Oddo BHF maintains its 'outperform' rating on TotalEnergies shares, with an unchanged target price of 75 euros.

The analyst reports that TotalEnergies has teamed up with Verbund to study the feasibility of a large-scale green hydrogen project in Tunisia. The project targets a production capacity of 200 ktpa by 2030.

The first phase of the project involves the installation of 5 GW of renewable capacity and 2 GW of electrolysis capacity, for a total capex of 6 billion euros. The second phase will bring the capacity up to 1 Mtpa by 2050, with 25 GW of renewables and capex of 40 billion euros, adds Oddo BHF.

The broker believes that, at present, the biggest obstacle to the development of the green hydrogen sector is cost, which stands at 6-8 E/kg in Europe, compared with 1 E/kg for grey hydrogen.

To enable its development, costs will have to be around 3-5 E/kg and, according to Oddo BHF, the sector therefore needs subsidies.

'TotalEnergies is our top pick in the sector, its valuation remains attractive with a P/CF at 4.4x vs. 4.2x for the sector and offers one of the most generous cash returns in the sector with 40% of CFFO, i.e. a yield of 10%' concludes the analyst.

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