Plug Power, Inc.

PLUG Details

Plug Power, Inc. (NASDAQ: PLUG) provides and develops hydrogen and fuel cell solutions to replace lead-acid batteries in electric material handling vehicles. Additionally, it manufactures and sells fuel cell products to replace batteries and diesel generators. These products are valuable for telecommunication, transportation and utility customers for sustainable power solutions.

Result Performance – For the Second Quarter Ended 30 June 2021 (Q2FY21)

• The company shipped 3,666 GenDrive units and had revenue associated with 16 hydrogen infrastructure systems in Q2FY21 versus 2,683 GenDrive units and four hydrogen infrastructure systems in Q2FY20. Net revenue stood at $124.6 million, up 83% YoY
• Gross billings stood at $126.3 million in Q2FY21, up 75% YoY
• Net loss attributable to common stockholders increased to -$99.63 million in Q2FY21 from -$9.41 million in Q2FY20

Key Data (Source: Company Reports)

Recent Update

• As per the release dated 14 September 2021, the company announced an expansion of its operations with a European headquarters in North Rhine-Westphalia in Germany. The initial 70,000 sq. ft. facility will be used for innovation, engineering labs, and technical support

Risks

The products and performance of the company depend mainly on the availability of hydrogen gas and a lower supply of hydrogen could negatively impact the sales and deployment of products and services. Further, the company is dependent on certain third-party key suppliers for components used in the products. Also, the company is exposed to volatility in commodity prices.

Outlook:

The company launched HYVIA, Renault Group, and its joint venture, to target a 30% market share in hydrogen-powered light commercial vehicles in Europe by 2030. It has entered into a strategic partnership with BAE Systems to build hydrogen-backed electric buses. Further, it extended its execution on the green hydrogen generation network in North America, as it stated plans to build a 15 tons per day green hydrogen plant in Camden County, GA. Broadly, the level of activity continues to remain stronger in the core material handling market as well as strong bookings in the electrolyzer business, cementing the stage for significant growth in 2022.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Orange Color Line Reflects RSI (14-Period)

Stock Recommendation:

The stock posted 6-month and 1-year returns of ~-30.85% and ~+106.15%, respectively. It is currently trading below the average of 52-week high price of $75.49 and 52-week low price of $10.92.

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation method and arrived at the target price which reflects a rise of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ average, considering lower asset turnover at 0.02x in Q2FY21 versus an industry median of 0.19x, and a longer cash conversion cycle at 126.3 days in Q2FY21 versus an industry median of 76.9 days.

Considering the aforementioned factors, we give a “Speculative Buy” recommendation on the stock at the current market price of $26.470 per share, up by 6.01% on 17^th September 2021.

Ormat Technologies, Inc.

ORA Details

Ormat Technologies, Inc. (NYSE: ORA) is engaged in the business of providing renewable power and energy solutions to its customers globally. It provides clean, reliable energy solutions which it generates from geothermal and recovered energy. It also provides energy management and storage solutions.

Q2FY21 Results Highlights (For the Period Ended 30 June 2021)

• Overall revenue declined by 16.0% YoY to $146.9 million mainly due to lower product segment revenue, down by 83.0% YoY to $7.4 million primarily impacted by COVID-19. The decline in revenue was partially offset by the sustained top-line growth in both electricity and energy storage segments.
• The company logged a decline in its net income attributable to stockholders to $13.0 million from $23.0 million in the pcp primarily due to lower revenue in the product segment and lower gross profit at the electricity segment.
• Product segment backlog increased by 59% to $59.1 million as of August 4, 2021.

Key Data (Source: Company Reports)

Recent Updates

Bagged Contract: The company, on 11 August 2021,  bagged a supply contract to deliver products to a 10 MW of geothermal air-cooled Ormat Energy Converters (OEC) to Polaris Infrastructure Inc, which is the Toronto-based company and is in the business of operation, acquisition as well as development of renewable energy projects in Latin America, for the San Jacinto facility in Telica, Leon, Republic of Nicaragua.

Signed Long Term Agreement: ORA, on 10 August 2021,  entered into a long-term resource adequacy agreement with Pacific Gas and Electric Company (PG&E) for its under-construction 20MW/40MWh Pomona-2 facility. The agreement aims at delivering 10MW of resource adequacy to PG&E. Further, the Pomona-2 facility will take part in the energy and ancillary services markets that  are being operated by the California Independent System Operator (CAISO).

Outlook

Guidance: ORA is expecting to achieve revenue in the range of $650 million and $685 million in FY21. In addition to this,  the company anticipates achieving adjusted EBITDA in the range of $400 million and $410 million in FY21.

On Track to Increase its Portfolio to Around 1.5 GW by 2023: The company is going as per the plan of increasing its overall geothermal, energy storage, and solar generating portfolio to around 1.5 GW by 2023 driven by the recent completion of the expansion of the McGinness Hills coupled with the inclusion of the recently acquired Dixie Valley and Beowawe assets, and its internal growth. Besides, the addition of a 20MW/40MWh Pomona-2 facility will boost ORA’s current 83MW/176MWh operating energy storage portfolio and will assist its plan of adding further energy storage projects in the range of 200-300MW by 2023.

Key Risks

The company’s global operations are exposed to risks like foreign laws and regulations along with geopolitical risk  and acts of terrorism.  Besides, a sustained drop in product backlog would have an adverse bearing on its target of full utilization of the production and manufacturing facilities.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Orange Color Line Reflects RSI (14-Period)

Stock Recommendation

We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average), considering the significant increase in product segment backlog that grew by 59% to $59.1 million as of 4 August 2021 along with the steady and accelerating sales pipeline and sustained growth in its energy storage and electricity segments.

For the purposes of relative valuation, peers like Montauk Renewables Inc (MNTK.OQ), Nextera Energy Partners LP (NEP.N), among others have been considered.

Considering the aforementioned factors, and decent outlook, we give a “Buy” recommendation on the stock at the current market price of $68.43 per share, up by 3.59% on 17^th September 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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