TAT Technologies Ltd

TAT Technologies Ltd. (NASDAQ: TATT) provides a range of services and products to the commercial and military aerospace, and ground defense sectors through its Gedera facility in Israel, and through its subsidiary in the United States, Limco-Piedmont Inc. (Limco-Piedmont), which operates through Limco Airepair Inc. (Limco). It operates in four segments: original equipment manufacturing (OEM) of heat transfer products and aviation accessories components, which it operates through its Gedera facility; heat transfer services and products, which it operates through its Limco subsidiary; maintenance, repair and overhaul (MRO) services for aviation components, especially in the area of landing gear and auxiliary power unitsmaintenance, repair and overhaul (MRO) services for aviation components, which it operates through its Piedmont Aviation Component Services LLC (Piedmont) subsidiary, and overhaul and coating of jet engine components, which it operates through its subsidiary, Turbochrome Ltd.

Recent Financial and Business Updates:

Revenue Growth and Profitability Enhancement: TAT Technologies demonstrated significant financial growth in the twelve months ending December 31, 2023, with total revenues reaching USD 113.8 million, reflecting a notable 35% increase compared to USD 84.6 million in the same period in 2022. Moreover, gross profit for the period surged to USD 22.5 million, representing 19.7% of revenues, marking a substantial 41% rise from USD 15.9 million (18.8% of revenues) in the prior year. These improvements underscore the company's enhanced operational efficiency and profitability.

Remarkable EBITDA Surge: The company achieved remarkable growth in Adjusted EBITDA, recording USD 11.2 million for the twelve months ending December 31, 2023, compared to USD 4 million for the same period in 2022, marking an impressive surge of 176%. This robust performance reflects TAT Technologies' strong market position and effective cost management strategies, driving sustained profitability and value creation.

Positive Net Profit and Debt Reduction: TAT Technologies reported a GAAP net profit from continued operations of USD 4.7 million (USD 0.51 per share on a fully diluted basis) for the twelve months ending December 31, 2023, compared to a GAAP net loss from continued operations of USD 1.6 million (USD 0.175 loss per share on a fully diluted basis) for the corresponding period in 2022. Additionally, the company successfully reduced its net debt position, which stood at USD 10.3 million as of December 31, 2023, compared to USD 19.4 million as of December 31, 2022, highlighting improved financial stability and liquidity.

Strategic Fundraising Initiatives: In December 2023, TAT Technologies executed a private placement sale to Israeli institutional investors, raising USD 10.1 million (net from all related expenses). This fundraising initiative further strengthens the company's financial position and supports its strategic growth objectives, positioning it for continued success in the dynamic market landscape.

Reflection on Achievements: The leadership at TAT Technologies reflects on the company's performance in 2023, highlighting a consistent growth trajectory observed since Q4 of 2022. The increasing demand for the company's products and services, coupled with the successful implementation of new operational strategies, has been instrumental in driving success throughout the year.

Strategic Shift and Improved Margins: The company emphasizes a strategic shift undertaken over the past three years, resulting in improved margins and the successful acquisition of significant contracts. This strategic transformation has propelled TAT Technologies to achieve record-breaking results in terms of revenue, gross margin, and EBITDA, underscoring the effectiveness of its strategic initiatives.

Optimistic Outlook and Growth Prospects: Looking forward to 2024, TAT Technologies expresses optimism for continued growth and success. A robust backlog exceeding USD 400 million, coupled with new contracts expected to drive in additional revenue, highlights the company's growth prospects. Furthermore, the significant potential from the company's new APU MRO capabilities and ongoing operational initiatives aimed at enhancing margins reinforce TAT Technologies' commitment to sustained growth and value creation in the dynamic market landscape. 

Technical Observation (on the daily chart)

Presently, the stock has given return of approximately 120.75% since reaching its lowest point in the past 52 weeks, which occurred on April 28, 2023. The Relative Strength Index (RSI) over a 14-day period stands at 47.03, recovering from oversold zone, indicating a state of potential consolidation or a short-term upward momentum. Additionally, the stock's current positioning is below both the 21-day Simple Moving Average (SMA) and the 50-day SMA, which may serve as dynamic short-term resistance levels. Furthermore, the price is currently near an important support zone of USD 11.00 -USD 11.50.

As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Buy’ rating has been given to TAT Technologies Ltd. (NASDAQ: TATT) at the current market price of USD 11.70 as of April 16, 2024, at 06:55 am PDT. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

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

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is April 16, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’