Reduced Incentives And Global Rivals Will Restrict Hydrogen Prospects

Key Takeaways

• Reliance on government support and commercial partners adds significant risk to revenue stability and long-term profitability.
  
• Competitive pressures and uncertain technology economics could erode market share and make future growth assumptions overly optimistic.
  
• Strong decarbonization demand, robust licensing partnerships, and disciplined financial management position Ceres Power for scalable, diversified, and increasingly profitable long-term growth.

Catalysts

Engages in the development and commercialization of fuel cell and electrochemical technology in Europe, Asia, and North America.

• Ceres Power's reliance on continued government support for hydrogen and clean energy technologies is a significant risk; future reductions or redirection of subsidies and incentives, especially in Europe and the U.S., could sharply dampen demand for its fuel cells and electrolysis IP, directly impacting revenue growth and royalty inflows.
  
• Intensifying global competition is likely to pressure Ceres' market share and margins, as lower cost alkali and PEM alternatives-particularly from China, where input costs are up to two-thirds lower-threaten to erode solid oxide technology's addressable market, leading to lower long-term earnings and margin compression.
  
• The company's heavy dependence on partners for commercialisation creates unpredictable and delayed revenue streams; if partners underperform, choose to exit (as Bosch did), or face their own market headwinds, royalty and license revenues could remain weak and threaten Ceres' path to sustained profitability.
  
• Capital intensity remains high despite cost base rationalisation, and Ceres' model assumes frequent large, unpredictable licensing deals; any shortfall in deal flow could increase the need for external capital, leading to dilution and harming future earnings per share.
  
• The future economics of solid oxide technology remain uncertain, as rapid cost declines in battery storage and alternative clean tech could make Ceres' products less attractive, shrinking total addressable market assumptions and leading to overoptimistic long-term revenue forecasts.

Ceres Power Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Ceres Power Holdings compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Ceres Power Holdings's revenue will grow by 2.6% annually over the next 3 years.
• The bearish analysts are not forecasting that Ceres Power Holdings will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Ceres Power Holdings's profit margin will increase from -54.5% to the average GB Electrical industry of 5.8% in 3 years.
• If Ceres Power Holdings's profit margin were to converge on the industry average, you could expect earnings to reach £3.3 million (and earnings per share of £0.02) by about August 2028, up from £-28.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 69.2x on those 2028 earnings, up from -7.7x today. This future PE is greater than the current PE for the GB Electrical industry at 14.6x.
• Analysts expect the number of shares outstanding to grow by 0.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.83%, as per the Simply Wall St company report.

Ceres Power Holdings Future Earnings Per Share Growth

Risks

• Strong global secular demand for decarbonization and clean energy is driving multi-year investments in hydrogen and fuel cell technologies, which supports long-term revenue growth for Ceres Power as a technology provider.
  
• The company's licensing and royalty-based business model, with a growing portfolio of global manufacturing partners such as Doosan, Delta, and Denso, improves predictability and scalability of future revenues and net margins.
  
• Ongoing technological leadership, protected by a significant patent portfolio and focused R&D, allows Ceres to maintain a competitive moat, enabling higher-margin licensing agreements and potential net margin expansion over time.
  
• Existing large cash reserves and disciplined cost management-including recent restructuring-position the company to achieve profitability and positive earnings without immediate need for additional capital, limiting dilution risks.
  
• Rapidly growing market opportunities in sectors like data centers, industrial hydrogen, and distributed power generation-especially in APAC-help diversify the revenue base and reduce region-specific demand fluctuations, supporting long-term earnings growth.

Valuation

• The assumed bearish price target for Ceres Power Holdings is £0.9, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Ceres Power Holdings's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £3.4, and the most bearish reporting a price target of just £0.9.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be £56.1 million, earnings will come to £3.3 million, and it would be trading on a PE ratio of 69.2x, assuming you use a discount rate of 8.8%.
• Given the current share price of £1.12, the bearish analyst price target of £0.9 is 24.4% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.