Key takeaways from London visit

Key takeaways from London visit NOT RATED Current PriceGBP460.8 Wemet with Ceres Power’s IR team in London, UK last weekto understandmore about the latest developmentof the company. Key takeaways: (1)thesteel-based technology remainsCeres’key competitive edge in theSolid OxideFuel Cell (SOFC)industry; (2) the unique licensing model (asset-light) workswellandCeres targetsmore potential intake ofmanufacturingpartners; (3)extensionof fuel cell useful life and cost reduction will be key drivers inthefuture.Ceres’ SOFC technology has become a feasible solution to meet thestrong AIDC power demand given the prolonged availability of traditionalsolutionssuch as gas turbine and nuclearpower.◼ China Capital GoodsWayne FUNG, CFA(852) 3900 0826waynefung@cmbi.com.hk Stock Data Companybackground.Founded in 2001, Ceres Power Holdings plc is aUK-based clean technology leader specializing in solid oxide fuel cells(SOFC) and electrolyzers (SOEC). Operating on an asset-light licensingmodel, the company licenses its proprietarytechnologyto global partnerssuch asDoosanFuel Cell (336260 KS, NR), WeichaiPower (2338 HK /000338 CH, BUY),andDelta Electronics(2308 TT, NR)to manufactureclean energy systems.Weichai is the largestshareholder of Ceres with anequity interest of~17.8%. ◼Key differentiation.Ceres’ SOFC products are steel substrate with a layerof in-house produced ceramic. Theuniquetechnologyenablesthe fuel celltooperate at only 450-630 degrees Celsius,much lower than theconventional SOFCs. ◼Licensing model.Ceres adopts an asset-light model by licensing thetechnology to manufacturing partners. The licensing agreement enablespartners to establish production base, produce SOFCs(or SOEC)andsystems by leveraging Ceres’ technology.These manufacturing partnersare free to select their suppliers and target markets (i.e. not exclusive).Inreturn,Ceres receives upfront payment of~US$40-50mn during theconstruction stage(~2 years at present), followed by royaltyincomeuponcommercialization(~US$50-100/kW of SOFC system).Through thelicensing model, Ceres will be able to scale up its technology rapidly.Cerestargets to win more manufacturing partners in the foreseeable future. ◼Protection of technology.Ceres is confident of protecting its technologythrough(1)patents,(2)careful screening for reliable and qualitymanufacturing partners,and(3)the in-house production ofkeymaterials.◼ Key drivers:extension ofproduct useful life+cost reduction.Atpresent, the useful life of SOFCs is ~5 years. Ceres will continue to investin R&D in order to achieve useful life extension. On the cost side,Ceresbelieves that the total cost of SOFC system could be 30% below the majorcompetitorwhen manufacturing partners reach GW-level productioncapacity. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong KongSecurities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad marketbenchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over next 12 monthsCMB InternationalGlobal MarketsLimited Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong,Tel: (852) 3900 0888 Fax: (852) 3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholly ownedsubsidiary of China Merchants Bank) ImportantDisclosuresThere are risks involved in transacting in any securities. The information contained in this report may not be suitable forthe purposes of all investors.CMBIGM does not provide individually tailored investment advice. This report h