Ceres Power should be a core position for investors in energy transition – Liberum


Ceres Power Holdings PLC (LSE:CWR) should be a core position for portfolio managers seeking exposure to the energy transition, so says stockbroker Liberum Capital.

Liberum rates Ceres as a ‘buy’ with a 1,460p price target, suggesting close to 25% upside to the current price of 1,179p.

Analyst Adam Collins highlighted, in a note, the opportunities for the company in regards to fuel cells and electrolysis which he estimates are worth 700p and 620p per share respectively to the company – the remainder of the analysis accounts for the other 140p per share of cash on the books.

He also pointed to April’s GBP181mln fund raise of which a substantial portion was earmarked for solid oxide electrolysis (SOEC) operations, with a view to developing systems with a class-leading target hydrogen production.

“We think it’s quite plausible that SOEC technology can account for 15% of hydrogen production in 2040, rising to 30% in 2050 despite the fact that, at this stage, only sub-1MW units have been demonstrated in EU projects,” Collins said. “Likewise, we think it is quite possible for Ceres to have a 30% share or more of the SOEC market in the mid-term, despite the fact that some rivals have started development a little earlier.

“Until now, the company’s focus has been on fuel cells, but the same efficient, low-cost, core-cell and stack technology platform can be applied for electrolysis. Moreover, the company has a healthy balance sheet to support product development.”

Collins added: “There is a possibility of a pullback as 1H results at the end of the month are unlikely to include new announcements, while the company’s near-term valuation (EV/Sales) and 12m share-price performance exceed those of peers.

“That said, we believe Ceres should be a core position for portfolio managers seeking exposure to the energy transition, given its strong tech, asset-light licensing model, robust finances, and strategic partners.

“Our valuation work indicates fair value of 1,460p, offering solid upside.”


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