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 6,769 bitcoins as of April 30, 2022. It mined 309 Bitcoin in April 2022, resulting in an average production rate of 10.3 Bitcoin per day. Additionally, the company look forward to increasing its operational efficiency at the mining locations by installing next-generation miners.

• Assembling 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 establish 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 Q1 FY 2022 in CAD

Source: Company Filing

• The company’s revenue in Q1 FY 2022, stood at CAD 53.33 million compared to CAD 31.98 million in the prior year. The increase was primarily driven by the Company's digital asset mining operations, where the Company mined 942 Bitcoin and generated CAD 49.3 million of revenue, versus 539 Bitcoin mined and CAD 30.6 million of revenue in the prior year period.

• The company’s gross profit increased to CAD 16.45 million in Q1 FY 2022, versus CAD 12.20 million in prior period. The rise in gross profit was mainly due to higher revenues.

• In Q1 FY 2022, the company reported net income of CAD 55.70 million, against net income of CAD 19.13 million in pcp.

Valuation Methodology (Illustrative): EV to Sales based

Analysis by Kalkine group 

Stock recommendation

The company reported increase in revenue for the Q1 FY22 to CAD 53.3 million compared to CAD 31.98 million in the prior year period. The increase was primarily driven by the Company's digital asset mining operations, where the Company mined 942 Bitcoin versus 539 Bitcoin mined in the prior year period. 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 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 3.20 as on May 27, 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 May 27, 2022). Source: REFINITIV, Analysis by Kalkine Group

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

 Technical Analysis Summary

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