Ceres Power has been hailed as a stock market hero and bemoaned as an investors’ villain over its 22-year history. The green energy technology business, originally spun out of London’s Imperial College, was a one-time poster child for British tech. However, frustration over growth and delays in dealmaking in China have struck the shares more recently.
While hype over green hydrogen, plus very cheap capital, helped Ceres fly up to £15 in 2021, the stock has since crashed to about £3.30. Its numbers haven’t been great: Ceres isn’t yet profitable, and 2022 revenues fell £8 million to £22 million as gross margin slipped by three percentage points and cash fell from £250 million to £182 million.
Then the admission in September that a “milestone” manufacturing deal for its fuel cell tech in China would be delayed (deflating hopes it would soon start getting royalties from its partners, China’s Weichai and Germany’s Bosch) caused the shares to halve to £3.14. Some investors clearly think Ceres will never fulfil its potential.
Yet the deal is delayed — over regulatory issues in Beijing — not dumped, and as China pushes towards a lower-carbon economy, it is still expected to be Ceres’s largest market.
The company also has a string of blue-chip clients. It is, for example, working on solid oxide electrolyser cell tech with Shell in India. This method is said to produce hydrogen about 20 per cent more efficiently than other technologies by using waste heat in industrial processes.
As Ceres is licencing its technology to royalty-paying partners, rather than scaling manufacturing itself, revenue growth will be imminent as more deals are signed. Two factories should begin producing and selling hydrogen products from the second half of next year.
In the shorter term, Ceres’s market shift should help to fuel the shares too. It will move its listing from Aim to London’s main market this Thursday.
Global trends are also favourable for Ceres, with forecasts of hydrogen demand reaching 660 tonnes by 2050. To fulfil this, the International Energy Agency estimates a total electrolyser capacity requirement of 3,585GW by that year, from about 1GW installed today.
“Ceres today is in a much stronger position than two years ago [when the share price was £15],” said Panmure Gordon broker Lacie Midgley. “It has that pending China [deal], royalties will be feeding through in under a year, two factories are gearing up — the business is miles ahead.” Buy Ceres.
