Risks Now Fairly Priced In - Upgrade to Hold

Research evidence excerpt

Risks Now Fairly Priced In - Upgrade to Hold

new grid policy will affect PREV

*Rev. (MM)

VH2's medium-term growth potential and the sustainability of its current margins.

New legislation in favour of overhead power lines: Last week, the German Bundestag approved

legislation that marks a significant shift in transmission grid policy, with new high-voltage DC Exhibit100% 1 - Revenue split by segment

2power lines to be built primarily as overhead lines rather than underground cables. The government 80% 3736 10 101 119 116 12728

28 26argues this will materially reduce construction costs, accelerate permitting and deployment, and 60% 47 56

63 184

support a faster buildout of the transmission network. The legislation also removes the previous 40% 216 184 364

preference for underground cabling for new HVDC projects, including the DC42 and DC42plus 20% 184 165 172 185

transmission corridors. The law does not require affirmative approval, but the Bundesrat can review 0%

and potentially object in the post-summer sitting. VH2 currently has >60% of its order backlog in 2020Natural Gas 2021Electricity 2022Clean Hydrogen2023 Adjacent2024Opportunities2025

electricity projects, of which roughly half is directly exposed to underground cables. While tendered .Source: Company Data, Jefferies

projects in the backlog would not be impacted, future projects are likely to be tendered for overhead

power lines where VH2 currently has no exposure. Exhibit 2 - Order backlog split by segment,

FY25

Upgrade from UNPF to Hold: VH2 has significantly derated over the last eight months and is now HydrogenClean4%

trading at 6.7x EV/EBITDA or 14x P/E FY26 (JEFe), which we think is a fair reflection of the elevated

risks and leaves limited downside from here.