Home » Reports » Zeus Capital: » Ceres Power New manufacturing facility
Ceres Power Holdings Plc

Ceres Power New manufacturing facility

In line with the Board’s announced strategy, Ceres Power (LON:CWR) has today announced that it is investing c. £7.0m in a new manufacturing facility in Redhill, Surrey. The new facility is in close proximity, c.20miles, of the existing Horsham office that will remain the Group’s Headquarters and also the Technical Centre. It is estimated that initial production at Redhill will supply the equivalent to 2 MW of fuel cells per annum increasing to 10 MW when fully operational. The new manufacturing base will fulfil three strategic priorities of meeting existing demand from partners in the development phase, initial commercial launch and proof of concept in terms of large scale manufacturing. No change to forecasts on today’s announcement, capex assumptions relating to the new facility and been included in estimates previously (21st August 2018). We also highlight last Friday’s announcement that Weichai had increased its holding to 10%, in line with its intentions.

New production facility is the next step on the road to commercialisation – Ceres has announced a £7.0m investment into a new production facility, initially producing the equivalent of 2 MW of fuel cells capacity increasing to 10 MW per annum over time. Flexibility in production will mean both 1kW and 5kW stacks will be able to be produced. The new facility fulfils medium term strategic plans and has been driven by demand from existing OEM partners for SteelCell® stacks as the drive for full commercialisation continues. The successful execution of the new production facility will act as a proof of concept in terms of manufacturing and the ability to materially scale up production and lower costs, underpinning Ceres’ business model of licensing its IP to generate royalties over the long term.

Forecasts unchanged – Estimates were updated in late August, factoring in the capex of the new production facility. As a result, forecasts are unchanged on the back of today’s announcement. We reiterate revenue forecasts of £7.0m increasing to £12.0m in FY19E, predicated on announcements that have already been made to the market. The associated loss after tax improves by £0.4m in FY2019E to £7.7m, inclusive of increased commercial investment, and we then expect a reduced loss to £6.1m in FY2020E. Our capex assumptions increased to £8m in both FY2019E and FY2020E, due to the on-going investment in Ceres’ new manufacturing facility. Separately, FY2018 results are tomorrow.

Positive momentum across the business – Ceres Power is engaged with six OEM partners at the development stage: Bosch, Nissan, Cummins, Honda, Weichai, and an unnamed OEM. The relationships with Bosch and Weichai, announced in August and May respectively, have been very exciting additions and Ceres also recently announced a new partnership agreement with Nissan to develop fuel cells for electric vehicle applications through UK government funding from the Advanced Propulsion Centre (“APC”).