer to “Overweight,” arguing that a string of catalysts due through 2026 could propel the company to EBITDA breakeven by the 2028 financial year. Jefferies followed suit with an upgrade to “Buy,” and the combined effect of both institutional nods drove the stock to multi-year highs of 173.1p on Tuesday and 172.9p on Wednesday.

But the rally has created a sharp divide. While institutional buyers pile in, individual investors are taking profits en masse. The divergence reflects a deeper tension: ITM Power’s market capitalisation now implies a price-to-sales ratio of roughly 38, a multiple that UBS — which maintains a 60p target — warns has raced far ahead of fundamental reality.

Insider Activity Adds a Twist

Amid the volatility, a significant insider transaction caught the market’s attention. Technology director Simon Bourne exercised 1.33 million stock options originally granted in 2018 and 2019, then sold approximately 873,000 of the resulting shares at an average price of 157.44p. The company stressed that the sale was primarily to cover tax liabilities arising from the option exercise. Bourne retains roughly 657,000 shares, representing about 0.095% of the company’s issued capital.

The timing — during a rally driven by institutional upgrades — has prompted some observers to question the signal, though the tax-cover explanation is standard practice in such transactions.

The Numbers Beneath the Hype

ITM Power’s operational trajectory is improving, albeit from a loss-making base. First-half revenue for fiscal 2026 hit a record £18 million, prompting management to raise its full-year guidance to between £40 million and £43 million. The order book now stands at £152 million, with nearly three-quarters of contracts considered profitable. Legacy loss-making projects are gradually being worked through.

Yet profitability remains elusive. The pretax loss for the fiscal year ending April 2025 widened to £45.4 million. On the balance sheet, however, the company sits in a strong position: debt-free with approximately £198 million in cash.

The June Decision That Could Define the Next Decade

All eyes are now on a pivotal subsidy ruling expected in the coming weeks. On May 26, the UK’s Subsidy Advice Unit is due to publish its report on a proposed £46.5 million government grant earmarked for expanding ITM Power’s Sheffield facility between 2026 and 2028. The funding, which depends on approval from the Department for Energy Security and Net Zero, would support the company’s “Chronos” production plan — a programme designed to add one gigawatt of annual manufacturing capacity.

Beyond the direct grant, the state-owned entity Great British Energy has signalled its intention to inject £40 million into the company, taking a roughly 10% equity stake. The combined public support would underwrite the commercial launch of ITM Power’s next-generation Chronos electrolysers, which deliver three times the power output of current systems while cutting costs by 40%.

If the subsidy decision is positive, the company can place orders for the Chronos production line and lock in a commercial launch by 2028. A delay would throw the entire timeline into doubt.

A Military-Industrial Dimension

The company’s strategic pivot extends beyond green hydrogen. In April, ITM Power sealed a deal with Rheinmetall for the Giga-PtX project, aimed at building decentralised synthetic fuel production facilities for NATO. That partnership provides a long-term demand anchor that complements the civilian pipeline.

Additional large-scale opportunities, such as Uniper’s Humber project, could further swell the order book in the near term. But the crucial test remains whether capacity reservations can be converted into firm purchase orders — a transition that will determine whether the current valuation is a speculative peak or a genuine inflection point.