Ormat Technologies, Inc.

ORA Details

Ormat Technologies, Inc. (NYSE: ORA) provides global renewable power and energy solutions to its customers. It offers clean, reliable energy solutions which it generates from geothermal and recovered energy. It also provides energy management and storage solutions.

Results Performance for the Third Quarter Ended 30 September 2021 (Q3FY21)

• The total revenue stood at $158.84 million in Q3FY21, down 0.1% YoY. Segment-wise, revenue from Electricity, Product and Energy storage stood at $142.65 million (up 15.4% YoY), $10.53 million (down 64.5% YoY), and $5.66 million (Unchanged), respectively.
• Net income stood at $14.9 million in Q3FY21, down 5.0% YoY mainly due to lower operating income driven primarily by a $9.0 million raised in the G&A expenses.
• On 30 September 2021, cash equivalents stood at $267.80 million, versus $448.25 million as of 31 December 2020.

Source: Company Reports, Analysis by Kalkine Group

Outlook

On the segmental front, the company experienced a significant decline in the product backlog, which it believes resulted mainly due to the impact of COVID-19 and the unwillingness of potential customers to enter new commitments at this time. However, since the second quarter of 2021, the company has seen a limited recovery, increasing backlog. In the Energy Storage segment, revenues are generated primarily from participating in the energy and ancillary services markets and therefore are directly impacted by the prevailing energy prices in those markets.

The company is in the process of repowering the Heber 1 and Heber 2 power plants. In addition, it is planning to replace steam turbine and old OEC units with new advanced technology equipment that will add a net capacity of 11 MW. The company expect the commercial operation of Heber 2 at the end of 2022 and Heber 1 in the first quarter of 2023.

Key Risks

The company’s global operations are exposed to foreign laws & regulations, geopolitical risks, and acts of terrorism. Besides, a sustained drop in product backlog would have an adverse bearing on its full utilization of the production and manufacturing facilities.

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

Stock Recommendation

The company has delivered 6-month and 1-year returns of ~+10.83% and ~-3.11%, respectively. The stock is trading lower than the average of the 52-week high price of $128.87 and the 52-week low price of $63.7085

The stock has been valued using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price that reflects a low double-digit decline (in percentage terms). Accordingly, a slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average), considering a reduced quick ratio at 1.14x in Q3FY21 versus 2.11x in Q3FY20 and a current ratio at 1.19x in Q3FY21 versus 2.25x in Q3FY20.

Considering the factors above, we give a “Sell” recommendation on the stock at the closing market price of $79.21 per share as on 9.30am USA Time as of 26^th November 2021.

Technical Overview:

Daily Price Chart

Tim

Source: REFINITIV, Note: Purple colour line reflects Relative Strength Index (14-Period)

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

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