Proactive Investors - Liberum has updated its estimates and reiterated its positive stance on Ceres Power Holdings PLC (LON:CWR), a leading developer of electrochemical technologies, following the company's first-half 2023 trading update.
Liberum noted that the anticipated three-way joint venture agreement between Ceres Power, Weichai, and Bosch is now expected to be finalised in 2024 rather than 2023.
This delay means the associated upfront licence fee will not be reflected in this this year's revenue.
As a result, Ceres Power has adjusted its revenue guidance downwards by 30%, forecasting around £34 million. Liberum's own 2023 revenue estimate remains unchanged at £33.5 million, aligning with the company's new guidance.
The gross margin assumption for 2023 is also unchanged at 69%.
Liberum has adjusted its 2023 revenue estimate upwards by £18 million to £50.6 million, anticipating the trajectory of licence fees.
This results in a £12.6 million increase in 2024 gross profit, bringing it to £34.9 million.
Liberum also highlighted another development for Ceres Power: Bosch has secured European funding of approximately €160.7 million to advance the mass production of its solid oxide fuel cell (SOFC) technology.
Given Bosch's existing licence with Ceres to produce fuel cells, any increase in SOFC production by Bosch could lead to additional licensing agreements with Ceres.
Furthermore, Ceres confirmed that Doosan's 50MW factory in South Korea is nearing completion. This facility will produce fuel cells using Ceres' technology, with production set to commence in 2024.
Liberum anticipates a positive shift in Ceres' revenue mix from the second half of 2023 onwards, with a significant increase in high-margin licence fees and royalty payments. By the end of 2024, these are expected to dominate Ceres' revenue stream.
In comparison to peers like Ballard Power and Bloom Energy, Ceres is projected to achieve a sustainable gross margin of over 70% from 2024 onwards, thanks to its unique licensing approach.
Predicting a “transformational 2024”, Liberum maintains its buy rating for Ceres Power, with a target price of 800p.