- Unique and cost-effective technology
- Blue-chip partners
- Revenue-generating business
What it does
Ceres’ core SteelCell technology overcomes two problems traditionally associated with other solid oxide fuel cells: cost and lack of robustness. SteelCell can use a variety of fuels - natural gas, hydrogen, biofuel - that can be manufactured from widely available materials, making it the most cost-effective solution on the market. “This scalability is Ceres’s key competitive advantage, in our view,” broker Berenberg said recently.
Progress to date
It has an impressive roster of partners. Key among them are Chinese engines giant Weichai Power, German engineering firm Bosch, US engine maker Cummins and Japanese carmakers Nissan and Honda. Ceres also has a sixth partner, which the company can't name due to confidentiality reasons.
In March it said it expected revenues for the year to double to £15mln, driven by the Bosch and Weichi deals. Interest in the technology translated financially into revenues of £8.3mln in the six months to December 31, up from £3.1mln. The latter has spent £48mln amassing a 20% stake Ceres.
As of December 31 it had cash of £78.4mln, which funds the business to break-even. And it also has £30.5mln of contracted future revenues “with significant licence deals, leading to potential future royalties”.
- Demonstration of an electric vehicle range extender concept with Weichai for latter’s fuel cell electric bus programme is expected by the middle of this year
- Fit out of its new manufacturing facility underway and on track for use by the end of 2019. This is an £8mln project that will create 60 new jobs
- On course to deliver target gross margins of greater than 50% thanks to its scalable licensing business model
What the brokers say
Price targets: 230p (Berenberg); 250p (Investec)
The company is making exciting progress, delivering on targets with its partners building up their activities and thereby accelerating technology development. Furthermore, the trajectory for the market opportunity appears to be growing rapidly as the technology matures and demonstrates its potential against pollution reduction and decarbonising agendas – Investec
The cash position on the balance sheet is estimated to be enough to fund the development of the business through to commercialisation. There are very few disruptive technology businesses with this level of strength and visibility in its funding position. In unison with the commercial progress, financially the business has seen an improvement with the trading update in early December leading to revenue upgrades on the back of the Bosch and Weichai agreements - Zeus Capital.