Panmure Liberum has downgraded Ceres Power Holdings PLC (LSE:CWR, OTC:CPWHF) from 'buy' to 'sell', arguing that the fuel cell technology company's extraordinary share price rally has outrun the realities of commercial scale-up, sending the shares down 5% to 689p.

The broker raised its price target to 590p from 475p but said the stock, which has risen 244% year to date and 8x over the past 12 months to reach a market cap of ยฃ1.4 billion, now prices in manufacturing capacity growth that is unlikely to materialise at the pace the market assumes.

Panmure estimates that confirmed manufacturing partners have capacity of only around 400 megawatts by 2030, well short of the 1.7 gigawatts it believes the current valuation implies.

The broker said it still believes in Ceres' underlying technology, with the company's proprietary solid oxide fuel cell platform, which generates electricity from gas at high efficiency, remaining among the strongest in its field following the April launch of the Ceres Endura product.

The key concern is the gap between technology quality and commercial execution, with Ceres relying entirely on third-party manufacturing partners to scale revenues through royalty and licence fees.

Panmure pointed to Doosan Fuel Cell's experience as a cautionary template, noting that early production yields at the South Korean company's new 50-megawatt facility in Gunsan ran below 50% in late 2025 due to higher material costs and process inefficiencies, only recovering to around 80% by the first quarter of 2026, still short of the 90% management target.

Doosan's balance sheet compounds the concern, with net debt rising to ยฃ285 million and debt to equity jumping from 221% to 264%, potentially limiting its ability to accelerate capacity investment.

The broker also questioned the "time to power" thesis that has animated the sector, arguing that conventional gas turbine order backlogs of three to four years point to delayed rather than unavailable supply, with competitive pressure likely to intensify from around 2028 as that backlog clears.

Panmure added that solid oxide fuel cells face a structural disadvantage in North America, where low wholesale electricity prices reduce the economic value of their efficiency advantage over conventional gas turbines, with upfront system costs estimated at around $3,500 per kilowatt against $1,000 to $1,400 per kilowatt for combined-cycle gas turbines.

The bear case in the note implies a zero equity value if partners fail to commercialise successfully, while the bull case, which assumes partners scale to around 5 gigawatts of capacity by 2035, implies a valuation of ยฃ2.3 billion.

The broker said the market is currently pricing a 63% probability of the bull case, a significant increase from the 40% implied when it last examined the framework in November, and one it regards as too optimistic.