Research: Industrials
Ceres Power Holdings’ innovative technology uses electrolysis to produce green hydrogen and solid oxide fuel cells to generate power. In a year where it moved to the Main Market of the London Stock Exchange, it recorded revenue growth of 13% and gross margin expansion to 61% (the highest in the sector, according to management), but is yet to record an operating profit (FY23 operating loss of £59.4m versus £54.0m in FY22). Ceres continued its strategy to drive innovation and technology across solid oxide fuel cells (SOFC) and hydrogen electrolysers (SOEC), increasing its R&D spending by 11% y-o-y to £54m (FY22: £48.5m). Management guides for FY24 revenue to be double that achieved in FY23, based on existing contacts. Net cash, including short term investments, was £140m at the end of FY23.
Ceres Power Holdings |
Strategic partnerships powering growth
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Industrials |
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22 April 2024 |
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Ceres Power Holdings’ innovative technology uses electrolysis to produce green hydrogen and solid oxide fuel cells to generate power. In a year where it moved to the Main Market of the London Stock Exchange, it recorded revenue growth of 13% and gross margin expansion to 61% (the highest in the sector, according to management), but is yet to record an operating profit (FY23 operating loss of £59.4m versus £54.0m in FY22). Ceres continued its strategy to drive innovation and technology across solid oxide fuel cells (SOFC) and hydrogen electrolysers (SOEC), increasing its R&D spending by 11% y-o-y to £54m (FY22: £48.5m). Management guides for FY24 revenue to be double that achieved in FY23, based on existing contacts. Net cash, including short term investments, was £140m at the end of FY23.
Key partners
Management guides for a doubling of revenues in FY24, driven by deals with key partners like Bosch, Doosan, Weichai and Delta Electronics (see below). Bosch’s power units received €160m in European funding, while all machinery and processes have completed factory acceptance testing at Doosan’s 50MW factory in Korea. These partnerships are crucial for expanding Ceres’s global reach and the quality of its partner ecosystems are testament to the strength of its technology.
Deal with Delta Electronics
The agreement with Delta (based in Taiwan) was signed in January and will see a global long-term collaboration for fuel cell and stack production, where Ceres will receive staged revenues of £43m, with roughly half to be recognised as revenue in FY24. Technology introduction and construction is set to begin in 2024, with initial production expected by the end of 2026. This is the first dual licence deal to include SOEC and SOFC.
Valuation: Lacking investor confidence
Ceres's stock price surged c 67% following the announcement of the key dual licensing agreement with Delta in January, but the momentum was short-lived and the stock drifted back to five-year lows in the following months. This muted response suggests the market is awaiting further confirmation of the benefits of Ceres's strategic partnerships. This looks likely in time as the company is well positioned to capitalise on its capabilities such as new SOFC applications and the potential use of its technology for electrolysis and hydrogen production for industrial decarbonisation applications. Ceres’s ability to execute and deliver on its strategic partnerships (and its expectation of doubling revenues in FY24) will therefore be critical catalysts for the stock.
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Consensus estimates
Source: LSEG |
EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: TMT
Zalaris announced a strategic review process on 2 April, as the company explores potential opportunities to accelerate growth and maximise value for both customers and shareholders. The potential of a sale and delisting reflects the sentiment from many other listed technology businesses that have recently gone private, finding public markets a restraint to investment in growth. There is no certainty that an initiative, event or transaction will take place. Zalaris’s Q124 results are scheduled for 7 May.