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, reporting 6,115 bitcoins in February 2022 and presently holding more than 6,200 Bitcoin. Additionally, the company look forward in increasing its operational efficiency at the mining locations by installing next-generation miners.

Source: Company Presentation 

• Acquired TeraGo Inc.: The company has done 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 with 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.

• 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.
  

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

• 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 the Company mined 2,786 Bitcoin and generated CAD 165.4 million of revenue for the year, against 2,798 Bitcoin mined and CAD 39.0 million of revenue in the prior year.
• Gross profit increased to CAD 88.7 million against a loss of CAD 18.5 million in prior period. The rise in gross profit was mainly due to higher revenues.
• In the reported period of FY 2021, the company reported net loss of CAD 72.7 million, against net income of CAD 19.0 million in pcp. The decrease is mainly due to non-cash loss on revaluation of warrant liability, higher general and administrative expense, and the one-time reversal of impairment charges in the prior year partially offset by higher gross profit margins.

Valuation Methodology (Illustrative): EV to Sales

Analysis by Kalkine group 

Stock recommendation

Hut 8 experienced a genuinely transformative year in fiscal year 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 6,200 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 current market price of CAD 6.90 at 9:46 AM Toronto Time on March 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 March 18, 2022). Source: REFINITIV, Analysis by Kalkine Group 

Technical Analysis Summary

Disclaimer

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