In the past few days, there have been profit warnings for some German small caps, which regularly lead to larger price drops. One German small cap that has not disappointed in the current reporting season is the hydrogen winner and energy transition beneficiary 2G Energy.

The company has presented positive first key figures for the past quarter. But first a brief overview of the business activities:

2G Energy in profile Founded in 2005 and based in Heek, Westphalia, 2G Energy is one of the established companies in the German market for so-called decentralized energy production. 2G Energy specializes in the manufacture of energy production systems using combined heat and power (CHP), which can be operated with natural gas, biogas and hydrogen.

2G’s CHP plants have outputs of 20 to 4,500 kW and provide independent electricity and heat supplies. The plants can be used in various industries and sectors. 2G’s customers include, among others, industrial companies, municipalities, municipal utilities and energy suppliers.

In addition to the manufacture of CHP plants, the company also offers holistic solutions such as planning and installation, as well as service and maintenance services. This means that 2G is able to cover almost the entire value chain around CHP plants. In addition, 2G recently also entered the lucrative heat pump business.

Order intake increases, order book at high level 2G management reported a few days ago that order intake in the past 3rd quarter was as expected and exceeded the previous year’s value by a whopping 12%. The order book is still at a high level with a volume of 195 million euros.

Bio gas business has recently grown particularly strongly. This is due to the higher energy prices, especially in Germany. 2G recently increased sales in this market by a total of 57%.

Forecast for 2023 confirmed 2G is still expecting full capacity for the rest of the year, which should continue well into the new year due to the high order book. The 2G board also confirmed the already communicated forecast for the current year.

Accordingly, a turnover of 310 to 350 million euros is to be achieved with an operating profit margin (EBIT margin) of 6.5 to 8.5%. For next year, a turnover of 390 million euros is targeted with an EBIT margin of 8.5 to 10%. Compared to the good prospects, 2G Energy shares are currently undervalued according to my analysis.