Broker tips: Trustpilot, Ceres Power, Vistry

11th Nov 2024 10:55

(Sharecast News) - Deutsche Bank initiated coverage of review platform Trustpilot on Monday with a 'buy' rating and 331p price target.

"Ultimately, the value of Trustpilot's platform is underpinned by the legitimacy placed on its reviews, which we feel is supported by its open-ended platform allowing for independence, the scope of its proprietary data (circa 300m reviews), and the multitude of content integrity measures," the bank said.

"Since reaching adjusted EBITDA break-even in FY23, Trustpilot's momentum continues to accelerate due to three key self-help measures: (i) an increased sophistication within its pricing/packaging models, (ii) re-focused Google Tag Manager strategies in its less mature regions, and (iii) a focus on cost discipline," DB said.

"Combining the above with unit economics benefits underpins our 15%+ per annum top-line growth and +200bps per annum adjusted EBITDA margin expansion between FY24-26E."

Deutsche Bank said it views near-term execution risk as low due to high revenue visibility and a high-quality management team/board.

Elsewhere, Berenberg slashed its price target on Vistry to 750p from 1,000p after the housebuilder issued another profit warning last week.

On Friday, Vistry cut its FY24 adjusted pre-tax profit forecast to around £300m from £350m.

Following the profit warning, Berenberg said it was keeping its 'hold' rating on the shares but cutting earnings per share estimates by 15% on average over 2024-26, and reducing the price target.

"Vistry's second profit warning in the last month raises some big questions about its business model and strategy, in our view," it said. "While we note management comments that the cost issues were confined to one division, we nevertheless continue to think it raises more fundamental questions about what a realistic and viable margin is in its forward-sold partnership model.

"Secondly, we think some of the commentary about mixed demand patterns from social housing providers raises questions about what the actual level of fully funded social housing demand is currently as opposed to the more generalised aspirations of the UK government's long-term social housing targets."

To be clear, Berenberg said it does not think the partnership model is broken but it does think questions need to be considered on what sustainable volume growth rates and profit margins are achievable over the mid-term.

The bank said that while Vistry did not provide any formal guidance for 2025, it did flag certain issues which present downside risk to prevailing forecasts.

"Firstly, it noted that its growth in 2025 would be 'influenced by our need to stabilise the South Division' (the source of cost issues) while it also flagged the potential impact on profitability from some build cost inflation reemerging and higher national insurance costs from next year."

Jefferies upgraded Ceres Power to 'buy' from 'hold' and lifted the price target to 265p from 190p as it took a look at renewable energy stocks.

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)."