Nel ASA: AlphaValue Cuts Its Target as PEM Growth Struggles to Offset an Alkaline Collapse

Nel ASA's investment case now rests on a single, uncomfortable question: can a fast-growing PEM business outrun a collapse in alkaline electrolysers? A downgrade issued on Friday has sharpened that debate. According to media reports, AlphaValue/Baader Europe trimmed its rating from "Buy" to "Accumulate" and cut its price target to NOK 2.38 from NOK 3.82. The call stopped short of a sell recommendation, and the analysts offered no detailed rationale — yet the direction of travel is plain.

The backdrop is the third-quarter 2026 report published roughly a week ago, which paired a surge in orders with a sharply lower top line and fresh losses. For a credible re-rating, Nel must show it can narrow its operating loss, not simply book more business.

Two Speeds, One Company

The numbers tell a story of divergence rather than simple decline. Revenue from customer contracts came in at NOK 112 million, down 63% year on year. Within that total, PEM revenue reached NOK 89 million — up 65% on the prior-year figure. The alkaline business moved the other way, with sales collapsing 91% to NOK 23 million.

That split matters more than any single order. Growth in one division can only steady the group once it is large enough to absorb the drag elsewhere. Investors would therefore learn more from a quarter in which PEM keeps expanding while the alkaline decline moderates than from another headline increase in bookings.

Profitability remains the sore point. Nel reported an EBITDA loss of NOK 93 million and a net loss of NOK 141 million, a reminder of how far the company sits from a profitable footing. A stronger order intake does nothing to erase that burden on its own.

Orders Are a Signal, Not a Proof

Demand, at least, is moving in the right direction. Group-wide order intake climbed 339% to NOK 253 million, and the order backlog rose 34% to NOK 1,314 million. Nel pointed to stronger PEM demand as the counterweight to its weak revenue line.

Bookings and revenue deserve to be judged separately. Orders brighten the commercial outlook, but they say nothing yet about when cash will arrive or what margin the work will carry. A larger backlog is no answer, by itself, to how profitably it will eventually be executed. The bullish reading is not that a turnaround has already happened — it is that demand could lay the groundwork for one, provided it converts into sales at a better contribution.

One confirmed piece of business illustrates the point. On 13 October, Nel Hydrogen US won an order from an unnamed US-based global technology group for several containerised PEM electrolyser units plus associated services. The contract is worth about USD 12 million, with delivery scheduled for 2027. It is real business, but not yet evidence of what it will contribute to the bottom line.

Rheinmetall Talks Add an Option, Not Revenue

A separate agreement offers longer-range potential. Nel and Rheinmetall have signed a letter of intent to explore decentralised synthetic fuel production. The arrangement is non-binding; any pilot projects and further steps depend on reviews and additional agreements. It is an opportunity rather than a secured revenue stream, and should be weighted accordingly.

The near-term anchor remains the 2027 delivery of the US order. Progress on that front could reinforce the PEM story. Beyond it, Nel must demonstrate that growing business actually strengthens group revenue and curbs losses.

What Would Break the Thesis

The bear case is not that orders dry up — it is that demand and earnings stay disconnected. Should the alkaline slump persist or PEM growth fade, new contracts would remain a welcome signal without dispelling doubts about profitability. On that reading, Friday's downgrade would not yet reflect the risks in full.

The optimistic path requires the PEM business to keep expanding and the alkaline decline to ease, with orders flowing through to deliveries and revenue. Until that link between commercial momentum and a smaller operating loss becomes visible, the recovery case leans more on expectation than on delivered results.