Azure Power Global Limited

AZRE Details

Business Update: Azure Power Global Limited (NYSE: AZRE) is engaged in solar power production, with a pan-India portfolio of 6.9 gigawatts as on 28 February 2021. The market capitalization of the company as on 01 June 2021 stood at ~$998.15 million. As per a recent update, Eos Energy Enterprises, Inc. has announced that it will install Eos energy solutions to Azure and provide solar shifting.

Sale of Solar Rooftop Portfolio: The company has recently announced that it has signed a binding agreement for the sale of its non-core solar rooftop portfolio to Radiance Renewables Pvt. Ltd. The transaction is expected to be value accretive and reduce G&A expenses.

Q3FY21 Performance Update: During the quarter, the Operating Megawatts stood at 1,987 MWs, as of 31 December 2020, reflecting an increase of ~10% over 31 December 2019. The operating revenues grew by 15.6% to $48.2 million during Q3FY21, compared to the previous corresponding quarter. The net loss during the quarter stood at $1,088 million. It posted an improvement in the non-GAAP cash flow to equity from operating assets at $16.8 million, an increase of ~142% on the prior corresponding period.

Uptrend in Revenue (Source: Analysis by Kalkine Group)

Key risks: The company is exposed to prudent operational and regulatory overview from the Government and other regulatory authorities.

Outlook: The company expects revenues to be between $59 - $61 million in Q4FY21. It anticipates operational MWs to be between 2,900 – 3,115 in FY21 and expects full-year revenue to be between $245 - $259 million. However, after excluding rooftop solar revenues, it has given a new revenue guidance range of $236 -$249 million.

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

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:  The company ended the period with a cash position of $122.1 million as of 31 December 2020. The stock of AZRE is trading below its average 52-weeks’ levels of $53.60-$13.50. The stock of AZRE gave a negative return of ~33.24% in the past three months and a positive return of ~1.56% in the past one week.  We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price with a correction of high single-digit (in % terms). We believe that the company can trade at a slight premium to its peer average EV/Sales (NTM trading multiple), considering the improved production of operating MWs, rise in top-line and proposed sale of solar rooftop portfolio. For this purpose, we have taken peers such as Ormat Technologies Inc (NYSE: ORA), Atlantica Sustainable Infrastructure PLC (NASDAQ: AY), Nextera Energy Partners LP (NYSE: NEP), to name a few. Considering expected upside in valuation and current trading levels, increase in Operating Megawatts, improvement in operating revenue and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $20.78, down by 0.14% as on June 01, 2021.

AZRE Daily Technical Chart, Data Source: REFINITIV

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.

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.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.