RBC Capital downgrades Ceres Power on stalling momentum

The bank noted it has been cautious on Ceres since initiating coverage of the shares in 2022, citing the lack of visibility surrounding its royalties-based business model.

"While we still admire the company’s ambitious positioning in the space, stalling momentum in the sector coupled with delays means Ceres has lower reserves and is yet to showcase the high-margin and mass-scale potential of its technology," it said.

RBC said it was cutting its licence fee and royalties assumptions for the rest of the decade. Its revenues and gross profit forecasts are down on average respectively 19% and 27% over 2023-30.

On the valuation side, in line with sector peers, it lifted its weighted average cost of capital (WACC) assumption from 10% to 12% and lowered its end-decade earnings multiple from 25x to 20x. The price target has been lowered on these new assumptions.

At 0855 GMT, the shares were down 6.4% at 154.10p.