Fuel cells technology developer Ceres Power (CWR:AIM) expects revenue and other operating income to top market expectations after what it called ‘strong’ commercial progress last year.
Revenue and other operating income would be around £32million to £33 million, the company said, following significant investments by Bosch and Weichai. Analysts at investment bank Berenberg had £32 million pencilled in.
Ceres Power works with leading original equipment manufacturers (OEMs) to commercialise its proprietary SteelCell technology for applications in the mass-market commercial, residential and transportation energy industries.
The figures are for the 18 months to 31 December 2020 after the company changed its year-end from June to December in April 2020. It will release the full results on 18 March 2021.
ORDERS AND PIPELINE POWER
Berenberg assesses sales to have come in ‘7% ahead of consensus’, while pointing out the strong orders and a packed pipeline. The order book and pipeline were £54 million and £44 million respectively at 31 December 2020, compared to £22 million and £50 million at 31 December 2019.
‘We believe 2020 was one of the most transformational years in its 20-year history’, said Berenberg’s analysts. With £110 million of cash on the books, the analysts believe Ceres is well set to capitalise on the ‘exciting growth trajectory’ ahead.
Several key commercial milestones were hit in 2020, including commercial development agreements with German engineer Bosch, South Korean industrial firm Doosan and AVL, the Austrian powertrain system designer. Bosch is now preparing to scale up to mass manufacture and targeting production capacity of 200MW (megawatts) in 2024.
Berenberg believes that there will be similar catalysts in 2021, such as the formation of a joint venture with Weichai Power and further focus and progress on electrolysis.
Weichai continues its bus trials employing Ceres’ SteelCell due to complete in the first half of 2021. Ceres said that this could result in a joint venture between Weichai and Ceres in China later this year.
YEARS OF HEAVY INVESTMENT
But the investment story of Ceres Power remains long-term and investors need to brace themselves for years of heavy investment and operating losses.
‘We value Ceres using a probability-weighted scenario analysis, assuming a 55% success rate that the business reaches £1 billion of annualised sales in 2035’, said Berenberg. The analyst have yet to factor several end-markets (maritime, utilityscale) into their valuation methodology or the electrolysis opportunity, which Berenberg believes could be ‘at least as big as fuel cells.’
‘As such, a blue-sky scenario would be multiples higher than the current share price.’
Ceres Power stock exploded into life in 2020 after years of stagnation, jumping 434%. The stock has risen 10% so far in 2021 despite nudging 2% lower today to £14.58 for a £2.56 billion market value. That equates to staggering 75-times 2021 top-end sales.
