Jefferies upgrades Ceres Power to ‘buy’, hikes price target

The bank noted that after two years of no new license agreements - 2022 and 2023 - Ceres signed two in the last 10 months, adding two large OEMs backing the company's solid oxide electrolysis cell (SOEC) technology.

"In addition to the incremental revenue visibility brought over the next three years, we believe the widely regarded licensors (Denso in Japan and Delta in Taiwan) drive further awareness for Ceres' technology and the overall company," it said.

"These come in addition to the existing solid oxide fuel cell (SOFC) licensing agreements with German Bosch and South Korean Doosan. Ceres is also commissioning its first 1MW SOEC demonstrator with Shell in Bangalore, with a partnership in place to scale it to multi-MW pressurised electrolyser modules.

"The electrolyser will be producing hydrogen for Shell's R&D purposes for three years for technology validation."

Jefferies pointed out that Ceres is also working on SOEC demonstrators for Bosch and Linde, though no date has yet been given on when these will be delivered.

"The incremental leeway provided to the balance sheet, thanks to the additional high margin license revenues, buys Ceres some valuable extra time (at least through '27/'28) as the sector continues to face adoption challenges short term," it said.

"Thanks to its high-margin, asset-light licensing model, Ceres looks best positioned once volumes pick-up, with solid oxide (SOEC) technology also seeing positive developments in the last few months, with key players entering the segment (eg, Thyssenkrupp nucera)."

At 0930 GMT, the shares were up 5.2% at 181.20p.