The Two-Megawatt Bet That Could Make or Break ITM Power’s Billion-Pound Valuation

Retail investors dump ITM Power shares after 400% rally, but institutions hold firm ahead of a critical UK subsidy decision for the Chronos hydrogen project.

A peculiar standoff is playing out in the shares of ITM Power. While retail investors have been dumping the stock at a furious pace, the institutional crowd is holding firm — and for good reason. The next few weeks will determine whether the company’s ambitious manufacturing expansion becomes a reality or remains a blueprint gathering dust.

The hydrogen electrolyser specialist has seen its stock rocket roughly 400% over the past twelve months, touching an intraday peak of 166.50 pence. But the rally has triggered a wave of profit-taking among private investors. On the AJ Bell trading platform, ITM Power recently became the most-sold stock, overtaking blue-chip names like Rolls-Royce and Shell. By Monday, the shares had retreated to 143.30 pence, with trading volumes surging 168% above the daily average.

Yet for all the retail exodus, the company’s largest shareholders are staying put. Their patience hinges on a single event: a subsidy decision scheduled for June under the UK’s Subsidy Control Act. The review, which began on April 7, will determine whether ITM Power can access a £40 million investment from Great British Energy — the state-owned clean power company — alongside a £46.5 million direct grant. Together, the funding would bankroll the Chronos project in Sheffield, a new production line with a targeted capacity of one gigawatt by 2028.

Chronos represents a technological leap for the company. Each unit delivers two megawatts of output, triple the capacity of the current Trident system. Costs are expected to fall by 40%, while the equipment’s footprint and weight are both cut in half. Crucially, up to 90% of components are designed to be recyclable. If the subsidy clears, management plans to take a final investment decision on the production line shortly after.

The stakes could hardly be higher. CEO Dennis Schulz has received a special grant of 1.3 million shares on top of his regular long-term incentive package — but those shares will vest only if Chronos hits its milestones. Management’s skin is firmly in the game.

A Tale of Two Analyst Views

The divergence in market opinion is stark. Morgan Stanley upgraded ITM Power to “Overweight” in a notable reversal — its first positive rating on the stock since 2021. The bank lifted its price target from 60 pence to 170 pence, arguing that the company could reach operating breakeven as early as fiscal 2028, a full year ahead of the consensus view.

UBS, by contrast, is sticking with its 60 pence target, signalling that the current valuation has run well ahead of the fundamentals. The stock trades at roughly 38 times sales, a multiple that looks stretched for a company still deep in the red. The average analyst price target sits at around 85 pence, well below the current share price.

The financials do show genuine progress. First-half revenue hit a record £18 million, prompting management to raise the full-year forecast to between £40 million and £43 million. The order book stands at £152 million, with nearly three-quarters of contracts now considered profitable. But the bottom line remains under pressure: the pretax loss widened to £45.4 million in the most recent fiscal year.

Cash Cushion and Catalysts

The company’s balance sheet offers some comfort. ITM Power holds roughly £198 million in liquidity with no debt, covering its current cash burn about five times over. That gives management breathing room, but it also means the stock’s £1 billion-plus market capitalisation is being supported almost entirely by future expectations rather than current earnings.

Beyond the Chronos decision, two other catalysts loom. The outcome of the UK’s Hydrogen Allocation Round 2 could unlock additional project revenue, while a final investment decision on Uniper’s 120-megawatt Humber project would provide a near-term boost to the order book. A strategic partnership with Rheinmetall is also in the works, targeting decentralised synthetic fuel production for NATO — a move that adds a defence angle to the hydrogen story.

If the June subsidy review comes back positive, ITM Power will be able to place orders for the Chronos production line and lock in its commercial launch for 2028. A rejection or delay, however, would throw the entire timeline into doubt — and force a hard reassessment of a valuation that has already left many analysts sceptical.