Alfa Laval: New Business Unit to Address Green Hydrogen Opportunity Announced at Capital Markets Day

Wide-moat Alfa Laval’s ALFA 2023 capital markets day provided us with no major surprises, with no material changes to either the group’s strategic direction or revision of the company’s financial targets announced. Consequently, we make no changes to our estimates or our SEK 340 fair value estimate. Alfa Laval shares screen as modestly overvalued, trading at a 7% premium to our unchanged valuation.

Alfa Laval reaffirmed its commitment to its product development strategy—Evolve, Expand, Explore—which aims to prepare Alfa Laval for opportunities relating to the sweeping changes in the energy landscape, and sustainability more broadly, that have begun and are likely to gather pace toward the end of this decade. Secular growth opportunities that Alfa Laval aims to capture relate to growth in renewable power generation, the adoption of alternative low- and zero-carbon fuels including hydrogen, carbon capture technology, and the like.

To this end, Alfa Laval updated the market regarding its growing clean technologies offering within its Energy division. Specifically, it announced the establishment of a new business unit to address the potentially sizable opportunity that exists to green hydrogen plant equipment. Alfa Laval has already positioned itself to benefit from the impending rise in hydrogen production, notably having taken orders in 2022 to supply heat exchangers to the Neom green hydrogen plant in Saudi Arabia, the world’s largest green hydrogen plant with an annual production capacity of 1.2 million metric tons. Nonetheless, Alfa Laval intends to build on its established expertise in heat exchange technology and process engineering, and is building an innovation center with focused R&D efforts on heat exchange technology, electrolyser equipment, and fuel cells for the green hydrogen market.