Hut 8 Mining Corp (TSX: HUT) is North America's innovation-focused digital asset miner. Located in energy-rich Alberta, Canada. Hut 8 has one of the highest installed capacity rates in the industry and holds more self-mined bitcoin than any crypto miner or publicly traded company globally.

Key highlights

• Highest inventories of self-mined Bitcoin: The company continues to have one of the world's largest self-mined Bitcoin reserves and reported a balance of 6,460 bitcoins as of March 31, 2022. It mined 345 Bitcoin in March 2022, resulting in an average production rate of 11.1 Bitcoin per day. Additionally, the company look forward to increasing its operational efficiency at the mining locations by installing next-generation miners.
  

• Constructing third mining facility: The construction at the company’s third mining facility located in North Bay, Ontario is nearing completion and is on track to begin operations in May, which is a key positive.
  

• Planning for high-performance computing infrastructure: The company intends to provide a strong high-performance computing infrastructure to the expanding Web 3.0 application development and digital asset ecosystems. Furthermore, the firm drives development, innovation, and market dominance by offering the computing capacity to fuel whole sectors through its wide high-performance computing platform, which is having recurring revenues and a steady cash flow profile.

• Acquired TeraGo Inc.: Hut 8's recent acquisition of TeraGo Inc.'s cloud and colocation data center business establishes the company as a pioneer in high-performance computing, offering the company a distinct position within the digital asset ecosystem. Moreover, the company is integrating traditional cloud and new kinds of high-performance computing with this purchase, bringing an innovative approach to transforming traditional assets.
  

Risks associated with the business

The company witnessed a surge in input costs such as higher cost of sales and significantly higher general & administrative expenses. Continuation of the above trend is likely to impact the company’s cash flows and profitability.

Financial overview of FY 2021 in CAD

Source: Company Filing

• The company’s revenue in FY 2021, stood at CAD 173.8 million compared to CAD 40.7 million in the prior year. The increase was primarily driven by the Company’s digital asset mining operations, where it mined 2,786 Bitcoin and generated CAD 165.4 million of revenue for the year, on account of higher bitcoin prices.
• Its gross profit increased to CAD 88.7 million in FY 2021, against a loss of CAD 18.5 million in prior period. The rise in gross profit was mainly due to higher revenues.
• In FY 2021, the company reported net loss of CAD 72.7 million, against net income of CAD 19.0 million in pcp. This is mainly due to non-cash loss on revaluation of warrant liability, and higher general and administrative expense.

Valuation Methodology (Illustrative): EV to Sales based

Analysis by Kalkine group

Stock recommendation

The Company experienced a transformative year in fiscal 2021, which was accompanied by significant growth. By pursuing a diversified strategy, the company has distinguished itself from its peer group, becoming the only company in North America to mine digital assets while also expanding its traditional infrastructure business to support companies in Web 3.0 and the Metaverse, which is a significant positive.

It maintains one of the world's largest self-mined Bitcoin reserves, presently holding more than 6,460 Bitcoin, and looks forward in achieving operational efficiency at its mining locations through the deployment of next-generation miners. Hence considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating at the last closing price of CAD 5.49 as on April 18, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on April 18, 2022). Source: REFINITIV, Analysis by Kalkine Group 

Technical Analysis Summary

Disclaimer

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