Ceres Power expecting strong margins, confident after electrolyser test results
By Alexander Bueso
Date: Tuesday 24 Jan 2023
(Sharecast News) - Ceres Power posted better-than-expected full-year gross margins and announced what analysts said were "very encouraging" test data for its first electrolyser modules.
The maker of fuel cells and hydrogen electrolysers said in a pre-close trading update for the year to 31 December that gross margins would reach approximately 60%.
That was expected to result in £182m of cash and short-term investments at period end.
"These are just some highlights of another year of significant investment for growth at Ceres, despite a challenging macroeconomic backdrop," said Ceres boss Philip Cadwell.
"We remain focused on building a world-leading team and capability in solid oxide fuel cells and electrolysis, and partnering to deliver global deployment of our technologies at scale and pace."
Consensus for the company's gross margins had been 54% while Berenberg analysts had penciled in 50%.
Hence the "strong" year-end liquidity position of £182m (consensus: £155m), the analysts, who had expected £180m, added.
Sales of £21m were also ahead of consensus for £20m.
"[Ceres] remains our favoured hydrogen-focused name due to its differentiated technology, high-margin licence and royalty business model, and likely near-term catalyst when signing of the China JVs is confirmed. We reiterate our Buy rating [and 1,560.0p target price]," the analysts from Berenberg said in a research note sent to clients.
On the electrolyser test results, Ceres said it was now confident that its technology could deliver green hydrogen at less than 40kWh/kg or 25% more efficiently than rival lower temperature technologies.
Berenberg said the test results were significant if confirmed.
Looking ahead, the analysts added that signing of the JV deals now hinged on resolving commercial negotiations between Bosch ad Weichai and the follow-on regulatory process.
The latter was expected to take no longer than four months.
Confirmation of the agreements would be a "key" piece of near-term newsflow and "significant" positive catalyst.
As of 1006 GMT, Ceres Power shares were trading up by 5.71% to 409.0p, having earlier jumped to 425.60p.
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