Boralex Inc (TSX: BLX) is an electric utility company which develops, constructs, and operates renewable energy power facilities across, Canada, the United States, France, and the United Kingdom. Most of Boralex's plants rely on wind power, while a significant number also employ hydroelectric power.

Key highlights 

• Recorded higher adjusted EBITDA and discretionary cash flow: The company reported consolidated adjusted EBITDA of CAD 106 million in Q2 2021, up CAD 20 million or 23% over the same quarter in 2020. Higher revenue from energy sales and feed-in premium, as well as the contribution of newly acquired and commissioned facilities, all contributed to the rise. Furthermore, on a TTM basis, discretionary cash flows totaled CAD 149 million.
  

• Strategic plan and financial objectives: The group is implementing strategic procedures based on the growth potential in the markets in which they operate. Along with strict financial discipline, targeting projects and acquisitions that meet specific growth is helping the group to gain synergy criteria to create value and generate returns. On the back of this, the company’s objective is to earn discretionary Cash Flows in a range of CAD 240-260 million and EBITDA in a range of CAD 800-850 million respectively by 2025.

Source: Company 

• Adding capacity through new projects and good progress on development projects: Recently the company added 553 MW in wind and solar projects and 190 MW in energy storage projects under its "Early-stage" phase of the project pipeline. Along these projects the company is also working on many other projects with an aim to increase its total installed capacity to 4,400MW by 2025.

Source: Company 

• Diversified assets at different locations: The Company remains highly diversified with facilities that are fully contracted (99%) and located in various geographies. A significant portion of the company’s net installed capacity originates from the wind power segment, making the company largest independent producer of onshore wind power in France.

Source: Company 

Financial Highlights of Q2 2021

Source: Company 

• In Q2 2021, the company posted consolidated revenues of CAD 151 million, up 22% against CAD 124 million in Q2 2020. This increase was mainly attributable to a favorable volume from Canadian wind power segment.
• On the back of elevated operating cost, the company managed to post a slight growth in its operating income to CAD 25 million compared to CAD 24 million in the previous corresponding period.

• The company posted a net loss of CAD 8 million in the reported financials, against a loss of CAD 6 million in the previous corresponding period.
  

Risks associated with investment

In the usual course of business, the Company faces a variety of market risks that might have an impact on its profits and cash flows. Reduced demand, lower output, and poor weather conditions are all major risk concerns. There's also the possibility that its contract counterparties won't fulfill their commitments. Because the Company operates in several locations, it is also exposed to foreign currency fluctuation risk. 

Valuation Methodology (Illustrative): Price to Cash flow 

Stock recommendation 

The renewable energy is likely to show a substantial increase in the market share over the next decade as most of the developed nations are adopting the renewable services at mass, which is promising and augers well for the company’s long-term growth. The company is also looking for organic growth and is increasing its capacity to the next level by 2025, which is a key positive. Also, on the back of this increased capacity the firm is trying to capture an EBITDA in a range of CAD 800-850 million along healthy cash flows by 2025. Therefore, based on the above rationale and valuation methodology, we recommend a “Buy” rating at the closing price of CAD 38.82 as on October 13, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary:

One-Year Technical Price Chart (as on October 13, 2021). Source: REFINITIV, Analysis by Kalkine Group 

*The reference data in this report has been partly sourced from REFINITIV.

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.