HSBC picks its top global stocks for the energy transition — and some have serious upside

Published Mon, Jul 5 20217:30 PM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Investment bank HSBC has picked multiple global stocks that are set to benefit from the so-called "energy transition" theme, ranging from green hydrogen to electric vehicle makers. All have the potential to rise significantly, according to the bank, which gives one a possible upside of 98%. HSBC said its picks are all buy-rated and "poised to benefit from Energy Transition." It comes as politicians and business leaders publicly acknowledge the need to transition to a low-carbon society in an effort to limit global warming. Progress is slow, however, and in some cases, non-existent . The U.S. Energy Information Administration has said it expects global carbon dioxide emissions from energy-related sources to continue to grow in the coming decades. As such, there is a increasing pressure on both governments and corporates to do more. HSBC's stock picks in the space "span the entire transition value chain from the 'spades and shovels' enablers of renewable power and electrification of transport, to generation and distribution assets," its analysts wrote in a research note published Tuesday. The stocks include: Renewable energy Chinese firm Daqo New Energy makes polysilicon, a component of solar panels, and HSBC said the stock has a potential upside of 98.3% to its current share price. HSBC described the firm as "the highest quality producer in China." In Europe, E.ON is a top pick for HSBC, which described it as "the only way to own energy transition via low-voltage regulated networks," referring to the way electric power is distributed. "One in five renewable power units is linked to an E.ON network," according to the bank, which added that the low-voltage business is set to grow. HSBC said the stock has 16.6% upside potential. Siemens is a "leading supplier of equipment and services across the global energy sector," the bank said, and it noted its "targeted push" into Asia. The bank puts its upside potential at 37.2%. Electric vehicles " Volkswagen is the single best positioned 'future mobility' company in Europe," HSBC's analysts stated, giving the stock a potential 30.2% upside to its share price. The bank also likes the automaker's "strong" financial performance and expansion into connected and digital services. French auto supplier Faurecia (with 31% potential upside) is also a pick and is currently trading at a more than 20% discount to its peers, according to HSBC. The bank likes its expansion into hydrogen storage systems for vehicles. LG Chemical is a leader in its market, producing batteries for EVs, and is set to benefit from market consolidation in the long term, according to HSBC. The bank said the stock had an estimated potential upside of 27.6% to its share price. The HSBC analysts said Samsung SDI is set to "stand out" from its EV battery competitors, due to its advanced technology and ties with leading Original Equipment Manufacturers (OEMs) – companies that produce official auto parts. HSBC said the stock has a 30.4% upside potential. Chemicals company Johnson Matthey produces battery components and makes around 100 million pounds ($72.6 million) a year from its fuel cell and hydrogen production technologies, according to the bank. There is a "significant" opportunity to grow this to between 5 and 7 billion pounds by 2030, and the stock has a potential upside of 29.1%, according to HSBC. Synthetic biology U.S firm Amyris is a pick for HSBC, for its "innovative" tech that sees the firm use sugar cane to produce ingredients for beauty products. (The company also produces biologically-made squalene, an ingredient found in some Covid-19 vaccines, which in nature comes from shark livers.) HSBC said the stock has a potential upside of 19.4%.

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